-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 KPTHcq+7uQN3h9AQwCSWSzQm5Wnk8Cf4WJ2Blmc5tUIX0Njs5YLy7/f7Ad1jA4kU
 TCWDjHOQPSsDZkjX49LZnQ==

<SEC-DOCUMENT>0001193125-08-109442.txt : 20080509
<SEC-HEADER>0001193125-08-109442.hdr.sgml : 20080509
<ACCEPTANCE-DATETIME>20080509135739
ACCESSION NUMBER:		0001193125-08-109442
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20080331
FILED AS OF DATE:		20080509
DATE AS OF CHANGE:		20080509

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NUVELO INC
		CENTRAL INDEX KEY:			0000907654
		STANDARD INDUSTRIAL CLASSIFICATION:	IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835]
		IRS NUMBER:				363855489
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-22873
		FILM NUMBER:		08817539

	BUSINESS ADDRESS:	
		STREET 1:		201 INDUSTRIAL ROAD
		STREET 2:		SUITE 310
		CITY:			SAN CARLOS
		STATE:			CA
		ZIP:			94070-6211
		BUSINESS PHONE:		650-517-8000

	MAIL ADDRESS:	
		STREET 1:		201 INDUSTRIAL ROAD
		STREET 2:		SUITE 310
		CITY:			SAN CARLOS
		STATE:			CA
		ZIP:			94070-6211

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	HYSEQ INC
		DATE OF NAME CHANGE:	19970610
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d10q.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML><HEAD>
<TITLE>Form 10-Q</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="4"><B>UNITED STATES </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="4"><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="3"><B>WASHINGTON, D.C. 20549 </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="5"><B>FORM 10-Q </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P
STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="1">(Mark One) </FONT></P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#120;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 </B> </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2">FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">OR </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><FONT FACE="WINGDINGS">&#168;</FONT></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 </B> </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">FOR THE TRANSITION PERIOD FROM <U></U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> TO
<U></U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2">Commission File Number 000-22873 </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P
STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="6"><B>NUVELO, INC. </B></FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>(Exact Name of Registrant as Specified in Its Charter) </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="48%"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>DELAWARE</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>36-3855489</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(State or Other Jurisdiction of</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="1"><B>Incorporation or Organization)</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center"> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(I.R.S. Employer</B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="1"><B>Identification Number)</B></FONT></P></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>201 INDUSTRIAL ROAD, SUITE 310, SAN CARLOS, CA 94070-6211 </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Address of Principal Executive Offices, including Zip Code) </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>650-517-8000 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(Registrant&#146;s Telephone Number, including Area Code) </B></FONT></P> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center> <P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">Indicate by check mark whether the registrant: (1)&nbsp;has filed all reports required to be filed by Sections 13 or 15(d) of the Securities 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)&nbsp;has been subject to such filing requirements for the past 90 days.&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;&nbsp;<FONT
FACE="WINGDINGS">&#120;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#168;</FONT> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;small reporting company&#148; in Rule 12b-2
of the Exchange Act. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">Large accelerated filer&nbsp;&nbsp;<FONT
FACE="WINGDINGS">&#168;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated filer&nbsp;&nbsp;<FONT
FACE="WINGDINGS">&#120;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-accelerated filer&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#168;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Small
reporting company&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#168;</FONT> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).&nbsp;&nbsp;&nbsp;&nbsp;Yes&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#168;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#120;</FONT> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">Indicate the number of shares outstanding of each of the issuer&#146;s classes of common stock, as of the latest practicable date. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="50%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD WIDTH="48%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:18pt" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Class</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:106pt" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Number of Shares Outstanding</B></FONT></P></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">Common Stock $0.001 par value</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">On April&nbsp;30, 2008: 53,505,956</FONT></TD></TR>
</TABLE> <P STYLE="font-size:24px;margin-top:0px;margin-bottom:0px">&nbsp;</P> <P STYLE="line-height:0px;margin-top:0px;margin-bottom:0px;border-bottom:0.5pt solid #000000">&nbsp;</P> <P
STYLE="line-height:3px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000">&nbsp;</P>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><U>
<A NAME="toc"></A>Table of Contents </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>NUVELO, INC. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"
ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>FORM 10-Q </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>FOR THE QUARTER ENDED MARCH 31, 2008 </B></FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="4%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="89%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>PAGE</B></FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Part&nbsp;I</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_1">Financial Information</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_2">Item 1. Condensed Consolidated Financial Statements (unaudited)</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_3">Condensed Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_4">Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2008 and 2007</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_5">Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_6">Notes to Condensed Consolidated Financial Statements</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_7">Item 2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_8">Item 3. Quantitative and Qualitative Disclosures about Market Risk</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">16</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_9">Item 4. Controls and Procedures</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">16</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Part&nbsp;II</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_10">Other Information</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">17</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_11">Item 1. Legal Proceedings</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">17</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_12">Item 1A. Risk Factors</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">18</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_13">Item 2. Unregistered Sales of Equity Securities and Use of Proceeds</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">36</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_14">Item 3. Defaults Upon Senior Securities</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">36</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_15">Item 4. Submission of Matters to a Vote of Security Holders</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">36</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_16">Item 5. Other Information</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">36</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_17">Item 6. Exhibits</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">36</FONT></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">
<A HREF="#tx56756_18">Signature </A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">38</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">2 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_1"></A>PART I. FINANCIAL INFORMATION </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_2"></A>ITEM&nbsp;1.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>CONDENSED CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_3"></A>NUVELO, INC. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>CONDENSED CONSOLIDATED BALANCE SHEETS </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>(unaudited) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="82%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>March&nbsp;31,<BR>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>December&nbsp;31,<BR>2007</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(In thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>ASSETS</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">37,968</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">32,061</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Marketable securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">43,200</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">65,506</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Collaboration receivables</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">834</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">588</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Other current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,458</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,831</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Total current assets</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">83,460</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">99,986</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Restricted cash</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Property and equipment, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">8,445</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">8,906</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Goodwill</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4,671</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4,671</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Other assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,110</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,120</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Total assets</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">103,686</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">120,683</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="top"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Accounts payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,393</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,307</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Accrued compensation and employee benefits</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,018</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,350</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Accrued clinical trial and drug manufacturing costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,059</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,232</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Current portion of deferred revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">15,250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">250</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Current portion of deferred rent</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,415</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,400</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Current portion of accrued facility exit costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,553</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,389</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Other current liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">501</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,259</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Total current liabilities</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">32,189</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">18,187</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Non-current portion of deferred revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,000</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">16,063</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Non-current portion of deferred rent</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,236</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,597</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Non-current portion of accrued facility exit costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">12,769</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">13,098</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Other liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">869</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">79</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Total liabilities</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">52,063</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">53,024</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Stockholders&#146; equity:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Preferred stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Common stock</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">53</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">53</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Additional paid-in capital</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">540,403</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">538,070</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Accumulated other comprehensive income</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">88</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">49</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Accumulated deficit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(488,921</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(470,513</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Total stockholders&#146; equity</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">51,623</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">67,659</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2"><B>Total liabilities and stockholders&#146; equity</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">103,686</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">120,683</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">See accompanying notes to condensed consolidated financial statements. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">3 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_4"></A>NUVELO, INC. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>(unaudited) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="76%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Three Months Ended<BR>March&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2008&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2007&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(In&nbsp;thousands,&nbsp;except&nbsp;per&nbsp;share&nbsp;data)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Contract revenues</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">63</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">910</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Operating expenses:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Research and development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11,518</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">12,725</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">General and administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4,009</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,366</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Restructuring</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,470</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Facility exit charge</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,472</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Total operating expenses</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">19,469</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">18,091</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Operating loss</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(19,406</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(17,181</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Interest income, net</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">998</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,832</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Net loss</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(18,408</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(15,349</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Basic and diluted net loss per share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(0.34</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(0.29</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Weighted average shares used in computing basic and diluted net loss per share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">53,456</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">53,252</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">See accompanying notes to condensed consolidated financial statements. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_5"></A>NUVELO, INC. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>(unaudited) </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="80%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2008&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2007&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(In thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Cash flows from operating activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Net loss</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(18,408</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(15,349</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Adjustments to reconcile net loss to net cash used in operating activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Depreciation and amortization</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">589</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">586</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Stock-based compensation expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,238</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,231</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Non-cash facility exit charge and accretion expense</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,869</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">526</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Other non-cash items</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:5.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Changes in operating assets and liabilities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Collaboration receivables</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(246</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,248</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Other current assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">373</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,357</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Other assets</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">10</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">212</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Accounts payable</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">86</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(4,905</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Accrued compensation and employee benefits</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(332</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,359</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Accrued clinical trial and drug manufacturing costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(173</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,334</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Deferred revenue</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(63</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(910</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Deferred rent</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(346</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(332</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Accrued facility exit costs</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,034</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(1,968</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:7.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Other current and non-current liabilities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">44</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(179</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:9.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Net cash used in operating activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(16,393</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(17,177</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Cash flows from investing activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Maturities of marketable securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">47,908</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">48,932</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Purchases of marketable securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(25,563</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(24,100</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Purchases of property and equipment</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(128</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(218</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:9.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Net cash provided by investing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">22,217</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">24,614</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Cash flows from financing activities:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Proceeds from issuance of common stock under employee stock purchase plan</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">95</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">166</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Payments on bank loans and capital lease obligations</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(395</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Payments on related party line of credit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(688</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:9.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Net cash provided by (used in) financing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">83</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(917</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Net increase in cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,907</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,520</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Cash and cash equivalents at beginning of period</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">32,061</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">60,335</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Cash and cash equivalents at end of period</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">37,968</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">66,855</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">See accompanying notes to condensed consolidated financial statements. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_6"></A>NUVELO, INC. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>March&nbsp;31, 2008 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>(Unaudited) </B>
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>1. Basis of Presentation and Significant Accounting Policies </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I>Basis of Presentation </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The accompanying unaudited condensed consolidated financial statements have been prepared by
Nuvelo, Inc. (&#147;Nuvelo,&#148; or the &#147;Company&#148;) in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying financial information is unaudited but includes all adjustments (consisting only of normal recurring
adjustments) that the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The condensed consolidated balance sheet as of December&nbsp;31, 2007 is derived from
the Company&#146;s audited financial statements. Certain prior period amounts have been reclassified to conform to the current period&#146;s presentation, including other current liabilities in the condensed consolidated balance sheets and
statements of cash flows. The results of operations for the interim period shown herein are not necessarily indicative of operating results expected for the entire year. For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company&#146;s Annual Report on Form 10-K for the year ended December&nbsp;31, 2007. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The unaudited
condensed consolidated financial statements include the accounts of Nuvelo, Inc. and Hyseq Diagnostics, Inc., Nuvelo&#146;s wholly owned and inactive subsidiary. All significant inter-company transactions and accounts have been eliminated on
consolidation. Nuvelo is a biopharmaceutical company engaged in the discovery, development and commercialization of novel drugs for acute cardiovascular disease, cancer and other debilitating medical conditions. </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I>Use of Estimates </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Conformity with GAAP
requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent amounts. The Company bases its estimates on historical experience and on assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for the judgments made about the carrying values of assets and liabilities that are not readily apparent from other sources. Future results may differ
from these estimates. The Company believes significant judgment is involved in evaluating whether alternative future use exists for materials and equipment acquired for use in research and development, in estimating goodwill and long-lived asset
impairment, facility exit costs, clinical trial accruals, stock-based compensation, income taxes and in determining revenue recognition. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I>Liquidity
and Concentration Risk </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Company&#146;s primary sources of liquidity are from financing activities and collaboration receipts.
The Company plans to continue to raise funds through additional public and/or private offerings and collaboration activities in the future. The primary use of capital has been to fund operating activities, including research, clinical development
and drug manufacturing expenses, license payments and spending on capital items. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I>Fair Value Disclosures </I></B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">On January&nbsp;1, 2008, the Company adopted FASB Statement of Financial Accounting Standards No.&nbsp;157, &#147;<I>Fair Value Measurements</I>&#148;
(SFAS 157). SFAS 157 establishes a common definition for fair value to be applied to U.S. GAAP requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. In February
2008, the FASB issued FASB Staff Position No.&nbsp;FAS 157-2, <I>&#147;Effective Date of FASB Statement No.&nbsp;157&#148;</I> (FSP 157-2), which delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except
items that are recognized or disclosed at fair value on a recurring basis (at least annually), until fiscal years beginning after November&nbsp;15, 2008. The implementation of SFAS&nbsp;157 for financial assets and financial liabilities did not have
a material impact on our consolidated financial position and results of operations. The Company is currently assessing the impact of adopting SFAS 157 for nonfinancial assets and nonfinancial liabilities on its financial position and results of
operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (exit price). SFAS 157 classifies the inputs used to measure fair value into the following hierarchy: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">Level 1 &#150; Unadjusted quoted prices in active markets for identical assets or liabilities </FONT></P></TD></TR></TABLE> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">6 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">Level 2 &#150; Unadjusted quoted prices in active markets for similar assets or liabilities; unadjusted quoted prices for identical or similar assets or liabilities
in markets that are not active; or inputs other than quotes prices that are observable for the asset or liability </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">Level 3 &#150; Unobservable inputs for the asset or liability </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">The following table represents the Company&#146;s fair value hierarchy for its financial assets (cash equivalents and marketable securities) measured at fair value on a recurring basis as of March&nbsp;31, 2008 (in
thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="75%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Level 1</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Level 2</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Level&nbsp;3</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Total</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Money market funds</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">23,374</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">23,374</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Corporate debt securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">47,050</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">47,050</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Asset-backed securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,005</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,005</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">U.S. government agency securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,976</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3,976</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">23,374</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">57,031</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">80,405</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Money market funds, which are expected to maintain a net asset value of $1 per share, are
categorized in Level 1 of the fair value hierarchy. Other marketable debt securities, including corporate debt, asset-backed and U.S. government agency securities, are categorized in Level 2 of the fair value hierarchy. The fair value of these
securities is generally based on pricing models which take into consideration market prices of identical or similar securities from multiple sources and the securities&#146; accreted balance on the reporting day. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In February&nbsp;2007, the FASB issued Statement of Financial Accounting Standards No.&nbsp;159, &#147;<I>The Fair Value Option for Financial Assets and
Financial Liabilities</I>&#148; (SFAS 159). SFAS 159 allows entities to voluntarily choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently required to be measured at
fair value. The effective date for the Company is January&nbsp;1, 2008. To date, the Company has not elected this fair value option for any assets or liabilities. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>2. Net Loss Per Share </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Company has computed net loss per common share according to Statement of Financial Accounting
Standards No.&nbsp;128, <I>&#147;Earnings Per Share,&#148; </I>which requires disclosure of basic and diluted earnings per share. Basic net loss per share is computed using the weighted-average number of common shares outstanding during the period.
Diluted net loss per share reflects the potential dilution of securities by adding other potential common shares to the weighted-average number of common shares outstanding during the period, if dilutive. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In calculating diluted net loss per share, the Company excluded the following outstanding shares of common stock equivalents, as the effect would be
anti-dilutive (in thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="87%"></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="2%"></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="3" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>March&nbsp;31,</B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>2007</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Stock options and restricted stock units</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,196</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">9,077</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Warrants</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">850</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,096</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">7,046</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">10,173</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">7 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>3. Comprehensive Loss </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">The components of comprehensive loss for each period presented, net of any related tax effects, are as follows (in thousands): </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="78%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;2008&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;2007&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Net loss, as reported</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(18,408</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(15,349</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Change in unrealized gain (loss) on hedging instruments</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Change in unrealized gain (loss) on available-for-sale securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">39</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Comprehensive loss</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(18,369</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(15,362</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>4. Stock-based Compensation </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Stock-based compensation expense related to employee stock options, restricted stock units and employee stock purchase plan purchase rights was as follows (in thousands): </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="78%"></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="7%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="5" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;2008&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;2007&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Research and development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">222</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,033</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">General and administrative</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">779</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,193</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Restructuring</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,237</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Total</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,238</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2,226</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Stock-based compensation expense related to non-employees was negligible in these periods.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Company has not recognized, and does not expect to recognize in the near future, any tax benefit related to employee stock-based
compensation expense and, as a result, a full valuation allowance is applied to this deferred tax asset. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The fair values of employee stock
options granted under the Company&#146;s stock option plans during the periods presented were estimated at the date of grant using the Black-Scholes model with the following assumptions and had the following estimated weighted-average grant date
fair values per share: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="78%"></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="9%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Three&nbsp;Months&nbsp;Ended&nbsp;March&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;2008&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>&nbsp;&nbsp;&nbsp;&nbsp;2007&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Expected term</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4.63&nbsp;years</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4.95&nbsp;years</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Expected volatility</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">0.95</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">0.87</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Risk-free interest rate</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2.75</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">4.65</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">%</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Expected dividend yield</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&#151;&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Weighted-average grant date fair value per share</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1.12</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2.48</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Company granted options to purchase 1,205,800 and 1,318,350 shares of common stock in the
three months ended March&nbsp;31, 2008 and 2007, respectively. Generally, stock options become exercisable at a rate of 25%&nbsp;per year for a period of four years from the date of grant and have a maximum term of 10 years. Of the options granted
in the three months ended March&nbsp;31, 2007, 1,307,750 options vest ratably over a period of three years from the date of grant. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The
Company terminated two executives in connection with its reduction in force announced in March 2008 (see Note 5, Restructuring). The two former executives were entitled to a 12-month acceleration in vesting of their options at the time of their
termination. The Company recorded $1.2 million of stock-based compensation expense as a result of this acceleration in vesting of these options and classified this expense as part of restructuring expense. </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>5. Restructuring </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">On March&nbsp;17, 2008, the Company
announced its decision to discontinue alfimeprase clinical development and restructure to make additional resources available for its other research and development programs. In connection with the restructuring, the Company reduced its workforce by
approximately 19 percent and recorded a restructuring expense of $2.5 million, including $1.3&nbsp;million of termination benefits and $1.2 million of non-cash stock-based compensation expense. As of March&nbsp;31, 2008, $1.0&nbsp;million of
termination benefits remained unpaid and were classified under accrued compensation and employee benefits in the condensed consolidated balance sheet. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">8 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In connection with the restructuring in August 2007, the Company recorded $1.4 million of termination
benefits, of which $1.0&nbsp;million was paid in 2007 and $0.2 million in the three months ended March&nbsp;31, 2008. The remaining balance of $0.2 million as of March&nbsp;31, 2008 was classified under accrued compensation and employee benefits in
the condensed consolidated balance sheet. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>6.&nbsp;Facility Exit Costs </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">The Company currently has a lease commitment for a 139,000-square-foot facility at 985 Almanor Avenue, Sunnyvale, California, which expires on May&nbsp;30, 2011. In September 2005, Nuvelo relocated the Company&#146;s
headquarters to a facility located at 201 Industrial Road, San Carlos, California. Through December 2006, the Company retained the Sunnyvale facility as a storage location. In December 2006, the Company approved a plan to exit the Sunnyvale facility
and restore the building for potential sublease. On December&nbsp;31, 2006, the Company exited the Sunnyvale facility and accrued $26.6 million to reflect the estimated present value of future lease-related payments less estimated net income from
sublease rental. The future lease-related payments are scheduled to be made periodically until the lease expires. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The balance of accrued
facility exit costs represents the fair value of the lease liability based on assumptions regarding the vacancy period, sublease terms, and the probability of subleasing this space. The estimates and assumptions are re-evaluated each quarter and are
based upon current market data, including vacancy rates and lease activities for similar facilities within the area. As of March&nbsp;31, 2008, the Company determined that the likelihood of subleasing the Sunnyvale facility during the remainder of
the lease term has become remote and, therefore, recorded a $1.5 million charge to reflect such change in the sublease assumption. The charge increased the net loss per share by $0.03 for the three months ended March&nbsp;31, 2008. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The following table summarizes the activity related to facility exit costs liabilities for the three months ended March&nbsp;31, 2008 (in thousands):
</FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="90%"></TD>
<TD VALIGN="bottom" WIDTH="5%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Balance as of December&nbsp;31, 2007</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">20,487</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Amounts paid during the period</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(2,034</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Non-cash accretion</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">397</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Change in fair value due to change in sublease assumption</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1,472</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Balance as of March&nbsp;31, 2008</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">20,322</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The non-cash accretion totaling $0.4 million and $0.5 million was included in general and
administrative expenses for the three months ended March&nbsp;31, 2008 and 2007, respectively. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Company has also recorded a $0.8
million facility restoration obligation related to the Sunnyvale facility. This obligation was classified as other current liabilities as of December&nbsp;31, 2007 and was reclassified to other long-term liabilities as of March&nbsp;31, 2008, as the
Company currently expects to complete the facility restoration in 2011. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>7. Goodwill </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%;padding-bottom:3px;line-Height:95%; vertical-align:top"><FONT FACE="Times New Roman" SIZE="2">The Company tests goodwill for impairment using a fair value approach at the reporting unit level
on an annual basis or when events indicate that the carrying value of the asset may be impaired in accordance with Statement of Financial Accounting Standards No.&nbsp;142, &#147;<I>Goodwill and other Intangible Assets</I>,&#148; (SFAS 142).
Consistent with the determination that the Company has only one reporting segment, it has determined that there is only one reporting unit and, therefore, goodwill is tested at the entity level. The Company has elected October&nbsp;31</FONT><FONT
FACE="Times New Roman" SIZE="1"><SUP>st</SUP></FONT><FONT FACE="Times New Roman" SIZE="2"> as its measurement date. The Company completed its last annual goodwill tests as of October&nbsp;31, 2007, and no impairments were recognized. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">SFAS 142 requires a two-step test for goodwill impairment. In the first step, the Company compares the fair value of the Company to its carrying value.
The Company bases its fair value on its market capitalization, which is based on quoted market prices of its common stock taking into account other factors that may affect the fair value of the Company as a whole. If the fair value of the Company
exceeds the carrying value of its net assets, goodwill is not impaired and the Company is not required to proceed to the second step of the impairment test. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">In the first quarter of 2008, the Company performed an additional goodwill impairment test due to the significant decline of its stock price subsequent to the announcement on March&nbsp;17, 2008 (see Note 5,
Restructuring). Significant judgment is required to evaluate the fair value of the Company, as quoted market prices of the Company&#146;s common stock and </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">9 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">consequently market capitalization may experience significant fluctuations in reaction to disclosures of new information about the Company. Based on the
increases in the price of the Company&#146;s common stock after the March&nbsp;17, 2008 announcement and through the date of this filing, management concluded that the market capitalization following the initial market reaction to the announcement
does not provide a good indication of the Company&#146;s fair value. Accordingly, management concluded that the carrying value of the net assets currently does not exceed the Company&#146;s fair value and consequently, goodwill is not impaired. The
Company will continue to monitor its market capitalization and evaluate its goodwill for potential impairment in future periods. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>8. Agreements with
Bayer </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In June 2007, the Company and Bayer Healthcare AG (Bayer) terminated their January 2006 license and collaboration agreement for
the development and commercialization of alfimeprase. As part of the termination agreement with Bayer, the Company agreed to waive Bayer&#146;s obligation to provide Nuvelo 12 months&#146; notice of termination in consideration of Bayer&#146;s
agreement to pay Nuvelo a lump sum of $15.0 million. Nuvelo also granted Bayer the option to reacquire rights to alfimeprase upon the initiation of a pivotal stroke trial or upon Nuvelo&#146;s public announcement that it is discontinuing further
development of alfimeprase in the stroke indication. The notice period during which Bayer may exercise the option begins upon the Company making certain information available to Bayer and lasts for 30 days after delivery of the information.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Company announced its decision to discontinue alfimeprase clinical development on March&nbsp;17, 2008 (see Note 5, Restructuring) and
provided the information to Bayer as required by the termination agreement in April 2008. The $15.0 million termination payment, which had been recorded as deferred revenue, is expected to be recognized as revenue in May 2008 upon the expiration of
the notice period. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>9. Segment Information </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">The Company is engaged in the discovery, development and commercialization of novel acute cardiovascular and cancer therapies. The Company has only one reportable segment and, therefore, all segment-related financial information required by
Statement of Financial Accounting Standards No.&nbsp;131,<I> &#147;Disclosures About Segments of an Enterprise and Related Information,&#148;</I> is included in the condensed consolidated financial statements. The reportable segment reflects the
Company&#146;s structure, reporting responsibilities to the chief executive officer and the nature of the products under development. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">10 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_7"></A>ITEM&nbsp;2.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS </B></FONT></TD></TR></TABLE> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><I>This Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations contains &#147;forward-looking statements&#148; as
defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words including &#147;will,&#148; &#147;anticipate,&#148; &#147;believe,&#148; &#147;intends,&#148; &#147;estimates,&#148;
&#147;expect,&#148; &#147;should,&#148; &#147;may,&#148; &#147;potential&#148; and similar expressions. Such statements are based on management&#146;s current expectations and involve risks and uncertainties. Actual results and performance could
differ materially from those projected in the forward-looking statements as a result of many factors discussed herein and elsewhere including, in particular, those factors described under the &#147;Risk Factors&#148; set forth below, and in our
other periodic reports filed from time to time with the Securities and Exchange Commission, or SEC. Actual results and performance could also differ materially from time to time from those projected in our filings with the SEC. </I></FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Overview </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We are a biopharmaceutical company
dedicated to improving the lives of patients through the discovery, development and commercialization of novel drugs for acute cardiovascular disease, cancer and other debilitating medical conditions. Our development pipeline includes NU172, a
direct thrombin inhibitor in Phase 1 development for use as a short-acting anticoagulant during medical or surgical procedures, and preclinical candidate NU206, a recombinant, secreted protein for the potential treatment of chemotherapy/radiation
therapy-induced mucositis and inflammatory bowel disease. In addition, we have research programs in leukemia therapeutic antibodies and Wnt signaling pathway therapeutics to further expand our pipeline and create additional partnering and licensing
opportunities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">On March&nbsp;17, 2008, we announced that data from our alfimeprase Phase 2 program in catheter occlusion (CO), known as
SONOMA-3, did not show sufficient improvement in catheter opening at the higher dose and concentration evaluated in the study to meet the desired target product profile. As a result, we ended further clinical development of alfimeprase, including
the programs in CO and acute ischemic stroke, and restructured the company to make additional resources available for our other research and development programs. In connection with the restructuring, we reduced our workforce by approximately 19
percent and recorded a restructuring expense of $2.5 million, including $1.3 million of termination benefits and $1.2 million of non-cash stock-based compensation expense. We expect the reduction in workforce and the discontinuance of alfimeprase to
result in reduced operating expenses in 2008 of approximately $47.0 to $52.0 million, which include restructuring and facility exit charges totaling $4.0 million, as compared to the guidance we provided in the February 2008 of $55.0 to $60.0
million. We also expect net cash used in operating expenses for 2008 of approximately $43.0 to $48.0 million, as compared to the guidance we provided in February 2008 of $50.0 to $55.0 million. </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT FACE="Times New Roman" SIZE="2"><B><I>NU172 </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">NU172 is an aptamer,
which is a single-stranded nucleic acid that binds target molecules in a manner conceptually similar to antibodies, that was designed to directly inhibit thrombin&#146;s ability to stimulate blood clot formation in the setting of medical or surgical
procedures where human blood is exposed to foreign materials. Specifically, NU172 is being studied for use as a potential short-acting anticoagulant during procedures such as coronary artery bypass graft surgery and percutaneous interventions. Data
from early animal models suggest that NU172 has the potential for predictable anticoagulant effects, rapid onset and offset of action, and avoidance of heparin-induced thrombocytopenia. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">On April&nbsp;29, 2008, we announced results from the Phase 1 proof-of-concept trial of NU172, demonstrating that the thrombin-inhibitor achieved rapid
onset and offset of anticoagulation after a single bolus dose with a favorable safety profile. The Phase 1 trial examined the safety, tolerability and pharmacokinetics of escalating bolus doses of NU172 in normal, healthy volunteers. In the trial,
NU172 produced dose-dependent increases in anticoagulation, measured by activated clotting time (ACT). The 2.00 mg/kg bolus dose of NU172 achieved an average ACT of 415 seconds. Upon withdrawal of NU172, the ACT showed a rapid return toward baseline
with a plasma half-life of NU172 of approximately 10 minutes. No serious adverse events occurred in the trial. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We plan to initiate a Phase
1b trial in the second quarter of this year to assess the safety, tolerance, pharmacokinetics and pharmacodynamics of bolus followed by escalating infusion doses of NU172 in healthy volunteers. Top-line data from this study is expected in the third
quarter of 2008. If the data from the Phase 1b trial are consistent with the results of the Phase 1a trial, we anticipate initiating a Phase 2 study in medical or surgical procedures in the fourth quarter of 2008 or first quarter of 2009.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We are developing NU172 through a collaboration with Archemix Corporation, under which we are responsible for development and worldwide
commercialization of NU172 and other potential product candidates that may be developed under this collaboration. </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">11 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">In February 2008, we paid Archemix a $1.0 million milestone fee in connection with the dosing of the first patient in the Phase 1 trial for NU172. If we
enroll the first patient in a Phase 2 trial of NU172, which may occur within the next 12 months, we are obligated to pay Archemix a $3.0 million milestone fee. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT
FACE="Times New Roman" SIZE="2"><B><I>NU206 </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">NU206 (R-spondin1) is a recombinant, secreted protein that acts as a highly specific
regulator of the gastrointestinal (GI) epithelial cell function as demonstrated in early animal studies. Preclinical studies suggest it can promote growth and repair in animal models of radiation or cancer chemotherapy induced gastrointestinal
injury, as well as in animal models of inflammatory bowel disease. We expect to enroll the first patient in our Phase 1 trial of NU206 in patients with cancer chemotherapy induced mucositis in the second quarter of 2008. In order to accelerate the
development of NU206, we will also be conducting trials in normal healthy volunteers and expect to initiate this Phase 1 single ascending dose trial in the third quarter of 2008. Top-line data from the healthy volunteer trial is expected in the
second half of 2008, which will be followed by the initiation of a second healthy volunteer trial, a Phase 1b multiple ascending dose trial, in the fourth quarter of 2008 or the first quarter of 2009. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In March 2005, we entered into a collaboration agreement with the Kirin Pharma Company, Limited for the development and commercialization of NU206. Under
this agreement, all operating expenses and any profits related to the development and commercialization of NU206 are being shared 60 percent by us and 40 percent by Kirin. </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px; margin-left:2%"><FONT FACE="Times New Roman" SIZE="2"><B><I>Research Programs </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In addition
to our clinical and development-stage drug candidates, we have active research programs in leukemia therapeutic antibodies and Wnt signaling pathway therapeutics. Through these programs, we plan to further expand our pipeline and create additional
partnering and licensing opportunities. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B><I>Leukemia Therapeutic Antibody Program </I></B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We are developing monoclonal antibody (mAbs) candidates discovered by our leukemia therapeutic antibody program. We are completing preclinical studies
with a series of chimeric mAbs to select drug candidates for the potential treatment of chronic lymphocytic leukemia (CLL) and acute mylogenous leukemia (AML). </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><B><I>Wnt Therapeutics Program </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We have identified several drug candidates as part of our Wnt
therapeutics program. The Wnt signaling pathway is critical for regulating cell growth and differentiation during homeostasis and pathogenesis. We have developed a comprehensive approach to target key receptors and secreted proteins that modulate
the Wnt pathway. In addition, we have produced mAbs and secreted recombinant proteins with biological activity in cellular assays and animal disease models. Potential indications include: Inflammatory Bowel Disease (IBD), peptic ulcers, mucositis,
wound healing, and cancer, as well as bone disorders and osteolytic lesions caused by osteoarthritis and multiple myeloma. Our lead candidate in this program is NU206, a Wnt regulator also known as R-Spondin1 (RSpo1), which we are developing in
collaboration with Kirin. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Results of Operations </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B><I>Contract Revenues </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Contract revenues were $0.1 million in the three months ended March&nbsp;31, 2008, compared to
$0.9 million in the corresponding period of 2007. The collaboration agreement with Bayer HealthCare AG (Bayer) was terminated in June 2007 and, therefore, there was no amortization of the related $50 million up-front license fee in 2008. The
up-front license fee from Bayer had been recorded as deferred revenue upon receipt in January 2006 and was being recognized on a straight-line basis over the performance period under the agreement, originally estimated to be through September 2020.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We expect the quarterly amortization of existing deferred revenue for the remainder of 2008 to be $63,000 due to the ongoing revenue
recognition from an up-front license fee received from Kirin under the NU206 collaboration agreement. We expect to recognize as revenue in May 2008 the $15.0 million that was received from Bayer in connection with the termination of the
collaboration agreement in June 2007. The $15.0 million, which had been recorded as deferred revenue, is to be recognized as revenue upon the expiration of the notice period, as defined in the termination agreement with Bayer. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our revenues may vary significantly from quarter to quarter as a result of any licensing or collaboration activities, or the termination of existing
collaborations. In the future, we may not be able to maintain existing collaborations, obtain additional collaboration partners or obtain revenue from other sources, which could have a material adverse effect on our revenues, operating results and
cash flows. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">12 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I>Research and Development Expenses </I></B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Research and development (R&amp;D) expenses primarily consist of clinical trial and drug manufacturing costs, R&amp;D personnel costs, including related
stock-based compensation expense, license, collaboration and royalty fees and allocated facilities expenses. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">R&amp;D expenses for our
significant programs were as follows for the periods indicated (including up-front fees and collaboration cost-sharing credits, and excluding occupancy costs and stock-based compensation expense): </FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="80%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ROWSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Since<BR>Inception</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="5" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Three&nbsp;Months&nbsp;Ended<BR>March&nbsp;31,</B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP> <P STYLE="border-bottom:1px solid #000000;width:30pt"><FONT FACE="Times New Roman" SIZE="1"><B>Program</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>2007</B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="8" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(In millions)</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Alfimeprase</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">123.0</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3.6</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">3.9</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">NU172</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">15.4</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">2.3</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1.9</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">NU206</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">11.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">1.5</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">0.7</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">R&amp;D expenses were $11.5 million for the three months ended March&nbsp;31, 2008, compared to
$12.7 million for the corresponding period in 2007, net of cost sharing credits billable to collaboration partners of $0.8 million and $3.3 million, respectively. The decrease of $1.2 million in 2008 was primarily attributed to the following: a $0.3
million decrease in alfimeprase development expenses, $1.1 million decrease in expenses related to rNAPc2, of which the development was suspended in 2007, and a reduction of $0.8 million in employees&#146; stock-based compensation expense, partially
offset by increases in expenses related to NU172 of $0.4 million and NU206 of $0.8 million. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The increase in NU172-related expenses in 2008
was primarily due to the initiation of the Phase 1 trial in January 2008. The increase in NU206-related expenses in 2008 was primarily related to increased expenditures in manufacturing and toxicology studies for NU206. During the remainder of 2008,
we expect NU172- and NU206-related expenses to increase from 2008 first quarter levels as we advance these drug candidates through clinical development. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">In March 2008, we decided to end further clinical development in alfimeprase. We expect to continue to incur expenses in the remainder of 2008 to wind down all programs in alfimeprase but at a level significantly
lower than the current level. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The timing, cost of completing the clinical development of any product candidate, and any potential future
product revenues will depend on a number of factors, including the disease or medical condition to be treated, clinical trial design and endpoints, availability of patients to participate in trials and the relative efficacy of the product versus
treatments already approved. Due to these uncertainties, we are unable to estimate the length of time or the costs that will be required to complete the development of these product candidates. </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I>General and Administrative Expenses </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">General
and administrative (G&amp;A) expenses primarily consist of G&amp;A personnel, including related stock-based compensation expense, consulting and professional fees, insurance, facilities and depreciation expenses, and various other administrative
costs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">G&amp;A expenses were $4.0 million for the three months ended March&nbsp;31, 2008, compared to $5.4 million for the corresponding
period in 2007. The decrease of $1.4 million in 2008 was primarily related to a $1.4 million decrease in personnel-related expenses as a result of a reduction in headcount, partially offset by an increase in consulting and professional fees of $0.3
million in total. We expect G&amp;A expenses in the remainder of 2008 to be consistent with or slightly lower than the current level. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I>Facility Exit
Charge </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In December 2006, we exited the Sunnyvale facility and recorded a liability for the remaining lease obligations, less
estimated sublease income, for the remainder of the lease term. As of March&nbsp;31, 2008, we determined that the likelihood of subleasing the Sunnyvale facility has become remote and, accordingly, recorded a $1.5 million charge reflecting the
change in our sublease assumption. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">13 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I>Interest Income, Net </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Interest income, net, was $1.0 million for the three months ended March&nbsp;31, 2008, compared to $1.8 million in the corresponding period of 2007. The decrease was primarily due to declining balances in cash, cash
equivalents and marketable securities and a substantial reduction in the yield on cash equivalents and marketable securities. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I>Assessment of Goodwill
Impairment </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In the first quarter of 2008, we performed a goodwill impairment test due to the significant decline of our stock price
subsequent to the March&nbsp;17, 2008 announcement discussed above. As a result of this impairment test, we determined that the goodwill was not impaired (see Note 7 to the Condensed Consolidated Financial Statements). We will continue to evaluate
goodwill for potential impairment. An impairment of goodwill may have a material adverse effect on our financial conditions and results of operations. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Liquidity and Capital Resources </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I>Cash and Cash Equivalents, Marketable Securities and Restricted Cash </I></B></FONT></P> <P
STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="79%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>March&nbsp;31,<BR>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>December&nbsp;31,<BR>2007</B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="5" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(In thousands)</B></FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">37,968</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">32,061</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Marketable securities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">43,200</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">65,506</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Restricted cash</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,000</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,000</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;87,168</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">103,567</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">As of March&nbsp;31, 2008, we had total cash and cash equivalents, marketable securities and
restricted cash of $87.2 million, as compared to $103.6 million as of December&nbsp;31, 2007. The decrease of $16.4 million resulted primarily from operating expenditures during the period. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">As of March&nbsp;31, 2008, all of our investments in marketable securities have been classified as available-for-sale securities, as defined by Statement
of Financial Accounting Standards No.&nbsp;115,<I> &#147;Accounting for Certain Investments in Debt and Equity Securities.&#148;</I> These securities are recorded at their fair value and consist of corporate debt, U.S. government agency and
asset-backed securities. We make our investments in accordance with our investment policy. The primary objectives of our investment policy are liquidity, safety of principal and diversity of investments. </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I>Cash Flows from Operating, Investing and Financing Activities </I></B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="92%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="82%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>Three Months Ended<BR>March&nbsp;31,</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>2008</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="2" ALIGN="center" STYLE="border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="1"><B>2007</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" COLSPAN="6" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>(In thousands)</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Net cash provided by (used in):</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Operating activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(16,393</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(17,177</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Investing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">22,217</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">24,614</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Financing activities</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">83</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">(917</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">)</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Net increase in cash and cash equivalents</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">5,907</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">6,520</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size:1px">
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom">&nbsp;&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD VALIGN="bottom">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD VALIGN="bottom" STYLE="border-top:3px double #000000">&nbsp;</TD>
<TD>&nbsp;</TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Net cash used in operating activities was $16.4 million in the three months ended March&nbsp;31,
2008, compared to $17.2 million in the corresponding period of 2007. The decrease of $0.8 million was primarily due to an overall reduction in R&amp;D and G&amp;A expenses in the 2008 period. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Net cash provided by investing activities was $22.2 million in the three months ended March&nbsp;31, 2008, compared to $24.6 million in the corresponding
period of 2007. The decrease of $2.4 million was primarily due to a decrease in maturities, net of purchases, of marketable securities. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Net cash provided by financing activities was $0.1 million in the three months ended March&nbsp;31, 2008, compared to net used in financing activities of $0.9 million in the corresponding period of 2007. The change of $1.0 million was
primarily because we had no debt payments related to the bank loans and related party line of credit in 2008 as they were paid in full in the second half of 2007. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">14 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B><I>Sources and Uses of Capital </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Our primary sources of liquidity are from financing activities and collaboration receipts. We plan to continue to raise funds through additional public and/or private offerings and collaboration activities in the
future. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In August 2005, we entered into a Committed Equity Financing Facility (CEFF) with Kingsbridge Capital Ltd. (Kingsbridge), under
which Kingsbridge committed to purchase up to a total of $75.0 million of our common stock, not to exceed 8,075,000 shares, within a three-year period, subject to certain conditions and limitations. Under the CEFF, we sold 1,839,400 shares for gross
proceeds of $14.4 million in the fourth quarter of 2005, and a further 568,247 shares for gross proceeds of $10.0 million in October 2006, and may sell the balance of 5,667,353 shares to Kingsbridge through the expiration of the CEFF in October
2008, limited to the remaining $50.6 million available under the facility, and subject to certain other limitations, which, among others, include a minimum volume weighted average price for our common stock of $2.50 per share. The closing price of
our stock on March&nbsp;31, 2008 was $0.71. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In July 2006, we entered into a collaboration agreement with Archemix. Under the agreement,
Archemix is responsible for the discovery of short-acting aptamers targeting the coagulation cascade for use in acute cardiovascular procedures, and we are responsible for development and worldwide commercialization of these product candidates. If
we enroll the first patient in a Phase 2 trial of NU172, which may occur within the next 12 months, a $3.0 million milestone fee is payable to Archemix. In addition, we are obligated to purchase Archemix common stock having a value equal to the
lesser of $10.0 million or 15 percent of the total gross proceeds raised by Archemix in a qualified public offering of Archemix stock occurring within five years of the effective date of the collaboration agreement. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We have a $6.0 million letter of credit issued to the landlord of our Sunnyvale facility as required by the lease agreement of this facility, and the
letter of credit is being collateralized by a certificate of deposit of the same amount, which is recorded as restricted cash. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our primary
uses of capital resources to date have been to fund operating activities, including research, clinical development and drug manufacturing expenses, license payments, and spending on capital items. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under &#147;Part II,
Item&nbsp;1A. Risk Factors.&#148; We may not be able to secure additional financing to meet our funding requirements on acceptable terms, if at all. If we raise additional funds by issuing equity securities, substantial dilution to our existing
stockholders may result. If we are unable to obtain additional funds, we will have to reduce our operating costs and delay our research and development programs. We believe that we have adequate balance in cash, cash equivalents and marketable
securities to fund our operations for at least the next twelve months. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Critical Accounting Policies and Estimates </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">There have been no material changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K for the year ended
December&nbsp;31, 2007. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Off-Balance Sheet Arrangements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">We have not participated in any transactions with unconsolidated entities, such as special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Indemnifications </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In the ordinary
course of business, we enter into contractual arrangements under which we may agree to indemnify certain parties from any losses incurred relating to the services they perform on our behalf or for losses arising from certain events as defined within
the particular contract. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been insignificant. In addition, we have entered into indemnity agreements with
each of our directors and officers. Such indemnity agreements contain provisions, which are in some respects broader than the specific indemnification provisions contained in Delaware law. We also maintain an insurance policy for our directors and
executive officers insuring against certain liabilities arising in their capacities as such. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">15 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_8"></A>ITEM&nbsp;3.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">There have been no material changes in the reported interest rate risk or credit risk from those reported under &#147;Item&nbsp;7A, Quantitative and Qualitative Disclosures About Market Risk&#148; in our Annual Report on Form 10-K for the
year ended December&nbsp;31, 2007. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_9"></A>ITEM&nbsp;4.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>CONTROLS AND PROCEDURES </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We maintain disclosure
controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in
the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective at the reasonable assurance level. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We continue to review and improve the design and
effectiveness of our internal controls over financial reporting in order to remain in compliance with Section&nbsp;404 of the Sarbanes-Oxley Act of 2002. There has been no change in our internal controls during our fiscal quarter ended
March&nbsp;31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">16 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_10"></A>PART II. OTHER INFORMATION </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_11"></A>ITEM&nbsp;1.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>LEGAL PROCEEDINGS </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">On February&nbsp;9, 2007,
Nuvelo, Inc. and certain of our former and current officers and directors were named as defendants in a purported securities class action lawsuit filed in the United States District Court for the Southern District of New York. The suit alleges
violations of the Securities Exchange Act of 1934 related to the clinical trial results of alfimeprase, which we announced on December&nbsp;11, 2006, and seeks damages on behalf of purchasers of our common stock during the period between
January&nbsp;5, 2006 and December&nbsp;8, 2006. Specifically, the suit alleges that we misled investors regarding the efficacy of alfimeprase and the drug&#146;s likelihood of success. The plaintiff seeks unspecified damages and injunctive relief.
Three additional lawsuits were filed in the Southern District of New York on February&nbsp;16, 2007,&nbsp;March&nbsp;1, 2007 and March&nbsp;6, 2007, respectively. On April&nbsp;10, 2007, three separate motions to consolidate the cases, appoint lead
plaintiff, and appoint lead plaintiff&#146;s counsel were filed. On April&nbsp;18, 2007, we filed a motion to transfer the four cases to the Northern District of California. The Court granted our motion to transfer the cases to the Northern District
of California in July 2007. Plaintiffs have filed motions for consolidation, lead plaintiff and lead plaintiff&#146;s counsel in the Northern District of California. Plaintiffs filed their consolidated complaint in the Northern District of
California on November&nbsp;9, 2007. We filed a motion to dismiss plaintiffs consolidated complaint on December&nbsp;21, 2007. Plaintiffs filed an opposition to our motion to dismiss on February&nbsp;4, 2008. The motion to dismiss the consolidated
complaint is still pending. We currently cannot determine the impact that this litigation will have on our business, results of operations or financial condition. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">On March&nbsp;19, 2007, we received a summons related to a derivative suit that had been filed in the Superior Court for California, San Mateo County, by an alleged individual stockholder of Nuvelo, purportedly on
behalf of Nuvelo against certain of Nuvelo&#146;s current and former officers and directors. The complaint alleges among other claims, that the defendants breached their fiduciary duties to Nuvelo by issuing or failing to prevent the issuance of
purportedly false and misleading statements between January&nbsp;5, 2006 and December&nbsp;11, 2006 relating to the clinical trial results of alfimeprase, which we announced on December&nbsp;11, 2006, and that certain defendants benefited from these
actions. On April&nbsp;18, 2007, we filed a demurrer to the complaint on the ground that plaintiff was not excused from issuing a demand to the board prior to filing the lawsuit. Plaintiffs filed oppositions to our demurrer, and we have subsequently
filed replies to Plaintiffs&#146; oppositions. The Court heard this motion on July&nbsp;30, 2007, and granted our demurrer, but also granted plaintiffs the opportunity to file an amended complaint. Plaintiffs filed an amended complaint on
October&nbsp;15, 2007. We filed our reply to their amended complaint on December&nbsp;6, 2007. The Court heard the motion on December&nbsp;17, 2007. On January&nbsp;2, 2008, the Superior Court for California, San Mateo County, entered final judgment
dismissing in its entirety, with prejudice, the second amended consolidated derivative complaint. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">On or about December&nbsp;6, 2001,
Variagenics, Inc. was sued in a complaint filed in the United States District Court for the Southern District of New York naming it and certain of its officers and underwriters as defendants. The complaint purportedly is filed on behalf of persons
purchasing Variagenics&#146; stock between July&nbsp;21, 2000 and December&nbsp;6, 2000, and alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended and Section&nbsp;10(b) of the Securities Exchange Act of 1934,
as amended, and Rule 10b-5 promulgated thereunder. The complaint alleges that, in connection with Variagenics&#146; July&nbsp;21, 2000 initial public offering, or IPO, the defendants failed to disclose additional and excessive commissions
purportedly solicited by and paid to the underwriter defendants in exchange for allocating shares of Variagenics&#146; stock to preferred customers and alleged agreements among the underwriter defendants and preferred customers tying the allocation
of IPO shares to agreements to make additional aftermarket purchases at predetermined prices. Plaintiffs claim that the failure to disclose these alleged arrangements made Variagenics&#146; registration statement on Form S-1 filed with the SEC in
July 2000 and the prospectus, a part of the registration statement, materially false and misleading. Plaintiffs seek unspecified damages. On or about April&nbsp;19, 2002, an amended complaint was filed which makes essentially the same allegations.
On or about July&nbsp;15, 2002, Variagenics and the individuals filed a motion to dismiss. We are involved in this litigation as a result of our merger with Variagenics in January 2003. On July&nbsp;16, 2003, Nuvelo&#146;s Board of Directors
approved a settlement proposal initiated by the plaintiffs. However, because of a recent court ruling, the settlement class, as defined in the settlement papers, is no longer feasible. While a new complaint has not been filed against us, there are
several &#147;focus&#148; cases against other issuers in which new complaints have been filed. Defendant issuers in the &#147;focus&#148; cases filed motions to dismiss the new complaints. On March&nbsp;26, 2008, the District Court issued an order
granting in part and denying in part the &#147;focus&#148; issuers motions to dismiss. The &#147;focus&#148; issuers had been advised that plaintiffs intended to file new complaints against us, but none have been filed yet. We believe that any
attorneys&#146; fees, loss or settlement payment with respect to this suit will be paid by our insurance provider. However, it is possible that we could be forced to incur material expenses in the litigation if the parties cannot achieve a
settlement, and, in the event of an adverse outcome, our business could be harmed. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">17 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="10%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_12"></A>ITEM&nbsp;1A.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>RISK FACTORS </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We operate in a rapidly changing
environment that involves a number of risks, some of which are beyond our control. The following discussion highlights some of these risks. Those risk factors that reflect substantive changes from the risk factors included in our Annual Report on
Form 10-K for the fiscal year ended December&nbsp;31, 2007 are marked with an asterisk(*). </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>RISKS RELATED TO OUR BUSINESS </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We may not be able to develop and commercialize any of our drug candidates successfully.* </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our clinical-stage drug candidate, alfimeprase, did not meet its primary endpoint in the first of two planned Phase 3 trials for the treatment of acute
peripheral arterial occlusion, or PAO, and in the first of two planned Phase 3 trials for the treatment of catheter occlusion, or CO. All clinical trials for alfimeprase were suspended in December 2006. We subsequently reported our decision to close
the suspended PAO trial. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In the second quarter of 2007, we reported our decision to pursue alfimeprase for the treatment of CO in a Phase
2 trial using a single, higher and more concentrated dose of alfimeprase, and dosed our first patient in that trial in August 2007. In the second quarter of 2007, we also reported our decision to pursue alfimeprase for the treatment of acute
ischemic stroke in a Phase 2 clinical trial, and dosed our first patient in that trial in December 2007. On March&nbsp;17, 2008, we announced that the data from our alfimeprase Phase 2 trial in CO did not show sufficient improvement in catheter
opening at the higher dose and concentration evaluated in the study to meet the desired target product profile. As a result, we ended further clinical development of alfimeprase, including the programs in CO and acute ischemic stroke. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In August 2007, we announced the suspension of our clinical development of our drug candidate, rNAPc2, for the treatment of metastatic colorectal cancer
and acute coronary syndromes. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In January 2008, we announced our enrollment of the first patient in a single-center, Phase 1 trial to
determine the safety, tolerability and pharmacokinetics of escalating bolus doses of NU172. In April 2008, we announced positive results from this Phase 1 trial, and we plan to launch a Phase 1b trial of bolus dosing followed by escalating infusion
doses of NU172 in the second quarter of 2008. We cannot predict whether we will be able to initiate and complete the Phase 1b trial, or whether it will be successful. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">In November 2007, we announced that we have successfully concluded our discussions with the FDA and now have regulatory clearance to begin clinical evaluation of NU206. We cannot predict whether we will be able to
successfully initiate a trial for NU206, and if we do, whether it will be successful. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">All of our other potential products and programs,
including our research programs in leukemia therapeutic antibodies and Wnt signaling pathway therapeutics, are currently in research or preclinical development, and revenues from the sales of any products may not occur for several years, if at all.
If we are unable to successfully develop and commercialize our products, our business, results of operations and financial condition will be affected in a materially adverse manner. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Our success is dependent on the proper management of our current and future business operations, and the expenses associated with them.* </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our business strategy requires us to manage our operations to provide for the continued development and potential commercialization of our drug
candidates. Our strategy also calls for us to undertake increased research and development activities, and to manage an increasing number of relationships with collaborators and other third parties, while simultaneously managing the expenses
generated by these activities. In August 2007, we announced a reduction of approximately 30% of our workforce, across our research, clinical development and administrative functions. This reduction in force was a part of our efforts to reduce our
operating expenses through prioritization of our development portfolio and streamlining our infrastructure. As a result of the reduction in force, we recorded a restructuring charge of approximately $2.3 million in the third quarter of 2007. On
March&nbsp;17, 2008, we announced the decision to discontinue alfimeprase clinical development and restructure to make additional resources available for our other research and development programs. As a result of the reduction in force, we recorded
a restructuring expense of $2.5 million in the first quarter of 2008. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We continue to believe that strict cost containment in the near term
is essential if our current funds are to be sufficient to allow us to continue our currently planned operations. If we are unable to effectively manage our current operations, we may not be able to implement our business strategy and our financial
condition and results of operations may be adversely affected. If we are unable to effectively manage our expenses, we may find it necessary to reduce our expenses through another reduction in our workforce, which could adversely affect our
operations. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">18 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We may merge with or acquire other companies or drug candidates, and our failure to receive the anticipated benefits
in these transactions could harm our business. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In January 2003, we merged with Variagenics, and we may merge with or acquire other
companies in the future. The success of any merger or acquisition depends, in part, on our ability to realize the anticipated synergies, cost savings and growth opportunities from integrating the business of the merged or acquired company with our
business. The integration of two independent companies is a complex, costly and time-consuming process. The difficulties of combining the operations of the companies and/or our subsidiary include, among others: </FONT></P> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">consolidating research and development operations; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">retaining key employees; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">consolidating corporate and administrative infrastructures; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">preserving the research and development and other important relationships of the companies; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">integrating and managing the technology of two companies; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">using the merged or acquired company&#146;s liquid capital and other assets efficiently to develop the business of the combined company;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">appropriately managing any liabilities of the acquired company; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">diverting management&#146;s attention from ongoing business concerns; and </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">coordinating geographically separate organizations. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">We cannot assure you that we will receive all of the anticipated benefits of any mergers or acquisitions, or that any of the risks described above will not occur. Our failure to receive anticipated benefits of, and
our exposure to inherent risks in, any such merger or acquisition transaction could significantly harm our business, financial condition and operating results. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>If we encounter difficulties enrolling patients in our clinical trials, our trials could be delayed or otherwise adversely affected. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Clinical trials for our drug candidates require that we identify and enroll a large number of patients with the disorder or condition under investigation. We may not be able to enroll a sufficient number of patients to complete our clinical
trials in a timely manner. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Patient enrollment is affected by factors including: </FONT></P> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">design of the protocol; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the size of the patient population; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">eligibility criteria for the study in question; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">perceived risks and benefits of the drug under study; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">availability of competing therapies, including the off-label use of therapies approved for related indications; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">efforts to facilitate timely enrollment in clinical trials; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the success of our personnel in making the arrangements with potential clinical trial sites necessary for those sites to begin enrolling patients;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">patient referral practices of physicians; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">availability of clinical trial sites; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">other clinical trials seeking to enroll subjects with similar profiles. </FONT></P></TD></TR></TABLE> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay or terminate ongoing or
planned clinical trials, either of which would have a negative effect on our business. Delays in enrolling patients in our clinical trials would also adversely affect our ability to generate product, milestone and royalty revenues, and could impose
significant additional costs on us or on our collaborators. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Our clinical trials for our products may not yield results that will enable us to further
develop our products and obtain the regulatory approvals necessary to sell them.* </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We, and our collaborators, will only receive
regulatory approval for our drug candidates if we can demonstrate in carefully designed and conducted clinical trials that the drug candidate is safe and effective. We do not know whether our </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">19 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">current or any future clinical trials will demonstrate sufficient safety and efficacy to obtain the requisite regulatory approvals or will result in
marketable products. Clinical trials are lengthy, complex and expensive processes with uncertain results. We have spent, and expect to continue to spend, significant amounts of time and money in the clinical development of our product candidates. It
will take us several years to complete our testing, and failure can occur at any stage of testing. The results we obtain in preclinical testing and early clinical trials may not be predictive of results that are obtained in later studies. We may
suffer significant setbacks in advanced clinical trials, even after promising results in earlier studies. For example, in December 2006, we announced that alfimeprase did not meet its primary endpoint in the first of two planned Phase 3 trials for
the treatment of acute PAO and in the first of two planned Phase 3 trials for the treatment of CO. In the second quarter of 2007, we reported our decision to close the suspended PAO trial. In March 2008, we announced that the data from our
alfimeprase Phase 2 program in CO did not show sufficient improvement in catheter opening at the higher dose and concentration evaluated in the study to meet the desired target product profile. As a result, we ended further clinical development of
alfimeprase, including the programs in CO and acute ischemic stroke. Based on results at any stage of clinical trials, we may decide to repeat or redesign a trial or discontinue development of one or more of our drug candidates. If we fail to
adequately demonstrate the safety and efficacy of our products under development, we will not be able to obtain the required regulatory approvals to commercialize our drug candidates, and our business, results of operations and financial condition
would be materially adversely affected. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In January 2008, we announced our enrollment of the first patient in a single-center, Phase 1
trial to determine the safety, tolerability and pharmacokinetics of escalating bolus doses of NU172. In April 2008, we announced positive results from this Phase 1 trial, and we plan to launch a Phase 1b trial of bolus dosing followed by escalating
infusion doses of NU172 in the second quarter of 2008. We cannot predict whether we will be able to initiate and complete the Phase 1b trial, or whether it will be successful. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Clinical trials are subject to continuing oversight by governmental regulatory authorities and institutional review boards, or IRBs, and must meet the
requirements of these authorities in the United States and in foreign countries, including those for informed consent and good clinical practices. We may not be able to comply with these requirements and the FDA, a similar foreign authority, an IRB,
or we may suspend or terminate clinical trials at any time. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Administering our drug candidates to humans may produce undesirable side
effects. These side effects could interrupt, delay or halt clinical trials of our drug candidates and could result in the FDA or other regulatory authorities denying approval of our drug candidates for any or all targeted indications. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">If clinical trials for a drug candidate are unsuccessful, we will be unable to commercialize the drug candidate. If one or more of our clinical trials
are delayed, we will be unable to meet our anticipated development timelines. Either circumstance could cause the market price of our common stock to decline. For example, in December 2006, after we announced that alfimeprase did not meet its
primary endpoint in Phase 3 trials for the treatment of PAO and a Phase 3 trial for CO, the closing price of our common stock was $4.05 on the day of the announcement, as compared to $19.55 on the trading day prior to the announcement. Similarly,
when we announced we were terminating all clinical development of alfimeprase in March 2008, the closing price of our common stock was $0.73 the day after the announcement, as compared to $1.36 prior to the announcement. </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>If we fail to maintain existing licenses, or fail to develop new collaborations, our business will be harmed.* </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The success of our business is dependent, in significant part, upon our ability to maintain current licensing and collaborative relationships, and to
enter into multiple new licenses and collaboration agreements. We also must manage effectively the numerous issues that arise from such arrangements and agreements. Management of our relationships with these third parties has required and will
require: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">a significant amount of our management team&#146;s time and effort; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">effective allocation of our and third-party resources to multiple projects; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">agreements with third parties as to ownership of proprietary rights and development plans, including clinical trials or regulatory approval strategy; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the recruitment and retention of management, scientific and other personnel. </FONT></P></TD></TR></TABLE> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In June 2007, we agreed to terminate our January 2006 collaboration with Bayer for the development and commercialization of alfimeprase. As part of our
terminated agreement with Bayer, we agreed to waive Bayer&#146;s obligation to provide us twelve months&#146; notice of termination in consideration of Bayer&#146;s agreement to pay us a lump sum of $15.0 million. We also granted Bayer the one-time
option to reacquire rights to alfimeprase upon the initiation of a pivotal stroke trial or upon our public announcement that we are discontinuing further development of alfimeprase in the stroke indications. </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">20 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">We announced the decision to discontinue alfimeprase clinical development in March 2008 and provided the information to Bayer as required by the termination
agreement in April 2008. Bayer&#146;s notice period expired in May 2008, without Bayer exercising its option to reacquire rights to alfimeprase. As a result of the termination of the Agreement, we continue to be responsible for all remaining costs
and expenses associated with alfimeprase. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In October 2004, we obtained worldwide rights to develop and commercialize alfimeprase from
Amgen in exchange for payment to Amgen of future development milestones and royalties. Future milestone payments under the license agreement could total as much as $35.0 million. Under our terminated agreement with Bayer, we retained sole
responsibility for making these payments to Amgen. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In February 2004, we entered into a license agreement with Dendreon relating to rNAPc2.
We have suspended our clinical development of rNAPc2, which could negatively impact our relationship and license with Dendreon. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In March
2005, we entered into a collaboration agreement with the Kirin Pharma Company, Limited for the development and commercialization of NU206. In November 2007, we announced that we have successfully concluded our discussions with the FDA and now have
regulatory clearance to begin clinical evaluation of NU206. All operating expenses and any profits related to the development and commercialization of NU206 are being shared 60 percent by us and 40 percent by Kirin. If this agreement is terminated,
or we or Kirin elect under certain circumstances to no longer actively participate in the collaboration, the relationship with respect to NU206 will convert from an expense and profit sharing structure to a royalty-based structure. Our 2001
collaboration agreement with Kirin for research and development of secreted proteins expired in December&nbsp;2005 in accordance with its terms. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">On July&nbsp;31, 2006, we entered into an agreement with Archemix Corporation. Under the agreement, Archemix is responsible for the discovery of short-acting aptamers targeting the coagulation cascade for use in acute cardiovascular
procedures, and we are responsible for development and worldwide commercialization of these product candidates. Under the agreement, we made an upfront license fee payment to Archemix of $4.0 million. We are also funding at least $5.25 million of
Archemix&#146;s research in the area of short-acting aptamer discovery over the first six years of the agreement. In addition, we may have to make payments to Archemix totaling up to $35.0 million per development compound on the achievement of
specified development and regulatory milestones, along with potential royalty payments based on sales of licensed compounds. In January 2008, we announced our enrollment of the first patient in a single-center, Phase 1 trial to determine the safety,
tolerability and pharmacokinetics of escalating doses of NU172, and we made the related $1 million milestone payment to Archemix in February 2008. At the initiation of the first Phase 3 study for any licensed compound, Archemix has the option to
elect to participate in profits from sales of the compound by funding its pro rata share of prior and future product development and commercialization expenses, in lieu of receiving milestone payments and royalties with respect to that compound.
Nuvelo also is obligated to purchase Archemix common stock having a value equal to the lesser of $10.0 million or 15 percent of the total gross proceeds raised by Archemix in a qualified public offering of Archemix stock occurring within five years
of the effective date of the new collaboration agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Due to the factors discussed above and other possible disagreements with current
or potential collaborative partners, we may be delayed or prevented from developing or commercializing NU172, NU206 or other preclinical product candidates, or we may become involved in litigation or arbitration with our partners, which would be
time-consuming or expensive and could have a material adverse effect on our stock price. Our efforts to manage simultaneously a number of collaboration arrangements may not be successful, and our failure to manage effectively such collaborations
would significantly harm our business, financial condition and results of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In addition to our existing collaborations, we may
enter into new collaborative arrangements where we would share costs of identifying, developing and marketing drug candidates. We cannot assure you that we will be able to negotiate new collaboration arrangements of this type on acceptable terms, or
at all. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We are heavily dependent upon third parties for manufacturing and a variety of other functions, including clinical trials management. Our
current and future arrangements with our manufacturers and other third parties may not provide us with the benefits we expect.* </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We do
not have the resources, facilities or experience to manufacture our drug candidates on our own. We rely, and will continue to rely, on third parties, such as contract research and manufacturing organizations, to manufacture our drug candidates for
clinical trials, and, if our products are approved, in quantities for commercial sales. We currently rely on a number of sole-source service providers and suppliers to manufacture bulk drug substance, fill and finish our drug product candidates, and
label and package them, and we do not have long-term supply agreements with these third-party manufacturers. We may not be able to finalize contractual arrangements, transfer technology or maintain relationships with such organizations in order to
file an investigational new drug application, or IND, with the FDA, and proceed with clinical trials for any of our drug candidates. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">21 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Since NU172 is in Phase 1 clinical trials, and NU206 is moving into the clinical trial phase, we are
dependent upon third-party contract manufacturers to develop the necessary production processes, and produce the volume of cGMP-grade material needed to complete such trials. We have entered into and intend to enter into additional contractual
relationships with third parties in order to (i)&nbsp;complete the Good Laboratory Practices, or GLP, toxicology and other studies necessary to file INDs with the FDA, (ii)&nbsp;produce a sufficient volume of cGMP-grade material in order to conduct
clinical trials of these other drug candidates, and (iii)&nbsp;fill and finish, and label and package our material. We cannot be certain that we will be able to complete these tasks on a timely basis or that we will be able to obtain sufficient
quantities of material or other manufacturing services on commercially reasonable terms. In addition, the failure of any of these third parties to perform their obligations may delay our filing for an IND or impede our progress through the clinical
trial phase. Any significant delay or interruption would have a material adverse effect on our ability to file an IND with the FDA and/or proceed with the clinical trial phase for any of our drug candidates. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Moreover, contract manufacturers that we may use must continually adhere to cGMP enforced by the FDA through a facilities inspection program. If one of
our contract manufacturers fails to maintain compliance, the production of our product candidate could be interrupted, resulting in delays, additional costs and potentially lost revenues. In addition, if the facilities of such manufacturers do not
pass a pre-approval plant inspection, the FDA will not grant pre-market approval of our products. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We also currently rely upon third
parties to perform administrative functions and functions related to the research, development, preclinical testing and clinical trials of our drug candidates. Our reliance on third-party contract research organizations and consultants that manage
and monitor our clinical trials may result in delays in completing, or in failing to complete, our clinical trials if they fail to perform with the speed and competency we expect. Our reliance on third-party contract research organizations to
conduct research and testing, including GLP, toxicology studies necessary to gather the data necessary to file INDs with the FDA, for any of our drug candidates may result in delays in our regulatory filings if they do not conduct their research or
testing properly, or if they fail to complete their contract research or testing on the anticipated schedule. In either case, the progress of our clinical programs may be delayed and our research and development costs may increase, which may in turn
have a material adverse affect on our business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our reliance on these manufacturing and other contract services relationships poses a
number of risks, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">inability of third parties to manufacture, including filing and finishing, and labeling and packaging, our drug candidates in a cost-effective or timely manner or
in quantities needed for clinical trials; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">changes to current raw material suppliers or product manufacturers (whether the change is attributable to us or the supplier or manufacturer), resulting in delayed
clinical studies, regulatory submissions and commercialization of our drug candidates; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">failure to identify acceptable manufacturers or other suppliers or enter into favorable long-term agreements with them; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">ineffective clinical trials management or monitoring resulting in delays in or interruptions to our clinical trials; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">delays in, or failures to achieve, scale-up to commercial quantities of our drug candidates resulting in delayed regulatory submissions and commercialization of our
drug candidates; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">our inability to effectively control the resources devoted by our partners to our programs or products; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">disagreements with third parties that could disrupt our operation or delay or terminate the research, development or manufacturing of drug candidates, or result in
litigation or arbitration; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">inadequate contractual protection or difficulty in enforcing the contracts if one of our partners fails to perform; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">failure of these third parties to comply with regulatory requirements; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">conflicts of interest between third parties&#146; work for us and their work for another entity or entities, and the resulting loss of their services; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">lack of all necessary intellectual property rights to manufacture and sell our drug candidates. </FONT></P></TD></TR></TABLE> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Given these risks, our current and future arrangements with third parties may not be successful. If these efforts fail, we would be required to devote
additional internal resources to the activities currently performed, or to be performed, by third parties, to seek alternative third-party sources, or to delay our product development or commercialization. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">22 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We are dependent on key personnel, and we must attract and retain qualified employees, collaborators and consultants.*
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The success of our business is highly dependent on the principal members of our scientific and management staff, including our senior
management team. The loss of the services of any such individual might seriously harm our product development efforts. Retaining and training personnel with the requisite skills is challenging and extremely competitive, particularly in Northern
California, where we are located. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our success will depend on our ability to attract and retain qualified employees to help develop our
potential products and execute our research and development strategy. We have programs in place to retain personnel, including programs to create a positive work environment and competitive compensation packages. Because competition for employees in
our field is intense, however, we may be unable to retain our existing personnel or attract qualified individuals to fill open positions. In addition, in August 2007 we reduced our workforce by approximately 30 percent as part of our efforts to
reduce our operating expenses through prioritization of our development portfolio and streamlining our infrastructure. In March 2008, we announced the decision to discontinue alfimeprase clinical development and restructure to make additional
resources available for our other research and development programs. In connection with the restructuring, we reduced our workforce by approximately 19 percent. These reductions in our workforce may impair our ability to recruit and retain qualified
employees and to effectively complete administrative and development functions. If we need to rehire terminated individuals or hire individuals with similar skills, we may be unable to do so. Our success also depends on the continued availability of
outside scientific collaborators, including collaborators at research institutions, to perform research and develop processes to advance and augment our internal research efforts. Competition for collaborators is intense. We also rely on services
provided by outside consultants. Attracting and retaining qualified outside consultants is competitive, and, generally, outside consultants can terminate their relationship with us at will. If we do not retain qualified personnel, outside
consultants and scientific collaborators, or if we experience turnover or difficulties recruiting new employees or outside consultants, our research and development programs could be delayed, and we could experience difficulties in generating
sufficient revenue to maintain our business. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We may not achieve our projected development goals in the time frames we announce and expect.
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We set goals for and make public statements regarding the timing of certain accomplishments, such as the commencement and completion of
clinical trials and the disclosure of trial results, which we sometimes refer to as milestones. These milestones may not be achieved, and the actual timing of these events can vary dramatically due to a number of factors such as delays or failures
in our clinical trials, disagreements with current or future collaborative partners, the uncertainties inherent in the regulatory approval process and manufacturing scale-up and delays in achieving manufacturing or marketing arrangements sufficient
to commercialize our products. There can be no assurance that our clinical trials will be completed, or that we will make regulatory submissions or receive regulatory approvals as planned. If we fail to achieve one or more of these milestones as
planned, our business will be materially adversely affected, and the price of our shares will decline. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>The success of our potential products in
research and preclinical studies does not guarantee that these results will be replicated in humans. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Several of our drug development
programs are currently in the research stage or in preclinical development, including our research programs in leukemia therapeutic antibodies and Wnt signaling&nbsp;pathway therapeutics. Although our clinical development-stage drug candidates have
shown favorable results in preclinical studies, these results may not be replicated in our clinical trials with humans. Before we make any products available to the public from our research and development programs, we or our collaboration partners
will need to conduct further research and development and complete laboratory testing and animal studies. These programs may not move beyond their current stages of development. Even if our research does advance, we will need to engage in certain
additional preclinical development efforts to determine whether a product is sufficiently safe and effective to enter clinical trials. We have little experience with these activities with respect to protein candidates and may not be successful in
developing these products. Consequently, there is no assurance that the results in our research and preclinical studies are predictive of the results that we may see in our clinical trials with humans or that they are predictive of whether any
resulting products will be safe and effective in humans. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>FDA and international regulatory approval of our products is uncertain. </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The research, testing, manufacturing and marketing of drug products such as those proposed to be developed by us or our collaboration partners are subject
to extensive regulation by federal, state and local governmental authorities, including the FDA and comparable agencies in other countries. To obtain regulatory approval of a drug product, we or our collaboration partners must demonstrate to the
satisfaction of the applicable regulatory agency, among other things, that the </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">23 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">product is safe and effective for its intended uses. In addition, we must show that the manufacturing facilities used to produce the products are in
compliance with current cGMP and that the process for manufacturing the product has been validated in accordance with the requirements of the FDA and comparable agencies in other countries. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The process of obtaining FDA and other required regulatory approvals and clearances typically takes several years and will require us to expend
substantial capital and resources. Despite the time and expense expended, regulatory approval is never guaranteed. The number of preclinical and clinical tests that will be required for FDA and international regulatory approval varies depending on
the drug candidate, the disease or condition that the drug candidate is in development for, and the regulations applicable to that particular drug candidate. The FDA or comparable international regulatory authorities can delay, limit or deny
approval of a drug candidate for many reasons, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">a drug candidate may not be safe or effective; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the FDA or comparable international regulatory authorities may interpret data from preclinical and clinical testing in different ways than we and our collaboration
partners interpret them; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the FDA or comparable international regulatory authorities may not approve our manufacturing processes or facilities or the processes or facilities of our
collaboration partners; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the FDA or comparable international regulatory officials may change their approval polices or adopt new regulations. </FONT></P></TD></TR></TABLE> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In addition, in order to market any products outside of the United States, we and our collaborators must establish and comply with numerous and varying
regulatory requirements of other jurisdictions, including the European Medicines Evaluation Agency, or EMEA, regarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional
administrative review periods. The time required to obtain approval in other countries differs from that required to obtain FDA approval. The regulatory approval process in other countries can include all of the risks detailed above regarding FDA
approval in the United States as well as other risks. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the
regulatory process in others. Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such approval could have the same adverse effects detailed above regarding FDA approval in the United States. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">If and when our products do obtain such approval or clearances, the manufacturing, marketing, and distribution of such products would remain subject to
extensive ongoing regulatory requirements. Failure to comply with applicable regulatory requirements could result in: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">warning letters; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">fines; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">civil penalties; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">injunctions; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">recall or seizure of products; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">total or partial suspension of production; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">refusal of the government to grant approvals; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">withdrawal of approvals and criminal prosecution. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Any delay or failure by us, or our collaboration partners, to obtain regulatory approvals for our product candidates: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">would adversely affect our ability to generate product, milestone and royalty revenues; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">could impose significant additional costs on us or our collaboration partners; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">could diminish competitive advantages that we may attain; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">would adversely affect the marketing of our products; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">could cause the price of our shares to decline. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Even if we do receive regulatory approval for our drug candidates, the FDA or international regulatory authorities may impose limitations on the indicated uses for which our products may be marketed, subsequently
withdraw approval or take other actions against us, or our products, that are adverse to our business. The FDA and comparable international regulatory authorities generally approve products for particular indications. An approval for a limited
indication reduces the size of the potential market for the product. Product approvals, once granted, may be withdrawn if problems occur after initial marketing. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">24 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We have not yet commercialized any of our drug candidates; our ability to commercialize products is unproven. </B>
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We have not yet commercialized any of our therapeutic product candidates. Our commercialization of products is subject to several risks,
including but not limited to: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the possibility that a product is toxic, ineffective or unreliable; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">failure to obtain regulatory approval for the product; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">difficulties in manufacturing the product on a large scale; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">difficulties in planning, coordinating and executing the commercial launch of the product; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">difficulties in marketing, distribution or sale of the product; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the possibility of a failure to comply with laws and regulations related to the marketing sale and reimbursement of the product; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">competition from superior products; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">third-party patents that preclude us from marketing a product. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Any regulatory approvals that we or our collaboration partners receive for our product candidates may be subject to limitations on the intended uses for which the product candidates may be marketed or contain
requirements for potentially costly post-marketing follow-up studies. The labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping for any approved product will be subject to extensive regulatory requirements.
Additionally, we, our collaborators and our suppliers may not be able to produce any products in commercial quantities at a reasonable cost or may not be able to successfully market such products. If we do not develop a commercially viable product,
then we will suffer significant harm to our business, financial condition and operating results. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Even if a product candidate is approved
for commercial sale, significant strategic planning and resources will be necessary to effectively coordinate commercial launch of the product in the approved indication or indications, and to effectively market, distribute and sell the product for
use in the approved indication or indications. In addition, the marketing, distribution, sale and reimbursement of pharmaceutical products is heavily regulated, and we must comply with all such applicable laws and regulations, or incur costs, fees,
fines and other liabilities associated with non-compliance. If our or a collaboration partner&#146;s commercial launch of a product approved for commercial sale were to be unsuccessful, or if we or a collaboration partner were to fail in our or
their efforts to properly market, distribute or sell any product approved for sale, our business, financial condition and operating results would suffer significant harm. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>Even if approved, our products may not be accepted in the marketplace, and we may not be able to generate significant revenue, if any. </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Even if they are approved for marketing, our products, if any, may never achieve market acceptance among physicians, patients and the medical community.
The degree of market acceptance of any products developed by us, alone or in conjunction with our collaboration partners, will depend on a number of factors, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the establishment and demonstration of the clinical efficacy and safety of the products; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">convenience and ease of administration; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">cost-effectiveness; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">our products&#146; potential advantages over alternative treatment methods; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">marketing, sales and distribution support of our products; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">reimbursement policies of government and third-party payers. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Physicians, patients or the medical community in general may not accept and utilize any of the products that we alone, or in conjunction with our collaboration partners, develop. In practice, competitors may be more
effective in marketing their drugs. The lack of such market acceptance would significantly harm our business, financial condition and results of operations. Even if our product candidates are approved for marketing and are accepted by physicians,
patients and the medical community, the size of the market for these products may be insufficient to sustain our business, or may not provide an acceptable return on our investment in the development of these products. As a result, the
commercialization of any of our product candidates could fail even if we receive marketing approval from the FDA or similar foreign authorities, and acceptance by the medical and patient communities. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">25 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We face intense competition.* </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%;padding-bottom:3px;line-Height:95%; vertical-align:top"><FONT FACE="Times New Roman" SIZE="2">The biopharmaceutical industry is intensely competitive, which is accentuated by the rapid pace of
technological development. Our products, if successfully developed, will compete with a number of traditional drugs and therapies and with new products currently under development. We also expect to face increased competition in the future as new
companies enter our markets. Research and discoveries by others may result in breakthroughs that render our potential products obsolete even before they begin to generate any revenue. The competitors for our drugs currently in development will vary
depending on the particular indication pursued, and may include major pharmaceutical, medical device and biotechnology firms, many of which have substantially greater research and product development capabilities and financial, scientific, marketing
and human resources than we have. Our clinical-stage product candidate, NU172, is an anticoagulant that has the potential for predictable anticoagulant effects and rapid self-reversal. If approved, it could face competition from other drugs or
devices that are used as anticoagulants. Competition differs depending on the indication and includes, for example, heparin and its antidote, protamine, as well as Angiomax<FONT FACE="Times New Roman" SIZE="1"><SUP>&reg;</SUP></FONT> bivalirudin, an
approved product of The Medicines Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our competitors may obtain patents and regulatory approvals for their competing products more
rapidly than we, or our collaboration partners, or develop products that are more effective than those developed by us, or our collaboration partners. All of our products will face competition from companies developing similar products as well as
from companies developing other forms of treatment for the same conditions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Many of the companies developing competing products have
greater expertise than we or our collaboration partners have in discovery, research and development, manufacturing, preclinical and clinical testing, obtaining regulatory approvals and marketing. Other smaller companies may also prove to be
significant competitors, particularly through collaborative arrangements with large and established companies. These companies as well as other organizations compete with us in recruiting and retaining qualified scientific and management personnel
as well as in acquiring technologies complementary to our programs. We may face competition with respect to: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">product efficacy and safety; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the timing and scope of regulatory approvals; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">availability of resources; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">reimbursement coverage; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">price and patent position, including the potentially dominant patent positions of others. </FONT></P></TD></TR></TABLE> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">There can be no assurance that research and development by others will not render the products that we may develop obsolete or uneconomical, or result in
treatments or cures superior to any therapy developed by us or that any therapy we develop will be preferred to any existing or newly-developed alternative products. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>We are subject to the risk of natural disasters. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our facilities are located in Northern California.
If a fire, earthquake, flood or other natural disaster disrupts our research or development efforts, our business, financial condition and operating results could be materially adversely affected. Although we maintain personal property and general
business interruption coverage, we do not maintain earthquake or flood insurance coverage for personal property or resulting business interruption. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>RISKS RELATED TO OUR CAPITAL STRUCTURE AND FINANCIAL RESULTS AND STOCK PRICE VOLATILITY </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We will need to raise additional capital, and
such capital may be unavailable to us when we need it or not available on acceptable terms. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We will need to raise significant
additional capital to finance the research and clinical development of our drug product candidates. If future securities offerings are successful, they could dilute our current stockholders&#146; equity interests and reduce the market price of our
common stock. Financing may be unavailable when we need it or may not be available on acceptable terms. As an example, if the minimum volume weighted-average price for our common stock is below $2.50 per share, which was the case as of
March&nbsp;31, 2008, we may be unable to sell stock to Kingsbridge Limited under the CEFF. The unavailability of financing may require us to delay, scale back or eliminate expenditures for the research and development of our potential
biopharmaceutical products. We may also be required to raise capital by granting rights to third parties to develop and market drug candidates that we would prefer to develop and market on our own, potentially reducing the ultimate value that we
could realize from these drug candidates. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">26 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">If we are unable to obtain additional financing when we need it, the capital markets may perceive that we
are not able to raise the amount of financing we desire, or on the terms that we desire. This perception, if it occurs, may negatively affect the market price of our common stock. If sufficient capital is not available, we may be forced to delay,
reduce the scope of, eliminate or divest one or more of our research or development programs. As an example, in August 2007, we announced that we suspended the clinical development of rNAPc2. Any such action could significantly harm our business,
financial condition and results of operations. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our future capital requirements and the adequacy of our currently available funds will
depend on many factors, including, among others, the following: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">any business transactions or arrangements through which the Company acquires or purchases new products, product candidates or other companies;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">our ability to maintain, and the financial commitments involved in, our existing collaborative and licensing arrangements, including our ability to continue to
receive cost-sharing reimbursements from Kirin; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">progress in current and anticipated clinical studies of our products, including NU172 and NU206; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">our need to develop, acquire or license new technologies or products; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">future funding commitments to new and existing collaborators, such as Archemix, from which Nuvelo is obligated to purchase Archemix common stock having a value
equal to the lesser of $10.0 million or 15 percent of the total gross proceeds raised by Archemix in a qualified public offering; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the cost of manufacturing our material for preclinical and clinical purposes; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">our ability to establish new collaborative relationships with other companies to share costs and expertise of identifying, developing and commercializing drug
candidates; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the magnitude and scope of our research and development programs, including development of product candidates; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">continued scientific progress in our research and development programs, including progress in our research and preclinical studies; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the cost involved in maintaining facilities to support research and development of our product candidates; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the cost of prosecuting and enforcing our intellectual property rights; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the time and cost involved in obtaining regulatory approvals; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">competing technological and market developments; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">our ability to use our committed equity financing facility with Kingsbridge Capital; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">current conditions and the uncertainty of future conditions in the financial markets and in the biotech sector; and </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">other factors not within our control. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Our stock
price has historically been and is likely to remain highly volatile, and an investment in our stock could suffer a decline in value.* </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Stock prices and trading volumes for many biopharmaceutical companies fluctuate widely for a number of reasons, including factors which may be unrelated to their businesses or results of operations, such as media coverage, legislative and
regulatory measures and the activities of various interest groups or organizations. This market volatility, as well as general domestic or international economic, market and political conditions, could materially and adversely affect the market
price of our common stock and the return on any investment in our company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Historically, our stock price has been extremely volatile.
Between January&nbsp;1, 2007 and December&nbsp;31, 2007, the price ranged between a high of $6.63 per share and a low of $1.26 per share. Between January&nbsp;1, 2008 and March&nbsp;31, 2008, the price ranged between a high of $1.85 per share and a
low of $0.66 per share. In March 2008, after we announced that the data from our Phase 2 program in catheter occlusion did not show sufficient improvement in catheter opening at the higher dose and concentration evaluated in the study to meet the
desired target product profile and that we ended further clinical development of alfimeprase, the closing price of our common stock was $0.73 the day after the announcement, as compared to $1.36 prior to the announcement. Significant market price
fluctuations of our common stock can be due to a variety of factors, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the depth of demand for our common stock; </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">27 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the experimental nature of, and public concern or expectations with respect to, our product candidates; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">actual or anticipated fluctuations in our operating results; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">sales of our common stock by existing holders, or sales of shares issuable upon exercise of outstanding options and warrants; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">market conditions relating to the biopharmaceutical and pharmaceutical industries; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">any announcements of technological innovations, new commercial products or collaborations, or clinical progress or lack thereof by us, our collaborative partners or
our competitors; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">announcements concerning regulatory developments or developments with respect to proprietary rights; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">changes in our collaborative arrangements; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">changes in or our failure to meet market or, to the extent securities analysts follow our common stock, securities analysts&#146; expectations;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">loss of key personnel; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">changes in accounting principles; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">general market conditions. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In
addition, the stock market in general, and the market for biotechnology and other life science stocks in particular, has historically been subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market
prices of securities issued by many companies for reasons unrelated to the operating performance of these companies. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Our stock price may not meet the
minimum bid price for continued listing on the Nasdaq Global Market. Our ability to publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if we are delisted from The Nasdaq Global Market or if
we are unable to transfer our listing to another stock market.* </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Nasdaq Global Market listing standards require that for continued
listing, the bid price of our common stock must be a minimum of $1.00 per share. Since we announced on March&nbsp;17, 2008 that we were terminating the development of alfimeprase, the bid price of our common stock has been less than $1.00 each
trading day since March&nbsp;18, 2008. On May&nbsp;1, 2008, we received notice from Nasdaq indicating that, for 30 consecutive business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued
inclusion on the Nasdaq Global Market. We were given 180 calendar days, or until October&nbsp;28, 2008, to regain compliance with this listing requirement, which would be accomplished if the bid price of our common stock closed at $1.00 per share or
more for a minimum of 10 consecutive business days. The notice from Nasdaq also indicated that, if we do not regain compliance by October&nbsp;28, 2008, Nasdaq will provide written notification that our common stock will be delisted, after which
Nuvelo may appeal the staff determination to the Nasdaq Listing Qualifications Panel. In addition, if we do not regain compliance with this listing requirement by October&nbsp;28, 2008, but meet the initial inclusion criteria for the Nasdaq Capital
Market (except for the bid price requirement), we may apply to transfer the listing of our common stock to this market and, if accepted, be provided with an additional 180 day period to demonstrate compliance. If we are not eligible for an
additional compliance period at that time, Nasdaq Staff will provide written notification that Nuvelo securities will be delisted. Upon such notice, we may appeal the Nasdaq Staff&#146;s Determination to the Nasdaq Listing Qualifications Panel.
There can be no assurance that our common stock would be eligible for transfer to the Nasdaq Capital Market, or, if we appeal the Nasdaq Staff&#146;s Determination, that such appeal would be successful. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">If our common stock is delisted by Nasdaq, our common stock may be eligible for quotation on the OTC Bulletin Board maintained by Nasdaq, another
over-the-counter quotation system, or on the pink sheets. Upon any such delisting, our common stock would become subject to the regulations of the Securities and Exchange Commission relating to the market for penny stocks. A penny stock is any
equity security not traded on a national securities exchange that has a market price of less than $5.00 per share. The regulations applicable to penny stocks may severely affect the market liquidity for our common stock and could limit your ability
to sell your securities in the secondary market. In such a case, an investor may find it more difficult to dispose of or obtain accurate quotations as to the market value of our common stock, although there can be no assurance that our common stock
will be eligible for trading or quotation on any alternative exchanges or markets. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Delisting from Nasdaq could adversely affect our
ability to raise additional financing through the public or private sale of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock.
Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">28 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We have a significant accumulated deficit and anticipate continuing losses. </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We have incurred significant net losses, including $130.6 million in 2006, $12.3 million in 2007 and $18.4 million in the three months ended
March&nbsp;31, 2008. As of March&nbsp;31, 2008, we had an accumulated deficit of $488.9 million and we anticipate continuing losses for the foreseeable future. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">All of our product candidates are in various stages of product development, and some are still in research or in early development. None of them are approved for sale. The process of developing our drug products will
require significant additional research and development, preclinical testing, clinical trials and regulatory approvals. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">These activities,
together with drug manufacturing, general administrative and other expenses, are expected to result in operating losses for the foreseeable future. To date, we have not generated any revenues from product sales. We do not expect to achieve
significant product sales or royalty revenue from product sales for several years, and we may never do so. We expect to incur additional operating losses in the future, and these losses may increase significantly as we continue preclinical research
and clinical trials, apply for regulatory approvals and develop our drug candidates. These losses, among other things, have caused and may cause our stockholders&#146; equity and working capital to decrease. We may not be successful in developing
our drug candidates and obtaining regulatory approvals. We may never generate profits and, as a result, the market price of our common stock could decline. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Moreover, utilization of our net operating loss and research and development credit carryforwards are subject to an annual limitation under the &#147;change in ownership&#148; provisions of the Internal Revenue Code
of 1986 and similar state law provisions, as a result of certain transactions that we have entered into prior to 2006. It is also possible that future transactions that we enter into, when considered in connection with other transactions, could
result in a &#147;change in ownership&#148; and further limit our ability to utilize these carryforwards for purposes of these provisions. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">We are potentially subject to additional non-cash charges, which can negatively impact our results of operations. For example, as a result of our adoption of SFAS&nbsp;123(R), we must measure compensation cost for stock-based awards made to
employees at the grant date, based on the fair value of the award, and recognize the cost as an expense over the employee&#146;s requisite service period. As the variables that are used as a basis for valuing future awards change over time, the
magnitude of the expense that we must recognize may increase significantly. Our results of operations could be materially and adversely affected by these or other non-cash charges that we may incur in the future. </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We may face fluctuations in operating results. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our
operating results may rise or fall significantly from period to period as a result of many factors, including: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">any business transactions or arrangements through which the Company acquires or purchases new products or product&nbsp;candidates; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the amount of research and development we engage in; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">if Nuvelo is obligated to purchase Archemix common stock having a value equal to the lesser of $10.0 million or 15 percent of the total gross proceeds, in
accordance with the collaboration agreement with Archemix; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the number of product candidates we have, their progress in research, preclinical and clinical studies and the costs involved in manufacturing them;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">our ability to maintain existing and enter into new strategic relationships; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the scope, duration and effectiveness of our licensing and collaborative arrangements; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">our ability to maintain our facilities to support our operations; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>

<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the costs involved in prosecuting, maintaining and enforcing patent claims; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the possibility that others may have or obtain patent rights that are superior to ours; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">changes in government regulation; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">changes in the price of our common stock or other variables used as a basis for valuing stock-based awards; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">changes in accounting policies or principles; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">release of successful products into the market by our competitors. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;
</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">29 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In addition, as a result of our adoption of SFAS 123(R), we must measure compensation cost for
stock-based awards made to employees at the grant date of the award, based on the fair value of the award, and recognize the cost as an expense over the employee&#146;s requisite service period. As the variables that we use as a basis for valuing
future awards change over time, the magnitude of the expense that we must recognize may vary significantly. Any such variance from one period to the next could cause a significant fluctuation in our operating results. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">All of our potential products are currently in research, preclinical or clinical development, and revenues from the sales of any products resulting from
this research and development may not occur for several years, if at all. We have a significant amount of fixed costs such as lease obligations, and certain charges to our statement of operations are dependent on movements in the price of our common
stock, which historically has been and is likely to remain highly volatile. As a result, we may experience fluctuations in our operating results from quarter to quarter and continue to generate losses. Quarterly comparisons of our financial results
may not necessarily be meaningful, and investors should not rely upon such results as an indication of our future performance. In addition, investors may react adversely if our reported operating results are less favorable than in a prior period or
are less favorable than those anticipated by investors or the financial community, which may result in a drop in the market price of our common stock. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>Future sales or the possibility of future sales of our common stock may depress the market price of our common stock. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Sales
in the public market of substantial amounts of our common stock could depress prevailing market prices of our common stock. As of March&nbsp;31, 2008, we had 53,505,956 shares of our common stock outstanding. All of these shares are freely
transferable without restriction or further registration under the Securities Act, except for shares held by our directors, officers and other affiliates and unregistered shares held by non-affiliates. As of March&nbsp;31, 2008, our directors,
officers and greater than five percent stockholders held approximately six percent of the shares of our outstanding common stock. Although we do not believe that our directors, officers and greater than five percent stockholders have any present
intentions to dispose of large amounts of any shares of common stock owned by them, there can be no assurance that such intentions will not change in the future. The sale of these additional shares could depress the market price of our common stock.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">As of March&nbsp;31, 2008, we had approximately 12,585,695 shares of our common stock which may be issued under our 2004 Equity Incentive
Plan, 2002 Equity Incentive Plan, 1995 Stock Option Plan, Non-Employee Director Stock Option Plan, Scientific Advisory Board/Consultants Stock Option Plan, stock option agreements entered into outside of any of our stock option plans, and our
Employee Stock Purchase Plan. Included in these 12,585,695 shares are (i)&nbsp;5,728,244 shares of our common stock issuable under outstanding options to purchase our common stock under the specified plans, (ii)&nbsp;440,206 shares of our common
stock issuable under stock option agreements entered into outside of any of our stock option plans, (iii)&nbsp;27,332 shares of our common stock issuable under restricted stock units, (iv)&nbsp;5,949,991 shares of our common stock reserved for
future grants under our 2004 Equity Incentive Plan, and (v)&nbsp;439,922 shares of our common stock reserved for future issuance under our Employee Stock Purchase Plan. As of March&nbsp;31, 2008, outstanding options to purchase 3,890,208 shares of
common stock were exercisable, and no outstanding restricted stock units have been vested. If and when these options are exercised, such shares are available for sale in the open market without further registration under the Securities Act. The
existence of these outstanding options and share reserves may negatively affect our ability to complete future equity financings at acceptable prices and on acceptable terms. The exercise of those options, and the prompt resale of shares of our
common stock received, may also result in downward pressure on the price of our common stock. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">As of March&nbsp;31, 2008, 850,224 shares of
our common stock were issuable upon the exercise of outstanding warrants, which were all exercisable as of this date. Once a warrant is exercised, the holder can arrange for the resale of shares either by invoking any applicable registration rights,
causing the shares to be registered under the Securities Act and thus freely transferable, or by relying on an exemption to the Securities Act. If these registration rights, or similar registration rights that may apply to securities we may issue in
the future, are exercised, it could result in additional sales of our common stock in the market, which may have an adverse effect on our stock price. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">Under the August 2005 committed equity financing facility, or CEFF, that we entered into with Kingsbridge Capital Ltd., and related stock purchase and registration rights agreements, we may periodically sell up to
$75.0 million in shares of our common stock, not to exceed 8,075,000 shares, to Kingsbridge over a three-year period, subject to certain conditions and restrictions. In the fourth quarter of 2005, under this CEFF, we sold 1,839,400 shares for gross
proceeds of $14.4 million, and in October 2006 we sold 568,247 shares for gross proceeds of $10.0 million. If we can satisfy certain conditions and requirements, including the condition of a minimum volume weighted average price for our common stock
of $2.50 per share, we may sell the balance of 5,667,353 shares to Kingsbridge through the expiration of the CEFF in October 2008, limited to the remaining $50.6 million available under the facility. Should we sell further securities under the CEFF,
it could have a dilutive effective on the holdings of our current stockholders and may result in downward pressure on the market price of our common stock. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">30 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We will need to raise significant additional capital to finance the research, development and
commercialization of our drug products. If future securities offerings are successful, they could dilute our current stockholders&#146; equity interests and reduce the market price of our common stock. </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>The committed equity financing facility with Kingsbridge may not be available to us when we desire to draw upon it, may require us to make additional
&#147;blackout&#148; payments to Kingsbridge, and may result in dilution to our stockholders.* </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In August 2005, in connection with a
committed equity financing facility, or CEFF, we entered into a stock purchase agreement and related registration rights agreement with Kingsbridge Capital Ltd. The CEFF entitles us to sell and obligates Kingsbridge to purchase, from time to time
over a period of three years, shares of our common stock for cash consideration up to an aggregate of $75.0 million, not to exceed 8,075,000 shares, subject to certain conditions and restrictions. Kingsbridge is not obligated to purchase shares
under the CEFF unless certain conditions are met, which include a minimum volume weighted average price for our common stock of $2.50 per share; the accuracy of representations and warranties made to Kingsbridge; compliance with laws; effectiveness
of a registration statement to register such shares for resale by Kingsbridge; and the continued listing of our stock on the Nasdaq Global Market. On May&nbsp;1, 2008, we received notice from Nasdaq that, for 30 consecutive business days, the bid
price for our common stock had closed below the minimum $1.00 per share requirement for continued listing on the Nasdaq Global Market, and we face delisting proceedings if we do not regain compliance by October&nbsp;28, 2008. If our common stock is
delisted for this or any other reason, Kingsbridge would no longer be obligated to purchase shares under the CEFF. In addition, Kingsbridge is permitted to terminate the CEFF if it determines that a material and adverse event has occurred affecting
our business, operations, properties or financial condition. If we are unable to access funds through the CEFF, or if the CEFF is terminated by Kingsbridge, we may be unable to access capital on favorable terms or at all. In the fourth quarter of
2005, under this stock purchase agreement, we sold 1,839,400 shares for gross proceeds of $14.4 million, and in October 2006 we sold 568,247 shares for gross proceeds of $10.0 million. If the previously discussed conditions are met, we may sell the
balance of 5,667,353 shares to Kingsbridge through the expiration of the CEFF in October 2008, limited to the remaining $50.6 million available under the facility. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">We are entitled in certain circumstances, to deliver a blackout notice to Kingsbridge to suspend the use of the registration statement under which shares sold under the CEFF are registered for resale, thereby
prohibiting Kingsbridge from selling shares. If we deliver a blackout notice in the 15 trading days following the settlement of a sale of shares under the CEFF, or if the registration statement is not effective in circumstances not permitted by our
agreement with Kingsbridge, then we must make a payment to Kingsbridge, or issue Kingsbridge additional shares in lieu of this payment, calculated on the basis of the number of shares held by Kingsbridge and the change in the market price of our
common stock during the period in which the use of the registration statement is suspended. If the market price of our common stock declines during a suspension of the registration statement, the blackout payment could be significant. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Should we sell additional shares to Kingsbridge under the CEFF, or issue shares in lieu of any blackout payment, it will have a dilutive effect on the
holdings of our current stockholders and may result in downward pressure on the market price of our common stock. If we draw down under the CEFF, we will issue shares to Kingsbridge at a discount of up to ten percent from the volume weighted average
price of our common stock. If we draw down amounts under the CEFF when our share price is decreasing, we will need to issue more shares to raise the same amount than if our share price was higher. Issuances in the face of a declining share price
will have an even greater dilutive effect than if our share price were stable or increasing, and may further decrease our share price. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>Our investments
in marketable debt securities are subject to credit risk that may adversely affect their fair value. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We maintain a significant
portfolio of investments in marketable debt securities, which are recorded at fair value. To minimize our exposure to credit risk, we invest in securities with strong credit ratings and have established guidelines relative to diversification and
maturity with the objective of maintaining safety of principal and liquidity. We do not invest in derivative financial instruments, mortgage-backed securities or auction rate securities, and we have not recorded any losses on our securities due to
credit or liquidity issues. In 2007, rising delinquency and default rates on subprime mortgages and declining home prices had caused a significant decline in the value of residential mortgage-backed securities, which had negatively impacted the
entire credit market in the U.S. In recent months, certain other financial instruments had also sustained downgrade in credit ratings and decline in value. Further deterioration in the credit market may have an adverse effect on the fair value of
our investment portfolio. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We do not intend to pay cash dividends on our common stock in the foreseeable future. </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We do not anticipate paying cash dividends on our common stock in the foreseeable future. Any payment of cash dividends will depend upon our financial
condition, results of operations, capital requirements and other factors and will be at the discretion of our board of directors. Furthermore, we may incur additional indebtedness that may severely restrict or prohibit the payment of dividends.
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">31 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We have implemented anti-takeover provisions that could discourage, prevent or delay a takeover, even if the
acquisition would be beneficial to our stockholders. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The existence of our stockholder rights plan and provisions of our certificate of
incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders. These provisions: </FONT></P> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">establish a classified board of directors so that not all members of our board may be elected at one time; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">authorize the issuance of up to 5,000,000 shares of preferred stock that could be issued by our board of directors to increase the number of outstanding shares and
hinder a takeover attempt; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">limit who may call a special meeting of stockholders; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders; and
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon at a stockholder
meeting. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Specifically, our certificate of incorporation provides that all stockholder action must be effected at a duly
called meeting and not by a written consent. The by-laws provide, however, that our stockholders may call a special meeting of stockholders only upon a request of stockholders owning at least 50 percent of our common stock. These provisions of our
certificate of incorporation and our by-laws could discourage potential acquisition proposals and could delay or prevent a change in control. We designed these provisions to reduce our vulnerability to unsolicited acquisition proposals and to
discourage certain tactics that may be used in proxy fights. These provisions, however, could also have the effect of discouraging others from making tender offers for our shares. As a consequence, they also may inhibit fluctuations in the market
price of our shares that could result from actual or rumored takeover attempts. Such provisions also may have the effect of preventing changes in our management. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">We are permitted to issue shares of our preferred stock without stockholder approval upon such terms as our board of directors determines. Therefore, the rights of the holders of our common stock are subject to, and
may be adversely affected by, the rights of the holders of our preferred stock that may be issued in the future. In addition, the issuance of preferred stock could have a dilutive effect on the holdings of our current stockholders. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">On June&nbsp;5, 1998, our board of directors adopted a rights plan and declared a dividend with respect to each share of our common stock then
outstanding. This dividend took the form of a right, which entitles the holders to purchase one one-thousandth of a share of our Series A junior participating preferred stock at a purchase price that is subject to adjustment from time to time. These
rights have also been issued in connection with each share of our common stock issued after June&nbsp;15, 1998. The rights are exercisable only if a person or entity or affiliated group of persons or entities acquires, or has announced its intention
to acquire, 15 percent (27.5 percent in the case of certain approved stockholders) or more of our outstanding common stock. The adoption of the rights plan makes it more difficult for a third party to acquire control of us without the approval of
our board of directors. This rights agreement was amended on March&nbsp;19, 2004, to reflect our reincorporation under Delaware law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We
are subject to the Delaware anti-takeover laws regulating corporate takeovers. These anti-takeover laws prevent a Delaware corporation from engaging in a merger or sale of more than ten percent of its assets with any stockholder, including all
affiliates and associates of the stockholder, who owns 15 percent or more of the corporation&#146;s outstanding voting stock, for six years following the date that the stockholder acquired 15 percent or more of the corporation&#146;s stock unless:
</FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">the board of directors approved the transaction where the stockholder acquired 15 percent or more of the corporation&#146;s stock; </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">after the transaction in which the stockholder acquired 15 percent or more of the corporation&#146;s stock, the stockholder owned at least 85 percent of the
corporation&#146;s outstanding voting stock, excluding shares owned by directors, officers and employee stock plans in which employee participants do not have the right to determine confidentially whether shares held under the plan will be tendered
in a tender or exchange offer; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">on or after this date, the merger or sale is approved by the board of directors and the holders of at least two-thirds of the outstanding voting stock that is not
owned by the stockholder. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The provisions of our governing documents, stockholder rights plan and current Delaware law
may, collectively: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">lengthen the time required for a person or entity to acquire control of us through a proxy contest for the election of a majority of our board of directors;
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">32 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">discourage bids for our common stock at a premium over market price; and </FONT></P></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">generally deter efforts to obtain control of us. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>We have adopted an Executive Change in Control and Severance Benefit Plan that could discourage, prevent or delay a takeover, even if the acquisition would be beneficial to our stockholders. </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In December 2004, our board of directors approved an &#147;Executive Change in Control and Severance Benefit Plan&#148; for our executive officers and
other eligible employees, which was amended and restated in August 2007. The purpose of the plan is to provide for the payment of severance benefits and/or change in control benefits to certain of our eligible employees, and the plan supersedes and
replaces any change in control and/or severance plans adopted by us previously. All of our executive employees at the level of Vice President or above have been designated as participants in the plan and our board of directors may designate other
eligible individuals as participants. The plan provides that, upon a change in control of the company as defined under the plan, all Nuvelo stock options and stock awards held by a plan participant will become fully vested. Such shares held by a
plan participant will also become fully vested if the participant is terminated without cause, or constructively terminated, within one month preceding our change in control. If a participant is terminated without cause or constructively terminated
one month before or one year after our change in control, he or she will also be entitled to certain cash severance and continued medical benefits. The change in control and severance benefits for certain of our employees provided for under this
plan could make it more difficult and expensive, or less desirable, for a third party to acquire us, even if doing so would benefit our stockholders. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>RISKS RELATED TO INTELLECTUAL PROPERTY AND OTHER LEGAL MATTERS </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>We are party to securities litigation, and defending these lawsuits could
hurt our business. The volatility of the market price of our securities could engender additional class action securities litigation.* </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">Following periods of volatility in the market price of a company&#146;s securities, class action securities litigation has often been instituted against such a company. This risk is especially acute for us, because biotechnology companies
have experienced greater than average stock price volatility in recent years and, as a result, have been subject to, on average, a greater number of securities class action claims than companies in other industries. Any such litigation instigated
against us could result in substantial costs and a diversion of management&#146;s attention and resources, which could significantly harm our business, financial condition and operating results. For example, in December 2006, after we announced that
alfimeprase did not meet its primary endpoint in the first of two planned Phase 3 trials for the treatment of acute peripheral arterial occlusion and in the first of two planned Phase 3 trials for the treatment of catheter occlusion, the closing
price of one share of our common stock was $4.05 on the day of the announcement, as compared to a closing price of $19.55 on the trading day prior to the announcement. On February&nbsp;9, 2007, Nuvelo, Inc. and certain of our former and current
officers and directors were named as defendants in a purported securities class action lawsuit filed in the United States District Court for the Southern District of New York. The suit alleges violations of the Securities Exchange Act of 1934
related to the clinical trial results of alfimeprase, which we announced on December&nbsp;11, 2006, and seeks damages on behalf of purchasers of our common stock during the period between January&nbsp;5, 2006 and December&nbsp;8, 2006. Specifically,
the suit alleges that we misled investors regarding the efficacy of alfimeprase and the drug&#146;s likelihood of success. The plaintiff seeks unspecified damages and injunctive relief. Three additional lawsuits were filed in the Southern District
of New York on February&nbsp;16, 2007,&nbsp;March&nbsp;1, 2007 and March&nbsp;6, 2007, respectively. On April&nbsp;10, 2007, three separate motions to consolidate the cases, appoint lead plaintiff, and appoint lead plaintiff&#146;s counsel were
filed. On April&nbsp;18, 2007, we filed a motion to transfer the four cases to the Northern District of California. The Court granted our motion to transfer the cases to the Northern District of California in July 2007. Plaintiffs have filed motions
for&nbsp;consolidation,&nbsp;lead plaintiff and lead plaintiff&#146;s counsel in the Northern District of California. Plaintiffs filed their consolidated complaint in the Northern District of California on November&nbsp;9, 2007. We filed a motion to
dismiss plaintiffs consolidated complaint on December&nbsp;21, 2007. Plaintiffs filed an opposition to our motion to dismiss on February&nbsp;4, 2008. The motion to dismiss the consolidated complaint is still pending. We currently cannot determine
the impact that this litigation will have on our business, results of operations or financial condition. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">In addition, Variagenics has been
named as a defendant in a securities class action lawsuit alleging the failure to disclose additional and excessive commissions purportedly solicited by and paid to underwriters who are also named defendants in the lawsuit. Plaintiffs in the suit
allege that underwriters took these commissions and in exchange allocated shares of Variagenics&#146; stock to their preferred customers through alleged agreements with these preferred customers that tied the allocation of initial public offering
shares to agreements by the customers to make additional aftermarket purchases at pre-determined prices. As a result of our merger with Variagenics, we are obligated to continue to defend against this litigation. We believe that any attorneys&#146;
fees, loss or settlement payment with respect to this suit will not be material to our </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">33 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">financial position or results of operations, and that any loss, settlement payment or attorneys&#146; fees accrued with respect to the suit will be paid by
our insurance provider. Because of a recent court ruling, the settlement class, as defined in the settlement papers, is no longer feasible. While a new complaint has not been filed against us, there are several &#147;focus&#148; cases against other
issuers in which new complaints have been filed. Defendant issuers in the &#147;focus&#148; cases filed motions to dismiss the new complaints. On March&nbsp;26, 2008, the District Court issued an order granting in part and denying in part the
&#147;focus&#148; issuers motions to dismiss. The &#147;focus&#148; issuers had been advised that plaintiffs intended to file new complaints against us, but none have been filed yet. We could be forced to incur material expenses in the litigation if
the parties cannot achieve a settlement, and in the event there is an adverse outcome, our business could be harmed. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>The commercial success of our
products will depend upon our ability to protect the intellectual property rights associated with our products and drug candidates. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our
competitive success will depend, in part, on our ability to obtain and maintain patent protection for our inventions, technologies and discoveries, including intellectual property that we license. The patent positions of biotechnology companies
involve complex legal and factual questions, and we cannot assure you that our patents and licenses will successfully preclude others from using our technology. We could incur substantial costs in seeking enforcement of our proprietary rights
against infringement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We currently have, or have in-licensed, issued patents and pending patent applications that include claims to our
in-licensed clinical products. We obtained exclusive worldwide rights to alfimeprase from Amgen in October 2004. We obtained exclusive worldwide rights for all indications of rNAPc2 and all of the rNAPc molecules owned by Dendreon in February 2004.
The United States government may claim a non-exclusive right to use rNAPc2 with respect to the treatment of hemorrhagic fever. We also currently have patents that cover some of our technological discoveries and patent applications that we expect to
protect some of our gene, protein and technological discoveries. We will continue to apply for patents for our discoveries. We cannot assure you that any of our applications, or our licensors&#146; applications, will issue as patents, or that any
patent issued or licensed to us will not be challenged, invalidated, circumvented or held unenforceable by way of an interference proceeding or litigation. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">The timing of the grant of a patent cannot be predicted. Patent applications describing and seeking patent protection of methods, compositions, or processes relating to proprietary inventions involving human
therapeutics could require us to generate data, which may involve substantial costs. Our pending patent applications may lack priority over others&#146; applications or may not result in the issuance of patents. Even if issued, our patents may not
be sufficiently broad to provide protection against competitors with similar technologies and may be challenged, invalidated or circumvented. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2">In addition to patents, we rely on a combination of trade secrets, copyright and trademark laws, nondisclosure agreements, licenses and other contractual provisions and technical measures to maintain and develop our competitive position
with respect to intellectual property. Nevertheless, these measures may not be adequate to safeguard the technology underlying our products. For example, employees, consultants and others who participate in the development of our products may breach
their agreements with us regarding our intellectual property, and we may not have adequate remedies for the breach. Our trade secrets could become known through other unforeseen means. We depend on our collaborators and other third parties that
license intellectual property to us to protect our licensed intellectual property. These collaborators and other third parties could fail to take a necessary step to protect our licensed intellectual property, which could seriously harm our
intellectual property position. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We also may not be able to effectively protect our intellectual property rights in some foreign countries,
as many countries do not offer the same level of legal protection for intellectual property as the United States. Furthermore, certain of the patent applications describing our proprietary methods are filed only in the United States. Even where we
have filed our patent applications internationally, for some cases and in certain countries, we have chosen not to maintain foreign patent protection by opting not to enter national phase or opting not to pay maintenance annuities. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Notwithstanding our efforts to protect our intellectual property, our competitors may independently develop similar or alternative technologies or
products that are equal or superior to our technology. Our competitors may also develop similar products without infringing on any of our intellectual property rights or design around our proprietary technologies. </FONT></P> <P
STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>If the manufacture, use or sale of our products infringe on the intellectual property rights of others, we could face costly litigation, which could cause us to pay
substantial damages or licensing fees and limit our ability to sell some or all of our products. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Extensive litigation regarding patents
and other intellectual property rights has been common in the biopharmaceutical industry. Litigation may be necessary to assert infringement claims, enforce patent rights, protect trade secrets or know-how </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">34 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">and determine the enforceability, scope and validity of certain proprietary rights. The defense and prosecution of intellectual property lawsuits, United
States Patent and Trademark Office interference proceedings, and related legal and administrative proceedings in the United States and internationally involve complex legal and factual questions. As a result, such proceedings are costly and
time-consuming to pursue, and their outcome is uncertain. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Regardless of merit or outcome, our involvement in any litigation, interference
or other administrative proceedings could cause us to incur substantial expense and could significantly divert the efforts of our technical and management personnel. An adverse determination may subject us to the loss of our proprietary position or
to significant liabilities, or require us to seek licenses that may include substantial cost and ongoing royalties. Licenses may not be available from third parties, or may not be obtainable on satisfactory terms. An adverse determination or a
failure to obtain necessary licenses may restrict or prevent us from manufacturing and selling our products, if any. These outcomes could materially harm our business, financial condition and results of operations. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our market success depends in part on us neither infringing valid, enforceable patents or proprietary rights of third parties, nor breaching any licenses
that may relate to our technologies and products. We are aware of third-party patents and proprietary rights that may relate to our technology. We may be required to obtain licenses to patents or other proprietary rights of others for ourselves, our
collaboration partners and our service providers in order to conduct research, development or commercialization of some or all of our programs. We plan to seek licenses, as we deem appropriate, but it is possible that we may infringe upon these
patents or proprietary rights of third parties. If we do not obtain these licenses, we may encounter delays in product market introductions, incur substantial costs while we attempt to design around existing patents or not be able to develop,
manufacture or sell products. In response, third parties may assert infringement or other intellectual property claims against us, our collaboration partners or our service providers. We may consequently be subjected to substantial damages for past
infringement or be required to modify our products if it is ultimately determined that our products infringe a third party&#146;s proprietary rights. Further, we may be prohibited from selling our products before we obtain a license, which, if
available at all, may require us to pay substantial royalties, which could adversely impact our product costs and have an impact on our business. Further, if we do obtain these licenses, the agreed terms may necessitate reevaluation of the potential
commercialization of any one of our programs. Failing to obtain a license could result in litigation. Even if these claims are without merit, defending a lawsuit takes significant time, may be expensive and may divert management attention from other
business concerns. Any public announcements related to litigation or interference proceedings initiated or threatened against us could cause our stock price to decline. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2"><B>We face product liability exposure and potential unavailability of insurance. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We risk financial
exposure to product liability claims in the event that the use of products developed by us, or our collaboration partners, if any, result in personal injury. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">We may experience losses due to product liability claims in the future. We have obtained limited product liability insurance coverage. Such coverage, however, may not be adequate or may not continue to be available to
us in sufficient amounts or at an acceptable cost, or at all. We may not be able to obtain commercially reasonable product liability insurance for any product approved for marketing. A product liability claim or other claim, product recalls, as well
as any claims for uninsured liabilities or in excess of insured liabilities, may significantly harm our business, financial condition and results of operations. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>We face heavy government regulation, and any disputes relating to business practices or improper handling, storage or disposal of hazardous materials, chemicals and patient samples could be time consuming and costly. </B></FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">Our research and development and production activities involve the controlled use of hazardous or radioactive materials, chemicals, including oxidizing
and reducing reagents, infectious disease agents, patient tissue and blood samples. We, our collaborators, and service providers are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these
materials and certain waste products. We could be liable for accidental contamination or discharge or any resultant injury from hazardous materials, and conveyance, processing, and storage of and data on patient samples. If we, our collaborators, or
service providers fail to comply with applicable laws or regulations, we could be required to pay penalties or be held liable for any damages that result, and this liability could exceed our financial resources. Further, future changes to
environmental health and safety laws could cause us to incur additional expense or restrict our operations. In addition, our collaborators and service providers may be working with hazardous materials, including viruses and hazardous chemicals, in
connection with our collaborations. In the event of a lawsuit or investigation, we could be held responsible for any injury caused to persons or property by exposure to, or release of, patient samples that may contain viruses and hazardous
materials. The cost of this liability could exceed our resources. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">35 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">We also are subject to numerous federal, state and local laws, regulations and recommendations relating
to safe working conditions, laboratory and manufacturing practices, general business practices, the experimental use of animals, and the environment. In addition, we cannot predict the extent of government regulations or the impact of new
governmental regulations that might significantly harm the discovery, development, production and marketing of our products. We may be required to incur significant costs to comply with current or future laws or regulations, and we may be adversely
affected by the cost of such compliance. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_13"></A>ITEM&nbsp;2.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Not
applicable. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_14"></A>ITEM&nbsp;3.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>DEFAULTS UPON SENIOR SECURITIES </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Not applicable. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_15"></A>ITEM&nbsp;4.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Not
applicable. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_16"></A>ITEM&nbsp;5.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>OTHER INFORMATION </B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Not applicable. </FONT></P> <P
STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="9%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_17"></A>ITEM&nbsp;6.</B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>EXHIBITS </B></FONT></TD></TR></TABLE> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD WIDTH="89%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:28pt" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Exhibit<BR>Number</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT FACE="Times New Roman" SIZE="1"><B>Description</B></FONT></P></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">3.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Amended and Restated Certificate of Incorporation of Nuvelo, Inc.(1)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">3.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Amended and Restated By-Laws of Nuvelo, Inc.(2)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Form of Nuvelo, Inc. Common Stock Certificate.(1)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Certificate of Designations of Series A Junior Participating Preferred Stock.(1)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.3</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Rights Agreement between Hyseq, Inc. and U.S. Stock Transfer Corporation dated June 5, 1998.(3)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.4</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Amendment to Rights Agreement between Hyseq, Inc. and U.S. Stock Transfer Corporation dated November<BR>9,&nbsp;2002.(4)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.5</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Amendment to Rights Agreement between Nuvelo, Inc. and U.S. Stock Transfer Corporation dated March 19,<BR>2004.(1)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.6</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Form of Warrant to purchase 1,491,544 shares (pre-split) of Common Stock of Hyseq, Inc. dated January 8, 2002.(5)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.7</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Warrant to purchase 350,000 shares of Common Stock of Nuvelo, Inc. dated August 4, 2005.(6)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.8</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Registration Rights Agreement by and between Nuvelo, Inc. and Kingsbridge Capital Limited dated August 4,<BR>2005.(6)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.9</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Reference is made to Exhibits 3.1 and 3.2.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;10.59&#134;*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Amended and Restated Addendum to Employment Agreement between Nuvelo, Inc. and Ted W. Love dated<BR>January 1, 2008.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;10.60&#134;*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Bonuses for Named Executive Officers Approved on January 25, 2008.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;10.61&#134;*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Separation Agreement between Nuvelo, Inc. and Michael D. Levy dated March 20, 2008.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">31.1*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">31.2*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">36 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="93%"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">32.1*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</FONT></TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&nbsp;*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Filed herewith. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&#134;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Compensatory plan or agreement. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Nuvelo, Inc.&#146;s Form 8-K, filed on March&nbsp;26, 2004, File No. 000-22873.
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Nuvelo, Inc.&#146;s Form 8-K, filed on December&nbsp;12, 2007, File No. 000-22873.
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Hyseq, Inc.&#146;s Form 8-K, filed on July&nbsp;31, 1998, File No. 000-22873.
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Hyseq, Inc.&#146;s Form S-4, filed on November&nbsp;27, 2002, File No.&nbsp;333-101503.
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Hyseq, Inc.&#146;s Form 10-Q filed on May&nbsp;15, 2002, File No. 000-22873.
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(6)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Nuvelo, Inc.&#146;s Form 8-K, filed on August&nbsp;5, 2005, File No. 000-22873.
</FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">37 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>
<A NAME="tx56756_18"></A>SIGNATURE </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="7%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD VALIGN="bottom" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">Nuvelo, Inc. (Registrant)</FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">/<SMALL>S</SMALL>/ L<SMALL>EE</SMALL>
B<SMALL>ENDEKGEY</SMALL></FONT></P></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Lee Bendekgey</B></FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><I>Senior&nbsp;Vice&nbsp;President&nbsp;and&nbsp;Chief&nbsp;Financial&nbsp;Officer (Duly&nbsp;Authorized&nbsp;and&nbsp;Principal&nbsp;Financial and Accounting&nbsp;Officer)</I>
</FONT></TD></TR>
</TABLE></DIV> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Dated: May&nbsp;9, 2008 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">38 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>EXHIBIT INDEX </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD WIDTH="89%"></TD></TR>
<TR>
<TD VALIGN="bottom" NOWRAP ALIGN="center"> <P STYLE="border-bottom:1px solid #000000;width:28pt" ALIGN="center"><FONT FACE="Times New Roman" SIZE="1"><B>Exhibit<BR>Number</B></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom" STYLE="border-bottom:1px solid #000000"> <P STYLE="margin-top:0px;margin-bottom:1px"><FONT FACE="Times New Roman" SIZE="1"><B>Description</B></FONT></P></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">3.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Amended and Restated Certificate of Incorporation of Nuvelo, Inc.(1)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">3.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Amended and Restated By-Laws of Nuvelo, Inc.(2)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.1</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Form of Nuvelo, Inc. Common Stock Certificate.(1)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.2</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Certificate of Designations of Series A Junior Participating Preferred Stock.(1)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.3</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Rights Agreement between Hyseq, Inc. and U.S. Stock Transfer Corporation dated June&nbsp;5, 1998.(3)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.4</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Amendment to Rights Agreement between Hyseq, Inc. and U.S. Stock Transfer Corporation dated November&nbsp;9, 2002.(4)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.5</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Amendment to Rights Agreement between Nuvelo, Inc. and U.S. Stock Transfer Corporation dated March&nbsp;19, 2004.(1)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.6</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Form of Warrant to purchase 1,491,544 shares (pre-split) of Common Stock of Hyseq, Inc. dated January&nbsp;8, 2002.(5)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.7</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Warrant to purchase 350,000 shares of Common Stock of Nuvelo, Inc. dated August&nbsp;4, 2005.(6)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.8</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Registration Rights Agreement by and between Nuvelo, Inc. and Kingsbridge Capital Limited dated August&nbsp;4, 2005.(6)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4.9</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Reference is made to Exhibits 3.1 and 3.2.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;10.59&#134;*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Amended and Restated Addendum to Employment Agreement between Nuvelo, Inc. and Ted W. Love dated January&nbsp;1, 2008.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;10.60&#134;*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Bonuses for Named Executive Officers Approved on January&nbsp;25, 2008.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;10.61&#134;*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Separation Agreement between Nuvelo, Inc. and Michael D. Levy dated March&nbsp;20, 2008.</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">31.1*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">31.2*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" NOWRAP ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">32.1*</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</FONT></TD></TR>
</TABLE> <P STYLE="line-height:8px;margin-top:0px;margin-bottom:2px;border-bottom:0.5pt solid #000000;width:10%">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&nbsp;*</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Filed herewith. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&#134;</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Compensatory plan or agreement. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(1)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Nuvelo, Inc.&#146;s Form 8-K, filed on March&nbsp;26, 2004, File No. 000-22873.
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(2)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Nuvelo, Inc.&#146;s Form 8-K, filed on December&nbsp;12, 2007, File No. 000-22873.
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(3)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Hyseq, Inc.&#146;s Form 8-K, filed on July&nbsp;31, 1998, File No. 000-22873.
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(4)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Hyseq, Inc.&#146;s Form S-4, filed on November&nbsp;27, 2002, File No.&nbsp;333-101503.
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(5)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Hyseq, Inc.&#146;s Form 10-Q filed on May&nbsp;15, 2002, File No. 000-22873.
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(6)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Nuvelo, Inc.&#146;s Form 8-K, filed on August&nbsp;5, 2005, File No. 000-22873.
</FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">39 </FONT></P>

</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.59
<SEQUENCE>2
<FILENAME>dex1059.htm
<DESCRIPTION>AMENDED AND RESTATED ADDENDUM TO EMPLOYMENT AGREEMENT
<TEXT>
<HTML><HEAD>
<TITLE>Amended and Restated Addendum to Employment Agreement</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>Exhibit 10.59 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B><U>AMENDED AND RESTATED ADDENDUM TO EMPLOYMENT AGREEMENT </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">This <B>A<SMALL>MENDED</SMALL>
A<SMALL>ND</SMALL> R<SMALL>ESTATED</SMALL> A<SMALL>DDENDUM</SMALL> T<SMALL>O</SMALL> E<SMALL>MPLOYMENT</SMALL> A<SMALL>GREEMENT</SMALL> </B>(the &#147;Restated Addendum&#148;) is made by and between <B>N<SMALL>UVELO</SMALL>, I<SMALL>NC</SMALL>.</B>
(the &#147;Company&#148;) and <B>T<SMALL>ED</SMALL>&nbsp;W. L<SMALL>OVE</SMALL></B><SMALL></SMALL> (&#147;Executive&#148;) effective as of January&nbsp;1, 2008. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B><U>RECITALS </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>W<SMALL>HEREAS</SMALL></B><SMALL></SMALL>, Executive has been employed by the
Company since January&nbsp;11, 2001 pursuant to the terms of an Employment and Confidential Information Agreement between Executive and the Company dated January&nbsp;11, 2001 (the &#147;Employment Agreement&#148;), an Addendum to Employment
Agreement dated January&nbsp;11, 2001 (the &#147;Original Addendum&#148;), and an Amended and Restated Addendum to Employment Agreement dated April&nbsp;30, 2007 (the &#147;April 2007 Addendum&#148;); </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>W<SMALL>HEREAS</SMALL></B><SMALL></SMALL>, the Parties desire to modify the terms of the April 2007 Addendum so as to provide for compliance with
Section&nbsp;409A of the Internal Revenue Code of 1986, as amended (the &#147;Code&#148;), while leaving intact all provisions of the Employment Agreement; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><B>W<SMALL>HEREAS</SMALL></B><SMALL></SMALL>, Section&nbsp;17 of the Employment Agreement permits the Parties to amend the Employment Agreement and April 2007 Addendum through a written instrument signed by the
Parties; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>AGREEMENT </U></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2"><B>N<SMALL>OW</SMALL>, T<SMALL>HEREFORE</SMALL>,</B> in consideration of the above recitals, Executive&#146;s continued employment with the Company, and the mutual covenants and promises set forth herein, the Parties hereby agree that the
following terms shall supersede and replace the April 2007 Addendum in its entirety. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B><U>EMPLOYMENT </U></B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1.1 <U>Position and Duties</U>: Executive agrees to be employed by and to serve the Company as its Chief Executive Officer and the Company agrees to
employ Executive in such capacity, subject to the terms and conditions set forth in the Employment Agreement and this Restated Addendum. In this capacity, Executive shall report to the Company&#146;s Board of Directors (the &#147;Board&#148;).
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1.2 <U>Best Efforts</U>. Executive agrees to devote his full time and attention to the Company, to use his best efforts to advance the
business and welfare of the Company, and to render his services under the Employment Agreement and this Restated Addendum fully, faithfully, diligently, competently and to the best of his ability. Notwithstanding any other term in the Employment
Agreement and this Restated Addendum, the Executive may undertake any of the following activities, provided that such activities do not materially interfere with the proper performance of his duties and responsibilities under the Employment
Agreement and this Restated Addendum: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(i)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Executive may engage in charitable activities and community affairs. </FONT></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">1 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(ii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Executive may manage his personal investments and affairs. </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(iii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Executive may invest in, or own up to 5% of a publicly held company engaged in the same or similar business as the Company. </FONT></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(iv)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Executive may serve as a director of, or advisor to any corporation which does not compete in any material way with the Company&#146;s business. </FONT></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(v)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Executive may participate in conferences, prepare or publish papers or books or teach; and </FONT></TD></TR></TABLE> <P
STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(vi)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">Executive may take on other positions of responsibility, with the approval of the Board, which approval shall not be unreasonably withheld. </FONT></TD></TR></TABLE> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">1.3 <U>Location of Employment</U>. Executive&#146;s principal place of employment shall be at a location that is within thirty (30)&nbsp;miles of the
Company&#146;s current headquarters, unless the relocation of the Executive&#146;s principal place of employment by more than thirty (30)&nbsp;miles results in moving Executive&#146;s principal place of employment closer to the Executive&#146;s
current residence in Hillsborough, California. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>COMPENSATION AND BENEFITS </B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.1 <U>Base Salary</U>. For services rendered by Executive under the Employment Agreement and this Restated Addendum, the Company shall pay Executive a
base salary of $655,000 per year, less deductions required by law, payable in equal bi-monthly installments. The Board shall review annually Executive&#146;s compensation, and the Board shall adjust Executive&#146;s base salary if the performance of
the Company or the services of the Executive reasonably merit an adjustment; provided, however, that at all times Executive&#146;s base salary shall be no lower than the highest base salary paid by the Company to any other Company employee.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.2 <U>Bonus Plan</U>. The Executive shall participate in Company&#146;s management bonus pool, with bonus payments to be determined and
paid based upon written performance objectives to be determined by the Compensation Committee of the Company&#146;s Board. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.3 <U>Equity
Awards</U>. The Company has granted Executive certain options to purchase shares of common stock in the Company (the &#147;Existing Options&#148;). Executive shall also be eligible for additional equity awards from time to time in the future as
shall be determined by the Compensation Committee of the Board in its sole discretion, and subject to such vesting, exercisability, and other provisions as the Board may determine in its discretion (the &#147;Future Equity Awards&#148;). Both the
Existing Options and the Future Equity Awards shall be governed in all respects by the terms of the applicable equity plan document(s), grant notice(s) and award agreement(s). </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.4 <U>Change of Control Benefits</U>. In the event of a Change of Control (as defined in Section&nbsp;3.9 herein), the vesting of any equity award
granted to Executive prior to the effective date of the Change of Control (whether in the form of an option to purchase shares or shares of restricted stock), including the Existing Options and any Future Equity Awards, shall be accelerated such
that 100% of the shares shall be deemed immediately vested as of the effective date of the Change of Control. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">2 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.5 <U>Reimbursement of Expenses</U>. The Company shall reimburse Executive for actual and reasonable
business expenses in accordance with Company policy. The Company shall also reimburse Executive for all reasonable legal and accounting expenses and all professional membership dues and continuing professional education in accordance with Company
policy. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">2.6 <U>Indemnification Agreement</U>. The Company and Executive have entered into an indemnification agreement, the terms and
conditions of which are unaffected by this Restated Addendum. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>TERMINATION AND SEPARATION PACKAGE </B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.1 <U>At Will Employment</U>. Executive and the Company agree that Executive&#146;s employment with the Company is &#147;at-will.&#148; This means that
either party may terminate Executive&#146;s employment at any time, with or without cause. However, any termination of Executive&#146;s employment shall be subject to the terms and conditions of the Employment Agreement and this Restated Addendum,
including without limitation, the Company&#146;s obligation to pay and/or provide the severance benefits described herein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.2
<U>Separation Package for Termination Without Cause and/or Good Reason Resignation</U>. If Executive&#146;s employment is terminated by the Company other than for Cause (as defined below) or if Executive terminates his employment for Good Reason (as
defined below), then (in either case) the Company will provide Executive with the following severance benefits: (i)&nbsp;the vesting of any options granted to Executive within the first four years of his employment with the Company (the
&#147;Initial Options&#148;) shall immediately accelerate such that all of the shares subject to the Initial Options shall be fully vested and immediately exercisable as of the date of such termination; (ii)&nbsp;the time period following such
termination during which Executive is permitted to exercise the Initial Options shall be extended by eighteen (18)&nbsp;months beyond the end of the time period for exercise that otherwise would apply in the absence of this extension (but not,
however, beyond the maximum terms of the Initial Options); (iii)&nbsp;the vesting of any Future Equity Awards shall be accelerated such that the awards that would have vested in the twenty-four (24)&nbsp;months following Executive&#146;s last day of
employment shall be deemed immediately vested as of Executive&#146;s last day of employment; (iv)&nbsp;the Company shall pay Executive, in one lump sum, twenty-four (24)&nbsp;months of Executive&#146;s then current base salary (subject to standard
payroll deductions and withholdings)(with such payment to be made within fifteen days after the effective date of the release referenced in Section&nbsp;3.4 below); and (v)&nbsp;the Company will pay the premiums necessary to continue
Executive&#146;s health insurance benefits for Executive and his family for the eighteen (18)&nbsp;months following Executive&#146;s last day of employment at the same level of benefits and the same cost to Executive as existed immediately before
Executive&#146;s last day of employment and will, at the end of such period, pay to Executive a lump sum cash amount equal to the cost of such coverage (as determined at the time of his employment termination) for an additional six (6)&nbsp;months,
provided that Executive has elected continuation of coverage under federal COBRA and analogous state law such that continuation of coverage shall be considered to have been provided pursuant to such laws. The benefits set forth in this
Section&nbsp;3.2 are referred to as the &#147;Separation Package.&#148; Executive shall not be entitled to any other severance benefits from the Company other than those expressly set forth herein, including any severance benefits under the
Company&#146;s Change in Control and Severance Benefit Plan. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">3 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.3 <U>Additional Severance Benefit for Termination Without Cause and/or Good Reason Resignation
Following A Change of Control</U>. If Executive&#146;s employment is terminated by the Company other than for Cause (as defined below) or if Executive terminates his employment for Good Reason (as defined below), and (in either event) such
termination occurs within twelve months following the effective date of a Change of Control (as defined herein), then in addition to the Separation Package, Executive shall also receive a lump sum payment equal to two times Executive&#146;s target
bonus for the year in which Executive&#146;s termination occurred, subject to standard payroll deductions and withholdings. This amount shall be paid within fifteen days after the effective date of the release referenced in Section&nbsp;3.4.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.4 <U>Release</U>. As a condition to receipt of any severance benefits under the Employment Agreement and this Restated Addendum,
Executive shall be required to provide the Company with an effective general release of any and all known and unknown claims against the Company and its officers, directors, employees, shareholders, parents, subsidiaries, successors, agents, and
affiliates in a form acceptable to the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.5 <U>Termination For Cause and/or Resignation Without Good Reason</U>. If the Company
terminates Executive&#146;s employment for Cause (as defined below) or Executive terminates his employment without Good Reason (as defined below), Executive shall not receive any severance benefits from the Company, including (without limitation)
the Separation Package. For purposes of the Employment Agreement and this Restated Addendum, a resignation tendered by Executive pursuant to a direct request of the Board where no Cause exists shall be deemed an involuntary termination without
Cause, and Executive shall be entitled to the Separation Package. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.6 <U>Benefits</U>. Following termination, Executive shall cease to be
a Company employee and shall not be entitled to any benefits other than the severance benefits set forth herein. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.7 <U>Cause</U>.
&#147;Cause&#148; shall mean (i)&nbsp;Executive&#146;s willful refusal or willful failure to comply with a lawful instruction of the Board, or (ii)&nbsp;Executive&#146;s conviction of any felony involving an act of moral turpitude. The Company may
not terminate Executive for Cause under subsection (i)&nbsp;above unless the Company gives Executive written notice of its intent to terminate Executive for Cause with an explicit written explanation for all reasons for the for Cause termination,
and the Company, in good faith, permits Executive thirty (30)&nbsp;days to cure the alleged wrongs. If the Executive cures the alleged wrongs within thirty (30)&nbsp;days of such notice, he cannot be terminated for Cause. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.8 <U>Good Reason</U>. &#147;Good Reason&#148; shall mean (i)&nbsp;the material reduction or material modification of Executive&#146;s authority,
duties, title or responsibilities without his prior written consent, provided that a change in the number of persons reporting to the Executive shall not, by itself, constitute Good Reason, or (ii)&nbsp;the material reduction or material
modification of Executive&#146;s base salary, Executive&#146;s stock option rights as set forth in the Employment </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">4 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">Agreement or this Restated Addendum or employee benefits without his prior written consent, or (iii)&nbsp;any requirement that Executive move his principal
place of employment more than thirty (30)&nbsp;miles from the Company&#146;s current headquarters unless the relocation of Executive&#146;s principal place of employment by more than thirty (30)&nbsp;miles results in moving his principal place of
employment closer to the Executive&#146;s current resident in Hillsborough, California. Executive shall give the Company written notice of his intent to resign for Good Reason (&#147;Notice of Good Reason&#148;) thirty (30)&nbsp;days before the date
he will terminate his employment (&#147;Good Reason Termination Date&#148;). In the event the Company disputes that Executive has Good Reason, the Company shall inform Executive in writing before the Good Reason Termination Date of every reason that
the Company disputes Executive&#146;s Good Reason claim. In the event that the Company disputes the existence of Good Reason, Executive, at his sole discretion, shall have the right to withdraw his notice of intent to resign for Good Reason and to
continue his employment under the same terms and conditions as if no Notice of Good Reason had been given. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.9 <U>Change of Control</U>.
&#147;Change of Control&#148; shall mean (i)&nbsp;any event in which the Company sells, transfers, or disposes of by other means all or substantially all of the Company&#146;s assets (or consummation of any transaction having similar effect), or
(ii)&nbsp;the dissolution or liquidation of the Company, or (iii)&nbsp;any merger, consolidation or transfer of securities of the Company with, to or into another corporation, entity or person, other than a merger, consolidation or transfer of
securities in which the holders of more than 50% of the shares of capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by the voting securities remaining outstanding or by their being converted into
voting securities of the surviving entity) more than 50% of the total voting power represented by the voting securities of the Company, or such surviving entity, outstanding immediately after such transaction. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.10 <U>Death</U>. In the event of Executive&#146;s death while Executive is an employee of the Company, the Company shall pay the Separation Package set
forth in Section&nbsp;3.2 of this Restated Addendum to Executive&#146;s heirs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.11 <U>Disability</U>. In the event of Executive&#146;s
Disability for any period of at least six consecutive months while Executive is an employee of the Company, the Company shall have the right, which may be exercised in its sole discretion, to terminate Executive. In the event the Company elects to
terminate Executive, the Company shall pay Executive the Separation Package set forth in Section&nbsp;3.2 of this Restated Addendum. For purposes of this Restated Addendum, &#147;Disability&#148; shall mean the inability of Executive to perform the
employment services called for in the Employment Agreement or this Restated Addendum by reason of physical or mental illness or incapacity as determined by a physician chosen by Executive and reasonably satisfactory to Company or its legal
representative. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.12 <U>Parachute Payments</U>. </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(i)</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT FACE="Times New Roman" SIZE="2"><U>Best After-Tax Result</U>. If any payment or benefit Executive is to receive under this Restated Addendum would be subject to the excise tax imposed by
Section&nbsp;4999 of the Code, or any comparable federal, state, or local excise tax (such excise taxes, together with any interest and penalties, are hereinafter collectively referred to as the &#147;Excise Tax&#148;), then </FONT>
</P></TD></TR></TABLE> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">5 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="8%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P>
<FONT FACE="Times New Roman" SIZE="2">Executive shall be entitled to receive the Reduced Amount. The &#147;Reduced Amount&#148; shall be either (x)&nbsp;the largest portion of the payment that
would result in no portion of the payment being subject to the Excise Tax or (y)&nbsp;the largest portion, up to and including the total, of the payment, whichever amount, after taking into account all applicable federal, state and local employment
taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive&#146;s receipt, on an after-tax basis, of the greater amount of the payment notwithstanding that all or some portion of the payment
may be subject to the Excise Tax. If a reduction in payments or benefits constituting &#147;parachute payments&#148; is necessary so that the payment equals the Reduced Amount, reduction shall occur in the following order unless Executive elects in
writing a different order (<I>provided, however,</I> that such election shall be subject to Company approval if made on or after the date on which the event that triggers the payment occurs): reduction of cash payments; cancellation of accelerated
vesting of stock awards; and reduction of employee benefits. In the event that acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of
Executive&#146;s stock awards unless Executive elects in writing a different order for cancellation. Notwithstanding the foregoing, Executive shall be permitted to elect to reduce any payments or benefits constituting &#147;parachute payments,&#148;
even if the provisions of this Section&nbsp;3.12 would not otherwise require such reduction, provided that such election is made in writing prior to the date of the event that triggers the payments or benefits (or, if made on or after such date, is
approved by the Company). </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT FACE="Times New Roman" SIZE="2">(ii)</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><U>Use of Third Party Expert</U>. The accounting firm engaged by the Company for the purpose of rendering general tax advice as of the day prior to the effective date of the Change
in Control shall perform the calculations required by this Section&nbsp;3.12. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control, the Company
shall appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. The accounting firm
engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and Executive within fifteen (15)&nbsp;calendar days after the date on which Executive&#146;s right to a
Payment is triggered (if requested at that time by the Company or Executive) or such other time as requested by the Company or Executive. If the accounting firm determines that no Excise Tax is payable with respect to a payment to Executive, it
shall furnish the Company and Executive with an opinion reasonably acceptable to Executive that no Excise Tax will be imposed with respect to such payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding,
and conclusive upon the Company and Executive. </FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">3.13 <U>Application of Section&nbsp;409A</U>. If the portion of the
Separation Package set forth in clause (iv)&nbsp;of Section&nbsp;3.2 or the additional severance benefit set forth in Section&nbsp;3.3 fails to satisfy the distribution requirement of Section&nbsp;409A(a)(2)(A) of the Code as a result of
Section&nbsp;409A(a)(2)(B)(i) of the Code, the payment of such amounts shall be delayed to the minimum extent necessary so that such amounts are not subject to the provisions of Section&nbsp;409A(a)(1) of the Code, but in no event will the Company
be obligated to pay any additional amount on account of such delay. That portion of the Separation Package set forth in clause (v)&nbsp;of Section&nbsp;3.2 shall be regarded as two separate &#147;payments&#148; for purposes of Treasury Regulations
Section&nbsp;1.409A-2(b)(2)(i), the first providing for eighteen (18)&nbsp;months of premium payments, followed </FONT>
</P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">6 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">by the second providing for a lump sum payment equal to six (6)&nbsp;months of premium payments (determined at the time of employment termination); the
former shall be treated as a reimbursement of medical expenses for purposes of Treasury Regulations Section&nbsp;1.409A-1(b)(9)(v)(B), and the latter shall be treated as a payment of deferred compensation in accordance with Treasury Regulations
Sections 1.409A-3(a)(1) and 1.409A-3(b). </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>ADDITIONAL PROVISIONS </B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.1 <U>Entire Agreement</U>. The Employment Agreement and this Restated Addendum contain the full, complete, and exclusive embodiment of the entire
agreement of the parties with regard to the subject matter hereof and supersede all prior communications, representations, or agreements, oral or written, and all negotiations and communications between the parties relating to the Employment
Agreement and this Restated Addendum (including the Original Addendum and the April 2007 Addendum). Executive represents that he has not entered into this Restated Addendum in reliance on any representations, written or oral, other than those
contained herein. Any ambiguity in this document shall not be construed against either party as the drafter. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.2 <U>Successors, Binding
Agreement</U>. The Employment Agreement and this Restated Addendum shall not automatically be terminated by the voluntary or involuntary dissolution of the Company or by any merger or consolidation, whether or not the Company is the surviving or
resulting corporation, or upon any transfer of all or substantially all of the assets of the Company. In the event of any such merger, consolidation or transfer of assets, the provisions of the Employment Agreement and this Restated Addendum shall
bind and inure to the benefit of the surviving or resulting corporation, or the corporation to which such assets shall have been transferred, as the case may be; provided, however, that the Company will require any successor to all or substantially
all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Executive, to expressly assume and agree to perform the Employment Agreement and this Restated Addendum in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken place. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.3 <U>No Mitigation</U>. Executive shall have no
duty to mitigate any breach of the Employment Agreement and/or this Restated Addendum. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.4 <U>Headings</U>. Section headings in the
Employment Agreement and this Restated Addendum are for convenience only and shall be given no effect in the construction or interpretation of the Employment Agreement and this Restated Addendum. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.5 <U>Notice</U>. All notices made pursuant to the Employment Agreement and this Restated Addendum, shall be given in writing, delivered by a generally
recognized overnight express delivery service, and shall be made to the Company&#146;s principal place of business, attention Legal Department, and to the Executive&#146;s residence. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">4.6 <U>Facsimile Signatures</U>. This Restated Addendum may be entered into by facsimile signatures, and in counterparts, all of which taken together
shall constitute one original agreement. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">7 </FONT></P>


<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>IN WITNESS WHEREOF,</B> the parties execute and deliver this Restated Addendum as of the day and year
first above written. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="7%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="92%"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2"><B>NUVELO, INC.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2">By:</FONT></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ Kimberly Popovits</FONT></TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">Print Name: Kimberly Popovits</FONT></TD></TR>
<TR>
<TD HEIGHT="8" COLSPAN="3"></TD></TR>
<TR>
<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">Print Title: Chair, Compensation Committee</FONT></TD></TR>
</TABLE></DIV> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="100%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>TED W. LOVE</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD></TR>
<TR>
<TD VALIGN="top" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ Ted W. Love</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"></TD></TR>
</TABLE></DIV> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2">8 </FONT></P>

</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.60
<SEQUENCE>3
<FILENAME>dex1060.htm
<DESCRIPTION>BONUSES FOR NAMED EXECUTIVE OFFICERS APPROVED ON JANUARY 25, 2008
<TEXT>
<HTML><HEAD>
<TITLE>Bonuses for Named Executive Officers Approved on January 25, 2008</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>Exhibit 10.60 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">Bonuses for Named Executive Officers Approved on January&nbsp;25, 2008: </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0" ALIGN="center">

<TR>
<TD WIDTH="90%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD></TD>
<TD></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Ted W. Love, M.D., Chairman and Chief Executive Officer</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">220,080</FONT></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Michael D. Levy, M.D., Executive Vice President, Research and Development</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">120,540</FONT></TD></TR>
<TR BGCOLOR="#cceeff">
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Lee Bendekgey, Senior Vice President, General Counsel and Chief Financial Officer</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">$</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2">&nbsp;&nbsp;&nbsp;&nbsp;121,275</FONT></TD></TR>
</TABLE>
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.61
<SEQUENCE>4
<FILENAME>dex1061.htm
<DESCRIPTION>SEPARATION AGREEMENT BETWEEN NUVELO, INC. AND MICHAEL D. LEVY
<TEXT>
<HTML><HEAD>
<TITLE>Separation Agreement between Nuvelo, Inc. and Michael D. Levy</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>Exhibit 10.61 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px">

<IMG SRC="g56756image_1.jpg" ALT="LOGO"> </P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">March&nbsp;14, 2008 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Michael D.
Levy </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Nuvelo, Inc. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">201 Industrial Road, Suite 310 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">San Carlos, CA 94070-6211 </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Dear Michael: </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">This letter sets forth the substance of the separation agreement (the &#147;Agreement&#148;) that Nuvelo, Inc. (the &#147;Company&#148;) is offering to you to aid in
your employment transition. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>1. Separation.</B> Your last day of work with the Company and your employment termination date will be
March&nbsp;20, 2008 (the &#147;Separation Date&#148;). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>2. Accrued Salary And Paid Time Off.</B> On the Separation Date, the Company
will pay you all accrued salary, and all accrued and unused PTO earned through the Separation Date, less required payroll deductions and withholdings. You are entitled to these payments regardless of whether you sign this Agreement. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>3. Severance Benefits.</B> If you sign this Agreement and allow it to become effective, then the Company will provide you with the following severance
benefits (the &#147;Severance Benefits&#148;): </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>(a) Salary Continuation Payments. </B>The Company shall make continuing
base salary payments to you (at the base salary rate in effect as of the Separation Date) for twelve (12)&nbsp;months (the &#147;Salary Continuation Payments&#148;) following the Separation Date. The Salary Continuation Payments shall be paid,
subject to applicable withholdings and deductions, on the Company&#146;s customary payroll dates starting on the first payroll date within ten (10)&nbsp;days after the Effective Date (as defined in paragraph 13 below). </FONT></P> <P
STYLE="margin-top:6px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>(b) </B><B>Accelerated Stock Vesting/Extended Exercise Period Benefit. </B>The Company will accelerate the vesting of any outstanding
stock options such that any shares that would have vested in the twelve (12)&nbsp;month period following the Separation Date had your employment not terminated shall be deemed vested and exercisable as of the Separation Date. You will have until the
fifteen (15)&nbsp;month anniversary of the Separation Date (i.e., until June&nbsp;20, 2009) to exercise any vested shares. Except for the accelerated vesting and extended exercise period set forth herein, all other rights and obligations with
respect to your stock options will be as set forth in your stock option agreement, grant notice and applicable plan documents. You hereby acknowledge that the Company is not providing tax advice to you and that you have been advised by the Company
to seek independent tax advice with respect to this acceleration of unvested equity awards, the extension of your exercise period, your exercise or sale of any vested shares, and any other compensation and benefits that you are receiving under this
Agreement. </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>(c) Continued Medical Benefits.</B> To the extent provided by the federal COBRA law
or, if applicable, state insurance laws (collectively, &#147;COBRA&#148;), and by the Company&#146;s current group health insurance policies, you will be eligible to continue your group health insurance benefits at your own expense following the
Separation Date. You will be provided with a separate notice describing your health insurance continuation rights and obligations. If you timely elect continued group health coverage through COBRA, the Company will pay for your COBRA premium for a
period of 12 months, sufficient to continue your group coverage at its current level (including dependent coverage, if applicable) through the earlier of either March&nbsp;31, 2009 or the date that you become eligible for group health insurance
coverage through a new employer. You agree to promptly notify the Company&#146;s Human Resources Department in writing if you become eligible for group health insurance coverage through a new employer before March&nbsp;31, 2009. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">You acknowledge and agree that the Severance Benefits are being provided to you in lieu of the severance benefits set forth in your September&nbsp;7, 2004 offer letter
from the Company, and that the provision of these Severance Benefits will extinguish any obligation on the part of the Company to provide you with severance benefits. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2"><B>4. Other Compensation Or Benefits.</B> You acknowledge that, except as expressly provided in this Agreement and excluding your rights with respect to any vested stock options (as set forth above) and any vested
rights you have in any ERISA-governed benefit plan sponsored by the Company (i.e., your 401(k) plan account)), you will not receive and are not entitled to any additional compensation, severance or benefits from the Company after the Separation
Date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>5. Expense Reimbursements.</B> You agree that, within fifteen (15)&nbsp;days after the Separation Date, you will submit your
final documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement. The Company will reimburse you for these expenses pursuant to its regular business
practices. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>6. Return Of Company Property.</B> On the Separation Date, you shall return to the Company all Company documents (and all
copies thereof) and other Company property within your possession, custody or control, including, but not limited to, Company files, notes, correspondence, memoranda, specifications, drawings, records, plans, forecasts, compilations of data,
operational and financial information, research and development information, sales and marketing information, personnel information, computer-recorded information, tangible property (including, but not limited to, computers), credit cards, entry
cards, identification badges, and keys; and, any materials of any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part). You agree that you will make a diligent
search to locate any such documents, property and information on the Separation Date. If you have used any personally owned computer, server, or e-mail system to receive, store, review, prepare or transmit any Company confidential or proprietary
data, materials or information, then within ten (10)&nbsp;days after the Separation Date, you shall provide </FONT>
</P>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">the Company with a computer-useable copy of such information and then permanently delete and expunge such Company confidential or proprietary information
from those systems; and you shall provide the Company access to your system as requested to verify that the necessary copying and/or deletion is done. Your timely return of all such Company documents and other property is a condition precedent to
your receipt of the severance benefits provided under this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>7. Proprietary Information Obligations.</B> You hereby agree to
execute, and abide by the terms of, the Proprietary Information and Inventions Agreement attached hereto as Exhibit&nbsp;A<I>.</I> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>8.
Nondisparagement.</B> You agree not to disparage the Company, or its officers, directors, employees, shareholders or agents, in any manner likely to be harmful to its or their business, business reputation, or personal reputation, and the Company
(through its officers and directors) agrees not to disparage you in any manner likely to be harmful to you or your business reputation or personal reputation; <I>provided, however,</I> that you and the Company will respond accurately and fully to
any question, inquiry or request for information when required by legal process. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>9. No Admissions.</B> You understand and agree that
the promises and payments in consideration of this Agreement shall not be construed to be an admission of any liability or obligation by the Company to you or to any other person, and that the Company makes no such admission. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>10. No Voluntary Adverse Action.</B> You agree that you will not voluntarily (except in response to legal compulsion) assist or provide information to
any third party in bringing or pursuing any proposed or pending litigation, arbitration, administrative claim or other formal proceeding against the Company, its parent or subsidiary entities, affiliates, officers, directors, employees or agents.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>11. Cooperation.</B> You agree to cooperate fully with the Company in connection with its actual or contemplated defense, prosecution,
or investigation of any claims or demands by or against third parties, or other matters arising from events, acts, or failures to act that occurred during the period of your employment by the Company. Such cooperation includes, without limitation,
making yourself available to the Company upon reasonable notice, without subpoena, to provide truthful and accurate information in witness interviews and deposition and trial testimony. The Company will reimburse you for reasonable out-of-pocket
expenses you incur in connection with any such cooperation (excluding forgone wages, salary, or other compensation) and will make reasonable efforts to accommodate your scheduling needs. In addition, you agree to execute all documents (if any)
necessary to carry out the terms of this Agreement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>12. Release of Claims.</B> In exchange for the consideration under this Agreement
to which you would not otherwise be entitled, you hereby generally and completely release the Company and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities,
insurers, affiliates, and assigns from any and all claims, liabilities and obligations, known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date
</FONT>
</P>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px">
<FONT FACE="Times New Roman" SIZE="2">you sign this Agreement. This general release includes, but is not limited to: (a)&nbsp;all claims arising out of or in any way related to your employment
with the Company or the termination of that employment; (b)&nbsp;all claims related to your compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits,
stock, stock options, or any other ownership interests in the Company; (c)&nbsp;all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (d)&nbsp;all tort claims, including claims
for fraud, defamation, emotional distress, and discharge in violation of public policy; and (e)&nbsp;all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys&#146; fees, or other claims
arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967, as amended (&#147;ADEA&#148;), the California Fair Employment and Housing
Act (as amended), and the California Labor Code. Notwithstanding the foregoing, you are not hereby releasing (i)&nbsp;any rights you have under this Agreement, or (ii)&nbsp;any obligation the Company may have to indemnify you for acts within the
course and scope of your employment with the Company, pursuant to the articles and bylaws of the Company, any fully executed written agreement with the Company, or applicable law. Also excluded from this Agreement are any claims which cannot be
waived by law. You are waiving, however, your right to any monetary recovery should any governmental agency or entity pursue any claims on your behalf. You also acknowledge that you have received all leaves of absence and leave benefits and
protections for which you are eligible, and have not suffered any on-the-job injury for which you have not already filed a claim. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>13.
ADEA Waiver.</B> You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you have under the ADEA (&#147;ADEA Waiver&#148;). You also acknowledge that the consideration given for the ADEA Waiver is in addition to
anything of value to which you were already entitled. A list of the job titles and ages of all employees whose employment is being terminated pursuant to the Company&#146;s reorganization and the job titles and ages of all employees of the Company
in the same business unit whose employment is not being termination is provided in Exhibit B, attached hereto. You further acknowledge that you have been advised by this writing, as required by the ADEA, that: (a)&nbsp;your ADEA Waiver does not
apply to any rights or claims that arise after the date you sign this Agreement; (b)&nbsp;you should consult with an attorney prior to signing this Agreement; (c)&nbsp;you have forty-five (45)&nbsp;days to consider this Agreement (although you may
choose voluntarily to sign it sooner); (d)&nbsp;you have seven (7)&nbsp;days following the date you sign this Agreement to revoke the ADEA Waiver (in a written revocation sent to me); and (e)&nbsp;the ADEA Waiver will not be effective until the date
upon which the revocation period has expired, which will be the eighth day after you sign this Agreement (the &#147;Effective Date&#148;). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman"
SIZE="2"><B>14. Section&nbsp;1542 Waiver.</B> In granting the release herein, which includes claims which may be unknown to you at present, you acknowledge that you have read and understand Section&nbsp;1542 of the California Civil Code, which
states: <B>&#147;A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her
settlement with the debtor.&#148;</B> You hereby expressly waive and relinquish all rights and benefits under that section and any law or legal principle of similar effect in any jurisdiction with respect to the releases granted herein, including
but not limited to the release of unknown and unsuspected claims granted in this Agreement. </FONT></P>

<p Style='page-break-before:always'>
<HR  SIZE="3" COLOR="#999999" WIDTH="100%" ALIGN="CENTER">

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2"><B>15. Miscellaneous.</B> This Agreement, including Exhibits A and B, constitutes the complete, final and
exclusive embodiment of the entire agreement between you and the Company with regard to its subject matters. It is entered into without reliance on any agreement, promise or representation, written or oral, other than those expressly contained
herein, and it supersedes any other such agreements, promises or representations. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs,
personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, and your and the Company&#146;s respective heirs, successors and assigns. If any provision of this Agreement is
determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provision in question will be modified so as to be rendered enforceable. This Agreement will be deemed
to have been entered into and will be construed and enforced in accordance with the laws of the State of California as applied to contracts made and to be performed entirely within California. Any ambiguity in this Agreement shall not be construed
against either party as the drafter. Any waiver of a breach of this Agreement shall be in writing and shall not be deemed to be a waiver of any successive breach. This Agreement may be executed in counterparts and facsimile and .pdf signatures will
suffice as original signatures. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">If this Agreement is acceptable to you, please sign below and return the original to me. We wish you the
best in your future endeavors. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Sincerely, </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="100%"></TD></TR>
<TR>
<TD VALIGN="top"><FONT FACE="Times New Roman" SIZE="2"><B>N<SMALL>UVELO</SMALL>, I<SMALL>NC</SMALL>.</B></FONT></TD></TR>
<TR>
<TD HEIGHT="16"></TD></TR>
<TR>
<TD VALIGN="top" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ Ted W. Love</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">By:&nbsp;&nbsp;<B>Ted W. Love</B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chairman&nbsp;&amp; CEO</B></FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>I <SMALL>HAVE</SMALL> <SMALL>READ</SMALL>, <SMALL>UNDERSTAND</SMALL> <SMALL>AND</SMALL> <SMALL>AGREE</SMALL>
<SMALL>FULLY</SMALL> <SMALL>TO</SMALL> <SMALL>THE</SMALL> <SMALL>FOREGOING</SMALL> A<SMALL>GREEMENT</SMALL>: </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="100%"></TD></TR>
<TR>
<TD VALIGN="top"></TD></TR>
<TR>
<TD HEIGHT="16"></TD></TR>
<TR>
<TD VALIGN="top" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ Michael D. Levy</FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">Michael D. Levy</FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Date: March&nbsp;20, 2008 </FONT></P>
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>5
<FILENAME>dex311.htm
<DESCRIPTION>CERTIFICATION OF CEO PURSUANT TO RULE 13A-14(A) OR 15D-14(A)
<TEXT>
<HTML><HEAD>
<TITLE>Certification of CEO pursuant to Rule 13a-14(a) or 15d-14(a)</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>EXHIBIT 31.1 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>CERTIFICATION </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">I, Ted W. Love, certify that: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">1. I have reviewed this quarterly report on Form 10-Q of Nuvelo, Inc.; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">4. The
registrant&#146;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">c) Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">d) Disclosed
in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s internal control over financial reporting; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">5. The
registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of the registrant&#146;s board of directors
(or persons performing the equivalent functions): </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant&#146;s ability to record, process, summarize and report financial information; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Date: May&nbsp;9, 2008 </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="100%"></TD></TR>
<TR>
<TD HEIGHT="16"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ T<SMALL>ED</SMALL> W. L<SMALL>OVE</SMALL></FONT></TD></TR>
<TR>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Ted W. Love</B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><I>Chairman of the Board and Chief Executive Officer</I></FONT></TD></TR>
</TABLE></DIV>
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>6
<FILENAME>dex312.htm
<DESCRIPTION>CERTIFICATION OF CFO PURSUANT TO RULE 13A-14(A) OR 15D-14(A)
<TEXT>
<HTML><HEAD>
<TITLE>Certification of CFO pursuant to Rule 13a-14(a) or 15d-14(a)</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>EXHIBIT 31.2 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>CERTIFICATION </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">I, Lee Bendekgey, certify that: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">1. I have reviewed this quarterly report on Form 10-Q of Nuvelo, Inc.; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">4. The
registrant&#146;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">c) Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">d) Disclosed
in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s internal control over financial reporting; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">5. The
registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of the registrant&#146;s board of directors
(or persons performing the equivalent functions): </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant&#146;s ability to record, process, summarize and report financial information; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Date: May&nbsp;9, 2008 </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P><DIV ALIGN="right">
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="40%" BORDER="0">

<TR>
<TD WIDTH="100%"></TD></TR>
<TR>
<TD HEIGHT="16"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ L<SMALL>EE</SMALL> B<SMALL>ENDEKGEY</SMALL></FONT></TD></TR>
<TR>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Lee Bendekgey</B></FONT></TD></TR>
<TR>
<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2"><I>Senior&nbsp;Vice&nbsp;President and&nbsp;Chief&nbsp;Financial&nbsp;Officer</I></FONT></TD></TR>
</TABLE></DIV>
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>7
<FILENAME>dex321.htm
<DESCRIPTION>CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SEC. 1350
<TEXT>
<HTML><HEAD>
<TITLE>Certification of CEO and CFO pursuant to 18 U.S.C. sec. 1350</TITLE>
</HEAD>
 <BODY BGCOLOR="WHITE">

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>EXHIBIT 32.1 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>NUVELO, INC. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>CERTIFICATION PURSUANT TO </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>18 U.S.C. SEC. 1350 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>AS ADOPTED
PURSUANT TO </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;) and Section&nbsp;1350 of Chapter 63 of Title 18 of the United States Code (18
U.S.C. &#167;1350), Ted W. Love, Chief Executive Officer of Nuvelo, Inc. (the &#147;Company&#148;), and Lee Bendekgey, Senior Vice President and Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">(1) The Company&#146;s Quarterly Report on Form 10-Q for the period ended March&nbsp;31, 2008, to which this Certification is attached as Exhibit 32.1
(the &#147;Periodic Report&#148;) fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act; and </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">(2) The information contained in
the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>In Witness
Whereof</B>, the undersigned have set their hands hereto as of the 9th day of May, 2008. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="100%" BORDER="0">

<TR>
<TD WIDTH="47%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="4%"></TD>
<TD VALIGN="bottom" WIDTH="1%"></TD>
<TD WIDTH="47%"></TD></TR>
<TR>
<TD HEIGHT="16"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD>
<TD HEIGHT="16" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ T<SMALL>ED</SMALL> W. L<SMALL>OVE</SMALL></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top" ALIGN="center" STYLE="BORDER-BOTTOM:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ L<SMALL>EE</SMALL> B<SMALL>ENDEKGEY</SMALL></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Ted W. Love</B></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>Lee Bendekgey</B></FONT></TD></TR>
<TR>
<TD VALIGN="top" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><I>Chairman of the Board and Chief Executive Officer</I></FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><I>Senior Vice President and Chief Financial Officer</I></FONT></TD></TR>
</TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">&#147;This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities
and Exchange Commission and is not to be incorporated by reference into any filing of Nuvelo, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form
10-Q), irrespective of any general incorporation language contained in such filing.&#148; </FONT></P>
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>8
<FILENAME>g56756image_1.jpg
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 g56756image_1.jpg
M_]C_X``02D9)1@`!`@``9`!D``#_[``11'5C:WD``0`$````9```_^X`#D%D
M;V)E`&3``````?_;`(0``0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!`0$!
M`0$!`0$!`0$!`0$!`0("`@("`@("`@("`P,#`P,#`P,#`P$!`0$!`0$"`0$"
M`@(!`@(#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#`P,#
M`P,#`P,#`P,#_\``$0@`-P#!`P$1``(1`0,1`?_$`*L```(#`0$!`0$!````
M```````)!@@*!P4"!`,+`0$``@(#`0$!````````````!P@%!@0)"@(#`1``
M``8"`@$#`P("!0P#`````0(#!`4&!P@`"1$2$PHA%!4Q(A8Z([87MWA!43)"
M4B0E=79W&+@9.7D1``(!`P,#`@0#!P('`0````$"`P`$!1$2!B$'"#$302(4
M"5%A(W&!,D)2%19B)*%RHC-#8S07_]H`#`,!``(1`Q$`/P#?QQ2H[;K;6J%5
M;'=[E-,*Y4JA!REELT_*+`WCH:"A&2TC*R;U80'VVS)DW.H<0`1\%^@"/TYQ
M[N[MK"UDO;QUCM(49W9N@55!+,?R`&M9CCW'\URO/67&.-VTMYR#(W45M;01
M#=)-/,XCBB0?%G=@H^&IZD"OR2E]I4+1W>2Y:TP4?CYA6C7%Y<W4DV2KC>J$
MCORQK"K*F4^T+$!&#[_O^KVQ2_=Y\<^);^RALCDI947'K'[AD)&P)INW[O3;
MMZZ^FE<BQXGR;)\HCX3C["ZFY=+>BS2S6-C<-=&3VOIQ%IO]WW?T]FF[=TTU
MK.MN-\B[#N/#2]-U&J!\T6E#WFA<DVQ.0K^+V+DIE$A7B8G_`'.UW`J1B@("
M/XML?R!B+*E_6O7,/(;#X\O9\2A^LNAT]Z35(0?Q5>CR?]`_`D5W%^.7V<>X
MW,%M^2>0F1'&L"^C_P!NM#'<9-UZ';++\]K9D@_#ZJ0=0T<;>C6]2<YV&OZ1
MX5SONAE:KUZU9-AXFYV2V6U6`H57B%,IRZLG0*JW*)8R*B46E?E(]FD10WN'
M6*85#G.83#*G$\Y<6_"K+.\RNHH[JY19'DDVQ(OOMNB0>BKHC(HUZZ^I)J@_
MD%VMP^7\G>3=JO&O`7UY@<'<RV=O:V@GOKJ88N$17]TW6264O<17$S%1M"$!
M%50`+T0TW#6*,:35?EXR=AY!$CAA+0S]K)QCUNH4#)KM'[)5=JY1.40$#$.8
MHA^@\W>&:&XC$UNZO"PU#*0P(_$$:@U5K)8S)8>]DQN7MY[7(PL5DBFC:*1&
M'0JZ.%92/B"`17I\_6N#1Q2CBE'%*.*4<4HXI1Q2CBE'%*.*4<4HXI1Q2CBE
M'%*.*4<4HXI1Q2D%?(4VB##FH,=A"!DP:W/9*P_@7:"*I"NT<:5$[*:N;GP`
MBHFE(R2L7'&^@`J@[7+Y^A@Y`WD!R?\`L_$5PD#:7F2DVD?'V8]&D/[SL3\P
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M\F8-U4#B*C4RBL<]PNT,^'YA:1X9">/92\2--/\`P.[#=$?](7<T9_I!4]5U
M-T/#S[C&*[D>.'(;ON3<QIWCX)QRYO+G>0/[I;6L+>S>QCXS-*(X+Q`.D\B2
MJ`DX1&F?(RLL?CS2#"6'Z\FG&QMBS!7&#*-0-Z2)5;'%'L'LLB$_UF[1V]CO
MI_D$A>2?Y#W,>/X398BW&V.2\0`#^B&)]!^P$I_PJB7V;L+><P\G^3]Q<NQF
MO;/CMQ(\C=2;K(WMON<G^IT2X_<6K-QUZ57L+O\`DM&M:+67*U;D45TCV2=K
MMDEJ]C*NM5E4S&>WYTN96I"U'Z'!LY0<N7(%$$4%3?MY7/M_:]P+_)"VX/)=
M1R`_.R.R0H/QE)_3T_(AB?Y5)KN@\OL]X@<2X4V:\IK+`7MFRD6T%Q;17&2N
M&`/R6"KI=[O@9(Y(XX]09)8UZU_H!:S4O/M"Q/!0.RN8H;-V54B%5F[A`4J.
MH\2GZFZ!"Q31E'`B66*S43-YD%6[-5V8PG,W1^A`OOQJRSUABHX.27B7N4'\
M4B1B-?0?*`/XM/ZR%+>NT>E>2/O;R7M-ROG]WENRO'+GC'`F.D-I/>R7LI^9
MC[KO)K[1<$?[=9)EB`VB:3^(V!YGZB.E3;Q]S>C?77G["NNVU%NN5'M6=(F-
MGJS:FM/6EL=UZ"D[:ZI@3-XLR#]-6OQK"59J*.U0;+E;-2BL?P0!\*4T]B^9
M2;)I)1KMK(1T@U;OF#]BX2=LGK)VD1=J[:.D#J(.6KE!0ITU"&,0Y#`("(#Q
M2JU;E[<XBT2UMR5M7G=2RI8IQ2A7'%K4I\&-DL14[3;H"DQ7XZ&!VQ^\$9RR
M-@4\JD!-'UG$?!?'%*EVM&PF/=L,!8FV2Q.>;4QMFBE1%]I9['%_A9TT!-I"
MLR&5BON'8,'GH#]Z8*J`'^T/%*[CQ2CBE'%*.*4<4HXI1Q2EQ8][3=5\F]@^
M5NLNL.,AFV;PU45[K<T']-%G0B0C>'HTXH,7;1E%!D'7V.0H[P3[4@"<5"^K
MR3ZJ4QWBE'%*.*4<4HXI58LT;F:QZZ7.N4/.N7ZUBFP6^'6G:R:ZEDH:"F8Y
MJ^&.>&:VE=A_#1'+%UZ`704=IK)%53.8H%.41UG,\QXSQZ\CL,Y=QVMQ,FY/
M<U56`.AT<C9J#Z@L"-0=-"*G#MKXV][^\?&[SE?:SCM[G\1CKD07/T1CFGAD
M9/<0-:K)]25===CK$R,5=0VY6`_-,U'2_<)M&2T[`ZX;*(L&*C>'DWK/'>4U
M(V/=B5VLWCWIBS*\<BL<`4.1,R?[@`1#R'/F:TX;R]5EGCQV255T5B(I]`>N
M@/S$#X]-*_?&\A\E/'6:>PQ=WS/A4LLH::-'R&+$DB:H&D0>RLC`:J"P;H=`
M=#4.IO7)I!CG(=9ROCS7&@4+(5.DQEZU9J8E+5=U%/C-UVBQDFL)*,HY9NY9
MNE45D%45$%D5#$.0Q3"'.'9]N^$X[(197'XZW@R$+;D>/<A4Z$>BL!H02"""
M""01I6Q\D\RO)_F7#[[@/,.9Y?+<0R4'M7-M>&*Y65`RN`6FB>0,KJKHZNKH
MZJRL&`-7-=,63X&X/6;5X#5T@^:@Z;I.`;/6QA.V>-P5(?V73<P^2*%\'(/Z
M"'-R9$?3>`=""-1KH1Z$?F/@:K9!=7-J7-M))&9(V1MK%=R-T9&T(U5AT93T
M/Q%+<WFZWZAOWDO!$CF"[3,=AS#+.Z/9#'E7*9A-7JRVMS6BH@]LQCF&"@V,
M=7Q34^V2,\6]\P$50\`?D<\W[=6G/,E8R9>=UP]F)"8DZ-*[E/5_Y5`30[1N
M.O0KZU=#Q;\S>0^)G"N56?;O&6TW<?DDEFD>0N?GAL;:U6YUV6P`]^=Y+C<O
MN.(4V`LDNI6JE;J=E6IW59CLNN.L-$HTMEZ*9"VB,54Y%%E3,=KN&Y0+8<J2
ML>I]Z\FU@`BIF)EE)F0'P=RL@0Y5S:GS/N1Q3M;C_P#'>,P0/ET718(^D<1(
M_CG8=2WH=NID?U8J#NJP/C1X5=_O/+F)[S=\<KE+?MY<2;ILI>$O>9!5;_Y\
M7%(-B0CJ@G"+9VXU6&.5E,0M-U,[Q/MZ=5XV\71[&JYDHT](TG++:-9H1C96
M63.:1K]A:1C8B:#-A8:XZ0,`)@"8.T')"_0GCFT=J>;/SCBRWMXRG,02&.<`
M!1N]4<*.@#H1Z=-P8#TJ"//_`,7K7Q9[\3<7XU%,O;C*6D=[BFD=I&$1'MW%
MN\K$L\EO<*XU8[C$\+-U:F><DRJ/5@A^33K%$[H=U?5OJK-69_3&&=\+NL>#
M;(UH@_=UYY-9*R$6+E@8.3$2?-V4HFB=9'U$,JB!RE.0P@8%*[ET1]F.;]%-
MB9/HD[2%7-4R-CF;3J.IN5K(^45AIR*=![M4Q:%E?@D29IUKC3IN:%)F-]2*
M?AE/;4(S;IJ4Z;Y)222W25OB59)-4I:/CI4I5"%.!54<X8P515*!@'PHDJ0#
M%']0,`"'%*C77ELI7-.OCP:P[26ZNS=MK&"-%:QDF<K-;58(3TW'5V#.[<Q\
M4M*+MH]-ZN0/!!64*0!_4>*4P#K;WQHW95J'CK<#'-(MF.ZED>4O<7'52[.(
M=U8X]6A7B?HSY5ZM!.GL89-\^KZBR7H4$02.4#>#>0XI5<=C>X'$VM_9EK%U
MC6+$N1[#DC:&LUNSUG),*^JZ5%KC:R3F0(-!K.-'TDC857#-;'RZB@H('*)'
M"?I$Q@.`*5X.".Y[$68.SW-?55:,,Y1PUG?$L=;I>"L5Y>U5>GY5C:R6$F6+
MFE?B9->7'^*L?SI+&Q*N@7S'(+@IZ%4Q(*E,QV*SOC_5_!&7=B<J2)HO'F%\
M?6C(UL=)>V9T>)J\4XDU&$<DH=,CF7EE$2M6:/J`5G2R:8?4P<4JG6M'9UA_
M-G7JQ[)\LUBPZI8`>URRWGW,R24(K,-Z#!3+F"C+4HE67,D18ES?M1"&9(^X
M]D/>;@BF<SA(IE*4!6/D2;8[.-IW)/7ETO[1[1ZU5Z:E(Q/-=@ND7B\UV2AE
MC-WZE&JP5&V$FW22I!*+9F_D'29Q]M9))8#)`I3+^K3N8UO[1VE_J-.K5ZP7
MLGAHRB69M9<OLDXS(=+!"54A'4I'*%(W+8Z^QF2%9NU?MV;V/>*$1>M&QE4/
M=4I!^FW\Y5V$_P"&Z3_NYU2XI6@#L^[BM;^L)ICVIW.OWK.&R.:7*#'">L6'
M8]*8R7?5G4HE"-9%R"GK1KM?=3*OV;=<R;EV^=@9%DU='26!)2EN9*[]]VM2
M8B"S!O\`]+6>]>-6IV9A8Y_F"E9MH>8YK'[6==D:L'5^I43`0GX!RH=0I"MY
M%]%F47,5`@F7,5$RE/FJ^X.(<H:D%W0P2_<9SQ!(8QELJUD]&<1+28L\%`LG
MCR9BFB5LDJZPBK-$GC739VQD7#-5J^;*-UO0J02@I5'\+=U.MN9=BL8ZJIXZ
MS52<UY47Q\XA*W9X>E.F<;5LFZUN]H:I=9F9K%XGV"-=6I*;6.7%$RSAO.OT
M&ITO`F4*I3B.*4G'N_U!_P#*+3"QV6N17WV4-?%'N5*>+9L9Q)2-?9LA3R'6
M&WM^5CDDZZB#XB1"F,J\BVY0#Z\A_O9Q'_)^&R7-LN[)X_6>/0:DH!^J@_YD
M^;3XLBBNQS[8'D1_^%^2=EA<S/[7!N7A,7=[FVQQW#OKC[EM>@,=P?8+$@)#
M<S,3TI!/5ATM99V&>US/F=W]OPEA!-5E*UN.BG;ZM90RFT]1'2*\*JF"3VHT
MUX0I?^)J`5T[3,`LB>DP.DX&[7=FLMR!X\]G6FLL)J&0*2DTX]=5^,<9_K/S
M,/X!I\P[9O._[EG;_L_;7G:?M5%CN3]SRKQ7,DJ)<XS%OU4K,#JEW>(2?]LN
ML43`BY;<#`^T^E_P/",_[.*;*1RP8YCH.$>U]*PJV";K;-5AZH-O85G\A)3I
M';Z/;^Z15^H9PZ)Y5$Q_(F&YEE]%`G]NLV4_3JJE-^]D&GRA]26U(&H+'5O7
M4^M>:/DO^49.X_S+DD$R_P!YFGF2X-N+>&Y<2:3M;B...`HDC;66!1'$?D"K
MIM$UYS:UFJ6;Q8_W(RAB=>D:<Y2QMAZTS9'S6S72ZM[(-B;1)T"D19T64@V$
MLWKDJ\.8Y59!5HNNW)X%N*2OA8FF<VL.89/%&RX?=6UG=/J'DD#[PNGI$RA@
MC'XN5)'\NAZBRWB]R[QPX-S].3^1N"S7(\%:E&MK.S:V^G:4-J7OHIY(FN(D
M`!6!9420ZB;W(]8VQ@9BZ0.RVC/)6<=XG;Y?!R^=O9&Q8\OL%;9&5>.5CN'4
MBM&3;^&N;]R]64,H<YF)E3G,(F^H_6F^8[)]R;%WG>T%WJQ)>*59"Q/4G:Q6
M0DGJ3MUUKTH]N?N?^%'*;:#%V^??CNR)$CM\A83VD<2*`JQB2%)K.-44!543
M!0``.@KO_3[=,^]?^Z$11\_8GRIBO&.PA6>*[2M?:1::Q"QMO4=&6QS8OO):
M.:1RAV\^N:-.J"@D3:RJJ@CX(',_VBO,]P'F266>M+JUQF0T@<RQNBB37]%]
M6`'1CLUUT"N3\*B3[B?&NTWEOXUW'*.TN?P.>YQQ`OE+5;"]M;F:2T"Z9&WV
M12/(`T"BX"[0S2VL:`:M6Y/EW*\N=8Q>X[^9CZ,/^5U[^]F_\4IHO?1TP5GM
M1P*UMF,_QM*W9P2P=S.`<C@J2&4LR+18TNMB*W3J/M.&\#.2!!6B7IS^8*8.
M#D@E06>D64K-E-]Q=SW'Z..QKKVW=._HW8AJYBZ!AIMM>FXPEDS54<:9BQXA
M-RCUBY!%8V6Z42,%"QM@+ZWJ?HE$_64[T&ZE.20_E!#?_EFX_JFKQ2K!_%-_
M^D'5O_J_8S_V&R7Q2E:]IO\`-H]1/_:;&']?MD^*5[/R=,26_2K;+03O&P9#
M&&PX3R=5,59Z0CRF2&?AFCB1EJ2I+"F<H`RM51<6.J2#@_CRBZCT?/\`HAQ2
MK"]\VQ?_`,@-:ZW>K;5&W*2"W:5:\<9MO-J@UE%#P6GU?397DEEE6K4RAR1L
MNLBI,`!P$APJBZ!@$3^.*54[Y@TLIK_H9U\:68>CQJ^%Y_):D$-2AW!(Y%Q6
M-?:%6:[CNH**B!4#1C<US*X$%0$GW;%NL8/4F`\4J_F'M^NWG!>*<=8:Q=\=
M"X57'>,*97J/3:_$;AX29L(ROUV,;1L>BB@C!@7UG1;@=4X^5%53&.<QCF,8
M5*H;KWK]VFY0^0C@[LLL_69<M)L6V^IR&-=G$BYAQ5?X:PLU<96^L&N4\K79
M6%D'9WSEM6_6@2/<*"[B47`F,H(F*I7JZ;?SE783_AND_P"[G5+BE0+3T6VV
MGS"]RKME0J4T;4W'>0V&'XB5$CIM7G..(C&N%XAU$-%P511!!&\34J3T`44Y
M!^+@OA7]W%*V7[28DIN>M;,\X7R#&1TO3,G8CO\`3+`RE4$7#/[*<K$DR!X8
MBY3D2<1BZA'*"P>#H+HD4()3D*(*5DA^%S>9R^Z+[AX*NA@LN/:'GQF,'#3!
M`D8@D7E7'Z:-PKB35T51N:%D'-:%RJV\"F=5^L8P>53>5*UL0NJ6LM<O4)D^
M`P!AZ&R/6XV&AZ_?(S'E696^%B:[5H^CP,9%V%O&$E6+"'IT2UBVR*:I4T6#
M=-$H`F0I04KO_%*YGES,&*L&4:7R)F:]5?'E$B4_1(S]LDF\>P,HJ0_M1S5-
M43.)63>@0Q4&;9-9RY-^U-,YOIS&Y;+XO!V+Y#,SQ6]BGJTA`'[!\68_!0"Q
M]`#6[=O>W?/>Z7*;?A_;;%7V8Y5<'6."UC:20`$:R,1\L4::@O-(R1QCYG=1
MUK)1OS\A*Z7I.6QAI"PD,:T\?6P>9KG6:2-_FFI0.D<*3`K%6:TA@L3Q[;MP
M"TH)/!B$9*!RJ'//("]O@^,X4K6UGZ&Y8?JL/_6OI&/P8ZO^`0UZ!_$[[0O&
MN+/;\Y\GI8<UR+I(F&@<FPA;H1];."&O9`?XHH]EMKJ&:Y0TSKX]-;DVFDUU
MRU:Y:1F;%F+.EYM4O9)]^ZD)23:UV,@:M][)RTBLNZ>J_DXE\<ZJIS&$QC"(
M^?/)+\?K:5.%S9:Z=GN+R^E=G8DLP1535F))/S*Q))JC_P!WW-65QY-XSM_@
M+>&VP_'.*V-K#;P1K'%$UQ+/=;(HHU54'M2P*J*H&@&@]*L?UW=H>-MZ;%F?
M&AOQM7R9C>[W0U=AFSHX(WS#J-F?,:C=X$RZAU5)!C&';(3")#&]EPHDN3PD
MX`B6Q]O>YV-YQ<7F-^6+)6T\FQ0?^[;[R(Y%U^(&T2#X$AAT;00SYA^#'-/%
MG#\:YJ/>ON$YK&68N)F4:V.7-LCW=E/M``C>02/:.0-\:O$VKQ%G0UOYO'VI
M==VT%IQ2KL7*VO&\J=2X8?G;CCG&<RG8*!*.EOL6CN25IB+QS-5APFI&O_"P
M&.NW][T@FLGY@KGO-^Z/;WDTN*.1>7'/^I;M)#"V^)CT!/MZED.J-U]1KZ,*
M[6O$OQ=\#O,/L;8<]CX;;V'-(`+3+P6>1R4)M[^)1O=(Q>%%AN5*W,'R$!)/
M;U+Q/I[>CG<[V0;,;,X:P`F.%K"GD&X,6%@DW^-'[9U$T^.(K,W.;34KMEB6
MZ2\95XYVLD)TA3%8I"B`^?`_OPCO'W%Y+R6SP`^BD%Q,`Y,)!6,?-(WR.HU5
M`Q'3372L7Y1?;8\,>R?9+DG=M_\`)K-\1CGDMXX\DC++=R$0V<)%Q;2L5EN9
M(D8!@VPL01IK6Q]9!%PF9%PBDNB?T^M)9,BJ9O28#E]1#@8IO2<H"'D/H(>>
M7`*AAHP!%><6.62%Q)"S)(/0@D$:]#U'7TZ5_7G]KXK'EV\T&^3WR0>DJW05
M(N$U4ZW&5\+%:(BL3DG7($0RK?%C!,SC)BO%Q@IHJ%.8%U2>A,P&-X*("*E;
M#>*5CI^3CT/CMY29[?K4:JF3VJQO65CYDH%:9F*\V'QM"Q_M'DHYFR*"C_*]
M*AD#$0(4IEIV))]E^]PW9)G4J]^K.N5SV=^,GC+62JH?89#RUUO.<?U5E,":
M*(%TDZ-))5V.DU'@)?CD7<ZF@@JHH``D0XF-]`XI2/>B3O$UHZN-3I7KJ[(*
MSFG6G-.OV1<D/(%C-XFN\^I9HJZVB0M2]>-"P<2]L$):(^T2+Y),J[4L<];J
M(JHNA$QRE4J)Y4S7FC>OY)G5KM@UU#V`PE@4\'28G$\]E*DS$?8KEB^)LV<%
M&F5KI$,6KZ/QHUM$_)/2QL<]=F<FB4&KY02E>)E!2MJN_FHU0WNTXV#U/N@-
MT8[,F.IBOP\LX0(O_#%U:E3F:#;D2'(H/OU6Z1K%^``'DX("3]##Q2LH'Q0]
M`<]U^_Y\W$W%C[:6^:]Q;CKWUV@[TDN#FBUC&TVYD,KMZXD\31,E`P\NX:P\
M8X1**9@5E4RF$##Q2F\_(\ZN;SV=Z*-X/"#-M(;&Z]W3^U[$D&NZ;1Y[TW_"
MOH2[XW:2;Q9!G'2=FB5T73!18Z:2DG%MD5%$DU3JD4I8NBORI,)X0PK4]=.U
MS&&PFNVV.$*W&4&Y2;S$L_*,<CC569(=C9WT";[&W52XR[5D0TDV<,!CU'@G
M70<E25!!%2FL:,=AVSW:/M/"93P-A_)FN76%ANL6LTM?\WTB+@,A[GY5LT:,
M-4X:C0LBG)N:MB;'"+A::<2<<[.N^D4FS594A3+-2*4JS4''F0&'R_-^K^_H
MES8T.4UWDV47=GE6G6M0DG8X\U;3!M'V5=@G"O5A59+$`J2YA$Z)R_J0P`I7
M-^Q/#F?.G3O'B.Z/'F';WFK2[8"*5K&T[+%T*O8+'C-2>J,-4+NI,1K;P+)@
M\DJS%6R+?N3(1[N3;KQRZ[8QT3JJ5<W=[Y+FEF1]6KGC#KDF\D;;[B[`8_FZ
M#B#$V.L,Y5"<IT]=XL]>/:+JE+52+]E2GIRIW"3%@+Y=X^122\$;G.Y34JWG
MQQ>LF^]977^UJ&:V*,3L!G:\/<TY7K:+IN__`($._A8>O4_'KA\T569NY.NU
MR&(O("B8Z24F_<HIG5(D54ZE/ZXI1Q2HG=*%1LD03BKY#IM6O=:=B!G,!<("
M*LD,N<"G(512-F&CQF94A5#`4WH]1?(^!#G$O;"QR,!M<A#%/;'U21%=3^Y@
M16P<:Y9RCA>53.\/R5_BLU'T6>TGEMIE&H.@DA='`)`U&NATZTH'/_0EH+F@
MSR2J-5L^`K(X*<Q'V*)OV:\9R8PF*HYI=E0G8))L7SX]J/".`0\`!@\<B//]
MB.!YG62TBEL+D_&!ODU_.-PRZ?DFRNQ#M)]V#RR[:B.RY#?V/+<*A`*96'6X
MV^FBWELT$Y;_`%SFXZ^H-2?*U3B>K3J'R11("TA8W^,L6W&J5^V*QP5YS.W?
M+=HDHR+ERQ24A)?:.FTS=R+>V5PK^UL(^KQ^G*RMI%VO[2W-C;R^Y);6LB))
MIL+23N55MNIT(:3734^E8/@/(+_SL^X9A>59:P^BM,WG;.ZN+42?4+!98FUC
MEEB]TQQ[U:&R*;C&O60#2L.>J=AV#J&?<;VS5R+MTSFRO3[61J$73(61L,G(
MJ@8&[R-?0\:DJI(0$HS7.VD$E`!!1HL<JABE$1"DG%KCD%IGK:ZXPLSYJ.0&
M-8U+D_`@J/5&!(8'H5)UKU#]^\/VAY#VFS6`[Z3X^V[97EHT=W+>31V\<8TW
M)(DTA`CGB=1)`RZNLJ*4!(T.W7L&TWNG8UH75IBWXN+BW;:DU=+(]3I:TI%S
M3J%N7XTO\88N-.Q;EXT=P]S;-O2V_IO*3U-D=?TF25)RZO/^'WG<3@D4UW:_
M2\LAB]Y(]RL5DT_4@W*2"L@'3KT8(6TT(KS$>(GD?QKPV\KK_'<>SISOC]D[
MXXZZO!%+"LUG[A^DR?L2JCI-9LVLGR:-"URL6HDC:EC?&VU2>-IW.&UEQA'3
M)U`G5P90T91BJV<-9<5&4WDIX5)T5-5N]CDTHV/\@4#%]]TD80$#%Y&GCEQ5
MUGO>4WB%6C_VT6X:$-T:8]?0CY$_>P_&KP?>A[]V\^*XOV$XY=)+!=@9N^,3
MAE:+1X<:FJDADD)N;C370[()!J"#6M/EKJ\_='%*.*4<4HXI7R4A2%`A"E(0
MH>"E*`%*4/\`,!0```.*5%IBAT:Q2C"<L%,JD[-Q?I_&3$Q78B3E([T&$Q?L
M)!ZS7=L_28PB'MG+X$>*5*^*4<4HXI1Q2HC8<?T*W.VC^UTBH6=]'^/L'MAK
M4--.V7I,)B_:.))DY6;>DQA$/0)?`CQ2I6DDD@DFBBFFBBBF1)))(A4TDDDR
M@1---,@`4B9"@```````<4K[XI7R<A%2'34(51-0IB*)G*!R'(<!*8ARF`2F
M*8H^!`?H(<4J)5_'U"J;UW)5:D5"M2,AZOOW]?K4-#/7OK,4Q_NW4<R;+N?6
M8H"/K,;R(!Q2I?Q2CBE'%*.*4<4I?G8Y@#!^Q6&*M4=E\\,<#8'@LFUVVWJ3
MD+34Z(TN:\<QEV-=I;J[7-VA$0#5[*28.1]*:SE=5LF5("&#UET'N)@,)R'#
M16G)+Y;#!)<I)*Q>.(2$!@D9DD(506.OH22HTT/6K<^&O=KNAV=[E7_(>R?%
M)>5]UKK!W%I8Q1VMW?/9K(\+W%XME9HTL[)%'[8U9(T61S)N4[3*-*Z7H3CZ
MHR-3T=DL`2\1%$:(VN2P]>*CD6P/%P3(5LO>+9"S=@GY)VKZ?407[DP%\C[8
M%#Z<Y/#++@F/M&M.$M8/"FF\V\D<SD_`R2*SN3^&X_LK!>2_)?*_E_(8<_Y0
MP\MM\C.7-K'E[*[Q]NBZG<ME:S0V\$:#71O8C&O\Y)ZU=OFZU6.N<8Q;8H:Q
M$^3$!J0:"5O=X<V4:&[AWD8&1W-C?K9#++'A5EVR-K+:CN0E$5!*Y2>>LJI2
MG`0#'8Q<4L,@Q'L>P9Y"_M%2OO%R9=VTD;]^N\'J&U!&M;GS>?GT^1M&[B#*
M#*KBK);;ZY)DE_MRVZ+CS$)@K&U-J(_I776-X=K1DJ0:Z/S(UIE'%*.*4<4H
BXI1Q2CBE'%*.*4<4HXI1Q2CBE'%*.*4<4HXI1Q2CBE?_V3\_
`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
