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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2004

OR

For the transition period from              to             

Commission File Number 0-23223

CURAGEN CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (203) 401-3330

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value

Preferred Stock Purchase Rights

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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) has been subject to such filing requirements for the past 90 days.  Yes  x No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).   Yes  x No  ¨

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in determining such value is an affiliate) computed by reference to the average bid and asked price of the common stock, as of the last business day of the registrant’s most recently completed second fiscal quarter, was $265,463,470.

The number of shares outstanding of the registrant’s common stock as of March 1, 2005 was 50,712,617.

Documents Incorporated by Reference

The registrant intends to file a definitive proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2004. Portions of such proxy statement are incorporated by reference into Part III of this report.

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CURAGEN CORPORATION

FORM 10-K

INDEX

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PART I

The following Business Section contains forward-looking statements, which involve risks and uncertainties. The registrant’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors. See also “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Factors”.

BUSINESS

Overview

We are a genomics-based pharmaceutical development company dedicated to improving the lives of patients by developing novel protein, antibody and small molecule therapeutics in the areas of oncology, inflammatory diseases, and diabetes. We have taken a systematic approach to identifying and validating the most promising therapeutic targets from the human genome. We use internal resources to develop our potential protein therapeutics and have established development alliances with Abgenix, Inc. (“Abgenix”) to support antibody projects, Bayer AG (“Bayer”) to support small molecule projects for diabetes, TopoTarget A/S (“TopoTarget”) to support small molecule histone deacetylase (“HDAC”) inhibitor projects for oncology and inflammatory diseases, and Seattle Genetics, Inc. (“Seattle Genetics”) to support antibody-drug conjugate projects.

Strategy

We hope to generate value for our shareholders by focusing our resources on developing genomics-based therapeutics to improve the lives of patients. We are striving to become profitable by commercializing a subset of therapeutics stemming from our development pipeline, and establishing partnerships with pharmaceutical and biotechnology companies for the development and commercialization of other therapeutics from our development pipeline.

Drug Development Approach

We have taken a systematic approach to identifying and validating the therapeutic targets we believe to be the most promising from the human genome. By leveraging our technology and informatics foundation, we have identified 8,000 genes, both novel and known, with the potential to be targets for therapeutic drug development. Based on disease associations in cellular and animal models, we have qualified 500 of these targets as possibly playing a role in disease. By evaluating the relative medical need, biology, speed of path to patients, and strength of intellectual property position of these targets, we have selected our priority projects for development.

As our pipeline of priority projects has matured over the past few years, we have decreased our early-stage target discovery efforts and focused our resources on the advancement of our pipeline of potential protein, antibody, and small molecule therapeutics through clinical development. We have 5 priority projects of protein, antibody, and small molecule therapeutics in preclinical and clinical development across the therapeutic areas of oncology, inflammatory diseases, and diabetes.

Protein Therapeutics

Proteins are molecules composed of amino acids found in the human body. There are many types of proteins, all carrying out a number of different biological functions. Protein therapeutics can treat conditions in which a person is either missing an important protein or would benefit from additional amounts of a given protein. We are applying our genomics expertise and knowledge of disease to develop protein therapeutics in the areas of oncology and inflammatory diseases. We have identified genes whose protein products may make

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suitable therapeutics, have disease associations and are potentially protected by our intellectual property position. We have implemented protocols for the production, purification and testing of our proteins, and have established cell-based assays for characterizing the therapeutic potential of these proteins. Using animal models, we are currently evaluating the activity of a number of proteins as potential human therapeutics. Proteins with activity and favorable toxicity profiles are then selected for clinical development. Our first product to enter into clinical trials was CG53135, also known as Fibroblast Growth Factor 20 (“FGF-20”), a protein therapeutic we discovered, which is being investigated for the prevention and treatment of oral mucositis (“OM”), a side effect experienced by patients receiving radiation and/or chemotherapy for cancer treatment. This product is now in a Phase II clinical trial for the prevention of OM. CG53135 is also active in multiple animal models of inflammatory bowel disease.

Human Monoclonal Antibody Therapeutics

We are applying our genomics expertise and knowledge of disease to develop antibody therapeutics primarily in oncology and inflammatory diseases. We have identified genes that make suitable targets for antibody therapeutics, have disease associations and may be protected by intellectual property rights. We are developing antibody therapeutics with our partner Abgenix, a biopharmaceutical company focused on the discovery, development and manufacturing of human therapeutic monoclonal antibodies. We and Abgenix are evaluating many antibody development programs and we plan on advancing the most promising into clinical development. CR002, our first fully-human monoclonal antibody therapeutic to enter a Phase I clinical trial, has the potential to be a promising treatment for patients with IgA nephropathy, and other diseases such as lupus and diabetes, in which kidney inflammation, when left untreated, may progress to kidney failure necessitating kidney transplantation. We are also evaluating CR011, a fully-human monoclonal antibody-drug conjugate (“ADC”), as a potential treatment for metastatic melanoma, a deadly form of skin cancer, and expect to initiate clinical trials in the first half of 2006.

Small Molecule Therapeutics

We have applied our genomics expertise and knowledge of disease to identify small molecule therapeutics primarily in two disease areas: diabetes and oncology. Our small molecule diabetes program is partnered with Bayer. In this alliance, we intend to co-develop small molecule therapeutics to treat Type 2 (adult onset) diabetes and will co-commercialize resulting products. The first compound resulting from this collaboration is CT052, an orally-administered small molecule that has a potentially novel mechanism of action for treating Type 2 diabetes. We expect to initiate clinical trials with CT052 in the first half of 2006. We are also exploring with TopoTarget the role of HDAC inhibitors, including PXD101, for the treatment of solid and hematologic cancers. Our most advanced small molecule product, PXD101, is in a Phase II clinical trial in patients with advanced multiple myeloma.

Disease Focus

We are focusing our discovery and development efforts on three disease areas that have fast growing markets and large unmet medical needs.

Oncology

Nearly 10 million people throughout the world are diagnosed with cancer each year. The direct and indirect medical costs to treat cancer total more than $180 billion each year, and in the United States alone, cancer takes the lives of 1,500 people on average each day. Most of our protein and antibody therapeutics are being developed to help cancer patients. The first indication being investigated in Phase II for our clinical product, CG53135, is for the prevention of oral mucositis, a side effect experienced by patients undergoing cancer therapy. Our first small molecule HDAC inhibitor, PXD101, is being investigated in Phase II for the treatment of multiple myeloma, and is being evaluated in other solid and hematologic malignancies either alone, or in combination

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with other chemotherapeutic agents. Our first fully-human monoclonal ADC, CR011, is being investigated as a potential treatment for metastatic melanoma, a deadly form of skin cancer, and is expected to enter clinical trials in the first half of 2006. In addition, we are developing several other preclinical protein, antibody, ADC and HDAC inhibitor therapeutics as potential cancer treatments.

Inflammatory Diseases

More than 80 million Americans suffer from major inflammatory diseases. Arthritis, various forms of respiratory inflammation and debilitating inflammatory bowel disease are a daily reality in the lives of millions of individuals. For some sufferers, surgery is an undesirable last resort. However, surgery cannot restore diseased tissue to its previously healthy state. By focusing on the underlying causes of diseases, we are making progress in developing therapeutics to treat the damage caused by inflammatory disorders. CR002, our first fully-human monoclonal antibody therapeutic to enter a Phase I clinical trial, has the potential to be a promising treatment for patients with IgA nephropathy, and other diseases such as lupus and diabetes, in which kidney inflammation, when left untreated, may progress to kidney failure necessitating kidney transplantation.

Diabetes

Approximately 127 million Americans are overweight or obese and 13 million have been diagnosed with diabetes. In the United States alone, the direct and indirect costs related to the treatment of overweight and obese individuals is over $120 billion and of diabetics is over $130 billion. These conditions are reaching epidemic proportions and causing a tremendous burden on the healthcare system. Our collaboration with Bayer is for the development of small molecules for the treatment of diabetes. CT052, a small molecule therapeutic with a potentially novel mechanism of action for treating Type 2 diabetes, represents the first preclinical therapeutic from this ongoing collaboration and is being prepared to enter clinical trials in the first half of 2006.

Clinical Products

CG53135 for oncology support

In 2003, we became one of the first genomics companies to discover, validate, and successfully advance a novel therapeutic candidate from the human genome into Phase I clinical trials when we received U.S. Food and Drug Administration (“FDA”) clearance to begin testing CG53135 in patients. In October 2004, we advanced CG53135 into Phase II with the initiation of a randomized, placebo-controlled, multi-center clinical trial to evaluate its safety and efficacy, following a single-dose, for the prevention of OM for patients receiving high-dose chemotherapy followed by hematopoietic stem cell transplantation (“HSCT”).

CG53135, also known as FGF-20, is a novel investigational protein therapeutic being studied for the prevention and treatment of OM that occurs following exposure to chemotherapy and/or radiation therapy. OM is a side effect that can be experienced by patients receiving radiation and/or chemotherapy for cancer treatment. The condition is characterized by inflammation and ulceration of the tissue lining the mouth and throat leading to bleeding, pain, and difficulty eating and drinking. In addition to leading to debilitating symptoms, OM may result in the interruption of radiation or chemotherapeutic protocols in oncology patients. A therapeutic that could prevent or treat OM successfully would not only mitigate debilitating symptoms, but also may enable cancer patients to receive the optimum dosage of radiation therapy or chemotherapy needed to fight their cancer.

In February 2004, we received orphan drug designation from the FDA for CG53135 in OM, which we believe will help to strengthen the program by offering important clinical development and commercialization benefits. In December 2004, we received Fast Track status from the FDA to investigate CG53135 for the prevention of OM in patients receiving HSCT following myeloablative chemotherapy with or without total body irradiation (“TBI”). The Fast Track program enables a company to file a New Drug Application (“NDA”) on a rolling basis as data becomes available and permits the FDA to review the filing as it is received, rather than waiting for the entire document prior to commencing the review process. With a Fast Track designation, there is

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an opportunity for more frequent interactions with the FDA and the possibility of a priority review, which could decrease the typical review period.

The potency of CG53135 is believed to be due to the molecule’s activity in promoting proliferation of two critical layers of cells (epithelial and mesenchymal) present in the mucosa lining of the mouth and the remainder of a patient’s gastrointestinal tract. The molecule has demonstrated activity in two animal models of OM and the data for these studies was published in the journal Clinical Cancer Research in 2003. In June 2004, we presented animal model data at the 16th Annual International Symposium on Supportive Care in Cancer held by the Multinational Association of Supportive Care in Cancer that highlighted the potential of this molecule and differentiated it from competing products. The data demonstrates that a single-dose of CG53135 administered to animals exposed to chemotherapy, but before the development of active OM, reduces the severity and duration of subsequent OM; and that administration of CG53135 to animals with active OM resulted in a significant reduction in the number of days and severity of OM. This preclinical data supports our strategy to investigate CG53135 as a single dose agent for the prevention of OM and as well as for the treatment of active OM.

Two Phase I trials evaluating the safety and pharmacokinetics of CG53135 for the prevention of OM have been completed. In November 2004, abstracts containing preliminary results from both Phase I trials were published in the proceedings of the 46th Annual Meeting of the American Society of Hematology (“ASH”). In December 2004, data from the Phase I trial on CG53135 for cancer patients undergoing bone marrow transplantation was presented during the ASH conference. Preliminary data on the safety, pharmacokinetics, and potential efficacy of CG53135 on 22 of 30 patients treated with a single-dose of CG53135 suggested that CG53135 was well tolerated with no serious drug-related adverse events noted. Mild-moderate reactions including nausea, vomiting, tachycardia, hypotension, chills, and fever were observed, and infusional reactions in the two patients treated at the highest dose level were considered dose limiting. A total of 18 out of 22 patients (81.8%) did not develop severe grade 3 or 4 OM. Of the four patients experiencing severe grade 3 or 4 OM, all were treated with high dose melphalan, a highly mucosatoxic chemotherapeutic regimen, and the duration of OM was brief (2-5 days) for three of these patients.

In October 2004, we initiated a Phase II trial on CG53135 that is currently enrolling patients in a randomized, placebo-controlled, multi-center study to determine the safety and efficacy of a single-dose of CG53135 to prevent the development of clinically significant OM. Approximately 200 patients in the United States will be randomized to receive a single administration of either placebo or one of three dosage levels of CG53135 immediately after bone marrow transplantation.

A Phase I clinical trial to evaluate the safety and tolerability on CG53135 for the treatment, as opposed to the prevention, of OM is anticipated to be initiated in the first half of 2005. Studies in other clinical indications are planned.

PXD101 for oncology

In June 2004, we added PXD101, a novel HDAC inhibitor, to our pipeline through a license and collaboration agreement with TopoTarget. PXD101 will be investigated as a potential treatment of both solid and hematologic cancers either alone, or in combination with other cancer drugs. The collaboration with TopoTarget also provides us with access to their extensive library of HDAC inhibitor candidates for future commercialization by CuraGen. HDAC inhibitors represent a new mechanistic class of anti-cancer therapeutics that target HDAC enzymes, and have been shown to: arrest growth of cancer cells; induce apoptosis, or programmed cell death; promote differentiation; inhibit angiogenesis; and sensitize cancer cells to overcome drug resistance.

In August 2004, we signed a clinical trials agreement with the National Cancer Institute (“NCI”) that provides us with access to the expertise at the NCI for the design, implementation, and monitoring of clinical trials with PXD101. Under the agreement, the NCI will sponsor several clinical trials evaluating the activity of PXD101, either alone or in combination with other anti-cancer therapies, for the treatment of solid and

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hematologic malignancies. NCI-sponsored clinical trials will occur in parallel to those sponsored by CuraGen, with all data generated available for use in future product registration.

In January 2005, we initiated a Phase II clinical trial evaluating PXD101 on patients with advanced multiple myeloma. This Phase II clinical trial is an open label, multi-center study evaluating the efficacy and safety of PXD101 administered as a single-agent and in combination with dexamethasone, for the treatment of advanced multiple myeloma in patients who have previously failed at least two treatment regimens. The trial is expected to enroll approximately 50 patients at multiple sites in Europe and the United States. Following enrollment, patients will receive 900 mg/m2/day of PXD101 administered intravenously once daily for five consecutive days every three weeks for two cycles. Patients will then be evaluated for tumor response by standard criteria and will either continue receiving up to eight cycles of PXD101 if they demonstrate response or stable disease, or begin combination therapy consisting of PXD101 and dexamethasone. The study is expected to be complete by mid-2006.

CR002 for kidney inflammation

In October 2004, we announced that CR002 received clearance from the FDA to be investigated as a potential treatment for IgA nephropathy. CR002 is a novel fully-human monoclonal antibody being investigated as a potential treatment of kidney inflammation to prevent or slow the progression of IgA nephropathy toward kidney failure. CR002 is designed to block the activity of platelet-derived growth factor D, or PDGF-D, a protein shown to play a role in kidney inflammation. CR002 is the most advanced fully-human monoclonal antibody from our collaboration with Abgenix.

In November 2004, we received orphan drug designation from the FDA for CR002 as a potential treatment to slow the progression of IgA nephropathy and delay kidney failure in patients affected by the disease, which we believe will help to strengthen the program by offering important clinical development and commercialization benefits. In November 2004, we initiated a Phase I clinical trial evaluating the safety and tolerability of CR002 on healthy male volunteers.

Kidney inflammation typically is characterized by a loss of architecture and diminishing function that may eventually lead to kidney failure, necessitating dialysis or kidney transplantation. Kidney inflammation is usually managed clinically by the use of non-specific immunosuppressants, which have variable efficacy and debilitating side effects. A study conducted in an animal model of kidney nephritis, published in the Journal of the American Society of Nephrology in 2003, earned a Congress Award at the 2003 World Congress of Nephrology Meeting. CR002 will be one of the first therapeutics aimed at treating a cause of kidney inflammation.

Pipeline

In addition to our three therapeutics in clinical development, we have two priority projects being advanced through preclinical development and a pipeline of potential protein, antibody and small molecule therapeutics that have been, or are ready to be evaluated in animal studies. The majority of our advanced protein and antibody therapeutics are in the areas of oncology and inflammation, and our small molecules are primarily in the areas of oncology and diabetes. Many of the investigational new drug (“IND”) applications that we anticipate filing in the future will be from our pipeline, and have been or are ready to be evaluated in animal studies.

We anticipate that in the first half of 2006 both CR011, an ADC being investigated as a potential treatment for metastatic melanoma, and CT052, a small molecule therapeutic with a potentially novel mechanism of action for treating Type 2 diabetes stemming from our collaboration with Bayer, will enter into clinical trials.

Collaborations

Our technology and expertise have been used in our partnerships with more than a dozen leading biotechnology and pharmaceutical companies including Biogen, Inc. (“Biogen”), Genentech, Inc. (“Genentech”), GlaxoSmithKline, Inc. (“GSK”), Hoffmann-La Roche Inc. (“Roche”) and Pfizer Inc.

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In addition, we have established a pipeline of potential therapeutics by leveraging the capabilities of industry leaders to more efficiently advance our programs, reduce risk, and conserve resources. We have developed four classes of therapeutics: protein therapeutics which are developed in-house; fully-human monoclonal antibody therapeutics which are developed in collaboration with Abgenix; small molecule therapeutics for oncology and inflammatory diseases which are developed in collaboration with Bayer and TopoTarget; and ADCs which are developed in collaboration with Abgenix and Seattle Genetics.

Abgenix

In December 1999, we entered into a strategic alliance with Abgenix to develop and commercialize genomics-based antibody therapeutics using Abgenix’ XenoMouse^™ technology. This six-year alliance was established initially to identify fully-human antibody therapeutic candidates primarily in oncology. Antibodies determined to have commercial product potential will be allocated between the parties for further development. Under the terms of the agreement, the developing party will pay milestone and royalty payments to the other party for products resulting from this drug development alliance. Potential aggregate milestone payments payable per product launched are approximately $8.5 million. In addition, under the agreement, Abgenix purchased 837,990 shares of our common stock at a price of $17.90 per share for $15.0 million through a private placement.

In November 2000, we expanded our alliance with Abgenix to include the potential for generating fully-human monoclonal antibodies against a larger number of targets and for treating a broader range of complex diseases including autoimmune disorders. As part of this expanded alliance, Abgenix purchased an additional 1,441,442 shares of our common stock at a price of approximately $34.69 per share for $50.0 million through a private placement. Either party can terminate the agreement upon an uncured material breach of contract by the other party, with 30 days written notice. In addition, either party may terminate the agreement upon a breach of certain payment or diligence obligations by the other party if such breach continues, in the case of certain payment obligations, for 10 days and, in the case of certain diligence obligations, for 30 days, after written notice of such breach was provided by the non-breaching party.

Our collaboration with Abgenix has been very productive. Fully-human monoclonal antibodies have been raised against over 20 targets and many of these programs are being evaluated for advancement into cellular and animal validation.

In November 2004, we initiated a Phase I clinical trial with CR002, our leading fully-human monoclonal antibody therapeutic stemming from this collaboration, as a potential treatment for kidney inflammation to prevent or slow the progression of IgA nephropathy toward kidney failure. In October 2004, we announced that CR011, an antibody-drug conjugate, is being advanced toward clinical development with an expected filing of an IND application with the FDA and initiation of clinical trials to occur during the first half of 2006. Our Abgenix collaboration has enabled us to leverage the resources and expertise of one of the world’s leaders in generating fully-human monoclonal antibodies and has fueled our pipeline with a total of five proprietary fully-human monoclonal antibodies whose development we control.

Bayer

In January 2001, we signed two comprehensive agreements with Bayer. As part of these agreements, Bayer purchased 3,112,482 shares of our common stock at a price of $27.31 per share in a private placement totaling $85.0 million.

The first agreement is a comprehensive alliance to discover, develop, and jointly commercialize small molecule therapeutics to treat metabolic disorders, primarily adult onset diabetes. We are to provide therapeutic targets to Bayer and grant Bayer access to our comprehensive suite of functional genomic technologies, bioinformatics and pharmacogenomic expertise to select and prioritize the resulting therapeutics. Bayer will utilize its development expertise to develop small molecule therapeutics against the targets supplied by us. Bayer is responsible under the agreement for funding all high-throughput screening, combinatorial chemistry, medicinal chemistry and pharmacology activities until a designated preclinical stage. Expenses are equally split with Bayer

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for later stage preclinical and clinical compound development to fund the relevant research, development and commercialization activities. If we jointly commercialize any therapeutics resulting from this alliance with Bayer, Bayer will receive 56% of the profits associated with that therapeutic and we will receive 44%. Either party can terminate the agreement upon an uncured material breach of contract by the other party, upon 90 days written notice (30 day notice for payment breach). Bayer may terminate the agreement if there is a change in control involving us, upon providing 90 days written notice to us within 90 days. We may terminate the screening term upon a change in control of Bayer, upon providing written notice to Bayer within 90 days.

Our collaboration with Bayer has been very productive. In October 2004, we announced that the first small molecule compound stemming from this collaboration was advanced to the preclinical stage. CT052 is an orally available small molecule therapeutic being investigated as a potential treatment for Type 2 diabetes. CT052 has a potentially novel mechanism of action for treating Type 2 diabetes and is expected to enter Phase I in the first half of 2006.

The second agreement is a broad, five-year pharmacogenomic and toxicogenomic collaboration. We are applying our functional genomic technologies and pharmacogenomics expertise to evaluate Bayer’s developmental and preclinical pipeline of pharmaceutical compounds across all disease areas. Through the efforts of this collaboration, we and Bayer expect to reduce drug development costs, reduce the time to market, and create safer and more efficacious therapeutics. Either party can terminate upon an uncured material breach of contract by the other party, upon 90 days written notice. In certain circumstances Bayer may terminate the agreement if there is a change in control involving us, upon providing written notice to us within 90 days.

TopoTarget

In June 2004, we signed a license and collaboration agreement with TopoTarget to develop PXD101, a novel HDAC inhibitor for the treatment of solid and hematologic malignancies and identify additional HDAC inhibitors from TopoTarget’s extensive library of compounds.

Under the terms of the agreement, we acquired exclusive rights to develop, and commercialize PXD101 in North America, Asia and all other markets excluding Europe. TopoTarget retains commercialization rights in Europe. During June 2004, we made a $5.0 million equity investment in, and paid a $5.0 million perpetual license fee to TopoTarget. In addition, TopoTarget is eligible to receive up to $10.0 million within a period of 12 months from June 2004 in milestones and research support; $4.0 million over the subsequent 24 months in research support; and up to $27.0 million in additional milestone payments based on successful development, regulatory approval, and commercialization of PXD101. TopoTarget is expected to receive royalties from us based on sales of PXD101 outside of Europe, and we expect to receive reciprocal royalties from TopoTarget based on sales of PXD101 in Europe. We will fund the global development of PXD101. In addition, we have an option to select additional HDAC compounds from TopoTarget for clinical development in oncology and other indications for a take-up fee not to exceed $1.0 million and up to $30.0 million in milestone payments based on successful development, regulatory approval, and commercialization of each additional product. TopoTarget has the option to fund a portion of the global development of PXD101 and additional products in exchange for higher royalties. Potential payments to TopoTarget from us based on the successful development and commercialization of PXD101 and two additional HDAC inhibitor products could exceed $100.0 million.

Either party can terminate the agreement upon an uncured material breach of contract by the other party with 60 days written notice, or if either party files a bankruptcy or insolvency petition which is not dismissed within 60 days of the filing. The three year research program to identify additional HDAC inhibitors from TopoTarget’s library can be terminated by either party upon a change in control of the other party or an uncured material breach in connection with the research program, and by CuraGen after the first year upon payment of a penalty equal to 50% of the unexpended research funding or without penalty if it becomes apparent that a commercially viable future product is unlikely to be identified.

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Seattle Genetics

In June 2004, we announced the licensing of Seattle Genetics’ proprietary ADC technology for use with up to two of our fully-human monoclonal antibodies. We paid an upfront fee of $2.0 million for access to the ADC technology for use with CR011, our first antibody program to utilize this technology. In February 2005, we also exercised our option to access Seattle Genetics’ ADC technology for use with a second antibody program in exchange for a $1.0 million payment.

Seattle Genetics’ ADC technology employs synthetic, highly potent drugs that can be attached to antibodies with their proprietary linker systems. The linkers are designed to be stable in the bloodstream but to release the drug payload under specific conditions once inside target cells, thereby sparing non-target cells many of the toxic effects of traditional chemotherapy. ADCs can increase the therapeutic potential of the many antibodies with targeting ability but limited or no inherent cell-killing activity.

Under the terms of the multi-year agreement, Seattle Genetics may receive up to $28 million in milestone payments assuming successful development of two antibody therapeutics employing ADC technology and will receive royalties on net sales of resulting products. We are responsible for research, product development, manufacturing and commercialization of all products under this collaboration. We also pay maintenance and material supply fees as well as research support payments for ongoing assistance provided by Seattle Genetics in developing ADC products. We may terminate any license under the agreement by providing not less than 90 days prior written notice to Seattle Genetics. In addition, either party can terminate the agreement upon an uncured material breach of contract by the other party with 60 days written notice, or if either party files a bankruptcy or insolvency petition which is not dismissed within 60 days of the filing.

Other

In addition to the above-listed alliances, we have smaller, ongoing collaborative relationships with various pharmaceutical and biotech companies. We have established relationships with more than 100 universities, academic institutions, and individual companies to gain access to disease tissue samples, disease models, and select technologies. We have successfully conducted research with, and have the potential to receive future milestones and royalties from companies including Alexion Pharmaceuticals, Inc., Biogen, DuPont/Pioneer Hi-Bred International, Inc., GSK, Genentech, Roche and its affiliate, Roche Vitamins, Inc. and Millennium Pharmaceuticals, Inc. (formerly COR Therapeutics, Inc.). At present, we do not consider these relationships either collectively or individually to be of a material nature.

Company History

We began operations in 1993, when the massive undertaking to sequence the human genome was just beginning. Our strategy was based on discovering novel ways to combat disease through an understanding of how genes and their resulting proteins function within the human genome. We developed an integrated genomics, proteomics and bioinformatics technology platform that has been used to analyze the human genome, disease models, marketed therapeutics and therapeutic candidates. This approach has led to our discovery of hundreds of disease-related genes, therapeutic targets and potential novel therapeutics. Our platform has been utilized by over a dozen biotechnology and pharmaceutical companies. These collaborations helped validate our technology and have assisted us in developing our own proprietary pipeline of potential therapeutics. We have focused our research efforts on three types of targets: targets that encode protein therapeutics, targets amenable to antibody therapeutic development, and targets amenable to small molecule therapeutic development. As our portfolio has grown, we have started developing protein therapeutics on our own, and transitioned our service-based collaborations towards more strategic research and development alliances that would enable us to leverage the expertise and resources of industry leaders to turn our antibody and small molecule targets into therapeutics. To that end, we established a strategic alliance with Abgenix for the development of fully-human monoclonal antibodies against our proprietary targets, a strategic alliance with Bayer around the development of small molecules directed against our targets in diabetes, a strategic alliance with TopoTarget around the development

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of small molecule HDAC inhibitors for oncology and inflammatory diseases, and a collaboration with Seattle Genetics around the development of ADC products against our proprietary targets. As our pipeline has matured over the past few years, we have decreased our early-stage target discovery efforts and increased resources for the advancement of our pipeline of protein, antibody and small molecule therapeutics into clinical development. Today, we remain one of the leading genomics-based pharmaceutical companies in the industry with two Phase II products in oncology, a Phase I fully-human monoclonal antibody for kidney inflammation and a pipeline of protein, antibody and small molecule therapeutics.

Technology

We have assembled a comprehensive, proprietary, and large-scale platform to understand the human genome and have laid the groundwork to better understand the biology behind disease. Using this foundation, we prioritized promising programs from what we believe to be the remaining intervention points appropriate for the development of novel therapeutics. We identify pharmaceutically relevant genes and proteins and associate them with specific diseases through biological methods that include hypothesis-driven disease models, drug response models, gene and pathway mining approaches, and human genetics. We are developing a pipeline of protein, antibody, and small molecule therapeutics in the areas of oncology, inflammatory diseases, and diabetes.

We have used our proprietary technology to identify the Pharmaceutically Tractable Genome (“PTG”). The PTG is the subset of human genes that we believe will make suitable therapeutic targets either because they are proteins that are shed in the blood and can be targeted by protein and antibody therapeutics, sit on cell surfaces and make suitable antibody and small molecule therapeutics, or belong to intracellular classes of proteins that can be modulated by small molecules. We have identified the roughly 8,000 genes that make up the PTG and have used this foundation to systematically determine which are the most promising ones to develop as therapeutic candidates.

We have established disease programs for the identification of novel, pharmaceutically relevant targets and the association of these targets with specific diseases through process-driven and hypothesis-driven scientific strategies. Once associated with diseases, potential therapeutic target candidates are validated through cellular assays and animal model systems. Information resulting from these efforts is comprehensively managed through our bioinformatics system which is composed of tools and databases that have been designed specifically to manage, organize, and analyze this complementary biological information.

We have used our technologies to complete the world’s first comprehensive protein interaction map for a multicellular organism, Drosophila melanogaster. That achievement was featured on the cover of and published in the December 5, 2003 edition of Science. We also were the first to complete a proteomics map of a eukaryotic organism, yeast (Saccharomyces cerevisiae). That achievement was featured on the cover of and published in the February 10, 2000 edition of Nature. In addition, we have a proprietary set of human protein-protein interaction data. Insight into the highly complex pathways of model organisms’ protein-protein interactions, combined with our proprietary knowledge of human protein-protein interactions, enhances our ability to select promising novel targets for drug development and continues to support our preclinical and clinical development efforts.

Competition

We are subject to significant competition from organizations that are pursuing strategies, approaches, technologies and products that are similar to our own. Many of the organizations competing with us have greater capital resources, research and development staffs and facilities and marketing capabilities. In addition, research in the field of drug development is highly competitive. Our competitors include:

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We compete with biotechnology and pharmaceutical companies that develop, produce and market therapeutic compounds in the U.S., Europe and elsewhere. We face competition from a number of biotechnology and pharmaceutical companies with products in preclinical development, clinical trials or approved for conditions identical or similar to the ones we are pursuing. Other companies and institutions engaged in research and development we face intense competition from include:

The competition listed above was selected based upon identifying those companies that we feel have business models, are developing drugs or have drugs approved for therapeutic indications that are similar to the ones we are pursuing.

A number of our competitors are attempting to rapidly identify and patent genes and gene fragments sequenced at random, typically without specific knowledge of the function of such genes or gene fragments. If our competitors discover or characterize important genes or gene fragments before we do, it could adversely affect any of our related disease research programs. In addition, a number of competitors are producing proteins from genes and claiming both the proteins as potential therapeutics as well as claiming antibodies against these proteins. In many cases generic antibody claims are being issued by the United States Patent and Trademark Office (“USPTO”) even though competitors have not actually made antibodies against the protein of interest, or do not have cellular, animal, or human data to support the use of these antibodies as therapeutics. These claims on proteins as therapeutics and such claims covering all antibodies against the proteins and methods of use in broad human indications are being filed at a rapid rate, and some number of these claims have issued and may continue to issue. We expect that competition in genomics research will intensify as technical advances are made and become more widely known.

Intellectual Property

Our business and competitive position depend on our ability to protect our genomic technologies, gene sequences, the proteins they encode, antibodies raised against them, small molecules, other products, information systems and proprietary databases, software and other methods and technology. We continually file patent applications for our proprietary methods and devices for sequencing, gene expression analysis, discovery of biological pathways and drug screening and development. As of the date of this report, we had been issued approximately 79 patents with respect to aspects of our gene portfolio, products, processes and technologies.

In 2001, the USPTO issued new guidelines for patent applications reflecting its current policy regarding statutory written description and utility requirements for patentability. The implementation of these new guidelines may cause the USPTO initially to reject some of our pending new gene and protein patent applications. Although we believe that we will overcome such rejections to any of our new gene and protein

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cases, there is no guarantee that the USPTO will approve them. We strive especially to gain issued patents for our commercially important genes and proteins. The new guidelines are not expected to impact pending cases directed to technology platforms.

CuraGen^® and other trademarks of CuraGen Corporation mentioned in this report are the property of CuraGen Corporation. Trademarks of 454 Life Sciences Corporation mentioned in this report are the property of 454 Life Sciences Corporation. All other trademarks or trade names referred to herein are the property of their respective owners.

454 Life Sciences Corporation

In June 2000, we announced the formation of 454 Life Sciences Corporation (“454”). This majority-owned subsidiary was initially funded with $40.0 million primarily from investors including us, Soros Fund Management, L.L.C., Cooper Hill Partners, L.L.C., and members of our senior management team. In September 2003, 454 secured an additional $20.0 million in equity financing from us and several existing shareholders, including Cooper Hill Partners L.L.C., to initiate commercialization of 454’s product offering. This second round of financing increased our ownership from 60% to 66%.

This majority-owned subsidiary is commercializing novel nanoscale instrumentation and technologies for rapidly and comprehensively determining the nucleotide sequence of entire genomes—“whole genome sequencing”. 454’s proprietary technology is expected to have widespread applications in industrial processes, agriculture, animal health, biodefense, and human health care, including drug discovery and development, and disease diagnosis. Scientists, using the 454 technology platform, will be able to generate whole genome sequences for a wide variety of viral, bacterial and small fungi organisms. Instead of looking for biologically meaningful regions in one bacterial genome, researchers will have at their disposal multiple strains of an organism for comparison. This will provide information about new pathogens, drug resistant strains and variations in host-pathogen interactions as mutation of pathogens occurs.

454’s technology platform is based on the application of massively parallel approaches to every step of the sequencing process: sample preparation, DNA sequencing, sequence assembly and bioinformatic analysis. This approach, combined with the use of advanced nanotechnology, reduces cost and throughput roadblocks to efficient whole genome analysis. It is 454’s goal to allow entire genomes to be analyzed without the cost and time restrictions normally associated with scaling up current methods of DNA sequencing in large facilities.

In May 2004, 454 received a two-year, $2.4 million federal grant from the National Human Genome Research Institute (“NHGRI”), one of the National Institutes of Health (“NIH”). The grant, entitled “Massively Parallel High Throughput, Low Cost Sequencing” will partially fund the scale up of 454’s technology toward sequencing larger genomes. In October 2004, 454 was awarded a three-year, $5.0 million grant from the NHGRI. The grant, entitled “The 454 Life Sciences Massively Parallel System for DNA Sequencing Technology,” aims to achieve the NIH’s initial goal of reducing the cost of whole mammalian genome sequencing by 100-fold.

Throughout 2004, 454 offered high-throughput sequencing at its Measurement Service Center for the analysis of virus, bacteria and small fungi. In the first quarter of 2004, 454’s proprietary whole genome sequencing technology was used to sequence several strains of Mycobacterium tuberculosis for scientists at Johnson & Johnson Pharmaceutical Research & Development L.L.C. (“J&JPRD”). The resulting sequence was used by scientists at J&JPRD to help understand the basis of tuberculosis drug resistance. An article entitled “A Diarylquinoline Drug Active on the ATP Synthase of Mycobacterium tuberculosis,” was published online in Science Express on December 9, 2004 and printed in the January 14, 2005 edition of the journal Science. The article details the discovery of a potential antimicrobial treatment for tuberculosis against a new target identified with the use of 454’s technology.

In 2005, 454 will offer instrument systems and reagents for purchase by customers who desire high-throughput sequencing without the need and complexity of large-scale robotics. Additionally, 454 will continue scaling its technology to analyze larger model organisms, including human DNA, and develop other genomic applications.

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The operations of 454 are run by a separate management team and governed by a Board of Directors made up of members of our management team and Board of Directors. 454 has also established a Scientific Advisory Board that is comprised of an elite group of scientists in the fields of whole genome sequencing, infectious disease, human genetics, chemical engineering and bioinformatics. As this new technology is commercialized and its applications become accepted across the life sciences industry, we anticipate that 454 will contribute revenue and value to the consolidated entity. See Note 15 to our consolidated financial statements for segment reporting.

Patents and Licenses

454’s products and services are based on the combination of several complex technologies. 454 has developed some of these technologies internally and has pursued patent protection in the U.S. and other countries for certain developments, improvements, and inventions it has developed that are incorporated into 454’s products or that fall within its fields of interest. Other of the technologies of interest to 454 are owned by third parties and are used by 454 under license. The rights that 454 considers important to its current business include patents or patent applications directed to nucleic acid sample preparation and amplification, as well as certain sequencing by synthesis approaches.

From time to time, third parties may assert that 454 is infringing patents owned by such third parties. 454 will endeavor to settle such claims by mutual agreement on a satisfactory basis, which would result in withdrawal of the claim and/or result in the granting of licenses to 454. However, we cannot make any assurances as to the outcome of any future claims.

Government Regulation

Prior to the marketing of any new therapeutic developed by us, or by our collaborators, that new therapeutic must undergo an extensive regulatory review and approval process in the United States and other countries. This regulatory process, which includes preclinical and clinical studies to establish a compound’s safety and efficacy, can take many years and require the expenditure of substantial resources. Data obtained from such studies are susceptible to varying interpretations that could delay, limit or prevent regulatory approval.

The process for new drug approval has many steps, including:

Investigational new drug application.    After most of the pre-clinical testing is completed, an IND is submitted to the FDA before human testing of the drug may begin. Clinical studies may commence 30 days after the FDA has received the IND unless it objects within 30 days. All clinical trials must be conducted in accordance with good clinical practices, (“GCPs”). In addition, an Institutional Review Board, (“IRB”), at each hospital or clinic where the proposed studies will be conducted, must review and approve the study. The IRB also continues to monitor the study for any safety issues. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA. In addition, the FDA may, at any time during the 30-day period or at any time thereafter, impose a clinical hold on proposed or ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA. In some instances, the IND application process can result in substantial delay and expense. The IND must contain information, such as:

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Clinical trials.    Clinical trials involve the administration of the drug to healthy volunteers or patients under the supervision of a qualified principal investigator. They must be conducted in compliance with federal regulations and requirements and under established protocols. These protocols detail the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. The study protocol and informed consent information for patients in clinical trials must also be approved by the institutional review board at each institution where the clinical trials are conducted.

Clinical evaluation involves a time-consuming and costly three-phase process. Our studies are being conducted in the following manner:

The FDA, the study sponsor and the institutional review boards reviewing each clinical trial site closely monitor the progress of each of the three phases of clinical trials that are conducted in the United States. They may change or terminate the testing based upon the data accumulated to that point and their assessment of the relative risks and benefits to the patient.

New drug application.    After the completion of the clinical trial phases, and with input from the FDA, a company prepares an NDA for submission to the FDA. The NDA must contain all of the information on the drug gathered to that date, including details on manufacturing and data from the clinical trials.

The FDA does a preliminary review of all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. Under the Federal Food, Drug and Cosmetic Act, the FDA has specified time frames in which to review the NDA and respond to the applicant. The review process is often significantly extended by FDA requests for additional information or clarification regarding information already provided in the submission. The FDA may refer the application to an appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee. If FDA evaluations of the NDA and the manufacturing facilities are favorable, the FDA may issue either an approval letter or an approvable letter, which usually contains a number of conditions that must be met in order to secure final approval of the NDA. When and if those conditions have been met to the FDA’s satisfaction, the FDA will issue an approval letter, authorizing commercial marketing of the drug for certain indications. The FDA may request additional studies (Phase IV) to evaluate long-term effects as a condition of approval. If the FDA’s evaluation of the NDA submission or manufacturing facilities is not favorable, the FDA may refuse to approve the NDA or issue a not approvable letter.

Phase IV clinical trials and post marketing studies.    In addition to studies requested by the FDA after approval, additional studies are conducted to explore new indications. The purpose of these trials and related publications is to broaden the application and use of the drug and its acceptance in the medical community.

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Approvals in European Union (“EU”).    In 1993, the EU established a system for the registration of medicinal products in the EU and under that system, marketing authorization may be submitted at either a centralized or decentralized level. The centralized procedure is administered by the European Agency for the Evaluation of Medicinal Products. This procedure is mandatory for the approval of biotechnology products and is available at the applicant’s option for other innovative products. The centralized procedure provides, for the first time in the EU, for the granting of a single marketing authorization that is valid in all EU member states. A mutual recognition procedure is available at the request of the applicant for all medicinal products that are not subject to the mandatory centralized procedure, under a decentralized procedure. The decentralized procedure creates a new system for mutual recognition of national approvals and establishes procedures for coordinated EU action on product suspensions and withdrawals. Under this procedure, the holder of a national marketing authorization for which mutual recognition is sought may submit an application to one or more member states, certifying that identical dossiers are being submitted to all member states for which recognition is sought. Within 90 days of receiving the application and assessment report, each member state must decide whether or not to recognize the approval. The procedure encourages member states to work with applicants and other regulatory authorities to resolve disputes concerning mutual recognition. If such disputes cannot be resolved within the 90-day period provided for review, the application will be subject to a binding arbitration procedure at the request of the applicant. Alternatively, the application may be withdrawn.

Approvals outside of the United States and EU.    Steps similar to those in the United States must be undertaken in virtually every other country comprising the market for our products before any such product can be commercialized in those countries. The approval procedure and the time required for approval vary from country to country and may involve additional testing. There can be no assurance that approvals will be granted on a timely basis or at all. In addition, regulatory approval of prices is required in most countries other than the United States. There can be no assurance that the resulting prices would be sufficient to generate an acceptable return to us.

Regulatory status of our pipeline.    We are conducting clinical trials for: CG53135, a potential protein therapeutic for the prevention of oral mucositis in cancer patients that are undergoing chemotherapy and radiotherapy; PXD101, a potential small molecule HDAC inhibitor for the treatment of advanced multiple myeloma; and CR002, a fully-human monoclonal antibody as a potential treatment to slow the progression of IgA nephropathy and delay kidney failure in patients affected by the disease. None of our product candidates have been approved for commercialization in the United States or elsewhere. We, or any of our collaborators, may not be able to conduct clinical testing or obtain the necessary approvals from the FDA or other regulatory authorities for some products. Failure by us, or our collaborators, to obtain required governmental approvals will delay or preclude our collaborators or us from marketing therapeutics or diagnostic products developed with us or limit the commercial use of such products and could have a material adverse effect on our business, financial condition and results of operations.

In February 2004, the FDA granted us orphan drug designation on CG53135, for the treatment of radiation induced oral mucositis. In November 2004, the FDA granted us orphan drug designation on CR002, as a potential treatment to slow the progression of IgA nephropathy and delay kidney failure in patients affected by the disease. The Orphan Drug Act of 1983 is intended to encourage companies to develop therapies for the treatment of diseases that affect fewer than 200,000 individuals in the United States at the time of application. Further criteria include the ability of the product to address an unmet medical need where no approved treatment option exists or to provide significant benefit over available treatments. Orphan drug designation, granted by the FDA’s Office of Orphan Products Development, provides us with a number of potential benefits for CG53135 and CR002. Orphan drug designation may result in seven years of market exclusivity in the United States upon FDA product approval, provided that the sponsor company continues to meet certain conditions established by the FDA. Upon marketing authorization and during the period of market exclusivity, the FDA does not accept or approve other applications to market the same drug for the same therapeutic indication. Other incentives provided by orphan designation include protocol assistance and eligibility for research and development support. Protocol assistance includes regulatory assistance and reduced filing fees, as well as advice on the conduct of clinical trials.

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In December 2004, the FDA granted us fast track status on CG53135, for the prevention of OM in patients receiving HSCT following myeloablative chemotherapy with or without TBI. Under the FDA Modernization Act of 1997, the Fast Track program facilitates interactions with the FDA before and during the submission of a NDA for therapeutics being investigated as a treatment of serious or life-threatening diseases where there is an unmet medical need. The Fast Track program enables a company to file an NDA on a rolling basis as data becomes available. This permits the FDA to review the filing as it is received, rather than waiting for the entire document prior to commencing the review process. With a Fast Track designation, there is an opportunity for more frequent interactions with the FDA and the possibility of a priority review, which could decrease the typical review period.

Our research and development activities involve the controlled use of hazardous materials, chemicals and controlled substances. We are subject to federal, state and local laws and regulations governing the acquisition, use, storage, handling and disposal of such materials and certain waste products.

Available Information

We were incorporated in Delaware in 1991. Our principal executive office is located at 555 Long Wharf Drive, 11th Floor, New Haven, Connecticut 06511. Our telephone number is (203) 401-3330. We maintain a web site on the Internet at http://www.curagen.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, are available free of charge through the Investor Relations section of our website as soon as reasonably practicable after such materials have been electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). These documents are also available in the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330, and in addition, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (http://www.sec.gov).

Employees

As of December 31, 2004, we and 454 had 242 full and part-time employees, 107 of whom hold Ph.D., M.D. or J.D. degrees. Our employees include engineers, physicians, molecular biologists, chemists, lawyers and computer scientists. We believe that we maintain good relationships with our employees. We believe that our future success will depend in large part on our ability to attract and retain experienced and skilled employees.

Seasonality

Our business is not subject to any material fluctuations based on the season of the year.

We maintain our administrative offices along with research facilities at locations in both Branford and New Haven, Connecticut. At December 31, 2004, we leased a total of approximately 155,000 square feet at all locations. Our leases are for original terms of two to six years, and generally provide for renewal options for terms of up to five years. In January 2004, we entered into a five-year lease agreement for an additional 20,000 square foot research facility in Branford to allow us to further our pipeline efforts. Also in 2004, we executed three vacancy agreements for approximately 13,000 square feet of space at our New Haven facility.

We believe that our facilities are adequate for our current operations or that suitable additional leased space will be available as needed. Our plans to construct a new corporate headquarters and protein production facility on the land we own in Branford have been deferred, pending improvements in the external financing environment which would afford us the ability to finance the future construction costs.

We are not currently a party to any material legal proceedings.

No matters were submitted to a vote of our security holders during the quarter ended December 31, 2004.

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PART II

Market Information

Our common stock is traded on the Nasdaq National Market under the symbol “CRGN”. The following table sets forth, for the periods indicated, the low and high sales prices per share for our common stock, as reported by the Nasdaq National Market: