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

For the quarterly period ended March 31, 2006.

OR



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

For the transition period from  to

Commission file number: 0-21643



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CV THERAPEUTICS, INC.

(Exact name of Registrant as specified in its charter)



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|                         |  |                                     
|------------------------ |  | ------------------------------------
|Delaware                 |  | 43-1570294                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)

3172 Porter Drive, Palo Alto, California 94304

(Address of principal executive offices, including zip code)

Registrants telephone number, including area code: (650) 384-8500



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Indicate by check whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities and 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  x    Accelerated filer ̈Non-accelerated filer ̈

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

As of April 28, 2006, 45,052,860 shares of the registrants common stock, $.001 par value, were outstanding.



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##### Table of Contents

CV THERAPEUTICS, INC.

INDEX



|                               |  |                                                                                                  |  |     
|------------------------------ |  | ------------------------------------------------------------------------------------------------ |  | ----
|                               |  |                                                                                                  |  | Page
|PART I  FINANCIAL INFORMATION |  |                                                                                                 
|                               |  |                                                                                                 
|Item 1                         |  | Condensed Consolidated Financial Statements                                                      |  |     
|                               |  |                                                                                                 
|                               |  | Condensed Consolidated Balance Sheets  March 31, 2006 and December 31, 2005                     |  | 3   
|                               |  |                                                                                                 
|                               |  | Condensed Consolidated Statements of Operations  for the quarters ended March 31, 2006 and 2005 |  | 4   
|                               |  |                                                                                                 
|                               |  | Condensed Consolidated Statements of Cash Flows  for the quarters ended March 31, 2006 and 2005 |  | 5   
|                               |  |                                                                                                 
|                               |  | Notes to Condensed Consolidated Financial Statements                                             |  | 6   
|                               |  |                                                                                                 
|Item 2                         |  | Managements Discussion and Analysis of Financial Condition and Results of Operations            |  | 13  
|                               |  |                                                                                                 
|Item 3                         |  | Quantitative and Qualitative Disclosures About Market Risk                                       |  | 21  
|                               |  |                                                                                                 
|Item 4                         |  | Controls and Procedures                                                                          |  | 22  
|                               | 
|PART II 
OTHER INFORMATION    |  |                                                                                                 
|Item 1                         |  | Legal Proceedings                                                                                |  | 23  
|Item 1A                        |  | Risk Factors                                                                                     |  | 23  
|Item 6                         |  | Exhibits                                                                                         |  | 42  
|                               | 
|SIGNATURES                     |  | 43                                                                                              



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##### Table of Contents

CV THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)



|                                                                                                                                                                            |  |               |          |   |                   |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | - | ----------------- | - | -------- | -
|                                                                                                                                                                            |  | March 31,2006 |          |   | December 31, 2005 |  
|                                                                                                                                                                            |  | (Unaudited)   |          |   | (A)               |  
|ASSETS                                                                                                                                                                      |  |               |          |   |                   |   |          |  
|Current assets:                                                                                                                                                             |  |               |          |   |                   |   |          |  
|Cash and cash equivalents                                                                                                                                                   |  | $             | 21,462   |   |                   | $ | 23,688   |  
|Marketable securities                                                                                                                                                       |  |               | 351,801  |   |                   |   | 436,495  |  
|Accounts receivable                                                                                                                                                         |  |               | 7,157    |   |                   |   |         |  
|Inventory                                                                                                                                                                   |  |               | 4,302    |   |                   |   |         |  
|Restricted cash                                                                                                                                                             |  |               | 9,982    |   |                   |   | 10,587   |  
|Other current assets                                                                                                                                                        |  |               | 21,571   |   |                   |   | 16,296   |  
|                                                                                                                                                                            |  |               |          |   |                   |   |          |  
|Total current assets                                                                                                                                                        |  |               | 416,275  |   |                   |   | 487,066  |  
|Notes receivable from related parties                                                                                                                                       |  |               | 75       |   |                   |   | 75       |  
|Property and equipment, net                                                                                                                                                 |  |               | 22,916   |   |                   |   | 20,491   |  
|Restricted cash                                                                                                                                                             |  |               | 8,719    |   |                   |   | 10,990   |  
|Other assets                                                                                                                                                                |  |               | 19,382   |   |                   |   | 13,939   |  
|                                                                                                                                                                            |  |               |          |   |                   |   |          |  
|Total assets                                                                                                                                                                |  | $             | 467,367  |   |                   | $ | 532,561  |  
|                                                                                                                                                                            |  |               |          |   |                   |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                        |  |               |          |   |                   |   |          |  
|Current liabilities:                                                                                                                                                        |  |               |          |   |                   |   |          |  
|Accounts payable                                                                                                                                                            |  | $             | 5,065    |   |                   | $ | 4,690    |  
|Accrued and other current liabilities                                                                                                                                       |  |               | 47,043   |   |                   |   | 58,172   |  
|Deferred revenue                                                                                                                                                            |  |               | 6,501    |   |                   |   | 665      |  
|                                                                                                                                                                            |  |               |          |   |                   |   |          |  
|Total current liabilities                                                                                                                                                   |  |               | 58,609   |   |                   |   | 63,527   |  
|Convertible subordinated notes                                                                                                                                              |  |               | 399,500  |   |                   |   | 399,500  |  
|Other liabilities                                                                                                                                                           |  |               | 5,405    |   |                   |   | 8,544    |  
|                                                                                                                                                                            |  |               |          |   |                   |   |          |  
|Total liabilities                                                                                                                                                           |  |               | 463,514  |   |                   |   | 471,571  |  
|Stockholders equity:                                                                                                                                                       |  |               |          |   |                   |   |          |  
|Preferred stock, $0.001 par value, 5,000,000 shares authorized, none issued and outstanding                                                                                 |  |               |         |   |                   |   |         |  
|Common stock, $0.001 par value, 85,000,000 shares authorized, 45,049,094 and 44,858,060 shares issued and outstanding at March 31, 2006
and December 31, 2005, respectively |  |               | 886,873  |   |                   |   | 891,724  |  
|Accumulated deficit                                                                                                                                                         |  |               | (883,028 | ) |                   |   | (812,554 | )
|Deferred stock-based compensation                                                                                                                                           |  |               |         |   |                   |   | (18,218  | )
|Accumulated other comprehensive income                                                                                                                                      |  |               | 8        |   |                   |   | 38       |  
|                                                                                                                                                                            |  |               |          |   |                   |   |          |  
|Total stockholders equity                                                                                                                                                  |  |               | 3,853    |   |                   |   | 60,990   |  
|                                                                                                                                                                            |  |               |          |   |                   |   |          |  
|Total liabilities and stockholders equity                                                                                                                                  |  | $             | 467,367  |   |                   | $ | 532,561  |  
|                                                                                                                                                                            |  |               |          |   |                   |   |          |  

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|(A) | Derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2005. Certain reclassifications have been
made to prior period balances to conform to the current presentation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes



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CV THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)



|                                                              |  |                        |         |   |      |   |         |  
|------------------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | -
|                                                              |  | Quarter endedMarch 31, |        
|                                                              |  | 2006                   |         |   | 2005 |  
|Revenues:                                                     |  |                        |         |   |      |   |         |  
|Collaborative research                                        |  | $                      | 4,376   |   |      | $ | 5,630   |  
|Co-promotion                                                  |  |                        | 688     |   |      |   |        |  
|                                                              |  |                        |         |   |      |   |         |  
|Total revenues                                                |  |                        | 5,064   |   |      |   | 5,630   |  
|                                                              |  |                        |         |   |      |   |         |  
|Operating expenses:                                           |  |                        |         |   |      |   |         |  
|Research and development                                      |  |                        | 31,460  |   |      |   | 35,129  |  
|Selling, general and administrative                           |  |                        | 44,827  |   |      |   | 16,355  |  
|                                                              |  |                        |         |   |      |   |         |  
|Total operating expenses                                      |  |                        | 76,287  |   |      |   | 51,484  |  
|                                                              |  |                        |         |   |      |   |         |  
|Loss from operations                                          |  |                        | (71,223 | ) |      |   | (45,854 | )
|Interest and other income, net                                |  |                        | 3,915   |   |      |   | 2,255   |  
|Interest expense                                              |  |                        | (3,166  | ) |      |   | (2,823  | )
|                                                              |  |                        |         |   |      |   |         |  
|Net loss                                                      |  | $                      | (70,474 | ) |      | $ | (46,422 | )
|                                                              |  |                        |         |   |      |   |         |  
|Basic and diluted net loss per share                          |  | $                      | (1.57   | ) |      | $ | (1.31   | )
|                                                              |  |                        |         |   |      |   |         |  
|Shares used in computing basic and diluted net loss per share |  |                        | 44,982  |   |      |   | 35,498  |  
|                                                              |  |                        |         |   |      |   |         |  

See accompanying notes



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CV THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                            |  |                        |         |   |      |   |         |  
|--------------------------------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | -
|                                                                            |  | Quarter endedMarch 31, |        
|                                                                            |  | 2006                   |         |   | 2005 |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                        |  |                        |         |   |      |   |         |  
|Net loss                                                                    |  | $                      | (70,474 | ) |      | $ | (46,422 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                        |         |   |      |   |         |  
|(Gain) loss on the sale of investments                                      |  |                        | (21     | ) |      |   | 224     |  
|Impairment recognized for unrealized loss on marketable securities          |  |                        | 1,157   |   |      |   |        |  
|Forgiveness of related party notes and interest                             |  |                        | 3       |   |      |   | 23      |  
|Stock-based compensation expense                                            |  |                        | 6,655   |   |      |   | 948     |  
|Depreciation and amortization, net                                          |  |                        | 1,378   |   |      |   | 2,914   |  
|Change in assets and liabilities:                                           |  |                        |         |   |      |   |         |  
|Accounts receivable                                                         |  |                        | (7,157  | ) |      |   |        |  
|Inventory                                                                   |  |                        | (4,302  | ) |      |   |        |  
|Restricted cash                                                             |  |                        | 2,876   |   |      |   | (119    | )
|Prepaid and other current assets                                            |  |                        | (5,281  | ) |      |   | 1,014   |  
|Other assets                                                                |  |                        | (5,799  | ) |      |   | 43      |  
|Accounts payable                                                            |  |                        | 375     |   |      |   | 604     |  
|Accrued and other liabilities                                               |  |                        | (9,720  | ) |      |   | 5,410   |  
|Deferred revenue                                                            |  |                        | 5,836   |   |      |   | (257    | )
|                                                                            |  |                        |         |   |      |   |         |  
|Net cash used in operating activities                                       |  |                        | (84,474 | ) |      |   | (35,618 | )
|CASH FLOWS FROM INVESTING ACTIVITIES                                        |  |                        |         |   |      |   |         |  
|Purchases of investments                                                    |  |                        |        |   |      |   | (48,731 | )
|Sales of investments                                                        |  |                        | 33,749  |   |      |   | 45,723  |  
|Maturities of investments                                                   |  |                        | 50,300  |   |      |   | 12,550  |  
|Capital expenditures                                                        |  |                        | (3,679  | ) |      |   | (1,942  | )
|                                                                            |  |                        |         |   |      |   |         |  
|Net cash provided by investing activities                                   |  |                        | 80,370  |   |      |   | 7,600   |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                        |  |                        |         |   |      |   |         |  
|Net proceeds from issuance of common stock                                  |  |                        | 1,878   |   |      |   | 25,808  |  
|                                                                            |  |                        |         |   |      |   |         |  
|Net cash provided by financing activities                                   |  |                        | 1,878   |   |      |   | 25,808  |  
|                                                                            |  |                        |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                   |  |                        | (2,226  | ) |      |   | (2,210  | )
|Cash and cash equivalents at beginning of period                            |  |                        | 23,688  |   |      |   | 20,759  |  
|                                                                            |  |                        |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                  |  | $                      | 21,462  |   |      | $ | 18,549  |  
|                                                                            |  |                        |         |   |      |   |         |  

See accompanying notes



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CV THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Summary of Significant Accounting
Policies

Basis of Presentation

The accompanying condensed consolidated financial statements of CV Therapeutics, Inc. have been prepared following the requirements of the Securities and Exchange Commission for interim reporting. As permitted under
those rules, certain footnotes or other financial information that are normally required by U.S. generally accepted accounting principles (GAAP) have been condensed or omitted. The condensed consolidated financial statements are unaudited and
reflect all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary to present fairly the financial position at, and the results of operations for, the interim periods presented. The results
of operations for the quarter ended March 31, 2006 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2006 or of future operating results for any interim period. The financial information
included herein should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2005, which includes our audited consolidated financial statements and the notes thereto.

Reclassifications

Certain
reclassifications have been made to prior period balances in order to conform to the current presentation. We have combined line items in the condensed consolidated statements of operations previously separately titled sales and
marketing and general and administrative to a new category titled selling, general and administrative. We have also reclassified certain items on our balance sheet, including non-cash consideration paid related to our
operating lease agreements.

Principles of Consolidation

The financial statements include the accounts of our company and our wholly owned subsidiary. The functional currency of our wholly-owned European
subsidiary in the United Kingdom is the U.S. dollar, and all intercompany transactions and balances have been eliminated. All foreign currency remeasurement gains and losses were recorded in the condensed consolidated statements of operations in
accordance with Statement of Financial Accounting Standards No. 52, Foreign Currency Translation, and have not been significant.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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.

Inventory

We expense costs relating to inventory until such time as we receive an approval letter from the FDA for a new
product and then we begin to capitalize the subsequent inventory costs relating to that product. Prior to approval of Ranexa for commercial sale in January 2006 by the FDA, we had expensed all costs associated with the production of Ranexa as
research and development expense. Subsequent to receiving approval for Ranexa, we capitalized the cost of manufacturing Ranexa as inventory, including costs to convert existing raw materials to active pharmaceutical ingredient as well as costs to
tablet, package and label previously manufactured inventory whose costs had already been expensed as research and development. Until we sell the inventory for which a portion of the costs were previously expensed, the carrying value of our inventory
will reflect only incremental costs incurred subsequent to the approval date.

The valuation of inventory requires us to estimate obsolete,
expired or excess inventory. Once packaged as finished goods, Ranexa currently has a shelf life of 36 months. The determination of obsolete, expired or excess inventory requires us to estimate the future demand for Ranexa. If our current assumptions
about future production or inventory levels, demand or competition were to change or if actual market conditions are less favorable than those we have projected, inventory write-downs may be required that could negatively impact our product margins
and results of operations. We also review our inventory for quality assurance and quality control issues identified in the manufacturing process and determine if a write-down is necessary.



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Inventory is stated at the lower of cost or market. Cost is determined on a method which approximates the
first-in-first-out method. Inventories consist of the following (in thousands):



|                |  |                |      
|--------------- |  | -------------- | -----
|                |  | March 31, 2005
|Raw materials   |  | $              | 1,485
|Work in process |  |                | 1,917
|Finished goods  |  |                | 326  
|Deferred costs  |  |                | 574  
|                |  |                |      
|Total           |  | $              | 4,302
|                |  |                |      

Deferred costs represent the costs of products shipped for which recognition of revenue has been
deferred. The total stock-based compensation expense capitalized to inventory was less than $0.1 million for the quarter ended March 31, 2006.

Revenue Recognition

We follow the provisions of Staff Accounting Bulletin No. 104, Revenue Recognition (SAB
104), and recognize revenue when there is persuasive evidence an arrangement exists, delivery to the customer has occurred, title has transferred to our wholesale customers, the price is fixed or determinable and collectibility is reasonably
assured. Consistent with SAB 104, for arrangements where the revenue recognition criteria are not met, we defer the recognition of revenue by recording deferred revenue until such time that all criteria under the provision are met. During March
2006, we offered product return privileges which are customary during product launch on product sales to wholesalers. As a result of these privileges, we have deferred recognition of Ranexa revenue of $6.0 million and recorded this amount as a
liability on our condensed consolidated balance sheet as of March 31, 2006. In addition, the costs of manufacturing Ranexa associated with the deferred revenue are recorded as deferred costs, which are included in inventory, until such time the
deferred revenue is recognized.

We sell our product to wholesale distributors, who in turn, sell to retail pharmacies and government
entities. Deferred product revenue is recorded net of applicable allowances for sales returns, distributor fees, government rebate programs, Medicaid reimbursements and customer incentives such as cash discounts for prompt payment. Estimates for
distributor fees are based on contractually determined fixed percentages of sales. Estimates for government rebate programs and cash discounts are based on contractual terms, estimated utilization rates and our expectations regarding future
utilization rates for these programs. As Ranexa is a new product, we estimate product returns based on the industry trends for other products with similar characteristics.

Trade accounts receivable are recorded net of allowances for cash discounts for prompt payment. Allowances for discounts, distribution fees, and product
returns are included in accounts payable, accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

Revenue under our collaborative research arrangement is recognized based on the performance requirements of the contract. Amounts received under such arrangements consist of up-front license payments, periodic milestone payments and
reimbursements for research activities. Up-front or milestone payments which are still subject to future performance requirements are recorded as deferred revenue and are amortized over the performance period. The performance period is estimated at
the inception of the arrangement and is reevaluated at each reporting period. The reevaluation of the performance period may shorten or lengthen the period during which the deferred revenue is recognized. We reevaluated the performance period for
certain collaborative research arrangements in 2005, which resulted in an immaterial change in revenues as compared to our original estimate. We will continue to reevaluate the performance period for our collaborative arrangements in future periods.
We evaluate the appropriate performance period based on research progress attained and certain events, such as changes in the regulatory and competitive environment. Revenues related to substantive, at-risk milestones are recognized upon achievement
of the scientific or regulatory event specified in the underlying agreement. Revenues for research activities are recognized as the related research efforts are performed.

Revenue under our amended ACEON®co-promotion agreement is recognized based on net product sales recorded by Solvay Pharmaceuticals, our co-promotion partner, above a specified baseline for each reporting period. We recognized $0.7
million of co-promotion revenue during the quarter ended March 31, 2006.

Concentration of Credit Risk

Two trade customers individually comprised greater than 10% of total accounts receivable and their respective percentage of our total deferred product
revenue. These two customers comprised 63% and 34%, respectively, of total accounts receivable as of March 31, 2006.



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Comprehensive Loss

Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, established standards for the reporting and display of comprehensive income (loss) and its components. Comprehensive
loss consists of net loss plus the changes in unrealized gains and losses on available-for-sale investment securities. At each balance sheet date presented, our accumulative other comprehensive loss consists solely of unrealized gains on
available-for-sale investment securities. Comprehensive loss for the quarter ended March 31, 2006 and 2005 are as follows (in thousands):



|                                                                                               |  |                         |         |   |      |   |         |  
|---------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | -
|                                                                                               |  | Quarter ended March 31, |        
|                                                                                               |  | 2006                    |         |   | 2005 |  
|Net loss                                                                                       |  | $                       | (70,474 | ) |      | $ | (46,422 | )
|Increase in unrealized losses on available-for-sale securities                                 |  |                         | (1,166  | ) |      |   | (1,373  | )
|Reclassification adjustment for losses on available-for-sale securities recognized in earnings |  |                         | 1,136   |   |      |   | 224     |  
|                                                                                               |  |                         |         |   |      |   |         |  
|Comprehensive loss                                                                             |  | $                       | (70,504 | ) |      | $ | (47,571 | )
|                                                                                               |  |                         |         |   |      |   |         |  

Net Loss Per Share

In accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share, basic and diluted net loss per share have been
computed using the weighted average number of shares of common stock outstanding during each period. Our calculation of diluted net loss per share excludes potentially dilutive shares, as these shares were antidilutive for all periods presented. Our
calculation of diluted net income per share may be affected in future periods by dilutive impact of our outstanding stock options, restricted stock units, stock appreciation rights, and warrants. In addition, our calculation of diluted net income
per share may be affected in future periods by our convertible notes and debentures.

2. Stock-Based Compensation

We have a stock-based compensation program that provides our Board of Directors broad discretion in creating employee equity incentives. This program
includes incentive and non-statutory stock options, restricted stock units (RSUs), stock appreciation rights (SARs) and an employee stock purchase plan (ESPP). The following table presents the total stock-based employee compensation expense
resulting from stock-based compensation included in our statement of operations (in thousands):



|                                    |  |                          |       |      |   |    
|----------------------------------- |  | ------------------------ | ----- | ---- | - | ---
|                                    |  | Quarter Ended, March 31,
|                                    |  | 2006                     |       | 2005
|Research and development            |  | $                        | 1,757 |      | $ | 283
|Selling, general and administrative |  |                          | 4,518 |      |   | 430
|                                    |  |                          |       |      |   |    
|Total                               |  | $                        | 6,275 |      | $ | 713
|                                    |  |                          |       |      |   |    

As of March 31, 2006, we had 10,649,501 shares of common stock reserved for future issuance
under our stock compensation plans and ESPP. Cash received from option exercises and purchases under the ESPP for the quarter ended March 31, 2006 was $1.9 million.

Stock Options

Stock options
generally vest at least 20% on each annual anniversary of the grant date over four years and expire no later than ten years from the grant date. Stock options are generally granted with an exercise price equal to or above the market value of a share
of common stock on the date of grant. For the quarter ended March 31, 2006, approximately $3.4 million of compensation expense related to stock options was recorded.



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The following table summarizes stock option activity for the quarter ended March 31, 2006 under all
option plans:



|                                          |  |                                |   |  |                                |       |                                         |           |                                         |   |       
|----------------------------------------- |  | ------------------------------ | - |  | ------------------------------ | ----- | --------------------------------------- | --------- | --------------------------------------- | - | ------
|                                          |  | Number ofShares (in thousands) |   |  | Weighted-Average ExercisePrice |       | WeightedAverageRemainingContractualTerm |           | AggregateIntrinsic Value (in thousands)
|Options outstanding at December 31, 2005: |  | 7,664                          |   |  | $                              | 26.73 |                                         |           |                                         |   |       
|Granted                                   |  | 174                            |   |  |                                | 26.49 |                                         |           |                                         |   |       
|Exercised                                 |  | (27                            | ) |  |                                | 12.59 |                                         |           |                                         |   |       
|Forfeited or expired                      |  | (70                            | ) |  |                                | 22.66 |                                         |           |                                         |   |       
|                                          |  |                                |   |  |                                |       |                                         |           |                                         |   |       
|Options outstanding at March 31, 2006     |  | 7,741                          |   |  | $                              | 26.81 |                                         | 6.7 years |                                         | $ | 22,927
|                                          |  |                                |   |  |                                |       |                                         |           |                                         |   |       
|Exercisable at March 31, 2006             |  | 4,917                          |   |  | $                              | 29.76 |                                         | 5.5 years |                                         | $ | 16,067
|                                          |  |                                |   |  |                                |       |                                         |           |                                         |   |       

The weighted average grant-date fair value of options granted during the quarter ended
March 31, 2006 was $16.18. The total intrinsic value of options exercised for the quarter ended March 31, 2006 was $0.3 million. The total intrinsic value of options exercised for the quarter ended March 31, 2005 was immaterial.

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between our closing stock price on
March 31, 2006 of $22.08 and the exercise price, times the number of shares), which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options
exercisable on March 31, 2006 was approximately 1.9 million. As of March 31, 2006, there was $18.7 million of total unrecognized compensation expense related to unvested stock options. This expense is expected to be recognized over a
weighted-average period of approximately 1.4 years.

Employee Stock Purchase Plan

Under the terms of the ESPP, eligible employees may purchase shares of our common stock at quarterly intervals through their periodic payroll deductions,
which may not exceed 15 percent of any employees compensation and may not exceed a value of $25,000 in any calendar year, at a price not less than the lesser of an amount equal to 85 percent of the fair market value of our common stock at the
beginning of the offering period or an amount equal to 85 percent of the fair market value of our common stock on each purchase date. For the quarter ended March 31, 2006, we recorded approximately $0.4 million of compensation expense related
to the ESPP. During the three months ended March 31, 2006, 944,910 shares were purchased under the ESPP.

Restricted Stock
Units

Our stock compensation plan permits the granting of RSUs to eligible employees, including executives and to certain consultants
at fair market value at the date of grant and typically become fully vested over the period the services are performed. Restricted stock units are payable in shares of our common stock upon vesting. RSUs generally vest monthly over a period of 48
months and are settled and issued on specific distribution dates. Some of the RSUs provide for immediate acceleration of vesting in the event that we achieve a certain annualized product revenue threshold over four consecutive quarters. As of
March 31, 2006, we cannot estimate the likelihood of achieving this target and have not recorded any accelerated compensation expense related to the performance-based component of the award.

The following table presents a summary of the status of our nonvested RSUs as of March 31, 2006, and changes for the quarter ended March 31,
2006:



|                                    |  |                                 |   |  |                                        |      
|----------------------------------- |  | ------------------------------- | - |  | -------------------------------------- | -----
|Nonvested RSUs                      |  | Outstanding RSUs (in thousands) |   |  | Weighted-Average Grant-Date Fair Value
|Nonvested RSUs at December 31, 2005 |  | 768                             |   |  | $                                      | 23.93
|Granted                             |  | 345                             |   |  |                                        | 27.15
|Vested                              |  | (82                             | ) |  |                                        | 24.60
|Forfeited                           |  | (1                              | ) |  |                                        | 23.57
|                                    |  |                                 |   |  |                                        |      
|Nonvested RSUs at March 31, 2006    |  | 1,030                           |   |  | $                                      | 24.97
|                                    |  |                                 |   |  |                                        |      

As of March 31, 2006, there was approximately $25.7 million of total unrecognized
compensation cost related to nonvested RSUs granted under our plans. That cost is expected to be recognized over a period of 3.3 years. Compensation expense related to restricted stock units was $2.0 million and $0.7 million for the quarter ended
March 31, 2006 and 2005, respectively. At March 31, 2006, we had approximately 1,251,580 RSUs outstanding, of which 220,980 are vested.



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##### Table of Contents

Stock Appreciation Rights

During 2005, we granted 950,000 SARs to certain executives. As originally granted, the SARs generally vest annually over four years and are automatically
exercised upon each vesting date. When an award vests, employees will receive compensation equal to the amount, if any, by which the volume weighted average market price of the shares covered by the SAR exceeds the SAR base value for each SAR
vested. The SAR base value is a predetermined strike price of $26.45. In January 2006, the board of directors amended the terms of the SAR agreements. For the period of 2006 through 2008 covered by the amended SAR grants, in addition to receiving
compensation equal to the amount, if any, by which the volume weighted average market price of the shares covered by the SAR exceeds the SAR base value for each SAR vested for the current year, for that current year the employee will also receive
compensation, if any, equal to the amount(s), if any, settled and received in prior years, including 2005. We expect to settle all amounts due under the SARs, if any, using shares of our common stock. As of March 31, 2006, a total of 237,500
SARS were vested. As of March 31, 2006, there was approximately $4.1 million of total unrecognized compensation cost related to nonvested SARs. That cost is expected to be recognized over a period of 2.75 years. We recorded $0.5 million of
compensation expense related to these SARs in the quarter ended March 31, 2006.

Adoption of SFAS 123R

On January 1, 2006, we adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based
Payment (SFAS 123R), which requires the measurement and recognition of compensation expense at fair value for all share-based payment awards made to employees and directors. We adopted SFAS 123R using the modified-prospective transition method.
Under that transition method, compensation expense recognized in the quarter ended March 31, 2006 includes (a) compensation expense for share-based payment awards granted prior to, but not yet vested as of January 1, 2006, based on
the grant-date fair value estimated in accordance with the pro forma provisions of SFAS 123 and (b) compensation expense for the share-based payment awards granted subsequent to January 1, 2006, based on the grant-date fair value estimated
in accordance with the provisions of SFAS 123R.

Prior to the adoption of SFAS 123R, we presented deferred compensation, which represented
the value of RSUs granted to employees as of the grant date remaining to be amortized as the services are performed, as a separate component of stockholders equity. Upon the adoption of SFAS 123R, we reclassified the balance in deferred
compensation (which totaled approximately $18.2 million) to common stock on our consolidated balance sheet.

Pro Forma Disclosures

Prior to January 1, 2006, we accounted for share-based payment awards under the recognition and measurement provisions of APB Opinion
No. 25, Accounting for Stock Issued to Employees(APB 25). The following table illustrates the effect on net loss and net loss per share if we had applied the fair value recognition provisions of SFAS 123 stock-based compensation for the
quarter ended March 31, 2005 (in thousands, except per share amounts):



|                                                                                                                    |  |                              |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | -
|                                                                                                                    |  | Quarter Ended March 31, 2005 |        
|Net loss:                                                                                                           |  |                              |         |  
|As reported                                                                                                         |  | $                            | (46,422 | )
|Add: Stock-based employee compensation (related to RSUs and SARs) included in reported net loss                     |  |                              | 713     |  
|Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards |  |                              | (4,502  | )
|                                                                                                                    |  |                              |         |  
|Pro forma net loss                                                                                                  |  | $                            | (50,211 | )
|                                                                                                                    |  |                              |         |  
|Net loss per share basic and diluted:                                                                               |  |                              |         |  
|As reported                                                                                                         |  | $                            | (1.31   | )
|                                                                                                                    |  |                              |         |  
|Pro forma                                                                                                           |  | $                            | (1.41   | )
|                                                                                                                    |  |                              |         |  



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##### Table of Contents

Measurement

The fair value of our options granted to employees was estimated assuming no expected dividends and the following weighted-average assumptions:



|                        |  |                         |   |  |           |  
|----------------------- |  | ----------------------- | - |  | --------- | -
|                        |  | Quarter Ended March 31, |  
|                        |  | 2006                    |   |  | 2005      |  
|Expected life           |  | 6.2 years               |   |  | 5.3 years |  
|Risk-free interest rate |  | 4.5                     | % |  | 4.2       | %
|Volatility              |  | 60                      | % |  | 65        | %

The expected term of options granted is derived from historical data on employee exercise and
post-vesting employment termination behavior. The risk-free rate for periods within the contractual life of the option is based on the yield at the time of grant of a U.S. Treasury security. Expected volatility is based on both the implied
volatilities from traded options on our stock and historical volatility on our stock.

The fair value of awards issued under ESPP plan is
measured using assumptions similar to those used for stock options, except that the term of the award is 0.4 years. We value the RSUs at the market price of our common stock on the date of the award. Under APB 25, compensation related to SARs was
measured at the end of each period as the amount by which the volume weighted average market price of the shares covered by the SAR exceeds the SAR base value (the predetermined strike price of the instrument of $26.45). Changes in the SAR value
were reflected as an adjustment of compensation expense in the periods in which the changes occurred. Under SFAS 123R, compensation expense related to SARs is measured at fair value using an option pricing model, using assumptions similar to those
used for employee stock options. Any incremental fair value resulting from modifications of the SARs is also measured at fair value and amortized over the remaining service period for the award.

The Black-Scholes option valuation model requires the input of highly subjective assumptions, including the expected life of the stock-based award and
stock price volatility. The assumptions listed above represent managements best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if other assumptions had been used, our
recorded and pro forma stock-based compensation expense could have been materially different.

Recognition

For options granted prior to January 1, 2006, and valued in accordance with SFAS 123, we used the accelerated method for expense attribution and we
recognized option forfeitures as they occurred as allowed by SFAS 123. For options granted after January 1, 2006, and valued in accordance with SFAS 123R, we used the straight-line method for expense attribution, and we estimate forfeitures and
only recognize expense for those shares expected to vest. Estimates of pre-vesting option forfeitures are based on our historical forfeiture experience. We will adjust our estimate of forfeitures over the requisite service period based on the extent
to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation
expense to be recognized in future periods. Our annualized estimated forfeiture rate is approximately 7%. If our actual forfeiture rate is materially different from our estimate, the share-based compensation expense could be materially different.

We recognize the stock compensation expense for RSUs, using the straight-line method, over the period the services are performed, which is
generally 48 months. We recognize stock compensation expense for SARs using the accelerated attribution method over the period the related services were performed, which is generally 4 years.

3. Marketable Securities

As a result of increases in
market interest rates during 2006, we had unrealized losses of $1.2 million in our investment portfolio as of March 31, 2006. After consideration of the scheduled maturities in our investment portfolio, our policies with respect to the
concentration of investments with issuers or within industries, and our forecasted cash needs to support our operations, we concluded that we did not have the ability to hold all of the impaired securities for a period of time sufficient to recover
their cost basis. As of March 31, 2006, management has not determined which individual securities we would sell in order to meet our future cash requirements. As a result, we determined that all individual marketable securities in our portfolio
with fair values below amortized cost were other-than-temporarily impaired. Accordingly, we recorded a non-cash impairment charge of approximately $1.2 million as an offset to interest and other income, net for the quarter ended March 31, 2006
to write down the carrying value of these securities to fair value.

4. Lease Amendment

In January 2006, we extended the lease on our Porter Drive buildings in Palo Alto, CA. The lease term was extended to April 2016 with an option to renew
for nine years, and the lease provided for net rent reductions of $3.7 million over five



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years in return for the issuance of warrants to the landlord and the ground lessor to purchase an aggregate total of
200,000 shares of our common stock at a price of $24.04. Each warrant is exercisable, in whole or in part, until the later of (i) the tenth anniversary of January 19, 2006 if (but only if) at any time prior to the fifth anniversary of
January 19, 2006 the closing price of our common stock on the Nasdaq National Market has not been more than $48.08 for each trading day during any period of twenty consecutive trading days or (ii) the fifth anniversary of January 19,
2006. In accordance with Emerging Issues Task Force Consensus No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,the warrant was valued
using the Black-Scholes model, assuming a term of ten years, a risk-free interest rate of 4.4% and volatility of 61%. We are accounting for the warrant as non-cash rent expense over the life of the lease.

5. Litigation

We and certain of our officers and
directors are named as defendants in a purported securities class action lawsuit filed in August 2003 in the U.S. District Court for the Northern District of California captioned Crossen v. CV Therapeutics, Inc., et al. The lawsuit is brought
on behalf of a purported class of purchasers of our securities, and seeks unspecified damages. As is typical in this type of litigation, several other purported securities class action lawsuits containing substantially similar allegations were filed
against the defendants. In November 2003, the court appointed a lead plaintiff, and in December 2003, the court consolidated all of the securities class actions filed to date into a single action captioned In re CV Therapeutics, Inc. Securities
Litigation. In January 2004, the lead plaintiff filed a consolidated complaint. We and the other named defendants filed motions to dismiss the consolidated complaint in March 2004. In August 2004, these motions were granted in part and denied in
part. The court granted the motions to dismiss by two individual defendants, dismissing both individuals from the action with prejudice, but denied the motions to dismiss by us and the two other individual defendants. After the motions to dismiss
were decided, this action entered the discovery phase, and discovery in the action is ongoing.

In addition, certain of our officers and
directors have been named as defendants in a derivative lawsuit filed in August 2003 in California Superior Court, Santa Clara County, captioned Kangos v. Lange, et al., which names CV Therapeutics as a nominal defendant. The plaintiff in
this action is one of our stockholders who seeks to bring derivative claims on behalf of CV Therapeutics against the defendants. The lawsuit alleges breaches of fiduciary duty and related claims based on purportedly misleading statements concerning
our new drug application for Ranexa. At the appropriate time, we expect to file a motion to dismiss this lawsuit due to the plaintiffs unexcused failure to make a demand on us before filing the action.

As with any litigation proceeding, we cannot predict with certainty the eventual outcome of pending litigation, and defending these lawsuits is likely to
be costly, time-consuming and uncertain. Accordingly, no expense accrual has been established for these lawsuits. In the event of an adverse outcome, our business could be harmed.

4. Subsequent Events

Equity Line of Credit

In April 2006, we entered into a Common Stock Purchase Agreement with Azimuth Opportunity Ltd., which provides that, upon the terms and subject to the
conditions set forth in the Purchase Agreement, Azimuth is committed to purchase up to $200,000,000 of our common stock, or the number of shares which is one less than twenty percent (20%) of the issued and outstanding shares of our common
stock as of April 18, 2006, whichever occurs first, over the approximately 36-month term of the Purchase Agreement.

In May 2006,
Azimuth purchased 1,080,828 shares for gross proceeds of $20.0 million under this Purchase Agreement.



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

Forward-Looking
Statements

This Quarterly Report on Form 10-Q and the information incorporated herein by reference contain forward-looking statements
that involve a number of risks and uncertainties. Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on facts and factors currently known by us. Consequently, forward-looking
statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.

Forward-looking statements can be identified by the use of forward-looking words such as believe, expect, hope,
may, will, plan, intend, estimate, could, should, would, continue, seek, pro forma, anticipate or other
similar words (including their use in the negative), or by discussions of future matters such as our future clinical or product development, regulatory review of our products or product candidates, commercialization of our products, our financial
performance, possible changes in legislation and other statements that are not historical. These statements include but are not limited to statements under the captions Risk Factors and Managements Discussion and Analysis of
Financial Condition and Results of Operations as well as other sections in this report. You should be aware that the occurrence of any of the events discussed under the heading Risk Factors and elsewhere in this report could
substantially harm our business, results of operations and financial condition and that if any of these events occurs, the trading price of our common stock could decline and you could lose all or a part of the value of your shares of our common
stock.

The cautionary statements made in this report are intended to be applicable to all related forward-looking statements wherever they
may appear in this report. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly update any forward-looking statements, whether as a result
of new information, future events or otherwise.

Overview

CV Therapeutics, Inc., headquartered in Palo Alto, California, is a biopharmaceutical company focused on the discovery, development and commercialization of new small molecule drugs for the treatment of cardiovascular
diseases. We apply advances in molecular biology and genetics to identify mechanisms of cardiovascular diseases and targets for drug discovery.

We currently have two approved cardiovascular products to promote with our national cardiovascular specialty sales force: Ranexa(ranolazine extended-release tablets) and ACEON®(perindopril erbumine) Tablets. Ranexa was approved in the United States in January 2006 for the treatment of chronic angina in patients who have not achieved an adequate response with other antianginal drugs. Ranexa represents the first new
pharmaceutical approach to treat angina in the United States in more than 20 years. We launched Ranexa in the United States in March 2006. ACEON®, an angiotensin converting enzyme inhibitor, or ACE inhibitor, is approved in the United States for use in patients with stable coronary artery disease to reduce the risk of cardiovascular mortality
or nonfatal myocardial infarction, or MI, and for the treatment of patients with essential hypertension. We co-promote ACEON®in the United States with our partner Solvay Pharmaceuticals, Inc. In addition to our marketed products, we are developing regadenoson, a selective A2A-adenosine receptor agonist for potential use as a pharmacologic agent in myocardial perfusion imaging studies.

In January 2006, the U.S. Food and Drug Administration, or FDA, approved Ranexa for the treatment of chronic angina. Because Ranexa prolongs the QT
interval, the approved product labeling indicates that it is reserved for patients who have not achieved an adequate response with other antianginal drugs. Ranexa should be used in combination with amlodipine, beta-blockers or nitrates. Ranexa has
antianginal and anti-ischemic effects that do not depend upon reductions in heart rate or blood pressure.

In order to potentially broaden
the product labeling for Ranexa, we are conducting the Metabolic Efficiency with Ranolazine for Less Ischemia in Non-ST Elevation Acute Coronary Syndromes, or MERLIN TIMI-36, clinical study. This study is being conducted under a special protocol
assessment, or SPA, agreement with the FDA. If treatment with Ranexa is not associated with an adverse trend in death or arrhythmia compared to placebo, the study could support potential approval of Ranexa as first-line chronic angina therapy, even
if statistical significance on the primary endpoint is not achieved. In addition, if statistical significance on the primary endpoint is achieved, Ranexa could also gain potential approval for hospital-based and long-term prevention of acute
coronary syndromes. The MERLIN TIMI-36 study began enrollment in October 2004 and is being conducted by the Harvard-based TIMI Study Group. We currently expect data from the MERLIN TIMI-36 study in the first quarter of 2007.



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In August 2005, the FDA approved a supplemental new drug application, or sNDA, for ACEON®for the treatment of patients with stable coronary artery disease to reduce the risk of cardiovascular mortality
or nonfatal myocardial infarction. The labeling expansion was based on the EUROPA (EUropean trial on Reduction Of cardiac events with Perindopril in patients with stable coronary Artery disease) study, which assessed the ability of perindopril to
reduce cardiovascular death, nonfatal myocardial infarction and cardiac arrest in a broad population of patients who had stable coronary artery disease but not heart failure or substantial hypertension. In the EUROPA study, perindopril significantly
reduced relative cardiovascular risk by 20% as assessed by the primary combined study endpoint of cardiovascular death, nonfatal myocardial infarction and cardiac arrest. ACEON®is also indicated for the treatment of hypertension.

One of our drug candidates, regadenoson, a selective A2A-adenosine receptor agonist
for potential use as a pharmacologic agent in myocardial perfusion imaging studies is in late-stage clinical development. We completed a Phase 3 trial of regadenoson which met its primary endpoint, for this proposed use in August 2005. Data from a
second Phase 3 trial with the same design are expected in the second half of 2006.

In addition, we have several development, preclinical
and research programs, the objectives of which are to bring additional drugs to market to help patients with unmet medical needs.

We are
subject to risks common to biopharmaceutical companies, including risks inherent in our research, development and commercialization efforts, preclinical testing, clinical trials, uncertainty of regulatory approvals, reliance on collaborative
partners, enforcement of patent and proprietary rights, the need for future capital, potential competition, use of hazardous materials and retention of key employees. In order for a product to be commercialized, it will be necessary for us and, in
some cases, our collaborators, to conduct preclinical tests and clinical trials, demonstrate the efficacy and safety of our product candidate to the satisfaction of regulatory authorities, obtain marketing approval, enter into manufacturing,
distribution and marketing arrangements, obtain market acceptance and, in many cases, obtain adequate reimbursement from government and private insurers. We cannot provide assurance that we will generate revenues or achieve and sustain profitability
in the future.

Critical Accounting Policies and the Use of Estimates

The accompanying discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements and the related disclosures, which have been prepared in
accordance with U.S. generally accepted accounting principles (GAAP). The preparation of these condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts in our condensed
consolidated financial statements and accompanying notes. These estimates form the basis for making judgments about the carrying values of assets and liabilities. We base our estimates and judgments on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates.

Except
as noted below, our critical accounting policies and the use of estimates are consistent with those noted in our Annual Report on Form 10-K for the year ended December 31, 2005. We believe the following policies to be the most critical to an
understanding of our financial condition and results of operations because they require us to make estimates, assumptions and judgments about matters that are inherently uncertain.

Valuation of Marketable Securities

We invest in short-term and long-term marketable debt securities for use in current operations. We classify our investments as available-for-sale and report the securities at fair value, with unrealized gains and losses reported in
stockholders equity as a component of other comprehensive income (loss). For securities with unrealized losses as of the period end, we evaluate whether the impairment is other-than-temporary. Our assessment includes a consideration of our
intent and ability to hold the impaired security for a period of time sufficient to recover its cost basis. If we conclude that an other-than-temporary impairment exists, we recognize an impairment charge to reduce the investment to fair value and
record the related charge as a reduction of interest and other income, net. As a result of increases in market interest rates during 2006, we had unrealized losses of $1.2 million in our investment portfolio as of March 31, 2006. After
consideration of the scheduled maturities in our investment portfolio, our policies with respect to the concentration of investments with issuers or within industries, and our forecasted needs to support our operations, we concluded that we did not
have the ability to hold impaired securities for a period of time sufficient to recover their cost basis. As a result, for the quarter ended March 31, 2006, we recorded an impairment charge of $1.2 million related to these securities. If market
interest rates continue to increase in future periods, we may record additional impairment charges related to our investments.



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Inventory

Until January 2006, all costs associated with the manufacturing of Ranexa were included in research and development expenses when incurred. Once Ranexa was approved by the FDA, we have capitalized in inventory the
subsequent cost of manufacturing Ranexa for commercial sale and will expense such cost as cost of sales at the time of sale. However, as we sell our existing inventory that was previously expensed, there will be a period of time whereby we will
reflect product revenue with minimal cost of sales. Cost of sales reflected in our operating expenses in 2006, and for some period thereafter, will not reflect full absorption cost of production because a portion of the raw materials, labor and
overhead costs incurred to produce the product sold were previously expensed. For this reason, we anticipate that our margin on sales of Ranexa will continue to fluctuate from quarter to quarter during 2006 and for some period thereafter. We expect
that cost of sales will continue to reflect incremental costs for 2006 and some period of time thereafter, as we consume inventory that was expensed prior to approval. Inventory which was previously expensed was $12.5 million as of March 31,
2006. The decrease in the value of these previously expensed inventories offset deferred costs, sample expense and research and development costs, as appropriate.

The valuation of inventory requires us to estimate obsolete, expired or excess inventory. Currently, Ranexa has a shelf life of 36 months. The determination of obsolete, expired or excess inventory requires us to
estimate the future demands for Ranexa. If our current assumptions about future production or inventory levels, demand or competition were to change or if actual market conditions are less favorable than those we have projected, inventory
write-downs may be required that could negatively impact our product margins and results of operations. We also review our inventory for quality assurance and quality control issues identified in the manufacturing process and determine if a
write-down is necessary.

Revenue Recognition

We follow the provisions of Staff Accounting Bulletin No. 104 Revenue Recognition (SAB 104), and recognize revenue when there is persuasive evidence an arrangement exists, delivery to the customer has
occurred, title has transferred to our wholesale customers, the price is fixed or determinable and collectibility is reasonably assured. Consistent with SAB 104, for arrangements where the revenue recognition criteria are not met, we defer the
recognition of revenue by recording deferred revenue until such time that all criteria under the provision are met. During March of 2006, we offered product return privileges which are customary during product launch on product sales to wholesalers.
As a result of these privileges, we have deferred recognition of Ranexa revenue of $6.0 million and recorded this amount as a liability on our condensed consolidated balance sheet as of March 31, 2006. In addition, the costs of manufacturing
Ranexa associated with the deferred revenue are recorded as deferred costs, which are included in inventory, until such time the deferred revenue is recognized. The expanded return privileges offered on sales to customers during March of 2006 expire
in the third quarter of 2006. We expect to recognize the deferred revenue, if any, in the third quarter of 2006 related to the portion of product sales made during the March 2006 product launch period that are not returned.

We sell our product to wholesale distributors, who in turn, sell to retail pharmacies and government entities. Deferred product revenue is recorded net
of applicable allowances for sales returns, distributor fees, government rebate programs, Medicaid reimbursements and customer incentives such as cash discounts for prompt payment. Estimates for distributor fees are based on contractually determined
fixed percentages of sales. Estimates for government rebate programs and cash discounts are based on contractual terms, estimated utilization rates and our expectations regarding future utilization rates for these programs. As Ranexa is a new
product, we will estimate product returns based on the industry trends for other products with similar characteristics. Commencing in April 2006, we expect to recognize product revenues upon shipment to the distributors.

Revenue under our amended ACEON® co-promotion agreement is recognized based on net product sales recorded by Solvay Pharmaceuticals, our co-promotion partner, above a specified
baseline for each reporting period.

Stock Based Compensation

We currently use the Black-Scholes and other option pricing models to estimate the fair value of employee stock options, stock appreciation rights,
restricted stock units and the employee stock purchase plan. Calculating the fair value of share-based payment awards requires considerable judgment, including estimating stock price volatility, the amount of stock-based awards that are expected to
be forfeited and the expected life of the share-based payment awards. While fair value may be readily determinable for awards of stock or restricted stock units, market quotes are not available for long-term, non-transferable stock options or stock
appreciation rights because these instruments are not traded. The value of a stock option is derived from its potential for appreciation. The more volatile the stock, the more valuable the option becomes because of the greater possibility of
significant changes in stock price. Because there is a market for options on our common stock, we have considered implied volatilities as well as our historical realized volatilities when developing an estimate of expected volatility. We consider
many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. The expected option term also has a significant effect on the value of the option. The longer the term, the more time the option
holder has to allow the stock price to increase without a cash investment and thus, the more valuable the option. When establishing an estimate of the expected term, we consider the vesting period for the award, our historical



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experience of employee stock option exercises, the expected volatility, and a comparison to relevant peer group data. We
review our valuation assumptions at each grant date and, as a result, we are likely to change our valuation assumptions used to value stock based awards granted in future periods. Actual results, and future changes in estimates, may differ
substantially from our current estimates. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Results of Operations

Revenues

Total revenues and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are
presented in millions):



|                                  |  |                         |      |    |      |   |    
|--------------------------------- |  | ----------------------- | ---- | -- | ---- | - | ---
|                                  |  | Quarter ended March 31,
|                                  |  | 2006                    |      |    | 2005
|Collaborative research            |  | $                       | 4.4  |    |      | $ | 5.6
|Co-promotion                      |  |                         | 0.7  |    |      |   |   
|                                  |  |                         |      |    |      |   |    
|Total revenues                    |  | $                       | 5.1  |    |      | $ | 5.6
|                                  |  |                         |      |    |      |   |    
|Dollar change from prior year     |  | $                       | (0.5 | )  |      |   |    
|Percentage change from prior year |  |                         | (9   | )% |      |   |    

The decrease in collaborative research revenues was primarily due to a decrease in the amount of
reimbursable development costs incurred in connection with our two Phase 3 clinical trials undertaken in our collaboration with Astellas US LLC for the development of regadenoson. We announced data for one of the two Phase 3 clinical trials for
regadenoson in August 2005 and this trial has now been largely completed, while the other Phase 3 trial is ongoing.

The decrease in
collaborative research revenues was partially offset by recognition of $0.7 million of co-promotion revenue as sales of ACEON®exceeded the baseline specified in the amended co-promotion agreement with our collaborative partner, Solvay Pharmaceuticals, Inc.

With respect to Ranexa, we received FDA approval in January 2006 and commenced commercial product sales in March 2006. Due to customary product launch return privileges on product sales to wholesalers during March
2006, we deferred recognition of Ranexa product revenue of $6.0 million for the quarter ended March 31, 2006.

Research and
Development Expenses

Total research and development expenses and dollar and percentage changes as compared to the prior year are as
follows (dollar amounts are presented in millions):



|                                        |  |                         |      |    |      |   |     
|--------------------------------------- |  | ----------------------- | ---- | -- | ---- | - | ----
|                                        |  | Quarter ended March 31,
|                                        |  | 2006                    |      |    | 2005
|Total research and development expenses |  | $                       | 31.5 |    |      | $ | 35.1
|Dollar change from prior year           |  | $                       | (3.6 | )  |      |   |     
|Percentage change from prior year       |  |                         | (10  | )% |      |   |     

The decrease in research and development expenses in the quarter ended March 31, 2006
compared to the quarter ended March 31, 2005 was primarily due to lower outside contract service expenses for our Phase 3 regadenoson studies and capitalization of Ranexa manufacturing costs as inventory in the current quarter versus the
expensing of these costs in the same quarter in 2005 prior to receiving FDA approval of Ranexa. The decrease was partially offset by higher personnel related expenses, which includes stock-based compensation as a result of our adoption of SFAS 123R
on January 1, 2006, in our research and development organization.

Management categorizes research and development expenses by
project. The table below shows research and development expenses for our two primary clinical development projects, Ranexa and regadenoson, as well as expenses associated with all other projects in our research and development pipeline. Other
projects consist primarily of numerous pre-clinical research projects, none of which individually constitutes more than 10% of our total research and development expenses for the periods presented.



16



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##### Table of Contents

|                               |  |                        |        |      |   |       
|------------------------------ |  | ---------------------- | ------ | ---- | - | ------
|                               |  | Quarter endedMarch 31,
|(in thousands)                 |  | 2006                   |        | 2005
|Ranexa                         |  | $                      | 16,136 |      | $ | 17,954
|Regadenoson                    |  |                        | 6,675  |      |   | 8,772 
|Other projects                 |  |                        | 8,649  |      |   | 8,403 
|                               |  |                        |        |      |   |       
|Total research and development |  | $                      | 31,460 |      | $ | 35,129
|                               |  |                        |        |      |   |       

Selling, General and Administrative Expense

Total selling, general and administrative expenses and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are
presented in millions):



|                                                   |  |                         |      |   |      |   |     
|-------------------------------------------------- |  | ----------------------- | ---- | - | ---- | - | ----
|                                                   |  | Quarter ended March 31,
|                                                   |  | 2006                    |      |   | 2005
|Total selling, general and administrative expenses |  | $                       | 44.8 |   |      | $ | 16.4
|Dollar change from prior year                      |  | $                       | 28.4 |   |      |   |     
|Percentage change from prior year                  |  |                         | 173  | % |      |   |     

The increase in selling, general and administrative expenses in the quarter ended March 31,
2006 compared to the quarter ended March 31, 2005 was primarily due to additional personnel and related expenses incurred in conjunction with maintaining a national cardiovascular specialty sales force that includes approximately 250
cardiovascular account specialists that was recruited in the second and third quarters of 2005, other expenses incurred to launch Ranexa and co-promote ACEON® and higher headcount related expenses, which includes stock-based compensation as a
result of our adoption of SFAS 123R on January 1, 2006, in other areas to support our increased commercialization and business activities.

Interest and Other Income, Net

Total interest and other income, net and dollar and percentage changes as compared to the
prior year are as follows (dollar amounts are presented in millions):



|                                     |  |                         |     |   |      |   |    
|------------------------------------ |  | ----------------------- | --- | - | ---- | - | ---
|                                     |  | Quarter ended March 31,
|                                     |  | 2006                    |     |   | 2005
|Total interest and other income, net |  | $                       | 3.9 |   |      | $ | 2.3
|Dollar change from prior year        |  | $                       | 1.6 |   |      |   |    
|Percentage change from prior year    |  |                         | 70  | % |      |   |    

The increase in interest and other income, net in the quarter ended March 31, 2006 compared
to the quarter ended March 31, 2005 was primarily due to higher interest rates earned on our investment portfolio, partially offset by a non-cash investment impairment charge of $1.2 million related to a decline in market values of marketable
securities in our investment portfolio that were deemed to be other-than-temporary. We expect interest and other income, net to fluctuate in the future with changes in average investment balances and market interest rates.

Interest Expense

Total interest
expense and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are presented in millions):



|                                  |  |                         |     |   |      |   |    
|--------------------------------- |  | ----------------------- | --- | - | ---- | - | ---
|                                  |  | Quarter ended March 31,
|                                  |  | 2006                    |     |   | 2005
|Total interest expense            |  | $                       | 3.2 |   |      | $ | 2.8
|Dollar change from prior year     |  | $                       | 0.4 |   |      |   |    
|Percentage change from prior year |  |                         | 14  | % |      |   |    

The increase in interest expense in the quarter ended March 31, 2006 compared to the quarter
ended March 31, 2005 was primarily due to higher average convertible debt balances.



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##### Table of Contents

Liquidity and Capital Resources



|                                                 |  |                         |       |                   |   |      
|------------------------------------------------ |  | ----------------------- | ----- | ----------------- | - | -----
|                                                 |  | As of                  
|(in millions)                                    |  | March 31, 2006          |       | December 31, 2005
|Cash, cash equivalents and marketable securities |  | $                       | 373.3 |                   | $ | 460.2
|                                                 |  |                         |       |                   |   |      
|                                                 | 
|                                                 |  | Quarter ended March 31,
|                                                 |  | 2006                    |       | 2005             
|Cash flows:                                      |  |                         |       |                   |   |      
|Net cash used in operating activities            |  | $                       | 84.5  |                   | $ | 35.6 
|Net cash provided by investing activities        |  | $                       | 80.4  |                   | $ | 7.6  
|Net cash provided by financing activities        |  | $                       | 1.9   |                   | $ | 25.8 

We have financed our operations since inception primarily through public offerings and private
placements of debt and equity securities and payments under corporate collaborations.

In April 2006, we entered into a Common Stock
Purchase Agreement with Azimuth Opportunity Ltd., which provides that, upon the terms and subject to the conditions set forth in the Purchase Agreement, Azimuth is committed to purchase up to $200,000,000 of our common stock, or the number of shares
which is one less than twenty percent (20%) of the issued and outstanding shares of our common stock as of April 18, 2006, whichever occurs first, over the approximately 36-month term of the Purchase Agreement. In May 2006, Azimuth
purchased 1,080,828 shares for gross proceeds of $20.0 million under this Purchase Agreement.

We estimate that our cash, cash equivalents
and marketable securities as of March 31, 2006 should be sufficient to fund our operations for at least the next 12 months. We currently estimate that our operating expenses for 2006 will be approximately $310.0 million to $330.0 million.

As of March 31, 2006, we had $373.3 million in cash, cash equivalents and marketable securities, compared to $460.2 million at
December 31, 2005. Net cash used in operating activities was $84.5 million for the quarter ended March 31, 2006, and resulted primarily from our net loss adjusted for changes in accrued and other liabilities, non-cash expenses primarily
related to stock-based compensation, accounts receivable, inventory, deferred revenue, other assets and other current assets. Net cash used in operating activities was $35.6 million for the quarter ended March 31, 2005, and resulted primarily
from our net loss adjusted for changes in accrued and other liabilities and non-cash expenses.

Net cash provided by investing activities
of $80.4 million in the quarter ended March 31, 2006 consisted primarily of maturities and sales of marketable securities of $84.0 million offset by capital expenditures of $3.7 million. Net cash provided by investing activities of $7.6 million
in the quarter ended March 31, 2005 consisted primarily of proceeds from sales and maturities of marketable securities of $58.3 million, partially offset by purchases of marketable securities of $48.7million and capital expenditures of $1.9
million. In the future, net cash provided by or used in investing activities may fluctuate from period to period due to the timing of maturities, sales or purchases of marketable securities and payments for capital expenditures.

Net cash provided by financing activities of $1.9 million in the quarter ended March 31, 2006 was related to stock issued through our Employee Stock
Purchase Plan and exercises of employee stock options. Net cash provided by financing activities of $25.8 million in the quarter ended March 31, 2005 was primarily due to net proceeds of approximately $25.0 million from the sale of 1,275,711
shares of common stock to Acqua Wellington North American Equities Fund, Ltd.

We may from time to time seek to retire our outstanding debt
through cash purchases and/or conversions or exchanges for equity securities in open market purchases, privately negotiated transactions or otherwise. Such purchases, conversions or exchanges, if any, will depend on prevailing market conditions, our
liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Alternatively, we may from time to time seek to restructure our outstanding debt through exchanges for new debt securities in open market
transactions, privately negotiated transactions, or otherwise. The amounts involved may be material.



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##### Table of Contents

Contractual Obligations and Significant Commercial Commitments

The following summarizes our contractual obligations and the periods in which payments are due as of March 31, 2006:



|                             |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|---------------------------- |  | -------------- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | ----- | ------ |  | - | ------- |  | - | -------
|                             |  | 2006           |        | 2007 |   | 2008   |  | 2009 |        | 2010 |   | Thereafter |  | Total
|                             |  | (in thousands)
|Convertible notes(1)         |  | $              | 8,554  |      | $ | 10,984 |  | $    | 10,984 |      | $ | 10,984     |  | $     | 10,984 |  | $ | 445,263 |  | $ | 497,753
|Manufacturing obligations(2) |  |                | 10,375 |      |   | 3,198  |  |      | 2,501  |      |   | 1,251      |  |       |       |  |   |        |  |   | 17,325 
|Operating leases(3)          |  |                | 8,499  |      |   | 13,069 |  |      | 13,281 |      |   | 13,589     |  |       | 15,158 |  |   | 37,992  |  |   | 101,588
|                             |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|                             |  | $              | 27,428 |      | $ | 27,251 |  | $    | 26,766 |      | $ | 25,824     |  | $     | 26,142 |  | $ | 483,255 |  | $ | 616,666
|                             |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        

---

|(1) | Convertible notes consist of principal and interest payments on our 2.0% senior subordinated convertible debentures due 2023, our 2.75% senior subordinated convertible
notes due 2012 and our 3.25% senior subordinated convertible notes due 2013. The holders of our 2.0% senior subordinated convertible debentures due 2023 may require us to purchase all or a portion of their debentures on May 16,
2010, May 16, 2013 and May 16, 2018, in each case at a price equal to the principal amount of the debentures to be purchased, plus accrued and unpaid interest, if any, to the purchase date. The principal for these debentures is shown
in the thereafter column consistent with their maturity date.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Manufacturing obligations include significant non-cancelable orders and minimum commitments under our agreements related to the manufacturing of Ranexa.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Operating leases consists of minimum lease payments related to real estate leases for our facilities covering 186,000 square feet. These leases expire between February
2008 and April 2016. One of the leases is secured by a $6.0 million irrevocable letter of credit.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We also have a commitment
related to an agreement with Quintiles Transnational Corp. which is not included in the table above whereby we are required to engage Quintiles to provide $10.0 million or more of commercialization services by or before six months following the
approval of Ranexa by the FDA. Otherwise, we are obligated to pay Quintiles ten percent of the difference between $10.0 million and the actual amounts of commercialization services we have engaged with them during the end of the six month period
following the approval of Ranexa.

Risks and Uncertainties Related to Our Future Capital Requirements

According to industry statistics, it generally takes 10 to 15 years to research, develop and bring to market a new prescription medicine in the United
States. Drug development in the United States is a process that includes multiple steps defined by the FDA under applicable statutes, regulations and guidance documents. After the preclinical research process of identifying, selecting and testing in
animals a potential pharmaceutical compound, the clinical development process begins with the filing of an investigational new drug application, or IND, or equivalent foreign filing. If successful, an IND allows clinical study of the product
candidate. Clinical development typically involves three phases of study: Phase 1, 2 and 3. The most significant costs associated with clinical development are usually for Phase 3 trials, which tend to be the longest and largest studies conducted
during the drug development process. After the completion of a successful preclinical and clinical development program, a new drug application, or NDA, must be filed with the FDA, which includes among other things very large amounts of preclinical
and clinical data and results and manufacturing-related information necessary to support requested approval of the product candidate. The NDA must be reviewed by the FDA, and the review and approval process is often uncertain, time-consuming and
costly. The process for developing and obtaining regulatory review and approval of product candidates in other potentially significant markets such as the European Union is generally comparable to that in the United States, and also involves
significant costs, time and uncertainty. In light of the steps and complexities involved, the successful development of our product candidates is highly uncertain. Actual product timelines and costs are subject to enormous variability and are very
difficult to predict, as our clinical development programs are updated and changed to reflect the most recent clinical and preclinical data and other relevant information. In addition, various statutes and regulations also govern or influence the
testing, manufacturing, safety reporting, labeling, storage, recordkeeping and marketing of each product. The lengthy process of seeking these regulatory reviews and approvals, and the subsequent compliance with applicable statutes and regulations,
require the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals for our potential products could materially adversely affect our business.

Conducting clinical trials and obtaining regulatory approval are lengthy, time-consuming and expensive processes. Before obtaining regulatory approvals
for the commercial sale of any products, we must demonstrate to regulatory authorities through preclinical testing and clinical trials that our product candidates are safe and effective for use in humans. We will continue to incur substantial
expenditures for, and devote a significant amount of time to, preclinical testing and clinical trials. The amounts of the expenditures that will be necessary to execute our business plan are subject to numerous uncertainties that may adversely
affect our liquidity and capital resources to a significant extent.



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##### Table of Contents

As we transition from a research and development-focused company to a company with commercial operations
and revenues, we expect that our operating results will continue to fluctuate. Our product revenues will be unpredictable and may fluctuate due to many factors, many of which we cannot control. For example, our ability and the ability of our
collaborative partners to market and sell our products will depend significantly on the market acceptance of our products as well as the extent to which reimbursement for the cost of our products will be available from government health
administration authorities, private health insurers and other organizations. If our products fail to achieve market acceptance or are unfavorably reimbursed, this would result in lower product sales and lower product revenues. As a result, we would
have increased capital requirements in the future.

We may require substantial additional funding in order to complete our research and
development activities and commercialize our products and product candidates. As of March 31, 2006, our cash, cash equivalents and marketable securities totaled $373.3 million. We estimate that our cash, cash equivalents and marketable
securities as of March 31, 2006 should be sufficient to fund our operations for at least the next 12 months. However, we cannot assure you that we will not require or seek additional funding prior to then or that additional financing will be
available on acceptable terms or at all.

Our future capital requirements will depend on many factors, including revenues, if any,
generated from ACEON® and Ranexa, market acceptance of our approved products, scientific progress in our research, development and commercialization programs, the size and complexity of these programs, the timing, scope and results of
preclinical studies and clinical trials, our ability to establish and maintain collaborative partnerships, the time and costs involved in obtaining regulatory approvals, the costs involved in filing, prosecuting and enforcing patent claims,
competing technological and market developments, the cost of manufacturing preclinical and clinical material and other factors not within our control. We cannot guarantee that the additional financing to meet our capital requirements will be
available on acceptable terms or at all. Insufficient funds may require us to delay, scale back or eliminate some or all of our research, development or commercialization programs, to lose rights under existing licenses or to relinquish greater or
all rights to product candidates on less favorable terms than we would otherwise choose, or may adversely affect our ability to operate as a going concern. If we issue equity or convertible debt securities to raise additional funds, substantial
dilution to existing stockholders may result.

The significant amounts of capital that we are spending to provide and/or enhance
infrastructure, headcount and inventory to co-promote ACEON®in the United States and to
commercialize Ranexa in the United States would be lost if we cannot significantly increase the level of United States sales of ACEON®and Ranexa. Our ACEON®and Ranexa commercialization
efforts include building our sales and marketing infrastructure, increasing our marketing communications efforts, and hiring and training a national specialty cardiovascular sales force that includes approximately 250 cardiovascular account
specialists. If we cannot substantially increase the level of United States sales of ACEON®or if we
do not achieve market acceptance for Ranexa the future benefits of these expenditures and any future commitments of capital would be lost. The loss of future benefits from this investment may harm our business, increase our cash requirements,
increase the volatility of our stock price and result in additional operating losses. Our sales and marketing expenses have increased substantially as we have begun to co-promote ACEON®and commercialize Ranexa in the United States.

We have experienced significant operating losses since our inception in 1990, including net losses of $70.5 million in the quarter ended March 31, 2006, $228.0 million in 2005, $155.1 million in 2004 and $111.1
million in 2003. As of March 31, 2006, we had an accumulated deficit of $883.0 million. The process of developing and commercializing our product candidates requires significant research and development work, preclinical testing and clinical
trials, as well as regulatory approvals, significant marketing and sales efforts, and manufacturing capability. These activities, together with our general and administrative expenses, require significant investments and are expected to continue to
result in operating losses for the foreseeable future. The revenues that we generate relating to ACEON®, Ranexa and other approved products, if any, may not be sufficient for us to achieve or sustain profitability.

Other
Information

In April 2006, we announced that in accordance with Nasdaq marketplace rule 4350, we granted 14 non-executive employees
inducement stock options covering an aggregate of 39,100 shares of common stock under our 2004 Employment Commencement Incentive Plan. These inducement stock options are classified as non-qualified stock options with an exercise price equal to the
fair market value on the grant date. The options have a ten-year term and vest over four years as follows: 20% of these options will vest on the date one year from the optionees hire date, 20% of the options will vest in monthly increments
during each of the second and third years, and 40% of the options will vest in monthly increments during the fourth year (in all cases subject to the terms and conditions of our 2004 Employment Commencement Incentive Plan).



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##### Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio and our long-term debt. We do not use
derivative financial instruments in our investment portfolio. We place our investments with high quality issuers and, by policy, limit the amount of credit exposure to any one issuer except for United States government securities. We are averse to
principal loss and strive to ensure the safety and preservation of our invested funds by limiting default, market and reinvestment risk. We classify our cash equivalents and marketable securities as fixed-rate if the rate of return on
such instruments remains fixed over their term. These fixed-rate investments include U.S. government securities, commercial paper, asset backed securities, corporate bonds, and foreign bonds. Fixed-rate securities may have their fair
market value adversely affected due to a rise in interest rates and we may suffer losses in principal if forced to sell securities that have declined in market value due to a change in interest rates. We classify our cash equivalents and marketable
securities as variable-rate if the rate of return on such investments varies based on the change in a predetermined index or set of indices during their term. As of March 31, 2006, there have been no material changes in these market
risks since December 31, 2005.

Our long-term debt at March 31, 2006 includes $100.0 million of our 2.0% senior subordinated
convertible debentures due May 2023, $150.0 million of our 2.75% senior subordinated convertible notes due May 2012, and $149.5 million of our 3.25% senior subordinated convertible notes due August 2013, which were issued in July 2005.
Interest on the 2.0% senior subordinated convertible debentures is fixed and payable semi-annually on May 16 and November 16 each year. Interest on the 2.75% senior subordinated convertible notes is fixed and payable semi-annually on
May 16 and November 16 each year. Interest on the 3.25% senior subordinated convertible notes due 2013 is fixed and payable semi-annually on February 16 and August 16 each year. All the notes and debentures are convertible into
shares of our common stock at any time prior to maturity, unless previously redeemed or repurchased, subject to adjustment in certain events. The market value of our long-term-debt will fluctuate with movements of interest rates and with movements
in the value of our common stock.

The table below presents the amounts and related average interest rates of our investment portfolio and
our long-term debt as of March 31, 2006:



|                                                         |  |                      |   |  |                      |        
|-------------------------------------------------------- |  | -------------------- | - |  | -------------------- | -------
|                                                         |  | AverageInterest Rate |   |  | EstimatedMarketValue
|                                                         |  | ($ in thousands)    
|Cash equivalents:                                        |  |                      |   |  |                      |        
|Variable rate                                            |  | 4.52                 | % |  | $                    | 18,292 
|Marketable securities portfolio:                         |  |                      |   |  |                      |        
|Fixed rate (mature in 2006)                              |  | 3.50                 | % |  | $                    | 137,649
|Fixed rate (mature in 2007)                              |  | 4.16                 | % |  | $                    | 150,533
|Variable rate (mature in 2007)                           |  | 4.79                 | % |  | $                    | 2,000  
|Fixed rate (mature in 2008)                              |  | 4.31                 | % |  | $                    | 61,619 
|Long-term debt:                                          |  |                      |   |  |                      |        
|2.0% senior subordinated convertible debentures due 2023 |  | 2.00                 | % |  | $                    | 84,380 
|2.75% senior subordinated convertible notes due 2012     |  | 2.75                 | % |  | $                    | 206,010
|3.25% senior subordinated convertible notes due 2013     |  | 3.25                 | % |  | $                    | 159,262

Foreign Currency Risk

We are exposed to foreign currency exchange rate fluctuations related to the operation of our European subsidiary in the United Kingdom. At the end of
each reporting period, expenses of the subsidiary are remeasured into U.S. dollars using the average currency rate in effect for the period and assets and liabilities are remeasured into U.S. dollars using either historical rates or the exchange
rate in effect at the end of the period. Additionally, we are exposed to foreign currency exchange rate fluctuations relating to payments we make to vendors and suppliers using foreign currencies. In particular, we have foreign expenses associated
with our ongoing clinical studies, such as the MERLIN-TIMI 36 clinical trial of Ranexa. We currently do not hedge against this foreign currency risk. Although fluctuations in exchange rates impact our financial condition and results of operations as
reported in U.S. dollars, foreign currency gains and losses for the quarters ended March 31, 2006 and 2005 have been under $0.1 million and are not significant.



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##### Table of Contents

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain
disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and utilized, can provide only reasonable assurance of achieving
the desired control objectives, and management necessarily is required to apply its judgment in evaluating disclosure controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were
effective at the reasonable assurance level.

Changes in Internal Controls over Financial Reporting. We received FDA approval for
Ranexa in January 2006, resulting in our implementation of new significant accounting policies during the quarter ended March 31, 2006 with respect to revenue recognition and capitalization of inventory. These new significant accounting
policies caused changes in certain of our business processes and associated internal controls over financial reporting. There have been no other changes in our internal controls over financial reporting, other than those noted above, during our most
recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We and certain of our officers and directors are named as defendants in a
purported securities class action lawsuit filed in August 2003 in the U.S. District Court for the Northern District of California captioned Crossen v. CV Therapeutics, Inc., et al. The lawsuit is brought on behalf of a purported class of
purchasers of our securities, and seeks unspecified damages. As is typical in this type of litigation, several other purported securities class action lawsuits containing substantially similar allegations were filed against the defendants. In
November 2003, the court appointed a lead plaintiff, and in December 2003, the court consolidated all of the securities class actions filed to date into a single action captioned In re CV Therapeutics, Inc. Securities Litigation. In January
2004, the lead plaintiff filed a consolidated complaint. We and the other named defendants filed motions to dismiss the consolidated complaint in March 2004. In August 2004, these motions were granted in part and denied in part. The court granted
the motions to dismiss by two individual defendants, dismissing both individuals from the action with prejudice, but denied the motions to dismiss by us and the two other individual defendants. After the motion to dismiss was decided, this action
entered the discovery phase, and discovery in the action is ongoing.

In addition, certain of our officers and directors have been named as
defendants in a derivative lawsuit filed in August 2003 in California Superior Court, Santa Clara County, captioned Kangos v. Lange, et al., which names CV Therapeutics as a nominal defendant. The plaintiff in this action is one of our
stockholders who seeks to bring derivative claims on behalf of CV Therapeutics against the defendants. The lawsuit alleges breaches of fiduciary duty and related claims based on purportedly misleading statements concerning our new drug application
for Ranexa. At the appropriate time, we expect to file a motion to dismiss this lawsuit due to the plaintiffs unexcused failure to make a demand on us before filing the action.

As with any litigation proceeding, we cannot predict with certainty the eventual outcome of pending litigation, and defending these lawsuits is likely to
be costly, time-consuming and uncertain. Accordingly, no accrual has been established for these lawsuits. In the event of an adverse outcome, our business could be harmed.

Item 1A. Risk Factors

Risk Factors Relating to Our Business

We expect to continue to operate at a loss, and we may never achieve profitability.

We have experienced significant operating losses since our inception in 1990, including net losses of $70.5 million in the quarter ended March 31, 2006, $228.0 million in 2005, $155.1 million in 2004 and $111.0
million in 2003. As of March 31, 2006, we had an accumulated deficit of $883.0 million. The process of developing and commercializing our products requires significant research and development work, preclinical testing and clinical trials, as
well as regulatory approvals, significant marketing and sales efforts, and manufacturing capabilities. These activities, together with our general and administrative expenses, require significant investments and are expected to continue to result in
operating losses for the foreseeable future. The revenues that we recognize relating to ACEON®,
Ranexa, and other approved products, if any, may not be sufficient for us to achieve or sustain profitability.

Our operating results are subject
to fluctuations that may cause our stock price to decline.

As we transition from a research and development-focused company to a
company with commercial operations and revenues, we expect that our operating results will continue to fluctuate. Our product revenues will be unpredictable and may fluctuate due to many factors, many of which we cannot control. For example, factors
affecting our revenues presently or in the future include:



| |  |  | timing and success of product launches by us and our collaborative partners, including the launch of Ranexa in the United States in March 2006;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | level of demand for our products, including physician prescribing habits;
| | - |  | -------------------------------------------------------------------------



| |  |  | wholesaler buying patterns, product returns and contract terms;
| | - |  | ---------------------------------------------------------------



| |  |  | reimbursement rates or policies;
| | - |  | --------------------------------



| |  |  | the results of our clinical studies, including our MERLIN TIMI-36 clinical trial of Ranexa;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | the length of time it takes for an approved product to achieve market acceptance, if at all;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | rebates and administrative fees on sales of our approved products that we pay to customers and other third parties;
| | - |  | -------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | the extent to which patients fill prescriptions written by their doctors for our approved products, and the amount of co-payments patients experience to fill their prescriptions;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | regulatory constraints on, or delays in the review of, our product promotional materials and programs;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | government regulations;
| | - |  | -----------------------



| |  |  | increased competition from new or existing products or therapies, including lower-priced generic products and alternatives to drug treatment such as interventional medicine;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in our contract manufacturing activity, including the availability or lack of commercial supplies of products and samples for promotion and distribution;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | timing of non-recurring license fees and the achievement of milestones under new and existing license and collaborative agreements; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our product marketing, promotion, distribution, sales and pricing strategies and programs, including product discounts and rebates extended to customers.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

With respect to our co-promotion arrangement relating to ACEON®, in addition to the foregoing factors, we will not receive any revenues in a given
quarter if specified sales levels are not achieved. This means that we may make substantial commercialization expenditures and only receive a small amount of revenues, as happened in the quarter ending March 31, 2006, or receive no revenues at
all, as happened in previous quarters under the arrangement. There are also provisions in our agreement that could affect revenues. For example, the amount of revenues we receive under the agreement will be modified if the FDA approves a generic to
perindopril in the United States, if we do not meet our minimum marketing and promotional commitments under the agreement, or if we allow Solvay Pharmaceuticals to provide at least a specified number of details that turns out to be the majority of
product details in any given year.

In addition, our expenses, including payments owed by us under licensing, collaborative or
manufacturing arrangements, are unpredictable and may fluctuate from quarter to quarter. We believe that quarter-to-quarter comparisons of our operating results are not a good indicator of our future performance and should not be relied upon to
predict our future performance. Also, our operating results in a particular quarter or quarters may not meet the expectations of securities analysts or investors, causing the market price of our common stock to decline.

If we are unable to secure additional financing, we may be unable to complete our research and development activities or successfully commercialize any of our
products.

As of March 31, 2006, we had cash, cash equivalents and marketable securities of $373.3 million, which we expect will be
sufficient to fund our current operations for at least the next 12 months. For the quarter ended March 31, 2006 and fiscal years ended December 31, 2005, 2004 and 2003, our net losses were $70.5 million, $228.0 million, $155.1 million and
$111.0 million, respectively. We currently estimate that our operating expenses for fiscal 2006 will be approximately $310.0 million to $330.0 million. We do not expect to generate sufficient revenues through our United States co-promotion of
ACEON® or through our launch of Ranexa in March 2006 to achieve profitability without requiring additional funding in order to complete our future research, development and commercialization activities.

The amount of additional funding that we will require depends on many factors, including, without limitation:



| |  |  | the amount of revenue, if any, that we are able to obtain from any approved products, and the time and costs required to achieve those revenues;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing, scope and results of preclinical studies and clinical trials, including our MERLIN TIMI-36 clinical trial of Ranexa;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | the costs of launching our products;
| | - |  | ------------------------------------



| |  |  | the costs of commercializing our products, including marketing, promotional and sales costs, product pricing, and discounts and rebates extended to customers;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the costs of manufacturing or obtaining preclinical, clinical and commercial materials;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | the size and complexity of our programs;
| | - |  | ----------------------------------------



| |  |  | the time and costs involved in obtaining regulatory approvals;
| | - |  | --------------------------------------------------------------



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| |  |  | our ability to establish and maintain strategic collaborative partnerships, such as our arrangement with Solvay Pharmaceuticals and our arrangement with Astellas US LLC (formerly
Fujisawa Healthcare, Inc.);
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | competing technological and market developments;
| | - |  | ------------------------------------------------



| |  |  | the costs involved in filing, prosecuting, maintaining and enforcing patent claims; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | progress in our research and development programs.
| | - |  | --------------------------------------------------

Additional financing may not be available on acceptable terms or at all. If we are unable to raise additional funds, we may, among other things:



| |  |  | have to delay, scale back or eliminate some or all of our research and/or development programs;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | have to delay, scale back or eliminate some or all of our commercialization activities;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | lose rights under existing licenses;
| | - |  | ------------------------------------



| |  |  | have to relinquish more of, or all of, our rights to product candidates on less favorable terms than we would otherwise seek; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | be unable to operate as a going concern.
| | - |  | ----------------------------------------

If additional
funds are raised by issuing equity or convertible debt securities, our existing stockholders will experience dilution.

Our failure to manage our rapid
growth could harm our business.

We have experienced rapid growth and expect to continue to expand our operations over time. In 2005, we
more than doubled the size of our workforce, including by hiring, training and deploying a national cardiovascular specialty sales force of approximately 250 personnel. As we perform under the co-promotion arrangement relating to ACEON®, launch Ranexa in the United States, continue to conduct a large clinical trial of Ranexa, continue to conduct
clinical trials for our other product candidates and continue our drug discovery efforts, we have added personnel in many areas, including operations, sales, marketing, regulatory, clinical, finance, information systems and other general and
administrative functions. We may not manage this growth effectively, which would harm our business and cause us to incur higher operating costs. If rapid growth continues, it may strain our operational, managerial and financial resources.

The commercialization of our products is substantially dependent on our ability to develop effective sales and marketing capabilities.

Our successful commercialization of Ranexa and ACEON®in the United States will depend on our ability to establish an effective sales and marketing organization in the United States. We have hired,
trained and deployed additional marketing personnel and a national cardiovascular specialty sales force of approximately 250 personnel, which began to promote ACEON®in 2005 and Ranexa in March 2006. The size of our sales force may increase or decrease in the future, depending on many factors, including the
effectiveness of the sales force, the level of market acceptance of Ranexa, and the results of our ongoing MERLIN TIMI-36 clinical trial of Ranexa. Recruiting, hiring, training, deploying and retaining a national sales force and additional personnel
is very expensive, complex and time-consuming. We do not know if this sales force will be sufficient in size or scope to compete successfully in the marketplace. Among other factors, we may not be able to gain sufficient access to healthcare
practitioners, which would have a negative effect on our ability to promote our products and gain market acceptance. Even if we gain access to healthcare practitioners, we may not be able to change prescribing patterns in favor of our approved
products. We do not know whether the personnel we have recruited and trained will be effective or whether we will gain market acceptance for Ranexa or ACEON®in the United States.

Our approved products
may not achieve market acceptance or generate revenues.

If Ranexa and ACEON®fail to achieve market acceptance, our product sales and our ability to become profitable in the future will be adversely affected. Many factors
may affect the rate and level of market acceptance of Ranexa and ACEON®in the United States,
including:



| |  |  | our product marketing, promotion, distribution sales and pricing strategies and programs;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | our ability to provide acceptable evidence of the products safety, efficacy, cost-effectiveness and convenience compared to that of competing products or therapies;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | product labeling claims;
| | - |  | ------------------------



| |  |  | the extent to which physicians do or do not prescribe a product to the full extent encompassed by product labeling;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | regulatory constraints on, or delays in the review of, our product promotional materials and programs;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | the perception of physicians and other members of the healthcare community of the products safety, efficacy, cost-effectiveness and convenience compared to that of competing
products or therapies;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | patient and physician satisfaction with the product;
| | - |  | ----------------------------------------------------



| |  |  | the effectiveness of our sales and marketing efforts and those of our strategic partners, including Solvay Pharmaceuticals and Astellas;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the size of the market for the product;
| | - |  | ---------------------------------------



| |  |  | any publicity concerning the product or similar products;
| | - |  | ---------------------------------------------------------



| |  |  | the introduction, availability and acceptance of competing treatments, including lower-priced generic products;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | the availability and level of third-party reimbursement for the product;
| | - |  | ------------------------------------------------------------------------



| |  |  | the ability to gain formulary acceptance and favorable formulary positioning for our approved products on government and managed care formularies and the discounts and rebates
offered in return;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the success of ongoing development programs relating to our products, including our MERLIN TIMI-36 clinical trial of Ranexa;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | new data or adverse event information relating to the product or any similar products and any resulting regulatory scrutiny;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to satisfy post-marketing safety surveillance responsibilities and safety reporting requirements;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | whether or not regulatory authorities impose risk management programs on the product, which can vary widely in scope, complexity, and impact on market acceptance of a product, and
can include education and outreach programs, controls on the prescribing, dispensing or use of the product, and/or restricted access systems;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the continued availability of third parties to manufacture and distribute the product and product samples on acceptable terms, and the continued ability to manufacture
commercial-scale quantities of the product successfully and on a timely basis;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the outcome of patent or product liability litigation, if any, related to the product;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | regulatory developments relating to the development, manufacture, commercialization or use of the product; and
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | changes in the regulatory environment.
| | - |  | --------------------------------------

For example, we
believe that the approved product labeling for Ranexa and ACEON®will have a direct impact on our
marketing, promotional and sales programs for these products, and could adversely affect market acceptance of our products.

Regulatory
authorities approve product labeling with reference to the preclinical and clinical data that form the basis of the product approval, and as a result the scope of approved labeling is generally impacted by the available data. The approved product
labeling for Ranexa states that because Ranexa prolongs the QT interval in a dose-dependent manner, the product should be reserved for use in chronic angina patients who have not achieved an adequate response with other antianginal drugs, and should
be used in combination with other common antianginal treatments, specifically amlodipine, beta-blockers or nitrates. As a result, Ranexa is approved for only a portion of the overall angina patient population in the United States. Any approval of
Ranexa for broader use with angina patients will require, among other things, successful completion of our large ongoing MERLIN TIMI-36 clinical trial, from which preliminary results are expected in the first quarter of 2007. We cannot assure you
that the MERLIN TIMI-36 clinical trial will succeed or allow us to expand the approved labeling for Ranexa.

In addition to approving
product labeling, the FDA typically reviews core promotional materials in connection with new product launches. We must obtain the FDAs review of our key promotional materials in connection with the launch of Ranexa. We do not know whether the
FDA will review these materials on a timely basis, or whether the reviewed materials



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will allow us to effectively promote Ranexa with healthcare practitioners and managed care audiences. For example, the
approved product labeling states that the mechanism of action of Ranexa is unknown. As a result, our promotional materials will not be able to discuss preclinical research that suggests that Ranexa is a selective late sodium current inhibitor, which
may make it difficult for us to differentiate the product in the market.

The pharmaceutical and biopharmaceutical industries and the
market for cardiovascular drugs in particular, are intensely competitive. Ranexa, ACEON®and any of
our other products that receive regulatory approval will compete with well-established, proprietary and generic cardiovascular therapies that have generated substantial sales over a number of years and are widely used and accepted by health care
practitioners. For example, ACEON®is a member of the highly competitive class of drugs known as ACE
inhibitors, including at least one branded ACE inhibitor with substantial United States sales much larger than United States sales of ACEON®. Although the FDA approved ACEON®for the treatment
of patients with stable coronary artery disease to reduce the risk of cardiovascular mortality or nonfatal myocardial infarction in August 2005, to date there have been only minimal product sales and our marketing and promotional efforts have not
materially increased overall market acceptance.

We may also be hampered in our promotional efforts by a lack of familiarity with our
company and our products among healthcare practitioners in the United States. Relatively few United States physicians served as clinical investigators in the CARISA or ERICA clinical studies of Ranexa; as a result, only a limited number of United
States healthcare practitioners are familiar with using Ranexa, even in a clinical trial setting. In addition, the EUROPA trial that led to the FDAs approval of ACEON®for a new indication in August 2005 was conducted entirely in Europe, and United States practitioners have relatively little experience using
ACEON®for this indication.

In addition to direct competition, our products will also have to compete against the promotional efforts for other products in order to be noticed by
physicians and patients. The level of promotional effort in the pharmaceutical and biopharmaceutical markets has increased substantially. Market acceptance of our products will be affected by the level of promotional effort that we are able to
provide for our products. The level of our promotional efforts will depend in part on our ability to train, deploy and retain an effective sales and marketing organization, as well as our ability to secure additional financing. We cannot assure you
that the level of promotional effort that we will be able to provide for our products or the levels of additional financing we are able to secure, if any, will be sufficient to obtain market acceptance of our products.

We launched Ranexa in the United States in March 2006 and we continue to co-promote ACEON in the United States, which require significant capital expenditures. If we
are not successful in achieving market acceptance for these products, the significant amounts of capital we are spending in connection with their commercialization would be lost.

We are spending significant amounts of capital in connection with the launch of Ranexa in the United States in March 2006. The level of our operating
expenses increased in the second half of 2005 in connection with our pre-commercialization efforts relating to Ranexa. We expect the level of our operating expenses in fiscal 2006 to increase substantially compared to our fiscal 2005 operating
expenses due to the launch of Ranexa. Our Ranexa commercialization efforts include further building inventory of the product and product samples, making distribution arrangements with wholesalers that include expensive launch-related arrangements to
stock Ranexa at the retail pharmacy level, sales training, increased marketing research and communication efforts, deployment of our national cardiovascular specialty sales force of approximately 250 personnel in connection with initial promotional
efforts, and additional hiring. Our previous and ongoing investments in the product would be lost if we cannot achieve market acceptance and generate revenues for the product.

We spent approximately $171.1 million on sales and marketing activities from January 1, 2002 through March 31, 2006, which primarily related to
Ranexa and ACEON®. The loss of these investments would harm our business, increase our cash
requirements and result in continued operating losses and a substantial decline in our stock price.

Even after a product has been approved for
commercial sale, if we or others identify previously known or unknown side effects, approval could be withdrawn or sales of the product could be significantly reduced.

If we or others identify previously unknown side effects for Ranexa or ACEON®or any products perceived to be similar to Ranexa or ACEON®, or if any already known
side effect becomes a more serious concern than was previously thought on the basis of new data or other developments, or if manufacturing problems occur, then in any of those circumstances:



| |  |  | sales of the product may decrease significantly;
| | - |  | ------------------------------------------------



| |  |  | regulatory approval for the product may be restricted or withdrawn;
| | - |  | -------------------------------------------------------------------



| |  |  | we may decide to, or be required to, send product warning letters or field alerts to physicians and pharmacists;
| | - |  | ----------------------------------------------------------------------------------------------------------------



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| |  |  | reformulation of the product, additional preclinical or clinical studies, changes in labeling of the product or changes to or re-approvals of manufacturing facilities may be
required;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our reputation in the marketplace may suffer; and
| | - |  | -------------------------------------------------



| |  |  | investigations and lawsuits, including class action suits, may be brought against us.
| | - |  | -------------------------------------------------------------------------------------

Any of the above occurrences would harm or prevent sales of Ranexa or ACEON®and increase our commercialization costs and expenses, and could mean that our ability to commercialize the product is seriously impaired or stopped altogether.

Unlike other treatments for angina currently being used in the United States, the approved labeling for Ranexa warns of the risk that the product may
cause a type of fatal arrhythmia known to healthcare practitioners as torsades de pointes. This fatal arrhythmia occurs in the general population of patients with cardiovascular disease at a low rate of incidence that is not well understood, and can
be triggered by a wide variety of factors including genetic predisposition and medical conditions such as low blood potassium levels or slow heart rate that are not uncommon among patients with cardiovascular disease. It is well known that some
drugs cause this fatal arrhythmia, although to date Ranexa has not been shown to have caused torsades de pointes. Now that Ranexa is approved in the United States, we expect that the product will start to be used in a wider population than in
previous controlled clinical studies of the product, including in patients with chronic angina who may be predisposed to the occurrence of torsades de pointes or other fatal arrhythmias and may be receiving other medications for a variety of
conditions. In this potential patient population it is inevitable that some patients will die suddenly, and it is likely that in at least some of these cases there will not be sufficient information available to rule out Ranexa as a contributing
factor or cause of mortality. As a result, regulatory authorities, healthcare practitioners and/or patients may perceive or conclude that the use of Ranexa is associated with torsades de pointes or sudden death, which could mean that our ability to
commercialize Ranexa could be seriously impaired or stopped altogether, and we may become subject to product liability litigation and other claims against us. This could harm our business, increase our cash requirements and result in continued
operating losses and a substantial decline in our stock price.

If we are unable to compete successfully in our market, it will harm our business.

There are many existing drug therapies approved for the treatment of the diseases targeted by our products, and we are also aware of
companies that are developing new potential drug products that will compete in the same markets as our products. Ranexa competes with several well established classes of drugs for the treatment of chronic angina in the United States, including
generic and/or branded beta-blockers, calcium channel blockers and long acting nitrates, and additional potential angina therapies may be under development. Surgical treatments such as coronary artery bypass grafting and percutaneous coronary
intervention can be another option for angina patients. ACEON®is a member of the highly competitive
class of drugs known as ACE inhibitors, many of which are generic. For the indication of coronary artery disease, there is at least one branded ACE inhibitor with substantial United States sales; for the treatment of hypertension there are other
drug classes that are used to treat hypertension, including angiotensin receptor blockers, beta-blockers, calcium channel blockers and thiazide-type diuretics. In the United States, there are numerous marketed generic and/or branded pharmacologic
stress agents, and at least two potential A2A-adenosine receptor agonist compounds under development, that could
compete with regadenoson, if approved. There are also numerous generic and/or branded drugs in the United States for the treatment of acute atrial arrhythmias, and at least one A1-adenosine receptor agonist compound that could compete with tecadenoson may be under development. In addition, there are many therapeutic drug classes approved
for the treatment of asthma, including steroids, beta-2 agonists, cromolyn, theophylline, and anti-IgE, all of which could compete with CVT-6883, if approved. We are also aware of companies that are developing products that may compete with our
other product candidates and programs. There may also be potentially competitive products of which we are not aware. Many of these potential competitors have substantially greater product development capabilities and financial, scientific, marketing
and sales resources. Other companies may succeed in developing products earlier or obtaining approvals from regulatory authorities more rapidly or broadly than either we or our strategic partners are able to achieve. Potential competitors may also
develop products that are safer, more effective or have other potential advantages compared to those under development or proposed to be developed by us and our strategic partners. In addition, research, development and commercialization efforts by
others could render our technology or our products obsolete or non-competitive.

Failure to obtain adequate reimbursement from government health
administration authorities, private health insurers and other organizations could materially adversely affect our future business, market acceptance of our products, results of operations and financial condition.

Our ability and the ability of our collaborative partners to market and sell our products will depend significantly on the extent to which reimbursement
for the cost of our products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Third party payers and governmental health administration authorities are
increasingly attempting to limit and/or regulate the price of medical products and services,



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especially branded prescription drugs. For example, under the Medicare Prescription Drug Improvement and Modernization
Act of 2003, Medicare beneficiaries are now able to elect coverage for prescription drugs under Medicare Part D, and the various entities providing such coverage are attempting to negotiate rebates and other price concessions from pharmaceutical
manufacturers, which may increase pressure to lower prescription drug prices and may limit drug access. The full impact of this new law on our business as it relates to Ranexa and ACEON®in the United States is not yet clear to us, and the impact will depend in part on specific decisions regarding the level of coverage provided
for the therapeutic categories in which our products are included, the terms on which such coverage is provided, and the extent to which preference is given to selected products in a category. These changes in Medicare reimbursement could have a
negative effect on the revenue, if any, that we derive from sales of any of our products. In addition, the increased emphasis on managed healthcare in the United States will put additional pressure on the pricing and usage of any of our products,
which may adversely affect product sales and revenues.

Even if our products are deemed to be safe and effective by regulatory authorities,
third party payers and governmental health administration authorities may direct patients to generic products or other lower-priced therapeutic alternatives, and there are an increasing number of such alternatives available. Some third-party payers
establish a preference for selected products in a category and provide higher levels of formulary acceptance and coverage for preferred products and higher co-payments for non-preferred products. The current level of reimbursement for
ACEON®is low, and we may not be able to increase reimbursement levels or product revenues in part
because under our co-promotion arrangement, Solvay Pharmaceuticals is responsible for all managed care contracts for the product. Significant uncertainty exists as to the reimbursement status of newly approved health care products, such as Ranexa.
As a result, we cannot predict the availability or amount of reimbursement for Ranexa or how the product will be positioned relative to other antianginal products and therapies. In February 2006, we set the wholesale acquisition cost of Ranexa at
$5.50 per day for the daily starting dose of 500 mg tablet twice daily. This represents a higher price than the cost of any other antianginal drug currently on the market in the United States. Our pricing for Ranexa may result in less favorable
reimbursement and formulary positioning for the product under government programs including Medicare or by third-party payers, and may result in more or higher barriers to patient access to the product such as higher co-payments and/or prior
authorization requirements. If we fail to obtain favorable reimbursement or formulary positioning for Ranexa or ACEON®, health care providers may limit how much or under what circumstances they will prescribe or administer these products. We expect to offer discounts or rebates to some customers to attempt to contract for favorable formulary status,
which will lower the amount of product revenues we receive. These competing factors will affect the amount of product revenues we will receive for Ranexa in the United States.

For sales of any of our products in Europe, if approved, we will be required to seek reimbursement approvals on a country-by-country basis. We cannot be
certain that any products approved for marketing will be considered cost effective, that reimbursement will be available, or that allowed reimbursement will be adequate in these markets. In addition, in Europe, various government entities control
the prices of prescription pharmaceuticals and often expect prices of prescription pharmaceuticals to decline over the life of the product or as volumes increase. As a result, reimbursement policies and pricing controls could adversely affect our or
any strategic partners ability to sell our products on a profitable basis in Europe.

Our customer base is highly concentrated.

Our principal customers are a small number of wholesale drug distributors. These customers comprise a significant part of the distribution network for
pharmaceutical products in the United States. Three large wholesale distributors, Cardinal Health, Inc., McKesson Corporation and AmerisourceBergen Corporation, control a significant share of the market in the United States. Our ability to
distribute our products, including Ranexa, to retail pharmacy chains and to recognize revenues on a timely basis will be substantially dependent on our ability to maintain commercially reasonable agreements with each of these wholesale distributors.
The loss or bankruptcy of any of these customers could materially and adversely affect our future results of operations, financial condition and our ability to distribute our products.

Guidelines and recommendations published by various organizations may affect the use of our products.

Government agencies issue regulations and guidelines directly applicable to us and to our products. In addition, professional societies, practice management groups, private health/science foundations, and organizations involved in various
diseases from time to time publish guidelines or recommendations to the health care and patient communities. These various sorts of recommendations may relate to such matters as product usage, dosage, route of administration, and use of related or
competing therapies. These organizations have in the past made recommendations about our products or products that compete with our products, such as the recommendations of the Joint National Congress relating to the treatment of hypertension and
the treatment guidelines of the American Heart Association. These sorts of recommendations or guidelines could result in decreased use of our products. In addition, the perception by the investment community or stockholders that any such
recommendations or guidelines will result in decreased use of our products could adversely affect the market price of our common stock.



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We may be required to defend lawsuits or pay damages in connection with the alleged or actual violation of healthcare
statutes such as fraud and abuse laws, and our corporate compliance programs can never guarantee that we are in compliance with all relevant laws and regulations.

Our commercialization efforts in the United States are subject to various federal and state laws pertaining to pharmaceutical promotion and healthcare fraud and abuse, including the Food, Drug and Cosmetic Act, the
Prescription Drug Marketing Act, and federal and state anti-kickback laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to offer or pay any remuneration in exchange for, or to induce, the referral of
business, including the purchase or prescription of a drug. The federal government has published many regulations relating to the anti-kickback statutes, including numerous safe harbors or exemptions for certain arrangements. False claims laws
prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third-party payers (including Medicare and Medicaid), claims for reimbursed drugs or services that are false or fraudulent, claims for items or
services not provided as claimed, or claims for medically unnecessary items or services. Our activities relating to the sale and marketing of our products, and those of our strategic partners such as Solvay Pharmaceuticals and Astellas, will be
subject to scrutiny under these laws and regulations. It may be difficult to determine whether or not our activities, or those of our strategic partners, comply with these complex legal requirements and regulations. Violations are punishable by
significant criminal and/or civil fines and other penalties, as well as the possibility of exclusion of the product from coverage under governmental healthcare programs (including Medicare and Medicaid). If the government were to investigate or make
allegations against us or any of our employees, or sanction or convict us or any of our employees, of violating any of these laws, this could have a material adverse effect on our business, including our stock price. Similarly, in the case of Solvay
Pharmaceuticals under our co-promotion arrangement with respect to ACEON®, or in the case of Astellas
under our license and collaboration arrangement with respect to regadenoson, if either of these strategic partners becomes subject to investigation, allegation or sanction, our ability to continue to commercialize the product and/or obtain revenues
from its sale could be seriously impaired or stopped altogether.

Our activities and those of our strategic partners could be subject to
challenge for many reasons, including the broad scope and complexity of these laws and regulations, the difficulties in interpreting and applying these legal requirements, and the high degree of prosecutorial resources and attention being devoted to
the biopharmaceutical industry by law enforcement authorities. During the last few years, numerous biopharmaceutical companies have paid multi-million dollar fines and entered into burdensome settlement agreements for alleged violation of these
requirements, and other companies are under active investigation. Although we have developed and implemented corporate and field compliance programs as part of our efforts to commercialize Ranexa and ACEON®, we cannot assure you that we or our
employees, directors or agents are or will be in compliance with all laws and regulations or that we will not come under investigation, allegation or sanction. If we fail to comply with any of these laws or regulations, various negative consequences
could result, including criminal and/or civil prosecution, substantial criminal and/or civil penalties, exclusion of the approved product from coverage under governmental healthcare programs (including Medicare and Medicaid), and costly litigation.
In addition, our efforts to comply with these laws will be time-consuming and expensive.

Under our co-promotion arrangement relating to
ACEON®, Solvay Pharmaceuticals can terminate the agreement due to our uncured material breach, which
could include our failure to comply with applicable laws and regulations relating to our commercialization efforts for ACEON®.

The successful commercialization of our products is substantially dependent on the successful and timely performance of our strategic collaborative partners and other vendors, over whom we have little control.

Our key collaborative partnerships, collaborations and licenses include the following:



| |  |  | Roche Palo Alto LLCa 1996 license agreement under which we received rights to develop and commercialize ranolazine for the treatment of angina and other cardiovascular
indications;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Biogen Idec Inc. (formerly Biogen Inc.)a 1997 license agreement under which we licensed rights to Biogen to develop and commercialize products produced based on our
A1adenosine receptor antagonist patents or technologies, which Biogen Idec has labeled its Adentriprogram;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Astellas US LLCa 2000 collaboration and license agreement to develop and commercialize second generation pharmacologic cardiac stress agents, including regadenoson; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Solvay Pharmaceuticals, Inc.a 2004 co-promotion agreement under which we agreed to co-promote ACEON® in the United States with Solvay Pharmaceuticals.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

The successful commercialization of our ACEON®, regadenoson and Adentri programs will depend significantly on the efforts of our collaborative partners for each of these programs. For
instance, under our co-promotion agreement for ACEON®in the United States, Solvay Pharmaceuticals is
responsible for the manufacture, distribution (including pricing and managed care contracting), development and maintenance of all regulatory approval of ACEON®in the United States. Solvay Pharmaceuticals is also responsible for promoting ACEON®to primary care physicians in the United States, and is responsible for supplying product samples to support all promotional efforts. Under our
agreement with Astellas, Astellas is responsible for the commercial manufacture and distribution, marketing and sales of regadenoson in North America, if approved. Biogen Idec has sole responsibility for all worldwide development and
commercialization of products from the Adentri program, if any.

We cannot control the amount and timing of resources that any of our
strategic partners devote to these programs. Conflicting priorities may cause any of our strategic partners to deemphasize our programs or to pursue competing technologies or product candidates. In addition, these arrangements are each complex, and
disputes may arise between the parties, which could lead to delays in the development or commercialization of the products involved. If Solvay Pharmaceuticals fails to perform its obligations under the co-promotion agreement with us relating to
ACEON®, we would receive less or even no revenues under the arrangement. If Astellas fails to
successfully manufacture, market and sell regadenoson in North America, if approved, we would receive less or even no revenues under the arrangement. If Biogen Idec fails to successfully develop and commercialize any product from the Adentri
program, we would receive no revenues under the arrangement. To the extent that we enter into additional co-promotion or other commercialization arrangements in the future, our revenues will depend upon the efforts of third parties over which we
will have little control.

Our successful commercialization of Ranexa and ACEON®will also depend on the performance of numerous third-party vendors over which we have little control. For example, we rely entirely on
third-party vendors to manufacture and distribute Ranexa in the United States, to administer our physician sampling programs relating to Ranexa and ACEON®, and to perform some of our sales and marketing operations functions, such as our product call centers. As a result, our level of success in
commercializing Ranexa and ACEON®depends significantly on the efforts of these third parties, as
well as our strategic partners. If these third parties fail to perform as expected, our ability to market and promote Ranexa and ACEON®would be significantly compromised.

We have no manufacturing facilities and will depend on third
parties to manufacture our products.

We do not operate, and have no current plans to develop, any manufacturing facilities, and we
currently lack the resources and capability to manufacture any of our products ourselves on a clinical or commercial scale. As a result, we are dependent on corporate partners, licensees, contract manufacturers and other third parties for the
manufacturing of clinical and commercial scale quantities of all of our products, including Ranexa and ACEON®.

For example, we have entered into several agreements with third party manufacturers relating to Ranexa, including for commercial-scale active pharmaceutical ingredient, bulk tablet manufacturing, packaging and supply
of a raw material component of the product. We currently rely on a single supplier at each step in the production cycle for Ranexa. In addition, under our co-promotion agreement with Solvay Pharmaceuticals, Solvay Pharmaceuticals is responsible for
the manufacture and distribution of ACEON®, and the manufacture of product samples, and in turn is
dependent on third parties for the manufacture of the active pharmaceutical ingredient and the drug product. Similarly, under our agreement with Astellas relating to regadenoson, Astellas is responsible for the commercial manufacture and supply of
regadenoson, if approved, and in turn is dependent on third parties for the manufacture of the active pharmaceutical ingredient and the drug product. Our ability to commercialize Ranexa and our ability to co-promote ACEON®are each entirely dependent on these arrangements, and would be affected by any delays or difficulties in
performance on the part of our contract manufacturers for Ranexa, or Solvay Pharmaceuticals or its third party manufacturers in the case of ACEON®. For example, in the case of our Ranexa supply chain, where we are reliant on a single manufacturer at each step in the production cycle for the product, the failure of any manufacturers to supply
product on a timely basis or at all, or to manufacture our product in compliance with product specifications or applicable quality or regulatory requirements, or to manufacture product or samples in volumes sufficient to meet market demand, would
adversely affect our ability to commercialize Ranexa and could negatively affect our operating results. For example, a quality problem in the Ranexa supply chain could result in an inventory write-off that could negatively affect our operating
results.

Furthermore, we and our third party manufacturers, laboratories and clinical testing sites may be required to pass pre-approval
inspections of facilities by the FDA and corresponding foreign regulatory authorities before obtaining marketing approvals, including for any new drug application (if any) relating to one of our other product candidates, such as regadenoson. Even
after product approval, our facilities and those of our contract manufacturers remain subject to periodic



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inspection by the FDA and other domestic and foreign regulatory authorities. We cannot guarantee that any such
inspections will not result in compliance issues that could prevent or delay marketing approval or negatively impact our ability to maintain product approval or distribution, or require us to expend money or other resources to correct. In addition,
we or our third party manufacturers are required to adhere to stringent federal regulations setting forth current good manufacturing practices for pharmaceuticals. These regulations require, among other things, that we manufacture our products and
maintain our records in a carefully prescribed manner with respect to manufacturing, testing and quality control activities. In addition, drug product manufacturing facilities in California must be licensed by the State of California, and other
states may have comparable requirements. We cannot assure you that we will be able to obtain such licenses when and where needed.

Any delay in the
development of any of our drug product candidates will harm our business.

All of our product candidates in development require
preclinical studies and/or clinical trials, and will require regulatory review and approval, prior to marketing and sale. Any delays in the development of our product candidates would delay our ability to seek and obtain regulatory approvals,
increase our cash requirements, increase the volatility of our stock price and result in additional operating losses. One potential cause of a delay in product development is a delay in clinical trials. Many factors could delay completion of our
MERLIN TIMI-36 clinical trial of Ranexa or our other clinical trials, including, without limitation:



| |  |  | slower than anticipated patient enrollment;
| | - |  | -------------------------------------------



| |  |  | difficulty in obtaining sufficient supplies of clinical trial materials; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | adverse events occurring during the clinical trials.
| | - |  | ----------------------------------------------------

Our
MERLIN TIMI-36 clinical trial is a large, ongoing clinical study of Ranexa, in which the completion and duration of the study is based on achieving specified numbers of events. We expect to enroll approximately 6,500 patients in this trial. Although
we presently expect preliminary results from the trial at the end of 2006 or in the first quarter of 2007, the completion of our MERLIN TIMI-36 clinical trial may be delayed due to slower than anticipated event rates or enrollment. The MERLIN
TIMI-36 clinical trial of Ranexa is a large and expensive clinical study, and any delay in its conduct or completion would adversely affect our statements of operations and increase the period of uncertainty about its results.

We may be unable to maintain our proposed schedules for investigational new drug applications, which are regulatory filings made by a drug sponsor to the
FDA to allow human clinical testing in the United States, and equivalent foreign applications and clinical protocol submissions to the FDA and other regulatory agencies. In addition, we may be unable to maintain our proposed schedules for initiation
and completion of clinical trials as a result of FDA or other regulatory action or other factors, such as lack of funding, the occurrence of adverse safety effects or other complications that may arise in any phase of a clinical trial program.

Furthermore, even if our clinical trials are completed on schedule, the data and results may differ from those obtained in preclinical
studies and earlier clinical trials. Clinical trials may not demonstrate sufficient safety or efficacy to obtain the necessary marketing approvals. For example, although our previous phase 3 trials of Ranexa had positive results, our ongoing MERLIN
TIMI-36 study of Ranexa is in a different patient population for a different potential use with different entry criteria. These factors, other differences and the inherent variability of clinical trial results mean that there can be no assurance
that we will obtain positive results from the MERLIN TIMI-36 study.

Another potential example of variability in clinical study results
concerns our regadenoson program, for which we expect to obtain results from the second of two phase 3 studies that have an identical study design. The design of our identical phase 3 studies is different from the designs of our prior clinical
studies of regadenoson. The two phase 3 studies are non-inferiority studies, using a complex comparison based on multiple readings of reperfusion imaging scans by various blinded human scan readers. The study design for phase 3 of the clinical
program is unusual, and there is an inherently high degree of variability in the reading of reperfusion imaging scans (meaning that a single scan reviewed by two different readers, or even a single scan reviewed twice by the same reader, can produce
different results). While we obtained positive results from the first completed phase 3 study in the clinical program, there can be no assurance that we will obtain positive results from the second phase 3 study of regadenoson when it is completed,
or that the results of the first phase 3 study of regadenoson will be in any way predictive of the results of the second phase 3 study. Moreover, even if both phase 3 studies of regadenoson are positive, there can be no assurance that the data will
sufficient to obtain marketing approval for regadenoson in the United States or abroad.



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All of our products in development require regulatory review and approval prior to commercialization. Any delay in the
regulatory review or approval of any of our products in development will harm our business.

All of our products in development require
regulatory review and approval prior to commercialization. Any delays in the regulatory review or approval of our products in development would delay market launch, increase our cash requirements, increase the volatility of our stock price and
result in additional operating losses.

The process of obtaining FDA and other required regulatory approvals, including foreign approvals,
often takes many years and can vary substantially based upon the type, complexity and novelty of the products involved. Furthermore, this approval process is extremely complex, expensive and uncertain. We may not be able to maintain our proposed
schedules for the submission of any new drug application in the United States or any marketing authorization application or other foreign applications for any of our products. We may not be able to maintain our proposed schedules for the submission
of any supplemental new drug application (or equivalent foreign application) seeking changes to product labeling, manufacturing or other aspects of the NDA or foreign marketing authorization for Ranexa or other approved products (if any). If we
submit any new drug application or supplemental new drug application to the FDA, the FDA must decide whether to either accept or reject the submission for filing. We cannot be certain that any of these submissions will be accepted for filing and
reviewed by the FDA, or that our marketing authorization applications to European or other foreign regulatory authorities will be validated for review by those authorities. We cannot be certain that we will be able to respond to any regulatory
requests during the review period in a timely manner without delaying potential regulatory action. We also cannot be certain that any of our products or proposed product changes (such as labeling changes proposed in any supplemental new drug
application) will be approved by the FDA or foreign regulatory authorities.

Delays in approvals or rejections of marketing applications in
the United States or foreign markets may be based upon many factors, including regulatory requests for additional analyses, reports, clinical inspections, clinical and/or preclinical data and/or studies, regulatory questions regarding data or
results, unfavorable review by advisory committees, changes in regulatory policy during the period of product development and/or the emergence of new information regarding our products or other products. For example, in 2005 we withdrew our
marketing authorization application for ranolazine filed with the European Medicines Agency, because these regulatory authorities requested additional clinical pharmacokinetic data regarding the product prior to approval.

Data obtained from preclinical and clinical studies are subject to different interpretations, which could delay, limit or prevent regulatory review or
approval of any of our products. For example, some drugs that prolong the QT interval, which is a measurement of specific electrical activity in the heart as captured on an electrocardiogram, carry an increased risk of serious cardiac rhythm
disturbances that can cause a type of fatal arrhythmia known as torsades de pointes, while other drugs that prolong the QT interval do not carry an increased risk of this fatal arrhythmia. Small but statistically significant mean increases in the QT
interval were observed in clinical trials of Ranexa. QT interval measurements are not precise and there are different methods of calculating the corrected QTc interval, which is the QT interval as adjusted for heart rate. This uncertainty in the
measurement and calculation of the QT and QTc intervals can contribute to different interpretations of these data. The clinical significance of the changes in QTc interval observed in clinical trials of Ranexa remains unclear, and other clinical and
preclinical data do not suggest that Ranexa significantly pre-disposes patients to this fatal arrhythmia. Regulatory authorities may interpret the Ranexa data differently, which could delay, limit or prevent additional regulatory approvals of
Ranexa. For example, when acting on the original new drug application for Ranexa in October 2003, the FDA did not approve the product and indicated that additional clinical information would be needed prior to approval, in part because of the
FDAs safety concerns in light of the effect of Ranexa to prolong the QTc interval. We conducted an additional clinical study and submitted an amendment to the new drug application for Ranexa to the FDA in July 2005. In January 2006, the FDA
approved Ranexa for use in chronic angina, with product labeling which indicates that because of the potential safety risk of QT prolongation caused by Ranexa, the product should be reserved for use in chronic angina patients who have not achieved
an adequate response with other antianginal drugs, and should be used in combination with other common antianginal treatments, specifically amlodipine, beta-blockers or nitrates. Foreign regulatory authorities may have similar or other concerns
which would delay or prevent the approval of Ranexa or any of our other product candidates outside the United States.

Similarly, as a
routine part of the evaluation of any potential drug, clinical studies are generally conducted to assess the potential for drug-drug interactions that could impact potential product safety. While we believe that the interactions between Ranexa and
other drugs have been well characterized as part of our clinical development programs, the data are subject to regulatory interpretation and an unfavorable interpretation by regulatory authorities could delay, limit or prevent additional regulatory
approvals of Ranexa.

Furthermore, regulatory attitudes towards the data and results required to demonstrate safety and efficacy can change
over time and can be affected by many factors, such as the emergence of new information (including on other products), changing policies and agency funding, staffing and leadership. We cannot be sure whether future changes in the regulatory
environment will be favorable or unfavorable to our business prospects.



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In addition, the environment in which our regulatory submissions may be reviewed changes over time. For
example, average review times at the FDA for marketing approval applications can fluctuate substantially, and we cannot predict the review time for any of our submissions with any regulatory authorities. Review times also can be affected by a
variety of factors, including budget and funding levels and statutory, regulatory and policy changes.

We intend to file applications for
regulatory approval of our products in various foreign jurisdictions from time to time in the future. However, we have not received any regulatory approvals in any foreign jurisdiction for the commercial sale of any of our products. There are
potentially important substantive differences in reviews of approval applications in the United States and foreign jurisdictions such as Europe. For example, preclinical and/or clinical trials and data that are accepted by the FDA in support of a
new drug application may not be accepted by foreign regulatory authorities, and trials and data acceptable to foreign regulatory authorities in support of a product approval may not be accepted by the FDA. In addition, approval of a product in one
jurisdiction is no guarantee that any other regulatory authorities will also approve it.

While we have negotiated a special protocol assessment
agreement with the FDA relating to the MERLIN TIMI-36 clinical study of Ranexa, this agreement does not guarantee any particular outcome from regulatory review of the study or the product, including any approvals or expanded product labeling.

The FDAs special protocol assessment, or SPA, process creates a written agreement between the sponsoring company and the FDA
regarding clinical trial design, clinical endpoints, study conduct, data analyses and other clinical trial issues. It is intended to provide assurance that if pre-specified trial results are achieved, they may serve as the primary basis for an
efficacy claim in support of a new drug application. However, the SPA agreement is not a guarantee of an approval of a product or of any permissible claims about the product. In particular, it is not binding on the FDA if public health concerns
unrecognized at the time the SPA agreement is entered into become evident, other new scientific concerns regarding product safety or efficacy arise, or if the sponsor company fails to comply with the agreed upon trial protocols. Even after an SPA
agreement is finalized, the SPA agreement may be changed by the sponsor company or the FDA on written agreement of both parties, and the FDA retains significant latitude and discretion in interpreting the terms of the SPA agreement and the data and
results from any study that is the subject of the SPA agreement.

In July 2004, we announced that we reached written agreement with the FDA
on an SPA agreement for the MERLIN TIMI-36 clinical trial of Ranexa, which could support potential approval of Ranexa as first-line therapy for patients suffering from chronic angina if treatment with Ranexa is not associated with an adverse trend
in death or arrhythmia compared to placebo, even if statistical significance on the primary study endpoint is not achieved, provided that we also successfully complete a clinical evaluation of higher doses of Ranexa. MERLIN TIMI-36 could also result
in approval for Ranexa for the treatment and long-term prevention of acute coronary syndromes, if the study meets its primary endpoint. We cannot assure you that the MERLIN TIMI-36 clinical trial will succeed or allow us to expand the approved
labeling for Ranexa. The MERLIN TIMI-36 study will enroll approximately 6,500 patients, although the studys duration and completion is based on achieving specified numbers of events. An independent data safety monitoring board overseeing the
study may end the study early with no notice due to results observed by the board during one of its periodic safety assessments of the study. If the MERLIN TIMI-36 study shows that treatment with Ranexa is associated with an adverse trend in death
or arrhythmia compared to placebo, our ability to commercialize Ranexa would be seriously impaired or stopped altogether, and we may become subject to product liability litigation and other claims against us. Furthermore, the additional safety data
we will receive from our MERLIN TIMI-36 study will require us to modify the products labeling, and could cause the FDA to further limit or restrict the approved labeling for Ranexa. Any or all of these events would adversely affect the market
acceptance of Ranexa and our cash position, results of operations and our stock price.

In connection with our SPA agreement relating to
the MERLIN TIMI-36 clinical study, we expect that the FDA will review our compliance with the protocol under our SPA agreement. We also expect that the FDA will conduct inspections of some of the approximately 500 MERLIN TIMI-36 clinical sites, most
of which are located in 17 foreign countries. We do not know whether the clinical sites will pass such FDA inspections, and negative inspection results could significantly delay or prevent any potential expansion of the approved labeling for Ranexa.
In addition, the MERLIN TIMI-36 clinical trial involves the use of an intravenous formulation of ranolazine that the FDA has not approved. We do not know how the FDA will interpret the commitments under the SPA agreement relating to the MERLIN
TIMI-36 clinical study, how it will interpret the data and results from the MERLIN TIMI-36 clinical study, or whether Ranexa will receive any additional approvals or any expanded product labeling as a result of this SPA agreement with the FDA or the
MERLIN TIMI-36 clinical study. As a result, significant uncertainty remains regarding the MERLIN TIMI-36 clinical trial.



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If we are unable to satisfy governmental regulations relating to the development and commercialization of our drug
candidates, we may be subject to significant FDA sanctions.

The research, testing, manufacturing and marketing of drug products are
subject to extensive regulation by numerous regulatory authorities in the United States, including the FDA, and in other countries. Failure to comply with FDA or other applicable regulatory requirements may subject a company to administrative or
judicially imposed sanctions, including, without limitation:



| |  |  | warning letters and other regulatory authority communications objecting to matters such as promotional materials and requiring corrective action such as corrective communications to
healthcare practitioners;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | civil penalties;
| | - |  | ----------------



| |  |  | criminal penalties;
| | - |  | -------------------



| |  |  | injunctions;
| | - |  | ------------



| |  |  | product seizure or detention;
| | - |  | -----------------------------



| |  |  | product recalls;
| | - |  | ----------------



| |  |  | total or partial suspension of manufacturing; and
| | - |  | -------------------------------------------------



| |  |  | FDA refusal to review or approve pending new drug applications for unapproved products or supplemental new drug applications for previously approved products, and/or similar
rejections of marketing applications or supplements by foreign regulatory authorities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If we are unable to attract and retain
collaborators, licensors and licensees, the development of our products could be delayed and our future capital requirements could increase substantially.

We may not be able to retain current or attract new corporate and academic collaborators, licensors, licensees and others. Our business strategy requires us to enter into various arrangements with these parties, and
we are dependent upon the success of these parties in performing their obligations. If we fail to enter into and maintain these arrangements, the development and/or commercialization of our products would be delayed. We may be unable to proceed with
the development, manufacture or sale of products or we might have to fund development of a particular product candidate internally. If we have to fund the development and commercialization of substantially all of our products internally, our future
capital requirements will increase substantially.

The collaborative arrangements that we may enter into in the future may place
responsibility on the strategic partner for preclinical testing and clinical trials, manufacturing and preparation and submission of applications for regulatory approval of potential pharmaceutical products. For example, under our agreement with
Solvay Pharmaceuticals, Solvay Pharmaceuticals holds the new drug application for ACEON®, and is
responsible for maintaining FDA approval of ACEON®in the United States including all product
manufacturing. If Solvay Pharmaceuticals experiences manufacturing difficulties relating to the product or is not successful in maintaining FDA approval for ACEON®, this would increase our cash requirements, increase the volatility of our stock price and result in additional operating losses.

Under our arrangements, we or our strategic partners may also have to meet performance milestones. If we fail to meet our obligations under our
arrangements, our partners could terminate their arrangements or we could suffer other consequences such as losing our rights to the compounds at issue. For example, under our agreement with Astellas relating to regadenoson, we are responsible for
development activities and must meet development milestones in order to receive development milestone payments. Under our license agreement with Roche relating to Ranexa, we are required to use commercially reasonable efforts to develop and
commercialize ranolazine for angina, and have related milestone payment obligations. Under our co-promotion agreement with Solvay Pharmaceuticals, we are required to satisfy specified minimum marketing and promotion commitments relating to
ACEON®.

We cannot control the amount and timing of resources that our strategic partners devote to our programs. If a partner fails to successfully develop or commercialize any product, product launch would be delayed. In
addition, our partners may pursue competing technologies or product candidates. In addition, arrangements in our industry are extremely complex, particularly with respect to intellectual property rights, financial provisions, and other provisions
such as the parties respective rights with respect to decision-making. Disputes may arise in the future with respect to these issues, such as the ownership of rights to any technology developed with or by third parties. These and other
possible disagreements between us and our partners could lead to delays in the research, development or commercialization of product candidates, or in the amendment or termination of one or more of our license and collaboration agreements. These
disputes could also result in litigation or arbitration, which is time consuming, expensive and uncertain.



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If we are unable to effectively protect our intellectual property, we may be unable to complete development of any
products and we may be put at a competitive disadvantage; and if we are involved in an intellectual property rights dispute, we may not prevail and may be subject to significant liabilities or required to license rights from a third party, or cease
one or more product programs.

Our success will depend to a significant degree on, among other things, our ability to:



| |  |  | obtain patents and licenses to patent rights;
| | - |  | ---------------------------------------------



| |  |  | maintain trade secrets;
| | - |  | -----------------------



| |  |  | obtain trademarks; and
| | - |  | ----------------------



| |  |  | operate without infringing on the proprietary rights of others.
| | - |  | ---------------------------------------------------------------

However, we cannot be certain that any patent will issue from any of our pending or future patent applications, that any issued patent will not be lost through an interference or opposition proceeding, reexamination request, litigation or
otherwise, that any issued patent will be sufficient to protect our technology and investments or prevent the entry of generic or other competition into the marketplace, or that we will be able to obtain any extension of any patent beyond its
initial term. The following table shows the expiration dates in the United States for the primary compound patents for our key products and product candidates:



|                          |  |                                                |  
|------------------------- |  | ---------------------------------------------- | -
|Product/Product Candidate |  | United StatesPrimary CompoundPatent Expiration |  
|Ranexa                    |  | 2003                                           | *
|ACEON®                    |  | 2009                                           | 
|Regadenoson               |  | 2019                                           |  

---

|* | Because ranolazine is a new chemical entity, under applicable United States laws we have received exclusivity as a new chemical entity for the ranolazine compound until January
2011. In addition, the United States compound patent relating to Ranexa expired in 2003, but we have received several one-year interim patent term extensions under the Hatch-Waxman Act, and we reapplied on a permanent basis for patent term extension
after the FDA approved Ranexa in January 2006. We expect to be able to receive an extension under the Hatch-Waxman Act, which we anticipate will extend the patent protection to May 2008 for the approved product, which is the Ranexa extended-release
tablet, for the use in chronic angina approved by the FDA in January 2006. Also, we have received issued patents from the United States Patent and Trademark Office claiming various sustained release formulations of ranolazine and methods of using
sustained release formulations of ranolazine, including the formulation tested in our Phase 3 trials for Ranexa, for the treatment of chronic angina. These patents expire in 2019. We do not have any issued patent claims covering any intravenous
formulation of ranolazine on a stand-alone basis. After January 2011, patent term extension and new chemical entity exclusivity under the laws of the United States will no longer be available, and unless we are able to obtain additional exclusivity
relating to a successful supplemental new drug application and such additional exclusivity runs past January 2011, we will be entirely reliant on our then-issued patents claiming uses and formulations of Ranexa to continue to protect our investments
in Ranexas development and commercialization. It is possible that one or more competitors could develop competing products that do not infringe these patent claims, or could succeed in invalidating these issued patent claims, or that these
patents could be lost through an interference or opposition proceeding, reexamination, litigation or otherwise. Generic challenges and related patent litigation are common in the biopharmaceutical industry.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| | Perindopril is covered by an issued patent that covers the compound and expires in November 2009.
|- | -------------------------------------------------------------------------------------------------

In addition to these issued patents, we seek to file patent applications pending relating to each of our potential products, and we seek trade name and
trademark protection for our commercialized products such as Ranexa. Although patent applications filed in the United States are now published 18 months after their filing date, as provided by federal legislation enacted in 1999, this statutory
change applies only to applications filed on or after November 2000. Applications filed in the United States prior to this date are maintained in secrecy until a patent issues. As a result, we can never be certain that others have not filed patent
applications for technology covered by our pending applications or that we were the first to invent the



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technology. There may be third party patents, patent applications, trademarks and other intellectual property relevant to
our compounds, products, services, development efforts and technology which are not known to us and that block or compete with our compounds, products, services, development efforts or technology. For example, competitors may have filed applications
for, or may have received or in the future may receive, patents, trademarks and/or other proprietary rights relating to compounds, products, services, development efforts or technology that block or compete with ours.

In addition, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office. These proceedings
determine the priority of invention and, thus, the right to a patent for the technology in the United States. We may also become involved in opposition proceedings in connection with foreign patent filings. In addition, litigation may be necessary
to enforce any patents or trademarks issued to us, or to determine the scope and validity of the proprietary rights of us or third parties. Litigation, interference and opposition proceedings, even if they are successful, are expensive,
time-consuming and risky to pursue, and we could use a substantial amount of our financial resources in any such case.

We also must not
infringe patents or trademarks of others that might cover our compounds, products, services, development efforts or technology. If third parties own or have proprietary rights to technology or other intellectual property that we need in our product
development and commercialization efforts, we will need to obtain licenses to those rights. We cannot assure you that we will be able to obtain such licenses on economically reasonable terms, if at all. If we fail to obtain any necessary licenses,
we may be unable to complete product development and commercialization.

We also rely on proprietary technology and information, including
trade secrets, to develop and maintain our competitive position. Although we seek to protect all of our proprietary technology and information, in part by confidentiality agreements with employees, consultants, collaborators, advisors and corporate
partners, these agreements may be breached. We cannot assure you that the parties to these agreements will not breach them or that these agreements will provide meaningful protection or adequate remedies in the event of unauthorized use or
disclosure of our proprietary technology or information. In addition, we routinely grant publication rights to our scientific collaborators. Although we may retain the right to delay publication to allow for the preparation and filing of a patent
application covering the subject matter of the proposed publication, we cannot assure you that our collaborators will honor these agreements. Publication prior to the filing of a patent application would mean that we would lose the ability to patent
the technology outside the United States, and third parties or competitors could exploit the technology. We also may not have adequate remedies to protect our proprietary technology and information, including trade secrets. As a result, third
parties may gain access to our trade secrets and other proprietary technology, or our trade secrets and other proprietary technology or information may become public. In addition, it is possible that our proprietary technology or information will
otherwise become known or be discovered independently by our competitors.

In addition, we may also become subject to claims that we are
using or misappropriating trade secrets of others without having the right to do so. Such claims can result in litigation, which can be expensive, time-consuming and risky to defend.

Litigation and disputes related to intellectual property matters are widespread in the biopharmaceutical industry. Although to date no third party has
asserted a claim of infringement against us, we cannot assure you that third parties will not assert patent or other intellectual property infringement claims against us with respect to our compounds, products, services, technology or other matters
in the future. If they do, we may not prevail and, as a result, we may be subject to significant liabilities to third parties, we may be required to license the disputed rights from the third parties or we may be required to cease using the
technology or developing or selling the compounds or products at issue. We may not be able to obtain any necessary licenses on economically reasonable terms, if at all. Any intellectual property-related claims against us, with or without merit, as
well as claims initiated by us against third parties, may be time-consuming, expensive and risky to defend or prosecute. If we assert a patent against an alleged infringer and the alleged infringer is successful in invalidating the patent, the
protection afforded by the patent is lost.

Our business depends on certain key personnel, the loss of whom could weaken our management team, and on
attracting and retaining qualified personnel.

The growth of our business and our success depends in large part on our ability to
attract and retain key management, research and development, sales and marketing and other operating and administrative personnel. Our key personnel include all of our executive officers and vice presidents, many of whom have very specialized
scientific, medical or operational knowledge regarding one or more of our key products. We have entered into an employment agreement with our chairman and chief executive officer. We have entered into executive severance agreements with certain key
personnel, and have a severance plan that covers our full-time employees. We do not maintain key-person life insurance on any of our employees. The loss of the services of one or more of our key personnel or the inability to attract and retain
additional personnel and develop expertise as needed could limit our ability to develop and commercialize our existing and future product candidates. Such persons are in high demand and often receive competing employment offers.



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Our ability to attract and retain key employees in a competitive recruiting environment is dependent on
our ability to offer competitive compensation packages, which typically include equity compensation such as stock option grants. Changes in laws, regulations, corporate governance standards, listing requirements and accounting treatment regarding
stock options and other equity awards that we grant to employees, as well as to other common compensation features such as loans, may limit or impair our ability to be competitive in attracting and retaining key personnel.

If there is an adverse outcome in our pending litigation, such as the securities class action litigation that has been filed against us, our business may be harmed.

We and certain of our officers and directors are named as defendants in a purported securities class action lawsuit filed in August
2003 in the U.S. District Court for the Northern District of California captioned Crossen v. CV Therapeutics, Inc., et al. The lawsuit is brought on behalf of a purported class of purchasers of our securities, and seeks unspecified damages.
As is typical in this type of litigation, several other purported securities class action lawsuits containing substantially similar allegations were filed against the defendants. In November 2003, the court appointed a lead plaintiff, and in
December 2003, the court consolidated all of the securities class actions filed to date into a single action captioned In re CV Therapeutics, Inc. Securities Litigation. In January 2004, the lead plaintiff filed a consolidated complaint. We
and the other named defendants filed motions to dismiss the consolidated complaint in March 2004. In August 2004, these motions were granted in part and denied in part. The court granted the motions to dismiss by two individual defendants,
dismissing both individuals from the action with prejudice, but denied the motions to dismiss by us and the two other individual defendants. After the motion to dismiss was decided, this action entered the discovery phase, and discovery in the
action is ongoing.

In addition, certain of our officers and directors have been named as defendants in a derivative lawsuit filed in
August 2003 in California Superior Court, Santa Clara County, captioned Kangos v. Lange, et al., which names CV Therapeutics as a nominal defendant. The plaintiff in this action is one of our stockholders who seeks to bring derivative claims
on behalf of CV Therapeutics against the defendants. The lawsuit alleges breaches of fiduciary duty and related claims based on purportedly misleading statements concerning our new drug application for Ranexa. At the appropriate time, we expect to
file a motion to dismiss this lawsuit due to the plaintiffs unexcused failure to make a demand on us before filing the action.

As
with any litigation proceeding, we cannot predict with certainty the eventual outcome of pending litigation, and defending these lawsuits is likely to be costly, time-consuming and uncertain. Accordingly, no accrual has been established for these
lawsuits. In the event of an adverse outcome, our business could be harmed.

Our operations involve hazardous materials, which could subject us to
significant liability.

Our research and development and manufacturing activities involve the controlled use of hazardous materials,
including hazardous chemicals, radioactive materials and pathogens, and the generation of waste products. Accordingly, we are subject to federal, state and local laws governing the use, handling and disposal of these materials. We may have to incur
significant costs to comply with additional environmental and health and safety regulations in the future. We currently do not carry insurance for hazardous materials claims. We do not know if we will be able to obtain insurance that covers
hazardous materials claims on acceptable terms with adequate coverage against potential liabilities, if at all. Although we believe that our safety procedures for handling and disposing of hazardous materials comply in all material respects with
regulatory requirements, we cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident or environmental discharge, we may be held liable for any resulting damages, which may exceed our financial
resources and may materially adversely affect our business, financial condition and results of operations. Although we believe that we are in compliance in all material respects with applicable environmental laws and regulations, there can be no
assurance that we will not be required to incur significant costs to comply with environmental laws and regulations in the future. There can also be no assurance that our operations, business or assets will not be materially adversely affected by
current or future environmental laws or regulations.

Changes in accounting rules for stock-based compensation will adversely affect our operating
results, and may adversely affect our stock price and our competitiveness in the employee marketplace.

We adopted SFAS No. 123
(revised 2004),Share-Based Payment, or SFAS 123R, on January 1, 2006. SFAS 123R requires all share-based payments to employees and directors, including grants of stock options, restricted stock units and stock appreciation rights, to be
recognized in the statement of operations based on their fair values. We expect that our adoption of SFAS 123R will cause our operating expenses and net loss to increase in 2006 compared to 2005, which may adversely affect our stock price. To the
extent that we reduce our use of share-based payments to employees and directors in an effort to reduce our operating expenses and net loss, we may also reduce our ability to recruit, hire and retain employees.



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We are exposed to risks related to foreign currency exchange rates.

A growing amount of our operating expenses are denominated in foreign currencies. Most of our foreign expenses are associated with our ongoing clinical
studies, such as our MERLIN TIMI-36 clinical trial of Ranexa, or the operations of our United Kingdom-based wholly owned subsidiary. We are primarily exposed to changes in exchange rates in Europe and Canada. When the United States dollar weakens
against these currencies, the dollar value of the foreign-currency denominated expense increases, and when the dollar strengthens against these currencies, the dollar value of the foreign-currency denominated expense decreases. Consequently, changes
in exchange rates, and in particular a weakening of the United States dollar, may adversely affect our results of operations. We currently do not hedge against our foreign currency risks.

We may be subject to product liability claims if our products harm people, and we have only limited product liability insurance.

The manufacture and sale of human drugs and other therapeutic products involve an inherent risk of product liability claims and associated adverse
publicity. The approved labeling for Ranexa includes warnings regarding QT prolongation and the risk of arrhythmias and sudden death and tumor promotion. Despite or even because of these warnings, we may be subject to product liability claims in the
future, including if patients on Ranexa die suddenly from arrhythmias or contract cancer. Any product liability claims could have a material negative effect on the market acceptance and sales of our products. We currently have only limited product
liability insurance for clinical trials testing and only limited commercial product liability insurance. We do not know if we will be able to maintain existing or obtain additional product liability insurance on acceptable terms or with adequate
coverage against potential liabilities. This type of insurance is expensive and may not be available on acceptable terms or at all. If we are unable to obtain or maintain sufficient insurance coverage on reasonable terms or to otherwise protect
against potential product liability claims, we may be unable to develop or commercialize our potential products. A successful product liability claim brought against us in excess of our insurance coverage, if any, may require us to pay substantial
amounts. This could adversely affect our cash position and results of operations and could increase the volatility of our stock price.

Our insurance
policies are expensive and protect us only from some business risks, which will leave us exposed to significant, uninsured liabilities.

We do not carry insurance for all categories of risk that our business may encounter. For example, we do not carry earthquake insurance. In the event of a major earthquake in our region, our business could suffer significant and uninsured
damage and loss. We currently maintain general liability, property, auto, workers compensation, products liability, directors and officers, and employment practices insurance policies. We do not know, however, if we will be able to
maintain existing insurance with adequate levels of coverage. For example, the premiums for our directors and officers insurance policy have increased significantly, and this type of insurance may not be available on acceptable terms or
at all. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our cash position and results of operations.

Risk Factors Relating to Our Common Stock and Convertible Debt

Investor confidence and share value may be adversely impacted if
our independent auditors do not provide us with the attestation of the effectiveness of our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission adopted rules requiring public companies to
include in annual reports on Form 10-K an assessment by management of the effectiveness of internal controls over financial reporting. In addition, we are required to have our independent auditors attest to and report on managements assessment
of the effectiveness of our internal controls over financial reporting. This requirement applies to each annual filing on Form 10-K. As we begin commercial operations, we are in the process of designing, implementing, documenting and testing new
internal controls for these operations. In addition, we will become more dependent on the internal controls maintained by our collaborative partners. If we are not successful in implementing these new internal controls for commercial operations, or
if our collaborative partners fail to maintain adequate internal controls on which we rely to prepare our financial statements, our management may determine that our internal controls over financial reporting are not effective. In addition, if our
independent auditors are not satisfied with the effectiveness of our internal controls over financial reporting, including the level at which these controls are documented, designed, operated or reviewed, or if the independent auditors interpret the
requirements, rules or regulations differently than we do, then they may be unable to attest to managements assessment or may be unable to issue an unqualified attestation report. Any of these events could result in an adverse reaction in the
financial marketplace due to a loss of investor confidence in the reliability of our financial statements, which ultimately could negatively impact the market price of our shares, increase the volatility of our stock price and adversely affect our
ability to raise additional funding.



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The market price of our stock has been and may continue to be highly volatile, and the value of an investment in our
common stock may decline.

Within the last 12 months, our common stock has traded between $17.10 and $29.79 per share. The market price
of the shares of our common stock has been and may continue to be highly volatile. Announcements and other events may have a significant impact on the market price of our common stock. We may have no control over information announced by third
parties, such as our corporate partners or our competitors, which may impact our stock price.

Other announcements and events that can
impact the market price of the shares of our common stock include, without limitation:



| |  |  | results of our clinical trials and preclinical studies, or those of our corporate partners or our competitors;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | regulatory actions with respect to our products or our competitors products;
| | - |  | -----------------------------------------------------------------------------



| |  |  | our operating results;
| | - |  | ----------------------



| |  |  | our product sales and product revenues;
| | - |  | ---------------------------------------



| |  |  | achievement of other research or development milestones, such as completion of enrollment of a clinical trial or making a regulatory filing;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adverse developments regarding the safety and efficacy of our products, our product candidates, or third-party products that are similar to our products or our product candidates;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | developments in our relationships with corporate partners;
| | - |  | ----------------------------------------------------------



| |  |  | developments affecting our corporate partners;
| | - |  | ----------------------------------------------



| |  |  | government regulations, reimbursement changes and governmental investigations or audits related to us or to our products;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in regulatory policy or interpretation;
| | - |  | -----------------------------------------------



| |  |  | developments related to our patents or other proprietary rights or those of our competitors;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | changes in the ratings of our securities by securities analysts;
| | - |  | ----------------------------------------------------------------



| |  |  | operating results or other developments that do not meet the expectations of public market analysts and investors;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | purchases or sales of our securities by investors who seek to exploit the volatility of our common stock price;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | market conditions for biopharmaceutical or biotechnology stocks in general; and
| | - |  | -------------------------------------------------------------------------------



| |  |  | general economic and market conditions.
| | - |  | ---------------------------------------

In addition, if
we fail to reach an important research, development or commercialization milestone or result by a publicly expected deadline, even if by only a small margin, there could be a significant impact on the market price of our common stock. In addition,
as we approach the announcement of important news, such as the results of important clinical studies, and as we announce such news, we expect the price of our common stock to be particularly volatile, and negative news would have a substantial
negative impact on the price of our common stock.

The stock market has from time to time experienced extreme price and volume
fluctuations, which have particularly affected the market prices for emerging biotechnology and biopharmaceutical companies, and which have often been unrelated to their operating performance. These broad market fluctuations may adversely affect the
market price of our common stock. In addition, sales of substantial amounts of our common stock in the public market could lower the market price of our common stock.



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Our indebtedness and debt service obligations may adversely affect our cash flow, cash position and stock price.

As of March 31, 2006, we had approximately $399.5 million in long-term convertible debt and aggregate annual debt service
obligations on this debt of approximately $11.0 million. If we issue other debt securities in the future, our debt service obligations and interest expense will increase.

We intend to fulfill our debt service obligations from our existing cash and investments. In the future, if we are unable to generate cash or raise additional cash through financings sufficient to meet these
obligations and need to use existing cash or liquidate investments in order to fund these obligations, we may have to delay or curtail research, development and commercialization programs.

Our indebtedness could have significant additional negative consequences, including, without limitation:



| |  |  | requiring the dedication of a portion of our cash to service our indebtedness and to pay off the principal at maturity, thereby reducing the amount of our expected cash available
for other purposes, including funding our commercialization efforts, research and development programs and other capital expenditures;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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

If we sell shares of our common stock under our equity line of credit arrangement or in other future financings, existing common stockholders will experience
immediate dilution and, as a result, our stock price may go down.

We may from time to time issue additional shares of common stock at a
discount from the current trading price of our common stock. As a result, our existing common stockholders will experience immediate dilution upon the purchase of any shares of our common stock sold at such discount. For example, we have entered
into a common stock purchase agreement with Azimuth Opportunity Ltd. pursuant to which we may sell to Azimuth up to $200.0 million of our common stock, or 9,010,404 shares of our common stock, whichever occurs first, at a discount of 3.8% to 5.8%,
to be determined based on our market capitalization at the start of each sale period. The purchase agreement with Azimuth provides that, at our request, Azimuth will purchase a certain dollar amount of shares, with the exact number of shares to be
determined based on the per share market price of our common stock over the draw-down period for such purchase. Upon each sale of our common stock to Azimuth under the purchase agreement, we have also agreed to pay Reedland Capital Partners, an
Institutional Division of Financial West Group, Member NASD/SIPC, a placement fee equal to one fifth of one percent of the aggregate dollar amount of common stock purchased by Azimuth. Our existing common stockholders will experience immediate
dilution upon the purchase of any shares of our common stock by Azimuth.

In addition, as opportunities present themselves, we may enter
into financing or similar arrangements in the future, including the issuance of debt securities, preferred stock or common stock. If we issue common stock or securities convertible into common stock, our common stockholders will experience dilution.

Provisions of Delaware law and in our charter, by-laws and our rights plan may prevent or frustrate any attempt by our stockholders to replace or
remove our current management and may make the acquisition of our company by another company more difficult.

Our board of directors has
adopted a stockholder rights plan, authorized executive severance benefit agreements for our officers in the event of a change of control, and adopted a severance plan for all non-officer employees in the event of a change of control. We entered
into such severance agreements with these executives. Subsequently, in November 2002 the board approved additional as well as amended executive severance agreements and a severance plan. Our rights plan and these severance arrangements may delay or
prevent a change in our current management team and may render more difficult an unsolicited merger or tender offer.

The following
provisions of our Amended and Restated Certificate of Incorporation, as amended, and our by-laws, may have the effects of delaying or preventing a change in our current management and making the acquisition of our company by a third party more
difficult:



| |  |  | our board of directors is divided into three classes with approximately one third of the directors to be elected each year, necessitating the successful completion of two proxy
contests in order for a change in control of the board to be effected;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of the stockholders and may not be effected by a consent
in writing;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | advance written notice is required for a stockholder to nominate a person for election to the board of directors and for a stockholder to present a proposal at any stockholder
meeting; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | directors may be removed only for cause by a vote of a majority of the stockholders and vacancies on the board of directors may only be filled by a majority of the directors in
office.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, our board of directors has the authority to issue shares of preferred stock without stockholders
approval, which also could make it more difficult for stockholders to replace or remove our current management and for another company to acquire us. We are subject to the provisions of Section 203 of the Delaware General Corporation Law, an
anti-takeover law, which could delay a merger, tender offer or proxy contest or make a similar transaction more difficult. In general, this statute prohibits a publicly held Delaware corporation from engaging in a business combination with an
interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

If any or all of our existing notes and debentures are converted into shares of our common stock, existing common stockholders will experience immediate dilution and,
as a result, our stock price may go down.

Our existing convertible debt is convertible, at the option of the holder, into shares of our
common stock at varying conversion prices, subject to the satisfaction of certain conditions. We have reserved shares of our authorized common stock for issuance upon conversion of our existing convertible notes and convertible debentures. If any or
all of our existing notes and debentures are converted into shares of our common stock, our existing stockholders will experience immediate dilution and our common stock price may be subject to downward pressure. If any or all of our notes and
debentures are not converted into shares of our common stock before their respective maturity dates, we will have to pay the holders of such notes or debentures the full aggregate principal amount of the notes or debentures, as applicable, then
outstanding. Any such payment would have a material adverse effect on our cash position. Alternatively, from time to time we might need to modify the terms of the notes and/or the debentures prior to their maturity in ways that could be dilutive to
our stockholders, assuming we can negotiate such modified terms.

Item 6. Exhibits



|              |  |                                                                                                                                                                                                                
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  |                                                                                                                                                                                                                
|3.1           |  | Amended and Restated Certificate of Incorporation of the Company (Filed as Exhibit 3.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 1999, and
incorporated herein by reference).
|              | 
|3.2           |  | Amendment No. 1 to the Amended and Restated Certificate of Incorporation (Filed as Exhibit 4.2 to the Companys Registration Statement on Form S-3, File No. 333-53206, and incorporated
herein by reference). 
|              | 
|3.3           |  | Restated Bylaws of the Company (Filed as Exhibit 3.5 to the Companys Registration Statement on Form S-1, File No. 333-12675, and incorporated herein by reference).                                           
|              | 
|31.1          |  | Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                              
|              | 
|31.2          |  | Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                              
|              | 
|32.1          |  | Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                               
|              | 
|32.2          |  | Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                               



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized.



|                  |  |                       |  |                                                                              
|----------------- |  | --------------------- |  | -----------------------------------------------------------------------------
|                  |  | CV THERAPEUTICS, INC.
|                  |  |                      
|Date: May 9, 2006 |  | By:                   |  | /s/ LOUIS G. LANGE, M.D., PH.D.                                              
|                  |  |                       |  | Louis G. Lange, M.D., Ph.D.                                                  
|.                 |  |                       |  | Chairman of the Board & Chief Executive Officer (Principal Executive Officer)
|                  |  |                      
|Date: May 9, 2006 |  | By:                   |  | /s/ DANIEL K. SPIEGELMAN                                                     
|                  |  |                       |  | Daniel K. Spiegelman                                                         
|                  |  |                       |  | Chief Financial Officer (Principal Financial and Accounting Officer)         



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