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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark one)

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007

OR



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

Commission File Number: 0-19410



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POINT THERAPEUTICS, INC.

(Exact
Name of Registrant as Specified in Its Charter)



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|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|Delaware                                                      |  | 04-3216862                         
|(State or Other Jurisdiction ofIncorporation or Organization) |  | (I.R.S. EmployerIdentification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|70 Walnut Street, Wellesley Hills, MA    |  | 02481     
|(Address of Principal Executive Offices) |  | (Zip Code)

(781) 239-7502

Registrants Telephone Number, Including Area Code



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

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

Large accelerated
filer ̈Accelerated filer  x    Non-accelerated filer ̈

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

As of November 6, 2007, there were approximately 39,312,000 shares of the Registrants Common Stock, $0.01 par value per share, outstanding.



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##### Table of Contents

POINT THERAPEUTICS, INC. AND SUBSIDIARY

(A Development Stage Company)

QUARTERLY REPORT ON FORM 10-Q

INDEX



|                              |  |                                                                                                                                                                                                       |  |   
|----------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|PART I. FINANCIAL INFORMATION |  |                                                                                                                                                                                                      
|                              |  |                                                                                                                                                                                                      
|Item 1.                       |  | Financial Statements (unaudited)                                                                                                                                                                      |  |   
|                              |  |                                                                                                                                                                                                      
|                              |  | Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006                                                                                                                            |  | 3 
|                              |  |                                                                                                                                                                                                      
|                              |  | Consolidated Statements of Operations for the Three and Nine Month Periods Ended September 30, 2007 and 2006 and for the Period From September 3, 1996 (Date of Inception) Through September 30, 2007 |  | 4 
|                              |  |                                                                                                                                                                                                      
|                              |  | Consolidated Statements of Cash Flows for the Three and Nine Month Periods Ended September 30, 2007 and 2006 and for the Period From September 3, 1996 (Date of Inception) Through September 30, 2007 |  | 5 
|                              |  |                                                                                                                                                                                                      
|                              |  | Notes to Consolidated Financial Statements                                                                                                                                                            |  | 6 
|                              |  |                                                                                                                                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                 |  | 12
|                              |  |                                                                                                                                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                            |  | 17
|                              |  |                                                                                                                                                                                                      
|Item 4.                       |  | Controls and Procedures                                                                                                                                                                               |  | 17
|                             
|PART II. OTHER INFORMATION   
|                              |  |                                                                                                                                                                                                      
|Item 1A.                      |  | Risk Factors                                                                                                                                                                                          |  | 18
|                              |  |                                                                                                                                                                                                      
|Item 6.                       |  | Exhibits                                                                                                                                                                                              |  | 22
|                              | 
|SIGNATURES                    |  | 23                                                                                                                                                                                                   

In this report, Point, the Company, we, us and
our refer to Point Therapeutics, Inc. and Subsidiary.



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PART I. FINANCIAL INFORMATION



|Item 1. | FINANCIAL STATEMENTS
|------- | --------------------

POINT THERAPEUTICS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



|                                                                                                                                                                                                                                                                                     |  |                    |              |   |                  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------ | ------------ | - | ---------------- | - | ----------- | -
|                                                                                                                                                                                                                                                                                     |  | September 30, 2007 |              |   | December 31,2006 |  
|Assets                                                                                                                                                                                                                                                                               |  |                    |              |   |                  |   |             |  
|Current assets:                                                                                                                                                                                                                                                                      |  |                    |              |   |                  |   |             |  
|Cash and cash equivalents                                                                                                                                                                                                                                                            |  | $                  | 2,310,642    |   |                  | $ | 9,797,930   |  
|Cash and cash equivalentsrestricted                                                                                                                                                                                                                                                 |  |                    |             |   |                  |   | 300,000     |  
|Unbilled receivable                                                                                                                                                                                                                                                                  |  |                    |             |   |                  |   | 2,904       |  
|Prepaid expenses and other current assets                                                                                                                                                                                                                                            |  |                    | 810,251      |   |                  |   | 2,228,555   |  
|                                                                                                                                                                                                                                                                                     |  |                    |              |   |                  |   |             |  
|Total current assets                                                                                                                                                                                                                                                                 |  |                    | 3,120,893    |   |                  |   | 12,329,389  |  
|Office and laboratory equipment, net                                                                                                                                                                                                                                                 |  |                    | 30,394       |   |                  |   | 238,395     |  
|                                                                                                                                                                                                                                                                                     |  |                    |              |   |                  |   |             |  
|Total assets                                                                                                                                                                                                                                                                         |  | $                  | 3,151,287    |   |                  | $ | 12,567,784  |  
|                                                                                                                                                                                                                                                                                     |  |                    |              |   |                  |   |             |  
|Liabilities and stockholders equity                                                                                                                                                                                                                                                 |  |                    |              |   |                  |   |             |  
|Current liabilities:                                                                                                                                                                                                                                                                 |  |                    |              |   |                  |   |             |  
|Accounts payable                                                                                                                                                                                                                                                                     |  | $                  | 97,450       |   |                  | $ | 2,170,491   |  
|Accrued severance                                                                                                                                                                                                                                                                    |  |                    | 1,240,000    |   |                  |   |            |  
|Accrued clinical trial costs & drug development                                                                                                                                                                                                                                      |  |                    | 36,000       |   |                  |   | 1,574,222   |  
|Accrued expenses                                                                                                                                                                                                                                                                     |  |                    | 203,873      |   |                  |   | 830,400     |  
|Short-term portion of capital lease                                                                                                                                                                                                                                                  |  |                    |             |   |                  |   | 4,723       |  
|                                                                                                                                                                                                                                                                                     |  |                    |              |   |                  |   |             |  
|Total current liabilities                                                                                                                                                                                                                                                            |  |                    | 1,577,323    |   |                  |   | 4,579,836   |  
|Patent liability, less current portion                                                                                                                                                                                                                                               |  |                    | 30,261       |   |                  |   | 36,601      |  
|Stockholders equity:                                                                                                                                                                                                                                                                |  |                    |              |   |                  |   |             |  
|Preferred stock, $0.01 par value, 1,000,000 shares authorized; no shares issued or outstanding                                                                                                                                                                                       |  |                    |             |   |                  |   |            |  
|Common stock, $0.01 par value; 75,000,000 shares authorized; 39,530,130 shares and 33,001,354 shares issued at September 30, 2007
and December 31, 2006, respectively, 39,311,585 shares and 32,782,809 shares outstanding at September 30, 2007 and December 31, 2006, respectively |  |                    | 395,302      |   |                  |   | 330,014     |  
|Treasury stock, 218,545 shares outstanding at September 30, 2007 and December 31, 2006, at cost                                                                                                                                                                                      |  |                    | (978,290     | ) |                  |   | (978,290    | )
|Additional paid-in capital                                                                                                                                                                                                                                                           |  |                    | 104,831,722  |   |                  |   | 100,333,199 |  
|Deficit accumulated during the development stage                                                                                                                                                                                                                                     |  |                    | (102,705,031 | ) |                  |   | (91,733,576 | )
|                                                                                                                                                                                                                                                                                     |  |                    |              |   |                  |   |             |  
|Total stockholders equity                                                                                                                                                                                                                                                           |  |                    | 1,543,703    |   |                  |   | 7,951,347   |  
|                                                                                                                                                                                                                                                                                     |  |                    |              |   |                  |   |             |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                                           |  | $                  | 3,151,287    |   |                  | $ | 12,567,784  |  
|                                                                                                                                                                                                                                                                                     |  |                    |              |   |                  |   |             |  



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POINT THERAPEUTICS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                   |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|-------------------------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------ | - | ---------- | ---------------------------------------------------------------------------- |  | - | ----------- | - |  | - | ----------- | - |  | - | ------------ | -
|                                                   |  | Three months endedSeptember 30, |            |   | Nine months endedSeptember 30, |   |            | Period from September 3, 1996 (date of inception) through September 30, 2007 | 
|                                                   |  | 2007                            |            |   | 2006                           |   |            | 2007                                                                         |  |   | 2006        |   | 
|Revenues                                           |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|License revenue                                    |  | $                               |           |   |                                | $ |           |                                                                              |  | $ |            |   |  | $ |            |   |  | $ | 5,115,041    |  
|Sponsored research revenue                         |  |                                 |           |   |                                |   | 220,407    |                                                                              |  |   |            |   |  |   | 359,202     |   |  |   | 3,000,000    |  
|                                                   |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Total revenues                                     |  |                                 |           |   |                                |   | 220,407    |                                                                              |  |   |            |   |  |   | 359,202     |   |  |   | 8,115,041    |  
|                                                   |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Operating expenses                                 |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Research and development                           |  |                                 | 374,604    |   |                                |   | 6,730,726  |                                                                              |  |   | 5,823,537   |   |  |   | 18,984,026  |   |  |   | 80,323,877   |  
|General and administrative                         |  |                                 | 2,071,699  |   |                                |   | 1,555,968  |                                                                              |  |   | 5,390,538   |   |  |   | 5,286,920   |   |  |   | 33,454,300   |  
|                                                   |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Total operating expenses                           |  |                                 | 2,446,303  |   |                                |   | 8,286,694  |                                                                              |  |   | 11,214,075  |   |  |   | 24,270,946  |   |  |   | 113,778,177  |  
|                                                   |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Net loss from operations                           |  |                                 | (2,446,303 | ) |                                |   | (8,066,287 | )                                                                            |  |   | (11,214,075 | ) |  |   | (23,911,744 | ) |  |   | (105,663,136 | )
|Other income and expense                           |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Interest income                                    |  |                                 | 36,262     |   |                                |   | 240,724    |                                                                              |  |   | 242,620     |   |  |   | 883,624     |   |  |   | 3,040,757    |  
|Interest expense                                   |  |                                 |           |   |                                |   |           |                                                                              |  |   |            |   |  |   |            |   |  |   | (82,652      | )
|                                                   |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Total other income, net                            |  |                                 | 36,262     |   |                                |   | 240,724    |                                                                              |  |   | 242,620     |   |  |   | 883,624     |   |  |   | 2,958,105    |  
|                                                   |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Net loss                                           |  | $                               | (2,410,041 | ) |                                | $ | (7,825,563 | )                                                                            |  | $ | (10,971,455 | ) |  | $ | (23,028,120 | ) |  | $ | (102,705,031 | )
|                                                   |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Net loss per common share                          |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Basic and diluted                                  |  | $                               | (0.06      | ) |                                | $ | (0.24      | )                                                                            |  | $ | (0.29       | ) |  | $ | (0.70       | ) |  |   |              |  
|                                                   |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Shares used in computing net loss per common share |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  
|Basic and diluted                                  |  |                                 | 39,311,585 |   |                                |   | 32,764,059 |                                                                              |  |   | 38,426,842  |   |  |   | 32,760,862  |   |  |   |              |  
|                                                   |  |                                 |            |   |                                |   |            |                                                                              |  |   |             |   |  |   |             |   |  |   |              |  

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



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POINT THERAPEUTICS, INC. AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                     |  |                                |             |   |                                                                  |   |             |   |  |   |              |  
|---------------------------------------------------- |  | ------------------------------ | ----------- | - | ---------------------------------------------------------------- | - | ----------- | - |  | - | ------------ | -
|                                                     |  | Nine months endedSeptember 30, |             |   | Period
frominception(September 3,1996) throughSeptember 30, 2007 |  
|                                                     |  | 2007                           |             |   | 2006                                                             |   |            
|Operating activities                                 |  |                                |             |   |                                                                  |   |             |   |  |   |              |  
|Net loss                                             |  | $                              | (10,971,455 | ) |                                                                  | $ | (23,028,120 | ) |  | $ | (102,705,031 | )
|Adjustments to reconcile net loss to net cash used:  |  |                                |             |   |                                                                  |   |             |   |  |   |              |  
|Depreciation                                         |  |                                | 76,030      |   |                                                                  |   | 101,046     |   |  |   | 656,307      |  
|Impairment of fixed assets                           |  |                                | 123,471     |   |                                                                  |   | 1,205       |   |  |   | 124,114      |  
|Stock-based compensation                             |  |                                | 168,980     |   |                                                                  |   | 1,612,649   |   |  |   | 3,223,947    |  
|Common stock issued under license agreement          |  |                                |            |   |                                                                  |   |            |   |  |   | 910,677      |  
|Accrued interest on convertible notes                |  |                                |            |   |                                                                  |   |            |   |  |   | 82,652       |  
|Patent costs                                         |  |                                |            |   |                                                                  |   |            |   |  |   | 75,557       |  
|Changes in assets and liabilities:                   |  |                                |             |   |                                                                  |   |             |   |  |   |              |  
|Restricted cash                                      |  |                                | 300,000     |   |                                                                  |   | 5,834       |   |  |   |             |  
|Unbilled accounts receivable                         |  |                                | 2,904       |   |                                                                  |   | (59,202     | ) |  |   |             |  
|Prepaid expenses and other assets                    |  |                                | 1,418,304   |   |                                                                  |   | 176,897     |   |  |   | (829,528     | )
|Accounts payable and accrued expenses                |  |                                | (2,977,790  | ) |                                                                  |   | (1,111,553  | ) |  |   | 1,574,879    |  
|                                                     |  |                                |             |   |                                                                  |   |             |   |  |   |              |  
|Net cash used in operating activities                |  |                                | (11,879,556 | ) |                                                                  |   | (22,301,244 | ) |  |   | (96,886,426  | )
|                                                     |  |                                |            
|Investing activities                                 |  |                                |             |   |                                                                  |   |             |   |  |   |              |  
|Purchase of office and laboratory equipment          |  |                                |            |   |                                                                  |   | (41,395     | ) |  |   | (874,420     | )
|Proceeds from disposal of property and equipment     |  |                                | 8,500       |   |                                                                  |   | 7,100       |   |  |   | 63,605       |  
|                                                     |  |                                |             |   |                                                                  |   |             |   |  |   |              |  
|Net cash used in investing activities                |  |                                | 8,500       |   |                                                                  |   | (34,295     | ) |  |   | (810,815     | )
|                                                     |  |                                |            
|Financing activities                                 |  |                                |             |   |                                                                  |   |             |   |  |   |              |  
|Proceeds from issuance of common stock, net          |  |                                | 4,390,831   |   |                                                                  |   |            |   |  |   | 78,040,886   |  
|Proceeds from merger between Point and HMSR Inc.     |  |                                |            |   |                                                                  |   |            |   |  |   | 14,335,285   |  
|Dividend from HemaSure A/S                           |  |                                |            |   |                                                                  |   | 787,150     |   |  |   | 787,150      |  
|Proceeds from issuance of convertible note           |  |                                |            |   |                                                                  |   |            |   |  |   | 1,892,904    |  
|Proceeds from warrant exercises                      |  |                                |            |   |                                                                  |   |            |   |  |   | 4,512,425    |  
|Proceeds from stock option exercises                 |  |                                | 4,000       |   |                                                                  |   | 8,800       |   |  |   | 482,085      |  
|Proceeds from capital lease financing                |  |                                |            |   |                                                                  |   |            |   |  |   | 13,082       |  
|Payments on capital leases                           |  |                                | (4,723      | ) |                                                                  |   | (4,723      | ) |  |   | (13,082      | )
|Principal payments of patent liability               |  |                                | (6,340      | ) |                                                                  |   | (5,763      | ) |  |   | (42,852      | )
|                                                     |  |                                |             |   |                                                                  |   |             |   |  |   |              |  
|Net cash provided by financing activities            |  |                                | 4,383,768   |   |                                                                  |   | 785,464     |   |  |   | 100,007,883  |  
|Net increase (decrease) in cash and cash equivalents |  |                                | (7,487,288  | ) |                                                                  |   | (21,550,075 | ) |  |   | 2,310,642    |  
|                                                     |  |                                |             |   |                                                                  |   |             |   |  |   |              |  
|Cash and cash equivalents, beginning of period       |  |                                | 9,797,930   |   |                                                                  |   | 37,328,396  |   |  |   |             |  
|                                                     |  |                                |             |   |                                                                  |   |             |   |  |   |              |  
|Cash and cash equivalents, end of period             |  | $                              | 2,310,642   |   |                                                                  | $ | 15,778,321  |   |  | $ | 2,310,642    |  
|                                                     |  |                                |             |   |                                                                  |   |             |   |  |   |              |  

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



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POINT THERAPEUTICS, INC. AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2007

(UNAUDITED)



|1. | Nature of the Business
|-- | ----------------------

Point Therapeutics, Inc.
(Point or the Company) is a biopharmaceutical company which has studied its lead product candidate, talabostat, in a number of human clinical trials in late-stage cancers. In May 2007, interim clinical results caused the
Companys Independent Data Monitoring Committee to recommend stopping the Companys two Phase 3 talabostat studies for patients in advanced non-small cell lung cancer. Subsequently, the talabostat clinical development program was put on
clinical hold by the U.S. Food and Drug Administration (FDA). The Company has also studied talabostat in several Phase 2 trials, including as a single-agent and in combination with cisplatin in metastatic melanoma, in combination with
rituximab in advanced chronic lymphocytic leukemia, and in combination with gemcitabine in Stage IV pancreatic cancer. Due to cash limitations, the Company is not currently funding any research or clinical operations.

On October 9, 2007, the Company entered into a definitive agreement to merge with DARA BioSciences, Inc. (DARA) pursuant to which DARA
will merge with DP Acquisition Corp., a newly-formed subsidiary of the Company, with DARA surviving as a wholly-owned subsidiary. After giving effect to the merger, DARA stockholders will hold 96.4% of the Companys outstanding shares of common
stock on a fully-diluted basis, and the Company will change its name to DARA BioSciences, Inc. and be based in Raleigh, North Carolina (see Note 9 below).

The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
However, as shown in the September 30, 2007 financial statements, the Company has cash of $2,311,000 and an accumulated deficit of $102,705,000. The Company also incurred a net loss of $10,971,000 and negative cash flows from operations of
$11,880,000 during the first nine months of 2007 and has also incurred a net loss and negative cash flows from operations in each of the last five years. As a result, there exists substantial doubt about the Companys ability to continue as a
going concern without additional financing. To date, the Company has principally raised capital through public and private placements of its equity securities. The Company has recently terminated all but two employees (the former senior executives
of the Company have retained their corporate titles and are currently acting as consultants to Point as part of a more variable-cost consulting team), ceased funding its research and clinical operations and has entered into an agreement to merge
with DARA. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities, or any other adjustments that might be
necessary should the Company be unable to continue as a going concern.



|2. | Significant Accounting Policies
|-- | -------------------------------

Unaudited Interim Financial
Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting
principles for the complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period
ended September 30, 2007 are not indicative of the results that may be expected for the year ended December 31, 2007.

The
condensed consolidated balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes
thereto included in the Companys annual report on Form 10-K for the year ended December 31, 2006.



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##### Table of Contents

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.

Net Loss Per Common Share

Basic and diluted net loss per common share amounts are presented in conformity with Statement of Financial Accounting Standards (SFAS)
No. 128, Earnings per Share, for all periods presented. In accordance with SFAS No. 128, basic and diluted net loss per common share amounts have been computed using the weighted-average number of shares of common stock
outstanding for the three and nine month periods ended September 30, 2007 and 2006. Potentially dilutive securities, consisting of stock options of 2,681,922 and warrants of 3,962,492 outstanding at September 30, 2007 and stock options of
5,314,728 and warrants of 2,592,500 outstanding at September 30, 2006 have been excluded from the diluted earnings per share calculations since their effect is antidilutive.

Stock-Based Compensation

The Company follows the provisions of SFAS 123(R), Share-Based
PaymentAn Amendment of FASB Statement No. 123 (SFAS No. 123R) which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on
their fair value over the requisite service period. Pro forma disclosure is no longer an alternative. In March 2005, the SEC issued Staff Accounting Bulletin (SAB) No. 107 (SAB No. 107), which expressed
the views of the SEC regarding the interaction between SFAS No. 123R and certain rules and regulations of the SEC. SAB No. 107 provides guidance related to the valuation of share-based payment arrangements for public companies,
including assumptions such as expected volatility and expected term.

Prior to January 1, 2006, the Company applied the pro forma
disclosure requirements under SFAS No. 123 and accounted for its stock-based employee compensation plans using the intrinsic value method under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees and related interpretations.

Accordingly, no stock-based employee compensation cost was
recognized in the statement of operations for the years prior to January 1, 2006, as all stock options granted under the Companys stock option plans had an exercise price equal to the market value of the underlying common stock on the
date of grant.

For the three month period ended September 30, 2007, the Company recorded a credit of non-cash stock-based
compensation expense in accordance with SFAS No. 123R of $203,000 for stock options granted to employees and outside directors under the Companys stock option plans, of which $56,000 was included in research and development expenses and
$146,000 was included in general and administrative expenses. The credit recorded resulted from an adjustment in the forfeiture rate previously estimated as all but two of our employees were terminated as of September 30, 2007. For the nine month
period ended September 30, 2007, the Company recorded non-cash stock-based compensation expense of $169,000 for stock options granted under the Companys stock option plans, of which a credit in the amount of $186,000 was recorded in
research and development expenses and a credit of $355,000 was recorded in general and administrative expenses.

For the three-month period
ended September 30, 2006, the Company recorded non-cash stock-based compensation expense of $488,000 for stock options granted under the Companys stock option plans, of which $262,000 was included in research and development expenses and
$226,000 was included in general and administrative expenses. For the nine-month period ended September 30, 2006, the Company recorded non-cash stock-based compensation expense of $1,613,000 for stock options granted under the Companys
stock option plans, of which $778,000 was recorded in research and development expenses and $835,000 was included in general and administrative expenses.

In connection with the work force reductions in 2007, the Company extended the time terminated employees had to vest their stock options from 90 days post termination to December 31, 2007. Utilizing the
Black-Scholes method, the Company determined that they did not have to record any incremental non-cash stock compensation as a result of this modification to the grants.

No amounts relating to stock-based compensation have been capitalized.

The Companys stock option
plans allow for the granting of incentive and nonqualified options and awards to purchase shares of the Companys common stock. Historically, incentive options granted to employees under the Companys stock option plans generally vested
over a four-year period, with 25% vesting on each anniversary date of the grant. Nonqualified options issued to non-employee directors and consultants under the Companys stock option plans generally vest during their period of service with the
Company. Options granted under the Companys stock option plans have a maximum term of ten



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years from the date of grant. At September 30, 2007, a total of 7,876,085 shares of common stock were approved for issuance under the Companys
stock option plans and 5,712,542 shares underlying options were available for future grant under the Companys stock option plans.

The Company uses the Black-Scholes option pricing model to calculate the fair value on the grant date of stock-based compensation for stock options granted. The fair value of stock options granted during the nine month periods ended
September 30, 2007 and 2006 was calculated using the following estimated weighted-average assumptions:



|                        |  |      |   |  |         |  
|----------------------- |  | ---- | - |  | ------- | -
|                        |  | 2007 |   |  | 2006    |  
|Expected term (years)   |  | 4.0  |   |  | 4.0     |  
|Volatility              |  | 87   | % |  | 6593   | %
|Risk-free interest rate |  | 4.8  | % |  | 4.35.1 | %

Expected termThe expected term of options granted represents the period of time for
which the options are expected to be outstanding and is derived from the Companys stock option exercise experience and option expiration data. The Company believes that this is currently the best estimate of the expected term of a new
option. In addition, for purposes of estimating the expected term, the Company has aggregated all individual option awards into one group as the Company does not expect substantial differences in exercise behavior among its employees.

Expected volatilityThe expected volatility is a measure of the amount by which the Companys stock price is expected to
fluctuate during the expected term of options granted. The Company determines the expected volatility based upon the historical volatility of the Companys common stock over a period commensurate with the options expected term, as
adjusted. The Company also reviewed the volatility of other similar stage companies in the biotechnology industry.

Risk-free
interest rateThe risk-free interest rate is the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equal to the options expected term on the grant date.

Expected dividend yieldThe Company has never declared or paid any cash dividends on any of its common stock and does not expect to do so in
the foreseeable future. Accordingly, the Company uses an expected dividend yield of zero to calculate the grant date fair value of a stock option.

The Company recognizes compensation expense on a straight-line basis over the requisite service period based upon options that are ultimately expected to vest, and accordingly, such compensation expense has been
adjusted by an amount of estimated forfeitures. Forfeitures represent only the unvested portion of a surrendered option. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates. Prior to the adoption of SFAS No. 123R, the Company accounted for forfeitures upon occurrence as permitted under SFAS No. 123. During the three and nine month period ended
September 30, 2007, the Company recorded forfeitures based upon actual forfeitures with an estimate for future forfeitures based on historical data which it believes is a reasonable assumption to estimate forfeitures. The rate used for the nine
month period ended September 30, 2007 was 100.0% due to the termination of all but two of our employees as of September 30, 2007, and the proposed merger with DARA. For the nine month period ended September 30, 2006, the Company accounted
for forfeitures based upon historical data only using a rate of 4.5% which at the time was a reasonable estimate of forfeitures. The estimation of forfeitures requires significant judgment, and to the extent actual results or updated estimates
differ from the Companys current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised.

The weighted-average per share fair value of stock options granted under the Companys stock option plans during the nine month period ended September 30, 2007 and 2006 was $0.46 and $1.88, respectively.

Information regarding option activity for the nine month period ended September 30, 2007 under the Companys stock option plans is summarized
below:



|                                                     |  |                    |   |  |                                        |      |                                                  |      |                         |   |  
|---------------------------------------------------- |  | ------------------ | - |  | -------------------------------------- | ---- | ------------------------------------------------ | ---- | ----------------------- | - | -
|                                                     |  | OptionsOutstanding |   |  | Weighted-AverageExercisePrice PerShare |      | Weighted-AverageRemainingContractualTerm inYears |      | AggregateIntrinsicValue
|Options outstanding at December 31, 2006             |  | 5,038,228          |   |  | $                                      | 3.44 |                                                  |      |                         |   |  
|Granted                                              |  | 92,500             |   |  | $                                      | 0.46 |                                                  |      |                         |   |  
|Exercised                                            |  | (5,000             | ) |  | $                                      | 0.80 |                                                  |      |                         |   |  
|Forfeited                                            |  | (1,521,791         | ) |  | $                                      | 3.59 |                                                  |      |                         |   |  
|Expired                                              |  | (922,015           | ) |  | $                                      | 3.06 |                                                  |      |                         |   |  
|                                                     |  |                    |   |  |                                        |      |                                                  |      |                         |   |  
|Options outstanding at September 30, 2007            |  | 2,681,922          |   |  | $                                      | 3.38 |                                                  | 1.53 |                         | $ | 
|                                                     |  |                    |   |  |                                        |      |                                                  |      |                         |   |  
|Options vested and exercisable at September 30, 2007 |  | 2,636,922          |   |  | $                                      | 3.37 |                                                  | 1.42 |                         | $ | 
|                                                     |  |                    |   |  |                                        |      |                                                  |      |                         |   |  



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There is no aggregate intrinsic value in the table above which would represent the total pre-tax
intrinsic value (the difference between the closing price of the Companys common stock on September 30, 2007 of $0.04 and the exercise price of each in-the-money option) that would have been received by the option holders had all option
holders exercised their options on September 30, 2007 due to the fact that all current stock options are priced above $0.04 per share. Total cash received for stock options exercised during the nine month period ended September 30,
2007 was $4,000. Total intrinsic value of stock options exercised under the Companys stock option plans for the nine month period ended September 30, 2007 was $300.

As of September 30, 2007, there was $86,000 of total unrecognized compensation cost related to unvested share-based awards. That cost is
expected to be recognized over a period of 2.5 remaining years with a weighted-average of 2.03 years.



|3. | Offering
|-- | --------

On February 2, 2007, the Company
priced a registered direct offering (the Offering) for the sale of 6,523,776 shares of its common stock at a price of $0.73 per share. The Offering closed on February 7, 2007 with gross proceeds from the Offering of $4,762,000.
After placement agent fees of $286,000 and other expenses related to the offering totaling $85,000, net proceeds to the Company were $4,391,000. The investors in this offering also received five-year warrants, exercisable upon expiration of a
lock-up period of six months, to purchase an additional 978,566 shares of common stock at an exercise price of $1.00 per share. The Company also issued 391,426 warrants at an exercise price of $1.00 per share to the placement agent,
Rodman & Renshaw LLC, exercisable upon expiration of a lock-up period of six months. The offered shares are registered pursuant to the Companys shelf registration statement that was declared effective by the Securities and Exchange
Commission (the SEC) on January 12, 2005.

As a result of this offering, 1,150,000 previously issued warrants were
repriced from $5.31 per share to $4.54 per share.



|4. | Insurance Settlement
|-- | --------------------

On March 2, 2007, the
Company received an insurance settlement in the amount of $305,000 relating to a shipment of drug supply that was damaged in June 2006 during shipping. The Company recorded this as a credit to manufacturing expense in the three month period ended
March 31, 2007.



|5. | Workforce Reduction
|-- | -------------------

In June 2007, the Company
reduced its work force from 33 employees to 8 employees. The total charge for this work force reduction for severance and related fringes was approximately $260,000. All severance was paid in a lump sum based on the Companys severance plan,
which permits employees to receive a base severance of two weeks plus one week for each year of service. In July 2007, the Company further reduced its workforce, including senior executives of the Company, to two employees. The total charge for this
workforce reduction for severance and related fringes was approximately $285,000. All severance was paid in a lump sum based on the Companys severance plan, which permits employees to receive a base severance of two weeks plus one week for
each full year of service. The Company also recorded $1,240,000 of additional severance benefits payable to certain former executives of the Company in accordance with their employment contracts. These severance benefits have not been paid to these
individuals as of September 30, 2007.



|6. | Lease Termination
|-- | -----------------

On July 26, 2007, the
Company reached an agreement with its landlord, KNH Realty Trust (KNH) to terminate the lease for its corporate offices at 155 Federal Street in Boston, Massachusetts (the Termination Agreement) effective July 31, 2007.
The Termination Agreement provides for a one time payment of approximately $333,000 by the Company to KNH in consideration of releasing the Company from all of its obligations under its lease, dated as of March 16, 2005, the term of which
otherwise ran until July 1, 2010. The one-time payment was made by the Company in the third quarter of 2007. In addition, the Company agreed to transfer ownership of all of its furniture, office equipment and leasehold improvements to KNH, all
of which were deemed to be impaired at June 30, 2007. On July 31, 2007, the Company relocated its corporate offices to a substantially smaller temporary location at 70 Walnut Street in Wellesley Hills, Massachusetts.



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|7. | Asset Impairment
|-- | ----------------

As a result of the workforce
reduction in 2007 and the subsequent negotiations regarding the termination of the lease for the Companys corporate headquarters (see Note 6), the Company wrote down and sold its assets no longer in use in accordance with FASB 144
Accounting for the Impairment or Disposal of Long-Lived Assets. The Company recorded an impairment charge of approximately $125,000 for the impairment of computer, office furniture, office equipment and leasehold improvements for which
the Company would not use or receive any compensation in the future. Offsetting the charge were net proceeds from the sale of the Companys laboratory equipment totaling $8,500, which resulted in a gain of approximately $2,000.



|8. | New Accounting Pronouncements
|-- | -----------------------------

In June 2006,
the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an entitys financial statements in accordance with SFAS No. 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on subsequent derecognition of tax positions, financial statement classification, recognition of interest and penalties, accounting
in interim periods, and disclosure and transition requirements. The Company adopted the provisions of FIN 48 on January 1, 2007. Previously, the Company had accounted for tax contingencies in accordance with Statement of Financial Accounting
Standards 5, Accounting for Contingencies. As required by FIN 48, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain
the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon
ultimate settlement with the relevant tax authority. At the adoption date, the Company applied FIN 48 to all tax positions for which the statute of limitations remained open. The amount of unrecognized tax benefits as of January 1, 2007 was
zero. There have been no material changes in unrecognized tax benefits since January 1, 2007. As of January 1, 2007, due to the carry forward of unutilized net operating losses and research and development credits, the Company is subject
to U.S. Federal income tax examinations for the tax years 2002 through 2006, and to state income tax examinations for the tax years 1994 through 2006. The Company recognizes accrued interest related to unrecognized tax benefits in interest expense
and penalties in operating expense. No amounts were accrued for the payment of interest and penalties at January 1, 2007. The Companys adoption of FIN 48 did not have a material effect on the Companys financial condition, results of
operations or cash flows.

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial
Liabilities, which will be effective for public entities no later than the beginning of the first fiscal year beginning after November 15, 2007. The new standard allows entities to voluntarily choose, at specific election dates, to
measure many financial assets and financial liabilities (as well as certain nonfinancial instruments that are similar to financial instruments) at fair value (the fair value option). The election is made on an instrument-by-instrument
basis and is irrevocable. If the fair value option is elected for an instrument, the statement specifies that all subsequent changes in fair value for that instrument shall be reported in earnings (or another performance indicator for entities such
as not-for-profit organizations that do not report earnings). The Company will adopt this pronouncement on January 1, 2008 and is currently evaluating the impact that this pronouncement will have on its consolidated financial statements.



|9. | Subsequent Event
|-- | ----------------

On October 9, 2007, the
Company entered into an Agreement and Plan of Merger (the Merger Agreement) with DARA.

Pursuant to the Merger Agreement, DARA
plans to merge with DP Acquisition Corp., a newly-formed subsidiary of the Company, with DARA surviving as a wholly-owned subsidiary of the Company (the Merger). DARA stockholders will receive shares of common stock of the Company
representing 96.4% outstanding common stock on a fully diluted basis of the combined company, which will change its name to DARA BioSciences, Inc. and be based in Raleigh, North Carolina. As a condition to the Merger Agreement, the Company will
effect a reverse stock split prior to the effective date of the Merger. The Merger is intended to be a tax-free reorganization under Section 368(a) of the Internal Revenue Code and is expected to close in the first quarter of 2008.

The Company and DARA cannot complete the Merger unless the Companys stockholders approve the issuance of shares of Point common stock in the
Merger and the reverse stock split, and DARAs stockholders approve the Merger Agreement, the Merger, and the other matters contemplated in the Merger Agreement. Additionally, the Merger is subject to other customary closing conditions,
including that the registration statement registering the shares of Point common stock to be issued in the Merger is declared effective by the Securities and Exchange Commission.



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The executive officers and directors of DARA and the directors and former executive officers of the
Company have executed agreements pursuant to which they have agreed to vote the shares beneficially owned by them in favor of the Merger and the related transactions.

In addition, on October 9, 2007, the Company entered into a Loan and Security Agreement (the Loan Agreement) with DARA. The Loan Agreement provides for a loan facility under which the Company may
request cash advances from DARA, in a total aggregate amount of up to $400,000, to be used to pay for professional and other fees and expenses and other transaction costs incurred by the Company in connection with the proposed Merger.

The Loan Agreement provides that the Companys debt obligation under the Loan Agreement will be forgiven in its entirety (i) upon the
consummation of the Merger, (ii) if the Merger Agreement is terminated because the required approval of DARA stockholders is not received, (iii) if the Company terminates the Merger Agreement due to a breach by DARA or the occurrence of a
material adverse effect on DARA or (iv) if DARA terminates the Merger Agreement for a reason expressly disclosed to it by the Company in the disclosure schedules to the Merger Agreement. If the Merger is not consummated, the Loan Agreement
requires the Company to repay the full amounts actually borrowed under the credit facility on the earlier of (i) the commencement of bankruptcy proceedings by the Company, (ii) termination of the Merger Agreement, other than as a result of
DARAs failure to fulfill its obligations thereunder, or (iii) March 31, 2008. Borrowings under the credit facility bear interest at an annual rate of 5%. All of the Companys assets are pledged as collateral for any borrowings
under the Loan Agreement. The Loan Agreement contains various affirmative and negative covenants, including prohibitions on sales of assets and certain other corporate transactions.

The description of the Merger and related transactions in this report is qualified in its entirety by reference to the Merger Agreement and the Loan
Agreement. Copies of the Merger Agreement, the Loan Agreement and the related Note, as well as a copy of the press release issued on October 10, 2007, are attached as Exhibits to the Companys Report on Form 8-K filed with the SEC on
October 10, 2007.



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|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Cautionary Factors with Respect to Forward-Looking Statements

Readers are cautioned that certain
statements contained in this Managements Discussion and Analysis of Financial Condition and Results of Operations that are not related to historical results are forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995, as from time-to-time in effect. This information includes statements on the prospects for our drug development activities and results of operations based on our current expectations, such as statements regarding
certain milestones with respect to our clinical program and our product candidates. Forward-looking statements are statements that are not historical facts, and can be identified by, among other things, the use of forward-looking language, such as
believe, expect, may, will, should, seeks, plans, schedule to, anticipates or intends or the negative of those terms, or
other variations of those terms of comparable language, or by discussions of strategy or intentions. A number of important factors could cause actual results to differ materially from those projected or suggested in the forward looking statement,
including, but not limited to, our ability to (1) receive stockholder approvals and complete our merger with DARA, (2) successfully locate a buyer or partner for the purposes of effectuating a strategic transaction if our merger with DARA
is not successful, (3) continue as a going concern, (4) comply with certain NASDAQ Marketplace Rules, and (5) enforce our intellectual property rights, as well as the risk factors discussed elsewhere in this report.

Overview

We are a biopharmaceutical
company which has studied our lead product candidate, talabostat, in a number of human clinical trials in late-stage cancers. May 2007 interim clinical results caused our Independent Data Monitoring Committee to recommend stopping our most advanced
clinical trials, two Phase 3 talabostat studies for patients in advanced non-small cell lung cancer. Subsequently, the talabostat clinical development program was put on clinical hold by the U.S. Food and Drug Administration (FDA). We
have also studied talabostat in several Phase 2 trials, including as a single-agent and in combination with cisplatin in metastatic melanoma, in combination with rituximab in advanced chronic lymphocytic leukemia, and in combination with gemcitabine
in Stage IV pancreatic cancer. Due to cash limitations, we are not currently funding any research or clinical operations.

On
October 9, 2007, we entered into a definitive agreement to merge with DARA pursuant to which DARA will merge with DP Acquisition Corp., our newly-formed subsidiary, with DARA surviving as a wholly-owned subsidiary. After giving effect to the
merger, DARA stockholders will hold 96.4% of our outstanding shares of common stock on a fully-diluted basis, and we will change our name to DARA BioSciences, Inc. and be based in Raleigh, North Carolina (see Note 9 to the Financial Statements found
elsewhere in this Report on Form 10-Q).

To date, we have generated no revenues from product sales and have primarily depended upon equity
financings, interest earned on invested funds, and collaboration payments received from pharmaceutical companies and government agencies to provide the working capital required to pursue our intended business activities. We have a net accumulated
deficit of approximately $102,705,000 as of September 30, 2007. The accumulated deficit has resulted principally from our efforts to develop drug candidates and the associated administrative costs required to support these efforts.

Effective July 25, 2007, we terminated all but two of our employees. We are utilizing some of our recently terminated executives as part of a
more variable-cost consulting team to assist us in completing the merger with DARA. In addition, on July 31, 2007, we terminated our lease at 155 Federal Street in Boston, Massachusetts and moved to a substantially smaller temporary location.
We may be unable to successfully complete the merger with DARA or to locate another buyer or partner for the purposes of effecting another strategic transaction if the merger fails. Although we currently retain control over our intellectual property
portfolio, we cannot make any assurances that these assets have or will continue to have any value. This uncertainty as to the value of our intellectual property portfolio and other assets may prevent us from locating another buyer or partner for
the purposes of effecting another strategic transaction if the merger with DARA fails.

If our attempts to complete the merger with DARA
fail and if no other strategic transaction can be completed, we will likely file for federal bankruptcy protection under Chapter 11 of the Bankruptcy Code. In the event that we do file for Chapter 11 protection, we will most likely not be able to
raise any type of funding from any source. Upon filing for Chapter 11 protection, we would not meet the minimum standards required for remaining listed on the NASDAQ Capital Market. If we are delisted, our stock would no longer be tradable on the
NASDAQ Capital Market.



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Our principal executive office is located at 70 Walnut Street, Wellesley Hills, Massachusetts, 02481 and
our telephone number is (781) 239-7502. Our common stock trades on the NASDAQ Capital Market under the symbol POTP. Our website is www.pther.com.

Critical Accounting Policies and Significant Judgments and Estimates

Critical Accounting Policies

Clinical Trial Expenses. We record the estimated cost of patient recruitment and related supporting functions for our clinical
trial as patients are enrolled in the trial. We record the costs for the trials based on a percentage of completion basis. In the past, our estimates have been materially accurate with the actual billings received. These costs consist primarily of
payments made to the outside clinical management organizations, clinical centers, investigators, testing facilities and patients for participating in our clinical trial. As actual or expected costs become known, they may differ from estimated costs
previously accrued for and this clinical trial accrual or prepaid would be adjusted accordingly. At September 30, 2007, we had no prepaid and deposit balances related to clinical trials. At September 30, 2007, there was $36,000 of accrued
expenses related to clinical trials. Clinical trial expenses were $0 and $2,493,000 for the three month periods ended September 30, 2007 and 2006, respectively and $2,377,000 and $7,797,000 for the nine month periods ended September 30,
2007 and 2006, respectively.

Stock-based Compensation. Effective January 1, 2006, we adopted the fair value recognition
provisions of Statement of Financial Accounting Standards No. 123R, Share-Based PaymentAn Amendment of FASB Statements No. 123 and 95, or SFAS No. 123R. SFAS No. 123R requires companies to measure compensation cost
for all share-based awards at fair value on grant date and recognize it as expense ratably over the requisite service period of the award. We use the Black-Scholes option pricing model to calculate the fair value of share-based awards on the
grant date. This option pricing model requires the input of highly subjective assumptions, including the term during which the awards are expected to be outstanding and the price volatility of the underlying stock. In addition, SFAS
No. 123R requires forfeitures, which represent only the unvested portion of a surrendered award, to be estimated at the time of the grant and revised, if necessary, in subsequent periods. Please refer to Note 2Summary of Significant
Accounting Principles, included in the condensed consolidated financial statements appearing elsewhere in this report, for additional information regarding our adoption of SFAS No. 123R.

Significant Judgments and Estimates.The preparation of our consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires that we make estimates and assumptions that affect the reported amounts and disclosure of certain assets and liabilities at our balance sheet date. Such estimates include the carrying value of
property and equipment and the value of certain liabilities. Actual results may differ from such estimates.

Results of Operations

Revenue

For the three and nine
month periods ended September 30, 2007, we did not recognize any revenue.

For the three month period ended September 30, 2006,
we recognized $220,000 in revenue. For the nine month period ended September 30, 2006, we recognized revenue totaling $359,000 relating to the $600,000 Orphan Drug Grant (the Grant) from the FDA to partially fund our Phase 2 CLL
clinical trial. No future amounts are anticipated to be received under the Grant.

Operating Expenses

Research and Development

During the three and nine month periods ending September 30, 2007 and 2006, almost all of our research and development efforts were focused on the preclinical and clinical development of talabostat for the treatment of solid tumors and
hematologic malignancies. In addition, during the nine month period ending September 30, 2007, the Company incurred costs associated with an interim analysis of its two Phase 3 studies and termination costs related to headcount reductions.

On May 21, 2007, we announced that the FDA has placed the clinical program for
talabostat on clinical hold as a result of the interim analyses of our two Phase 3 talabostat studies as a potential treatment for patients with advanced non-small cell lung cancer (NSCLC). Our Independent Data Monitoring Committee recommended
stopping both studies due to the primary endpoint of median progression-free survival (PFS) or the secondary endpoint of overall survival demonstrated no statistical improvement over the respective placebo groups. In addition, in the talabostat
combination trial with docetaxal (Taxotere®: sanofi-aventis), the talabostat arm of the study demonstrated significantly lower overall survival than the placebo arm. Subsequent to us
informing the FDA of the interim results, the FDA put our talabostat clinical program on hold.



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Research and development expenses decreased 94.4% to $375,000 for the three month period ended
September 30, 2007 from $6,731,000 for the three month period ended September 30, 2006. Research and development expenses decreased 69.3% to $5,823,000 for the nine-month period ended September 30, 2007 from $18,984,000 for the
nine-month period ended September 30, 2006.

Clinical and drug development: Clinical and drug development expenses include
costs of drug development and conducting clinical trials. Such costs include costs of personnel (including salary, fringe benefits, severance, recruiting and relocation costs), drug supply and testing costs and facility expenses, including
depreciation.

Total clinical and drug development expenses decreased 98.9% to $60,000 for the three month period ended September 30,
2007 from $5,850,000 for the three month period ended September 30, 2006. The decrease was due to the termination of our clinical program during the second quarter of 2007.

For the nine month period ended September 30, 2007, clinical and drug development expenses decreased 69.6% to $4,784,000 from $15,762,000 for the
nine month period ended September 30, 2006. The decrease of $10,978,000 was due to the termination of our clinical program and the termination of all employees in this area during the second quarter of 2007. During the nine month period ended
September 30, 2007, we recorded retention bonuses of $306,000 which were paid to non-executive employees in May 2007 and severance in the amount of $160,000 for headcount reductions in this area.

During the remainder of 2007, we anticipate that we will not incur any costs in the clinical and drug development area.

Research: Research includes expenses associated with research and testing of our product candidates supporting the clinical development of
talabostat and our other preclinical candidates prior to reaching the clinical development stage. Such expenses primarily include the costs of internal personnel, outside contractors, facilities, including depreciation, and laboratory supplies.

Research expenses decreased 64.2% to $315,000 for the three month period ended September 30, 2007 from $881,000 for the three month
period ended September 30, 2006. The decrease was primarily due to the shut-down of our internal research laboratory in December 2006. During the three month period ended September 30, 2007, we recorded severance totaling $304,000.

For the nine month period ended September 30, 2007, research expenses decreased 67.7% to $1,040,000 from $3,222,000 for the nine
month period ended September 30, 2006. The decrease was due to the shut-down of our internal research laboratory in December 2006. During the nine month period ended September 30, 2007, we recorded retention bonuses of $12,000 which were
paid to non-executive employees in May 2007 and severance totaling $404,000 for headcount reductions.

All operations in the Research area
were terminated in June 2007. During the remainder of 2007, we anticipate that we will not incur any material costs in the research area with the exception of costs related to the upkeep of our mice population at an offsite facility.

General and Administrative

General and administrative: General and administrative costs include the associated administrative costs required to support the clinical development and research efforts such as legal, finance and accounting, business
development, investor relations and other administrative support functions.

General and administrative expenses increased 33.2% to
$2,072,000 during the three month period ended September 30, 2007 from $1,556,000 for the three month period ended September 30, 2006. The increase in general and administrative expenses resulted primarily from severance benefits incurred
upon the reduction in headcount in July, 2007. During the three month period ended September 30, 2007, we recorded severance expenses totaling $1,138,000 for headcount reductions, legal and patent costs totaling $303,000 to pursue a strategic
transaction and maintain our patent portfolio and salaries and related fringes of $187,000. We also recorded rent expense of $251,000 for our corporate headquarters at 155 Federal Street which included a charge to terminate the lease of
approximately $220,000, which consisted of a payment of $330,000 offset by a reduction in accrued rent expense of approximately $114,000.

For the nine month period ended September 30, 2007, general and administrative expenses increased 2.0% to $5,391,000 from $5,287,000 for the nine month period ended September 30, 2006. The increase in general and administrative
expenses primarily resulted from severance benefits incurred upon the reduction in headcount in July, 2007 offset by a reduction in Companys operations. During the nine month period ended September 30, 2007, we recorded severance expenses
totaling $1,168,000 for headcount reductions, legal and patent costs totaling $1,139,000 to pursue a strategic transaction and maintain our patent portfolio, a loss for the impairment of fixed assets of $123,000 and retention bonuses, which were
paid to non-executive employees, of $68,000 in May 2007.



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During the remainder of 2007, we anticipate that general and administrative expenses will decrease
depending on the strategic direction of the Company. We have recently terminated all but two employees in this area. We also retained certain members of our senior management team as part of a more variable-cost consultant team to assist us as we
complete the proposed merger with DARA, or if the merger fails, to assist us in seeking a buyer or partner for our technology and related intellectual property and other assets, in bankruptcy or otherwise.

Non-Cash Stock Based Compensation

For the three month period ended September 30, 2007, we recorded a credit of non-cash stock-based compensation expense in accordance with SFAS No. 123R of $203,000 for stock options granted to employees and outside directors under
our stock option plans, of which $56,000 was included in research and development expenses and $146,000 was included in general and administrative expenses. For the three month period ended September 30, 2006, we recorded non-cash stock-based
compensation expense of $488,000 for stock options granted under our stock option plans, of which $262,000 was included in research and development expenses and $226,000 was included in general and administrative expenses.

For the nine month period ended September 30, 2007, we recorded non-cash stock-based compensation expense of $169,000 for stock options granted
under our stock option plans, of which a credit in the amount of $186,000 was recorded in research and development expenses and a credit of $355,000 was recorded in general and administrative expenses. For the nine-month period ended
September 30, 2006, we recorded non-cash stock-based compensation expense of $1,613,000 for stock options granted under our stock option plans, of which $778,000 was recorded in research and development expenses and $835,000 was included in
general and administrative expenses.

Interest Income

Interest income includes interest earned on invested cash balances. During the three month periods ended September 30, 2007 and 2006, our investments
consisted entirely of funds deposited in money market funds.

Interest income decreased 85.1% to $36,000 in the three month period ended
September 30, 2007 from $241,000 in the three month period ended September 30, 2006. Interest income decreased 72.5% to $243,000 in the nine month period ended September 30, 2007 from $884,000 in the nine month period ended
September 30, 2006. The decrease in interest income in both the three and nine month periods resulted primarily from a lower average cash balance.

Net loss

As a result of the foregoing, we incurred a net loss of $2,410,000, or $0.06 per
common share, for the three month period ended September 30, 2007 compared to a net loss of $7,856,000, or $0.24 per common share, for the three month period ended September 30, 2006 and a net loss of $10,971,000, or $0.29 per common
share, for the nine month period ended September 30, 2007 as compared to a net loss of $23,028,000, or $0.70 per common share, for the nine month period ended September 30, 2006.

Liquidity and Capital Resources

At
September 30, 2007, our principal sources of liquidity were cash and cash equivalents which totaled $2,311,000.

During the nine month
period ended September 30, 2007, our cash and cash equivalents decreased $7,487,000 as compared to December 31, 2006.

During the
nine month period ended September 30, 2007, the decrease in net cash used in operations resulted primarily from a net loss of $9,656,000. Included in the net loss for the nine month period ended September 30, 2007 were non-cash stock-based
compensation of $169,000, an impairment charge of $123,000 and depreciation of $76,000. Restricted cash decreased by $300,000 to $0 due to the termination of our lease for our corporate headquarters at 155 Federal Street effective July 31,
2007. Prepaid expenses, deposits and other assets, net, decreased $1,418,000 for the nine month period ended September 30, 2007, resulting primarily from a refund of prepaid costs we received from a clinical testing vendor when we terminated
services for our clinical trials and an adjustment to the amount due to us from our clinical management organization for which payment was received in July 2007. Offsetting these decreases were insurance premiums paid. Our unbilled receivable
decreased by $3,000 and accounts payable and accrued expenses decreased $2,998,000 during the nine month period ended September 30, 2007, resulting primarily from the payment of the majority of clinical and manufacturing related expenses for
our Phase 3 clinical program, offset somewhat by an increase in contractual severance benefits incurred but not yet paid.



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During the nine month period ended September 30, 2007, we received $8,500 from the sale of a piece
of laboratory equipment.

Our financing activities provided net cash of $4,384,000 for the nine month period ended September 30, 2007,
primarily related to the registered direct offering (the Offering) from the sale of 6,523,776 shares of our common stock at a price of $0.73 per share. Gross proceeds from the February 7, 2007 Offering were $4,762,000. After
placement agent fees of approximately $286,000 and other expenses related to the Offering totaling approximately $85,000, net proceeds to us were $4,391,000. We also received $4,000 from the exercise of stock options during the nine month period
ended September 30, 2007.

Capital Resources

At September 30, 2007, we had $2,311,000 in cash and cash equivalents. We currently anticipate that our existing capital resources will be sufficient to allow us to maintain our current and planned operations
into the first quarter of 2008 and the completion of the proposed merger with DARA. Our cash balance at September 30, 2007, and amounts we would receive, were we to liquidate all of our assets, after taking into account all anticipated uses of
the cash, may not be sufficient to pay all amounts on or in respect of our obligations when such amounts are required to be paid. These conditions raise substantial doubt about our ability to continue as a going concern. The audit report prepared by
our independent registered public accounting firm in connection with our financial statements for the year ended December 31, 2006 included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.

Our expectations regarding our rate of spending and the sufficiency of our cash resources over future periods are forward-looking
statements. Our funding requirements are dependent on our ability to seek a buyer or partner for our technology and related intellectual property and other assets. Effective July 25, 2007, we terminated all but two of our employees. We have
retained certain members of our senior management team as consultants as part of a more variable-cost consulting team to assist us in completing the proposed merger with DARA, or, if the merger fails, to seek a buyer or partner for our technology
and related intellectual property and other assets, in bankruptcy or otherwise. On July 31, 2007, we terminated our lease at 155 Federal Street for a substantially smaller temporary location. Given our limited staff and resources, if we are
unable to successfully complete the merger with DARA, we may not be able to locate a buyer or partner for the purposes of effectuating another strategic transaction. Although we currently retain control over our intellectual property portfolio, we
cannot make any assurances that these assets have or will continue to have any value. This uncertainty as to the value of our intellectual property portfolio and other assets may prevent us from locating another buyer or partner for the purposes of
enacting another strategic transaction if the DARA merger cannot be successfully completed.

If our proposed merger with DARA fails, and
our attempts to find another buyer or partner for our technology and related intellectual property and assets fail, and if no other strategic transaction can be effectuated, we will likely file for federal bankruptcy protection under Chapter 11 of
the Bankruptcy Code. In the event we do file for Chapter 11 protection, we will most likely not be able to raise any type of funding from any source. Upon filing for Chapter 11 protection, we will not meet the minimum standards required for
remaining listed on the NASDAQ Capital Market. If we are delisted, our stock would no longer be tradable on the NASDAQ Capital Market.

Contractual
Obligations

As of September 30, 2007, we had future payments required under contractual obligations and other commitments
approximately as follows:



|                         |  |                      |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |       |  |   |        
|------------------------ |  | -------------------- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | ----- | ------ |  | - | ----- |  | - | -------
|                         |  | Payments Due By Year
|                         |  | Q4 2007              |        | 2008 |   | 2009   |  | 2010 |        | 2011 |   | Thereafter |  | Total
|Operating Leases(1)      |  | $                    | 20,000 |      | $ | 25,000 |  | $    | 13,000 |      | $ | 13,000     |  | $     | 12,000 |  | $ |      |  | $ | 83,000 
|Capital Leases           |  |                      |       |      |   |       |  |      |       |      |   |           |  |       |       |  |   |      |  |   |       
|Licensing Obligations    |  |                      |       |      |   | 10,000 |  |      | 10,000 |      |   | 10,000     |  |       | 10,000 |  |   | 8,000 |  |   | 48,000 
|                         |  |                      |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |       |  |   |        
|Total Future Obligations |  | $                    | 20,000 |      | $ | 35,000 |  | $    | 23,000 |      | $ | 23,000     |  | $     | 22,000 |  | $ | 8,000 |  | $ | 131,000
|                         |  |                      |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |       |  |   |        

---

|(1) | On July 26, 2007, the Company reached an agreement with its landlord, KNH Realty Trust (KNH) to terminate the lease for its corporate offices at 155 Federal Street
in Boston, Massachusetts (the Termination Agreement) effective July 31, 2007. The Termination Agreement provides for a one time payment of $330,000 by the Company to KNH in consideration of releasing the Company from all of its
obligations under its lease, dated as of March 16, 2005, the term of which otherwise ran until July 1, 2010. The one-time payment will be recorded by the Company in the third quarter of 2007. In addition, the Company agreed to transfer
ownership of all of its furniture, office equipment and leasehold improvements to KNH, all of which were written down to zero at June 30, 2007.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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If we are able to complete the proposed merger with DARA or another strategic transaction, additional
severance and related fringes in the amount of approximately $1,240,000 will be paid to certain former executives of Point in accordance with their employment contracts. At September 30, 2007, we have recorded this amount as a liability on our
Consolidated Balance Sheet.

In addition, in accordance with the license agreement between us and Tufts University School of Medicine
(Tufts), we are required to make payments totaling $250,000 to Tufts upon marketing application of the first licensed product and marketing approval of the first licensed product. We are also required to pay a royalty based on future
sales of products covered under the license agreement.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2007 that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

New Accounting Pronouncements

In June 2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entitys financial
statements in accordance with SFAS No. 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to
be taken in a tax return. Additionally, FIN 48 provides guidance on subsequent derecognition of tax positions, financial statement classification, recognition of interest and penalties, accounting in interim periods, and disclosure and transition
requirements. We adopted the provisions of FIN 48 on January 1, 2007. Previously, we had accounted for tax contingencies in accordance with Statement of Financial Accounting Standards 5, Accounting for Contingencies. As
required by FIN 48, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the
more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption
date, we applied FIN 48 to all tax positions for which the statute of limitations remained open. The amount of unrecognized tax benefits as of January 1, 2007 was zero. There have been no material changes in unrecognized tax benefits since
January 1, 2007. As of January 1, 2007, due to the carry forward of unutilized net operating losses and research and development credits, we are subject to U.S. Federal income tax examinations for the tax years 1994 through 2006, and to
state income tax examinations for the tax years 2002 through 2006. We recognize accrued interest related to unrecognized tax benefits in interest expense and penalties in operating expense. No amounts were accrued for the payment of interest and
penalties at January 1, 2007. Our adoption of FIN 48 did not have a material effect on our financial condition, results of operations or cash flows.

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities, which will be effective for public entities no later than the beginning of the first fiscal
year beginning after November 15, 2007. The new standard allows entities to voluntarily choose, at specific election dates, to measure many financial assets and financial liabilities (as well as certain nonfinancial instruments that are similar
to financial instruments) at fair value (the fair value option). The election is made on an instrument-by-instrument basis and is irrevocable. If the fair value option is elected for an instrument, the Statement specifies that all
subsequent changes in fair value for that instrument shall be reported in earnings (or another performance indicator for entities such as not-for-profit organizations that do not report earnings). We will adopt this pronouncement on January 1,
2008 and are currently evaluating the impact that this pronouncement will have on our consolidated financial statements.



|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Our proceeds to date have been invested in money market funds that invest primarily in short-term, highly-rated investments, including U.S. Government securities, commercial paper and certificates of deposit guaranteed by banks. Because of
the short-term maturities of our investments, we do not believe that a change in market rates would have a significant impact on the value of our investment portfolio. Declines in interest rates would reduce our interest income while increases in
interest rates would increase our interest income. Currently, we do not use interest rate derivative instruments to manage exposure to interest rate changes.



|Item 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

(a) Evaluation of
disclosure controls and procedures. Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of September 30, 2007. Based on this evaluation, our



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principal executive officer and principal financial officer concluded that as of September 30, 2007, our disclosure controls and procedures were
(1) designed to ensure that material information relating to us is made known to our principal executive officer and principal financial officer by others, particularly during the period in which this report was prepared and (2) effective,
in that they provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs
rules and forms.

In connection with managements evaluation of the effectiveness of our internal controls and procedures, we
note that the translation of complex clinical data into complete and accurate disclosures that can readily be understood by non-scientific investors is a tremendous challenge for biotech companies. While we believe that our controls and procedures
regarding the disclosure of clinical data are designed properly as discussed above, the effectiveness of these controls and procedures in connection with the recording, processing and reporting of such information depends to a significant degree on
the quality of information provided by our clinical and regulatory personnel.

(b) Changes in internal controls. Effective
July 25, 2007, we terminated all but two of our employees. We currently utilize some of the recently terminated employees as part of a more variable-cost consulting team. Due to this workforce reduction, the effectiveness of the disclosure
control procedures for financial reporting may be limited and it may be difficult for us to maintain effectiveness in our internal controls over financial reporting in future periods.

PART II. OTHER INFORMATION



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

There is no guarantee that we will be able to
complete proposed merger with DARA

On October 9, 2007, we entered into a definitive agreement to merge with
DARA. Pursuant to the Merger Agreement, DARA will merge with DP Acquisition Corp., our newly formed subsidiary, with DARA surviving as our wholly-owned subsidiary. After giving effect to the merger, DARA stockholders will hold 96.4% of our
outstanding shares of common stock on a fully-diluted basis, and we will change our name to DARA BioSciences, Inc. and be based in Raleigh, North Carolina. The Merger is subject to a number of conditions, including approval by both our stockholders
and the stockholders of DARA. There is no assurance that the merger will be approved, and there is no assurance that the other conditions to the completion of the merger will be satisfied. If we are unable to complete the proposed merger with DARA,
we will either need to complete another strategic transaction or file for bankruptcy protection. In addition, if we fail to complete the proposed merger with DARA, we may be required to repay DARA any amounts borrowed from them under our Loan and
Security Agreement.

We may be forced to completely wind-down our operations and cease to exist as an operating company

At September 30, 2007, we had unrestricted cash of approximately $2.3 million. Our unrestricted cash balance is projected to
only allow us to maintain our current and planned operations into the first quarter of 2008. Our current position, combined with the cash we would potentially receive were we to liquidate all of our assets, after taking into account all anticipated
sources and uses of cash, may not be sufficient to pay all of our obligations when such amounts are required to be paid. This condition raises substantial doubt about our ability to continue as a going concern. The audit report prepared by our
independent registered public accounting firm in connection with our financial statements for the year ended December 31, 2006 included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.

In addition, in May 2007, our Independent Data Monitoring Committee recommended
stopping our two Phase 3 talabostat studies in patients with advanced non-small cell lung cancer (NSCLC) due to neither the primary endpoint of median progression-free survival nor the secondary endpoint of overall survival demonstrating
improvement over the placebo groups. Also, in the talabostat combination trial with docetaxal (Taxotere®: sanofi-aventis), the talabostat arm of the study demonstrated significantly lower
overall survival than the placebo arm. As a result of these interim results, the U.S. Food and Drug Administration (the FDA) has put our talabostat clinical program on hold. Our failure to achieve favorable results precludes us from
continuing our talabostat clinical program at this point in time. We have ceased funding our research and development efforts for talabostat, and we will not likely seek to raise future capital for operating purposes.

We have drastically reduced the scope and size of our facility and staff, and our efforts to complete our proposed merger with DARA or to find another buyer or
partner for our technology and related intellectual property and assets, in bankruptcy or otherwise, may be unsuccessful

Effective
July 25, 2007, we terminated all but two of our employees. We plan to utilize some or all of the recently terminated employees as part of a more variable-cost consulting team to assist us as in completing the proposed merger with



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DARA, or, if the merger fails, to seek another buyer or partner for our technology and related intellectual property and other assets, in bankruptcy or
otherwise. In addition, on July 31, 2007, we terminated our lease at 155 Federal Street in Boston, Massachusetts for a substantially smaller temporary location at 70 Walnut Street in Wellesley Hills, Massachusetts. Given our lack of staff and
resources, together with the FDA placing a clinical hold on our lead pharmaceutical product candidate, talabostat, we may be unable to successfully locate a buyer or partner for the purposes of effectuating a strategic transaction. Although we
currently retain control over our intellectual property portfolio, we cannot make any assurances that these assets have or will continue to have any value. This uncertainty as to the value of our intellectual property portfolio and other assets may
prevent us from successfully locating a buyer or partner for the purposes of enacting a strategic transaction if the proposed merger with DARA fails.

If our merger with DARA fails, and attempts to find another buyer or partner for our technology and related intellectual property and assets fail, and if no other strategic transaction can be completed, we will likely file for federal
bankruptcy protection under Chapter 11 of the Bankruptcy Code

If we cannot complete the merger with DARA and attempts to find
another buyer or partner for our technology and related intellectual property and assets fail and if no other strategic transaction can be effectuated, we will likely file for federal bankruptcy protection under Chapter 11 of the Bankruptcy Code. In
the event we do file for Chapter 11 protection, we will most likely not be able to raise any type of funding from any source. Upon filing for Chapter 11 protection, we would not meet the minimum standards required for remaining listed on the NASDAQ
Capital Market. If we are delisted, our stock would no longer be tradable on the NASDAQ Capital Market.

Although we have entered into an
agreement to merge with DARA and have previously been engaged in discussions with additional potential purchasers or strategic partners, we cannot guarantee that a transaction will occur within the time frame necessary to avoid having to file for
Chapter 11 bankruptcy protection within the coming weeks. The situation is dynamic, and our prospects for consummating a transaction could suddenly change; no assurances can be made that such a transaction can or will occur in time.

Provisions of our merger agreement with DARA may deter alternative strategic transactions

The Merger Agreement with DARA prohibits us from soliciting, initiating, encouraging or facilitating certain alternative acquisition proposals with any third party, subject to exceptions set forth in the Merger
Agreement. These provisions limit our ability to pursue offers from third parties that could result in greater value to our stockholders. If the Merger Agreement is terminated and we seek another business combination, we cannot assure stockholders
that we will be able to negotiate a transaction with another company on terms comparable to the terms of the merger with DARA, or that we will avoid incurrence of any fees associated with the termination of the Merger Agreement.

If the proposed merger with DARA is not completed, we will have incurred substantial costs that may adversely affect our financial results and operations and the
market price of our common stock

If the merger with DARA is not completed, the price of our common stock may decline to the extent
that the current market price of our common stock reflects a market assumption that the merger will be completed. In addition, we have incurred and will incur substantial costs in connection with the proposed merger. These costs are primarily
associated with the fees of attorneys, accountants and consultants. If the merger with DARA is not completed, we will have incurred significant costs for which we will have received little or no benefit. Each of these factors may adversely affect
the trading price of our common stock and our financial results and operations.

Even if we do not file for Chapter 11 bankruptcy, we do not currently
comply with certain NASDAQs Marketplace Rules and our stock may be delisted from the NASDAQ Capital market

Even if we do not
file for bankruptcy, we are not currently in compliance with certain requirements for continued listing on the NASDAQ Capital Market. On March 8, 2007, we were notified by the Listing Qualification Department of the NASDAQ Stock Market that we
had failed to comply with the minimum bid price requirement for continued listing on the NASDAQ Capital Market set forth in Marketplace Rule 4310(c)(4) because our common stock had closed below the minimum $1.00 per share requirement for 30
consecutive business days and were given until September 4, 2007, to regain compliance. On September 12, 2007, we received a staff determination letter from the Listing Qualifications Department notifying us that we had failed to regain
compliance with the applicable rule and that trading of our common stock on the NASDAQ Capital Market would be suspended at the opening of business on September 21, 2007 unless we requested an appeal of the determination. Within the September
letter, the NASDAQ staff also indicted its belief that we constituted a



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public shell and that such determination served as an additional basis to delist our securities from the NASDAQ Capital Market. On September 19, 2007,
we timely requested a hearing before NASDAQs Listing Qualification Panel (the Panel, which stayed the delisting determination pending results of the hearing. We attended a hearing with the Panel on November 1, 2007 and are
currently awaiting the Panels written decision. If the Panel does not grant us an exception to gain compliance with the applicable NASDAQ listing requirements, our shares will be delisted which would have a material adverse effect on the
trading price, volume and marketability of our common stock.

In addition, as a result of the Board of Directors vacancy created in January
2007 by the resignation of William Whelan, Jr. as a director and as Chairman of our Audit Committee, we do not currently comply with NASDAQs Marketplace Rule 4350(d)(2), which requires us to have an audit committee of at least three
independent directors as defined by NASDAQs rules. Consistent with NASDAQs Marketplace Rule 4350(d)(4), we have a cure period until the earlier of our next annual meeting of stockholders or January 24, 2008 to fill the vacancy and
regain compliance. Failure to maintain compliance with NASDAQ listing requirements could result in the delisting of our shares from trading on the NASDAQ system, which could have a material adverse effect on the trading price, volume and
marketability of our common stock.

Under Marketplace Rule 4300, NASDAQ has broad discretionary authority over the continued listing of
securities on the NASDAQ stock market. If the Panel does not grant us an extension for 90 days to complete the merger with DARA, our shares will be delisted, which could result in a material adverse effect on the trading price, volume and/or
marketability of our common stock. Even if the Panel grants us the requested extension, we will be delisted on January 30, 2008 unless we regain compliance with the NASDAQ rules by that date, the merger with DARA is completed and DARA has been
separately granted a NASDAQ Capital Market listing as a result of its own initial listing application, or unless we receive a further extension of time from NASDAQ.

If we complete the proposed merger with DARA, our current stockholders will face dilution

The issuance of shares of our common stock to DARA stockholders in the merger will substantially reduce the percentage interests of our stockholders. Pursuant to the Merger Agreement, in exchange for their shares of DARA common and
preferred stock, current DARA stockholders will be issued shares of our common stock in an amount so that following the closing of the merger, DARA stockholders will collectively own 96.4% of our outstanding common stock, on a fully diluted basis.
As a result, our current stockholders will collectively own 3.6% of our common stock after completion of the merger. The issuance of shares of our common stock to DARA stockholders and to holders of assumed options and warrants in the merger will
cause a significant reduction in the relative percentage interest of our current stockholders in our earnings, if any, voting power, liquidation value and market capitalization.

Our stock price could be volatile and our trading volume may fluctuate substantially

The
price of our common stock has been and may in the future continue to be extremely volatile, with the sale price fluctuating from a low of $0.03 to a high of $4.15 in the two-year period ended November 6, 2007. Many factors could have a
significant impact on the future price of our common stock, including:



| |  |  | our inability to close the proposed merger with DARA or find another buyer or partner for our technology and related intellectual property and assets;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | information regarding DARAs strategy and operations that has been publicly disclosed but which may not be as comprehensive or complete as information
otherwise publicly disclosed by an SEC-reporting company;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our filing for protection under Chapter 11 of the Bankruptcy Code;
| | - |  | ------------------------------------------------------------------



| |  |  | our inability to raise additional capital to fund our operations, whether through the issuance of equity securities or debt;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in our intellectual property portfolio or developments or disputes concerning the proprietary rights of our product candidates;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | maintenance of our existing licensing agreement with Tufts;
| | - |  | -----------------------------------------------------------



| |  |  | issuance of new or changed securities analysts reports or recommendations;
| | - |  | ---------------------------------------------------------------------------



| |  |  | degree of trading liquidity in our common stock; and
| | - |  | ----------------------------------------------------



| |  |  | our ability to meet the minimum standards required for remaining listed on the NASDAQ Capital Market.
| | - |  | -----------------------------------------------------------------------------------------------------

In addition, the stock market has from time to time experienced extreme price and volume fluctuations which may be unrelated to the operating performance
of particular companies. For the three month period ended November 6, 2007, the



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daily trading volume for shares of our common stock ranged from 102,000 to 49,928,000 shares traded per day, and the average daily trading volume during such
three month period was 2,548,000 shares traded per day. Accordingly, our investors who wish to dispose of their shares of common stock on any given trading day may not be able to do so or may be able to dispose of only a portion of their shares of
common stock.

If Tufts University School of Medicine terminates our license our intellectual property portfolio would have little value which could
prevent us from successfully locating a buyer or partner for the purposes of effectuating a strategic transaction

We license key
technology, including the rights to talabostat, from Tufts. The underlying license for this technology terminates on the later of the expiration date of the last-to-expire patents, or 20 years from the date of initial commercial sale of the licensed
product. Pursuant to the terms of the license, Tufts has the right to terminate the license prior to expiration of the term upon a material breach of the license by us, our ceasing to do business or becoming insolvent, or our failure to sell a
licensed product in the U.S. market by May 2011. If we do not meet certain clinical development, regulatory and commercialization milestones prior to May 2011, it is possible that Tufts could seek to terminate or modify the terms of the license, in
which case, our intellectual property portfolio would have little value which could prevent us from successfully locating a buyer or partner for the purposes of effectuating a strategic transaction. We also have no assurance that we would be able to
license substitute technology in the future. Our inability to do so could impair our ability to conduct our business because we may lack the technology, the necessary rights to such technology, or the finances required, in each case, to develop and
commercialize potential products.

We may fail to adequately protect or enforce our intellectual property rights, and our products and processes may
infringe the intellectual property rights of others

Protection of our compounds and technology owned or licensed by us is
essential to our business. Our policy is to protect our technology by, among other things, filing or causing to be filed on our behalf patent applications for technology relating to the development of our business. We own or have licensed 22 issued
U.S. patents and 14 pending U.S. patent applications. Most of these patents and patent applications relate to our oncology and diabetes technologies. If regulatory extensions are not taken into account, one U.S. patent and one application expire in
2011; one U.S. patent expires in 2012; and the remaining patents and applications expire in 2016 and beyond. We also own or have licensed foreign patents and patent applications corresponding to most of the U.S. patents and patent applications. It
is possible that no patents will be issued on our pending patent applications, and it is possible that our patent claims, now or in the future issued, will not be sufficient to protect our products and technology, will not be sufficient to provide
protection against competitive products, or otherwise will not be commercially valuable. Any patents issued to or licensed by us could be challenged, invalidated, infringed, circumvented or held unenforceable.

To date, we have not received any communications from third parties, nor are we aware of any claims by third parties that our use of talabostat or any of
our other activities infringe upon the patent or other proprietary rights of any third party. However, we have no assurance that other companies or individuals have not or will not independently develop substantially equivalent proprietary rights or
that other parties have not or will not be issued patents that may prevent the sale of products or require licensing and the payment of significant fees or royalties in order for us to be able to carry on our business. We from time to time engage in
discussions with Tufts, other licensors, vendors and other parties about the scope and enforceability of our contractual rights that may include utilization of dispute resolution procedures contained in applicable agreements. Otherwise, we have not
notified any third party that they are infringing any of our proprietary rights.

Litigation or other legal proceedings could result in
substantial costs to us and may be necessary to enforce any of our patents or other proprietary rights or to determine the scope and validity or enforceability of other parties proprietary rights. The defense and enforcement of patent and
intellectual property claims are both costly and time consuming, even if the legal outcome is favorable to us. Any adverse legal outcome could subject us to significant liabilities to third parties, require disputed rights to be licensed from third
parties, or require us to cease manufacturing or selling our future products.

Our current and former employees, consultants and advisors
were required to enter into written confidentiality agreements that prohibit the disclosure or use of confidential information. We also have entered into written confidentiality agreements that are intended to protect our confidential information
delivered to third parties for research and other purposes. However, these agreements could be breached, and we may not have adequate remedies for any breach, or our trade secrets and proprietary information could otherwise become known or be
independently discovered by others. We have not notified any person of a violation of a confidentiality agreement that has materially harmed our business.



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We may be sued for product or operational liability

We may be held liable if any of our products or operations cause injury or death or are found otherwise unsuitable during product testing, manufacturing,
marketing or sale. We currently maintain a $2 million general liability policy and a $5 million per occurrence and annual aggregate product liability insurance policy related to our clinical trials consistent with industry standards. When
necessary for our products, we intend to obtain additional product liability insurance. Insurance coverage may be prohibitively expensive, may not fully cover our potential liabilities or may not be available in the future. Inability to obtain
sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of our products. If we are sued for any injury caused by our products, the
litigation could consume substantial time and attention of our management and our liability could exceed our total assets.

We have contingent
liabilities relating to our historical discontinued operations that could give rise to liability risks in the future

Prior to the
sale of substantially all of our non-cash assets to Whatman Bioscience, Inc. (Whatman) in May of 2001, we were engaged in the business of developing and supplying blood filtration devices. Although Whatman contractually assumed and
agreed to indemnify us and hold us harmless from and against most liabilities and obligations arising out of the conduct of our blood filtration business, we retained certain known and unknown risks that were not contractually assumed by Whatman
including without limitation, (i) any of our liabilities under any benefit plan, (ii) tax liabilities incurred which relate to periods prior to the closing of the Whatman transaction, (iii) accounts payable arising prior to the
closing of the Whatman transaction, (iv) any of our liabilities which were owed to our security holders in their capacity as such, and (v) our liabilities which were owed to Sepracor, Inc. arising or resulting from its respective
contractual relationships with us. If for any reason Whatman, or its successors, is not able to satisfy any of the assumed liabilities, such outcome could have a material and adverse effect on our financial condition. Accordingly, there can be no
assurances that claims arising out of our historical business and operations would not be asserted against us in the future and, if asserted, there can be no assurances that we would prevail.

We may be subject to future litigation which could be costly and time-consuming to defend

In light of disclosures about our current financial and clinical difficulties, including the termination of our clinical programs, including our Phase 3
trial in NSCLC and our early termination of our Phase 2 trial in pancreatic cancer, we may be the subject of litigation by one or more parties, including our stockholders and recent investors. Any claim or series of claims brought against us could
significantly harm our business by, among other things, injuring our reputation and leading to costly litigation. Any judgment against us that is in excess of our insurance policy limits would have to be paid from our limited cash reserves, which
would further reduce our capital resources. If we are sued, we may not have sufficient capital resources to defend the suit or to pay a judgment. If we do not have sufficient capital resources to pay a judgment, our creditors could levy against our
assets, including our intellectual property.



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



|               |  |                                                                                                                           
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                               
|10.01          |  | Consulting agreement by and between the Company and Donald R. Kiepert, Jr. dated as of July 26, 2007.                     
|               | 
|10.02          |  | Consulting agreement by and between the Company and Michael P. Duffy dated as of July 26, 2007.                           
|               | 
|10.03          |  | Consulting agreement by and between the Company and Barry Jones dated as of July 26, 2007.                                
|               | 
|10.04          |  | Consulting agreement by and between the Company and Richard N. Small dated as of July 26, 2007.                           
|               | 
|31.1           |  | Certification of Donald R. Kiepert, Jr. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 9, 2007.
|               | 
|31.2           |  | Certification of Richard N. Small pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 9, 2007.      
|               | 
|32.1           |  | Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant
has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.



|                       |  |                          |  |                            
|---------------------- |  | ------------------------ |  | ---------------------------
|                       |  | POINT THERAPEUTICS, INC.
|                       |  |                         
|Date: November 9, 2007 |  | By:                      |  | /s/ DONALD R. KIEPERT, JR. 
|                       |  |                          |  | Donald R. Kiepert, Jr.     
|                       |  |                          |  | Principal Executive Officer
|                       | 
|                       |  | POINT THERAPEUTICS, INC.
|                       |  |                         
|Date: November 9, 2007 |  | By:                      |  | /s/ RICHARD N. SMALL       
|                       |  |                          |  | Richard N. Small           
|                       |  |                          |  | Principal Financial Officer



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