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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT UNDER SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

For the fiscal year ended December 31, 2004

Or

Commission file number: 000-27409

AKESIS PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

4370 La Jolla Village Drive

Suite 685

San Diego, California 92122

(858) 646-0789

(Address, including zip code, or registrant’s principal executive offices and

telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

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 12-b-2 of Act).    Yes ¨    No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates was approximately $30,347,184 computed by reference to the last sales price of $3.00 as reported by the O-T-C Bulletin Board Market, as of the last business day of the Registrant’s most recently completed second fiscal quarter, June 30, 2004. This calculation does not reflect a determination that certain persons are affiliates of the Registrant for any other purpose.

The number of shares outstanding of the Registrant’s common stock on February 28, 2005 was 14,992,552 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for its 2005 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed with the Securities and Exchange Commission, are incorporated by reference to Part III of this Annual Report on Form 10-K.

AKESIS PHARMACEUTICALS, INC.

FORM 10-K

Year Ended December 31, 2004

INDEX

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PART I

This document contains forward-looking statements that are based upon current expectations within the meaning of the Private Securities Reform Act of 1995. It is our intent that such statements be protected by the safe harbor created thereby and we disclaim any duty or obligation to update. Forward-looking statements involve risks and uncertainties and our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Examples of such forward-looking statements include, but are not limited to, statements about:

Such forward-looking statements are inherently subject to risks and uncertainties, (including those discussed in “Risk Factors” below and other sections of this document) and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements.

Item 1. Business

The Company

We are an early stage biopharmaceutical company engaged in the discovery, development and commercialization of complementary and alternative therapies for the treatment of three principal forms of carbohydrate intolerance – Type 2 diabetes, Syndrome X, and impaired glucose tolerance (“IGT”), and their associated complications. We have been granted patents and filed patent applications for a number of proprietary formulations and combination therapies, including formulations with existing diabetes medications, for use in the treatment of Type 2 diabetes. We intend to use our proprietary formulations to develop prescription treatments for Type 2 diabetes and related metabolic disorders. These products are in an early stage of development and no regulatory filings to commercialize our products have yet been made with the United States Food and Drug Administration, or FDA, or any similar state or foreign authorities.

We have undertaken an initial clinical trial of one of our specific product formulations, which demonstrated a consistent improvement in glycated hemoglobin levels (A1_c), compared to base line, after three months of treatment in a diabetic population. These formulations are covered by our issued patents as set forth below. This was a small (81 individual) open-label study; open-label studies are generally considered to be less reliable than double blind placebo controlled studies and are not accepted by the FDA. The observed reduction in A1_c, (which is an established long-term measure of blood glucose), in this open-label study was in excess of 2% for all treatment groups. This reduction

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contemplates an average improvement in excess of 20% in blood glucose parameters in this patient population. This included patients taking the initial product candidate as monotherapy, as well as with concomitant medications. We believe that this trial may suggest that Akesis’ formulations show the potential for enhancing currently available oral antidiabetic therapeutic agents. We intend to conduct follow-on feasibility clinical trials with one or more of our formulations with a goal of confirming and extending the results of our initial clinical study. We believe that the successful completion of these feasibility trials could lead to partnering opportunities in the pharmaceutical industry. We are not currently in discussions with the FDA regarding the specific requirements for approval and we have not commenced any FDA-approved clinical trials.

Diabetes

Diabetes is a major health problem and is the fifth leading cause of death by disease in the United States. Diabetes is characterized by poor control of glucose levels in the blood, and is often associated with severe long-term complications, such as heart, eye, kidney and peripheral vascular diseases.

It is estimated that over 194 million people worldwide have diabetes. Of that population, approximately 18 million have type 1 diabetes, also known as juvenile-onset diabetes, and approximately 159 million have type 2 diabetes, also known as adult-onset diabetes. In the United States alone, in 2002 there were approximately 13 million people diagnosed with diabetes, and approximately 1.3 million new cases of diabetes are diagnosed each year. CDC estimates that in 2005 direct and indirect costs related to diabetes will be in excess of 150 billion dollars.

For people suffering from diabetes, poor control of blood glucose concentrations has been shown to result in severe long-term complications. For instance, damage to small blood vessels due to diabetes may result in disorders such as retinopathy, nephropathy, neuropathy, and peripheral vascular disease.

Weight control and obesity are also major problems for patients with diabetes, particularly for those people using insulin as part of their treatment regimen. Other metabolic complications resulting from diabetes and associated metabolic disorders include high blood pressure and dyslipidemia, the abnormal metabolism of fat. These undesired metabolic effects may result in additional complications involving large blood vessels, which can lead to heart attacks, strokes and amputations of lower extremities. Further, patients with diabetes frequently have wide fluctuations in blood sugar following meals. These fluctuations in blood sugar can significantly affect a patient’s quality of life. Collectively, these complications and associated metabolic disorders can lead to increased pain, suffering, reduced quality of life and early death.

The most widely accepted measure of long-term blood glucose is glycated hemoglobin, or A1_c. A person’s A1_c level is a recognized indicator of that individual’s average blood glucose concentrations over a 3 to 4-month period. Lower A1_c levels indicate better blood glucose control, on average. A1_c levels in people without diabetes are usually less than 6%. The American Diabetes Association’s Clinical Practice Recommendations suggest that people with diabetes should aim for an A1_c level that is lower than 7%. Only a minority of people diagnosed with diabetes in the United States are able to achieve the American Diabetes Association’s recommended target A1_c level, even with available drug therapies. Additionally, aggressive use of insulin and other available therapies to achieve target glucose control can be associated with an increased risk of hypoglycemia and weight gain. Consequently, there is a pressing need to develop new treatment strategies that improve the overall health profile of patients with diabetes and reduce the risk of complications without increased pain and suffering.

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In 1993, a landmark study in patients with type 1 diabetes, called the Diabetes Control and Complications Trial, showed that improved glucose control — as measured by any reduction in an individual’s A1_c level — reduced the incidence of long-term complications. In 1998, a similar landmark study in patients with type 2 diabetes, the United Kingdom Prospective Diabetes Study, reported similar conclusions for type 2 diabetes. Unfortunately, both of these studies showed that available therapies cannot mitigate the progressive nature of diabetes and long-term complications are to be expected.

Product Description

The initial product we developed is a patented combination of micronutrients, the individual components of which have been used widely for many years. It is consumable in tablet form. It includes components that are believed to address (i) immediate health needs, (ii) longer-term health-maintenance issues, and (iii) aspects of general health and well-being. The product candidate has to date been sold as a dietary supplement under the 1994 Dietary Supplement Health and Education Act (“DSHEA”). Preliminary evidence suggests that it may be effective at promoting diabetic health and wellness when used as a stand-alone product, as well as when used as an adjunct to prescription anti-diabetic products, both oral and insulin.

It is contemplated that our new product formulations will be derived from the more recent patent issuances. We plan to evaluate metformin containing compositions for the treatment of diabetes. This will be an Rx combination of metformin, chromium, vanadium, and magnesium. The product will be taken orally, once or BID in tablet form. Our second product to be evaluated through the proposed feasibility study will be a combination of glimepride, chromium and vanadium. This product will also be considered for prescription use and be taken orally in tablet form.

The product candidates under consideration are being developed in response to the increasing number of cases of diabetes to attempt to improve health and wellness without requiring substantial lifestyle changes. It does so by delivering a core micronutrient offering that appears to be important for maintaining good diabetic control.

The anchor components of the initial product candidate are intended to mitigate insulin resistance, and include chromium (from its polynicotinate complex), magnesium (as highly-bioavailable salts) and vanadium (as its sulfate). These anchor components are supported by additional micronutrients that may support longer-term health and focus on cardiovascular benefits, specifically aspirin source and vitamin E (in its natural isomeric form).

The initial patented product formulation which had been tested by us is presented below:

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Chromium and vanadium supplements in diabetes treatment

The first studies to suggest that chromium supplementation, (with chromium picolinate) could have beneficial effects on body mass and glucose metabolism were published in 1989. Chromium supplementation has been proposed to help with weight loss, glycemic control in diabetes, athletic performance, controlling hypercholesterolemia, corticosteroid-induced hyperglycemia and improving lean muscle mass. However many subsequent studies of chromium picolinate have failed to support these earlier findings.

There is now reasonable evidence to suggest that chromium deficiency may be associated with the development, or progression of diabetes, and that supplementation with chromium can exert positive effects on insulin sensitivity, blood glucose levels and glycosylated hemoglobin levels in diabetic patients. However, there is as of yet no clear picture of whether populations susceptible to diabetes are chromium deficient, or what long term dosing is appropriate to treat or prevent diabetes, or what the long term side effects of chromium supplementation may arise.

The most commonly used form of chromium in health supplements is chromium picolinate, and this is significantly more bioavailable than elemental chromium. It is rapidly absorbed in the stomach, and subsequently absorbed into tissues, where it rapidly distributes within cells. Pharmacokinetic models predict that ingested chromium will accumulate and be retained in human tissues if the supplement is taken for extended periods of time; however this prediction has not been experimentally confirmed.

Accurate estimates of chromium levels in humans are difficult to determine, and tissue chromium levels do not necessarily correlate with serum chromium levels. The U.S. Food and Nutrition Board of the National Academy of Sciences concluded in 2001 that there was not enough existing evidence to set Recommended Daily Allowances (RDAs) for chromium and, instead set Adequate Intakes (AI’s) based on the amount of chromium that normal healthy people currently consume. Based on that data, the Institute of Medicine recommended AI’s of chromium of 25-35 micrograms per day (µg or mcg).

The nutritional biochemistry and mechanism of action of chromium in the body is still poorly understood. No enzymes have been formally identified that require chromium for activity, and no chromium dependent co-factors have been biochemically characterized. Chromium has been shown to activate the tyrosine kinase activity of insulin activated insulin receptor and to activate a membrane phosphotyrosine phosphatase in adipocyte membranes. The physiological actions of chromium on

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insulin sensitivity and diabetes may also be mediated through the interaction of chromium on the transport, storage and intracellular uptake of iron. Chromium supplementation competes with iron for transport through transferrin and acts to reduce iron storage in the body. Excess iron accumulation has been linked to diabetes, and insulin insensitivity in some studies, suggesting that the beneficial effects of chromium supplementation may be related to the short term reduction of iron accumulation, particularly in the elderly.

Chromium is considered safe up to doses of 1000 µg (1 mg) per day. However, the use of chromium picolinate has been associated with toxicity, especially at high doses in vitro, possibly through the release of the picolinate ligand, which can independently act as an oxidant.

In March 2003 the Expert Group on Vitamins and Minerals of the U.K. Joint Food Standards and Safety Group requested that the health supplement industry should voluntarily withdraw chromium picolinate containing products while also consulting on a ban on the use and sale of chromium picolinate in the U.K. Currently the U.S. Food and Drug Administration, working with the U.S. National Academy of Sciences, is studying the potential regulation of chromium picolinate.

In summary, the long term biological effects of chromium accumulation in humans are poorly understood, and there have not yet been any long term studies on the effects of chromium supplementation. There is no conclusive proof, as evidenced by a large long-term controlled clinical trial, demonstrating that the benefits of high dose chromium supplementation for the treatment of diabetes significantly outweigh the risk of chromium toxicity. Because of insufficient information on the use of chromium to treat diabetes, no recommendations for supplementation yet exists in the U.S. for diabetes treatment.

Vanadium does not appear to be an essential element, there are no disorders in humans associated with vanadium deficiency and the government has not established a recommended daily allowance (RDA). The normal diet contains 10-30 micrograms (µg or mcg) of vanadium per day. The reported Tolerable Upper limit (ULs) for vanadium is approximately 1.8 mg/day for an adult.

Sodium vanadate was first reported to be effective for treating diabetes in 1899, almost 100 years before the discovery of chromium picolinate. Many subsequent studies have shown that a number of vanadium compounds have insulin mimicking actions both in vitro and in vivo. Treatment with vanadium compounds such as vanadium sulfate resulted in the development of a modest increase in insulin sensitivity and decreased insulin requirements.

Vanadium has been proposed to act through at least three mechanisms, 1) a direct insulin-mimetic action, 2) an enhancement of insulin sensitivity, and 3), a prolongation of insulin biological response. The insulin mimetic action appears to be mediated by direct binding of vanadium, or vanadium complexes with low molecular serum proteins to the insulin receptor. The synergistic enhancement of insulin sensitivity and prolongation of insulin response appear to be mediated via an inhibitory action of vanadate on phosphoprotein tyrosine phosphatases (PTPs) which would otherwise act to switch off the intracellular effects of insulin within the cell.

Vanadium salts such as vanadyl sufate appear to be poorly absorbed through the gastrointestinal tract, with less than 5% of the absorbed dose being taken up. The use of enteric coated vanadyl sufate capsules has been shown to increase the uptake of vanadate sulfate by approximately 2 fold. Absorbed vanadate has been shown to bind to transferrin and ferritin in plasma and other body fluids. Absorbed vanadium is mainly excreted in the urine in both high and low molecular weight complexes. Long term administration of vanadium results in the accumulation of vanadium in bone.

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There is currently limited data on the long term toxicity of vanadium in humans. Vanadate appears to accumulate in bones and in clinical trials gastrointestinal side effects increase above doses of 75 mg / day. In one clinical trial, gastrointestinal side effects were experienced in 75% of the subjects in the first week, but well tolerated after that. In another study 12 subjects were given 13.5 mg daily for 2 weeks, followed by 22.5 mg daily for 5 months. Five developed gastrointestinal symptoms – nausea, vomiting, diarrhea, cramps – and five developed green tongues.

We believe, based on our initial studies, that chromium and vanadium supplementation may provide synergistic effects when administered in combination with other diabetes therapeutics, potentially making many existing therapeutic strategies for treating diabetes more effective.

Target Markets

The initial product is targeted at individuals with the three principal forms of carbohydrate intolerance – Type 2 diabetes, Syndrome X, and impaired glucose tolerance (“IGT”). Collectively, these conditions are found in one of every five or six individuals, and they are regarded by some analysts as significant growth engines for the human-health industry. All three of these market segments have clear needs and have articulated demands for product offerings that deliver benefits such as those that may be available through the product candidates.

Type 2 diabetes is endemic in modern industrialized countries and, by many estimates, represents >95% of the diabetic population. There are an estimated 15 million or more individuals with Type 2 diabetes in the US and upward of 150 million individuals worldwide. General agreement exists that this population will more than triple during the next 25 years. Annual sales of oral anti-diabetic agents currently are on the order of $10 billion.

Syndrome X is intermediate between Type 2 diabetes and IGT, and may represent a market of at least 30 million individuals in the US. Some recent studies have suggested that this condition is linked to 13 million or more cardiovascular disease cases, which would implicate Syndrome X in at least half of those reported.

Impaired glucose tolerance is an even larger market segment, as this condition affects at least 35 million individuals in the US. It has become an increasing area of focus by the American Diabetes Association (“ADA”), which has advocated the identification and intensive management of the health and wellness of individuals with IGT.

At a more general level, the product candidate is tied to health-management trends that are (or are becoming) mainstream. It is aligned perfectly with an aging consumer population that cares more than ever about staying healthy and active.

Safety Findings

All components in the product candidate are found in food articles that either are part of standard diets or are found in widely-available dietary supplements that are legally marketed and sold, and that have extensive clinical and/or safety-in-use histories. Safe consumption of individual and combination micronutrients at levels equivalent to and in excess of those found in the product candidate is documented over decades and, in some cases, centuries. No consistent reports specifically linking any of the product candidate’s components to adverse events are found in reports deposited with FDA and other regulatory bodies responsible for maintaining such data.

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For consumers with aspirin sensitivities or allergies, it should be noted that the initial product candidate contains a standardized willow/willow bark (“willow”) complex that is metabolized to acetylsalicylic acid, the active ingredient in aspirin. Willow is used in the initial product candidate at an equivalent of 20 mg aspirin to confer long-term cardioprotective benefits, which are advocated for people with diabetes by the ADA and the American Heart Association.

Reports of gastrointestinal upset have been made about individual micronutrients in the initial product candidate; however they generally are ameliorated or eliminated by concomitant food consumption or after a brief adaptation period.

We used WIL Laboratories, a contract toxicology organization, to perform a preliminary animal safety study with its product. The results from a good laboratory practices (GLP) 14-day rat toxicology study (n = 70 rats) showed a clean profile when it was administered at levels up to 20X those intended for humans, a regimen recommended by the professional staff at WIL as providing an appropriate margin of safety. Specifically, the results from this study indicated that the product candidate was taken up by study animals and that no adverse observations were noted in a comprehensive examination of tissues, organs, and fluids. Furthermore, all histopathological examinations were completely normal.

Based on the foregoing, we do not anticipate any safety issues related to the product candidate. However, the precise combination of micronutrients in the product candidate has not been clinically tested in humans. Accordingly, there can be no guarantee that toxicity issues will not arise or that results of human clinical trials of the product candidate will be consistent with the results obtained to date.

Preliminary Clinical Data

We performed a small (81 individual), 12-week open-label human study of our initial product, which provided preliminary but encouraging insight about its efficacy. This study was conducted over Thanksgiving and Christmas holidays, a period during which many diabetic individuals experience significant deteriorations of their diabetic control. Participants added the product candidate to their daily treatment regimen while making no changes to existing medications, diets, or exercise regimens.

Open-label studies can be used to make initial assessments about product efficacy, and are performed with prior physician and participant understanding that a product is being used that is expected to deliver health benefits. They differ from double-blind placebo-controlled trials, which are the industry-standard approach for testing prescription drugs and in which neither physicians nor patients know whether patients are taking a placebo or the product under investigation.

Open-label studies are generally considered to be less reliable than double blind placebo controlled trials, and are not accepted by the FDA.

Participants for this study came from hospitals and physician practices in La Jolla, CA; Pittsburgh, PA; Las Vegas, NV; and Chicago, IL. Summary participant information is presented below:

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The endpoint measured in the open-label study was hemoglobin A_1c (“HbA_1c”), which is the generally accepted standard against which diabetic control is evaluated. It provides a measure of average blood glucose readings throughout the previous 90 days. A generally accepted HbA_1c range for the non-diabetic population is 4.5% – 7.5%. Values above 10.0% (correlating to an average blood glucose of 250 mg/dL) are observed in a large part of the diabetic population, and values above even 8.0% typically are precursors to serious micro-and macro-vascular complications.

The table below presents summary results of the improved diabetic control (as measured by reductions in HbA_1c) that was delivered by the product candidate across various cross-sections of open-label study groups:

To provide context for these results, the following table compares the improvements in diabetic control delivered by the product candidate in the open-label study, when taken as the only product for diabetic control (as monotheraphy), with those delivered by prescription anti-diabetics taken as monotheraphy. Data for these prescriptions agents are taken from much larger and sometimes longer double-blind placebo-controlled studies. Accordingly, the data from these other studies is much more likely to be accurate than the data from our study. Further trials will need to be done to verify that the results with the product candidate are valid in larger populations and in longer-duration studies.

The small size of the participant population for our study, combined with its being an open-label protocol, make it difficult to draw broad, statistically-significant conclusions. However, the Company believes the Akesis study indicates the following:

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In order to test the product candidate under more demanding conditions, a randomized, double-blind, placebo-controlled, good clinical practices (GCP) human trial was conducted at Duke University on a pilot scale (n = 18 patients). The study evaluated the addition of the product candidate to an otherwise-unchanged diabetes-control program. Results from this trial were interpreted by Clinimetrics, an independent contract-research organization. Although this study was small by design, the Company believes the results may warrant undertaking larger similar studies.

Specifically, this blinded, placebo-controlled study made a stronger statement than trend-line information that generally is obtained from pilot trials. The treatment arm showed appreciably-improved HbA_1c values v. placebo (median improvement 1.0%, mean improvement 1.2%), although this improvement was not statistically significant (p = 0.07) due to the small sample size.

In summary, based on this preliminary clinical data, the Company believes that consumption of the Akesis Product may be an effective approach to improving the health of individuals with various manifestations of carbohydrate intolerance. However, there can be no assurance that the results of more extensive human studies will be consistent with those obtained thus far.

Patents, Proprietary Rights, and Licenses

We believe that patents and other proprietary rights are important to our business. Our policy is to file patent applications to protect technology, inventions and improvements that may be important to the development of our business. We also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. We plan to enforce our issued patents and our rights to proprietary information and technology.

Our core technology is covered by four issued U.S. patents, and we have one additional patent application pending. Each of these patents consist of method and composition claims. A summary of our intellectual property is as follows:

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Government Regulation

Drugs. The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, manufacture, marketing and distribution of drugs. These agencies and other federal, state and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion of our drug candidates.

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FFDCA, and implementing regulations. The process required by the FDA before our drug candidates may be marketed in the United States generally involves the following:

The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our drug candidates will be granted on a timely basis, if at all.

Preclinical tests include laboratory evaluation of product chemistry, formulation and stability, as well as studies to evaluate toxicity in animals. The results of preclinical tests, together with manufacturing information and analytical data, are submitted as part of an IND application to the FDA.

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The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions about the conduct of the clinical trial, including concerns that human research subjects will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Our submission of an IND, or those of our collaborators, may not result in FDA authorization to commence a clinical trial. A separate submission to an existing IND must also be made for each successive clinical trial conducted during product development, and the FDA must grant permission before each clinical trial can begin. Further, an independent institutional review board, or IRB, for each medical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center and it must monitor the study until completed. The FDA, the IRB, or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive Good Clinical Practice, or GCP, regulations and regulations for informed consent.

Clinical Trials. For purposes of NDA submission and approval, clinical trials are typically conducted in the following three sequential phases, which may overlap:

In some cases, the FDA may condition approval of an NDA for a drug candidate on the sponsor’s agreement to conduct additional clinical trials to further assess the drug’s safety and effectiveness after NDA approval. Such post-approval trials are typically referred to as Phase IV clinical trials.

New Drug Application. The results of drug candidate development, preclinical testing and clinical trials are submitted to the FDA as part of an NDA. The NDA also must contain extensive manufacturing information. Once the submission has been accepted for filing, by law the FDA has 180 days to review the application and respond to the applicant. The review process is often significantly extended by FDA requests for additional information or clarification. The FDA may refer the NDA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it

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generally follows such recommendations. The FDA may deny approval of an NDA if the applicable regulatory criteria are not satisfied, or it may require additional clinical data or an additional pivotal Phase III clinical trial. Even if such data are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data from clinical trials are not always conclusive and FDA may interpret data differently than we or our collaborators interpret data. Once issued, the FDA may withdraw drug approval if ongoing regulatory requirements are not met or if safety problems occur after the drug reaches the market. In addition, the FDA may require testing, including Phase IV clinical trials, and surveillance programs to monitor the effect of approved products which have been commercialized, and the FDA has the power to prevent or limit further marketing of a drug based on the results of these post-marketing programs. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved label. Further, if there are any modifications to the drug, including changes in indications, labeling, or manufacturing processes or facilities, we may be required to submit and obtain FDA approval of a new NDA or NDA supplement, which may require us to develop additional data or conduct additional preclinical studies and clinical trials.

Satisfaction of FDA regulations and requirements or similar requirements of state, local and foreign regulatory agencies typically takes several years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease. Typically, if a drug candidate is intended to treat a chronic disease, as is the case with some of the drug candidates we are developing, safety and efficacy data must be gathered over an extended period of time. Government regulation may delay or prevent marketing of drug candidates for a considerable period of time and impose costly procedures upon our activities. The FDA or any other regulatory agency may not grant approvals for new indications for our drug candidates on a timely basis, if at all. Even if a drug candidate receives regulatory approval, the approval may be significantly limited to specific disease states, patient populations and dosages. Further, even after regulatory approval is obtained, later discovery of previously unknown problems with a drug may result in restrictions on the drug or even complete withdrawal of the drug from the market. Delays in obtaining, or failures to obtain, regulatory approvals for any of our drug candidates would harm our business. In addition, we cannot predict what adverse governmental regulations may arise from future United States or foreign governmental action.

Other regulatory requirements. Any drugs manufactured or distributed by us or our collaborators pursuant to FDA approvals are subject to continuing regulation by the FDA, including recordkeeping requirements and reporting of adverse experiences associated with the drug. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including cGMPs, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Failure to comply with the statutory and regulatory requirements can subject a manufacturer to possible legal or regulatory action, such as warning letters, suspension of manufacturing, seizure of product, injunctive action or possible civil penalties. We cannot be certain that we or our present or future third-party manufacturers or suppliers will be able to comply with the cGMP regulations and other ongoing FDA regulatory requirements. If our present or future third-party manufacturers or suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution, or withdraw approval of the NDA for that drug.

The FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. A company can

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make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective