##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 For the Quarterly Period Ended March 31, 2006
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Period From  to
 Commission File Number: 0-27914
 
 SIRNA THERAPEUTICS, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    34-1697351(State of incorporation)
    
    (I.R.S. Employer Identification No.)185 Berry Street, Suite 6504San Francisco, California 94107
    
    (415) 512-7200(Address of principal executive offices and zip code)
    
    (Registrants telephone number, including area code):
 
 Securities registered pursuant to Section 12(b) of the Act:
None
 Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
Rights to Purchase Series AA Junior Participating Preferred Stock
 
 þ o
  o o þ
 o þ




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##### 



SIRNA THERAPEUTICS, INC.
TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements:a.
    
    Condensed Balance Sheets  March 31, 2006 (Unaudited) and December 31, 2005
    
    
    2b.
    
    Condensed Statements of Operations  Three Months Ended March 31, 2006 and 2005 (Unaudited)
    
    
    3c.
    
    Condensed Statements of Cash Flows  Three Months Ended March 31, 2006 and 2005 (Unaudited)
    
    
    4d.
    
    Notes to Condensed Financial Statements (Unaudited)
    
    
    5Item 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4.
    
    Controls and Procedures
    
    
    18PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    19Item 1A.
    
    Risk Factors
    
    
    19Item 6.
    
    Exhibits
    
    
    28SIGNATURES
    
    
    30EXHIBIT 10.1EXHIBIT 10.2EXHIBIT 10.3EXHIBIT 10.4EXHIBIT 10.5EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 SIRNA THERAPEUTICS, INC.
 
 CONDENSED BALANCE SHEETS
(In thousands, except par value and share data)
 March 31,
    
    
    December 31,2006
    
    
    2005(Unaudited)
    
    
    (Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    14,551
    
    
    $
    19,519Securities available-for-sale
    
    
    26,999
    
    
    
    26,173Receivable from collaboration partner
    
    
    12,000
    
    
    
    Notes receivable  related parties
    
    
    65
    
    
    
    145Prepaid expenses and other current assets
    
    
    1,437
    
    
    
    439Total current assets
    
    
    55,052
    
    
    
    46,276Property and equipment, net
    
    
    2,133
    
    
    
    1,906Notes receivable  related parties, less current portion
    
    
    65
    
    
    
    65Other assets, net of accumulated amortization of $1,592
and $1,370 at March 31, 2006 and December 31, 2005,
respectively
    
    
    1,511
    
    
    
    1,270$
    58,761
    
    
    $
    49,517LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,236
    
    
    $
    1,174Accrued wages
    
    
    994
    
    
    
    1,054Accrued liabilities
    
    
    2,836
    
    
    
    2,338Deferred revenue, current portion
    
    
    3,872
    
    
    
    2,133Total current liabilities
    
    
    8,938
    
    
    
    6,699Other liabilities
    
    
    284
    
    
    
    275Deferred revenue, less current portion
    
    
    7,716
    
    
    
    2,917Commitments and contingenciesStockholders equity:Preferred stock, $.01 par value; 5,000,000 shares
authorized; none issued and outstanding at March 31,
2006 and December 31, 2005, respectively
    
    
    
    
    
    
    Common stock, $.01 par value; 120,000,000 shares
authorized; 62,276,753 and 59,754,709 shares issued and
outstanding at March 31, 2006 and December 31, 2005,
respectively
    
    
    623
    
    
    
    598Additional paid-in capital
    
    
    326,303
    
    
    
    316,890Accumulated deficit
    
    
    (285,102
    )
    
    
    (277,124
    )Unearned deferred compensation
    
    
    
    
    
    
    (911
    )Unrealized (loss) gain on securities available-for-sale
    
    
    (1
    )
    
    
    173Total stockholders equity
    
    
    41,823
    
    
    
    39,626$
    58,761
    
    
    $
    49,517
 See accompanying notes to condensed financial statements.
 2




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SIRNA THERAPEUTICS, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except for per share amounts)
(Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005Revenues:Contract revenue
    
    $
    426
    
    
    $
    43Contract manufacturing revenue
    
    
    
    
    
    
    465Total revenues
    
    
    426
    
    
    
    508Operating expenses:Cost of contract manufacturing
    
    
    
    
    
    
    394Research and development
    
    
    5,640
    
    
    
    6,104General and administrative
    
    
    3,381
    
    
    
    2,170Total operating expenses
    
    
    9,021
    
    
    
    8,668Loss from operations
    
    
    (8,595
    )
    
    
    (8,160
    )Other income (expense):Interest and other income
    
    
    617
    
    
    
    175Interest expense
    
    
    
    
    
    
    (25
    )Net loss
    
    $
    (7,978
    )
    
    $
    (8,010
    )Basic and diluted net loss per common share
    
    $
    (0.13
    )
    
    $
    (0.19
    )Weighted average common shares outstanding, basic and diluted
    
    
    60,099
    
    
    
    41,532
 See accompanying notes to condensed financial statements.
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SIRNA THERAPEUTICS, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (7,978
    )
    
    $
    (8,010
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    515
    
    
    
    464Compensation related to common stock and options
    
    
    1,194
    
    
    
    186Compensation for forgiveness of notes receivable  related parties
    
    
    80
    
    
    
    80Purchase of license through issuance of common stock
    
    
    
    
    
    
    488Accrued interest included in convertible debt  related parties
    
    
    
    
    
    
    20Changes in operating assets and liabilities:Receivable from collaboration partner
    
    
    (6,955
    )
    
    
    Prepaid expenses and other current assets
    
    
    (998
    )
    
    
    (318
    )Other assets
    
    
    (463
    )
    
    
    (14
    )Accounts payable
    
    
    62
    
    
    
    46Accrued wages
    
    
    544
    
    
    
    (197
    )Accrued liabilities
    
    
    623
    
    
    
    (242
    )Other liabilities
    
    
    9
    
    
    
    (100
    )Deferred revenue
    
    
    6,538
    
    
    
    (225
    )Net cash used in operating activities
    
    
    (6,829
    )
    
    
    (7,822
    )Cash flows from investing activities:Purchases of securities available-for-sale
    
    
    (2,295
    )
    
    
    (1,997
    )Sales of securities available-for-sale
    
    
    1,295
    
    
    
    6,398Additions to property, plant, and equipment
    
    
    (520
    )
    
    
    (185
    )Additions to patents
    
    
    
    
    
    
    (71
    )Net cash (used in) provided by investing activities
    
    
    (1,520
    )
    
    
    4,145Cash flows from financing activities:Net proceeds from the issuance of equity securities
    
    
    3,381
    
    
    
    (19
    )Payments under loan facilities
    
    
    
    
    
    
    (3,080
    )Conversion of debt
    
    
    
    
    
    
    5Net cash provided by (used in) financing activities
    
    
    3,381
    
    
    
    (3,094
    )Net decrease in cash and cash equivalents
    
    
    (4,968
    )
    
    
    (6,771
    )Cash and cash equivalents, beginning of the period
    
    
    19,519
    
    
    
    16,817Cash and cash equivalents, end of the period
    
    $
    14,551
    
    
    $
    10,046Supplementary information:Fair value of common stock issued in settlement of accrued wages and liabilities
    
    $
    729
    
    
    $
    Fair value of common stock issued to collaboration partner
    
    $
    5,045
    
    
    $
    
 See accompanying notes to condensed financial statements.
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SIRNA THERAPEUTICS, INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 1. Basis of Presentation
    2. Use of Estimates
  3. Employee Stock-Based Compensation
   Employee Stock Plans
  5




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Adoption of FAS 123R
  (in
thousands, except for per share data):
 Three MonthsEndedMarch 31, 2006Research and development
    
    $
    320General and administrative
    
    
    355Effect on net loss
    
    $
    675Effect on net loss per common share, basic and diluted
    
    $
    0.01
  Pro Forma Information for Period Prior to Adoption of FAS 123R
 (in thousands, except for per share data)
 Three MonthsEndedMarch 31, 2005Net loss, as reported
    
    $
    (8,010
    )Add: Stock-based employee compensation expense included in net loss, as reported
    
    
    186Deduct: Stock-based employee compensation expense determined under fair value
method for all awards
    
    
    (872
    )Pro forma net loss
    
    $
    (8,696
    )Loss per share:Basic and diluted net loss per common share, as reported
    
    $
    (0.19
    )Basic and diluted pro forma net loss per common share
    
    $
    (0.21
    )
 6




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Valuation Assumptions
  Three Months Ended March 31,2006
    
    
    2005Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Risk-free interest rate
    
    
    4.58
    %
    
    
    3.70
    %Expected volatility
    
    
    100.0
    %
    
    
    100.0
    %Weighted average expected term (years)
    
    
    5.7
    
    
    
    5.0
  Stock Option Activity
  Outstanding Stock OptionsShares
    
    
    
    
    
    
    WeightedAvailable for
    
    
    Number of
    
    
    AverageGrant
    
    
    Shares
    
    
    Exercise PriceOutstanding at December 31, 2005
    
    
    3,786,276
    
    
    
    5,779,783
    
    
    $
    4.01Options granted
    
    
    (965,375
    )
    
    
    965,375
    
    
    $
    5.14Stock awards granted, net
    
    
    (119,325
    )
    
    
    
    
    
    $
    5.06Options exercised
    
    
    
    
    
    
    (316,947
    )
    
    $
    2.49Options cancelled
    
    
    16,466
    
    
    
    (16,466
    )
    
    $
    3.04Outstanding at March 31, 2006
    
    
    2,718,042
    
    
    
    6,411,745
    
    
    $
    4.26
  7




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Options OutstandingWeighted
    
    
    
    
    
    
    Options ExercisableAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRange of
    
    
    Number
    
    
    Remaining
    
    
    Average
    
    
    Number
    
    
    AverageExercise Prices
    
    
    Outstanding
    
    
    Contractual Life
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise Price$1.62
    
    
    
    
    
    $
    1.62
    
    
    
    300,000
    
    
    
    9.26
    
    
    $
    1.62
    
    
    
    
    
    
    $
    $1.86
    
    
    
    
    
    $
    2.10
    
    
    
    3,109,036
    
    
    
    6.87
    
    
    $
    2.10
    
    
    
    2,068,557
    
    
    $
    2.10$2.34
    
    
    
    
    
    $
    3.35
    
    
    
    663,947
    
    
    
    8.09
    
    
    $
    3.09
    
    
    
    240,014
    
    
    $
    3.05$3.40
    
    
    
    
    
    $
    4.26
    
    
    
    769,015
    
    
    
    7.71
    
    
    $
    4.19
    
    
    
    555,927
    
    
    $
    4.21$4.30
    
    
    
    
    
    $
    5.06
    
    
    
    808,777
    
    
    
    9.49
    
    
    $
    4.81
    
    
    
    84,722
    
    
    $
    4.69$5.15
    
    
    
    
    
    $
    187.50
    
    
    
    760,970
    
    
    
    6.76
    
    
    $
    14.62
    
    
    
    485,812
    
    
    $
    19.48$1.62
    
    
    
    
    
    $
    187.50
    
    
    
    6,411,745
    
    
    
    7.53
    
    
    $
    4.26
    
    
    
    3,435,032
    
    
    $
    5.03
  4. Loss per Share
   March 31, 2006
    
    
    March 31, 2005Outstanding stock options
    
    
    6,412
    
    
    
    6,748Warrants
    
    
    10,530
    
    
    
    5,578
 5. Collaboration with GlaxoSmithKline
     8




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Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Statements in this Item contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as
amended and the Private Securities Litigation Reform Act of 1995. Forward-looking statements give
our current expectations or forecasts of future events. You can identify these statements by the
fact that they do not relate strictly to historical or current events. Forward-looking statements
use words such as anticipate, estimate, expect, will, may, intend, plan, believe
and similar expressions in connection with discussion of future operating or financial performance.
The forward-looking statements include statements relating to future actions, prospective products
and product approvals, future performance or results of current and anticipated products, sales
efforts, expenses and financial results. For example there is a very significant risk that
promising pre-clinical or clinical results may not translate into an FDA-approved drug. In
addition, patent applications may not result in issued patents, and issued patents may not be
enforceable or could be invalidated. Furthermore, our ability to develop products and to operate as
a going concern is contingent upon having readily available cash to fund our operating programs and
are subject to the escalating expenses and risks associated with the initiation of clinical trials
and their potential outcomes. Other risks and uncertainties include, among others, our early stage
of development and short operating history, our history and expectation of losses and need to raise
capital, our need to obtain clinical validation and regulatory approval for Sirna-027, Sirna-034
and our other product candidates, any of which could have negative results, our need to engage
collaborators, our need to obtain and protect intellectual property, and the risk of third-party
patent infringement claims. Forward-looking statements are not guarantees of future performance
and they can be affected by inaccurate assumptions or by known or unknown risks and uncertainties.
Actual results may differ materially from those projected in the forward-looking statements as a
result of various factors, including, without limitation, those listed under Part II, Item 1A,
Risk Factors included in this Quarterly Report on Form 10-Q and under Part I, Item 1A, Risk
Factors in our Annual Report on Form 10-K for the year ended December 31, 2005. Except to fulfill
our obligations under the federal securities laws, we undertake no obligation to update
forward-looking statements to reflect events or circumstances after the date on which it is made.
  Our Company
    9




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RNA Interference Background
  i.e
  10




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in vivo
   Our Product Candidate Programs
  Age-Related Macular Degeneration (AMD)
   11




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Chronic Hepatitis
  Respiratory Diseases
  Dermatology
  Huntingtons Disease
  Type 2 Diabetes
  Our Patents and Proprietary Technology
   12




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Patent Filings
    
    StatusSeminal RNAi or
siRNA Technology 
    
    Sirna  No-ribo siNA Technology
    
    20 patent applications
    
    2 granted (UK)
    
    Sirna  Multifunctional siRNA Technology
    
    5 patent applications
    
    Pending
    
    Sirna-Conserved Sequence Targeting Technology
    
    5 patent applications
    
    1 granted (UK)
    
    MicroRNA Technology (includes Worldwide Exclusive
License from Univ. Mass. Medical School to the Zamore
miRNA patents)
    
    7 patent applications
    
    pending
    
    Tuschl et al.Patent (Worldwide Exclusive License
from Univ. Mass. Medical School)
    
    2 patent applications
    
    Pending
    
    Rana Patents on chemically-modified siRNAs
(Worldwide Exclusive License from the University of
Massachusetts Medical School)
    
    3 patent applications
    
    Pending
    
    Fire et al.Patent ( Worldwide Non-exclusive
License from Carnegie Institution of Washington and the
University of Massachusetts)
    
    3 patent applications
    
    1 IssuedTherapeutic Targets
for siRNA 
    
    Sirna  RNAi Gene Targets (including VEGF, IL-4,
IL-13, Hairless, PTP-1B, HD, HCV, RSV and other viruses)
    
    >125 patent applications
    
    1 issued (US), 
5 granted (UK)
    
    Davidson et al.,Patents on siRNAs against
neurological disease targets such as Huntingtons Disease
(Worldwide Exclusive License from the University of Iowa
Research Foundation)
    
    10 patent applications
    
    1 granted
(Australia)
    
    Christiano et al.,Patents on genes involved in
hair growth and hair loss (Worldwide Exclusive License
from Columbia University)
    
    5 patent applications
    
    PendingSirna  Oligonucleotide Chemistry & Delivery Technology
    
    >60 patent applications
    
    24 IssuedSirna  Oligonucleotide Manufacturing & Process Technology
    
    >25 patent applications
    
    17 IssuedSUMMARY OF INTELLECTUAL PROPERTY ESTATE
    
    >270 Patent Applications
    
    52 Issued
 Our Business Strategy
  
    
    We intend to independently develop chemically optimized and formulated siRNA molecules
for therapeutic applications in several disease areas and dermatological conditions.
    
    We plan to pursue partnerships, collaborations or alliances with pharmaceutical and
biotechnology companies to develop RNA interference-based therapeutics.
    
    We seek to maintain and expand our patent portfolio and proprietary technology.
Worldwide, we have 52 patents and over 270 patent applications that we believe are important
to the identification, design, chemical
 13




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modification, synthesis, formulation and manufacture of RNAi-based and siRNA therapeutics for
commercialization. These include exclusive license rights to seven patent families bearing on
both RNAi technology and specific therapeutic disease areas. We intend to aggressively pursue
patent protection to maintain worldwide rights relating to the development, manufacture and
sale of RNAi-based and siRNA therapeutics.
 
    
    We intend to leverage our expertise in the design, chemical modification, formulation and
manufacture of RNA-based therapeutics. We believe that we have established one of the
leading RNA-based therapeutic research and development teams. We can provide lead
optimization, process development and manufacturing to others in need of this expertise. We
plan to capitalize on our continuing investment in nucleic acid technology by entering into
technology transfer and contract manufacturing arrangements with collaborators to generate
revenues, while retaining the rights to our know-how for our own drug development.
  Licensing, Process Development and Pilot Manufacturing
  Critical Accounting Policies and Estimates
  Revenue Recognition
  Patent Expenses
  14




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Employee Stock-Based CompensationAdoption of FAS 123R
   Results of Operations for the Three Months Ended March 31, 2006 and 2005
 Revenues
  Three Months Ended March 31,2006
    
    
    2005Contract revenues Allergan
    
    $
    417
    
    
    $
    Other
    
    
    9
    
    
    
    43426
    
    
    
    43Contract revenues  manufacturingArchemix
    
    
    
    
    
    
    465Total revenues
    
    $
    426
    
    
    $
    508
  15




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Expenses
 Research and development
  Three Months Ended March 31,2006
    
    
    2005Salaries and benefits
    
    $
    1,916
    
    
    $
    2,178Chemicals and supplies
    
    
    756
    
    
    
    905Outside services
    
    
    544
    
    
    
    551Fair value of stock options granted to Scientific Advisory Board
    
    
    384
    
    
    
    FAS 123R employee stock-based compensation
    
    
    320
    
    
    
    Depreciation
    
    
    293
    
    
    
    295License fees
    
    
    258
    
    
    
    1,241All other
    
    
    1,169
    
    
    
    934Total research and development expenses
    
    $
    5,640
    
    
    $
    6,104Average research and development staffing
    
    
    54
    
    
    
    66
   Three Months Ended March 31,2006
    
    
    2005Age-related Macular Degeneration (AMD)
    
    $
    131
    
    
    $
    403Chronic Hepatitis
    
    
    698
    
    
    
    545Asthma
    
    
    395
    
    
    
    278Hair removal
    
    
    405
    
    
    
    320Other RNAi programs and RNAi technology development
    
    
    1,045
    
    
    
    2,006Total project expenses
    
    $
    2,674
    
    
    $
    3,552
  General and administrative
  Three Months Ended March 31,2006
    
    
    2005Salaries and benefits
    
    $
    1,142
    
    
    $
    961Patent and amortization
    
    
    792
    
    
    
    552FAS 123R employee stock-based compensation.
    
    
    355
    
    
    
    All other
    
    
    1,092
    
    
    
    657Total general and administrative expenses
    
    $
    3,381
    
    
    $
    2,170Average general and administrative staffing
    
    
    17
    
    
    
    15
 16




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Interest and other income
  Liquidity and Capital Resources
     
    
    our research, drug discovery and development programs;
    
    preclinical and clinical studies of our product candidates, if developed;
    
    prosecuting and enforcing patent claims;
    
    general administrative and legal fees; and
    
    manufacturing and marketing of our products, if any.
  17




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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4. CONTROLS AND PROCEDURES
 Controls Evaluation and Related CEO and CFO Certifications
  18




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PART II. OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  
 Item 1A. RISK FACTORS
 Risks Relating to our Business, Industry and Common Stock
 We are a biotechnology company in the early stage of development.
  
    
    obtain the human and financial resources necessary to develop, test, manufacture and market products;
    
    engage corporate partners to assist in developing, testing, manufacturing and marketing our products;
    
    satisfy the requirements of clinical trial protocols, including patient enrollment;
    
    establish and demonstrate the clinical efficacy and safety of our products;
    
    obtain necessary regulatory approvals; and
    
    market our products to achieve acceptance and use by the medical community in general.
 We have a history of losses, expect future losses, have a continuing need to raise additional
capital, and cannot assure you that we will ever become or remain profitable.
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Our product development programs are based on novel technologies, are inherently risky and may
never lead to marketable products.
    Because we must obtain regulatory approval to market our products in the United States and foreign
jurisdictions, we cannot predict whether or when we will be permitted to commercialize our
products.
   
    
    must be conducted in conformity with the FDAs good laboratory practice regulations;
    
    must meet requirements for informed consent;
    
    must meet requirements for good clinical practices;
    
    are subject to continuing FDA oversight;
    
    may require large numbers of test subjects; and
    
    may be suspended by the FDA or us at any time if it is believed that the subjects
participating in these trials are being exposed to unacceptable health risks or if the FDA
finds deficiencies in the IND or the conduct of these trials.
   20




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We may experience negative results, problems or delays in our clinical trials with Sirna-027,
Sirna-034 or other product candidates that could adversely affect our stock price, financial
position and our commercial prospects.
  To develop, market or sell RNAi-based drugs, we currently depend upon collaborative relationships.
    
    
    our ability to find and enter into agreements with appropriate collaborators for our
RNAi-based product candidates;
    
    the pace of development of our product candidates, including the achievement of performance milestones;
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
    
    development by our collaborators of competing technologies or products;
    
    exercise by our collaborators of marketing or manufacturing rights; and
    
    the loss of our rights to products or the profits from our products if we are unable to
fund our share of development costs.
    A majority of our patent applications have not yet been approved. We do not know which of these
applications will result in issued patents. Additionally, patent proceedings and litigation could
result in substantial costs and delays in obtaining and enforcing our patent rights. The ultimate
result of any patent litigation could be the loss of some or all protection for the patent involved
or the loss of ability to pursue business opportunities. We may also decide to oppose or challenge
third party patents.
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The manufacture, use or sale of our products may infringe on the patent rights of others. We may
not have identified all United States and foreign patents and patent applications that pose a risk
of infringement. We may be forced to in-license or litigate if an intellectual property dispute
arises.
  
    
    incur substantial monetary damages;
    
    encounter significant delays in marketing our products;
    
    be unable to conduct or participate in the manufacture, use or sale of products or
methods of treatment requiring licenses; or
    
    lose patent protection for our inventions and products.
  Disclosure of our trade secrets could reduce our competitiveness.
  We have moved our headquarters and initiated the move of a majority of our research and development
operations from Colorado to California, and these moves could reduce employee retention and
efficiency and could add to our expenses.
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Our success depends on attracting and retaining qualified personnel.
  Our competitors may develop and market drugs that are more effective, safer, easier to use, or less
expensive than our product candidates.
  Our success may depend on third party reimbursement of patients costs for our products that could
result in price pressure or reduced demand for our products.
  We may in the future be exposed to product liability claims, which could adversely affect our
business, results of operations, financial condition and cash flow.
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Our products require materials that may not be readily available at a commercially viable price,
which may reduce our competitiveness or reduce our profitability.
  We have limited experience in manufacturing of our proprietary nanoparticle delivery formulations.
We are currently investing resources to develop this expertise, but we may be unsuccessful and may
be forced to rely on third parties to manufacture these formulated materials.
  Our operations are vulnerable to interruption by fire, earthquake, power loss, telecommunications
failure, terrorist activity and other events beyond our control, which could result in a material
adverse effect on our business.
  We deal with hazardous materials that may cause injury to others and are regulated by environmental
laws that may impose significant costs and restrictions on our business.
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Our common stock has a history of volatility, which could impair your investment.
  
    
    our ability to raise additional funds;
    
    the results of our preclinical studies or clinical trials;
    
    timing or denial by the FDA of clinical trial protocols or marketing applications;
    
    changes in the status of our corporate collaborative agreements;
    
    research activities, technological innovations or new products by us or our competitors;
    
    developments or disputes concerning patents or proprietary rights;
    
    quarterly variations in our operating results;
    
    changes in earnings estimates by market research analysts;
    
    concentrated ownership interest of our investors;
    
    purchases or sales of our stock by our executive officers, directors or substantial
holders of our common stock;
    
    securities class actions or other litigation; and
    
    changes in government regulations.
  We plan to use potential future operating losses and our federal and state net operating loss
carryforwards to offset taxable income from operations. However, our ability to use our net
operating loss carryforwards is limited as a result of previous issuances of equity securities and
could be further limited as a result of potential future issuances of equity securities.
  Concentration of ownership of our common stock may give certain stockholders significant influence
over our business.
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Both our charter documents and Delaware law have anti-takeover provisions that may discourage
transactions involving actual or potential changes of control at premium prices.
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Item 6. EXHIBITS
 (a)
    
    Exhibits
 Number
    
    Description3.1
    
    
    Amended and Restated Certificate of Incorporation of the Company(1)3.2
    
    
    Amended and Restated By-Laws of the Company, including amendment executed on February 22, 2006
[conformed copy](2)4.1
    
    
    Specimen Stock Certificate(3)4.2
    
    
    Rights Agreement, dated November 22, 2000 between Ribozyme Pharmaceuticals, Inc. and American
Stock Transfer & Trust Company, which includes the form of Certificate of Designation of Series
AA Junior Participating Preferred Stock attached as Exhibit A thereto(4)4.3
    
    
    Amendment dated February 11, 2003 to Rights Agreement dated November 22, 2000 between Ribozyme
Pharmaceuticals, Inc. and American Stock Transfer & Trust Company(5)4.4
    
    
    Common Stock and Warrant Purchase Agreement dated as of February 11, 2003 by and among Ribozyme
Pharmaceuticals, Inc. and the Investors named therein(5)4.5
    
    
    Form of First Replacement Warrants(6)4.6
    
    
    Form of Second Replacement Warrant(6)4.7
    
    
    Form of Securities Purchase Agreement dated as of July 5, 2005 by and between the Company and
certain Investors(7)4.8
    
    
    Form of Warrant to Purchase Common Stock of the Company(7)10.1*
    
    
    Employment Agreement dated February 4, 2006 between the Company and Gregory L. Weaver**10.2*
    
    
    Lease Agreement dated February 8, 2006 between the Company and ARE-San Francisco No. 26, LLC10.3*
    
    
    Offer Letter dated February 24, 2006 to Lutz Lingnau to serve as a Director of the Company**10.4*
    
    
    Strategic Alliance Agreement dated March 31, 2006 between the Company and Glaxo Group Limited and
SmithKline Beecham Corporation, d/b/a GlaxoSmithKline***10.5*
    
    
    Indemnification Agreement dated February 24, 2006 between the Company and Lutz Lingnau31.1*
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2*
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1*
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
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*
    
    Filed herewith.**
    
    Indicates compensatory plan or arrangement.***
    
    Pursuant to 17 CFR 240.24b-2, confidential information has been omitted and has been filed
separately with the Securities and Exchange Commission pursuant to a Confidential Treatment
Application filed with the Commission.(1)
    
    Incorporated by reference to certain exhibits to the Companys Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on July 22, 2003 (File No.
333-107216).(2)
    
    Incorporated by reference to certain exhibits to the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2005 filed with the Securities and Exchange Commission
on March 31, 2006.(3)
    
    Incorporated by reference to certain exhibits to Ribozyme Pharmaceuticals Form SB-2
Registration Statement filed with the Securities and Exchange Commission on April 11, 1996
(File No. 333-1908-D).(4)
    
    Incorporated by reference to certain exhibits to Ribozyme Pharmaceuticals Form 8-K filed
with the Securities and Exchange Commission on December 5, 2000.(5)
    
    Incorporated by reference to certain exhibits to Ribozyme Pharmaceuticals Form 8-K filed
with the Securities and Exchange Commission on February 14, 2003.(6)
    
    Incorporated by reference herein to certain exhibits to the Companys Current Report on Form
8-K filed with the Securities and Exchange Commission on January 6, 2005.(7)
    
    Incorporated by reference herein to certain exhibits to the Companys Current Report on Form
8-K filed with the Securities and Exchange Commission on July 11, 2005. 29




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SIGNATURES
  SIRNA THERAPEUTICS, INC.By:
    /s/ Howard W. RobinHoward W. RobinPresident and Chief Executive Officer
(Principal Executive Officer)By:
    /s/ Gregory L. WeaverGregory L. WeaverSenior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer) 30