Anacor is a biopharmaceutical company focused on discovering, developing and commercializing novel small molecule therapeutics derived from its boron chemistry platform. Anacor has discovered and is developing five clinical compounds, including its three lead programs: AN2690, a topical antifungal for the treatment of onychomycosis; AN2728, a topical anti-inflammatory for the treatment of psoriasis and AN3365, a systemic antibiotic for the treatment of infections caused by Gram-negative bacteria. The Company is developing AN3365 and other systemic antibacterial therapeutics under a research and development agreement with GlaxoSmithKline.

Anacor was founded based on technology created by board members and scientific advisory board co-chairs, Dr. Lucy Shapiro at Stanford University and Dr. Stephen Benkovic at Pennsylvania State University. Prior to founding Anacor, the two had worked together for years in their respective universities through a collaboration that combined Lucy's work in bacterial genetics with Stephen's work with novel chemistry. By 2001, this work had started to yield results in the form of unique boron containing compounds that inhibited specific bacterial targets.

Although the research was at an early stage (the boron-based compounds had not yet even been tested in in vivo studies), the possibility existed that boron chemistry could provide a platform for drug development for antibiotics as well as other indications. Based on these early but promising results, Anacor was founded in 2002. Members of the founding management team include David Perry (CEO), Kirk Maples (SVP Program Management) and Lucy Day (VP Finance). Steve Baker (program management, formerly in medicinal chemistry) and Dickon Alley (molecular biology) are current Anacor employees who worked in Stephen and Lucy's labs as the key technology was being developed.

In April 2002, Anacor raised a $3 million Series A round from venture capital firms Aberdare Ventures and Rho Ventures. Later in 2002, Anacor entered into a $21.6 million contract with the Department of Defense to explore the use of boron chemistry in biodefense, and raised an additional $4 million from the same investors. This initial funding, along with the Department of Defense contract, allowed Anacor to spend the first two years exploring the potential uses of boron in drug development.

By 2005, Anacor had progressed its first compound into clinical trials. Of equal importance, we had generated data showing that our boron platform had potential applications in the treatment of a wide variety of diseases including bacterial, fungal, viral, and parasitic infections as well as inflammatory diseases. Based on these data, Anacor raised a $25 million Series C round and brought in new investors, Care Capital and Venrock.

In 2007, we signed important collaboration agreements with Schering (now Merck) and GlaxoSmithKline. These two agreements brought in over $57 million in cash in 2007 alone.

In 2008, we demonstrated positive results from our Phase 2a clinical trial of AN2728 in psoriasis patients and initiated a Phase 2b clinical trial to evaluate longer dosing. We also initiated a Phase 1 clinical trial for AN2718 in skin fungal infections (our fifth compound to enter the clinic).

By the start of 2009, Anacor had raised $50 million through a preferred stock financing from partners GlaxoSmithKline and Schering Corporation as well as existing investors, Rho Capital Partners, Venrock Associates, Care Capital and Aberdare Ventures. Our drug development efforts continue to be both efficient and productive. During the year, Anacor announced positive Phase 2 psoriasis data for AN2728 and encouraging Phase 1 results for both AN2718 in skin and nail infections and AN2898 in psoriasis and atopic dermatitis. We also entered into agreements with the Global Alliance for TB Drug Development (TB Alliance) and Drugs for Neglected Diseases initiative (DNDi) to apply our boron chemistry platform in the area of neglected diseases. Under the agreements, Anacor's boron platform will be applied to the development of new therapies for tuberculosis, Human African Trypanosomiasis (HAT or African Sleeping Sickness), Visceral Leishmaniasis (kala azar) and Chagas disease. In the future, we hope to expand these efforts into other disease areas.

In November 2009, Anacor initiated Phase 1 clinical development for AN3365, its first compound to enter the clinic under the company's systemic antibacterial agreement with GSK. Preclinical studies suggest that AN3365 could be a novel approach for the treatment of Gram-negative infections, including E. coli, K. pneumoniae and Enterobacter spp. The initiation of Phase 1 studies releases a milestone payment to Anacor of $6 million.

Our objective is to discover, develop and commercialize proprietary boron based drug compounds with superior efficacy, safety and convenience for the treatment of a variety of diseases. The key elements of our strategy to achieve this objective are to:

• Drive rapid, efficient discovery of novel boron based compounds. We believe the unique characteristics of boron allow us to design novel product candidates that target a broad range of diseases and drive a rapid and efficient drug development process. We have discovered and advanced multiple compounds into clinical development and have active research programs ongoing.
• Focus development activities on our core therapeutic areas, dermatology and anti-infectives. Our boron chemistry platform has demonstrated utility in addressing the therapeutic areas of dermatology and infectious diseases. We intend to leverage our expertise and capabilities to discover and develop compounds in these therapeutic areas.
• Commercialize our products ourselves in specialty markets in the United States. We intend to create a specialty sales force to market our products to dermatologists and other specialists in the United States and we will seek commercialization partners for products in non-specialty and international markets.
• Leverage partnerships for non-core therapeutic areas. We believe boron chemistry has utility in a broad range of diseases outside of our core therapeutic areas. To maximize the value of our boron chemistry platform, we seek partnerships early in development for compounds in these non-core areas.
• Expand and protect our intellectual property. We intend to expand and aggressively prosecute our intellectual property in the area of boron chemistry and boron based compounds. Since a relatively limited amount of research has been done in the area of boron based drug development, we believe that we can establish a defensible and valuable intellectual property portfolio.