**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549**

**FORM 10-Q**

| **x**      |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|------------|--------|---------------------------------------------------------------------------------------------------------|
| ** ** |   | ** **                                                                                              |
| ** ** |   | **For the  quarterly period ended June 30, 2007.**                                                      |
| ** ** |   | ** **                                                                                              |
| ** ** |   | **or**                                                                                                  |
| ** ** |   | ** **                                                                                              |
| **o**      |   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**Forthe transition periodfrom                      to                     .**

**CommissionFile Number 000-51171**

**SIRTRISPHARMACEUTICALS, INC.******(Exact name of registrant as specified in its charter)

| **Delaware**                              |   | **20-1410189**                        |
|-------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of          |   | (IRS Employer  Identification Number) |
| incorporation or  organization)           |   |                                  |
|                                      |   |                                  |
| **790  Memorial Drive**                   |   | ** **                            |
| **Cambridge,  Massachusetts**             |   | **02139**                             |
| (Address of  Principal Executive Offices) |   | (Zip Code)                            |

 

**(617)252-6920** (Registrant’stelephone number, including area code)

**None**(Former name, former address and former fiscal year, ifchanges since last report)

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

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer. Please see definition of “accelerated and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.

Large AcceleratedFiler: o                   AcceleratedFiler: o             Non-Accelerated Filer: x

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

Number of shares of theregistrant’s Common Stock, $0.001 par value per share, outstanding as of August10, 2007: 28,697,525 shares

 

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**SIRTRISPHARMACEUTICALS, INC.QUARTERLY REPORTON FORM 10-Q**

**INDEX**
| PART I  |   | FINANCIAL  INFORMATION                                                                      |   |   |
|--------------|--------|---------------------------------------------------------------------------------------------|--------|--------|
| Item 1.      |   | Financial  Statements (Unaudited)                                                           |   | 3      |
| Item 2.      |   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   | 12     |
| Item 3.      |   | Quantitative  and Qualitative Disclosures About Market Risk                                 |   | 14     |
| Item 4.      |   | Controls and Procedures                                                                     |   | 15     |
|         |   |                                                                                        |   |   |
| PART II |   | OTHER INFORMATION                                                                           |   |   |
| Item 1.      |   | Legal Proceedings                                                                           |   | 16     |
| Item  1A.    |   | Risk  Factors                                                                               |   | 16     |
| Item 2.      |   | Unregistered  Sales of Equity Securities and Use of Proceeds from Registered Securities     |   | 29     |
| Item 4.      |   | Submission  of Matters To a Vote of Security Holders                                        |   | 29     |
| Item 5.      |   | Other Information                                                                           |   | 29     |
| Item  6.     |   | Exhibits                                                                                    |   | 29     |
| SIGNATURES   |   |                                                                                        |   | 30     |

 

2

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**PART I**

**FORWARD-LOOKINGSTATEMENTS**

This quarterlyreport on Form 10-Q contains forward-looking statements within the meaningof the Private Securities Litigation Reform Act of 1995 that involve risks anduncertainties, as well as assumptions that, if they never materialize or proveincorrect, could cause the results of Sirtris to differ materially from thoseexpressed or implied by such forward-looking statements. All statements otherthan statements of historical fact are statements that could be deemed forward-lookingstatements, including any projections of financing needs, revenue, expenses,earnings or losses from operations, or other financial items; any statements ofthe plans, strategies and objectives of management for future operations; anystatements concerning product research, development and commercialization plansand timelines; any statements regarding safety and efficacy of productcandidates, any statements of expectation or belief; and any statements ofassumptions underlying any of the foregoing. In addition, forward lookingstatements may contain the words “believe,” “anticipate,” “expect,” “estimate,”“intend,” “plan,” “project,” “will be,” will continue,” “will result,” “seek,” “could,”“may,” “might,” or any variations of such words or other words with similarmeanings.

The risks,uncertainties and assumptions referred to above include risks that aredescribed in ”Risk Factors” and elsewhere in this quarterly report andthat are otherwise described from time to time in our Securities and ExchangeCommission reports filed after this report.

Theforward-looking statements included in this quarterly report represent ourestimates as of the date of this quarterly report. We specifically disclaim anyobligation to update these forward-looking statements in the future. Theseforward-looking statements should not be relied upon as representing ourestimates or views as of any date subsequent to the date of this quarterlyreport.

**Item 1.Financial Statements - Unaudited**

The financialinformation set forth below should be read in conjunction with our “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”appearing elsewhere in this Quarterly Report on Form 10-Q.

3

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**SirtrisPharmaceuticals, Inc.(A development-stage company)**

**Consolidated Balance Sheets**

(in thousands,except per share amounts)(Unaudited)
| ** **                                                                                                                                                            | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                            | ** ** | **2007**          | ** ** | **2006**              | ** ** |
|                                                                                                                                                                  |       |              |       |                  |       |
| **Assets**                                                                                                                                                            | ** ** | ** **        | ** ** | ** **            | ** ** |
| Current assets:                                                                                                                                                       |       |              |       |                  |       |
| Cash and cash equivalents                                                                                                                                             |       | $                 | 74,005     |                  | $          | 7,513 |   |
| Short-term investments                                                                                                                                                |       | 61,945            |       | 42,497                |       |
| Prepaid expenses and other current assets                                                                                                                             |       | 1,989             |       | 346                   |       |
| Restricted cash                                                                                                                                                       |       | 26                |       | 26                    |       |
| Total current  assets                                                                                                                                                 |       | 137,965           |       | 50,382                |       |
|                                                                                                                                                                  |       |              |       |                  |       |
| Property and  equipment, net                                                                                                                                          |       | 2,331             |       | 1,481                 |       |
| Other assets                                                                                                                                                          |       | 197               |       | 223                   |       |
| Restricted cash                                                                                                                                                       |       | 1,926             |       | —                |       |
| Total assets                                                                                                                                                          |       | $                 | 142,419    |                  | $          | 52,086 |   |
|                                                                                                                                                                  |       |              |       |                  |       |
| **Liabilities  and stockholders’ equity**                                                                                                                        | ** ** | ** **        | ** ** | ** **            | ** ** |
| Current  liabilities:                                                                                                                                                 |       |              |       |                  |       |
| Accounts payable                                                                                                                                                      |       | $                 | 3,355      |                  | $          | 829 |   |
| Accrued expenses                                                                                                                                                      |       | 1,496             |       | 1,197                 |       |
| Current portion of notes payable                                                                                                                                      |       | 2,193             |       | 1,018                 |       |
| Total current  liabilities                                                                                                                                            |       | 7,044             |       | 3,044                 |       |
|                                                                                                                                                                  |       |              |       |                  |       |
| Warrants to  purchase shares subject to redemption                                                                                                                    |       | —            |       | 438                   |       |
| Notes payable,  net of current portion and discount                                                                                                                   |       | 7,992             |       | 9,425                 |       |
|                                                                                                                                                                  |       |              |       |                  |       |
| Redeemable  convertible preferred stock, at liquidation value                                                                                                         |       | —            |       | 66,813                |       |
|                                                                                                                                                                  |       |              |       |                  |       |
| Stockholders’  (deficit) equity:                                                                                                                                 |       |              |       |                  |       |
| Preferred stock,  $0.001 par value; 20,000 shares authorized; none issued                                                                                             |       | —            |       | —                |       |
| Common stock,  $0.001 par value: 206,575 shares authorized; 28,695 and 1,345 shares issued  and outstanding at June 30, 2007 and December 31, 2006, respectively |       | 29                |       | 1                     |       |
| Additional paid-in  capital                                                                                                                                           |       | 168,274           |       | 916                   |       |
| Accumulated  other comprehensive income                                                                                                                               |       | 39                |       | 22                    |       |
| Deficit  accumulated during the development stage                                                                                                                     |       | (40,959           | )          | (28,573               | )          |
| Total  stockholders’ equity (deficit)                                                                                                                            |       | 127,383           |       | (27,634               | )          |
| Total liabilities,  redeemable convertible preferred stock and stockholders’ (deficit) equity                                                                    |       | $                 | 142,419    |                  | $          | 52,086 |   |

 

4

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**SirtrisPharmaceuticals, Inc.(A development-stage company)**

**Consolidated Statements of Operations**(in thousands, except share and per share amounts)(Unaudited)
| ** **                                                                       | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** | **Period from March  25, 2004 (date of  inception) through ** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|--------------------------------------------------------------------------------------------------|------------|
| ** **                                                                       | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007**                                                                                         | ** ** | **2006** | ** ** | **June 30, 2007** | ** ** |
| ** **                                                                       | ** ** | ** **                                          | ** ** | ** **                                        | ** ** | ** **                                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                                                          |       | $                                                   | —     |                                              | $          | —                                                                                           |       | $ | — |   | $ | — |   | $ | 68 |   |
|                                                                             |       |                                                |       |                                              |       |                                                                                             |       |   |   |   |   |
| Operating  expenses:                                                             |       |                                                |       |                                              |       |                                                                                             |       |   |   |   |   |
| Research and  development (1)                                                    |       | 6,175                                               |       | 3,204                                             |       | 11,295                                                                                           |       | 6,359 |   | 33,789 |   |
| General and  administrative (1)                                                  |       | 1,312                                               |       | 1,053                                             |       | 2,551                                                                                            |       | 2,196 |   | 11,455 |   |
| Total operating  expenses                                                        |       | 7,487                                               |       | 4,257                                             |       | 13,846                                                                                           |       | 8,555 |   | 45,244 |   |
|                                                                             |       |                                                |       |                                              |       |                                                                                             |       |   |   |   |   |
| Loss from  operations                                                            |       | (7,487                                              | )          | (4,257                                            | )          | (13,846                                                                                          | )          | (8,555 | ) | (45,176 | ) |
| Interest income                                                                  |       | 1,288                                               |       | 662                                               |       | 2,188                                                                                            |       | 1,029 |   | 5,823 |   |
| Interest expense                                                                 |       | (404                                                | )          | (224                                              | )          | (728                                                                                             | )          | (224 | ) | (1,606 | ) |
| Net loss                                                                         |       | $                                                   | (6,603     | )                                                 | $          | (3,819                                                                                           | )          | $ | (12,386 | ) | $ | (7,750 | ) | $ | (40,959 | ) |
|                                                                             |       |                                                |       |                                              |       |                                                                                             |       |   |   |   |   |
| Net loss per  share - basic and diluted                                          |       | $                                                   | (0.51      | )                                                 | $          | (4.66                                                                                            | )          | $ | (1.75 | ) | $ | (9.76 | ) |   |   |
| Weighted average number  of common shares used in net loss per basic and diluted |       | 12,928,107                                          |       | 822,809                                           |       | 7,113,201                                                                                        |       | 797,789 |   |   |   |

 
| (1) Amounts include  stock-based compensation expense, as follows: |   |   |   |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Research and  development                                          |   | $      | 887    |   | $      | 121    |   | $      | 1,067  |   | $      | 241 |   |   |   |
| General and  administrative                                        |   | 126    |   | 37     |   | 220    |   | 59     |   |   |   |
|                                                                    |        |        |        |        |        |        |        |        |        |        |        |  |  |  |  |

 

 

5

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**SirtrisPharmaceuticals, Inc.(A development-stage company)**

**Consolidated Statements of Cash Flow**(in thousands)(Unaudited)
| ** **                                                                   | ** ** | **Six months ended June 30,** | ** ** | **Period from March  25, 2004 (date of  inception) through**

**June 30, 2007** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                   | ** ** | **2007**                                          | ** ** | **2006**                                                                                                                | ** ** | ** ** |
| ** **                                                                   | ** ** | ** **                                        | ** ** | ** **                                                                                                              | ** ** | ** ** | ** ** |
| **Operating  activities**                                                    | ** ** | ** **                                        | ** ** | ** **                                                                                                              | ** ** | ** ** | ** ** |
| Net loss                                                                     |       | $                                                 | (12,386    | )                                                                                                                       | $          | (7,750 | ) | $ | (40,959 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |                                              |       |                                                                                                                    |       |   |   |
| Depreciation and amortization                                                |       | 263                                               |       | 113                                                                                                                     |       | 688 |   |
| Stock-based compensation expense                                             |       | 1,287                                             |       | 300                                                                                                                     |       | 2,180 |   |
| Issuance of common stock in exchange for licenses  and services              |       | —                                            |       | —                                                                                                                  |       | 82 |   |
| Non-cash rent expense                                                        |       | 61                                                |       | —                                                                                                                  |       | 86 |   |
| Non-cash interest expense                                                    |       | 138                                               |       | —                                                                                                                  |       | 230 |   |
| Change in  operating assets and liabilities:                                 |       |                                              |       |                                                                                                                    |       |   |   |
| Prepaid expenses and other current assets                                    |       | (1,643                                            | )          | (70                                                                                                                     | )          | (1,989 | ) |
| Other assets                                                                 |       | 26                                                |       | (249                                                                                                                    | )          | (231 | ) |
| Accounts payable                                                             |       | 2,526                                             |       | 71                                                                                                                      |       | 3,355 |   |
| Accrued expenses                                                             |       | 299                                               |       | 321                                                                                                                     |       | 1,496 |   |
| Net cash used in  operating activities                                       |       | (9,429                                            | )          | (7,264                                                                                                                  | )          | (35,062 | ) |
|                                                                         |       |                                              |       |                                                                                                                    |       |   |   |
| **Investing  activities**                                                    | ** ** | ** **                                        | ** ** | ** **                                                                                                              | ** ** | ** ** | ** ** |
| Purchases of  property and equipment                                         |       | (1,113                                            | )          | (555                                                                                                                    | )          | (3,018 | ) |
| Purchases of  short-term investments                                         |       | (68,648                                           | )          | (10,165                                                                                                                 | )          | (178,075 | ) |
| Sales and  maturities of short-term investments                              |       | 49,217                                            |       | 19,975                                                                                                                  |       | 116,169 |   |
| Increase in  restricted cash                                                 |       | (1,926                                            | )          | —                                                                                                                  |       | (1,952 | ) |
| Net cash (used  in) provided by investing activities                         |       | (22,470                                           | )          | 9,255                                                                                                                   |       | (66,876 | ) |
|                                                                         |       |                                              |       |                                                                                                                    |       |   |   |
| **Financing  activities**                                                    | ** ** | ** **                                        | ** ** | ** **                                                                                                              | ** ** | ** ** | ** ** |
| Proceeds from  issuance of redeemable convertible preferred stock            |       | 35,890                                            |       | 21,968                                                                                                                  |       | 102,565 |   |
| Proceeds from  issuance of common stock                                      |       | 62,567                                            |       | 18                                                                                                                      |       | 62,647 |   |
| Proceeds from  note payable                                                  |       | —                                            |       | 10,000                                                                                                                  |       | 10,797 |   |
| Repayment of  note payable                                                   |       | (66                                               | )          | —                                                                                                                  |       | (66 | ) |
| Net cash  provided by financing activities                                   |       | 98,391                                            |       | 31,986                                                                                                                  |       | 175,943 |   |
|                                                                         |       |                                              |       |                                                                                                                    |       |   |   |
| Net increase in  cash and cash equivalents                                   |       | 66,492                                            |       | 33,977                                                                                                                  |       | 74,005 |   |
|                                                                         |       |                                              |       |                                                                                                                    |       |   |   |
| Cash and cash  equivalents at beginning of the period                        |       | 7,513                                             |       | 7,836                                                                                                                   |       | — |   |
| **Cash  and cash equivalents at end of the period**                          |       | $                                                 | 74,005     |                                                                                                                    | $          | 41,813 |   | $ | 74,005 |   |
| ** **                                                                   | ** ** | ** **                                        | ** ** | ** **                                                                                                              | ** ** | ** ** | ** ** |
| **Supplemental  disclosure of non-cash financing activities:**               | ** ** | ** **                                        | ** ** | ** **                                                                                                              | ** ** | ** ** | ** ** |
| Accretion of  redeemable convertible preferred stock to redemption value     |       | $                                                 | 36         |                                                                                                                    | $          | 35 |   | $ | 174 |   |
| Discount to note  payable for warrant valuation                              |       | $                                                 | 191        |                                                                                                                    | $          | 401 |   | $ | 604 |   |

 

6

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**SirtrisPharmaceuticals, Inc.(A development-stage company)**

**Notes to Consolidated FinancialStatements**(*in thousands, exceptshare and per share amounts*)*(Unaudited)*

**1. Basisof Presentation**

The accompanying unaudited consolidated financial statements have beenprepared in accordance with accounting principles generally accepted in theUnited States (“GAAP”) for interim financial reporting and as required byRegulation S-X, Rule 10-01. Accordingly, they do not include all of theinformation and footnotes required by GAAP for complete financial statements.In the opinion of management, all adjustments (including those which are normaland recurring) considered necessary for a fair presentation of the interimfinancial information have been included. When preparing financial statementsin conformity with GAAP, the Company must make estimates and assumptions thataffect the reported amounts of assets, liabilities, revenues, expenses andrelated disclosures at the date of the financial statements. Actual results coulddiffer from those estimates. Additionally, operating results for the three andsix months ended June 30, 2007 are not necessarily indicative of the resultsthat may be expected for any other interim period or for the fiscal year endingDecember 31, 2007.

The accompanying unaudited consolidated financial statements and notesthereto should be read in conjunction with the audited consolidated financialstatements for the year ended December 31, 2006 included in the Company’sRegistration Statement on Form S-1(as amended), which was declared effective bythe Securities and Exchange Commission (“SEC”) on May 22, 2007.

**2.Recent Accounting Pronouncements**

In September 2006, the FASB issued FASB Statement No. 157,Fair Value Measurements, or SFAS 157, which defines fair value,establishes a framework for measuring fair value under GAAP, and expandsdisclosures about fair value measurements. SFAS 157 applies to otheraccounting pronouncements that require or permit fair value measurements. Thenew guidance is effective for financial statements issued for fiscal yearsbeginning after November 15, 2007, and for interim periods within thosefiscal years. The Company is currently evaluating the requirements ofSFAS 157; however, it does not believe that the adoption will have amaterial effect on its consolidated financial statements.

In February 2007, the FASB released SFAS No. 159, “The Fair ValueOption for Financial Assets and Financial Liabilities,” or SFAS No. 159. SFAS No. 159 permits entities to choose to measure many financialinstruments and certain other items at fair value. The objective is to improvefinancial reporting by providing entities with the opportunity to mitigatevolatility in reported earnings caused by measuring related assets and liabilitiesdifferently without having to apply complex hedge accounting provisions. SFASNo. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently analyzing the effect, if any, SFAS No. 159 willhave on its consolidated financial position and results of operations. 

In June 2007, the FASB issued EITF Issue No. 07-3, “Accounting forNonrefundable Advance Payments for Goods or Services to Be Used in FutureResearch and Development Activities,” or EITF 07-3.  EITF 07-3 requires thatnonrefundable advance payments for goods or services to be received in thefuture for use in research and development activities should be deferred andcapitalized.  The capitalized amounts should be expensed as the relatedgoods are delivered or the services are performed.  EITF 07-3 is effectivefor new contracts entered into during fiscal years beginning after December 15,2007.  The Company is currently analyzing the effect, if any, EITF 07-3will have on its consolidated financial position and results of operations.

The Company adopted the provisions of Financial Standards AccountingBoard Interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN48”) an interpretation of FASB Statement No. 109 (“SFAS 109”) onJanuary 1, 2007. As a result of the implementation of FIN 48, it recordedno adjustment for unrecognized income tax benefits. At the adoption date of FIN48, January 1, 2007 and also at June 30, 2007, the Company had nounrecognized tax benefits.

The Company recognizes interest and penalties related to uncertain taxpositions in income tax expense. As of June 30, 2007, it had no accruedinterest or penalties related to uncertain tax positions.

The tax years 2004 through 2006 remain open to examination by the majortaxing jurisdictions to which the Company is subject.

At December 31, 2006, the Company had federal and state netoperating loss (“NOL”) carryforwards of $7,272 and $10,031, respectively,available to reduce future taxable income, which expire at various datesbeginning in 2010 through 2027.  TheCompany also had federal and state research and development tax creditcarryforwards of $352 and $266, respectively, available to reduce future taxliabilities and which expire at various dates beginning in 2020 through2027.  Utilization of the NOL and taxcredit carryforwards may be subject to a substantial annual limitation due toownership change limitations that have occurred previously or that could occurin the future provided by Section 382 of the Internal Revenue Code of 1986,as well as similar state and foreign provisions. These ownership changes maylimit the amount of NOL and tax credit carryforwards that can be utilized

7

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**SirtrisPharmaceuticals, Inc.(A development-stage company)**

**Notesto Consolidated Financial Statements**(*in thousands, exceptshare and per share amounts*)*(Unaudited)*

annually to offset future taxable income and tax, respectively. Ingeneral, an ownership change, as defined by Section 382, results fromtransactions increasing the ownership of certain shareholders or public groupsin the stock of a corporation by more than 50 percentage points over athree-year period. Since the Company’s formation, the Company has raisedcapital through the issuance of capital stock on several occasions which,combined with the purchasing shareholders’ subsequent disposition of thoseshares, may have resulted in a change of control, as defined bySection 382, or could result in a change of control in the future uponsubsequent disposition. The Company has not currently completed a study toassess whether a change of control has occurred or whether there have beenmultiple changes of control since the Company’s formation due to thesignificant complexity and cost associated with such study and that there couldbe additional changes in control in the future. If the Company has experienceda change of control at any time since Company formation, utilization of its NOLor tax credit carryforwards would be subject to an annual limitation underSection 382. Further, until a study is completed and any limitation known,no amounts are being presented as an uncertain tax position under FIN 48.

In addition to uncertainties surrounding the use of NOL carryforwardsin a change of control, the Company has identified research and developmentcredits as material components of its deferred tax asset. The uncertainties inthese components arise from judgments in the allocation of costs utilized tocalculate these credits. The Company has not conducted studies to analyze thesecredits to substantiate the amounts due to the significant complexity and costassociated with such study. Any limitation may result in expiration of aportion of the NOL or tax credits before utilization. Further, until a study iscompleted and any limitation known, no amounts are being presented as anuncertain tax position under FIN 48.

**3.Comprehensive Loss**

The Company’s total comprehensive loss consists of the following:
| ** **                                  | ** ** | **Three months ended June 30,** | ** ** | **Six months ended June 30,** | ** ** |
|---------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                  | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                        |       |                                                |       |                                              |       |   |   |   |   |
| Net loss  applicable to common stockholders |       | $                                                   | (6,617     | )                                                 | $          | (3,838 | ) | $ | (12,422 | ) | $ | (7,785 | ) |
| Other  comprehensive loss:                  |       |                                                |       |                                              |       |   |   |   |   |
| Unrealized gain on investments              |       | 15                                                  |       | 17                                                |       | 17 |   | 29 |   |
| Comprehensive loss                          |       | $                                                   | (6,602     | )                                                 | $          | (3,821 | ) | $ | (12,405 | ) | $ | (7,756 | ) |

 

**4. Accounting for Stock-BasedCompensation**

The Company follows the provisions of Statement of Financial AccountingStandards No. 123 (revised 2004), “Share Based Payment” (“SFAS 123R”).Under SFAS 123R, the Company is required to recognize, as expense, theestimated fair value of all share based payments to employees.  For thethree and six months ended June 30, 2007, the Company recorded stock-basedcompensation expense of approximately $200 and $347, respectively, inconnection with its share-based payment awards to employees.

Equity instruments issued to non-employees are recorded at their fairvalue as determined in accordance with SFAS 123(R) and EITF IssueNo. 96-18, Accounting for Equity Instruments That are Issued to Other ThanEmployees for Acquiring, or in Conjunction with Selling Goods and Services (“EITF96-18”) and are periodically revalued as the equity instruments vest and arerecognized as expense over the related service period.

*Stock Plans*

The Company’s 2004 Stock Option Plan (“Plan”), as amended, provides forthe issuance of a total of 4,047,157 shares of common stock in the form of incentive stockoptions, awards of stock, and direct stock purchase opportunities todirectors,  officers, employees andconsultants of the Company.   Generally,stock options granted to employees pursuant to the Plan fully vest four yearsfrom the grant date, with 25% of the award vesting after one year and 6.25% ofthe award vesting quarterly thereafter. Stock options have a term of10 years. The Plan includes an “evergreen provision” that allows for anannual increase in the number of shares of common stock available for issuanceunder the Plan.  The annual increase willbe added on the first day of each fiscal year from 2008 through 2013, inclusive,and will be equal to the lesser of (i) 1,904,762 shares; (ii) 3.5% of thenumber of then-outstanding shares of stock; and (iii) a number as determined bythe board of directors.

As of June 30, 2007, there were 470,543 shares available for futureissuance under the plan.

A summary of the status of our stock option plan at June 30, 2007 andchanges during the six months then ended is presented in the table andnarrative below:

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**SirtrisPharmaceuticals, Inc.(A development-stage company)**

**Notesto Consolidated Financial Statements**(*in thousands, exceptshare and per share amounts*)*(Unaudited)*

 
| ** **                                     | ** ** | **Options** | ** ** | **Weighted-  Average  Exercise Price** | ** ** | **Weighted  Average  Remaining  Contractual  Term** | ** ** | **Aggregate  Intrinsic Value** | ** ** |
|------------------------------------------------|------------|-------------|------------|---------------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------|------------|
| Options  outstanding at December 31, 2006 |       | 2,538,141   |       | $                                           | 0.84       |                                                | 9.02       |                                | $          | 9,634 |   |
| Options granted                                |       | 507,079     |       | $                                           | 6.78       |                                                |       |                                |       |   |
| Options  exercised                             |       | (175,073    | )          | $                                           | 0.39       |                                                |       |                                |       |   |
| Options  forfeited or expired                  |       | (56,071     | )          | $                                           | 5.06       |                                                |       |                                |       |   |
|                                           |       |        |       |                                        |       |                                                |       |                                |       |
| Options  outstanding at June 30, 2007          |       | 2,814,076   |       | $                                           | 1.84       |                                                | 8.75       |                                | $          | 22,730 |   |
| Vested or  expected to vest at June 30, 2007   |       | 2,595,746   |       | $                                           | 1.83       |                                                | 8.74       |                                | $          | 21,004 |   |
| Options exercisable at  June 30, 2007          |       | 563,122     |       | $                                           | 0.49       |                                                | 8.16       |                                | $          | 5,283 |   |

 

The aggregate intrinsic value in the table above represents the value(the difference between the Company’s closing common stock price on June 30,2007 and the exercise price of the options, multiplied by the number ofin-the-money options) that would have been received by the option holders hadall option holders exercised their options on June 30, 2007. As of June 30,2007, there was $3.1 million of total unrecognized stock-based compensationexpense related to stock options granted under the Plan. The expense isexpected to be recognized over a weighted-average period of 2.76 years. Theweighted-average grant date fair value of options granted during the three andsix months ended June 30, 2007 was $6.05 and $4.06, respectively. The intrinsicvalue of stock options exercised for the three and six months ended June 30,2007 was $47 and $555, respectively, and represents the difference between theexercise price of the option and the market price of the Company’s common stockon the dates exercised.

The Company values stock options using a Black-Scholes method ofvaluation and has applied the weighted-average assumptions set forth in thefollowing table. The resulting fair value is recorded as compensation cost on astraight line basis over the requisite service period, which generally equalsthe option vesting period. Since the Company completed its initial publicoffering in May 2007, it did not have sufficient history as a publicly tradedcompany to evaluate its volatility factor and expected term. As such, theCompany analyzed the volatilities and expected terms of a group of peercompanies to support the assumptions used in its calculations for the three andsix months ended June 30, 2007. The Company averaged the volatilities andexpected terms of the peer companies with in-the-money options, sufficienttrading history and similar vesting terms to generate the assumptions detailedabove. The risk free interest rates are based on the United States Treasuryyield curve in effect for periods corresponding with the expected life of thestock option.
|                                | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|--------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                     | ** ** | **2007**                                            | ** ** | **2006**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
|                           |       |                                                |       |                                              |       |   |   |   |   |
| Expected term  (life in years) |       | 5.72                                                |       | 5.69                                              |       | 5.70 |   | 5.69 |   |
| Interest rate                  |       | 5.03                                                | %          | 4.75                                              | %          | 4.80. | % | 4.75 | % |
| Volatility                     |       | 60.8                                                | %          | 72.3                                              | %          | 70.1 | % | 72.3 | % |
| Dividend yield                 |       | —                                              |       | —                                            |       | — |   | — |   |

 

*Restricted Stock*

A summary of the status of nonvested restricted stock as of June 30,2007 and changes during the three months ended June 30, 2007 are as follows:
|                                      | ** ** | **Shares** | ** ** |
|--------------------------------------|------------|------------|------------|
| Nonvested at  December 31, 2006 |       | 164,166    |       |
| Granted                              |       | —     |       |
| Vested                               |       | (38,098    | )          |
| Canceled                             |       | (11,784    | )          |
| Nonvested at June 30,  2007          |       | 114,284    |       |

 

*Stock Options Granted toNon-Employees*

The Company granted stock options to purchase 7,619 shares of commonstock to non-employees at exercises prices of $5.99 to $6.51 in the six monthsended June 30, 2007.  No stock optionswere granted to non-employees in the three months ended June 30, 2007.  The stock options vest over periods of one tofour years. The Company has recorded the estimated fair value of thenonemployee options on an accelerated basis under FASB InterpretationNo. 28 (FIN 28), Accounting for Stock Appreciation Rights and OtherVariable Stock Options or Award Plans (an interpretation of APB OpinionNo. 15 and 25 ). The assumptions used in the calculations were as follows:(i) risk-free interest rate of 5.1%, (ii) contractual life of tenyears, (iii) volatility of 83.1% and

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**SirtrisPharmaceuticals, Inc.(A development-stage company)**

**Notesto Consolidated Financial Statements**(*in thousands, exceptshare and per share amounts*)*(Unaudited)*

(iv) no expected dividends. The Company recognized stock-basedcompensation expense relating to the estimated fair value of non-employeeoptions of $813 and $940 for the three and six months ended June 30, 2007,respectively. The unvested stock options are subject to remeasurement over theremaining service period.

**5. NetLoss Per Share**

The Company calculates net loss per share in accordance with SFASNo. 128,*Earnings Per Share*.Basic and diluted net loss per common share was determined by dividing net lossapplicable to common stockholders by the weighted average common sharesoutstanding during the period. The Company’s potentially dilutive shares, whichinclude outstanding common stock options, unvested restricted stock,convertible preferred stock, redeemable convertible preferred stock, and warrants,have not been included in the computation of diluted net loss per share for allperiods as the result would be anti-dilutive.
| ** **                                                                             | ** ** | **Three Months Ended    June 30,** | ** ** | **Six Months Ended    June 30,** | ** ** |
|----------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-----------------------------------------------------------|------------|
| ** **                                                                             | ** ** | **2007**                                                    | ** ** | **2006**                                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                                   |       |                                                        |       |                                                      |       |   |   |   |   |
| Net loss                                                                               |       | $                                                           | (6,603     | )                                                         | $          | (3,819 | ) | $ | (12,386 | ) | $ | (7,750 | ) |
| Accretion of  redeemable convertible preferred stock issuance costs                    |       | (14                                                         | )          | (19                                                       | )          | (36 | ) | (35 | ) |
| Net loss  applicable to common stockholders                                            |       | $                                                           | (6,617     | )                                                         | $          | (3,838 | ) | $ | (12,422 | ) | $ | (7,785 | ) |
| Weighted-average  number of common shares used in net loss per share-basic and diluted |       | 12,928,107                                                  |       | 822,809                                                   |       | 7,113,201 |   | 797,789 |   |
| Net loss per share  applicable to common stockholders—basic and diluted           |       | $                                                           | (0.51      | )                                                         | $          | (4.66 | ) | $ | (1.75 | ) | $ | (9.76 | ) |

 

The following common share equivalents, prior to the use of thetreasury stock method, have been excluded from the computation of dilutedweighted average shares outstanding as of June 30, 2007 and 2006, as they wouldbe anti-dilutive.
|                                                             | ** ** | **Three and Six Months Ended    June 30,** | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **2007**                                                                      | ** ** | **2006** | ** ** |
|                                                        |       |                                                                          |       |   |   |
| Redeemable  convertible preferred stock                     |       | —                                                                        |       | 16,212,871 |   |
| Options  outstanding                                        |       | 2,814,077                                                                     |       | 1,881,781 |   |
| Unvested  restricted stock under the 2004 Stock Option Plan |       | 114,284                                                                       |       | 204,880 |   |
| Unvested  restricted stock issued to founders               |       | 66,388                                                                        |       | 127,096 |   |
| Warrants outstanding                                        |       | 99,465                                                                        |       | 96,939 |   |

 

**6. Commitments**

On June 22, 2007, the Company entered into a lease agreement forapproximately 44,000 square feet of office and laboratory space located inCambridge, Massachusetts. The target commencement date (Commencement Date) ofthe lease is December 1, 2007 and extends for a period of ten years at aninitial annual rental rate of $58.50 per square foot and a minimum averageannual rate of $68.63 per square foot over the lease term.  The lease contains annual rent escalation provisionsand the Company will record rent expense on a straight-line basis over theeffective lease term.  The Company hasthe option to extend the lease for two consecutive additional five-yearperiods.  The Company’s current lease ofapproximately 11,500 square feet located at 790 Memorial Drive in Cambridge,Massachusetts has been amended to terminate on the Commencement Date, subjectto certain written notifications.

The Company’s payment obligations under the lease are secured by a $1.9 millionstandby letter of credit. The certificate of deposit that secures the letter ofcredit is included in long-term restricted cash on the balance sheet at June30, 2007.

**7. Common Stock**

***Reverse Stock Split***

OnApril 11, 2007, the Company’s Board of Directors and stockholders approved a1-for-5.25 reverse stock split.  Allshare and per share amounts in the consolidated financial statements have beenretroactively adjusted for all periods presented to give effect to the reversestock split, including reclassifying an amount equal to the reduction in parvalue to additional paid-in capital.

***Initial Public Offering***

InMay 2007, the Company raised $69.0 million in gross proceeds from the saleof 6,900,000 shares of its common stock in an initial public offering(IPO) at $10.00 per share. The net offering proceeds after deductingapproximately $6.5 million in offering related expenses

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**SirtrisPharmaceuticals, Inc.(A development-stage company)**

**Notesto Consolidated Financial Statements**(*in thousands, except shareand per share amounts*)*(Unaudited)*

andunderwriters’ discounts were approximately $62.5 million.  All outstanding shares of the Company’sredeemable convertible preferred stock were converted into 20,287,131 shares ofcommon stock upon the completion of the IPO.

Inconnection with the initial public offering, the Company revalued the warrantsfor shares subject to repurchase and recorded additional interest expense of$63.  Warrants for shares subject torepurchase was then reclassified to additional paid-in capital upon thewarrants converting from warrants for the purchase of shares of redeemableconvertible preferred stock to warrants for the purchase of common stock.  The remaining value of the warrants will berecorded in interest expense and rent expense, as appropriate, over theremaining term of the notes payable and the lease in connection with which theywere issued.

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**Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations**

*The following discussion containsforward-looking statements, which involve risks and uncertainties. Our actualresults could differ materially from those anticipated in these forward-lookingstatements as a result of various factors, including those set forth belowunder Part II, Item 1A, “Risk Factors.” The interim financialstatements and this Management’s Discussion and Analysis of Financial Conditionand Results of Operations should be read in conjunction with the financialstatements and notes thereto for the year ended December 31, 2006 and therelated Management’s Discussion and Analysis of Financial Condition and Resultsof Operations, both of which are contained in our Prospectus filed pursuant toRule 424(b) under the Securities Act with the Securities and Exchange Commissionon May 22, 2007. Except as required by law, we assume no obligation to updatethese forward-looking statements, whether as a result of new information,future events or otherwise.*

**Overview**

We are a biopharmaceutical company focused ondiscovering and developing proprietary, orally available, small molecule drugswith the potential to treat diseases associated with aging, including metabolicdiseases such as Type 2 Diabetes. Our goal is to successfully developtherapeutics for diseases of aging by modulating sirtuins, a recentlydiscovered class of enzymes, and their related pathways. To date, we havedevoted substantially all of our resources to our drug discovery efforts andthe development of our drug candidates, including conducting preclinical studiesand clinical trials and seeking protection for our intellectual property. Sinceour inception in March 2004, we have had no revenue from product sales,and have funded our operations principally through private and public sales ofequity securities and debt financings.

We have never been profitable and, as of June 30,2007, we have an accumulated deficit of $41.0 million. We had net lossesof $1.8 million for the period from March 25, 2004 (date of inception)through December 31, 2004, $9.7 million for the year endedDecember 31, 2005, $17.0 million for the year ended December 31,2006 and $12.4 million for the six months ended June 30, 2007. We expectto incur significant and increasing operating losses for the foreseeable futureas we advance our product candidates from discovery through preclinical studiesand clinical trials and seek regulatory approval and eventualcommercialization. In addition to these increasing research and developmentexpenses, we expect general and administrative costs to increase as we addpersonnel and continue to operate as a public company. We will need to generatesignificant revenues to achieve profitability and may never do so.

**Critical Accounting Policies**

We believe that several accounting policies areimportant to understanding our historical and future performance. We refer tothese policies as “critical” because these specific areas generally require usto make judgments and estimates about matters that are uncertain at the time wemake the estimate, and different estimates - which also would have beenreasonable - could have been used, which would have resulted in differentfinancial results.  It is important thatthe discussion of our operating results that follows be read in conjunctionwith the critical accounting policies disclosed in our Prospectus filed pursuant to Rule 424(b) under the Securities Act withthe Securities and Exchange Commission on May 22, 2007.  There were no changes to such criticalaccounting policies in the three months ended June 30, 2007.

**Results of Operations**

***Comparison of theThree Months ended June 30, 2007 and June 30, 2006***

*Revenue.  *We did not record any revenue for the three months ended June 30, 2007 (2007Quarter) or the three months ended June 30, 2006 (2006 Quarter).

*Research and development.*    Research anddevelopment expense for the 2007 Quarter was $6.2 million compared to$3.2 million for the 2006 Quarter. The $3.0 million increase from the 2006Quarter to the 2007 Quarter principally resulted from an increase of $766,000in stock-based compensation expense, an increase of $661,000 in externalchemistry and biology costs, an increase of $463,000 for personnel costsrelated principally to an increase in research and development headcount, anincrease of $340,000 in occupancy and information technology (IT) costs, anincrease of $232,000 in formulation costs for our product candidates and anincrease of $230,000 in external clinical trial costs.

*General and administrative*.    General andadministrative expense for the 2007 Quarter was $1.3 million compared to$1.1 million for the 2006 Quarter. The $259,000 increase from the 2006Quarter to the 2007 Quarter was primarily due to an increase of $89,000 instock-based compensation expense, an increase of $74,000 in accounting fees as aresult of being a public company, an increase of $48,000 of bank fees primarilydue to a letter of credit fee related to a new facility lease and an increaseof $35,000 in occupancy and IT costs.

*Interest income*.    Interest incomeincreased to $1.3 million for the 2007 Quarter from $662,000 for the 2006Quarter. The increase in interest income was caused by an increase in theaverage fund balances available for investment and an

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increase in interest rates earned oninvestments. The increase in the average fund balances for investment wasprimarily due to the sale of redeemable convertible preferred stock in Januaryand February of 2007 and the completion of our initial public offering in May2007.

*Interest expense.*    Interest expenseincreased to $404,000 for the 2007 Quarter from $224,000 for the 2006 Quarter.The increase in interest expense from the 2006 Quarter to the 2007 Quarter wasprimarily the result of the drawdown of $10.0 million under a loanagreement and $797,000 under an equipment loan agreement in April 2006 and July2006, respectively.  We also recorded$102,000 of non-cash interest expense related to warrants for the purchase ofredeemable convertible preferred stock that converted into warrants for thepurchase of common stock upon our initial public offering.

***Comparison of theSix Months ended June 30, 2007 and June 30, 2006***

*Revenue.  *We did not record any revenue for the six months ended June 30, 2007 (2007Period) or the six months ended June 30, 2006 (2006 Period).

*Research and development.*    Research anddevelopment expense for the 2007 Period was $11.3 million compared to$6.4 million for the 2006 Period. The $4.9 million increase from the 2006Period to the 2007 Period principally resulted from an increase of $1.2 millionin external chemistry and biology costs, an increase of $826,000 in stock-basedcompensation expense, an increase of $801,000 for personnel costs primarilyrelated to an increase in research and development headcount, an increase of$715,000 in external clinical trial costs, an increase of $686,000 in occupancyand IT costs, an increase of $410,000 in sponsored research costs and anincrease of $204,000 in formulation costs for our product candidates.

*General and administrative*.    General andadministrative expense for the 2007 Period was $2.6 million compared to$2.2 million for the 2006 Period. The $355,000 increase from the 2006Period to the 2007 Period was primarily due to an increase of $161,000 instock-based compensation expense, an increase of $85,000 in accounting fees asa result of being a public company, an increase of $72,000 in occupancy and ITcosts and an increase of $57,000 of bank fees primarily due to a letter ofcredit fee related to a new facility.

*Interest income.*    Interest incomeincreased to $2.2 million for the 2007 Period from $1.0 million for the 2006Period. The increase in interest income was caused by an increase in theaverage fund balances available for investment and an increase in interestrates earned on investments. The increase in the average fund balances forinvestment was primarily due to the sale of redeemable convertible preferredstock in January and February of 2007 and the completion of our initial publicoffering in May 2007.

*Interest expense.*    Interest expense increasedto $728,000 for the 2007 Period from $224,000 from the 2006 Period. Theincrease in interest expense from the 2006 Period to the 2007 Period wasprimarily the result of the drawdown of $10.0 million under a loanagreement and $797,000 under an equipment loan agreement in April 2006 and July2006, respectively.  We also recorded$138,000 of non-cash interest expense related to warrants for the purchase ofredeemable convertible preferred stock that converted into warrants for thepurchase of common stock upon our initial public offering.

***Liquidity andCapital Resources***

Since our inception in March2004, we have funded our operations principally through the private placementof equity securities, which provided aggregate net cash proceeds ofapproximately $102.6 million and the completion of an initial publicoffering that provided net proceeds of approximately $62.5 million. We havealso generated funds from debt financing and interest income. As ofJune 30, 2007, we had cash, cash equivalents and short-term investments ofapproximately $136.0 million. Our funds are currently invested ininvestment grade and United States government securities.

During the 2007 Period and2006 Period, our operating activities used cash of $9.4 million and $7.3million, respectively. The use of cash in both periods primarily resulted fromour net losses and changes in our working capital accounts. The increase incash used in operations in the 2007 Period was due primarily to an increase inresearch and development activities as noted above.

During the 2007 Period, ourinvesting activities used cash of $22.5 million compared to providing cashof $9.3 million for the 2006 Period. The use of cash in the 2007 Period isa result of purchases of investment grade securities, partially offset bymaturities of such short-term investments, and additions to restricted cash tosecure a standby letter of credit for our new facility lease.  During the 2006 Period, investing activitiesprovided cash as a result of maturities of investment grade securities.  We may have an increase in capitalexpenditures during the second half of 2007 related to our new facility.  We

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cannot determine the exact amount of suchcapital expenditures until we complete the space design and receive proposals.

Our financing activitiesprovided $98.4 million and $32.0 million for the 2007 Period and the2006 Period, respectively. The cash provided in the 2007 Period resulted fromthe sale and issuance of 21.4 million shares of Series C-1 redeemableconvertible preferred stock in January and February 2007 that provided netproceeds of $35.9 million and from the sale and issuance of 6.9 million sharesof common stock in our initial public offering in May 2007 that provided netproceeds of $62.5 million.  The cashprovided in 2006 resulted from the sale and issuance of 19.7 millionshares of Series C redeemable convertible preferred stock in March andApril 2006 that provided  netproceeds of $22.0 million and $10.0 million of proceeds from a notepayable to a financial institution.

In April 2006, weobtained a loan from a financial institution which permits borrowings of up to$15.0 million, $10.0 million of which was available immediately andan additional $5.0 million of which will be available during the thirdquarter of 2007 if certain clinical milestones are achieved. We are obligatedto make interest-­only payments through July 2007 followed by forty-fiveequal monthly payments of principal and interest. The loan is secured byessentially all our assets except for intellectual property and bears interestat 10.60% per annum. In April 2006, we borrowed $10.0 million underthe loan. In connection with the loan, the lender received a warrant topurchase up to 127,551 shares of our common stock depending upon the amount actuallyborrowed at an exercise price of $5.88 per share. The warrant is currentlyexercisable for up to 85,034 shares of our common stock, while up to 42,517additional shares of our common stock become exercisable if we make additionalborrowings under this loan. This warrant has not been exercised.

In May 2006, we enteredinto an equipment loan agreement with a bank to borrow up to $1.5 millionthrough March 2007. Amounts borrowed under the facility are repayable over36 months beginning in April 2007 and bear interest at prime plus0.25% per annum. As of June 30, 2007, there was $731,000 outstanding and noremaining amount available under the equipment loan. In connection with thefinancing, the lender received a warrant to purchase up to 4,749 shares of ourcommon stock depending upon the amount actually borrowed at an exercise priceof $4.20 per share. The warrant is currently exercisable for up to 2,526 sharesof our common stock while the remaining 2,223 additional shares of our commonstock were cancelled since we did not make any additional borrowings under thisloan before March 2007.  This warrant hasnot been exercised.

We expect our existing resources to be sufficient to fund our plannedoperations until at least the end of 2009.

**Contractual Obligations**

On June 22, 2007, we entered into a commercial leaseagreement for approximately 44,000 square feet of office and laboratory spacelocated in Cambridge, Massachusetts. The target commencement date (CommencementDate) of the lease is December 1, 2007 and it extends for a period of tenyears at an initial annual rental rate of $58.50 per square foot and a minimumaverage annual rate of $68.63 per square foot over the lease term.  The lease contains annual rent escalationprovisions.  We have the option to extendthe lease for two consecutive additional five-year periods.  Our payment obligations under the lease aresecured by a $1.9 million standby letter of credit. The certificate ofdeposit that secures the letter of credit is included in long-term restrictedcash on the consolidated balance sheet at June 30, 2007.   Our current lease of approximately 11,500square feet located at 790 Memorial Drive in Cambridge, Massachusetts has beenamended to terminate on the Commencement Date, subject to certain writtennotifications. Our President and Chief Executive Officer, Christoph Westphal,performs consulting services for an affiliate of the landlord.

There are no other additional material obligationsincurred by us that materially change the disclosure of our contractualobligations in our Prospectus filed pursuant to Rule 424(b) under theSecurities Act with the Securities and Exchange Commission on May 22, 2007.

**Off-Balance Sheet Arrangements**

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

**Item 3.Quantitative and Qualitative Disclosure about Market Risk**

We are exposed to market risk related to changes ininterest rates. As of June 30, 2007, we had cash, cash equivalents andshort-term investments of $136.0 million consisting of cash and highly liquidshort-term investments.   Our primaryexposure to market risk is interest income sensitivity, which is affected bychanges in the general level of U.S. interest rates, particularly because ourinvestments are in short-term marketable securities.  Due to the short-term duration of ourinvestment portfolio and the low risk profile of our investments, an immediate10% change in interest rates would not have a material effect on the fairmarket value of our portfolio.  Ouroutstanding notes payable are at fixed interest rates and therefore haveminimal exposure to changes in interest rates.

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**Item 4.Controls and Procedures**

**Evaluation of Disclosure Controls andProcedures**

As required by Rule 13a–15(b) of the 1934Act, the Company’s management, including the principal executive officer andthe principal financial officer, conducted an evaluation as of the end of theperiod covered by this Quarterly Report on Form 10-Q of the effectivenessof the design and operation of the Company’s disclosure controls andprocedures. Based on that evaluation, the Company’s principal executive officerand principal financial officer concluded that the Company’s disclosurecontrols and procedures are effective at the reasonable assurance level inensuring that information required to be disclosed by the Company in thereports that it files or submits under the 1934 Act is recorded, processed,summarized and reported within the time periods specified in the SEC’srules and forms.  Disclosurecontrols and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed by us in thereports we file under the Securities and Exchange Act is accumulated andcommunicated to our management, including our principal executive officer andprincipal financial officer, as appropriate to allow timely decisions regardingrequired disclosure.

**Changes in Internal Control**

As required by Rule 13a-15(d) of the 1934Act, the Company’s management, including the principal executive officer andthe principal financial officer, conducted an evaluation of the internalcontrol over financial reporting to determine whether any changes occurredduring the period covered by this Quarterly Report on Form 10-Q that havematerially affected, or are reasonably likely to materially affect, the Company’sinternal control over financial reporting. Based on that evaluation, theprincipal executive officer and principal financial officer concluded no suchchanges during the fiscal quarter covered by this Quarterly Report onForm 10-Q materially affected, or were reasonably likely to materiallyaffect, the Company’s internal control over financial reporting.

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**PART II**

**Item 1.Legal Proceedings**

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

**Item 1a.Risk Factors**

**RISK FACTORS THAT MAY AFFECTFUTURE RESULTS**

*Investmentin our common stock involves a high degree of risk and uncertainty. You shouldcarefully consider each of the risks and uncertainties described below beforeyou decide to invest in our common stock. You should also refer to the otherinformation in this quarterly report, including our financial statements andrelated notes. If any of the following risks and uncertainties actually occurs,our business, financial condition, and results of operations could be severelyharmed. This could cause the trading price of our common stock to decline, andyou could lose all or part of your investment.*

**Risksrelated to our discovery, development and commercialization of new medicines**

***Our results to date provide no basis for predicting whetherany of our product candidates will be safe or effective, or receive regulatoryapproval.***

Our only clinical candidate,SRT501, is in an early stage of development and its risk of failure is high. Todate, the data supporting our drug discovery and development programs,including SRT501 and new chemical entities, are derived solely from laboratoryand preclinical studies and limited early stage clinical trials. Results inanimal studies of SRT501 were favorable and all of the reported adverse sideeffects in our early stage clinical trials were reversible and none wereserious. However, additional clinical trials in humans may not show that ourcurrent formulation of SRT501 is safe and effective, in which event we may needto reformulate or abandon development of SRT501. Reformulation of SRT501 couldresult in delays and additional costs. It is impossible to predict when or ifSRT501 or any of our NCEs will prove effective or safe in humans or willreceive regulatory approval. These compounds may not demonstrate in patientsthe chemical and pharmacological properties ascribed to them in laboratorystudies, or early stage clinical trials, and they may interact with humanbiological systems or other drugs in unforeseen, ineffective or harmful ways.Neither we nor any other company has received regulatory approval to markettherapeutics that target sirtuins. If we are unable to discover or successfullydevelop drugs that are effective and safe in humans, we will not have a viablebusiness.

***We may not be able to initiate and complete preclinicalstudies and clinical trials for our product candidates which could adversely affectour business.***

We have completed twoPhase 1a trials with respect to our only clinical product candidate, SRT501,both of which were conducted outside of the United States, and have notcommenced any clinical trials for our NCEs. We must successfully initiate andcomplete extensive preclinical studies and clinical trials for our productcandidates before we can receive regulatory approval. Preclinical studies andclinical trials are expensive and will take several years to complete and maynot yield results that support further clinical development or productapprovals. Conducting clinical studies for any of our drug candidates forapproval in the United States requires filing an IND and reaching agreementwith the FDA on clinical protocols, finding appropriate clinical sites andclinical investigators, securing approvals for such studies from theinstitutional review board at each such site, manufacturing clinical quantitiesof drug candidates, supplying drug product to clinical sites and enrolling sufficientnumbers of participants. Currently, the IND that we filed for SRT501 inAugust 2006 is on hold with the FDA, and we cannot conduct clinicalstudies in the Unites States until we satisfactorily respond to requests fromthe FDA for certain additional information. In order to commence clinicaltrials in the United States, we must reach agreement with the FDA on a secondanimal species for preclinical toxicity studies, conduct such studies andsatisfy the FDA with the results of such studies. We cannot guarantee that wewill be able to successfully accomplish these activities or all of the otheractivities necessary to initiate and complete clinical trials. As a result, ourpreclinical studies and clinical trials may be extended, delayed or terminated,and we may be unable to obtain regulatory approvals or successfullycommercialize our products.

***None of our product candidates has received regulatoryapprovals. If we are unable to obtain regulatory approvals to market one ormore of our product candidates, our business may be adversely affected.***

All of our productcandidates are in early stages of development, and we do not expect our productcandidates to be commercially available for several years, if at all. Ourproduct candidates are subject to strict regulation by regulatory authoritiesin the United States and in other countries. We cannot market any productcandidate until we have completed all necessary preclinical studies andclinical trials and have obtained the necessary regulatory approvals. We do notknow whether regulatory agencies will grant approval for any of our productcandidates. Even if we complete preclinical studies and clinical trialssuccessfully, we may not be able to obtain regulatory approvals or we may notreceive approvals to make claims about our products that we believe to benecessary to effectively market our products. Data obtained from preclinicalstudies and clinical trials are subject to varying interpretations that coulddelay,

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limit or preventregulatory approval, and failure to comply with regulatory requirements orinadequate manufacturing processes are examples of other problems that couldprevent approval. In addition, we may encounter delays or rejections due toadditional government regulation from future legislation, administrative actionor changes in the FDA policy. Even if the FDA approves a product, the approvalwill be limited to those indications covered in the approval.

Outside the UnitedStates, our ability to market any of our potential products is dependent uponreceiving marketing approvals from the appropriate regulatory authorities.These foreign regulatory approval processes include all of the risks associatedwith the FDA approval process described above. If we are unable to receiveregulatory approvals, we will be unable to commercialize our productcandidates, and our business may fail.

***We may not be able to gain market acceptance of our productcandidates, which would prevent us from becoming profitable.***

We cannot be certain thatany of our product candidates will gain market acceptance among physicians,patients, healthcare payers, pharmaceutical companies or others. Demonstratingthe safety and efficacy of our product candidates and obtaining regulatoryapprovals will not guarantee future revenue. Sales of medical products largelydepend on the reimbursement of patients’ medical expenses by governmenthealthcare programs and private health insurers. Governments and privateinsurers closely examine medical products to determine whether they should be coveredby reimbursement and if so, the level of reimbursement that will apply. Wecannot be certain that third party payers will sufficiently reimburse sales ofour products, or enable us to sell our products at profitable prices. Similarconcerns could also limit the reimbursement amounts that health insurers orgovernment agencies in other countries are prepared to pay for our products. Inmany countries where we plan to market our products, including Europe, Japanand Canada, the pricing of prescription drugs is controlled by the governmentor regulatory agencies. Regulatory agencies in these countries could determinethat the pricing for our products should be based on prices of othercommercially available drugs for the same disease, rather than allowing us tomarket our products at a premium as new drugs.

Sales of medical productsalso depend on physicians’ willingness to prescribe the treatment, which islikely to be based on a determination by these physicians that the products aresafe, therapeutically effective and cost-effective. We cannot predict whetherphysicians, other healthcare providers, government agencies or private insurerswill determine that our products are safe, therapeutically effective and costeffective relative to competing treatments.

***Our current product candidates are SIRT1 activators.Resveratrol, a SIRT1 activator, is marketed by other companies as a dietarysupplement. As a result, any products we successfully develop may be subject tosubstitution and competition.***

SRT501, a proprietaryformulation of resveratrol, and our NCEs activate SIRT1. Resveratrol, anaturally occurring substance currently marketed by others as a dietarysupplement, also activates SIRT1. We believe that our product candidates willhave a significantly superior therapeutic profile to resveratrol based onpreclinical data regarding the level of resveratrol in the blood and theeffectiveness of these product candidates in reducing fasted glucose levels andfed insulin levels in animals. However, we cannot be sure that physicians willview our product candidates as superior to currently available dietarysupplements. To the extent that the price of any product candidate wesuccessfully develop is significantly higher than the prices of commerciallyavailable resveratrol as marketed by other companies as dietary supplements,physicians may recommend this commercially available resveratrol instead ofwriting prescriptions for our products or patients may elect on their own totake commercially available resveratrol, and this may limit how we price ourproduct.

***We may not be able to manufacture our product candidates inclinical or commercial quantities, which would prevent us from commercializingour product candidates.***

To date, our productcandidates have been manufactured in small quantities by us and third partymanufacturers for preclinical studies and clinical trials. If any of ourproduct candidates is approved by the FDA or other regulatory agencies forcommercial sale, we will need to manufacture it in larger quantities and weintend to use third party manufacturers for commercial quantities. Our thirdparty manufacturers may not be able to successfully increase the manufacturingcapacity for any of our product candidates in a timely or efficient manner, or atall. If we are unable to successfully increase the manufacturing capacity for aproduct candidate, the regulatory approval or commercial launch of that productcandidate may be delayed or there may be a shortage in the supply of theproduct candidate. Our failure or the failure of our third party manufacturersto comply with the FDA’s good manufacturing practices and to pass inspectionsof the manufacturing facilities by the FDA or other regulatory agencies couldseriously harm our business.

***We may not be able to obtain and maintain the third partyrelationships that are necessary to develop, commercialize and manufacture someor all of our product candidates.***

We expect to depend oncollaborators, partners, licensees, clinical research organizations, manufacturersand other third parties to support our discovery efforts, to formulate productcandidates, to conduct clinical trials for some or all of our productcandidates, to manufacture clinical and commercial scale quantities of ourproduct candidates and products and to market, sell, and distribute anyproducts we successfully develop.

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We cannot guarantee thatwe will be able to successfully negotiate agreements for or maintainrelationships with collaborators, partners, licensees, clinical investigators,manufacturers and other third parties on favorable terms, if at all. If we areunable to obtain or maintain these agreements, we may not be able to clinicallydevelop, formulate, manufacture, obtain regulatory approvals for orcommercialize our product candidates, which will in turn adversely affect ourbusiness.

We expect to expendsubstantial management time and effort to enter into relationships with thirdparties and, if we successfully enter into such relationships, to manage theserelationships. In addition, substantial amounts of our expenditures will bepaid to third parties in these relationships. However, we cannot control theamount or timing of resources our contract partners will devote to our researchand development programs, product candidates or potential product candidates,and we cannot guarantee that these parties will fulfill their obligations to usunder these arrangements in a timely fashion, if at all.

In particular, wecurrently have approximately 40 contract scientists performing research anddevelopment services for us in a contract research organization in China. Theloss of this contractual relationship could result in a significant delay andadditional costs for our discovery and development activities. In addition, weare less knowledgeable about the reputation and quality of third partycontractors in countries outside of the United States where we conductdiscovery and clinical development programs and, therefore, enter into theserelationships with less information than if these third parties were in theUnited States and may not choose the best parties for these relationships.

***We have no experience in sales, marketing and distributionand may have to enter into agreements with third parties to perform thesefunctions, which could prevent us from successfully commercializing our productcandidates.***

We currently have nosales, marketing or distribution capabilities. To commercialize our productcandidates, we must either develop our own sales, marketing and distributioncapabilities, which will be expensive and time consuming, or make arrangementswith third parties to perform these services for us. If we decide to market anyof our products on our own, we will have to commit significant resources todeveloping a marketing and sales force and supporting distributioncapabilities. If we decide to enter into arrangements with third parties forperformance of these services, we may find that they are not available on termsacceptable to us, or at all. If we are not able to establish and maintainsuccessful arrangements with third parties or build our own sales and marketinginfrastructure, we may not be able to commercialize our product candidateswhich would adversely affect our business and financial condition.

***If we were to elect to commercialize SRT501 as a dietarysupplement, we may not be able to successfully market one or more of our NCEsas a therapy for disease, if approved, and our results may be adverselyaffected.***

Resveratrol is currentlyavailable for sale by other companies as dietary supplements. If we were toelect to market SRT501 as a dietary supplement, which we may do if wediscontinue development of SRT501 as a therapeutic drug, we believe we could doso without the need to complete lengthy and costly clinical trials. If we wereto obtain regulatory approval for one of our NCEs, we anticipate that we wouldprice the NCE at a considerably higher level than SRT501 would be priced if wewere selling SRT501 as a dietary supplement. While our NCEs are chemicalentities distinct from SRT501 and resveratrol, patients suffering from diseasesfor which our NCEs may be approved for treatment may choose to use the lowerpriced SRT501 dietary supplement, since it also activates SIRT1, rather thanthe higher priced approved NCE prescription product. As a result, if we chooseto commercialize SRT501 as a dietary supplement, our ability to successfullycommercialize NCE activators of SIRT1 may be adversely affected.

***We may fail to select or capitalize on the mostscientifically, clinically or commercially promising or profitable productcandidates.***

We have limitedtechnical, managerial and financial resources to determine which of our productcandidates should proceed to initial clinical trials, later stage clinicaldevelopment and potential commercialization. We may make incorrectdeterminations. Our decisions to allocate our research and development,management and financial resources toward particular product candidates ortherapeutic areas may not lead to the development of viable commercial productsand may divert resources from better opportunities. Similarly, our decisions todelay or terminate drug development programs may also be incorrect and couldcause us to miss valuable opportunities.

***If we are not able to retain our current senior managementteam and our scientific advisors or continue to attract and retain qualifiedscientific, technical and business personnel, our business will suffer.***

We are dependent on themembers of our management team and our scientific advisors for our businesssuccess. An important element of our strategy is to take advantage of theresearch and development expertise of our current management and to utilize theunique expertise of our scientific advisors in the sirtuin field. We currentlyhave employment agreements with all of our executive officers. Our employmentagreements with our executive officers are terminable on short notice or nonotice and provide for severance and change of control benefits. The loss ofany one of our executive officers or key scientific consultants, including, inparticular, Dr. Christoph Westphal, our Chief Executive Officer, couldresult in a significant loss in the knowledge and experience that we, as anorganization, possess and could cause significant delays, or outright failure,in the development and further commercialization of our product candidates.

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To grow, we will need tohire a significant number of qualified commercial, scientific andadministrative personnel. However, there is intense competition for humanresources, including management in the technical fields in which we operate,and we may not be able to attract and retain qualified personnel necessary forthe successful development and commercialization of our product candidates. Ourinability to attract new employees or to retain existing employees could limitour growth and harm our business.

***Disputes under key agreements or conflicts of interest withour scientific advisors or clinical investigators could delay or preventdevelopment or commercialization of our product candidates.***

Any agreements we have ormay enter into with third parties, such as collaboration, license, formulationsupplier, manufacturing, clinical research organization or clinical trialagreements, may give rise to disputes regarding the rights and obligations ofthe parties. Disagreements could develop over rights to ownership or use ofintellectual property, the scope and direction of research and development, theapproach for regulatory approvals or commercialization strategy. We intend toconduct research programs in a range of therapeutic areas, but our pursuit ofthese opportunities could result in conflicts with the other parties to theseagreements who may be developing or selling pharmaceuticals or conducting otheractivities in these same therapeutic areas. Any disputes or commercialconflicts could lead to the termination of our agreements, delay progress ofour product development programs, compromise our ability to renew agreements orobtain future agreements, lead to the loss of intellectual property rights orresult in costly litigation.

We collaborate withoutside scientific advisors and collaborators at academic and otherinstitutions that assist us in our research and development efforts. Ourscientific advisors are not our employees and may have other commitments thatlimit their availability to us. If a conflict of interest between their workfor us and their work for another entity arises, we may lose their services.

***We may encounter difficulties in managing our growth, whichcould adversely affect our operations.***

Since our inception in2004, we have grown to approximately 50 employees. We have experienced a periodof rapid growth that has placed a strain on our administrative and operationalinfrastructure. We expect this strain to continue as we continue to grow andseek to obtain and manage relationships with third parties. Our ability tomanage our operations and growth effectively depends upon the continualimprovement of our procedures, reporting systems, and operational, financial,and management controls. We may not be able to implement improvements in anefficient or timely manner and may discover deficiencies in existing systemsand controls. If we do not meet these challenges, we may be unable to takeadvantage of market opportunities, execute our business strategies or respondto competitive pressures which in turn may slow our growth or give rise toinefficiencies that would increase our losses.

We may acquire additionaltechnology and complementary businesses in the future. Acquisitions involvemany risks, any one of which could materially harm our business, including thediversion of management’s attention from core business concerns, failure toexploit acquired technologies, or the loss of key employees from either ourbusiness or the acquired business.

**Risksrelated to our financial results and need for additional financing**

***We have a history of operating losses, expect to incursignificant and increasing operating losses and may never be profitable.***

We were incorporated inMarch 2004 and have a very limited operating history for you to evaluateour business. We have no approved products and have generated no productrevenue. We have incurred operating losses since our inception in 2004. As ofJune 30, 2007, we had an accumulated deficit of $41.0 million.  We have spent, and expect to continue tospend, significant resources to fund research and development of our productcandidates. We expect to incur substantial and increasing operating losses overthe next several years as our research, development, preclinical testing, andclinical trial activities increase. As a result, our accumulated deficit willalso increase significantly.

Our product candidatesare in the early stages of development and may never result in any revenue. Wewill not be able to generate product revenue unless and until one of ourproduct candidates successfully completes clinical trials and receivesregulatory approval. As our most advanced product candidates are at an earlyproof-of-concept stage, we do not expect to receive revenue from any productcandidate for the foreseeable future. We may seek to obtain revenue fromcollaboration or licensing agreements with third parties. We currently have nosuch agreements which will provide us with material, ongoing future revenue andwe may never enter into any such agreements. Even if we eventually generate revenues, we may never be profitable, andif we do achieve profitability, we may not be able to sustain or increaseprofitability on a quarterly or annual basis.

***We may be unable to raise the substantial additional capitalthat we will need to sustain our operations.***

We will need substantialadditional funds to support our planned operations. Based on our currentoperating plans, we expect our existing resources to be sufficient to fund ourplanned operations until at least the end of 2009. We may, however, need toraise additional funds before that date if our research and developmentexpenses exceed our current expectations. This could occur for many reasons,including:

·                  someor all of our product candidates fail in clinical or preclinical studies and weare forced to seek additional product

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candidates;

·                  ourproduct candidates require more extensive clinical or preclinical testing thanwe currently expect;

·                  weadvance more of our product candidates than expected into costly later stageclinical trials;

·                  weadvance more preclinical product candidates than expected into early stageclinical trials;

·                  weare required, or consider it advisable, to acquire or license rights from oneor more third parties; or

·                  weacquire or license rights to additional product candidates or new technologies.

While we expect to seekadditional funding through public or private financings, we may not be able to obtainfinancing on acceptable terms, or at all. In addition, the terms of ourfinancings may be dilutive to, or otherwise adversely affect, holders of ourcommon stock. We may also seek additional funds through arrangements withcollaborators or other third parties. These arrangements would generallyrequire us to relinquish rights to some of our technologies, product candidatesor products, and we may not be able to enter into such agreements, onacceptable terms, if at all. These arrangements also may include issuances ofequity, which may also be dilutive to, or otherwise adversely affect, holdersof our common stock.  If we are unable toobtain additional funding on a timely basis, we may be required to curtail orterminate some or all of our research or development programs, including someor all of our product candidates.

**Risksrelated to regulatory approvals**

***Our product candidates must undergo rigorous clinical trialsand regulatory approvals, which could delay or prevent commercialization of ourproduct candidates.***

All of our productcandidates will be subject to rigorous and extensive clinical trials andextensive regulatory approval processes implemented by the FDA and similarregulatory bodies in other countries. The approval process is typically lengthyand expensive, and approval is never certain. We or our collaborators, if any,may delay, suspend or terminate clinical trials at any time for reasonsincluding:

·                  ongoingdiscussions with the FDA or comparable foreign authorities regarding the scopeor design of our clinical trials;

·                  delaysor the inability to obtain required approvals from institutional review boardsor other governing entities at clinical sites selected for participation in ourclinical trials;

·                  delaysin enrolling patients and volunteers into clinical trials;

·                  lowerthan anticipated retention rates of patients and volunteers in clinical trials;

·                  theneed to repeat clinical trials as a result of inconclusive or negative resultsor poorly executed testing;

·                  insufficientsupply or deficient quality of product candidate materials or other materialsnecessary to conduct our clinical trials;

·                  unfavorableFDA inspection and review of a clinical trial site or records of any clinicalor preclinical investigation;

·                  seriousand unexpected drug-related side effects or adverse device effects experiencedby participants in our clinical trials; or

·                  theplacement of a clinical hold on a trial.

The use of commerciallyavailable resveratrol could adversely affect our development or the approval ofSRT501, which is our proprietary formulation of resveratrol, if any adverseside effects become associated with such commercially available resveratrolproducts. Such use could also adversely affect our ability to market andcommercialize our product candidates.

Positive or timelyresults from preclinical studies and early clinical trials do not ensurepositive or timely results in late stage clinical trials or product approval bythe FDA or any other regulatory authority. Product candidates that showpositive preclinical or early clinical results often fail in later stageclinical trials. Data obtained from preclinical and clinical activities issusceptible to varying interpretations, which could delay, limit, or preventregulatory approvals.

We have limitedexperience in conducting the clinical trials required to obtain regulatoryapproval. We may not be able to conduct

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clinical trials atpreferred sites, enlist clinical investigators, enroll sufficient numbers ofparticipants, or begin or successfully complete clinical trials in a timelyfashion, if at all. Any failure to perform may delay or terminate the trials.Our current clinical trials may be insufficient to demonstrate that ourpotential products will be active, safe, or effective. Additional clinicaltrials may be required if clinical trial results are negative or inconclusive,which will require us to incur additional costs and significant delays. If wedo not receive the necessary regulatory approvals, we will not be able togenerate product revenues and may not become profitable.

***The regulatory approval process is costly and lengthy and wemay not be able to successfully obtain all required regulatory approvals.***

The preclinicaldevelopment, clinical trials, manufacturing, marketing and labeling ofpharmaceuticals are all subject to extensive regulation by numerousgovernmental authorities and agencies in the United States and other countries.We must obtain regulatory approval for each of our product candidates beforemarketing or selling any of them. It is not possible to predict how long theapproval processes of the FDA or any other applicable federal or foreignregulatory authority or agency for any of our products will take or whether anysuch approvals ultimately will be granted. The FDA and foreign regulatoryagencies have substantial discretion in the drug approval process, and positiveresults in preclinical testing or early phases of clinical studies offer noassurance of success in later phases of the approval process. In addition, theuser fee law under which the FDA has made performance goal commitments withrespect to its review of New Drug Applications is set to expire this year. IfCongress fails to reauthorize the user fee law the effect may be significantlyincreased time to FDA approvals. Generally, preclinical and clinical testing ofproducts can take many years and require the expenditure of substantialresources, and the data obtained from these tests and trials can be susceptibleto varying interpretations that could delay, limit or prevent regulatoryapproval. If we encounter significant delays in the regulatory process thatresult in excessive costs, this may prevent us from continuing to develop ourproduct candidates. Any delay in obtaining, or failure to obtain, approvalscould adversely affect the marketing of our products and our ability togenerate product revenue. The risks associated with the approval processinclude:

·                  failureof our product candidates to meet a regulatory agency’s requirements forsafety, efficacy and quality;

·                  limitationon the indicated uses for which a product may be marketed;

·                  unforeseensafety issues or side effects; and

·                  governmentalor regulatory delays and changes in regulatory requirements and guidelines.

We filed for Orphan Drugstatus for SRT501 for MELAS in the United States and the European Union. TheFDA and the European Union regulatory authorities grant Orphan Drug designationto drugs intended to treat a rare disease or condition, which is generally adisease or condition that affects fewer than 200,000 individuals in the UnitedStates and fewer than 5 in 10,000 individuals in the European Union. In theUnited States, a product that has Orphan Drug designation and receives thefirst FDA approval for the disease, for which it has such designation, isentitled to market exclusivity, except in very limited circumstances, for sevenyears. However, if a competitor has Orphan Drug status for its own product andis first to obtain approval of the same drug, as defined by the FDA, for the OrphanDrug indication, or if our product candidate is determined to be containedwithin the competitor’s product for the same indication or disease, then thatcompetitor would have market exclusivity and approval of our product for thatindication or disease could potentially be blocked for seven years. Orphan Drugdesignation does not convey any advantage in, or shorten the duration of, theregulatory review and approval process. Obtaining Orphan Drug designation maynot provide us with a material commercial advantage.

***Even if we receive regulatory approvals for marketing ourproduct candidates, if we fail to comply with continuing regulatoryrequirements, we could lose our regulatory approvals, and our business would beadversely affected.***

The FDA and otherregulatory authorities continue to review products even after they receiveinitial approval. If we receive approval to commercialize any productcandidates, the manufacturing, testing, marketing, sale and distribution ofthese drugs will be subject to continuing regulation, including compliance withquality systems regulations, good manufacturing practices, adverse eventrequirements, and prohibitions on promoting a product for unapproved uses.Enforcement actions resulting from our failure to comply with government andregulatory requirements could result in fines, suspension of approvals,withdrawal of approvals, product recalls, product seizures, mandatory operatingrestrictions, criminal prosecution, civil penalties and other actions thatcould impair the manufacturing, testing, marketing, sale and distribution ofour potential products and our ability to conduct our business.

***Even if we are able to obtain regulatory approvals for anyof our product candidates, if they exhibit harmful side effects after approval,our regulatory approvals could be revoked or otherwise negatively impacted, andwe could be subject to costly and damaging product liability claims.***

Even if we receiveregulatory approval for SRT501 or any of our NCEs, we will have tested them inonly a small number of patients during our clinical trials. If our applicationsfor marketing are approved and more patients begin to use our product, newrisks and side effects associated with our products may be discovered. As aresult, regulatory authorities may revoke their approvals; we may be

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required to conductadditional clinical trials, make changes in labeling of our product,reformulate our product or make changes and obtain new approvals for our andour suppliers’ manufacturing facilities. We might have to withdraw or recallour products from the marketplace. We may also experience a significant drop inthe potential sales of our product if and when regulatory approvals for suchproduct are obtained, experience harm to our reputation in the marketplace orbecome subject to lawsuits, including class actions. Any of these results coulddecrease or prevent any sales of our approved product or substantially increasethe costs and expenses of commercializing and marketing our product.

***Healthcare reform measures could adversely affect ourbusiness.***

The efforts ofgovernmental and third-party payers to contain or reduce the costs ofhealthcare may adversely affect the business and financial condition ofpharmaceutical companies. In the United States and in foreign jurisdictionsthere have been, and we expect that there will continue to be, a number oflegislative and regulatory proposals aimed at changing the healthcare system.For example, in some countries other than the United States, pricing of prescriptiondrugs is subject to government control, and we expect proposals to implementsimilar controls in the United States to continue. The pendency or approval ofsuch proposals could result in a decrease in our common stock price or limitour ability to raise capital or to enter into collaborations or license rightsto our products.

***New federal legislation may increase the pressure to reduceprices of pharmaceutical products paid for by Medicare, which could adverselyaffect our revenues, if any.***

The Medicare PrescriptionDrug Improvement and Modernization Act of 2003, or MMA, expanded Medicarecoverage for drug purchases by the elderly and disabled beginning in 2006. Thenew legislation uses formularies, preferred drug lists and similar mechanismsthat may limit the number of drugs that will be covered in any therapeuticclass or reduce the reimbursement for some of the drugs in a class.

As a result of theexpansion of legislation and the expansion of federal coverage of drugproducts, we expect that there will be additional pressure to contain andreduce costs. Indeed, legislation that would permit the federal government tonegotiate drug prices directly with manufacturers under the Medicareprescription drug programs is currently under consideration. These costreduction initiatives could decrease the coverage and price that we receive forour products in the future and could seriously harm our business. While the MMAapplies only to drug benefits for Medicare beneficiaries, private payers oftenfollow Medicare coverage policy and payment limitations in setting their ownreimbursement systems, and any limits on or reductions in reimbursement thatoccur in the Medicare program may result in similar limits on or reductions inpayments from private payers.

***New federal laws or regulations on drug importation couldmake lower cost versions of our future products available, which couldadversely affect our revenues, if any.***

The prices of some drugsare lower in other countries than in the United States because of governmentregulation and market conditions. Under current law, importation of drugs intothe United States is generally not permitted unless the drugs are approved inthe United States and the entity that holds that approval consents to theimportation. Various proposals have been advanced to permit the importation ofdrugs from other countries to provide lower cost alternatives to the productsavailable in the United States. In addition, the MMA requires the Secretary ofHealth and Human Services to promulgate regulations for drug reimportation fromCanada into the United States under some circumstances, including when thedrugs are sold at a lower price than in the United States.

If the laws orregulations are changed to permit the importation of drugs into the UnitedStates in circumstances that are currently not permitted, such a change couldhave an adverse effect on our business by making available lower pricedalternatives to our future products.

***Failure to obtain regulatory and pricing approvals inforeign jurisdictions could delay or prevent commercialization of our productsabroad.***

If we succeed indeveloping any products, we intend to market them in the European Union andother foreign jurisdictions. In order to do so, we must obtain separate regulatoryapprovals and comply with numerous and varying regulatory requirements. Theapproval procedure varies among countries and can involve additional testing.The time required to obtain approval abroad may differ from that required toobtain FDA approval. The foreign regulatory approval process may include all ofthe risks associated with obtaining FDA approval and additional risksassociated with requirements particular to those foreign jurisdictions where wewill seek regulatory approval of our products. We may not obtain foreignregulatory approvals on a timely basis, if at all. Approval by the FDA does notensure approval by regulatory authorities in other countries, and approval byone foreign regulatory authority does not ensure approval by regulatoryauthorities in other foreign countries or by the FDA. We and our collaboratorsmay not be able to file for regulatory approvals and may not receive necessaryapprovals to commercialize our products in any market outside the UnitedStates. The failure to obtain these approvals could materially adversely affectour business, financial condition and results of operations.

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**Risksrelated to our intellectual property**

***Our success depends upon our ability to obtain and maintainintellectual property protection for our products and technologies.***

Our success will dependon our ability to obtain and maintain adequate protection of our intellectualproperty covering any products or product candidates we plan to develop. Inaddition to taking other steps to protect our intellectual property, we intendto apply for patents with claims covering our technologies, processes, productsand product candidates when and where we deem it appropriate to do so. We haveapplied for patent protection, with claims directed at mechanism and methodsrelating to our product candidates, SRT501 formulations, our NCEs and severalof our drug discovery tools in the United States, and in some, but not all,foreign countries. Any changes we make to the SRT501 formulations may not becovered by our existing patent applications which would require us to file newapplications or seek other forms of protection. In addition, resveratrol, theactive ingredient in SRT501, our most advanced product candidate, cannot beprotected by a patent covering its chemical composition of matter sinceresveratrol has long been in the public domain. Consequently, we are relying onmethod of use and formulation patent protection for SRT501, which may notprovide the same level of protection as composition of matter patentprotection. In countries where we have not and do not seek patent protection,third parties may be able to manufacture and sell our products without ourpermission, and we may not be able to stop them from doing so.

Similar to otherbiotechnology companies, our patent position is generally uncertain andinvolves complex legal and factual questions. In addition, the laws of someforeign countries do not protect proprietary rights to the same extent as thelaws of the United States, and other biotechnology companies have encounteredsignificant problems in protecting and defending their proprietary rights inforeign jurisdictions. Whether filed in the United States or abroad, our patentapplications may be challenged or may fail to result in issued patents. Inaddition, our existing patents and any future patents we obtain may not besufficiently broad to prevent others from practicing our technologies or fromdeveloping or commercializing competing products. Furthermore, others mayindependently develop or commercialize similar or alternative technologies ordrugs, or design around our patents. Our patents may be challenged, invalidatedor fail to provide us with any competitive advantages.

We have licensed somepatents on a non-exclusive basis which means such patents could, now or in thefuture, potentially be licensed to our competitors as well, and we may not beable to control or influence the prosecution or enforcement of such patents. Wealso may not have unilateral control over the prosecution and enforcement ofour exclusively licensed patents, and our ability to protect our products usingsuch patents may depend to some extent on the cooperation of our licensors.

If we do not obtain or weare unable to maintain adequate patent or trade secret protection for ourproducts in the United States, competitors could duplicate them withoutrepeating the extensive testing that we will be required to undertake to obtainapproval of the products by the FDA. Regardless of any patent protection, underthe current statutory framework the FDA is prohibited by law from approving anygeneric version of any of our products for three years after it has approvedour product. Upon the expiration of that period, or if that time period isaltered, the FDA could approve a generic version of our product unless we havepatent protection sufficient for us to block that generic version. Withoutsufficient patent protection, the applicant for a generic version of ourproduct would be required only to conduct a relatively inexpensive study toshow that its product is bioequivalent to our product and would not have torepeat the studies that we conducted to demonstrate that the product is safeand effective. In the absence of adequate patent protection in other countries,competitors may similarly be able to obtain regulatory approval in thosecountries of products that duplicate our products.

A significant portion ofour discovery and development efforts is performed in China and other countriesoutside of the United States through third party contractors. We may not beable to effectively monitor and assess intellectual property developed by thesecontractors and may therefore not appropriately protect this intellectualproperty and lose valuable intellectual property rights. In addition, the legalprotection afforded to inventors and owners of intellectual property incountries outside of the United States may not be as protective of intellectualproperty rights as in the United States, and we may, therefore, be unable toacquire and protect intellectual property developed by these contractors to thesame extent as if these discovery and development activities were beingconducted in the United States.

***We may be unable to in-license intellectual property rightsor technology necessary to develop and commercialize our products.***

Several third parties areactively researching and seeking patents and have obtained issued patents inthe sirtuin field. Such patents being sought by third parties include publishedapplications that are directed to the use of activators of SIRT1, which includeclaims that, if issued as published, could encompass SRT501. Although we do notbelieve that these applications support patentable claims that would cover ourproduct candidates, including SRT501, we cannot assure you that such claimswill be denied by the patent office.  Inaddition, we are aware of one issued patent covering the composition of matterof resveratrol and which may cover SRT501. Depending on what patents ultimately issue and depending on the ultimateformulation and method of use of our product candidates, including SRT501 andwhether the validity of the issued patent of which we are aware is maintained,we may need to obtain a license under such patents or other intellectualproperty rights. There can be no assurance that such licenses will be availableon commercially reasonable terms, or at all. If a third party does not offer usa necessary license or offers a license only on terms that are unattractive orunacceptable to us, we might be unable to develop and commercialize one or moreof our product candidates.

Moreover, if we fail tomeet our obligations under our license agreements, or our agreements areterminated for any other reasons, we

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may lose our rights toin-licensed technologies.

***Confidentiality agreements with employees and others may notadequately prevent disclosure of trade secrets and other proprietaryinformation.***

In our activities, werely substantially upon proprietary materials, information, trade secrets andknow-how to conduct our research and development activities, and to attract andretain collaborators, licensees and customers. Our scientific advisors andcollaborators gain access to valuable proprietary knowledge through theiractivities in collaboration with us. We take steps to protect our proprietaryrights and information, including the use of confidentiality and otheragreements with our employees and consultants and in our academic andcommercial relationships. However, these steps may be inadequate, agreementsmay be violated, or there may be no adequate remedy available for a violationof an agreement. We cannot assure you that our proprietary information will notbe disclosed or that we can meaningfully protect our trade secrets. Ourcompetitors may independently develop substantially equivalent proprietaryinformation or may otherwise gain access to our trade secrets, which couldadversely affect our ability to compete in the market.

***Litigation or third party claims of intellectual propertyinfringement could require substantial time and money to resolve. Unfavorableoutcomes in these proceedings could limit our intellectual property rights andour activities.***

We may need to resort tolitigation to enforce or defend our intellectual property rights, including anypatents issued to us. If a competitor or collaborator files a patentapplication claiming technology also invented by us, in order to protect ourrights, we may have to participate in an expensive and time consuminginterference proceeding before the United States Patent and Trademark Office.We cannot guarantee that our product candidates will be free of claims by thirdparties alleging that we have infringed their intellectual property rights.Third parties may assert that we are employing their proprietary technologieswithout authorization and they may resort to litigation to attempt to enforcetheir rights. Third parties may have or obtain patents in the future and claimthat the use of our technology or any of our product candidates infringes theirpatents. We may not be able to develop or commercialize product candidatesbecause of patent protection others have. Our business will be harmed if wecannot obtain a necessary or desirable license, can obtain such a license onlyon terms we consider to be unattractive or unacceptable, or if we are unable toredesign our product candidates or processes to avoid actual or potentialpatent or other intellectual property infringement. Obtaining, protecting anddefending patent and other intellectual property rights can be expensive andmay require us to incur substantial costs, including the diversion ofmanagement and technical personnel. An unfavorable ruling in patent orintellectual property litigation could subject us to significant liabilities tothird parties, require us to cease developing, manufacturing or selling theaffected products or using the affected processes, require us to license thedisputed rights from third parties, or result in awards of substantial damagesagainst us.

There can be no assurancethat we would prevail in any intellectual property infringement action, will beable to obtain a license to any third party intellectual property oncommercially reasonable terms, successfully develop non-infringing alternativeson a timely basis, or license non-infringing alternatives, if any exist, oncommercially reasonable terms. Any significant intellectual property impedimentto our ability to develop and commercialize our products could seriously harmour business and prospects.

***Patent litigation or other litigation in connection with ourintellectual property rights may lead to publicity that may harm our reputationand the market price of our common stock may decline.***

During the course of anypatent litigation, there may be public announcements of the results ofhearings, motions, and other interim proceedings or developments in thelitigation. If securities analysts or investors regard these announcements asnegative, the market price of our common stock may decline. General proclamationsor statements by key public figures may also have a negative impact on theperceived value of our intellectual property.

**Risksrelated to our industry**

***Our competitors and potential competitors may developproducts and technologies that make ours less attractive or obsolete.***

Many companies,universities, and research organizations developing competing productcandidates have greater resources and significantly greater experience infinancial, research and development, manufacturing, marketing, sales, distribution,and technical regulatory matters than we have. In addition, many competitorshave greater name recognition and more extensive collaborative relationships.Our competitors could commence and complete clinical testing of their productcandidates, obtain regulatory approvals, and begin commercial-scalemanufacturing of their products faster than we are able to for our products.They could develop products that would render our product candidates, and thoseof our collaborators, obsolete and noncompetitive. If we are unable to competeeffectively against these companies, then we may not be able to commercializeour product candidates or achieve a competitive position in the market. Thiswould adversely affect our ability to generate revenues.

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***Competition in the biotechnology and pharmaceuticalindustries may result in competing products, superior marketing of otherproducts and lower revenues or profits for us.***

There are many companiesthat are seeking to develop products and therapies for the treatment ofdiabetes and other metabolic disorders. Our competitors include multinationalpharmaceutical and chemical companies, specialized biotechnology firms anduniversities and other research institutions. A number of pharmaceuticalcompanies, including Abbott, AstraZeneca, Bayer, Bristol-Myers Squibb,GlaxoSmithKline, Johnson & Johnson, Lilly, Merck, Novartis, NovoNordisk, Pfizer, Roche, Sanofi-Aventis, Takeda and Wyeth, as well as large andsmall biotechnology companies such as Amgen, Amylin, Genentech and MannKind,are pursuing the development or marketing of pharmaceuticals that target thesame diseases that we are targeting, and it is possible that the number ofcompanies seeking to develop products and therapies for the treatment ofdiabetes and other metabolic disorders will increase. We are also aware ofother companies, including Elixir Pharmaceuticals, that are seeking to developdrugs that modulate sirtuins. Many of our competitors have substantiallygreater financial, technical, human and other resources than we do and may bebetter equipped to develop, manufacture and market technologically superiorproducts. In addition, many of these competitors have significantly greaterexperience than we do in undertaking preclinical testing and human clinicalstudies of new pharmaceutical products and in obtaining regulatory approvals ofhuman therapeutic products. Accordingly, our competitors may succeed inobtaining FDA approval for superior products.

Other products arecurrently in development or exist in the market that may compete directly withthe products that we are developing or marketing. Various other products totreat Type 2 Diabetes are available or are in development, including:

·                  Biguanides;

·                  Sulfonylureas;

·                  Thiazolidinediones(TZDs);

·                  Alpha-glucosidaseinhibitors (AGIs);

·                  Dipeptidylpeptidase 4 (DPP4) inhibitors;

·                  Glucagon-likepeptide-1 (GLP-1) analogues; and

·                  Insulins,including injectable and inhaled versions.

In addition, severalcompanies are developing various approaches to improve treatments for Type 1and Type 2 Diabetes. We cannot predict whether any products we successfullydevelop will have sufficient advantages to cause health care professionals toadopt them over our competitors’ products or that our products will offer aneconomically feasible alternative to our competitors’ products. Our potentialproducts could become obsolete before we recover expenses incurred indeveloping them.

***We may have significant product liability exposure which mayharm our business and our reputation.***

We face exposure toproduct liability and other claims if our product candidates, products orprocesses are alleged to have caused harm. These risks are inherent in thetesting, manufacturing, and marketing of human therapeutic products. Althoughwe currently maintain product liability insurance in the amount of$3.0 million, we may not have sufficient insurance coverage, and we maynot be able to obtain sufficient coverage at a reasonable cost, if at all. Ourinability to obtain product liability insurance at an acceptable cost or tootherwise protect against potential product liability claims could prevent orinhibit the commercialization of any products or product candidates that wedevelop. If we are sued for any injury caused by our products, productcandidates or processes, our liability could exceed our product liabilityinsurance coverage and our total assets. Claims against us, regardless of theirmerit or potential outcome, may also generate negative publicity or hurt ourability to obtain physician endorsement of our products or expand our business.

***We use and generate materials that may expose us toexpensive and time-consuming legal claims.***

Our research anddevelopment programs involve the use of hazardous materials, chemicals andradioactive and biological materials. We are subject to foreign, federal, stateand local environmental and health and safety laws and regulations governing,among other matters, the use, manufacture, handling, storage, and disposal ofhazardous materials and waste products. We may incur significant costs tocomply with these current or future environmental and health and safety lawsand regulations. In addition, we cannot completely eliminate the risk ofcontamination or injury from hazardous materials and may incur materialliability as a result of such contamination or injury. In the event of anaccident, an injured party may seek to hold us liable for any damages thatresult. Any liability could exceed the limits or fall outside the coverage ofour workers’ compensation, property and business interruption insurance and wemay not be able to maintain insurance on acceptable terms, if at all. Wecurrently carry no insurance specifically covering environmental claims.

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**Risksrelated to an investment in our Common Stock**

***Our common stock may have a volatile public trading priceand a low trading volume.***

The market prices forsecurities of companies comparable to us have been highly volatile. Often,these stocks have experienced significant price and volume fluctuations for reasonsunrelated to the operating performance of the individual companies. The marketprice of our stock may be similarly volatile. Factors giving rise to this volatility may include:

·                  disclosureof actual or potential results with respect to product candidates we aredeveloping;

·                  regulatorydevelopments in both the United States and abroad;

·                  developmentsconcerning proprietary rights, including patents and litigation matters;

·                  publicconcern about the safety or efficacy of our product candidates or technology,or related technology, or new technologies generally;

·                  publicannouncements by our competitors or others; and

·                  generalmarket conditions and comments by securities analysts and investors.

***Fluctuations in our operating losses could adversely affectthe price of our common stock.***

Our operating losses mayfluctuate significantly on a quarterly basis. Some of the factors that maycause our operating losses to fluctuate on a period-to-period basis include thestatus of our preclinical and clinical development programs, level of expensesincurred in connection with our preclinical and clinical development programs,implementation or termination of collaboration, licensing, manufacturing orother material agreements with third parties, non-recurring revenue or expensesunder any such agreement, and compliance with regulatory requirements.Period-to-period comparisons of our historical and future financial results maynot be meaningful, and investors should not rely on them as an indication offuture performance. Our fluctuating losses may fail to meet the expectations ofsecurities analysts or investors. Our failure to meet these expectations maycause the price of our common stock to decline.

***Because of expected volatility in our trading price andtrading volume, we may incur significant costs from class action litigation.***

Our stock price mayfluctuate for many reasons, including as a result of public announcementsregarding the progress of our development efforts, the addition or departure ofour key personnel, variations in our quarterly operating results and changes inmarket valuations of pharmaceutical, biotechnology or other life sciencecompanies. Recently, when the market price of a stock has been volatile, as ourstock price may be, holders of that stock have occasionally brought securitiesclass action litigation against the company that issued the stock. If any ofour stockholders were to bring a lawsuit of this type against us, even if thelawsuit is without merit, we could incur substantial costs defending thelawsuit. A stockholder lawsuit could also divert the time and attention of ourmanagement, which could adversely affect our business.

***Future sales of our common stock may cause the market priceof our common stock to decline.***

The market price of ourcommon stock may decline if our stockholders or we sell shares of our commonstock.  A small number of stockholdersown a significant number of shares that they will be able to sell in the publicmarket in the near future.  Sales by ourcurrent stockholders of a substantial number of shares, or the expectation thatsuch sales may occur, could significantly reduce the market price of our commonstock.  Moreover, the holders of asubstantial number of shares of common stock have rights, subject to certainconditions, to require us to file registration statements to permit the resaleof their shares in the public market or to include their shares in registrationstatements that we may file for ourselves or other stockholders.

We intend to file a registrationstatement ninety days following our initial public offering to permit the saleof shares of our common stock that we may issue under our stock optionplan.  As a result, these shares may befreely sold in the public market upon issuance, subject to restrictions underthe securities laws and lock-up agreements. In connection with our initial public offering, most of our stockholdershave agreed, subject to certain limited exceptions, not to sell any shares ofour common stock owned by them, for a period of 180 days after the closingof this offering unless they first obtain the written consent of J.P. MorganSecurities Inc.

***Our management team may invest or spend the proceeds fromour initial public offering in ways with which our stockholders may not agreeor in ways which may not yield a significant return.***

We may allocate theproceeds from our initial public offering in ways that stockholders may notsupport. Our management has considerable discretion in the application of thenet proceeds of our initial public offering. We may use the net proceeds for corporate purposes that do not increaseour profitability or our stock price. Until the net proceeds are used, weintend to invest them in accordance with our investment policy, which includesinvestments in short-term, interest-bearing, investment-grade securities or

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guaranteed obligations ofthe United States or other governments or their agencies.

***We will incur significant increased costs as a result ofoperating as a public company, and our management will be required to devotesubstantial time to new compliance initiatives.***

As a public company, weare incurring and will continue to incur significant legal, accounting andother expenses that we did not incur as a private company.  In addition, the Sarbanes-Oxley Act, as wellas rules adopted or proposed by the United States Securities and ExchangeCommission, or SEC, and by The NASDAQ Global Market, have imposed variousrequirements on public companies, including establishment and maintenance of effectivedisclosure and financial controls and changes in corporate governancepractices.  Our management and otherpersonnel will need to devote a substantial amount of time to these newcompliance initiatives.  Moreover, theserules and regulations have already and will continue to increase our legal andfinancial compliance costs and will make some activities more time-consumingand costly.  For example, we expect theselaws and regulations will make it more difficult and more costly for us toobtain certain types of insurance, including director and officer liabilityinsurance, and we may be forced to accept reduced policy limits and coverage orincur substantially higher costs to obtain the same or similar coverage. Theimpact of these events could also make it more difficult for us to attract andretain qualified persons to serve on our board of directors, our boardcommittees or as executive officers. We cannot estimate the amount or timing ofadditional costs we may incur as a result of these laws and regulations.

***Section 404 of the Sarbanes-Oxley Act of 2002 willrequire us to document and test our internal control over financial reportingfor fiscal year 2008 and beyond and will require an independent registeredpublic accounting firm to report on our assessment as to the effectiveness ofthese controls. Any delays or difficulty in satisfying these requirements couldadversely affect our future results of operations and our stock price.***

Section 404 of theSarbanes-Oxley Act of 2002 will require us to document and test theeffectiveness of our internal control over financial reporting in accordancewith an established internal control framework and to report on our conclusionas to the effectiveness of our internal controls. It will also require an independentregistered public accounting firm to test our internal control over financialreporting and report on the effectiveness of such controls for our fiscal yearending December 31, 2008 and subsequent years. An independent registeredpublic accounting firm will also be required to test, evaluate and report onthe completeness of our assessment. In addition, upon completion of thisoffering, we will be required under the Securities Exchange Act of 1934 tomaintain disclosure controls and procedures and internal control over financialreporting. Moreover, it may cost us more than we expect to comply with thesecontrol- and procedure-related requirements.

We may in the futurediscover areas of our internal controls that need improvement. We cannot becertain that any remedial measures we take will ensure that we implement andmaintain adequate internal controls over our financial processes and reportingin the future. Any failure to implement required new or improved controls, ordifficulties encountered in their implementation, could harm our operatingresults or cause us to fail to meet our reporting obligations. If we are unableto conclude that we have effective internal control over financial reporting,or if our independent registered public accounting firm is unable to provide uswith an unqualified opinion regarding the effectiveness of our internal controlover financial reporting as of December 31, 2008 and in future periods asrequired by Section 404, investors could lose confidence in the reliabilityof our consolidated financial statements, which could result in a decrease inthe value of our common stock. Failure to comply with Section 404 couldpotentially subject us to sanctions or investigations by the SEC, the NASD orother regulatory authorities.

***Anti-takeover provisions in our charter documents andprovisions of Delaware law may make an acquisition more difficult.***

We are incorporated inDelaware. Anti-takeover provisions of Delaware law and our charter documentsmay make a change in control more difficult. Also, under Delaware law, ourboard of directors may adopt additional anti-takeover measures.

Our charter authorizesour board of directors to issue up to 20,000,000 shares of preferred stock andto determine the terms of those shares of stock without any further action byour stockholders. If the board of directors exercises this power to issuepreferred stock, it could be more difficult for a third party to acquire amajority of our outstanding voting stock.

Our charter also providesstaggered terms for the members of our board of directors. Under Section 141 ofthe Delaware General Corporation Law, our directors may be removed bystockholders only for cause and only by a vote of the holders of a majority ofvoting shares then outstanding.  Theseprovisions may prevent stockholders from replacing the entire board in a singleproxy contest, making it more difficult for a third party to acquire control ofus without the consent of our board of directors.  These provisions could also delay the removalof management by the board of directors with our without cause.  In addition, our bylaws limit the ability ourstockholders to call special meetings of stockholders.

Our stock option plangenerally permits our board of directors to provide for acceleration of vestingof options granted under the plan in the event of certain transactions thatresult in a change of control. If our board of directors uses its authority toaccelerate vesting of options, this action could make an acquisition more costly,and it could prevent an acquisition from going forward.

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Under Section 203 ofthe Delaware General Corporation Law, a corporation may not engage in abusiness combination with any holder of 15% or more of its capital stock untilthe holder has held the stock for three years unless, among otherpossibilities, the board of directors approves the transaction. Our board ofdirectors could use this provision to prevent changes in management. Theexistence of the foregoing provisions could limit the price that investorsmight be willing to pay in the future for shares of our common stock.

***Our officers and directors and other affiliates may be ableto exert significant control over the company.***

Currently, our executiveofficers, directors, and other affiliates control approximately 24% of ouroutstanding common stock. Therefore, our executive officers, directors andother affiliates have the ability to influence the company through thisownership position.

These stockholders, ifthey act together, may be able to influence all matters requiring stockholderapproval, including the election of directors, amendments of our organizationaldocuments, or approval of any merger, sale of assets, or other majorcorporation transaction. This may prevent or discourage unsolicited acquisitionproposals or offers for our common stock that you may feel are in your bestinterest as one of our stockholders.

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**Item2. Unregistered Sales of Equity Securities and Use of Proceeds**

***Unregistered Sales of EquitySecurities***

On January 23, 2007 and February 1, 2007, we issuedand sold 21,389,880 shares of our Series C-1 redeemable convertible preferredstock to 26 accredited investors. The pre-reverse split price per share was$1.68 and generated gross proceeds to us of $35,935,000. The shares were issuedpursuant to Rule 506 of Regulation D promulgated under the federal SecuritiesAct.

During the period from April 1, 2007 until June 30,2007, we issued 6,269 shares of common stock upon option exercises for anaggregate sale price of approximately $2,000.

***Use of Proceedsfrom Registered Securities***

Our initial public offering of common stock waseffected through a Registration Statement on Form S-1 (FileNo. 333-140979), that was declared effective by the Securities andExchange Commission on May 22, 2007, which registered an aggregate of 5,750,000shares of our common stock.   On May 22,2007, an additional 1,150,000 shares of our common stock were registeredthrough a Registration Statement filed pursuant to Rule 462(b) (File No.333-143174).  On May 29, 2007, wecompleted an initial public offering of 6,000,000 shares of our common stock ata price to the public of $10.00 per share. J.P. Morgan Securities Inc, CIBC World Markets Corp., Piper Jaffray& Co., JMP Securities LLC and Rodman & Renshaw, LLC were the managingunderwriters of the initial public offering.  In addition, on May 29, 2007 in connection with the exercise of theunderwriters’ over-allotment option, 900,000 additional shares of common stockwere sold on our behalf at the initial public offering price of $10.00 pershare, for aggregate gross proceeds of $9.0 million.  There were no selling stockholders in theoffering.

We paid $4.8 million in underwriting discounts to theunderwriters in connection with the offering. In addition, we incurred additional costs of approximately $1.7 millionin connection with the offering, which then added to the underwriting discountspaid by us, amounts to total expenses of approximately $6.5 million.  Thus the net offering proceeds to us, afterdeducting underwriting discounts and offering expenses, were approximately$62.5 million.  No offering expenses werepaid directly or indirectly to any of our directors or officers (or theirassociates) or persons owning ten percent or more of any class of our equitysecurities or to any other affiliates.

We have used approximately $3.2 million of the netproceeds from the initial public offering to fund the clinical development ofSRT501, to advance and expand our preclinical development of additional productcandidates targeting SIRT1, other sirtuins and related pathways, and forworking capital, capital expenditures and other general corporate purposes. Wehave invested the unused proceeds from the offering in short-terminterest-bearing, investment grade securities.

**Item 4.Submission of Matters To a Vote of Security Holders.**

None.

**Item 5.Other Information.**

The description of the lease for 200 TechnologySquare, Cambridge, Massachusetts, is described in Form 8-K filed June 22, 2007with the Securities and Exchange Commission and above in Part 1, Item 2 under “ContractualObligations”.

**Item 6.Exhibits.**

(a) **Exhibits.**

The Exhibitslisted in the Exhibit Index immediately preceding the Exhibits are filedas a part of this Quarterly Report on Form 10-Q.

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**SIGNATURES**

Pursuant to the requirements of Section 13 or15(d) of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.
|        |   |   | SIRTRIS PHARMACEUTICALS, INC.                                        |   |
|--------|--------|--------|----------------------------------------------------------------------|--------|
|   |   |   |                                                                 |   |
|   |   | By:    | /s/ Christoph Westphal                                               |   |
|   |   |   | Christoph Westphal                                                   |   |
|   |   |   | President and Chief Executive Officer  (principal executive officer) |   |
|   |   |   |                                                                 |   |
|   |   |   |                                                                 |   |
|   |   | By:    | /s/ Garen Bohlin                                                     |   |
|   |   |   | Garen Bohlin                                                         |   |
|   |   |   | Chief Operating Officer  (principal financial officer)               |

 

Date: August 13, 2007

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**EXHIBITINDEX**
| Exhibit  No. | ** ** | **Description**                                                                                                                                                               |
|--------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1         |       | Lease Agreement, dated as of June 22, 2007, by and  between ARE-Tech Square, L.L.C. and the Company.                                                                          |
|         |       |                                                                                                                                                                          |
| 31.1         |       | Certification of Chief Executive Officer pursuant to  Exchange Act rules 13a-14 or 15d-14.                                                                               |
|         |       |                                                                                                                                                                          |
| 31.2         |       | Certification of Chief Operating Officer pursuant to  Exchange Act rules 13a-14 or 15d-14.                                                                               |
|         |       |                                                                                                                                                                          |
| 32.1         |       | Certifications of Chief Executive Officer and Chief  Operating Officer pursuant to Exchange Act rules 13a-14(b) or  15d-14(b) and 18 U.S.C. Section 1350. |

 

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