We have developed a class of boron-based compounds that show activity in research-stage tests in treating systemic bacterial infections. One part of our strategy is to partner programs for potential systemic product candidates at an early stage of development and undertake early development, preclinical and initial clinical development of resulting product candidates in conjunction with our partners.

To that end, we entered into a research and development collaboration, option and license agreement with GSK in October 2007 for the discovery, development, manufacture and worldwide commercialization of boron-based systemic therapeutics for at least eight product options in up to four target-based projects, one of which will target Hepatitis C Virus (HCV) and others of which will be in the area of antibiotics. Under the agreement, we will collaborate with GSK to identify and develop boron-based small molecule product candidates.

Pursuant to the agreement, GSK paid us a $12 million non-refundable, non-creditable up-front fee in October 2007. In each project, GSK has the option to obtain an exclusive license to develop, commercialize and market worldwide a specified number of product candidates once they have achieved proof of concept criteria. In the HCV project, GSK also has an option to obtain such an exclusive license at the time a product candidate is selected. We will be primarily responsible for the discovery and development of each product candidate from the research stage until GSK exercises an option for such product candidate, at which point GSK will assume sole responsibility for the further development and commercialization of such product candidate on a worldwide basis. GSK is obligated to make payments to us if certain development, regulatory and commercial milestones are met on a compound-by-compound basis. Total potential payments for discovery, development, regulatory and commercial milestones range up to $252 million to $331 million per product candidate. GSK is further obligated to pay us double-digit tiered royalties with the potential to reach the mid-teens, on annual net sales of products containing optioned compounds in jurisdictions where there is a valid patent claim covering composition of matter or method of use of the product and lesser royalties for sales in jurisdictions where there is no valid patent claim. In the event that GSK exercises its option for a product candidate in the HCV project at the candidate selection stage, the discovery, development and regulatory milestone payments for which we are eligible and the product royalties payable to us would be lower.