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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|ý                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 
|--------------------------------------------- | ----------------------------------------------------------------------------------------
|For the QUARTERLY PERIOD ended June 30, 2002.
|o                                             | 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)

|Delaware(State of Incorporation) |  | 43-1570294(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

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 ý    No o

The
number of shares of Common Stock, $0.001 par value, outstanding as of August 9, 2002 was 26,395,376.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements Item

CV THERAPEUTICS, INC.  BALANCE SHEETS  (in thousands, except share and per share amounts)

|                                           |                                                                                                                                                                            | December 31,
2001 |         | June 30,
2002 |  
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------- | ------------- | -
|
|ASSETS                                     |                                                                                                                                                                            |                   |         |               |  
|Current assets:                            |                                                                                                                                                                            |                   |         |               |  
|                                           | Cash and cash equivalents                                                                                                                                                  |                   | $       | 80,911        |  
|                                           | Marketable securities                                                                                                                                                      |                   |         | 397,514       |  
|                                           | Other current assets                                                                                                                                                       |                   |         | 9,938         |  
|                                           |                                                                                                                                                                            |                   |         |               |  
|Total current assets                       |                                                                                                                                                                            |                   | 488,363 |               |  
|Notes receivable from related parties      |                                                                                                                                                                            |                   | 951     |               |  
|Property and equipment, net                |                                                                                                                                                                            |                   | 12,889  |               |  
|Other assets                               |                                                                                                                                                                            |                   | 5,041   |               |  
|                                           |                                                                                                                                                                            |                   |         |               |  
|Total assets                               |                                                                                                                                                                            | $                 | 507,244 |               | $
|                                           |                                                                                                                                                                            |                   |         |               |  
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                                                                            |                   |         |               |  
|Current liabilities:                       |                                                                                                                                                                            |                   |         |               |  
|                                           | Accounts payable                                                                                                                                                           |                   | $       | 5,529         |  
|                                           | Accrued liabilities                                                                                                                                                        |                   |         | 10,614        |  
|                                           | Current portion of capital lease obligation                                                                                                                                |                   |         | 779           |  
|                                           | Current portion of deferred revenue                                                                                                                                        |                   |         | 1,029         |  
|                                           |                                                                                                                                                                            |                   |         |               |  
|Total current liabilities                  |                                                                                                                                                                            |                   | 17,951  |               |  
|Capital lease obligation                   |                                                                                                                                                                            |                   | 786     |               |  
|Convertible subordinated notes             |                                                                                                                                                                            |                   | 196,250 |               |  
|Deferred revenue                           |                                                                                                                                                                            |                   | 3,630   |               |  
|Other liabilities                          |                                                                                                                                                                            |                   | 234     |               |  
|                                           |                                                                                                                                                                            |                   |         |               |  
|Total liabilities                          |                                                                                                                                                                            |                   | 218,851 |               |  
|Commitments                                |                                                                                                                                                                            |                   |         |               |  
|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, 25,482,343 and 25,820,998 shares issued and outstanding at December 31, 2001 and June 30, 2002, respectively |                   |         | 494,604       |  
|                                           | Deferred compensation                                                                                                                                                      |                   |         | (194          | )
|                                           | Accumulated deficit                                                                                                                                                        |                   |         | (210,752      | )
|                                           | Cumulative other comprehensive income                                                                                                                                      |                   |         | 4,735         |  
|                                           |                                                                                                                                                                            |                   |         |               |  
|Total stockholders' equity                 |                                                                                                                                                                            |                   | 288,393 |               |  
|                                           |                                                                                                                                                                            |                   |         |               |  
|Total liabilities and stockholders' equity |                                                                                                                                                                            | $                 | 507,244 |               | $
|                                           |                                                                                                                                                                            |                   |         |               |  

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See
accompanying notes

2

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CV THERAPEUTICS, INC.  STATEMENTS OF OPERATIONS  (in thousands, except per share amounts)  (unaudited)

|                                                              |                            | Three months ended June 30, |         | Six months ended June 30, |  
|------------------------------------------------------------- | -------------------------- | --------------------------- | ------- | ------------------------- | -
|
|Revenues:                                                     |                            |                             |         |                           |  
|                                                              | Collaborative research     |                             | $       | 1,014                     |  
|Operating expenses:                                           |                            |                             |        |                           |  
|                                                              | Research and development   |                             |         | 19,479                    |  
|                                                              | General and administrative |                             |         | 2,927                     |  
|                                                              |                            |                             |         |                           |  
|Total operating expenses                                      |                            |                             | 22,406  |                           |  
|                                                              |                            |                             |         |                           |  
|Loss from operations                                          |                            |                             | (21,392 | )                         |  
|Interest income                                               |                            |                             | 4,676   |                           |  
|Interest expense                                              |                            |                             | (2,619  | )                         |  
|Other expense                                                 |                            |                             | (36     | )                         |  
|                                                              |                            |                             |         |                           |  
|Net loss                                                      |                            | $                           | (19,371 | )                         | $
|                                                              |                            |                             |         |                           |  
|Basic and diluted net loss per share                          |                            | $                           | (0.96   | )                         | $
|                                                              |                            |                             |         |                           |  
|Shares used in computing basic and diluted net loss per share |                            |                             | 20,172  |                           |  
|                                                              |                            |                             |         |                           |  

See
accompanying notes

3

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CV THERAPEUTICS, INC.  STATEMENTS OF CASH FLOWS  (in thousands)  (unaudited)

|                                                                            |                                           | Six months ended June 30,     |         
|--------------------------------------------------------------------------- | ----------------------------------------- | ----------------------------- | --------
|
|CASH FLOWS FROM OPERATING ACTIVITIES                                        |                                           |                               |         
|Net loss                                                                    |                                           | $                             | (34,451 
|Adjustments to reconcile net loss to net cash used in operating activities: |                                           |                               |         
|                                                                            | Losses (gains) on the sale of investments |                               |         
|                                                                            | Non cash stock compensation               |                               |         
|                                                                            | Depreciation and amortization             |                               |         
|                                                                            | Change in assets and liabilities:         |                               |         
|                                                                            |                                           | Other current assets          |         
|                                                                            |                                           | Accounts payable              |         
|                                                                            |                                           | Accrued and other liabilities |         
|                                                                            |                                           | Deferred revenue              |         
|                                                                            |                                           |                               |         
|Net cash used in operating activities                                       |                                           |                               | (34,948 
|CASH FLOWS FROM INVESTING ACTIVITIES                                        |                                           |                               |         
|Purchases of investments                                                    |                                           |                               | (175,585
|Maturities of investments                                                   |                                           |                               | 71,972  
|Sales of investments                                                        |                                           |                               | 48,088  
|Capital expenditures                                                        |                                           |                               | (3,590  
|Notes receivable from officers and employees                                |                                           |                               | (148    
|                                                                            |                                           |                               |         
|Net cash used in investing activities                                       |                                           |                               | (59,263 
|CASH FLOWS FROM FINANCING ACTIVITIES                                        |                                           |                               |         
|Payments on capital lease obligations                                       |                                           |                               | (374    
|Net proceeds from issuance of common stock, net of repurchases              |                                           |                               | 102,755 
|                                                                            |                                           |                               |         
|Net cash provided by financing activities                                   |                                           |                               | 102,381 
|                                                                            |                                           |                               |         
|Net increase (decrease) in cash and cash equivalents                        |                                           |                               | 8,170   
|Cash and cash equivalents at beginning of period                            |                                           |                               | 54,028  
|                                                                            |                                           |                               |         
|Cash and cash equivalents at end of period                                  |                                           | $                             | 62,198  
|                                                                            |                                           |                               |         

See
accompanying notes

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CV THERAPEUTICS, INC.  NOTES TO FINANCIAL STATEMENTS

1.    Summary of Significant Accounting Policies



The accompanying financial statements of CV Therapeutics, Inc. have been prepared in accordance with generally accepted accounting principles, 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 six-month period ended June 30, 2002, are not necessarily indicative of the results to be
expected for the entire year ending December 31, 2002, 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 fiscal year ended December 31, 2001, which includes the audited financial statements and the notes thereto.



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



Revenue under our collaborative research arrangements is recognized based on the performance requirements of the contract. Amounts received under such
arrangements consist of up-front license and periodic milestone payments. 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 periodically reevaluated. The reevaluation of
the performance period may shorten or lengthen the period during which the deferred revenue is recognized. We evaluate the appropriate period based on research progress attained and events such as
changes in the regulatory and competitive environment. Payments received related to substantive, at-risk milestones are recognized upon achievement of the scientific or regulatory event
specified in the underlying agreement. Payments received for research activities are recognized as the related research effort is performed.



Net loss per share is computed using the weighted average number of common shares outstanding. Common equivalent shares have been excluded from the computation as
their effect is antidilutive.

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2.    Comprehensive Loss

The components of comprehensive loss for the periods ended June 30, 2001, and June 30, 2002, are as follows:

|                                        |  | Three months ended June 30, |         | Six months ended June 30, |  
|--------------------------------------- |  | --------------------------- | ------- | ------------------------- | -
|
|
|Net loss                                |  | $                           | (19,371 | )                         | $
|Unrealized gains (losses) on securities |  |                             | (851    | )                         |  
|                                        |  |                             |         |                           |  
|Comprehensive loss                      |  | $                           | (20,222 | )                         | $
|                                        |  |                             |         |                           |  

3.    Equity

On March 28, 2002, we sold 209,645 shares of our common stock for proceeds of $8.4 million under the financing commitment from Acqua Wellington
North American Equities Fund, Ltd., after a discount based on our market capitalization in accordance with the terms of the arrangement.

On
August 9, 2002, we sold 561,037 shares of our common stock for proceeds of $12.5 million under the financing commitment from Acqua Wellington, after a discount based on
our market capitalization in accordance with the terms of the arrangement. As of August 14, 2002, we have issued 1,932,555 shares of common stock in exchange for aggregate net proceeds of
$79.9 million under this arrangement.

4.    Commitments

We lease two facilities under noncancellable operating leases. The lease for one facility expires in April 2012. The lease for the second facility
incorporates a sublease that expires in February 2005, and a master lease that expires in April 2012.

In
addition, we have leased certain fixed assets under four capital leases with expiration dates through 2004.

During
the quarter ended June 30, 2002, we entered into certain manufacturing-related agreements in connection with the future commercial production of ranolazine.

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Future
minimum payments under these commitments are as follows:

|                                       |                     | Manufacturing
Agreements |        | Operating
Leases |   | Capital
Leases |       
|-------------------------------------- | ------------------- | ------------------------ | ------ | ---------------- | - | -------------- | ------
|
|Year ending December 31,               |                     |                          |        |                  |   |                |       
|                                       | 2002                |                          | $      | 5,350            |   | $              | 10,928
|                                       | 2003                |                          |        | 1,725            |   |                | 11,918
|                                       | 2004                |                          |        | 2,000            |   |                | 12,298
|                                       | 2005                |                          |        | 2,250            |   |                | 9,795 
|                                       | 2006                |                          |        | 2,250            |   |                | 13,256
|                                       | 2007 and thereafter |                          |        | 2,250            |   |                | 76,019
|                                       |                     |                          |        |                  |   |                |       
|Total minimum payments                 |                     | $                        | 15,825 |                  | $ | 134,214        |       
|                                       |                     |                          |        |                  |   |                |       
|Less amount representing interest      |                     |                          |        |                  |   |                |       
|                                       |                     |                          |        |                  |   |                |       
|Present value of future lease payments |                     |                          |        |                  |   |                |       
|Less current portion                   |                     |                          |        |                  |   |                |       
|                                       |                     |                          |        |                  |   |                |       
|Long-term portion                      |                     |                          |        |                  |   |                |       
|                                       |                     |                          |        |                  |   |                |       

Under
the manufacturing-related agreements, additional payments above the specified minimums will be required if the FDA approves ranolazine, and in connection with the manufacture of ranolazine.

5.    Convertible Subordinated Notes

In March 2000, we completed a private placement of $196,250,000 aggregate principal amount of 4.75% convertible subordinated notes due March 7,
2007. The notes are unsecured and subordinated in right of payment to all existing and future senior debt as defined in the indenture governing the notes. We pay interest semi-annually on
March 7th and September 7th of each year. The conversion rate is 15.66 shares of common stock per $1,000 principal amount of notes. This is equivalent to a
conversion price of $63.84 per share.

The
conversion price is subject to adjustment upon the occurrence of certain events, including the payment of dividends or distributions to our stockholders in shares of our common
stock, stock splits, the issuance of rights or warrants to all of our stockholders which provide for a subscription or exercise price that is below the then current market price of our common stock,
the distribution to all of our stockholders of shares of any class of our capital stock, evidence of indebtedness, cash or other assets, the distribution of cash to all of our stockholders during any
twelve-month period that, in the aggregate, exceeds 10% of the aggregate market value of our then outstanding common stock, and, in certain circumstances in connection with an expired tender or
exchange offer made by us, the payment to our stockholders of an aggregate consideration that exceeds 10% of the aggregate market value of our then outstanding common stock.

We
have reserved 3,074,091 shares of authorized common stock for issuance upon conversion of the notes. We may redeem the notes on or after March 7, 2003, and prior to maturity,
at a premium, or earlier if our stock price reaches certain defined levels. We incurred issuance costs related to this private placement of approximately $6,701,000, which have been recorded as other
assets and are being amortized to interest expense over the seven-year life of the notes.

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

This Management's Discussion and Analysis of Financial Condition and Results of Operations and other parts of this Report contain forward-looking statements that
involve risks and uncertainties. These statements relate to future events or our future clinical or product development or financial

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performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of those terms and other comparable terminology. If one or more of these risks or uncertainties materialize, or if any underlying assumptions prove incorrect,
our actual results, performance or achievements may vary materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Our actual results
may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors" as
well as such other risks and uncertainties detailed in our other Securities and Exchange Commission reports and filings.

Overview

CV Therapeutics is a biopharmaceutical company engaged in the discovery, development and commercialization of new small molecule drugs for the treatment of
cardiovascular diseases. Since our inception in December 1990, substantially all of our resources have been dedicated to research and development. To date, we have not generated any product
revenues and do not expect to generate any product revenues until we receive marketing approval of one of our products, if at all. As of June 30, 2002, we had an accumulated deficit of
$264.3 million. We expect our sources of revenues, if any, to consist of payments under corporate partnerships and interest income until one of our products receives marketing approval, if at
all. The process of developing and commercializing our products requires significant research and development, preclinical testing and clinical trials, as well as marketing approvals. These
activities, together with our general and administrative expenses, are expected to result in substantial operating losses for the foreseeable future. We will not receive product revenues unless and
until we or our collaborative partners complete clinical trials, obtain marketing approval, and successfully commercialize one or more of our products.

We
are subject to risks common to biopharmaceutical companies, including risks inherent in our research and development efforts, preclinical testing, clinical trials, uncertainty of
regulatory and marketing 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 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

We believe the only critical accounting policy which presently involves our more significant judgments and estimates used in the preparation of our financial
statements is our policy regarding revenue recognition.

Revenue
under our collaborative research arrangements is recognized based on the performance requirements of the contract. Amounts received under such arrangements consist of
up-front license and periodic milestone payments. 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 periodically reevaluated. The reevaluation of the performance period may
shorten or lengthen the period during which the deferred revenue is recognized. We evaluate the appropriate period based on research progress attained and events such as changes in the regulatory and
competitive environment. Payments received related to substantive, at-risk milestones are recognized upon achievement of the scientific or

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regulatory event specified in the underlying agreement. Payments received for research activities are recognized as the related research effort is performed.

Results of Operations

Collaborative Research Revenues.Collaborative research revenues increased to $1.1 million for the quarter ended
June 30, 2002, compared to $1.0 million for the quarter ended June 30, 2001. Collaborative research revenues decreased to $2.3 million for the six-month period
ended June 30, 2002, compared to $2.8 million for the six-month period ended June 30, 2001. The increase for the quarter ended June 30, 2002, compared to the
same period in 2001, was due to greater reimbursement of certain development costs for CVT-3146 related to our collaboration with Fujisawa Healthcare, Inc. The decrease for the
six-month period ended June 30, 2002, compared with the six-month period ended June 30, 2001, is due to a $1.0 million milestone payment recognized in
March 2001 from Biogen, Inc., earned in conjunction with their initiation of a Phase I oral development program for Adentri, partially offset by greater reimbursement during
2002 of certain development costs related to our collaboration with Fujisawa.

Research and Development Expenses.Research and development expenses increased to $29.5 million for the quarter ended
June 30, 2002, compared to $19.5 million for the quarter ended June 30, 2001. Research and development expenses increased to $50.3 million for the six-month
period ended June 30, 2002, compared to $36.3 million for the six-month period ended June 30, 2001. The increases for both the quarter and six-month
periods, compared to the same periods in 2001, were primarily due to expenses
for the ranolazine program related to NDA filing, pre-commercialization activities, and manufacturing-related agreements along with hiring additional employees to support our research
programs and expenses associated with our tecadenoson (CVT-510) and CVT-3146 programs. We expect research and development expenses may increase in the future as we further
expand product development efforts, clinical trials and pre-commercialization efforts.

Management
categorizes research and development expenditures into amounts related to pre-clinical research and amounts related to three clinical development programs, listed
in rank order of estimated expenditures for all periods discussed below: ranolazine, tecadenoson (CVT-510) and CVT-3146. During the quarter ended June 30, 2002, we
incurred approximately 86% of our research and development expenditures, or approximately $25.5 million, in connection with clinical development programs, and the remaining 14%, or
$4.0 million, in connection with preclinical research programs. By comparison, during the quarter ended June 30, 2001, we incurred approximately 81% of our research and development
expenditures, or $15.7 million, in connection with clinical development programs and the remaining 19% of our research and development expenditures, or $3.8 million, in connection with
preclinical research programs. During the six-month period ended June 30, 2002, we incurred 85% of our research and development expenditures, or approximately $42.9 million,
in connection with clinical development programs, and the remaining 15% of our research and development expenditures, or $7.4 million, in connection with preclinical research programs. For the
same period ended June 30, 2001, we incurred 83% of our research and development expenditures, or $30.0 million, in connection with clinical projects, and the remaining 17% of our
research and development expenditures, or $6.3 million, in connection with preclinical research programs. We expect that clinical development programs will represent approximately the same
portion of our overall research and development expenditures for the year as they have for the first six months of 2002.

General and Administrative Expenses.General and administrative expenses increased to $4.0 million for the quarter
ended June 30, 2002, compared to $2.9 million for the quarter ended June 30, 2001. General and administrative expenses increased to $8.2 million for the
six-month period ended June 30, 2002, compared to $5.2 million for the six-month period ended June 30, 2001. The increases for the quarter and
six-month periods ended June 30, 2002, compared to the same periods in 2001, were due to fees paid in connection with outside consulting services and additional personnel and

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facility expenses to support our increased research and development efforts. We expect general and administrative expenses to continue to increase in the future in line with our research, development
and commercialization activities.

Interest Income.Interest income was $3.3 million for the quarter ended June 30, 2002, compared to
$4.7 million for the quarter ended June 30, 2001. Interest income was $7.9 for the six-month period ended June 30, 2002, compared with $9.6 million for the
six-month period ended June 30, 2001. The decreases for both the quarter and six-month periods ended June 30, 2002, compared to the same periods in 2001, were due
to realized losses associated with certain securities and lower average interest rates, partially offset by higher average investment balances due to the proceeds received from our
follow-on equity offerings in June 2001 and December 2001. We expect that interest income will fluctuate with average investment balances and market interest rates.

Interest Expense.Interest expense was $2.6 million for the quarter ended June 30, 2002, and
$5.2 million for the six-month period ended June 30, 2002, which was consistent with interest expense for the same periods in 2001. Our subordinated convertible notes account
for $2.3 million of the interest expense in each quarter. We expect that interest expense will fluctuate with average loan balances.

Liquidity and Capital Resources

We have financed our operations since inception primarily through private placements and public offerings of debt and equity securities, equipment and leasehold
improvement financing, other debt financing and payments under corporate collaborations. For at least the next 24 months, operations can be funded from our cash, cash equivalents and marketable
securities, which totaled $431.7 million as of June 30, 2002.

In
March 2000, we entered into a purchase agreement pursuant to which we sold to certain purchasers $196.3 million in aggregate principal amount of convertible subordinated
notes. The offering of the notes was made to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended. Interest on the notes accrues at a rate of 4.75% per year,
subject to adjustment in certain circumstances. The notes will mature on March 7, 2007, and are convertible into shares of our common stock at a conversion price of $63.84 per share, subject to
adjustment in certain circumstances, as more fully described in Note 5 to our financial statements. We may, at our option, redeem the notes at any time after March 7, 2003, or earlier if
our stock price reaches certain defined levels.

In
July 2000, we entered into a collaboration agreement with Fujisawa to develop and market second generation pharmacologic cardiac stress agents. In connection with the signing
of this agreement, we received $10.0 million from Fujisawa consisting of an up-front payment and the purchase of our common stock. In September 2001, we received a
$2.0 million milestone payment under this collaboration for initiating a Phase II clinical trial for CVT-3146.

In
August 2000, we entered into a financing arrangement with Acqua Wellington to purchase our common stock. Under the purchase agreement, as presently amended, we may sell a total
of $149.0 million of our common stock to Acqua Wellington through December 2003. The purchase agreement provides that from time to time, in our sole discretion, we may present Acqua
Wellington with draw down notices constituting offers to sell our common stock for specified total proceeds over a specified trading period. Once presented with a draw down notice, Acqua Wellington is
required to purchase a pro rata portion of shares of our common stock as allocated on each trading day during the trading period on which the daily volume weighted average price for our common stock
exceeds a threshold price that we determine and state in the draw down notice. The threshold price we set may not be below $20 per share without Acqua Wellington's consent. The per share price then
equals the daily volume weighted average price on each date during the pricing period, less a 4% to 6% discount to be determined based on our market capitalization at the start of the draw down
period, unless we

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agree with Acqua Wellington to a different discount. However, if the daily volume weighted average price falls below the threshold price on any day in the pricing period, Acqua Wellington is not
required to purchase the pro rata portion of shares allocated to that day, but can elect to buy that pro rata portion of shares at the threshold price less the applicable discount.

Further,
if during a draw down pricing period we enter into an agreement with a third party to issue common stock or securities convertible into common stock (excluding stock or options
granted pursuant to our stock option, stock purchase or shareholder rights plans, common stock or warrants issued in connection with licensing agreements and/or collaborative agreements and warrants
issued in connection with equipment financings) at a net discount to the then current market price, if we issue common stock with warrants (other than provided in the prior parenthetical), or if we
implement a mechanism for the reset of the purchase price of our common stock below the then current market price, then Acqua Wellington can elect to purchase the shares so requested by us in the draw
down notice at the price established pursuant to the prior paragraph, to purchase such shares at the third party's price, net of discount or fees, or to not purchase our common stock during that draw
down pricing period.

The
purchase agreement also provides that from time to time, in our sole discretion, we may grant Acqua Wellington a right to exercise one or more call options to purchase additional
shares of our common stock during a drawn down pricing period, in an amount and for a threshold price that we determine and state in the draw down notice. However, the total call amount for any given
draw down cannot exceed a specified maximum amount, and the amount of proceeds we may receive by exercise of a call option for any given trading day is also limited. If Acqua Wellington exercises the
call option, we will issue and sell the shares of our common stock subject to the call option at a price equal to the greater of the daily volume weighted average price of our common stock on the day
Acqua Wellington exercises its call option, or the threshold price for the call option that we have determined, less a 4% to 6% discount (based on our market capitalization).

The
combined total value of shares that we may sell to Acqua Wellington through draw downs and call option exercises under the arrangement may not exceed $149.0 million. As of
August 14, 2002, we have issued 1,932,555 shares of common stock in exchange for aggregate net proceeds of $79.9 million under this arrangement, including $8.4 million in the
quarter ended March 31, 2002, and $12.5 million on August 9, 2002.

In
June 2001, we sold 2,020,203 shares of our common stock in an underwritten public offering at a price to the public of $49.50 per share pursuant to a prospectus supplement
under a shelf registration statement, resulting in net proceeds of $95.9 million, after deducting the underwriting expenses and commissions and other offering expenses. In December 2001,
we sold 2,875,000 shares of our common stock in an underwritten public offering at a price to the public of $52.50 per share pursuant to a prospectus supplement under a shelf registration statement,
resulting in net proceeds of $143.3 million, after deducting the underwriting expenses and commissions and other offering expenses. We are using and intend to continue to use the net proceeds
from these sales for general corporate purposes, which may include funding research, development and product manufacturing, development of clinical trials, preparation and filing of a new drug
application, product commercialization, increasing our working capital, reducing indebtedness, acquisitions of or investments in businesses, products or technologies that are complementary to our own,
and capital expenditures.

Cash,
cash equivalents and marketable securities at June 30, 2002 totaled $431.7 million compared to $478.4 million at December 31, 2001. The decrease was due
to utilizing $46.6 million to fund operations, $4.9 million for capital expenditures and a decrease of $2.6 million in the market value of our investment portfolio, due to market
and interest rate volitility, partially offset by $10.0 million raised from the issuance of our common stock, including $8.4 million of common stock issued pursuant to our arrangement
with Acqua Wellington.

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Net
cash used in operations for the six months ended June 30, 2002, was $46.6 million compared to $34.9 million for the six months ended June, 2001. The increase was
primarily due to increased research, development and commercialization efforts.

As
of June 30, 2002, we have invested $26.3 million in property and equipment, with the rate of investment having increased in line with increased research, development and
commercialization efforts and as we expand our facilities. We expect to continue to make investments in property and equipment to support our growth.

Under
our license agreement with Syntex (U.S.A.) relating to ranolazine, we paid an initial license fee. In addition, we are obligated to make certain milestone payments to Syntex, upon
receipt of the first and second product approvals for ranolazine in any of certain major market countries (consisting of France, Germany, Italy, the United States and the United Kingdom). Unless the
agreement is terminated, we will pay Syntex, on or before March 31, 2005, $7.0 million plus interest accrued thereon from the date of approval until the date of payment. Unless the
agreement is terminated, if the second product approval in one of the major market countries occurs before May 1, 2004, we will pay Syntex, on or before March 31, 2006,
$7.0 million plus interest accrued thereon from the date of approval until the date of payment, and if the second such product approval occurs after May 1, 2004 but before
March 31, 2006, we will pay Syntex, on or before March 31, 2006, $7.0 million plus interest accrued thereon from May 1, 2004, until the date of payment. Unless the
agreement is terminated, if the second product approval in one of the major market countries has not occurred by March 31, 2006, we will pay Syntex $3.0 million on or before
March 31, 2006, and if we receive the second product approval after March 31, 2006, we will pay Syntex $4.0 million within thirty (30) days after the date of such second
product approval.

We
may require substantial additional funding in order to complete our research and development activities and commercialize any potential products. We currently estimate that our
existing resources and projected interest income, including the proceeds from our offering of convertible subordinated notes and common stock financings, will enable us to maintain our current and
planned operations for at least the next 24 months. However, we cannot assure you that we will not require 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 scientific progress in our research and development 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 corporate 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 or development 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 securities to raise additional funds, substantial dilution to existing
stockholders may result.

Contractual Obligations and Significant Commercial Commitments

During the quarter ended June 30, 2002, we entered into certain manufacturing-related agreements in connection with the future commercial production of
ranolazine.

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The following summarizes our contractual obligations for the fiscal years ending December 31, 2002, through December 31, 2006, and thereafter:

|                                 |  | 2002 |        | 2003 |   | 2004   |  | 2005 |        | 2006 |   | Thereafter |  | Total
|-------------------------------- |  | ---- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | -----
|
|Convertible subordinated notes   |  | $    | 9,322  |      | $ | 9,322  |  | $    | 9,322  |      | $ | 9,322      |  | $    
|Capital leases                   |  |      | 885    |      |   | 448    |  |      | 410    |      |   |           |  |      
|Operating leases                 |  |      | 10,928 |      |   | 11,918 |  |      | 12,298 |      |   | 9,795      |  |      
|Manufacturing-related agreements |  |      | 5,350  |      |   | 1,725  |  |      | 2,000  |      |   | 2,250      |  |      
|                                 |  |      |        |      |   |        |  |      |        |      |   |            |  |      
|                                 |  | $    | 26,485 |      | $ | 23,413 |  | $    | 24,030 |      | $ | 21,367     |  | $    
|                                 |  |      |        |      |   |        |  |      |        |      |   |            |  |      

Under
the manufacturing-related agreements, additional payments above the specified minimums will be required if the FDA approves ranolazine, and in connection with the manufacture of
ranolazine.

Risk Factors

Our product candidates will take at least several years to develop, and we cannot assure you that we will successfully develop, market and
manufacture these products.

Since
our inception in 1990, we have dedicated substantially all of our resources to research and development. We do not have any marketed products, and we have not generated any product
revenue. Because all of our potential products are in research, preclinical or clinical development, we will not realize product revenues for at least several years, if at all.

We
have not applied for or received regulatory approval in the United States or any foreign jurisdiction for the commercial sale of any of our products. All of our product candidates are
either in clinical trials under an Investigational New Drug, or IND, or applicable foreign authority submission, or are in preclinical research and development. We have not submitted an NDA to the FDA
or an equivalent application to any other foreign regulatory authorities for any of our product candidates, and the products have not been determined to be safe or effective in humans for their
intended uses.

Conducting
clinical trials is a lengthy, time-consuming and expensive process. 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
expense for, and devote a significant amount of time to, preclinical testing and clinical trials.

Drug
discovery methods based upon molecular cardiology are relatively new. We cannot be certain that these methods will lead to commercially viable pharmaceutical products. In addition,
some of our
compounds within our adenosine receptor research, metabolism, atherosclerosis and cell cycle inhibition programs are in the early stages of research and development. We have not submitted IND
applications or commenced clinical trials for these new compounds. We cannot be certain when these clinical trials will commence, if at all. Because these compounds are in the early stages of product
development, we could abandon further development efforts before they reach clinical trials.

We
cannot be certain that any of our product development efforts will be completed or that any of our products will be shown to be safe and effective. Regulatory authorities have broad
discretion to interpret safety and efficacy data in making approval and other regulatory decisions. Even if we believe that a product is safe and effective, we cannot assure you that regulatory
authorities will interpret the data the same way and we may not obtain the required regulatory approvals. Furthermore, we may not be able to manufacture our products in commercial quantities or market
any products successfully.

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If we are unable to satisfy the regulatory requirements for our clinical trials, we will not be able to commercialize our drug candidates.

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

Many
factors could delay completion of our clinical trials, including:



For
example, our first Phase III clinical trial of ranolazine, called Monotherapy Assessment of Ranolazine In Stable Angina, or MARISA, had challenging enrollment criteria. As a result,
enrollment for this trial was slower than anticipated.

In
addition, data obtained from preclinical and clinical activities are susceptible to different interpretations, which could delay, limit or prevent regulatory approval of our products.
For example, some drugs that prolong the electrocardiographic QT interval carry an increased risk of serious cardiac rhythm disturbances, or arrhythmias, while other drugs that prolong the QT interval
do not carry an increased risk of arrhythmias. Small but statistically significant increases in the QT interval were observed in clinical trials of ranolazine. However, other clinical and preclinical
data do not suggest that ranolazine significantly pre-disposes patients to arrhythmias. Regulatory authorities such as the FDA may interpret these data differently, which could delay,
limit or prevent regulatory approval of ranolazine.

Delays
in approvals or rejections of marketing applications may be based upon many factors, including regulatory requests for additional analyses, data and/or studies, regulatory
questions regarding data and results, and/or changes in regulatory policy during the period of product development. For example, the initial clinical trials with ranolazine used an immediate release
formulation of ranolazine, while a sustained release formulation, which is the formulation intended for commercial use, was used in the Phase III MARISA and CARISA trials and most other clinical
trials conducted after 1997. Consequently, the NDA for ranolazine will contain data from trials using two different formulations, which is subject to interpretation by the FDA. An unfavorable
interpretation of these combined data could delay or prevent regulatory approval. Furthermore, regulatory attitudes towards the data and results required to demonstrate safety and efficacy change over
time and can be affected by many factors, including the emergence of new information (including on other products) and agency funding, staffing and leadership. We cannot be sure whether future changes
to the regulatory environment will be favorable or unfavorable to our business prospects.

We
may be unable to maintain our proposed schedules for IND applications and clinical protocol submissions to the FDA, initiations of clinical trials and completions of clinical trials,
as a result of FDA regulatory action or other factors such as lack of funding or complications that may arise in any phase of the clinical trial program.

Furthermore,
even if our clinical trials occur on schedule, the 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 approvals. For example, in November 1995, based on unfavorable efficacy data from a Phase II trial, we terminated a prior
development program.

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If we are unable to satisfy governmental regulations relating to the development of our drug candidates, we may be unable to obtain or maintain necessary
regulatory approvals to commercialize our products.

The
research, testing, manufacturing and marketing of drug products are subject to extensive regulation by numerous regulatory authorities in the United States and other countries.
Failure to comply with FDA or other applicable regulatory requirements may subject a company to administrative or judicially imposed sanctions. These include:



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 expensive and uncertain. We may not be able to maintain our proposed schedules for the submission of an NDA for any of
our products. We also cannot guarantee that any of our products under development will be approved for marketing by the FDA or corresponding foreign regulatory authorities. Even if marketing approval
of a product is granted, we cannot be certain that we will be able to obtain the labeling claims necessary or desirable for the promotion of the product.

In
addition, the regulatory environment in which our regulatory submissions may be reviewed changes over time. For example, average review times at the FDA for marketing approval
applications have fluctuated substantially over the last 10 years, with review times for marketing applications for new chemical entities having recently increased after having declined
previously. In addition, review times at
the FDA can be impacted by a variety of factors, including federal budget and funding levels and statutory and regulatory changes.

Even
if we obtain a marketing approval, we may be required to undertake post-marketing trials. In addition, identification of side effects or potential safety issues after a
drug is on the market or the occurrence of manufacturing-related problems could cause or require subsequent withdrawal of approval, reformulation of the drug, additional preclinical testing or
clinical trials, changes in labeling of the product, and/or additional regulatory approvals.

If
we receive a marketing approval, we will also be subject to ongoing FDA obligations and continued regulatory review, such as continued safety reporting requirements, and we are likely
to be subject to FDA post-marketing obligations. In addition, we or our third party manufacturers will be required to adhere to stringent federal regulations setting forth current good
manufacturing practices for pharmaceuticals, known as cGMP regulations. 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.

If
we receive marketing approval and if any of our products or services become reimbursable by a government health care program, such as Medicare or Medicaid, we will become subject to
certain federal and state health care fraud and abuse and reimbursement laws. These laws include the federal

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"Anti-Kickback Statute," "False Claims Act," "Prescription Drug Marketing Act," and "Physician Self-Referral Law," and their state counterparts. If and when we become subject
to such laws, our arrangements with third parties, including health care providers, physicians, vendors, distributors, wholesalers and Innovex, will need to comply with these laws, as applicable. We
do not know whether our existing or future arrangements will be found to be compliant. Violations of these statutes could result in substantial criminal and civil penalties and exclusion from
governmental health care programs.

Our products, even if approved by the FDA or foreign regulatory agencies, may not be accepted by physicians, insurers or patients.

If
any of our products, after receiving FDA or foreign regulatory approvals, fail to achieve market acceptance, our ability to become profitable in the future will be adversely affected.
We believe that market acceptance will depend on our ability to provide acceptable evidence of safety, efficacy and cost effectiveness. In addition, we believe that the level of market acceptance will
depend in part on our ability to obtain favorable labeling claims that will not limit product usage or our marketing, promotional and sales programs, the effectiveness of our marketing strategy and
the availability of government and private insurance reimbursement for our products.

We have no marketing or sales experience, and if we are unable to enter into or maintain collaborations with marketing partners or if we are unable to develop our
own sales and marketing capability, we may not be successful in commercializing our products.

We
currently have no sales or distribution capability and only limited marketing capability. As a result, we depend on collaborations with third parties, such as Innovex, Biogen and
Fujisawa, which have established distribution systems and direct sales forces. To the extent that we enter into co-promotion or other licensing arrangements, our revenues will depend upon
the efforts of third parties, over which we may have little control. For instance, we have entered into a sales and marketing services agreement with Innovex with respect to ranolazine. Innovex will
market and sell ranolazine in the United States using a dedicated sales force if and when the FDA approves the marketing of ranolazine. Our successful commercialization of ranolazine depends on
Innovex performing their contractual obligations, and the level of success will depend at least in part on Innovex's efforts. Similarly, Biogen is responsible for worldwide marketing and sales of any
product that results from the Adentri program, and Fujisawa is responsible for marketing and sales of CVT-3146 in North America.

If
we are unable to reach and maintain agreement with one or more pharmaceutical companies or collaborative partners, we may be required to market our products directly. We may elect to
establish our own specialized sales force and marketing organization to market our products to cardiologists. In order to do this, we would have to develop a marketing and sales force with technical
expertise and with supporting distribution capability. Developing a marketing and sales force is expensive and time consuming and could delay any product launch. We cannot be certain that we will be
able to develop this capacity.

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 obtain and maintain these arrangements, the development 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.

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The
collaborative arrangements that we may enter into in the future may place responsibility on the collaborative partner for preclinical testing and clinical trials, manufacturing and
preparation and submission of applications for regulatory approval of potential pharmaceutical products. We cannot control the amount and timing of resources that our collaborative partners devote to
our programs. If a
collaborative partner fails to successfully develop or commercialize any product, product launch would be delayed. In addition, our collaborators may pursue competing technologies or product
candidates.

Under
our collaborative arrangements, we or our collaborative partners may also have to meet performance milestones. If we fail to meet our obligations under our collaborative
arrangements, our collaborators could terminate their arrangements or we could lose our rights to the compounds under development. For example, under our agreement with Innovex, we are required to
launch the product by a specific date. If we fail to reach this milestone, Innovex will no longer be obligated to provide sales and marketing services for ranolazine. Under our agreement with Biogen,
in order for us to receive development milestone payments, Biogen must meet development milestones. Under our license agreement with Syntex for ranolazine, we are required to use commercially
reasonable efforts to develop and commercialize ranolazine for angina, and have related milestone payment obligations. Under our agreement with Fujisawa, we are responsible for development activities
and must meet development milestones in order to receive development milestone payments.

In
addition, collaborative arrangements in our industry are extremely complex, particularly with respect to intellectual property rights. Disputes may arise in the future with respect to
the ownership of rights to any technology developed with or by third parties. These and other possible disagreements between us and our collaborators could lead to delays in the collaborative
research, development or commercialization of product candidates. These disputes could also result in litigation or arbitration, which is time consuming, expensive and uncertain.



We cannot be certain that we will ever achieve and sustain profitability. Since our inception, we have been engaged in research and development activities. We
have generated no product revenues. As of June 30, 2002, we had an accumulated deficit of $264.3 million. The process of developing and commercializing our products requires significant
additional research and development, preclinical testing and clinical trials, as well as regulatory approvals. These activities, together with our general and administrative expenses, are expected to
result in operating losses for the foreseeable future.

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

We
may require substantial additional funding in order to complete our research and development activities and commercialize any of our products. In the past, we have financed our
operations primarily through the sale of equity and debt securities, payments from our collaborators, equipment and leasehold improvement financing and other debt financing. We have generated no
product revenue and do not expect to do so for at least several years. We anticipate that our existing resources and projected interest income will enable us to maintain our current and planned
operations for at least the next 24 months. However, we may require additional funding prior to that time.

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:



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Our
future capital requirements will depend on many factors, including:



If
additional funds are raised by issuing equity securities, substantial dilution to existing stockholders may result. There may be additional factors that could affect our need for
additional financing. Many of these factors are not within our control.

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

The
pharmaceutical and biopharmaceutical industries, and the market for cardiovascular drugs in particular, are intensely competitive. If our products receive marketing approvals, they
will often compete with well-established, proprietary and generic cardiovascular therapies that have generated substantial sales over a number of years. Many of these therapies are
reimbursed from government health administration authorities and private health insurers.

In
addition, we are aware of companies that are developing products that may compete in the same markets as our products. 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 obtain approvals from the FDA more rapidly than
either we or our corporate partners are able to achieve. Competitors may also develop products that are safer or more effective than those under development or proposed to be developed by us and our
corporate partners. In addition, research and development by others could render our technology or our products obsolete or non-competitive.

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.

Our
success will depend to a significant degree on our ability to:



In
2001, we received an issued patent from the U.S. Patent and Trademark Office for a method of using ranolazine sustained release formulations, including the formulation used in the
MARISA and CARISA trials, for the treatment of chronic angina. In 2002, the scope of these claims was broadened to cover a wider range of sustained release formulations. However, in general we cannot
be certain that patents will issue from any of our pending or future patent applications, that any issued patent will not

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be lost through an interference or opposition proceeding, reexamination request, infringement litigation or otherwise, that any issued patent will be sufficient to protect our technology and
investments, or that we will be able to obtain extensions of patents beyond the initial term.

Although
United States patent applications 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 29, 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 technology. There may be third party patents,
patent applications, trademarks and other intellectual property relevant to our products, services and technology which are not known to us and that block or compete with our compounds, products,
services or processes.

Competitors
may have filed applications for, or may have received patents or trademarks and may obtain additional patents, trademarks and proprietary rights relating to, compounds,
products, services or processes that block or compete with ours. We may have to participate in interference proceedings declared by the 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. 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 third parties. Litigation and interference proceedings, even if they are successful, are expensive to pursue, and we could use a
substantial amount of our limited financial resources in either case.

Just
as it is important to protect our proprietary rights, we also must not infringe patents issued to competitors or breach the licenses that might cover technology used in our
potential products. If our competitors own or have rights to technology that we need in our product development efforts, we will need to obtain a license to those rights. We cannot assure you that we
will be able to obtain such
licenses on economically reasonable terms. If we fail to obtain any necessary licenses, we may be unable to complete product development.

We
also rely on trade secrets to develop and maintain our competitive position. Although we protect our proprietary technology 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. In that event, we may not have adequate remedies for any breach.
As a result, third parties may gain access to our trade secrets, and our trade secrets and confidential technology may become public. In addition, it is possible that our trade secrets will otherwise
become known or be discovered independently by our competitors.

Patent
litigation is widespread in the biopharmaceutical industry. Although 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 products or technology or other matters. If they do, we may not prevail and, as a result, may be
subject to significant liabilities to third parties or may be required to license the disputed rights from the third parties or cease using the technology. We may not be able to obtain any necessary
licenses on reasonable terms, if at all. Any such claims against us, with or without merit, as well as claims initiated by us against third parties, can be time-consuming and expensive to
defend or prosecute.

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

We
do not currently operate manufacturing facilities for clinical or commercial production of our products under development. We have no experience in manufacturing and currently lack
the resources

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or capability to manufacture any of our products on a clinical or commercial scale. As a result, we are dependent on corporate partners, licensees or other third parties for the manufacturing of
clinical and commercial scale quantities of our products.

For
example, we have entered into agreements with third party manufacturers for clinical scale production of ranolazine's active pharmaceutical ingredient and for ranolazine tableting,
which we believe are sufficient to support the remainder of the clinical program to support filing of an NDA for ranolazine for chronic angina. In addition, we have entered into several other
manufacturing agreements relating to ranolazine, including for commercial scale or scale-up of bulk active pharmaceutical ingredient, tableting, and supply of a raw material component of
the product. However, the commercial launch of ranolazine is dependent on these third party arrangements, and could be affected by any delays or difficulties in performance. In addition, because we
have used different manufacturers for elements of the ranolazine supply chain in different clinical trials and for potential commercial supply prior to FDA approval of ranolazine, in order to obtain
marketing approval we will be required to demonstrate to the FDA's satisfaction the bioequivalence or therapeutic equivalence of
the multiple sources of ranolazine used in our clinical trials to the product to be commercially supplied. An unfavorable regulatory interpretation by the FDA could delay or prevent regulatory
approval.

Furthermore,
we and our third party manufacturers must pass a preapproval inspection of facilities by the FDA and corresponding foreign regulatory authorities before obtaining marketing
approval, and will be subject to periodic inspection by the FDA and corresponding foreign regulatory authorities. We cannot guarantee that such inspections will not result in compliance issues that
could prevent or delay marketing approval, or require us to expend money or other resources to correct. 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.

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

Our
ability and the ability of our existing and future corporate partners to market and sell our products will depend in part 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 are increasingly challenging
the price of medical products and services.

Significant
uncertainty exists as to the reimbursement status of newly approved health care products. In addition, for sales of our products in Europe, we will be required to seek
reimbursement on a country-by-country basis. We cannot be certain that any products approved for marketing will be considered cost effective or that reimbursement will be
available or that allowed reimbursement in foreign countries will be adequate. In addition, payers' reimbursement policies could adversely affect our or any corporate partner's ability to sell our
products on a profitable basis.

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 success depends in large part on our ability to attract and retain key management, technical, sales and marketing and other operating personnel. We cannot
assure you that we will be able to attract and retain the qualified personnel or develop the expertise in these areas as needed for our business. 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 stock option grants. Current and proposed changes in laws,
regulations, Nasdaq corporate governance standards and accounting treatments regarding stock options may limit or impair our ability

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to attract and retain key personnel. Although we have entered into executive severance agreements with certain executives, we have not entered into any employment agreements with key executives. The
loss of the services of one or more members of these groups or the inability to attract and retain additional personnel and develop expertise as needed could limit our ability to develop and
commercialize our existing drugs and future drug candidates. Such persons are in high demand and often receive competing employment offers.



We have experienced rapid growth and expect to continue to expand our operations over time. As we prepare for the commercialization of ranolazine, continue to
conduct clinical trials for our product candidates and expand our drug discovery efforts, we have added personnel in many areas, including operations, regulatory, clinical, finance and information
systems. 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.

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

Our
research and development 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. 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.

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 therapeutic products involve an inherent risk of product liability claims and associated adverse publicity. We currently have only limited product
liability insurance for clinical trials and no 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 commercialize our 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 results of operations and our need for and the timing of additional financing.

If the market price of our stock continues to be highly volatile, the value of your investment in our common stock may decline.

Within
the last 12 months, our common stock has traded between $14.68 and $60.85. The market price of the shares of common stock for our company has been and may continue to be
highly volatile.

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Announcements may have a significant impact on the market price of our common stock. These announcements may include:



In
addition, if we fail to reach an important research or development milestone 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. For example, in January 2001, we announced that additional patients would need to be enrolled in our Phase III CARISA trial of ranolazine to meet a
protocol requirement, thereby delaying completion of enrollment of the trial by a number of months. The price of our common stock decreased significantly after this announcement.

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.

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.

In
February 1999, our board of directors adopted a stockholder rights plan and authorized executive severance benefit agreements in the event of a change of control for key
executives, into which severance agreements we have subsequently entered. The board of directors amended the stockholders rights plan in July 2000 to lower the triggering ownership percentage
and increase the exercise price. Our rights plan and these agreements 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

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board to be effected; 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; 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 up to 5,000,000 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, the 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.

Our indebtedness and debt service obligations may adversely affect our cash flow.

Our
annual debt service obligations on our 4.75% convertible subordinated notes due in 2007 are approximately $9.3 million per year in interest payments. 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 and development programs.

We
may add additional lease lines to finance capital expenditures and/or may obtain additional long-term debt and lines of credit. If we issue other debt securities in the
future, our debt service obligations will increase further.

Our
indebtedness could have significant additional negative consequences, including:



If shares of common stock are sold in our equity line of credit arrangement, existing common stockholders will experience immediate dilution and, as a result, our
stock price may go down.

We
have entered into a common stock purchase agreement with Acqua Wellington, pursuant to which Acqua Wellington may purchase shares of our common stock at a discount of 4.0% to 6.0%, to
be determined based on our market capitalization at the start of the draw-down period, unless we agree with Acqua Wellington to a different discount. As a result, our existing common
stockholders will experience immediate dilution upon the purchase of any shares of our common stock by Acqua Wellington. The purchase agreement with Acqua Wellington provides that, at our request,
Acqua Wellington 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. As a result, if the per share market price of our common stock declines over the

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draw-down period, Acqua Wellington will receive a greater number of shares for its purchase price, thereby resulting in further dilution to our stockholders and potential downward
pressure of the price of our stock.

Item 3. Market 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. We are averse to
principal loss and 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. These "variable-rate" investments primarily included
money market accounts.

Our
long-term debt includes $196,250,000 of 4.75% convertible subordinated notes due March 7, 2007. Interest on the notes is fixed and payable
semi-annually on March 7th and September 7th each year. The notes 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, as more fully described in Note 5 to our financial statements. 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.

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PART II. OTHER INFORMATION

Item 4.    Submission of Matters to a Vote of Security Holders

(a)    The
Annual Meeting of Stockholders of CV Therapeutics, Inc. was held on June 7, 2002.

(b)    Santo
J. Costa, John Groom and Barbara J. McNeil, M.D., Ph.D. were elected to the Board of Directors. Louis G. Lange, M.D., Ph.D., R. Scott Greer, Peter Barton Hutt, Thomas L.
Gutshall, Kenneth B. Lee, Jr., and Costa G. Sevastoupoulos, Ph.D. continued after the Annual Meeting.

(c)    Election
of Directors:

Nominee

For

WithheldSanto J. Costa

20,659,128

143,788John Groom

20,659,328

143,588Barbara J. McNeil, M.D., Ph.D.

20,611,229

191,687


Proposal
to approve our 2000 Equity Incentive Plan as amended to increase the aggregate number of shares of common stock authorized for issuance under such plan by 950,000 shares (from 1,500,000
shares to 2,450,000 shares):

For

Against

Abstain

Broker Non-Vote18,938,816

1,852,260

11,840

0


Proposal
to approve our Non-Employee Director's Stock Option Plan as amended to increase the aggregate number of shares of common stock authorized for issuance under such plan by 150,000
shares (from 400,000 shares to 550,000 shares):

For

Against

Abstain

Broker Non-Vote18,598,114

2,190,243

14,559

0


Proposal
to ratify the selection of Ernst & Young LLP as our independent auditors for the fiscal year ending December 31, 2002:

For

Against

Abstain

Broker Non-Vote19,955,311

841,625

5,980

0


Item 6.    Exhibits and Reports on Form 8-K



Exhibit
Number10.65

CV Therapeutics, Inc. 2000 Nonstatutory Incentive Plan10.66

CV Therapeutics, Inc. 2000 Equity Incentive Plan10.67

CV Therapeutics, Inc. Non-Employee Directors' Stock Option Plan10.68

CV Therapeutics, Inc. Employee Stock Purchase Plan






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SIGNATURES

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

|                      |  | CV THERAPEUTICS, INC.
|--------------------- |  | ---------------------
|Date: August 14, 2002 |  | By:                  
|Date: August 14, 2002 |  | By:                  

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