UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark One)

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2009
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from                      to

VIA PHARMACEUTICALS, INC.

Delaware		33-0687976
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NO.)

750 Battery Street, Suite 330
San Francisco, California 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, Par Value $0.001 Per Share
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No þ

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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 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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of June 30, 2009, the aggregate market value of the registrant’s common stock held by non-affiliates was approximately $4,804,977 based upon the closing sales price of the registrant’s common stock on The NASDAQ Capital Market on such date.

The number of shares of the registrant’s Common Stock outstanding as of March 15, 2010 was 20,636,998.

Portions of the definitive Proxy Statement for the 2010 Annual Meeting of Stockholders, which will be filed within 120 days after the end of the fiscal year, are incorporated by reference into Part III hereof.

 

 

TABLE OF CONTENTS

		Page
Item No.		No.
PART I
Item 1. BUSINESS			2
EXECUTIVE OFFICERS OF THE REGISTRANT			14
Item 1A. RISK FACTORS			16
Item 2. PROPERTIES			34
Item 3. LEGAL PROCEEDINGS			34
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES			34
Item 6. SELECTED FINANCIAL DATA			35
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			36
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			49
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			49
Item 9A(T). CONTROLS AND PROCEDURES			49
Item 9B. OTHER INFORMATION			50
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE			52
Item 11. EXECUTIVE COMPENSATION			52
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS			52
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			52
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES			52
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES			53
Exhibit 4.5
Exhibit 4.6
Exhibit 4.8
Exhibit 10.2
Exhibit 10.11
Exhibit 10.12
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I

Forward-looking statements

This Annual Report on Form 10-K contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or to the Company’s future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and which could materially affect actual results, levels of activity, performance or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to:

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the Company’s ability to find a market maker to apply and be cleared by the Financial Industry Regulatory Authority to quote the Company’s common stock on the OTC Bulletin Board;

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ability and willingness of active market makers in our Company’s common stock to trade the Company’s common stock on the Pink Sheets under a “piggyback qualification”;

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the Company’s ability to borrow additional amounts under the new loan from Bay City Capital, as described in “Other Information” in Part II, Item 9B and in Note 12 in the Notes to the Financial Statements;

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the Company’s ability to obtain necessary financing in the near term, including amounts necessary to repay the previous loan from Bay City Capital following the April 1, 2010 maturity date;

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the Company’s ability to control its operating expenses;

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the Company’s ability to comply with covenants included in the loans with Bay City Capital;

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the Company’s ability to operate its business following the restructuring, as described in “Other Information” in Part II, Item 9B and in Note 12 in the Notes to the Financial Statements;

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the Company’s ability to comply with its reporting obligations under the rules and regulations promulgated by the Securities and Exchange Commission following the restructuring;

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the Company’s ability to timely recruit and enroll patients in any future clinical trials;

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the Company’s failure to obtain sufficient data from enrolled patients that can be used to evaluate VIA-2291, thereby impairing the validity or statistical significance of its clinical trials;

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the Company’s ability to successfully complete its clinical trials of VIA-2291 on expected timetables and the outcomes of such clinical trials;

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complexities in designing and implementing cardiometabolic clinical trials using surrogate endpoints in Phase 1 and Phase 2 clinical trials which may differ from the ultimate endpoints required for registration of a candidate drug;

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the results of the Company’s FDG-PET clinical trial as well as any future clinical trials;

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if the results of the ACS and CEA studies, upon further review and analysis, are revised, interpreted differently by regulatory authorities or negated by later stage clinical trials;

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the Company’s ability to obtain necessary FDA approvals;

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the Company’s ability to successfully commercialize VIA-2291;

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the Company’s ability to identify potential clinical candidates from the family of DGAT1 compounds licensed and move them into preclinical development;

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the Company’s ability to obtain and protect its intellectual property related to its product candidates;

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the Company’s potential for future growth and the development of its product pipeline, including the THR beta agonist candidate and the other compounds licensed from Roche;

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the Company’s ability to obtain strategic opportunities to partner and collaborate with large biotechnology or pharmaceutical companies to further develop VIA-2291;

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the Company’s ability to form and maintain collaborative relationships to develop and commercialize our product candidates;

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general economic and business conditions; and

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the other risks described under the heading “Risk Factors” in Part I, Item 1A below.

All forward-looking statements attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of these statements in light of new information or future events.

ITEM 1. BUSINESS

Corporate History and Description of Merger

On June 5, 2007, privately-held VIA Pharmaceuticals, Inc. completed a reverse merger transaction (the “Merger”) with Corautus Genetics Inc. Until shortly before the Merger, Corautus Genetics Inc. (“Corautus”) was primarily focused on the clinical development of gene therapy products using a vascular growth factor gene. These activities were discontinued in November 2006. Privately-held VIA Pharmaceuticals, Inc. was formed in Delaware and began operations in June 2004. Unless otherwise specified, the “Company,” “VIA,” “we,” “us,” and “our” refers to the business of the combined company after the Merger and the business of privately-held VIA Pharmaceuticals, Inc. prior to the Merger. Unless specifically noted otherwise, “Corautus Genetics Inc.” or “Corautus” refers to the business of Corautus Genetics Inc. prior to the Merger.

Business Overview

VIA is a biotechnology company focused on the development of compounds for the treatment of cardiovascular and metabolic disease. Specifically, the Company’s lead compound, VIA-2291, targets an unmet medical need of reducing atherosclerotic plaque inflammation, which is an underlying cause of atherosclerosis and its complications. Atherosclerosis is a common cardiovascular disease that results from chronic inflammation and the build-up of plaque in arterial blood vessel walls. Plaque consists of inflammatory cells, cholesterol and cellular debris. Atherosclerosis, depending on its severity and the location of the artery it affects, may result in blockage in certain vessels and can also cause a rupture of inflamed plaque tissue, leading to major adverse cardiovascular events (“MACE”) such as heart attack and stroke. Heart attack and stroke are leading causes of death worldwide.

In 2008, the Company expanded its drug development pipeline with preclinical compounds that target additional underlying causes of cardiovascular and metabolic disease, including high cholesterol, high triglycerides and insulin sensitization/diabetes. The Company’s clinical development strategy integrates several technologies to provide clinical proof-of-concept as early as possible in the clinical development process. These technologies include the measurement of biomarkers (specific biochemicals in the body with a particular molecular feature that makes them useful for measuring the progress of a disease or the effects of treatment), medical imaging of the coronary and carotid vessel walls to evaluate the plaque characteristics, and atherosclerotic plaque bioassays (measurements of indicators of atherosclerotic plaque inflammation believed to promote MACE). Once the Company has established proof-of-concept, the Company plans to consider business collaborations with larger biotechnology or pharmaceutical companies for the late-stage clinical development and commercialization of its compounds.

In March 2005, the Company entered into an exclusive license agreement (the “Stanford License”) with Stanford University (“Stanford”) to use a comprehensive gene expression database and analysis tool to identify novel, and prioritize known, molecular targets for the treatment of vascular inflammation and to study the impact of candidate therapeutic interventions on the molecular mechanisms underlying atherosclerosis (the “Stanford Platform”). One of the Company’s founders, Thomas Quertermous, M.D., who currently serves on the advisory board to the Company, developed the Stanford Platform at Stanford during the course of a four-year, $30.0 million research study (the “Stanford Study”). The Stanford Study initially utilized human tissue samples made available from the Stanford heart transplant program to characterize human plaque at the level of gene expression and identify the inflammatory genes and pathways involved in the development of atherosclerosis and associated complications in humans. To develop the Stanford Platform, the Stanford Study performed similar experiments on vascular tissue samples from mice prone to developing atherosclerosis and identified genes and pathways associated with the development of atherosclerosis that mice and humans have in common (the “Overlap Genes”). The Stanford Platform allowed us to analyze the expression of the Overlap Genes following the administration of candidate drugs to atherosclerotic-prone mice, and thus provided a useful tool for studying the effects of therapeutic intervention in the development of cardiovascular disease. This platform also gave us useful insight into the molecular pathways that we believe to be most relevant to the cardiovascular disease process. In January 2009, the Company advised Stanford that it was terminating its exclusive license agreement effective February 14, 2009.

In 2005, the Company identified 5-Lipoxygenase (“5LO”) as a key target of interest for treating atherosclerosis. 5LO is a key enzyme in the biosynthesis of leukotrienes, which are important mediators of inflammation and are involved in the development and progression of atherosclerosis. In addition, cardiovascular-related literature has also identified 5LO as a key target of interest for treating atherosclerosis and preventing heart attack and stroke. Following such identification, the Company identified a number of late-stage 5LO inhibitors that had been in clinical trials conducted by large biotechnology and pharmaceutical companies primarily for non-cardiovascular indications, including ABT-761, a compound developed by Abbott Laboratories (“Abbott”) for use in treatment of asthma. Abbott abandoned its ABT-761 clinical program in 1996 after the U.S. Food and Drug Administration (“FDA”) approved a similar Abbott compound for use in asthma patients. Abbott made no further developments to ABT-761 from 1996 to 2005. In August 2005, the Company entered into an exclusive, worldwide license agreement (the “Abbott License”) with Abbott to develop and commercialize ABT-761 for any indication. The Company subsequently renamed the compound VIA-2291.

VIA-2291 is a potent, selective and reversible inhibitor of 5LO that the Company is developing as a once-daily, oral drug to treat inflammation in the blood vessel wall. In March 2006, the Company filed an Investigational New Drug (“IND”) application with the FDA outlining the Company’s Phase 2 clinical program, which initially consisted of two trials for VIA-2291. Each of these clinical trials was initiated during 2006 to study the safety and efficacy of VIA-2291 in patients with existing cardiovascular disease. Using biomarkers of inflammation, medical imaging techniques and bioassays of plaque, the Company is evaluating and determining VIA-2291’s ability to reduce vascular inflammation in atherosclerotic plaque. The Company enrolled 50 patients in a Phase 2 study of VIA-2291 at clinical sites in Italy for patients who had a carotid endarterectomy (“CEA”) procedure. In addition, the Company enrolled 191 patients in a second Phase 2 study at 15 clinical sites in the United States and Canada for patients with acute coronary syndrome (“ACS”) who experienced a recent heart attack.

In October 2007, the Company’s Data Safety Monitoring Board (“DSMB”) performed a review of both safety and efficacy data related to the Company’s CEA and ACS clinical trials to determine the progress in the clinical program and the patient safety of VIA-2291. Based on this review, the DSMB observed a continued acceptable safety profile and evidence of a consistent pharmacological effect of VIA-2291 as would be predicted given its proposed mechanism of action. The DSMB recommended the studies continue as planned.

Following the results of the DSMB review, the Company began enrolling patients in a third Phase 2 clinical trial that utilized Positron Emission Tomography with fluorodeoxyglucose tracer (“FDG-PET”) to measure the impact of VIA-2291 on reducing atherosclerotic plaque inflammation in treated patients. The Company enrolled 52 patients following an acute coronary syndrome event, such as heart attack or stroke, into the 24 week, randomized, double blind, placebo-controlled study, which was run at five clinical sites in the United States and Canada. Endpoints in the study included reduction in atherosclerotic plaque inflammation as measured by serial FDG-PET scans. The last patient visit was reported in December 2009 and completion of data analysis and reporting of clinical trial results are anticipated in the first half of 2010.

In December 2008, the Company entered into two research, development and commercialization agreements with Hoffman-LaRoche Inc. and Hoffman-LaRoche Ltd. (collectively, “Roche”) to license, on an exclusive, worldwide basis, two sets of compounds (the “Roche Licenses”). The first license is for Roche’s thyroid hormone receptor (“THR”) beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche’s preclinical diacylglycerol acyl transferease 1 (“DGAT1”) metabolic disorders program.

To further expand the Company’s product candidate pipeline, the Company continues to engage in discussions regarding the purchase or license of additional preclinical or clinical compounds that the Company believes may be of interest in treating cardiovascular and metabolic disease.

Business Strategy

The Company’s objective is to become a leading biotechnology company focused on discovering, developing and commercializing novel drugs for the treatment of unmet medical needs of cardiovascular and metabolic disease. The key elements of the Company’s business strategy are as follows:

•

Maximize the value of our lead product candidate, VIA-2291. The Company seeks to develop VIA-2291 for the treatment of atherosclerotic plaque and secondary prevention of ACS in patients who have experienced a recent heart attack. The Company is applying its clinical development expertise to complete its clinical trials for VIA-2291. The Company anticipates that the development of VIA-2291 may ultimately be expanded to include primary prevention of ACS and stroke. The Company plans to pursue business collaborations with large biotechnology or pharmaceutical companies to conduct additional clinical trials required for regulatory approval.

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Pursue the clinical development of the THR beta agonist compound licensed from Roche. The Company intends to pursue this clinically ready asset and is in the planning phases for its clinical development. The Company anticipates filing an IND application, and initiating Phase 1 clinical trials, during the next twelve months.

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Pursue the preclinical development of DGAT1 compounds licensed from Roche. The Company intends to pursue the preclinical development of the DGAT1 compounds in order to identify a potential lead candidate for further development in human clinical trials.

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Expand our portfolio of small molecule product candidates through acquisitions and in-licensing. The Company intends to continue to license and develop preclinical and clinical small molecule compounds for the treatment of cardiovascular and metabolic disease. The Company believes this strategy will enable the Company to build a valuable drug development pipeline.

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Maximize economic value for our product candidates under development. The Company intends to maximize the value of its product candidates through independent development, licensing and other partnership and collaboration opportunities with large biotechnology or pharmaceutical companies.

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Enhance and protect our intellectual property portfolio. The Company plans to pursue, license and acquire additional intellectual property protection as required to enhance and protect its existing and future portfolio and to enable the Company to maximize the commercial lifespan of its compounds and technology.

Inflammation and Cardiovascular Disease

Inflammation is a normal response of the body to protect tissues from infection, injury or disease. The inflammatory response begins with the production and release of chemical agents by cells in the infected, injured or diseased tissue. These agents cause redness, swelling, pain, heat and loss of function. Inflamed tissues generate additional signals that recruit white blood cells to the site of inflammation. White blood cells destroy any infective or injurious agent, and remove cellular debris from damaged tissue. This inflammatory response usually promotes healing but, if uncontrolled, may become harmful.

The inflammatory response can be either acute or chronic. Acute inflammation lasts at most only a few days. The treatment of acute inflammation, where therapy typically includes the administration of aspirin and other non-steroidal anti-inflammatory drugs, provides relief of pain and fever for patients. In contrast, chronic inflammation lasts weeks, months or even indefinitely and results in tissue damage. In chronic inflammation, the inflammation becomes the problem rather than the solution to infection, injury or disease. Chronically inflamed tissues continue to generate signals that attract white blood cells from the bloodstream. When white blood cells migrate from the bloodstream into the tissue they amplify the inflammatory response. This chronic inflammatory response can break down healthy tissue in a misdirected attempt at repair and healing.

Evidence of the key role of chronic inflammation in diverse disease states, such as atherosclerosis and arthritis, is mounting. For many of these diseases, the existing anti-inflammatory treatments are incomplete and limited in use. As more physicians believe that inflammation is a root cause of a wide range of chronic diseases, the Company believes that the market will require safer and more effective anti-inflammatory treatments.

Atherosclerosis is the result of chronic inflammation and the build-up of plaque in arterial blood vessel walls. Plaque consists of inflammatory cells, cholesterol and cellular debris. Atherosclerosis, depending on its severity and the location of the artery it affects, may result in blockage in certain vessels and can cause a rupture of inflamed plaque tissue, leading to MACE such as heart attack and stroke. Heart attack and stroke are leading causes of death worldwide.

Atherosclerosis in the blood vessels of the heart is called coronary artery disease or heart disease. It is the leading cause of death in the United States, claiming more lives each year than all forms of cancer combined. Estimates from the American Heart Association’s “Heart Disease and Stroke Statistics — 2009 Update” indicate that approximately 16.8 million Americans were diagnosed with coronary heart disease in 2006. Approximately 1.7 million of these cases were patients with a history of heart attacks and strokes and a high risk of MACE. When atherosclerosis becomes severe enough to cause complications, physicians must treat the complications, which can include angina, heart attack, abnormal heart rhythms, heart failure, kidney failure, stroke or obstructed peripheral arteries. Many of the patients with established atherosclerosis are treated aggressively for their associated risk factors, which include elevated triglyceride levels, high blood pressure, smoking, diabetes, obesity and physical inactivity. In addition, most patients suffering from atherosclerosis have concomitant high cholesterol, and as a result, the current treatment regime focuses primarily on cholesterol reduction. Additionally, these patients are routinely treated with anti-hypertensives to lower blood pressure and anti-platelet drugs to help prevent the formation of blood clots. There are currently no medications available for physicians to directly treat the underlying chronic inflammation of the blood vessel wall associated with atherosclerosis.

Carotid artery disease is the narrowing of the carotid arteries caused by the buildup of plaque inside the blood vessels causing decreased blood flow to the brain and an increased risk of stroke. VIA believes that VIA-2291 may also have utility in the treatment of inflammation in carotid artery disease and may reduce the risk of stroke in patients.

Metabolic Syndrome

The American Heart Association currently estimates that more than 50 million Americans suffer from metabolic syndrome and its incidence is high and growing worldwide. Metabolic syndrome is generally considered a group of risk factors, including high blood pressure, insulin resistance or diabetes (the body can’t properly use insulin), unhealthy cholesterol levels, high triglycerides, abdominal fat and a proinflammatory state, evidenced by elevated levels of C-reactive protein in the blood. People with metabolic syndrome are at increased risk of atherosclerosis and its complications, including heart attack and stroke. While the biological mechanisms of metabolic syndrome are complex and not fully understood, risk factors considered in the diagnosis include insulin resistance, diabetes, dyslipidemia, obesity (especially abdominal obesity) and unhealthy lifestyle.

The Company believes that small molecule drugs targeting a number of these key risk factors will be important in treating metabolic syndrome and reducing patient risk from cardiovascular and metabolic disease, including heart attack, stroke and type 2 diabetes. The Company believes that the compounds recently licensed from Roche described more fully below have the potential to be important drugs for the treatment of cardiovascular and metabolic disease.

VIA-2291

The Company’s lead product candidate is VIA-2291, a small molecule drug that targets atherosclerotic plaque inflammation, a primary disease process in atherosclerosis. VIA-2291 is a potent, selective and reversible inhibitor of 5LO, which is believed to be a key enzyme in the biosynthesis of leukotrienes (important mediators of inflammation involved in the development and progression of atherosclerosis). The Company is developing VIA-2291 as a once-daily, oral drug to target atherosclerotic plaque inflammation. The goal of the VIA-2291 program is to treat inflammation in atherosclerotic plaques of patients with existing disease, thus decreasing their risk of MACE, including heart attack and stroke.

The potential market for VIA-2291 comprises the approximately 16.8 million patients in the United States who are diagnosed annually with coronary artery disease, according to the American Heart Association. The Company’s initial focus within this patient population is the approximately 1.4 million patients who are discharged annually from the hospital after suffering from an episode of ACS and who have a high risk of MACE.

The Company is undertaking the clinical development of VIA-2291 for the secondary prevention of MACE in ACS patients. On March 30, 2006, the Company filed IND 72,381 for VIA-2291 under its name with the FDA and in 2006, began two Phase 2 proof-of-concept studies of VIA-2291: the first study focused on patients undergoing CEA surgical procedures, while the second focused on patients with ACS who recently experienced heart attack and remain at an increased risk for MACE. Prior to that, Abbott conducted a clinical development program for ABT-761 (now VIA-2291) under IND 48,839.

Abbott previously tested VIA-2291 in more than 1,100 patients in 29 clinical trials for the treatment of asthma. During preclinical animal testing conducted by Abbott, and clinical trials of ABT-761 (now VIA-2291), safety issues with regards to tumors in animals and higher incidence of liver function abnormality in humans were identified. The liver function abnormalities were demonstrated to be reversible with discontinuance of the drug in Abbott’s trials. Lower doses of the drug may reduce these safety concerns. In the ACS clinical trial, the Company did see generally mild, reversible elevations of normal liver enzymes in the low dose VIA-2291 treated group, but no elevations in the higher dose drug-treated groups.

The first Phase 2 clinical study of VIA-2291 enrolled 50 patients with significant stenosis of the carotid artery who had a CEA after three months of treatment with VIA-2291 or placebo. A CEA is a surgical procedure to remove plaque in the lining of the carotid artery to allow for normal blood flow to the brain. This Phase 2 clinical study was designed to demonstrate efficacy and mechanism of action of VIA-2291 in the vessel wall, and had the unique advantage of providing access to atherosclerotic tissue removed in surgery for direct evaluation of VIA-2291’s effect on inflammation, through a panel of assays and histological examinations. The study also included measures of leukotrienes and biomarkers of inflammation in blood serum that are indicative of increased risk of MACE.

The second Phase 2 clinical study, which the Company conducted concurrently with the first Phase 2 clinical study, enrolled 191 ACS patients who experienced a recent heart attack. Patients were treated once daily with one of three dose levels of VIA-2291 or placebo. The study was designed to establish dose and safety data in the ACS patient population, and included measures of leukotrienes and biomarkers of inflammation, and medical imaging of the coronary vessel wall in a sub-study of patients to evaluate plaque characteristics in patients in the VIA-2291 groups and placebo groups.

VIA-2291 Clinical Trial Results

On November 9, 2008, the Company announced the results of its ACS and CEA Phase 2 clinical trials at the American Heart Association (“AHA”) conference in New Orleans, Louisiana. In both the ACS trial and the CEA trial, VIA-2291 effectively inhibited production of leukotrienes. The ACS trial met its primary endpoint by demonstrating a significant change from baseline in Leukotriene B4 (“LTB4”) production at all doses tested (p<0.001). The CEA trial missed its primary endpoint of percentage reduction in macrophage inflammatory cells in plaque tissue, but met key secondary endpoints including reduction of high sensitivity C-reactive protein (“hs-CRP”) (p<0.01). VIA-2291 was generally well-tolerated in both trials.

The ACS Phase 2 study was designed to establish optimal dosing and safety data in 191 patients with ACS who recently had a heart attack or unstable angina. Patients were treated once daily for 12 weeks with one of three dose levels of VIA-2291 or placebo. In order to further evaluate VIA-2291’s effect over a longer timeframe, a sub-study of patients in the ACS trial continued for an additional 12 weeks of treatment at the same dose followed by a 64 slice multi-detector computed tomography (“MDCT”) scan following up on the baseline MDCT scan that all patients received in the ACS trial. The statistical outcomes for the ACS trial were validated by an independent academic statistics group at Montreal Heart Institute.

The ACS trial demonstrated a statistically-significant, dose-dependent inhibition of ex vivo stimulated LTB4 production at twelve weeks. LTB4 production was measured at trough, just before the next dose of VIA-2291 was taken, indicating a sustained pharmacological effect of the drug between doses. The secondary endpoint of change from baseline in urine Leukotriene E4 (“LTE4”) also showed significant inhibition at all dose levels. A statistically-significant reduction in hs-CRP levels, a measure of general inflammation in the treated patients, as compared to placebo, was also observed in those patients treated for 24 weeks. Significant reductions in hs-CRP levels were not observed in the ACS trial in patients treated for twelve weeks, possibly due in part to variability in the level of hs-CRP at the baseline as a result of the recent heart attack or unstable angina.

The CEA Phase 2 study evaluated VIA-2291’s effect on atherosclerotic plaque inflammation in 50 patients scheduled for CEA, a surgical procedure to remove plaque from the carotid artery to increase blood flow to the brain and to reduce the risk of stroke in patients with significant blockage in the artery. Patients in the CEA trial were treated for 12 weeks with either 100 mg of VIA-2291 or placebo, and then underwent a CEA procedure. The CEA trial was designed to provide direct evaluation of VIA-2291’s effect on inflammation by analyzing plaque removed from the carotid arteries of patients treated with VIA-2291 or placebo. The CEA trial also measured serum biomarkers of inflammation to measure reduction in inflammation in treated patients.

While the results of the CEA trial did not demonstrate a reduction in macrophages in the plaque tissue in carotid arteries of patients treated with VIA-2291, analysis of our data, including a post-hoc analysis, did show a reduction in necrotic core thickness relative to plaque thickness. Necrotic core is a region within plaque associated with a high risk of plaque rupture, and preventing expansion, or reducing necrotic core thickness, may reduce the risk of heart attacks in patients with cardiovascular disease. Furthermore, mRNA levels of Interleukin 6, or IL-6, a pro-inflammatory cytokine, appeared to decrease in plaque tissue from patients treated with VIA-2291. These findings may indicate anti-inflammatory activity of VIA-2291 in plaque tissue.

The CEA trial confirmed the findings of statistically significant inhibition in leukotriene production observed in the ACS trial, as measured by stimulated levels of LTB4 in serum and levels of LTE4 in urine. In the CEA trial, LTB4 production was highly inhibited at 12 weeks (p<0.001). Leukotriene inhibition was seen early in both trials and was already highly significant after two weeks of drug treatment, the first time it was assessed after starting the drug. In the CEA trial, a statistically-significant reduction from baseline compared with placebo in hs-CRP was observed over the twelve week treatment period.

VIA-2291 was generally well-tolerated in both trials. In the ACS trial, common (>10 percent) adverse events (“AEs”) with no clear difference between placebo and VIA-2291 treated patients included angina, fatigue, musculoskeletal pain, and headache. Laboratory abnormalities included generally mild, reversible three times upper limit of normal liver enzymes in the low dose VIA-2291 treated group (10 percent) and placebo (2 percent), not seen in the higher dose drug-treated groups. In the CEA study, common AEs (>7 percent) included fever, diarrhea and cystitis that occurred somewhat more commonly in VIA-2291 treated patients. Common laboratory abnormalities included mild reversible elevations of BUN and reversible decreases >1 gm/dL of hemoglobin that were more frequent in VIA-2291 treated patients.

Safety of VIA-2291 was monitored throughout the trials by the independent DSMB which is chaired by Sidney Goldstein, M.D., Division of Cardiovascular Medicine, Henry Ford Hospital, Wayne State University. The DSMB conducted a preliminary review of the patient safety data from the VIA-2291 ACS and CEA trials and found that the drug was well-tolerated at the doses tested and supports further development of VIA-2291.

In addition to the CEA and ACS Phase 2 clinical trials, the Company conducted a third Phase 2 clinical trial involving VIA-2291 that utilizes FDG-PET to measure the impact of VIA-2291 on reducing atherosclerotic plaque inflammation in treated patients. The Company enrolled 52 patients following an acute coronary syndrome event, such as heart attack or stroke, into the 24 week, randomized, double blind, placebo-controlled study. Endpoints in the study include reduction in atherosclerotic plaque inflammation as measured by serial FDG-PET scans. The last patient visit was reported in December 2009 and completion of the data analysis and reporting of clinical trial results are anticipated in the first half of 2010.

In May 2009, the Company announced results of a sub-study of the ACS Phase 2 clinical trial of VIA-2291 at the AHA Arteriosclerosis, Thrombosis and Vascular Biology Annual Conference 2009 in Washington D.C. The purpose of the sub-study was to evaluate the effect of VIA-2291 25mg, 50mg and 100mg doses relative to placebo from baseline in patients dosed with VIA-2291 for 24 weeks. After completion of the initial 12 weeks of dosing, more than 85 of the 191 total ACS patients continued on to receive an additional 12 weeks of dosing on top of current standard medical care and received a 64 slice MDCT scan at baseline and 24 weeks. Evaluable scans from patients treated with placebo showed significantly more evidence of new plaque lesions from VIA-2291 treated patients. MDCT scans of patients with low density plaques demonstrated statistically significant, lower plaque volumes in combined VIA treated groups compared to placebo. Together these results suggest that VIA-2291 may reduce the progression of unstable coronary plaques that lead to heart attacks and stroke.

In June 2009, the Company announced that it held an end of Phase 2a meeting with the FDA. The Company reviewed safety and biologic activity data from the VIA-2291 CEA and ACS trials with the FDA and received guidance, including suggestions from the FDA on the Company’s potential Phase 3 trial design.

The Company plans to pursue business collaborations with large biotechnology or pharmaceutical companies to conduct additional clinical trials required for regulatory approval.

Abbott Exclusive License Agreement

In August 2005, the Company entered into an exclusive, worldwide license agreement with Abbott for the development and commercialization of a patented compound and related technology, formerly known as ABT-761 and subsequently renamed VIA-2291, claimed in U.S. Patent No. 5,288,751 and EU Patent No. 667,855. In exchange for such license, the Company agreed to make certain payments to Abbott related to: (i) the grant of the license, (ii) the transfer of the licensed technology, (iii) the achievement of certain development milestones (i.e., the first dosing of a Phase 3 clinical trial patient, and regulatory approval to commence sale of a licensed product in United States, Japan or specified European countries), and (iv) the achievement of certain worldwide sales milestones. Abbott will be entitled to an aggregate of $19.0 million in payments if all development milestones are achieved and $27.0 million in payments if all worldwide sales milestones are paid. To date, the Company has paid Abbott $2.0 million for the grant of the license and $1.0 million for the transfer of the licensed technology. However, to date, no development or worldwide sales milestones have been achieved.

The Company is also required to pay Abbott a royalty (subject to certain step-down and offset provisions) during the term of the agreement, ranging from 3% to 6.5% of aggregate worldwide annual net sales. The Company may sublicense its rights under the agreement to third parties, and the agreement continues on a jurisdiction-by-jurisdiction basis until there are no remaining royalty payment obligations in such jurisdiction. Upon completing payment of all royalty obligations due under the agreement, the Company will have a perpetual, irrevocable and fully-paid exclusive license to commercialize VIA-2291 for any indication.

Stanford License Agreement

In January 2009, the Company notified Stanford that it was terminating the March 2005 Stanford License to use the Stanford Platform effective February 14, 2009. The Stanford License required certain royalty payments to Stanford related to the issuance and sublicense of the Stanford License and payments corresponding to the achievement of certain development and regulatory milestones. The royalty rate varied from 1% to 6% of net sales depending on the type of product sold and whether the Company held an exclusive right to the Stanford License at the time of sale. The Company was also required to make milestone payments to Stanford for each VIA licensed product that used the Stanford License as the product reaches various development and regulatory milestones. The Company does not believe that it owes any amounts under the terminated Stanford License.

Roche Licensed Assets

In December 2008, the Company entered into the Roche Licenses for two sets of compounds that we believe represent novel potential drugs for treatment of cardiovascular and metabolic disease. The first license is for Roche’s THR beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche’s preclinical DGAT1 metabolic disorders program. Under the terms of the agreements, the Company assumes control of all development and commercialization of the compounds, and will own exclusive worldwide rights for all potential indications.

Roche will receive up to $22.8 million in upfront and milestone payments, the majority of which is tied to the achievement of product development and regulatory milestones. In addition, once products containing the compounds are approved for marketing, Roche will receive single-digit royalties based on net sales, subject to certain reductions.

The Company must use commercially reasonable efforts to conduct clinical and commercial development programs for products containing the compounds. Under the license for the THR beta agonist, if the Company has not completed a Phase 1 clinical trial with respect to a lead product containing this compound by January 5, 2012, then either the Company must commit to developing another of Roche’s compounds or Roche may terminate the license for that compound.

If the Company determines that it is not reasonable to continue clinical trials or other development of the compounds, it may elect to cease further development and Roche may terminate the licenses. If the Company determines not to pursue the development or commercialization of the compounds in the United States, Japan, the United Kingdom, Germany, France, Spain, or Italy, Roche may terminate the licenses for such territories.

The Roche Licenses will expire, unless earlier terminated pursuant to other provisions of the licenses, on the last to occur of (i) the expiration of the last valid claim of a licensed patent covering the manufacture, use or sale of products containing the compounds, or (ii) ten years after the first sale of a product containing the compounds.

The THR beta agonist is an orally administered, small-molecule beta-selective thyroid hormone receptor agonist designed to specifically target receptors in the liver involved in metabolism and cholesterol regulation, and avoid side effects associated with thyroid hormone receptor activation outside the liver. Roche has completed preclinical studies of the THR beta agonist. These studies demonstrated a rapid reduction of non-HDL cholesterol and the drug was shown to be synergistic with statins in animal studies. The Company will investigate the possibility of using the THR beta agonist in combination with statins for the treatment of hypercholesterolemia. In addition, in animal studies insulin sensitization and glucose lowering were observed making this compound a possible treatment of patients with type 2 diabetes in combination with other diabetes medications.

DGAT1 is an enzyme that catalyzes triglyceride synthesis and fat storage. Triglycerides are the principal component of fat, which is the major repository for storage of metabolic energy in the body. Overweight and obese individuals have significantly greater triglyceride levels, making them more prone to diabetes and its associated metabolic complications. DGAT1 inhibitors are believed to be an innovative class of compounds that modify lipid metabolism. In studies of obese animals, DGAT1 inhibitors have been shown to induce weight loss and improve insulin sensitization, glucose tolerance and lipid levels. These observations suggest DGAT1 inhibitors may have the potential to treat obesity, diabetes and dyslipidemia. The Company intends to identify potential clinical candidates from the compounds in this program and determine which compounds may be moved into further preclinical development.

Patents and Intellectual Property

Protection of assets by means of patents and other instruments conferring proprietary rights is an essential element of the Company’s business strategy. The Company primarily relies on patent law, trade secret law and contract law to protect its proprietary information and technology as well as to establish and maintain market exclusivity. In regard to patents, the Company actively seeks patent protection in the United States and other jurisdictions to protect technology, inventions and improvements to inventions that are commercially important to the development of its business.

In 2005, the Company exclusively licensed from Abbott various U.S. and European Union (“EU”) composition of matter patents related to VIA-2291, including United States Patent No. 5,288,751 (collectively, the “Abbott Patents”). The Abbott Patents will expire in 2012 in the United States and 2013 in the EU.

In February 2009, the Company was issued United States Patent No. 7,495,024 entitled “Phenylalkyl N-Hydroxyureas for Combating Atherosclerotic Plaque”, covering the use of VIA-2291 for the treatment of atherosclerosis. This patent will expire in August 2026, and is pending in other major markets worldwide.

The United States Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman Act, provides for the restoration of up to five years of patent term for a patent that covers a new product or its use, to compensate for time lost from the effective life of the patent due to the regulatory review process of the FDA. An application for patent term restoration is subject to approval by the U.S. Patent and Trademark Office in conjunction with the FDA. If the Company’s clinical trials of VIA-2291 are successful, and the Company ultimately receives the FDA’s approval to market the drug prior to the expiration of the Abbott Patent in November 2012, the Company intends to work with Abbott to seek an extension of the term of the Abbott Patent under the Hatch-Waxman Act. The Hatch-Waxman Act also provides for up to five years of data exclusivity in the United States for new chemical entities (“NCE”) such as VIA-2291 that have not yet been commercially sold in the market.

Other jurisdictions have statutory provisions similar to those of the Hatch-Waxman Act that afford both patent extensions and market exclusivity for drugs that have obtained market authorizations, such as European Supplementary Protection Certificates that extend effective patent life and European data exclusivity rules that create marketing exclusivity for certain time periods following marketing authorization. European data exclusivity is longer than the equivalent NCE marketing exclusivity in the United States, possibly as long as 11 years. The Company believes that if it obtains marketing authorization for VIA-2291 in Europe or other jurisdictions with similar statutory provisions, the Company may be eligible for patent term extension and marketing exclusivity under these provisions and the Company intends to seek such privileges.

The Company’s commercial success will depend in part on its ability to manufacture, use and sell its product candidates and proposed product candidates without infringing on the patents or other proprietary rights of third parties. The Company may not be aware of all patents or patent applications that may impact its ability to make, use or sell any of its product candidates or proposed product candidates. For example, U.S. patent applications do not publish until 18 months from their effective filing date. Further, the Company may not be aware of published or granted conflicting patent rights. Any conflicts resulting from patent applications and patents of others could significantly affect the validity or enforceability of the Company’s patents and limit the Company’s ability to obtain meaningful patent protection. If others obtain patents with competing claims, the Company may be required to obtain licenses to these patents or to develop or obtain alternative technology. The Company may not be able to obtain any licenses or other rights to patents, technology or know-how necessary to conduct our business as described in this Annual Report. Any failure to obtain such licenses or other rights could delay or prevent the Company from developing or commercializing its product candidates and proposed product candidates, which could materially affect the Company’s business.

Litigation or patent interference proceedings may be necessary to enforce the Company’s patent or other proprietary rights, or to determine the scope and validity or enforceability of the proprietary rights of others. The defense and prosecution of patent and intellectual property claims are both costly and time consuming, even if the outcome is favorable to the Company. Any adverse outcome could subject the Company to significant liabilities, require the Company to license disputed rights from others or to cease selling the Company’s future products.

Trademarks

The Company has not yet applied to register any of its trademarks with the USPTO. The Company will take any and all actions that it deems necessary to protect the trademarks and/or service marks that the Company uses or intends to use in connection with its business.

Clinical Trials

The Company enters into master services agreements with contract research organizations to assist in the conduct of its clinical trials for development of products. The Company used i3 Research, a division of Ingenix Pharmaceutical Services, Inc., to conduct the VIA-2291 ACS and CEA clinical trials. The Company used PharmaNet LLC to conduct the VIA-2291 FDG PET clinical trial.

Manufacturing

The Company enters into manufacturing agreements with third party contract manufacturing organizations that comply with current Good Manufacturing Practice (“cGMP”) guidelines for bulk drug substance and oral formulations of VIA-2291 and the Company’s other product candidates needed to support both ongoing and planned clinical trials, as well as commercial marketing of the product following regulatory approval.

Sales and Marketing

The Company plans to consider business collaborations with large biotechnology or pharmaceutical companies to commercialize approved products that it develops to target patients or prescribing physicians in broad markets. The Company believes that collaborating with large companies that have significant marketing and sales capabilities provides for optimal penetration into broad markets, particularly into those areas that are highly competitive.

Competition

The Company faces intense competition in the development of compounds addressing cardiovascular and metabolic disease particularly from biotechnology and pharmaceutical companies. Certain of these companies may, using other approaches, identify and decide to pursue the discovery and development of new drug targets or disease pathways that the Company has identified through its research. Many of the Company’s competitors, either alone or with collaborative partners, have substantially greater financial resources and larger research and development operations than the Company does. These competitors may discover, characterize or develop important genes, drug targets or drug candidates with respect to treating atherosclerosis, inflammation or other targets to address cardiovascular and metabolic diseases before the Company does or they may obtain regulatory approvals of their drugs more rapidly than the Company does.

In addition, the Company believes that certain companies may have preclinical programs underway targeting atherosclerotic-related inflammation. Many of these entities have substantially greater resources, longer operating histories and greater marketing and financial resources than the Company does. They may, therefore, succeed in commercializing products before the Company does that compete on the basis of efficacy, safety and price.

The Company also faces competition from other biotechnology and pharmaceutical companies focused on alternative treatments for cardiovascular and metabolic disease, such as anti-oxidants, antibodies against oxidized LDL, compounds to raise HDL, and compounds addressing insulin resistance. Any product that the Company successfully develops may compete with these other approaches and may be rendered obsolete or noncompetitive.

The Company’s competitors may obtain patent protection or other intellectual property rights that could limit the Company’s rights to use its technologies or databases, or commercialize its products. In addition, the Company faces, and will continue to face, intense competition from other companies for collaborative arrangements with biotechnology and pharmaceutical companies, for establishing relationships with academic and research institutions and for licenses to proprietary technology.

The Company’s ability to compete successfully will depend, in part, on its ability to: (i) develop proprietary products; (ii) develop and maintain products that reach the market first, and are technologically superior to and more cost effective than other products on the market; (iii) obtain patent or other proprietary protection for its products and technologies; (iv) attract and retain scientific and product development personnel; (v) obtain required regulatory approvals; and (vi) manufacture, market and sell products that the Company develops. Developments by third parties may render our product candidates obsolete or noncompetitive. These competitors, either alone or in collaboration, may succeed in developing technologies or products that are more effective than those developed by the Company.

Governmental Regulation

The Company plans to develop prescription-only drugs for the foreseeable future. Prescription drug products are subject to extensive pre- and post-market regulation by the FDA, including regulations that govern the testing, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising and promotion of such products under the Federal Food Drug and Cosmetic Act (“FDCA”) and its implementing regulations, and by comparable agencies and laws in foreign jurisdictions. The European Union has vested centralized authority in the European Medicines Evaluation Agency and Committee on Proprietary Medicinal Products to standardize review and approval across EU member nations. Failure to comply with applicable FDA, EU or other requirements may result in civil or criminal penalties, recall or seizure of products, partial or total suspension of production or withdrawal of the product from the market.

FDA approval is required before any new unapproved drug or dosage form, including a new use of a previously approved drug, can be marketed in the United States. All applications for FDA approval must contain, among other things, information relating to pharmaceutical formulation, stability, manufacturing, processing, packaging, labeling, and quality control.

New Drug Application

Approval by the FDA of a new drug application (“NDA”) is generally required before a drug may be marketed in the United States. This process generally involves:

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completion of preclinical laboratory and animal testing in compliance with the FDA’s good laboratory practice regulations;

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submission to the FDA of an IND for human clinical testing which must become effective before human clinical trials may begin;

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performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug product for each intended use;

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satisfactory completion of an FDA pre-approval inspection of the facility or facilities at which the product is produced to assess compliance with the FDA’s current cGMP guidelines; and

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submission to, and approval by, the FDA of an NDA.

The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and the Company cannot be certain that the FDA will grant any approvals for its product candidates 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 to the FDA. 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. The Company’s submission of an IND 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. Further, an independent institutional review board (“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 (i.e. VIA) 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 GCP, or Good Clinical Practice requirements, including regulations for informed consent.

The Company is also subject to various laws and regulations regarding laboratory practices and the experimental use of animals in connection with its research. In these areas, as elsewhere, the FDA has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect on the Company.

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

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Phase 1: Studies are initially conducted in a limited population to test the product candidate for safety, dose tolerance, absorption, metabolism, distribution and excretion in healthy humans or, on occasion, in patients, such as cancer patients.

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Phase 2: Studies are generally conducted in a limited patient population to identify possible adverse effects and safety risks, to evaluate the efficacy of the product for specific targeted indications and to determine dose tolerance and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.

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Phase 3: These are commonly referred to as pivotal studies. When Phase 2 evaluations demonstrate that a dose range of the product may be effective and has an acceptable safety profile, Phase 3 trials are undertaken in large patient populations to further evaluate dosage, to provide substantial evidence of clinical efficacy and to further test for safety in an expanded and diverse patient population at multiple, geographically-dispersed clinical trial sites.

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Phase 4: In some cases, the FDA may condition approval of an NDA for a product candidate on the sponsor’s agreement to conduct additional post-approval clinical trials to further assess the drug’s safety and effectiveness after NDA approval and commercialization. Such post approval trials are typically referred to as Phase 4 studies.

Clinical trials, including the adequate and well-controlled clinical investigations conducted in Phase 3, are designed and conducted in a variety of ways. Phase 3 studies are often randomized, placebo-controlled and double-blinded. A “placebo-controlled” trial is one in which one group of patients, referred to as an “arm” of the trial, receives the drug being tested while another group receives a placebo, which is a substance known not to have pharmacologic or therapeutic activity. In a “double-blind” study, neither the researcher nor the patient knows which arm of the trial is receiving the drug or the placebo. “Randomized” means that upon enrollment patients are placed into one arm or the other at random by computer. Other controls also may be used by which the test drug is evaluated against a comparator. For example, “parallel control” trials generally involve studying a patient population that is not exposed to the study medication (i.e., is either on placebo or standard treatment protocols). In such studies experimental subjects and control subjects are assigned to groups upon admission to the study and remain in those groups for the duration of the study. Not all studies are highly controlled. An “open label” study is one where the researcher and the patient know that the patient is receiving the drug. A trial is said to be “pivotal” if it is designed to meet statistical criteria with respect to pre-determined “endpoints,” or clinical objectives, that the sponsor believes, based usually on its interactions with the relevant regulatory authority, will be sufficient to demonstrate safety and effectiveness meeting regulatory approval standards. In some cases, two “pivotal” clinical trials are necessary for approval.

The results of product development, preclinical studies and clinical trials are submitted to the FDA as part of an NDA. NDAs must also 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. In 1992, under the Prescription Drug User Fee Act (“PDUFA”), the FDA agreed to specific goals for improving the drug review time and created a two-tiered system of review times — Standard Review and Priority Review. Standard Review is applied to a drug that offers at most, only minor improvement over existing marketed therapies. The 2002 amendments to PDUFA set a goal that a Standard Review of an NDA be accomplished within ten months. A Priority Review designation is given to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists. A Priority Review means that the time it takes the FDA to review an NDA is reduced such that the goal for completing a Priority Review initial review cycle is six months. The review process is often significantly extended by FDA requests for additional information or clarification. The FDA may refer the application 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 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 and/or an additional pivotal Phase 3 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 the FDA may interpret data differently than the Company does. Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety problems occur after the product reaches the market. In addition, the FDA may require testing, including Phase 4 studies, 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 product based on the results of these postmarketing 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, the Company may be required to submit and obtain FDA approval of a new or supplemental NDA, which may require the Company to develop additional data or conduct additional preclinical studies and clinical trials.

The FDA has expanded its expedited review process in recognition that certain severe or life-threatening diseases and disorders have only limited treatment options. Fast track designation expedites the development process, but places greater responsibility on a drug company during Phase 4 clinical trials. The drug company may request fast track designation for one or more indications at any time during the IND process, and the FDA must respond within 60 days. Fast track designation allows the drug company to develop product candidates faster based on the ability to request an accelerated approval of the NDA. For accelerated approval the clinical effectiveness is based on a surrogate endpoint in a smaller number of patients. In addition, the drug company may request priority review at the time of the NDA submission. If the FDA accepts the NDA submission as a priority review, the time for review is reduced from one year to six months. The Company plans to request fast track designation and/or priority review, as appropriate, for its product candidates.

PDUFA, which has been reauthorized twice and is likely to be reauthorized again before the Company’s submission of an NDA, requires the payment of user fees with the submission of NDAs. These application fees are substantial ($1,405,500 in the FDA’s Fiscal Year 2010) and will likely increase in future years. If the Company obtains FDA approval for its product candidates, it could obtain five years of Hatch-Waxman marketing exclusivity for product candidates containing no active ingredient (including any ester or salt of the active ingredient) previously approved by the FDA. Under this form of exclusivity, third parties would be precluded from submitting a drug application which refers to the previously approved drug and for which the safety and effectiveness investigations relied upon by the new applicant were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use for a period of five years. This form of exclusivity does not block acceptance and review of stand-alone NDAs supported entirely by data developed by the applicant or to which the applicant has a right of reference.

The Company and its contract manufacturers are required to comply with applicable cGMP guidelines. cGMP guidelines require among other things, quality control, and quality assurance as well as the corresponding maintenance of records and documentation. The manufacturing facilities for the Company’s products must demonstrate that they meet GMP guidelines to the satisfaction of the FDA pursuant to a pre-approval inspection before they can manufacture products. The Company and its third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of its products to assess its compliance with applicable regulations.

Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including warning letters, the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations, and civil and criminal penalties. Adverse experiences with the product must be reported to the FDA and could result in the imposition of market restriction through labeling changes or in product removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following approval.

Other Regulatory Requirements

Following approval of a drug candidate, the FDA imposes a number of complex regulations on entities that advertise and promote pharmaceuticals, which include, among others, standards for direct-to-consumer advertising, prohibitions on off-label promotion, and restrictions on industry-sponsored scientific and educational activities, and promotional activities involving the internet. The FDA has very broad enforcement authority under the FDCA, and failure to abide by these regulations can result in penalties, including the issuance of a warning letter directing entities to correct deviations from FDA standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA, and state and federal civil and criminal investigations and prosecutions.

Any products the Company manufactures or distributes under FDA approvals are subject to pervasive and continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the products. Safety issues uncovered by such reporting may result in it having to recall approved products or FDA withdrawing its approval for such products, which could have a material adverse effect on the Company. Failure to make such reports as required by the FDA may result in fines and civil penalties, suspension of approvals, the seizure or recall of products, and the withdrawal of approvals, any one or more of which could have a material adverse effect on the Company.

Outside the United States, the Company’s ability to market a product is contingent upon receiving marketing authorization from the appropriate regulatory authorities. The requirements governing marketing authorization, pricing and reimbursement vary widely from jurisdiction to jurisdiction. At present, foreign marketing authorizations are applied for at a national level, although within the EU registration procedures are available to companies wishing to market a product in more than one EU member state. The regulatory authority generally will grant marketing authorization if it is satisfied that the Company has presented it with adequate evidence of safety, quality and efficacy.

Research and Development

The Company’s research and development expenses were $6.1 million and $11.8 million in the years ended December 31, 2009 and 2008, respectively. The Company continues to incur significant research and development expenses as it finalizes its clinical programs related to its lead compound VIA-2291, continues planning for clinical trials of its preclinical pipeline assets and evaluates other potential preclinical or clinical compounds that the Company may consider acquiring or licensing.

Employees

As of December 31, 2009, the Company had nineteen full-time employees, including nine in research and development. Of these employees, four have Ph.D.s, one has an M.D. and six have Masters degrees. For employee information following the restructuring, please see “Other Information” in Part II, Item 9B below.

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of VIA Pharmaceuticals, Inc. as of March 15, 2010 are as follows:

Name		Age				Position
Lawrence K. Cohen			56			Director, President and Chief Executive Officer
James G. Stewart			57			Senior Vice President, Chief Financial Officer and Secretary
Rebecca A. Taub			58			Senior Vice President, Research and Development

Biographical information relating to each of our executive officers is set forth below.

Lawrence K. Cohen, Ph.D. has served as President, Chief Executive Officer and a director of the Company since the consummation of the Merger on June 5, 2007, and prior to that time served as President, Chief Executive Officer and a director of privately-held VIA Pharmaceuticals, Inc. since its formation in 2004. Previously, he was the Chief Executive Officer of Zyomyx, Inc., a privately-held biotechnology company focused on protein chip technologies. Dr. Cohen joined Zyomyx in 1999 as Chief Operating Officer, where he was responsible for all internal activities, including research and development, business development, financing and operations. Dr. Cohen received a Ph.D. in Microbiology from the University of Illinois and completed his postdoctoral work in Molecular Biology at the Dana-Farber Cancer Institute and the Department of Biological Chemistry at Harvard Medical School.

James G. Stewart has served as Senior Vice President, Chief Financial Officer and Secretary of the Company since the consummation of the Merger on June 5, 2007, and prior to that time served as Senior Vice President, Chief Financial Officer and Secretary of privately-held VIA Pharmaceuticals, Inc. since November 2006. From 1988, Mr. Stewart has held a number of senior financial and operating roles with privately-held, venture backed companies in a number of industries, including telecommunications, corporate ethics and governance, semiconductor equipment and wireless sensors. From April 2005 to August 2006, Mr. Stewart served as Senior Vice President, Chief Financial Officer at Advanced Cell Technology, a public biotechnology company focused on stem cell derived products. From August 2004 to March 2005, Mr. Stewart served as Chief Financial Officer and Executive Vice President Administrator at LRN, a private venture capital-backed company focused on corporate governance matters. From April 2002 to July 2004, he served as Chief Financial Officer of SS8 Networks, Inc., a private venture capital-backed telecommunications company. From March 2001 to March 2002, Mr. Stewart served as Chief Financial Officer of Graviton, Inc., a private venture capital-backed technology company. From February 1999 to March 2001, Mr. Stewart served as Chief Financial Officer at Ventro Corporation, a public business-to-business marketplace company, where he was responsible for raising significant capital in the company’s initial public offering and subsequent debt offering. From June 1995 to February 1999, Mr. Stewart served as Chief Financial Officer of CN Biosciences, Inc., a public life sciences company where he was responsible for the company’s initial public offering and management of finance and other operating responsibilities culminating in the successful sale of the business to Merck KgaA Darmstadt. Prior to CN Biosciences, Mr. Stewart held key finance and operating responsibilities at two other companies after leaving Ernst & Young (formerly Arthur Young & Co.) where he ultimately served as an audit partner after 13 years with the firm. Mr. Stewart holds a B.A. from the University of Southern California.

Rebecca Taub, M.D. has served as Senior Vice President, Research and Development of the Company since January 14, 2008, and prior to that time served as Vice President of Research in Metabolic Diseases of Roche Pharmaceuticals, a unit of Roche Holding Ltd. since 2004. While at Roche Dr. Taub oversaw drug discovery programs in diabetes, dyslipidemia and obesity, including target identification, lead optimization and advancement of preclinical candidates into clinical development. From 2000 through 2003, Dr. Taub worked at Bristol-Myers Squibb Co. and DuPont Pharmaceutical Company, which was acquired by Bristol-Myers in 2001, in a variety of positions, including executive director of CNS and obesity research. Before becoming a pharmaceutical executive, Dr. Taub served in a number of academic medicine and biomedical research positions. She was a tenured professor of genetics and medicine at the University of Pennsylvania School of Medicine from 1997 to 2001, and she remains an adjunct professor. Earlier she was an assistant professor at the Joslin Diabetes Center of Harvard Medical School, Harvard University and an associate investigator with the Howard Hughes Medical Institute. She is the author of more than 120 research articles. Dr. Taub received her M.D. from Yale University School of Medicine and B.A. from Yale College.

Advisors

The Company has established an advisory board to provide guidance and counsel on aspects of its business. Members of the board provide input on product research and development strategy, assist in targeting future pathways of interest, provide industry perspectives and background and assist in education and publication plans.

The Company’s advisors are as follows:

Name		Specialty		Employment/Current Positions
Marcelo di Carli, MD		Atherosclerosis and cardiovascular disease and imaging technologies		Associate Professor of Radiology, and Chief of Nuclear Medicine, Brigham and Women’s Hospital
Robert Fenichel, MD, Ph.D.		Atherosclerosis and cardiovascular disease and regulatory matters		Former Deputy Division Director, Division of CardioRenal Drug Products, Food and Drug Administration
Peter Libby, MD		Atherosclerosis and cardiovascular disease, including the role of inflammation in the disease process		Mallinckrodt Professor of Medicine, and Chief, Cardiovascular Division, Brigham and Women’s Hospital
Marc Pfeffer, MD, Ph.D.		Pathophysiology and clinical management of progressive cardiac dysfunction following heart attack or hypertension		Dzau Professor of Medicine, Harvard Medical School Senior Physician, Brigham and Women’s Hospital in Boston
Thomas Quertermous, MD		Vascular pathophysiological, genetic and molecular mechanisms of inflammation and atherogenics		William G. Irwin Professor of Cardiovascular Medicine and Chief of Research, Cardiovascular Medicine Division, at Stanford University School of Medicine.
Paul Ridker, MD		Atherosclerosis and cardiovascular disease, including the role of inflammation in the disease process and the role of CRP		Eugene Braunwald Professor of Medicine, Harvard Medical School and Director, Center for Cardiovascular Disease Prevention, Divisions of Cardiovascular Diseases and Preventive Medicine, Brigham and Women’s Hospital
Jean-Lucien Rouleau, MD		Atherosclerosis and cardiovascular disease		Dean, Faculty of Medicine, University of Montreal
Jean-Claude Tardif, MD		Atherosclerosis and cardiovascular disease		Associate Professor of Medicine, University of Montreal Director of Research, Montreal Heart Institute
Renu Virmani, MD		Cardiovascular pathology		President and Medical Director of CVPath Institute, Inc.

Corporate Information

Our principal executive office is located at 750 Battery Street, Suite 330, San Francisco, CA 94111, and our telephone number is (415) 283-2200. Our website address is: www.viapharmaceuticals.com. The reference to our website address does not constitute incorporation by reference of the information contained on the website, which should not be considered part of this annual report on Form 10-K. You may view our financial information, including the information contained in this annual report, and other reports we file with the Securities and Exchange Commission (“SEC”), on the Internet, without charge as soon as reasonably practicable after we file them with the SEC, in the “SEC Filings” page of the Investor Relations section of our website at www.viapharmaceuticals.com. Alternatively, you may view or obtain reports filed with the SEC at the SEC Public Reference Room at 100 F Street, N.E. in Washington, D.C. 20549, or at the SEC’s Internet site at www.sec.gov. You may obtain information on the operation of the SEC Public Reference Room by calling the SEC at 1-800-SEC-0330.

ITEM 1A. RISK FACTORS

Risks Related to the Company’s Financial Results

The Company has experienced significant losses, expects losses in the future, has limited resources and there is substantial doubt as to the Company’s ability to continue as a going concern.

The Company is a clinical-stage biotechnology company with a limited operating history and a single product candidate in clinical trials, VIA-2291. The Company is not profitable and its current operating business has incurred losses in each year since the inception of the Company in 2004. The Company currently does not have any products that have been approved for marketing, and the Company will continue to incur significant research and development and general and administrative expenses related to its operations. The Company’s net loss for the years ended December 31, 2009 and 2008 was approximately $21.0 million and $20.3 million, respectively. As of December 31, 2009, the Company had an accumulated deficit of approximately $81.6 million. The Company expects that it will continue to incur significant losses for the foreseeable future, and the Company may never achieve or sustain profitability. If the Company’s product candidates, including VIA-2291, fail in clinical trials or do not gain regulatory approval, or if the Company’s future products do not achieve market acceptance, the Company may never become profitable. Even if the Company achieves profitability in the future, it may not be able to sustain profitability in subsequent periods.

Failure to obtain adequate financing in the near term will adversely affect the Company’s ability to operate as a going concern. The Company’s ability to continue as a going concern is also dependent upon its ability to control its operating expenses and its ability to achieve a level of revenues adequate to support its capital and operating requirements.

The factors described in the auditor’s report and Note 1 and Note 12 in the Notes to the Financial Statements may make it more difficult for the Company to obtain additional financing, and there can be no assurance that the Company will be able to obtain such financing on favorable terms, or at all. As a result of the Company’s losses to date, expected losses in the future, limited capital resources, including cash on hand, and accumulated deficit, the Company’s independent registered public accounting firm concluded that there is substantial doubt as to the Company’s ability to continue as a going concern, and accordingly, included an explanatory paragraph describing conditions that raise substantial doubt about its ability to continue as a going concern in their report on the Company’s December 31, 2009 financial statements.

The Company will require substantial additional funding in the near term to continue operating its business, which may not be available to the Company on acceptable terms, or at all, which could force the Company to delay, scale back or eliminate some or all of its research and development programs, or ultimately cease operations.

As of December 31, 2009, the Company had $2.2 million in cash. As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 below and in Note 6 in the Notes to the Financial Statements, in March 2009, the Company entered into a loan (the “March 2009 Loan”) with its principal stockholder, Bay City Capital, and one of Bay City Capital’s affiliates (the “Lenders”) whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million, which loan is secured by all of the Company’s assets, including its intellectual property, and accrues interest at the rate of 15% per annum, which increases to 18% per annum following an event of default. As of September 11, 2009, the Company had drawn down the full amount from the debt facility. As described in “Other Information” in Part II, Item 9B and in Note 12 in the Notes to the Financial Statements, the Company entered into another loan (the “March 2010 Loan”) with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million, which loan is secured by all of the Company’s assets, including its intellectual property, and accrues interest at the rate of 15%

per annum, which increases to 18% per annum following an event of default. On March 29, 2010, the Company borrowed an initial amount of $1,250,000. Management believes that the total amount of cash borrowed under the March 2010 Loan, if fully drawn, will enable the Company to meet its current obligations into the third quarter of 2010. Management does not believe that existing cash resources will be sufficient to enable the Company to meet its ongoing working capital requirements for the next twelve months and the Company will need to raise substantial additional funding in the near term to meet its working capital requirements and to continue its research, development and commercialization activities. Current funds and additional funds raised will be required to:

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fund the business operations of the Company, including general and administrative expenses and the expenses surrounding the restructuring as described in “Other Information” in Part II, Item 9B and in Note 12 in the Notes to the Financial Statements;

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fund clinical trials and seek regulatory approvals;

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pursue and implement strategic partnering transactions;

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pursue the development of additional product candidates;

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conduct and expand the Company’s research and development activities;

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access manufacturing and commercialization capabilities, including seeking collaboration and partnering opportunities;

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implement additional internal systems and infrastructure; and

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maintain, defend and expand the scope of the Company’s intellectual property portfolio.

The Company’s future funding requirements will depend on many factors, including but not limited to:

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the terms and timing of any collaboration, licensing or other strategic arrangements into which the Company may enter;

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the scope, cost, rate of progress, and results of the Company’s current and future clinical trials, preclinical studies and other discovery, research and development activities;

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the costs associated with establishing manufacturing and commercialization capabilities;

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the costs of acquiring or investing in product candidates and technologies;

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the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

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the costs and timing of seeking and obtaining FDA and other regulatory approvals;

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the potential need to hire additional management and research, development and clinical personnel;

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the effect of competing technological and market developments; and

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general and industry-specific economic conditions that may affect the Company’s research and development expenditures.

Until the Company can establish profitable operations to finance its cash requirements, which the Company may never do, the Company plans to finance future cash needs primarily through public or private equity or debt financings, the establishment of credit or other funding facilities, or entering into collaborative or other strategic arrangements with corporate sources or other sources of financing. Global market and economic conditions have been, and continue to be, disrupted and volatile. Concern about the stability of the markets has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers. The Company does not know whether additional financing will be available in the near term when needed, particularly in light of the current economic environment and adverse conditions in the financial markets, or that, if available, financing will be obtained on terms favorable to the Company or its stockholders. Since August 2007, other than through bridge loans from its largest stockholder, the Company has been unsuccessful in securing additional financing and may not be able to do so in the near term when needed. The delisting of the Company’s common stock from the NASDAQ Capital Market may further adversely affect our ability to obtain additional financing in the near term when needed. Having insufficient funds may require the Company to delay, scale back, or eliminate some or all of its research and development programs, including activities related to its clinical trials, or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than the Company would otherwise choose, or ultimately cease operations.

The Company expects to be in default under the March 2009 Loan, which default could lead to a foreclosure on the Company’s assets.

All outstanding principal and accrued interest under the March 2009 Loan are due on April 1, 2010. The Company will not be able to repay the loan when it becomes due on April 1, 2010. When the Company does not repay the loan at maturity, it will be in default under the March 2009 loan agreement and the Lenders may terminate the March 2009 Loan, demand immediate payment of all amounts borrowed by the Company and take possession of all collateral securing the March 2009 Loan, which could cause the Company to cease operations. In addition, if the Company raises additional funds through collaborative or other strategic arrangements, it may be required to relinquish potentially valuable rights to its product candidates or grant licenses on terms that are not favorable to the Company.

The Company may not be able to satisfy certain covenant restrictions, which could adversely affect the Company’s business, financial condition, results of operations and liquidity.

As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 below and in Note 6 in the Notes to the Financial Statements, in March 2009, the Company entered into a loan with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million, which loan is secured by all of the Company’s assets, including its intellectual property. As of September 11, 2009, the Company had drawn down the full amount from the debt facility. As described in “Other Information” in Part II, Item 9B and in Note 12 in the Notes to the Financial Statements, the Company entered into the March 2010 Loan with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million, which loan is secured by all of the Company’s assets, including its intellectual property. On March 29, 2010, the Company borrowed an initial amount of $1,250,000. In connection with both loans, the Company must also satisfy certain conditions and comply with covenants, including covenants relating to the Company’s ability to incur additional indebtedness, make future acquisitions, consummate asset dispositions, grant liens and pledge assets, pay dividends or make other distributions, incur capital expenditures and make restricted payments. These restrictions may limit the Company’s ability to pursue its business strategies and obtain additional funds. The Company’s ability to meet these financial covenants may be adversely affected by a deterioration in business conditions or its results of operations, adverse regulatory developments, the economic environment and adverse conditions in the financial markets or other events beyond the Company’s control. Failure to comply with these restrictions may result in the occurrence of an event of default under the loan. Upon the occurrence of an event of default, the Lenders may terminate the loan, demand immediate payment of all amounts borrowed by the Company and take possession of all collateral securing the loan, which could adversely affect the Company’s ability to repay its debt securities and cause the Company to cease operations. In addition, the loans provide that, subject to certain specified exemptions, the proceeds of any debt or equity offering or asset sale must be used to reduce outstanding indebtedness under the loan or other specified indebtedness. This restriction severely limits the Company’s ability to use the proceeds of any debt or equity offering or asset sale to operate or grow the Company’s business. All outstanding principal and accrued interest under the March 2009 Loan are due on April 1, 2010. The Company will not be able to repay the loan when it becomes due on April 1, 2010.

Raising additional funds by issuing securities or through collaboration and other strategic arrangements will likely cause dilution to existing stockholders, restrict operations or require the Company to relinquish potentially valuable rights.

The Company may raise additional capital through private or public equity or debt financings, the establishment of credit or other funding facilities, entering into collaborative or other strategic arrangements with corporate sources or other sources of financing, which may include partnerships for product development and commercialization, merger, sale of assets or other similar transactions. If the Company raises additional capital by issuing equity securities, its existing stockholders’ ownership will be diluted. Given the Company’s current market capitalization and financing needs, it is likely that any financing obtained will result in significant dilution to existing stockholders. Any additional debt financing that the Company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing, specific restrictions on the use of its assets as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. The Company may also be required to pledge all or substantially all of its assets, including intellectual property rights, as collateral to secure any debt obligations.

The March 2009 Loan is secured by all of the Company’s assets, including its intellectual property. In connection with this loan, the Company granted the Lenders warrants to purchase an aggregate of 83,333,333 shares of common stock (“Warrant Shares”) at $0.12 per share. The Warrant Shares vest based on the amount of borrowings under the loan and the passage of time. For each $2.0 million borrowing, 8,333,333 Warrant Shares vest and are exercisable immediately on the date of grant, and 8,333,333 vest and are exercisable 45 days thereafter as the Company meets certain conditions provided for in the warrants, including that the Company did not complete a $20.0 million financing, as defined in the Loan Agreement, within 45 days of the borrowing. Based on the $10.0 million of borrowings, 83,333,333 Warrant Shares are vested and are exercisable. The Warrant Shares are exercisable at any time until 5:00 p.m. (Pacific Time) on March 12, 2014, upon the surrender to the Company of the properly endorsed Warrant Shares, as specified in the warrants. To the extent the Warrant Shares are exercised by the Lenders, existing stockholders’ ownership in the Company will be significantly diluted.

As described in “Other Information” in Part II, Item 9B and in Note 12 in the Notes to the Financial Statements, the March 2010 Loan is secured by all of the Company’s assets, including its intellectual property. In connection with this loan, the Company granted the Lenders warrants to purchase an aggregate of 17,647,059 shares of common stock (“2010 Warrant Shares”) at $0.17 per share. The 2010 Warrant Shares vest based on the amount of borrowings under the loan. Based on the $1,250,000 of borrowings, 7,352,941 of the 2010 Warrant Shares are vested and are exercisable as of March 29, 2010. The 2010 Warrant Shares are exercisable at any time until 5:00 p.m. (Pacific Time) on March 26, 2015, upon the surrender to the Company of the properly endorsed 2010 Warrant Shares, as specified in the warrants. To the extent the Warrant Shares are exercised by the Lenders, existing stockholders’ ownership in the Company will be further diluted. In addition, upon default of the March 2009 Loan the Lenders will have the right to declare the March 2010 Loan due and payable upon sixty days notice.

Risks Related to the Company’s Business

The Company is at an early stage of development. The Company has never generated and may never generate revenues from commercial sales of its products and the Company may not have products to market for several years, if ever.

Since its inception, the Company has dedicated substantially all its resources to the support and conduct of research and development of compounds for clinical trials, and specifically, toward the development of VIA-2291. Because none of the Company’s current or potential products have been finally approved by any regulatory authority, the Company currently has no products for commercial sale and has not generated any revenues to date. The Company is considering its partnering opportunities with large biotechnology or pharmaceutical companies in connection with its current and future clinical trials and development activities. The Company does not expect to generate any revenues until it successfully partners its current or future programs or until it receives final regulatory approval and launches one of its products for sale.

The Company has conducted three Phase 2 clinical trials for VIA-2291: the CEA study, the ACS study, and the FDG-PET study. Based on the data reported, and to be reported, from these three studies, and subject to the receipt of substantial additional financing, the Company anticipates initiating future clinical development activities with respect to VIA-2291 and is currently evaluating various development alternatives, particularly strategic partnering opportunities. Such clinical development activities may include one or more additional clinical trials designed to further demonstrate that the drug can be safely administered following an acute coronary syndrome event and link the mechanism of action of VIA-2291 to improved cardiac outcomes. The Company is presently evaluating the design and strategy of additional clinical trials, which may take the form of a Phase 2b trial, a Phase 3 registration trial or some combination thereof. Any future trials will require regulatory approval and the failure to obtain such approval would have a material adverse effect on the Company’s business. Substantial additional investment in future clinical trials will be required and will require significant time.

In December 2008, the Company entered into two license agreements with Roche to develop and commercialize two sets of compounds (the “Metabolic Compounds”). The first license is for Roche’s THR beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche’s preclinical DGAT1 metabolic disorders program. If necessary financing is obtained either through additional investment in the Company or through another vehicle, the Company intends to enter into strategic arrangements to pursue preclinical and clinical development of the Metabolic Compounds. There can be no assurance that the Company will be able to obtain such financing.

The Company’s ability to generate product revenue will depend heavily on the successful development and regulatory approval of VIA-2291, the Metabolic Compounds or any other product candidates. The Company cannot guarantee that it will be successful in completing the remaining Phase 2 trial or any subsequent clinical trials initiated for VIA-2291, or that it will be able to obtain the necessary financing to initiate and/or complete clinical trials for VIA-2291, the Metabolic Compounds or any other product candidates. The Company also cannot assure you that it will be able to successfully negotiate a strategic collaboration with a large biotechnology or pharmaceutical company with respect to VIA-2291 or otherwise finance the development of VIA-2291, the Metabolic Compounds or any other product candidates. The Company’s revenues, if any, will be derived from products that the Company does not expect to be commercially available for several years, if ever. The development of VIA-2291, the Metabolic Compounds or any other product candidates may be discontinued at any stage of the clinical trial programs and the Company may never generate revenue from any of its product candidates. Accordingly, there is no assurance that the Company will ever generate revenues.

Clinical trials are expensive, difficult to design and implement, time-consuming and subject to delay, particularly in the cardiovascular area due to the large number of patients who must be enrolled and treated in clinical trials. As a result, there is a high risk that the Company’s drug development activities will not result in regulatory approval, or that such approval will be delayed, thereby reducing the likelihood of successful commercialization of products.

Clinical trials are very expensive and difficult to design and implement. Conducting clinical trials is a complex and uncertain process and involves screening, assessing, testing, treating and monitoring patients at multiple sites, and coordinating with patients and clinical institutions. This is especially true for trials related to the cardiovascular indications that the Company is pursuing, in part because they require a large number of patients and because of the complexities involved in using histology, measurement of biomarkers and medical imaging. The clinical trial process is also time-consuming. For example, based on the clinical data reported from the CEA and ACS Phase 2 clinical trials, as described under “Business — VIA-2291 Clinical Trial Results” in Part I, Item 1 above, and subject to the receipt of additional financing, the Company intends to pursue strategic partnering opportunities with respect to future clinical development of VIA-2291. Such clinical development activities may include one or more additional clinical trials designed to further demonstrate that the drug can be safely administered following an acute coronary syndrome event and link the mechanism of action of VIA-2291 to improved cardiac outcomes. The Company is presently evaluating the design and strategy of additional clinical trials, which may take the form of a Phase 2b trial, a Phase 3 registration trial or some combination thereof. The Company currently expects that any additional trial would require the recruitment of a significant number of patients, would require significant investment, and could require more than two years to complete. The Company is unable to currently estimate the costs of additional trials, but industry estimates for trials of cardiovascular drugs often exceed $200 million, and require in excess of two years to complete. If the results of the additional clinical trials do not demonstrate a statistically significant reduction of MACE, the Company would likely be required to conduct additional clinical trials or narrow the labeling of its product based on results achieved, thereby delaying or preventing the commercial launch of VIA-2291. In addition, subject to the receipt of additional financing, the Company intends to pursue clinical development of the THR beta agonist compound and preclinical development of the DGAT1 compounds licensed from Roche, each of which will require significant spending and may require separate sources of funding. Until the Company can generate a sufficient amount of revenue to finance its cash requirements, which the Company may never do, it expects to finance future cash needs primarily through public or private equity offerings, debt financings or strategic collaborations. Global market and economic conditions have been, and continue to be, disrupted and volatile. Concern about the stability of the markets has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers. To date the Company has been unsuccessful in securing additional financing and may not be able to do so in the near term when needed, particularly in light of the current economic environment, adverse conditions in the financial markets, and the Company’s inability to secure financing over the past two years other than through bridge financing from its largest stockholder. Further, additional financing, if available, may not be obtained on terms favorable to the Company or its stockholders.

The Company’s DSMB reviewed safety data numerous times in connection with the CEA, ACS and FDG-PET clinical trials and has recommended that studies continue as planned. Additional DSMB reviews may be performed in connection with potential future clinical trials, and if the results of the DSMB review are unfavorable, the Company may be required to modify or discontinue its clinical trials of VIA-2291, thereby delaying or preventing completion of subsequent clinical trials, and the commercial launch of VIA-2291.

The conduct of the Company’s clinical trial activities, including analysis of the FDG-PET trial, as well as the commencement and completion of any future clinical trial activities, could be delayed, prevented or otherwise negatively impacted by several factors, including:

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lack of adequate funding to continue the clinical development of VIA-2291 or to commence the preclinical and clinical development of the Metabolic Compounds, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional trials and studies and increased expenses associated with the services of the Company’s clinical research organizations (“CROs”) and other third parties;

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failure to enter into strategic partnering transactions or other strategic arrangements for the continued research and development of compounds for clinical trials;

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delays in obtaining regulatory approvals to commence a clinical trial;

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delays in identifying and reaching agreement on acceptable terms with prospective CROs and clinical trial sites;

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delays in obtaining institutional review board approval to conduct a clinical trial at a prospective site;

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slower than expected rates of patient recruitment and enrollment for a variety of reasons, including competition from other clinical trial programs for the treatment of similar indications, the nature of the protocol, and the eligibility criteria for the trial;

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enrolled patients may not remain in or complete clinical trials at the rates we expect;

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failure to obtain sufficient data from enrolled patients that can be used to evaluate VIA-2291, thereby impairing the validity or statistical significance of our clinical trials;

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lack of effectiveness during clinical trials;

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failure to achieve clinical trial endpoints;

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unforeseen safety issues;

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uncertain dosing issues;

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changes in regulatory requirements causing the Company to amend clinical trial protocols or add new clinical trials to comply with these changes;

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unforeseen difficulties developing the advanced manufacturing techniques, including adequate process controls, quality controls, and quality assurance testing, required to scale up production of the Company’s product candidates to commercial levels;

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inability to monitor patients adequately during or after treatment;

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conflicting or negating results, upon further analysis of the data from the clinical trials;

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retaining participants who have enrolled in a clinical trial but may be prone to withdraw due to the design of the trial, lack of efficacy or personal issues or who fail to return for follow-up visits for a variety of reasons; and

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inability or unwillingness of medical investigators to follow the Company’s clinical trial protocols and follow good clinical practices.

The Company will not know whether the analysis of the FDG-PET clinical trial will end on time and whether any future clinical trials, if any, will begin on time, need to be restructured or be completed on schedule, if at all. Significant delays in clinical trials will impede the Company’s ability to commercialize its product candidates and generate revenue, and could significantly increase its development costs, all of which could have a material adverse effect on the Company’s business.

Failure to timely recruit and enroll patients for any future clinical trials may cause the development of the Company’s product candidates to be delayed.

The Company may encounter delays if it is unable to timely recruit and enroll enough patients to complete any future clinical trials. Clinical trial patient levels depend on many factors, including the eligibility criteria for the trial, assumptions regarding the baseline disease state and the impact of standard medical care, the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites, and competition from other clinical trial programs for the treatment of similar indications. For example, although patient enrollment was completed, the Company experienced slower than expected patient enrollment in its completed CEA clinical trial. Any delays in planned patient enrollment in the future may result in increased costs, delay or prevent regulatory approval or harm the Company’s ability to develop and commercialize current or future product candidates, including in collaboration with biotechnology or pharmaceutical companies.

The Company’s Phase 2 clinical trials of VIA-2291 primarily target biomarkers, histology and medical imaging as endpoints, and the results of any Phase 2 clinical trials may not be indicative of success in future clinical trials that will target outcomes such as heart attack and stroke. The results of previous clinical trials may not be predictive of future results, and the Company’s current and future clinical trials may not satisfy the requirements of the FDA or other non-U.S. regulatory authorities.

The clinical data collected during the (i) prior clinical trials involving VIA-2291 (formerly known as ABT-761) conducted by Abbott prior to the licensing of VIA-2291 from Abbott in August 2005, and (ii) the CEA, ACS, ACS MDCT sub-study and FDG-PET clinical trials for VIA-2291, do not provide evidence of whether VIA-2291 will prove to be an effective treatment to reduce the rate of MACE in the prospective treatment population. In order to prove or disprove the validity of the Company’s assumption about the efficacy of VIA-2291, at least one additional clinical trial will need to be conducted which may include a Phase 2b or Phase 3 clinical trial and which may be 12 to 36 months in duration from the recruitment of the first patient, although this time may increase due to unforeseen circumstances. Such additional clinical trials must ultimately demonstrate that there is a statistically significant reduction in the number of MACE in patients treated with VIA-2291 compared to patients taking a placebo. Until data from one or more of these outcome clinical trials can be collected and analyzed, the Company will not know whether VIA-2291 shows clinically significant benefits.

Results of the CEA and ACS clinical trials as described under “Business — VIA-2291 Clinical Trial Results” in Part I, Item 1 above are based on a very limited number of patients and may, upon review and further analysis, be revised, interpreted differently by regulatory authorities or negated by later stage clinical results. For instance, we believe the results of the CEA and ACS clinical trials support further clinical development of VIA-2291 in larger outcome trials based on the fact both trials achieved nearly every key endpoint, although the CEA trial missed its primary endpoint. The results from preclinical testing and Phase 2 clinical trials often have not been predictive of results obtained in later trials. A number of new drugs and therapeutics have shown promising results in initial clinical trials, but later-stage trials may fail to establish sufficient safety and efficacy data to obtain necessary regulatory approvals. Negative or inconclusive results, or adverse medical events during a clinical trial, could cause the termination of a clinical trial or require it to be repeated or a whole new clinical trial conducted. Data obtained from preclinical and clinical studies are subject to varying interpretations, which may delay, limit or prevent regulatory approval.

The Company’s Phase 2 FDG-PET clinical trial utilizes new, innovative imaging technology that does not represent a widely accepted and validated clinical trial methodology for measuring inflammation in atherosclerosis. The results of this clinical trial may not be predictive of future results and may not be consistent with the results of the CEA and ACS clinical trials, the ACS MDCT sub-study or future clinical trials.

FDG-PET is a new, innovative imaging technology that does not represent a widely accepted and validated clinical trial methodology for measuring atherosclerotic plaque inflammation. The last patient in the FDG-PET Phase 2 clinical trial was reported in December 2009 and completion of data analysis and reporting of clinical trial results are anticipated in the first half of 2010. If the results from this clinical trial are unfavorable, the Company may be delayed or prevented from completing subsequent clinical trials related to VIA-2291 or from commercially launching VIA-2291. In addition, the results of this clinical trial may not be predictive of future results and may not be consistent with results from the CEA or ACS clinical trials or the ACS MDCT sub-study, which may delay or prevent regulatory approval of VIA-2291, may harm the Company’s ability to develop and commercialize VIA-2291, and may negatively impact the Company’s ability to raise additional capital in the future.

The Company’s clinical trials could be delayed, suspended or stopped.

The Company will not know whether future clinical trials, if any, will begin on time or whether it will complete any of its ongoing clinical trials on schedule or at all. Product development costs to the Company and potential future collaborators or strategic partners will increase if the Company has delays in testing or approvals, or if the Company needs to perform more or larger clinical trials than planned. Significant delays, suspension or termination of clinical trials would adversely affect the Company’s financial results and the commercial prospects for the Company’s products, and would delay or prevent the Company from achieving profitable operations.

The Company relies on third parties to conduct its clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, the Company may be unable to obtain, or may experience delays in obtaining, regulatory approval, or may not be successful in commercializing the Company’s planned and future products.

The Company enters into master service agreements with third-party CROs and relied primarily on CROs to oversee its Phase 2 clinical trials for VIA-2291, and depends on independent clinical investigators, medical institutions and contract laboratories to conduct its clinical trials. Similarly, the Company intends to rely on CROs to oversee any additional clinical trials for VIA-2291 and will depend on independent clinical investigators, medical institutions and contract laboratories to conduct these clinical trials, whether in the form of a Phase 2b trial, a Phase 3 registration trial or some combination thereof. The

Company remains responsible, however, for ensuring that each of its clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires the Company to comply with standards, commonly referred to as Good Clinical Practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. The Company’s reliance on third parties that it does not control does not relieve it of these responsibilities and requirements. If the Company’s CROs or independent investigators fail to devote sufficient time and resources to the Company’s drug development programs, if they are unable or unwilling to follow the Company’s clinical protocols, or if their performance is substandard, our clinical trials may not meet regulatory requirements. If our clinical trials do not meet regulatory requirements or if these third parties need to be replaced, our clinical trials may be extended, delayed, suspended or terminated. If any of these events occurs, the clinical development costs for the Company’s product candidates would be expected to rise and the Company may not be able to obtain regulatory approval or commercialize its product candidates.

The Company will need to provide additional information to the FDA regarding preclinical and clinical safety issues raised during prior trials of VIA-2291 that could result in delays in future FDA approvals.

During preclinical animal testing and clinical trials of ABT-761 (now VIA-2291) conducted by Abbott, safety issues with regards to tumors in animals and higher incidence of liver function abnormality in clinical trials in humans were identified. The liver function abnormalities were demonstrated to be reversible with discontinuance of the drug in Abbott’s trials. The FDA requested that the Company provide additional materials and information regarding the incidence of tumors in animals. As described under “Business — VIA-2291” in Part I, Item 1 above, lower doses of the drug may reduce these safety concerns. In the ACS clinical trial, the Company did see generally mild, reversible elevations of normal liver enzymes in the low dose VIA-2291 treated group, but no elevations in the higher dose drug-treated groups. Safety issues could delay the FDA’s approval of any Phase 2b and/or Phase 3 clinical trial, which could have a material adverse effect on the Company’s business.

VIA-2291 is the Company’s only product candidate currently in clinical trials. The Company’s efforts to identify, develop and commercialize new product candidates beyond VIA-2291 will be at an early stage and will be subject to a high risk of failure.

The Company’s product candidates are in various stages of development and are prone to the risks of failure inherent in drug development. The Company will need to complete significant additional clinical trials before it can demonstrate that its product candidates are safe and effective to the satisfaction of the FDA and other non-U.S. regulatory authorities. Clinical trials are expensive and uncertain processes that take years to complete. Failure can occur at any stage of the process, and successful early clinical trials do not ensure that later clinical trials will be successful. Current and future preclinical products have increased risk as there is no assurance that products will be identified that will qualify for, and be successful in, clinical trials. Furthermore, the Company may expend significant resources on research or target compounds that ultimately do not qualify for, or are not successful in, clinical trials. For example, in December 2008 the Company entered into two license agreements with Roche to develop and commercialize the Metabolic Compounds for up to $22.8 million in upfront and milestone payments with potential royalty payments in the future. If necessary financing is obtained, the Company intends to pursue preclinical and clinical development of these compounds. There can be no assurance that the Company will successfully develop and commercialize products containing these compounds. Product candidates may fail to show desired efficacy and safety traits despite having progressed through initial clinical trials. A number of companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in advanced clinical trials where costs of clinical trials are significant, even after obtaining promising results in earlier trials. In addition, a clinical trial may prove successful with respect to a secondary endpoint, but fail to demonstrate clinically significant benefits with respect to a primary endpoint. Failure to satisfy a primary endpoint in a Phase 2b and/or Phase 3 clinical trial would generally mean that a product candidate would not receive regulatory approval without a subsequent successful Phase 2b and/or Phase 3 clinical trial which the Company may not be able to fund, and may be unable to complete.

If the Company is unable to form and maintain the collaborative relationships that its business strategy requires, its product development programs will suffer, and the Company may not be able to develop or commercialize its product candidates and may ultimately have to cease operations.

A key element of the Company’s business strategy with regard to the development and commercialization of VIA-2291 includes collaboration with third parties, particularly leading biotechnology and pharmaceutical companies. If necessary financing is obtained, the Company plans to pursue partnering opportunities with biotechnology and pharmaceutical companies to conduct additional clinical trials required for regulatory approval of VIA-2291. Subject to the receipt of additional financing, the Company expects to consider further collaborations for the development and commercialization of its product candidates in the future. The timing and terms of any collaboration will depend on the evaluation by prospective collaborators of the Company’s clinical trial results and other aspects of the safety and efficacy profiles of its product candidates. If the Company is

unable to reach agreements with suitable collaborators for any product candidate, it would be forced to fund the entire development and commercialization of such product candidate, and the Company currently does not have the resources to do so. Even if the Company is able to reach an agreement with a suitable collaborator, the Company may be forced to fund a significant portion of the development and commercialization expenses, and the Company currently does not have the resources to do so. Additionally, if resource constraints require the Company to enter into a collaboration early in the development of a product candidate, the Company may be forced to accept a more limited share of any revenues such product may eventually generate. The Company faces significant competition in seeking appropriate collaborators. Moreover, these collaboration arrangements are complex and time-consuming to negotiate and document. The Company may not be successful in its efforts to establish collaborations or other alternative arrangements for any product candidate, may be unable to raise required capital to fund clinical trials, and therefore, may be unable to continue operations.

Even if the Company receives regulatory approval to market VIA-2291 and its other product candidates, such products may not gain the market acceptance among physicians, patients, healthcare payors and the medical community.

Any products, including VIA-2291, that the Company may develop may not gain market acceptance among physicians, patients, healthcare payors and the medical community even if they ultimately receive regulatory approval. If these products do not achieve an adequate level of acceptance, the Company, or future collaborators, may not be able to generate material product revenues and the Company may not become profitable. The degree of market acceptance of any of the Company’s product candidates, if approved for commercial sale, will depend on a number of factors, including:

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demonstration of efficacy and safety in clinical trials;

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the prevalence and severity of any side effects;

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the introduction and availability of generic substitutes for any of the Company’s products, potentially at lower prices (which, in turn, will depend on the strength of the Company’s intellectual property protection for such products);

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potential or perceived advantages over alternative treatments;

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the timing of market entry relative to competitive treatments;

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the ability to offer the Company’s product candidates for sale at competitive prices;

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relative convenience and ease of administration;

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the strength of marketing and distribution support;

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sufficient third party coverage or reimbursement; and

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the product labeling or product insert (including any warnings) required by the FDA or regulatory authorities in other countries.

The Company will rely on third parties to manufacture and supply its product candidates.

The Company does not own or operate manufacturing facilities for clinical or commercial production of product candidates. The Company will not have any experience in drug formulation or manufacturing, and it will lack the resources and the capability to manufacture any of the Company’s product candidates on a clinical or commercial scale. The Company expects to depend on third-party contract manufacturers for the foreseeable future. Any performance failure on the part of the Company’s contract manufacturers could delay clinical development, regulatory approval or commercialization of the Company’s current or future product candidates, depriving the Company of potential product revenue and resulting in additional losses.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, particularly in scaling up initial production. These problems include difficulties with production costs and yields, quality control (including stability of the product candidate and quality assurance testing), shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. If the Company’s third-party contract manufacturers were to encounter any of these difficulties or otherwise fail to comply with their obligations to the Company or under applicable regulations, the Company’s ability to provide product candidates to patients in its clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of the Company’s clinical trials, increase the costs associated with maintaining its clinical trial program and, depending upon the period of delay, require the Company to commence new trials at significant additional expense or terminate the trials completely.

The Company may be subject to costly claims related to its clinical trials and may not be able to obtain adequate insurance.

Because the Company currently conducts clinical trials in humans, it faces the risk that the use of its current or future product candidates will result in adverse side effects. During preclinical animal testing and clinical trials of ABT-761 (now VIA-2291) conducted by Abbott, safety issues with regard to tumors in animals and higher incidence of liver function abnormality in clinical trials in humans were identified. The liver function abnormalities were demonstrated to be reversible with discontinuance of the drug in Abbott’s trials. As described under “Business — VIA-2291” in Part I, Item 1 above, lower doses of the drug may reduce these safety concerns. Although the Company currently has, and intends to maintain, clinical trial liability insurance for up to $10.0 million, such insurance may be insufficient to cover any such adverse events. The Company does not know whether it will be able to continue to obtain clinical trial coverage on acceptable terms, or at all. The Company may not have sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limit of, its insurance coverage. There is also a risk that third parties, which the Company has agreed to indemnify, could incur liability. Any litigation arising from the Company’s clinical trials, even if the Company is ultimately successful in its defense, would consume substantial amounts of its financial and managerial resources and may create adverse publicity, which may result in significant damages and may adversely impact the Company’s ability to raise required capital or continue operations.

The Company may be subject to costly claims related to Corautus’ former clinical trials of Vascular Endothelial Growth Factor 2.

Prior to November 1, 2006, Corautus was the sponsor of a Phase 2b clinical trial to study the efficacy of VEGF-2 for the treatment of severe cardiovascular disease, known as the GENASIS trial. In addition, Corautus supported initial clinical trials studying the efficacy of VEGF-2 for the treatment of peripheral artery disease and diabetic neuropathy. On April 10, 2006, Corautus announced the termination of enrollment in the GENASIS trial.

The Company has and intends to maintain, clinical trial liability insurance for up to $10.0 million. Insurance may not adequately cover any such claims and if not, such claims may have a material adverse effect on the Company’s business, financial condition and results of operations. Such insurance may be insufficient to cover any claims unrelated to the GENASIS trial. The Company does not know whether it will be able to continue to obtain clinical trial coverage on acceptable terms, or at all. The Company may not have sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limit of, its insurance coverage. There is also a risk that third parties, which the Company has agreed to indemnify, could incur liability, and the Company may be required to reimburse such third parties for such liability if required pursuant to these indemnification arrangements.

For example, on July 17, 2007, the Company received a letter requesting indemnification from the Company of approximately $1.3 million of legal costs incurred by Tailored Risk Assurance Company, Ltd. in defending Caritas St. Elizabeth’s Medical Center of Boston, Inc. (“CSEMC”) and several physician co-defendants in the matter of Susan Darke, Individually, and as Executrix of the Estate of Roger J. Darke v. Caritas St. Elizabeth’s Medical Center of Boston, Inc., et al. (Suffolk Superior Court, Boston, Massachusetts). Vascular Genetics Inc. (“VGI”), the Company’s wholly-owned subsidiary, was also a defendant in the litigation, but was dismissed from the litigation in March 2007 after entering into a settlement agreement with the plaintiffs. The letter alleged that the Company, as a successor to Corautus Genetics Inc., was required to indemnify CSEMC pursuant to a License Agreement, dated October 31, 1997, between CSEMC and VGI. In August 2008, the parties reached a settlement. The Company’s insurance carrier covered the entire settlement payment. The Company, VGI and the insurance carrier obtained a release of liabilities in connection with the settlement.

Any cost required to be paid out by the Company or any litigation arising from these terminated clinical trials, even if the Company is ultimately successful in its defense, would consume substantial amounts of its financial and managerial resources and may create adverse publicity, which may result in significant damages and may adversely impact the Company’s ability to raise required capital or adversely affect the Company’s business, financial condition or results of operations.

If the Company is unable to retain its management, research, development, clinical teams and scientific advisors or to attract additional qualified personnel, the Company’s product operations and development efforts may be seriously jeopardized.

As described in “Other Information” in Part II, Item 9B and in Note 12 in the Notes to the Financial Statements, the Company’s current financial constraints has caused and may further cause the loss of the services of principal members of our management and research, development and clinical teams which could negatively impact our ability to operate, obtain necessary financing, or pursue strategic partnering opportunities. The employment agreement for Dr. Lawrence K. Cohen, the Company’s Chief Executive Officer, provides that his employment is terminable at will at any time with or without cause or notice by either the Company or Dr. Cohen. The employment agreement for Dr. Rebecca Taub, the Company’s Sr. Vice President, Research & Development, is terminable at will at any time with or without cause or notice by either the Company or Dr. Taub. Competition among biotechnology companies for qualified employees is intense, and the ability to retain and attract qualified individuals is critical to the Company’s success. The Company may be unable to attract and retain key personnel on acceptable terms, if at all. The Company does not maintain “key person” life insurance on any of its officers, employees or consultants.

The Company has relationships with consultants and scientific advisors who will continue to assist the Company in formulating and executing its research, development, regulatory and clinical strategies. The Company’s consulting agreements typically have provisions for hourly billing, non-disclosure of confidential information, and the assignment to the Company of any inventions developed within the scope of services to the Company. The consulting and scientific advisory agreements are typically terminable by either party on 30 days or shorter notice. These consultants and scientific advisors are not the Company’s employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to the Company. The Company will have only limited control over the activities of these consultants and scientific advisors and can generally expect these individuals to devote only limited time to the Company’s activities. The Company relies heavily on these consultants to perform critical functions in key areas of its operations. The Company also relies on these consultants to evaluate potential compounds and products, which may be important in developing a long-term product pipeline for the Company. Consultants also assist the Company in preparing and submitting regulatory filings. The Company’s scientific advisors provide scientific and technical guidance on cardiovascular drug discovery and development. The loss of service of any or all of these consultants may further impact our ability to operate or obtain additional financing needed in the near term. Failure of any of these persons to devote sufficient time and resources to the Company’s programs could harm its business. In addition, these advisors may have arrangements with other companies to assist those companies in developing technologies that may compete with the Company’s products.

If the Company’s competitors develop and market products that are more effective than the Company’s product candidates or others it may develop, or obtain regulatory and marketing approval for similar products before the Company does, the Company’s commercial opportunity may be reduced or eliminated.

The development and commercialization of new pharmaceutical products that target cardiovascular and metabolic disease is competitive, and the Company will face competition from numerous sources, including major biotechnology and pharmaceutical companies worldwide. Many of the Company’s competitors have substantially greater financial and technical resources, and development, production and marketing capabilities than the Company does. In addition, many of these companies have more experience than the Company in preclinical testing, clinical trials and manufacturing of compounds, as well as in obtaining FDA and foreign regulatory approvals. The Company will also compete with academic institutions, governmental agencies and private organizations that are conducting research in the same fields. Competition among these entities to recruit and retain highly qualified scientific, technical and professional personnel and consultants is also intense. As a result, there is a risk that one of the competitors of the Company will develop a more effective product for the same indication for which the Company is developing a product or, alternatively, bring a similar product to market before the Company can do so. Failure of the Company to successfully compete will adversely impact the ability to raise additional capital and continue operations.

The Company may be subject to damages resulting from claims that the Company or its employees, have wrongfully used or disclosed alleged trade secrets of its employees’ former employers.

Many of the Company’s employees were previously employed at biotechnology or pharmaceutical companies, including the Company’s competitors or potential competitors. Although the Company has not received any claim to date, it may be subject to claims that these employees or the Company have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of such employees’ former employers. Litigation may be necessary to defend against these claims. If the Company fails in defending such claims, in addition to paying monetary damages, the Company may lose valuable intellectual property rights or personnel or may be unsuccessful in identifying, developing or commercializing current or future products.

Risks Related to the Company’s Intellectual Property

The Company’s failure to protect adequately or to enforce its intellectual property rights or secure rights to third party patents could materially harm its proprietary position in the marketplace or prevent the commercialization of its products.

The Company’s success will depend in large part on its ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into its technologies and products. The patents and patent applications in the Company’s existing patent portfolio are either owned by the Company or licensed to the Company. The Company’s ability to protect its product candidates from unauthorized use or infringement by third parties depends substantially on its ability to obtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering pharmaceutical inventions and the scope of claims made under these patents, the Company’s ability to obtain and enforce patents is uncertain and involves complex legal and factual questions for which important legal principles are unresolved.

The Company may not be able to obtain patent rights on products, treatment methods or manufacturing processes that it may develop or to which the Company may obtain license or other rights. Even if the Company does obtain patents, rights under any issued patents may not provide it with sufficient protection for the Company’s product candidates or provide sufficient protection to afford the Company a commercial advantage against its competitors or their competitive products or processes. It is possible that no patents will be issued from any pending or future patent applications owned by the Company or licensed to the Company. Others may challenge, seek to invalidate, infringe or circumvent any patents the Company owns or licenses. Alternatively, the Company may in the future be required to initiate litigation against third parties to enforce its intellectual property rights. The cost of this litigation could be substantial and the Company’s efforts could be unsuccessful. Changes in patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of the Company’s intellectual property or narrow the scope of the Company’s patent protection.

The Company’s patents also may not afford protection against competitors with similar technology. The Company may not have identified all patents, published applications or published literature that affect its business either by blocking the Company’s ability to commercialize its product candidates, by preventing the patentability of its products or by covering the same or similar technologies that may affect the Company’s ability to market or license its product candidates. For example, patent applications filed with the United States Patent and Trademark Office (“USPTO”) are maintained in confidence for up to 18 months after their filing. In some cases, however, patent applications filed with the USPTO remain confidential for the entire time prior to issuance as a U.S. patent. Patent applications filed in countries outside the United States are not typically published until at least 18 months from their first filing date. Similarly, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Therefore, the Company or its licensors might not have been the first to invent, or the first to file, patent applications on the Company’s product candidates or for their use. The laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as in the United States and many companies have encountered significant difficulties in protecting and defending these rights in foreign jurisdictions. If the Company encounters such difficulties in protecting or is otherwise precluded from effectively protecting its intellectual property rights in either the United States or foreign jurisdictions, the Company’s business prospects could be substantially harmed.

Because VIA-2291 is exclusively licensed from Abbott and the Metabolic Compounds are exclusively licensed from Roche, any dispute with Abbott or Roche, respectively, may materially harm the Company’s ability to develop and commercialize VIA-2291 or the Metabolic Compounds, as applicable.

In August 2005, the Company licensed exclusive worldwide rights to its product candidate, VIA-2291, from Abbott (the “Abbott License”) and in 2008, Company entered into two license agreements (the “Roche Licenses”) with Roche to develop and commercialize the Metabolic Compounds. The Company does not have, nor has the Company ever had, any material disputes with Abbott or Roche regarding the Abbott License or the Roche Licenses. However, if there is any future dispute between the Company and Abbott regarding the parties’ rights under the Abbott License agreement, the Company’s ability to develop and commercialize VIA-2291 may be materially harmed. Any uncured, material breach under the Abbott License could result in the Company’s loss of exclusive rights to VIA-2291 and may lead to a complete termination of the Abbott License and force the Company to cease product development efforts for VIA-2291. Similarly, if there is any future dispute between the Company and Roche regarding the parties’ rights under the Roche License agreements, the Company’s ability to develop and commercialize the Metabolic Compounds may be materially harmed. Any uncured, material breach under the Roche License agreements could result in the Company’s loss of exclusive rights to Metabolic Compounds and may lead to a complete termination of the Roche License agreements and force the Company to cease product development efforts for the Metabolic Compounds.

If Abbott or Roche elect to maintain or enforce proprietary rights under the Abbott License or the Roche Licenses, respectively, the Company will depend on Abbott or Roche, as applicable, for the maintenance and enforcement of certain intellectual property rights and will have limited control, if any, over the amount or timing of resources that Abbott or Roche devote on the Company’s behalf.

The Company depends on Abbott to protect certain proprietary rights covering VIA-2291 and Roche to protect certain proprietary rights covering THR beta agonist (the “VIA Rights”) pursuant to the terms of the Abbott License and the Roche Licenses, respectively. Abbott and Roche are responsible for maintaining certain issued patents and prosecuting certain patent applications. Abbott and Roche are also responsible for seeking to obtain all available extensions or restorations of the VIA Rights. Although the Company has limited, if any, control over the amount or timing of resources that Abbott or Roche devote or the priority they place on maintaining these certain patent rights to the Company’s advantage, the Company expects Abbott and Roche to comply with its respective obligations pursuant to the Abbott License and the Roche Licenses and devote resources accordingly. However, if Abbott or Roche decide to no longer maintain any of the patents licensed under the Abbott License or the Roche Licenses, they are required to afford the Company the opportunity to do so at the Company’s expense. If Abbott or Roche elect not to maintain any of these certain licensed patents and if the Company does not assume the maintenance of these certain licensed patents in sufficient time to make required payments or filings with the appropriate governmental agencies, the Company risks losing the benefit of all or some of the VIA Rights.

While the Company currently intends to take actions reasonably necessary to enforce its patent rights, such enforcement depends, in part, on Abbott and Roche, respectively, to protect the VIA Rights. Abbott and Roche each have the first right to bring and pursue a third-party infringement action related to the VIA Rights. The Company has the right to cooperate with Abbott and Roche in third-party infringement suits involving the VIA Rights. If Abbott or Roche decline to prosecute a claim, the Company will have the right but not the obligation to bring suit and/or pursue any such infringement action as it determines, in its discretion, to be appropriate.

Abbott, Roche, and the Company may also be notified of alleged infringement and be sued for infringement of third-party patents or other proprietary rights related to the VIA Rights. Abbott has the right but not the obligation to defend and control the defense of an alleged third-party patent infringement claim or suit asserting that VIA-2291 infringes third-party patent rights directed to the composition of matter or the use of VIA-2291 in the treatment and/or prevention of diseases in humans, if Abbott is made a party to such suit. If Abbott so elects, the Company may have limited, if any, control or involvement over the defense of these claims, and Abbott and the Company could be subject to injunctions and temporary or permanent exclusionary orders in the United States or other countries. The Company has the sole responsibility to defend and control the defense of all other claims of infringement by a third party. If Abbott elects not to defend a claim it has the first right to defend against, or if the claim is one that the Company has the responsibility to defend against, Abbott is required to reasonably assist the Company in its defense. Roche has the right but not the obligation to defend and control the defense of an alleged third-party patent infringement claim or suit against the Metabolic Compounds in which the Company has indemnification rights under the Roche Licenses. The Company has limited, if any, control over the amount or timing of resources, if any, that Abbott or Roche devote, or the priority Abbott or Roche place on the defense of such third-party claims of infringement.

If the Company fails to comply with its obligations and meet certain milestones related to its intellectual property licenses with third parties, the Company could lose license rights that are important to its business.

The Company’s commercial success depends on not infringing the patents and proprietary rights of other parties and not breaching any collaboration, license or other agreements that the Company has entered into with regard to its technologies and product candidates. For example, the Company entered into a license agreement with Abbott pursuant to which the Company is required to use commercially reasonable efforts, at its own expense, to (a) initiate and complete the clinical development of VIA-2291, (b) obtain all required regulatory approvals in major markets, and (c) obtain and carry out subsequent worldwide marketing, distribution and sale of VIA-2291 in such major markets. Prior to the first commercial sale of VIA-2291, the Company is required to furnish Abbott with an annual written report summarizing the progress of its efforts to implement the preclinical/clinical development plan.

In December 2008, the Company entered into the Roche Licenses to develop and commercialize the Metabolic Compounds. The Company must use commercially reasonable efforts to conduct preclinical, clinical and commercial development programs for products containing the Metabolic Compounds. If the Company has not completed a Phase I clinical trial with respect to a lead product containing the THR beta agonist compound by January 5, 2012, the Company either must commit to developing another of Roche’s compounds or Roche may terminate the license for that compound. If the Company determines that it is not reasonable to continue clinical trials or other development of the compounds, it may elect to cease further development and Roche may terminate the licenses. If the Company determines not to pursue the development or commercialization of the compounds in the United States, Japan, the United Kingdom, Germany, France, Spain or Italy, Roche may terminate the licenses solely for such territories.

Third parties may own or control intellectual property that the Company may infringe.

If a third party asserts that the Company infringes such third party’s patents, copyrights, trademarks, trade secrets or other proprietary rights, the Company could face a number of issues that could seriously harm the Company’s competitive position, including:

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infringement and other intellectual property claims, which would be costly and time-consuming to litigate, whether or not the claims have merit, and which could delay the regulatory approval process and divert management’s attention from the Company’s business;

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substantial damages for past infringement, which the Company may have to pay if a court determines that the Company has infringed a third party’s patents, copyrights, trademarks, trade secrets or other proprietary rights;

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a court prohibiting the Company from selling or licensing its technologies or future products unless such third party licenses its patents, copyrights, trademarks, trade secrets or other proprietary rights to the Company, which it is not required to do; and

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if a license is available from a third party, the requirement that the Company pay substantial royalties or grant cross licenses to its patents, copyrights, trademarks, trade secrets or other proprietary rights.

The Company’s commercial success will depend in part on its ability to manufacture, use, sell and offer to sell its products without infringing patents or other proprietary rights of others.

The Company may not be aware of all patents or patent applications that potentially impact its ability to manufacture (or have manufactured by a third party), use or sell any of its product candidates or proposed product candidates. For example, patent applications are filed with the USPTO but not published until 18 months after their effective filing date. Further, the Company may not be aware of published or granted conflicting patent rights. Any conflicts resulting from other patent applications and patents of third parties could significantly reduce the coverage of the Company’s patents and limit the Company’s ability to obtain meaningful patent protection. If others obtain patents with conflicting claims, the Company may be required to obtain licenses to these patents or to develop or obtain alternative technology. The Company may not be able to obtain any licenses or other rights to patents, technology or know-how necessary to conduct the Company’s business. Any failure to obtain such licenses or other rights could delay or prevent the Company from developing or commercializing its product candidates and proposed product candidates, which could materially affect the Company’s business.

Additionally, litigation or patent interference proceedings may be necessary to enforce any of the Company’s patents or other proprietary rights, or to determine the scope and validity or enforceability of the proprietary rights of others. The defense and prosecution of patent and intellectual property claims are both costly and time consuming, even if the outcome is favorable to the Company. Any adverse outcome could subject the Company to significant liabilities, require the Company to license disputed rights from others, or require the Company to cease selling its future products.

Risks Related to the Company’s Industry

The Company’s product candidates are subject to extensive regulation, which can be costly and time-consuming, cause unanticipated delays or prevent the receipt of the required approvals to commercialize such product candidates.

The Company is subject to extensive and rigorous government regulation in the United States and foreign countries. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in foreign jurisdictions, which regulations differ from jurisdiction to jurisdiction. The Company will not be permitted to market its product candidates in the United States until it receives approval of an NDA from the FDA, or in any foreign jurisdiction until the Company receives the requisite approval from the applicable regulatory authorities in such jurisdiction. The Company has not submitted an NDA or received marketing approval for VIA-2291 or any of its other product candidates in the United States or any foreign jurisdiction. Obtaining approval of an NDA is a lengthy, expensive and uncertain process. The FDA also has substantial discretion in the drug approval process, including the ability to delay, limit, condition or deny approval of a product candidate for many reasons. For example:

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the FDA may not deem a product candidate safe and effective;

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the FDA may not find the data from preclinical studies and clinical trials sufficient to support approval;

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the FDA may not approve of the Company’s third-party manufacturers’ processes and facilities;

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the FDA may change its approval policies or adopt new regulations; or

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the FDA may condition approval on additional clinical studies, including post-approval clinical studies.

These requirements vary widely from jurisdiction to jurisdiction and make it difficult to estimate when the Company’s product candidates will be commercially available, if at all. If the Company is delayed or fails to obtain required approvals for its product candidates, the Company’s operations and financial condition would be damaged.

The process of obtaining these approvals is expensive, often takes many years, and can vary substantially based upon the type, complexity and novelty of the products involved. Approval policies or regulatory requirements may change in the future and may require the Company to resubmit its clinical trial protocols to institutional review boards for re-examination, which may impact the costs, timing or successful completion of a clinical trial. In addition, although members of the Company’s management have drug development and regulatory experience, as a company, it has not previously filed the applications necessary to gain regulatory approvals for any product. This lack of experience may impede the Company’s ability to obtain regulatory approval in a timely manner, if at all, for its product candidates for which development and commercialization is the Company’s responsibility. The Company will not be able to commercialize its product candidates in the United States until it obtains FDA approval and in other jurisdictions until it obtains approval by comparable governmental authorities. Any delay in obtaining, or inability to obtain, these approvals would prevent the Company from commercializing its product candidates and the Company’s ability to generate revenue will be delayed.

Even if any of the Company’s product candidates receives regulatory approval, it may still face future development and regulatory difficulties.

Even if U.S. regulatory approval is obtained, the FDA may still impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies. The Company’s product candidates will also be subject to ongoing FDA requirements governing the labeling, packaging, storage, advertising, promotion, recordkeeping and submission of safety and other post-marketing information. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current good manufacturing practices. If the Company or a regulatory agency discovers problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturer or the Company, including requiring withdrawal of the product from the market or suspension of manufacturing. If the Company or the manufacturing facilities for the Company’s product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:

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issue warning letters or untitled letters;

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impose civil or criminal penalties;

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suspend regulatory approval;

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suspend any ongoing clinical trials;

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refuse to approve pending applications or supplements to approved applications filed by the Company or its collaborators;

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impose restrictions on operations, including costly new manufacturing requirements; or

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seize or detain products or require a product recall.

The FDA and other regulatory agencies actively enforce regulations prohibiting the promotion of a drug for a use that has not been cleared or approved by the FDA. Use of a drug outside its cleared or approved indications is known as “off-label” use. Physicians may use the Company’s products for off-label uses, as the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine. However, if the FDA or another regulatory agency determines that the Company’s promotional materials or training constitutes promotion of an off-label use; it could request that the Company modify its training or promotional materials or subject the Company to regulatory enforcement actions, including the issuance of a warning letter, injunction, seizure, civil fine and criminal penalties.

In order to market any products outside of the United States, the Company and its collaborators must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Approval procedures vary among jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other jurisdictions might differ from that required to obtain FDA approval. The regulatory approval process in other jurisdictions may include all of the risks detailed above regarding FDA approval in the United States. Regulatory approval in one jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one jurisdiction may negatively impact the regulatory process in others. Failure to obtain regulatory approval in other jurisdictions or any delay or setback in obtaining such approval could have the same adverse effects described above regarding FDA approval in the United States, including the risk that product candidates may not be approved for all indications requested, which could limit the uses of product candidates and adversely impact potential royalties and product sales, and that such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-approval follow-up studies.

If the Company or any of its manufacturers or other partners fails to comply with applicable foreign regulatory requirements, the Company and such other parties may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Legislative or regulatory reform of the healthcare system may affect the Company’s ability to sell its products profitably.

In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system in ways that could impact upon the Company’s ability to sell its products profitably. In recent years, new legislation has been enacted in the United States at the federal and state levels that effects major changes in the healthcare system, either nationally or at the state level. These new laws include a prescription drug benefit for Medicare beneficiaries and certain changes in Medicare reimbursement. Given the recent enactment of these laws, it is still too early to determine their impact on the biotechnology and pharmaceutical industries and the Company’s business. Further, federal and state proposals are likely. More recently, administrative proposals are pending and others have become effective that would change the method for calculating the reimbursement of certain drugs. The adoption of these proposals and pending proposals may affect the Company’s ability to raise capital, obtain additional collaborators or profitably market its products. Such proposals may reduce the Company’s revenues, increase its expenses or limit the markets for its products. In particular, the Company expects to experience pricing pressures in connection with the sale of its products due to the trend toward managed health care, the increasing influence of health maintenance organizations and additional legislative proposals.

Risks Related to the Securities Market and Ownership of the Company’s Common Stock

Our common stock has been delisted from the NASDAQ Capital Market and is not listed on any other national securities exchange. It will likely be more difficult for stockholders and investors to sell our common stock or to obtain accurate quotations of the share price of our common stock.

On December 29, 2009, the Company received written notice from the listing qualifications staff of the NASDAQ Stock Market informing the Company that trading of the Company’s common stock would be suspended from the NASDAQ Capital Market prior to the open of business on January 4, 2010 and that NASDAQ would initiate procedures to delist the Company’s common stock. The Company had notified NASDAQ on December 23, 2009 that the Company would be unable to comply with NASDAQ listing rule 5550(b), which requires a minimum stockholders’ equity requirement of $2.5 million, and NASDAQ listing rule 5605, which requires, among other things, that the Company’s board of directors be comprised of at least a majority of independent directors and that the Company’s audit committee be comprised of at least three independent directors. The Company’s common stock is currently traded on the Pink Sheets, a real-time inter-dealer electronic quotation and trading system in the over-the-counter securities market.

The trading of our common stock on the Pink Sheets entails certain risks. Stocks trading on the over-the-counter market are typically less liquid than stocks that trade on a national securities exchange such as the NASDAQ Capital Market. Liquidity may be impaired not only in the number of shares that are bought and sold, but also through delays in the timing of transactions, and coverage by security analysts and the news media, if any, of the Company. Trading on the over-the-counter market may also negatively impact the market price of our common stock, the number of institutional and other investors that will consider investing in our common stock, the availability of information concerning the trading prices and volume of our common stock, and the number of broker-dealers willing to execute trades in shares of our common stock. In addition, the trading of our common stock on the Pink Sheets may materially and adversely affect our access to the capital markets, and the limited liquidity and reduced price of our common stock could materially and adversely affect our ability to raise capital through alternative financing sources on favorable terms or at all. Trading of securities on an over-the-counter securities market is often more sporadic than the trading of securities listed on a national exchange. The decreased liquidity of securities traded on the Pink Sheets may make it more difficult for holders of the Company’s common stock to sell their securities. There can be no assurance that we will be able to re-list our common stock on a national securities exchange in the future or that our common stock will continue to be traded on the Pink Sheets or any trading market.

The Company’s operating results and stock price may fluctuate significantly.

The Company’s results of operations may be expected to be subject to quarterly fluctuations. The Company’s level of revenues, if any, and results of operations at any given time, will be based primarily on the following factors:

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the Company’s ability to obtain additional financing and the terms of such financing;

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the Company’s ability to operate its business following the restructuring, as described in “Other Information” in Part II, Item 9B and in Note 12 in the Notes to the Financial Statements;

•

the status of development of VIA-2291, the Metabolic Compounds, and any other product candidates;

•

whether or not the Company enters into development and license agreements with strategic partners that provide for payments to the Company, and the timing and accounting treatment of payments to the Company, if any, under those agreements;

•

whether or not the Company achieves specified development or commercialization milestones under any agreement that the Company enters into with collaborators and the timely payment by commercial collaborators of any amounts payable to the Company;

•

the addition or termination of research programs or funding support;

•

the timing of milestone and other payments that the Company may be required to make to others; and

•

variations in the level of expenses related to the Company’s product candidates or potential product candidates during any given period.

These factors may cause the price of the Company’s stock to fluctuate substantially. Additionally, global market and economic conditions have been, and continue to be, disrupted and volatile. The Company believes that quarterly comparisons of its financial results are not necessarily meaningful and should not be relied upon as an indication of the Company’s future performance.

The Company’s stock price could decline significantly based on the results and timing of its clinical trials.

The Company may not be successful in completing the analysis of the FDG-PET clinical trial or commencing or completing further clinical trials to demonstrate the efficacy of VIA-2291 on the currently projected timetable, if at all. The Company anticipates results from the FDG-PET Phase 2 clinical trial in the first half of 2010. Biotechnology and pharmaceutical company stock prices have declined significantly when clinical trial results were unfavorable or perceived negatively, or when clinical trials were delayed or otherwise did not meet expectations. Failure to initiate or delays in the Company’s clinical trials of any of its product candidates or unfavorable results or negative perceptions regarding the results of any such clinical trials, could cause the Company’s stock price to decline significantly.

Bay City Capital, the Company’s principal stockholder, has significant influence over the Company, and the interests of the Company’s other stockholders may conflict with the interests of Bay City Capital.

Bay City Capital, the Company’s principal stockholder, currently claims beneficial ownership of approximately 90% of the Company’s common stock and holds a security interest in all of the Company’s assets, including its intellectual property, as a Lender under the March 2009 Loan and March 2010 Loan. As a result, Bay City Capital, as a stockholder and a secured lender, is able to exert significant influence over the Company’s management and affairs, including any financing transactions, and matters requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of the Company’s assets, and any other significant corporate transaction. The interests of Bay City Capital, may not always coincide with the interests of the Company or its other stockholders. For example, Bay City Capital could delay or prevent a change of control of the Company even if such a change of control would benefit the Company’s other stockholders. The significant concentration of stock ownership may adversely affect the trading price of the Company’s common stock due to investors’ perception that conflicts of interest may exist or arise.

A significant portion of the Company’s outstanding common stock may be sold into the market in the future. Substantial sales of the Company’s common stock, or the perception that such sales are likely to occur, could cause the price of the Company’s common stock to decline.

In August 2007 and December 2007, the Company also filed Form S-8 registration statements covering the resale of the shares of common stock underlying options granted to the Company’s employees, directors and consultants pursuant to stock incentive plans and shares of common stock that it may issue in the future under these plans. In March 2008 and 2009, the Company filed Form S-8 registration statements covering the issuance of up to 500,000 additional shares of common stock, respectively, that the Company may issue in the future to employees, directors and consultants pursuant to the VIA Pharmaceuticals, Inc. 2007 Incentive Award Plan. In March 2009, the Company issued to the Lenders warrants to purchase an aggregate of 83,333,333 shares of common stock of the Company at $0.12 per share. In accordance with the terms of the warrant, the Company entered into a registration rights agreement with the Lenders and certain stockholders of the Company, pursuant to which the Company has granted certain demand, shelf and “piggyback” registration rights to register their shares (including shares underlying the warrants) with the SEC so that such shares become freely tradeable without restriction under the Securities Act of 1933, as amended. As described in “Other Information” in Part II, Item 9B and in Note 12 in the Notes to the Financial Statements, in March 2010, the Company issued to the Lenders warrants to purchase an aggregate of 17,647,059 shares of common stock of the Company at $0.17 per share (of which 7,352,941 are vested as of March 29, 2010). In accordance with the terms of the warrant, the Company amended the registration rights agreement to include the shares underlying these warrants as well. Once registered, shares of the Company’s common stock generally can be freely sold in the public market upon issuance. Sales of a large number of these shares in the public market, or the perception that such sales are likely to occur, could cause the price of the Company’s common stock to decline and could make it more difficult for the Company to raise additional financing due to the additional overhang represented by these registered and to-be registered shares of common stock.

Our change of control agreements with our named executive officers may require us to pay severance benefits to any of those persons who are terminated in connection with a change of control of the Company.

All of our named executive officers are parties to change of control agreements providing for the payment of severance benefits and acceleration of vesting stock options in the event of a termination of employment in connection with a change of control of the Company. Accelerated vesting of options could result in dilution to our existing stockholders and harm the market price of our common stock. The payment of these severance benefits could harm our financial condition and results. In addition, these potential severance payments under these agreements may discourage or prevent third parties from seeking a business combination with the Company.

As a “smaller reporting company,” the Company has not been subject to the full requirements of Section 404 of the Sarbanes-Oxley Act of 2002. If the Company is unable to favorably assess the effectiveness of its internal controls over financial reporting, or if, beginning the year ending December 31, 2010, the Company’s independent registered public accounting firm is unable to provide an unqualified attestation report on the Company’s assessment, the price of the Company’s common stock could be adversely affected.

Pursuant to Section 404 of SOX, the Company’s management is required to report on the effectiveness of its internal control over financial reporting as of December 31, 2009 in this Annual Report on Form 10-K for the fiscal year ending December 31, 2009, and the Company’s independent auditor will be required to attest to the effectiveness of the Company’s internal control over financial reporting, as of June 15, 2010, in its Annual Report on Form 10-K for the fiscal year ending December 31, 2010. As a “smaller reporting company,” the Company has not been subject to the full requirements of Section 404 of SOX. During 2007, the Company installed systems of internal accounting and administrative controls it believes are needed to comply with Section 404 of SOX. Testing of systems installed was performed to enable management to report on the effectiveness of the controls as of December 31, 2009. While management did not identify any material weaknesses in the Company’s internal control over financial reporting, there can be no assurance that the systems will be deemed effective when the Company’s independent auditor reviews the systems during 2010, and tests transactions. In addition, any updates to the Company’s finance and accounting systems, procedures and controls, which may be required as a result of the Company’s ongoing analysis of its internal controls, or results of testing by the Company or its independent auditor, may require significant time and expense. If the Company fails to have effective internal control over financial reporting, is unable to complete any necessary modifications to its internal control reporting, or if the Company’s independent registered public accounting firm is unable to provide the Company with an unqualified report as to the effectiveness of its internal control over financial reporting, investors could lose confidence in the accuracy and completeness of the Company’s financial reports and in the reliability of the Company’s internal control over financial reporting, which could lead to a substantial price decline in the Company’s common stock.

The stock price of the Company’s common stock is likely to be volatile and you may lose all, or a substantial portion, of your investment.

The trading price of the Company’s common stock has been and is likely to continue to be volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond the Company’s control including, among others, lack of trading volume in the Company’s stock, concentration of stock ownership by Bay City Capital, the Company’s ability to pursue preclinical and clinical development of the Metabolic Compounds, market perception of the results of the Company’s clinical trials, the Company’s ability to control its operating expenses, the Company’s ability to recruit and enroll patients in potential future clinical trials for VIA-2291, the Company’s ability to acquire new compounds for the pipeline, and in particular, the Company’s ability to obtain necessary financing in the near term and successfully enter into collaborative or strategic arrangements in the long-term. In addition, global market and economic conditions have been, and continue to be, disrupted and volatile. Continued concerns about the systemic impact of potential long-term and wide-spread recession, energy costs, geopolitical issues, the availability and cost of credit, and the global housing and mortgage markets have contributed to increased market volatility and diminished expectations for western and emerging economies. The stock market in general, and the market for biotechnology and development-stage pharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These broad market and industry factors have seriously harmed and may continue to harm the market price of the Company’s common stock, regardless of the Company’s actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against the Company, could result in substantial costs and a diversion of management’s attention and resources.

The Company has never paid cash dividends on its common stock, and the Company does not anticipate that it will pay any cash dividends on its common stock in the foreseeable future.

The Company has never declared or paid cash dividends on its common stock. In addition, the payment of cash dividends is restricted by the covenants in the Company’s loan from the Lenders. The Company does not anticipate that it will pay any cash dividends on its common stock in the foreseeable future. The Company intends to retain all available funds and any future earnings to fund the development and growth of its business. Any future determination to pay dividends will be at the discretion of the Company’s board of directors and will depend on the Company’s financial condition, results of operations, capital requirements, restrictions contained in current or future financing instruments and such other factors as the Company’s board of directors deems relevant. As a result, capital appreciation, if any, of the Company’s common stock will be your sole source of gain for the foreseeable future.

ITEM 2. PROPERTIES

The Company leases its principal executive offices in San Francisco, California, which consist of approximately 8,180 square feet. This lease expires on May 31, 2013. The Company also leases approximately 4,979 square feet in Princeton, New Jersey, where its Senior Vice President, Research and Development, is located. This lease expires on April 2, 2012. The Company believes that its current facilities are adequate for its needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

The Company is currently not a party to any material legal proceedings.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is currently traded on the Pink Sheets, a real-time inter-dealer electronic quotation and trading system in the over-the-counter securities market, under the symbol “VIAP”. Prior to January 4, 2010, our common stock was traded on The NASDAQ Capital Market under the same ticker symbol. Effective January 4, 2010, trading in our common stock on The NASDAQ Capital Market was suspended and NASDAQ has initiated procedures to delist our common stock. As of March 15, 2010, there were approximately 115 registered holders of record of common stock.

The following table shows the high and low sales prices for our common stock on The NASDAQ Capital Market during the fiscal year ended 2008 and 2009, respectively:

		High				Low
FISCAL YEAR ENDED December 31, 2008:
First Quarter		$	3.20			$	2.11
Second Quarter		$	3.20			$	1.90
Third Quarter		$	2.23			$	0.67
Fourth Quarter		$	1.60			$	0.11
FISCAL YEAR ENDED December 31, 2009:
First Quarter		$	0.25			$	0.08
Second Quarter		$	0.84			$	0.15
Third Quarter		$	0.74			$	0.21
Fourth Quarter		$	0.60			$	0.20

Dividend Policy

We have never paid any cash dividends on our common stock to date. We currently anticipate that we will retain all future earnings, if any, to fund the development and growth of our business and do not anticipate paying any cash dividends for at least the next five years, if ever.

ITEM 6. SELECTED FINANCIAL DATA

The information set forth below should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this report. On June 5, 2007, Corautus completed the Merger with privately-held VIA Pharmaceuticals, Inc. pursuant to which Resurgens Merger Corp., a wholly-owned subsidiary of Corautus, merged with and into privately-held VIA Pharmaceuticals, Inc., with privately-held VIA Pharmaceuticals, Inc. continuing as the surviving corporation and as a wholly-owned subsidiary of Corautus. Immediately following the effectiveness of the Merger, privately-held VIA Pharmaceuticals, Inc. then merged with and into Corautus, pursuant to which Corautus continued as the surviving corporation. For accounting purposes, privately-held VIA Pharmaceuticals, Inc. was considered to be the acquiring company in the Merger, and the Merger was accounted for as a reverse acquisition of assets under the purchase method of accounting for business combinations in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In connection with the Merger, the name of the business was changed from “Corautus Genetics Inc.” to “VIA Pharmaceuticals, Inc.” and retroactively restated its authorized, issued and outstanding shares of common and preferred stock to reflect a 1 to 15 reverse common stock split. The financial data included in this report reflect the historical results of privately-held VIA Pharmaceuticals, Inc. prior to the Merger and that of the combined company following the Merger. The historical results are not necessarily indicative of results to be expected in any future period.

																						Period from
																						June 14, 2004
																						(Date of
		Years Ended December 31,																				Inception) to
(In whole dollars)		2009				2008				2007				2006				2005				Dec 31, 2009
Revenue		$	—			$	—			$	—			$	—			$	—			$	—
Loss from continuing operations			(20,978,324	)			(20,274,828	)			(21,835,382	)			(8,626,887	)			(8,804,220	)			(81,604,565	)
Loss from continuing operations per common share			(1.05	)			(1.03	)			(2.24	)			(19.81	)			(21.63	)			—
Total assets			2,556,094				5,000,803				24,484,941				3,726,420				686,856				—
Long-term obligations			37,450				30,637				3,980				6,827				4,946				—
Cash dividends declared per common share			—				—				—				—				—				—

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition contains certain statements that are not strictly historical and are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a high degree of risk and uncertainty. Our actual results may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in our operations, development efforts and business environment, including those set forth under the Section entitled “Risk Factors” in Item 1A, and other documents we file with the Securities and Exchange Commission. All forward-looking statements included in this report are based on information available to us as of the date hereof, and, unless required by law, we assume no obligation to update any such forward-looking statement.

Management Overview

VIA Pharmaceuticals, Inc., incorporated in Delaware in June 2004 and headquartered in San Francisco, California, is a development stage biotechnology company focused on the development of compounds for the treatment of cardiovascular and metabolic disease. The Company is building a pipeline of small molecule drugs that target the underlying causes of cardiovascular and metabolic disease, including atherosclerotic plaque inflammation, high cholesterol, high triglycerides and insulin sensitization/diabetes.

During 2005, the Company in-licensed a small molecule compound, VIA-2291, which targets an unmet medical need of reducing atherosclerotic plaque inflammation, an underlying cause of atherosclerosis and its complications, including heart attack and stroke. Atherosclerosis, depending on its severity and the location of the artery it affects, may result in major adverse cardiovascular events (“MACE”), such as heart attack and stroke. During 2006, the Company initiated two Phase 2 clinical trials of VIA-2291 in patients undergoing a carotid endarterectomy (“CEA”), and in patients at risk for acute coronary syndrome (“ACS”). During 2007, the Company initiated a third Phase 2 clinical trial where ACS patients undergo Positron Emission Tomography with flurodeoxyglucose tracer (“FDG-PET”), a non-invasive imaging technique to measure the effect of treatment of VIA-2291 on atherosclerotic plaque inflammation.

On November 9, 2008, the Company announced the results of its ACS and CEA Phase 2 clinical trials of its lead product candidate, VIA-2291, at the American Heart Association (“AHA”) 2008 Scientific Sessions conference in New Orleans, Louisiana (the “AHA Conference”). The Company completed enrollment of 52 patients in the FDG-PET Phase 2 clinical trial in May 2009, and results of the trial are expected in the first half of 2010.

On May 1, 2009, the Company announced results of a sub-study of the ACS Phase 2 clinical trial of VIA-2291 at the AHA Arteriosclerosis, Thrombosis and Vascular Biology Annual Conference 2009 in Washington D.C. The Company found that in 64 slice multi-detector computed tomography (“MDCT”) scans of patients with low density plaques demonstrated statistically significant, lower plaque volumes in combined VIA-2291 treated groups compared to placebo. Together these results suggest that VIA-2291 may reduce the progression of unstable coronary plaques that lead to heart attacks and stroke.

On May 14, 2009, the Company announced it had completed patient enrollment in the FDG-PET Phase 2 clinical trial. On December 3, 2009, the Company announced the last patient clinical visit. The Company expects to report results in the first half of 2010.

In 2008, the Company expanded its drug development pipeline with preclinical compounds that target additional underlying causes of cardiovascular and metabolic disease, including high cholesterol, high triglycerides and insulin sensitization/diabetes. The Company’s clinical development strategy integrates several technologies to provide clinical proof-of-concept as early as possible in the clinical development process. These technologies include the measurement of biomarkers (specific biochemicals in the body with a particular molecular feature that makes them useful for measuring the progress of a disease or the effects of treatment), medical imaging of the coronary and carotid vessel walls to evaluate the plaque characteristics, and atherosclerotic plaque bioassays (measurements of indicators of atherosclerotic plaque inflammation believed to promote MACE). Once the Company has established proof-of-concept, the Company plans to consider business collaborations with larger biotechnology or pharmaceutical companies for the late-stage clinical development and commercialization of its compounds.

Background

In March 2005, the Company entered into an exclusive license agreement (the “Stanford License”) with Leland Stanford Junior University (“Stanford”) to use a comprehensive gene expression database and analysis tool to identify novel, and prioritize known, molecular targets for the treatment of vascular inflammation and to study the impact of candidate therapeutic interventions on the molecular mechanisms underlying atherosclerosis (the “Stanford Platform”). One of the Company’s founders, Thomas Quertermous, M.D., developed the Stanford Platform at Stanford during the course of a four-year, $30.0 million research study (the “Stanford Study”). The Stanford Study initially utilized human tissue samples made available from the Stanford heart transplant program to characterize human plaque at the level of gene expression and identify the inflammatory genes and pathways involved in the development of atherosclerosis and associated complications in humans. To develop the Stanford Platform, the Stanford Study performed similar experiments on vascular tissue samples from mice prone to developing atherosclerosis and identified genes and pathways associated with the development of atherosclerosis that mice and humans have in common (the “Overlap Genes”). The Stanford Platform allowed us to analyze the expression of the Overlap Genes following the administration of candidate drugs to atherosclerotic-prone mice, and thus provided a useful tool for studying the effects of therapeutic intervention in the development of cardiovascular disease. This platform also gave us useful insight into the molecular pathways that we believe to be most relevant to the cardiovascular disease process. In January 2009, the Company advised Stanford that it was terminating its exclusive license agreement effective February 14, 2009.

VIA-2291

In 2005, the Company identified 5-Lipoxygenase (“5LO”) as a key target of interest for treating atherosclerosis. 5LO is a key enzyme in the biosynthesis of leukotrienes, which are important mediators of inflammation and are involved in the development and progression of atherosclerosis. In addition, cardiovascular-related literature has also identified 5LO as a key target of interest for treating atherosclerosis and preventing heart attack and stroke. Following such identification, the Company identified a number of late-stage 5LO inhibitors that had been in clinical trials conducted by large biotechnology and pharmaceutical companies primarily for non-cardiovascular indications, including ABT-761, a compound developed by Abbott Laboratories (“Abbott”) for use in treatment of asthma. Abbott abandoned its ABT-761 clinical program in 1996 after the U.S. Food and Drug Administration (“FDA”) approved a similar Abbott compound for use in asthma patients. Abbott made no further developments to ABT-761 from 1996 to 2005. In August 2005, the Company entered into an exclusive, worldwide license agreement (the “Abbott License”) with Abbott to develop and commercialize ABT-761 for any indication. The Company subsequently renamed the compound VIA-2291.

VIA-2291 is a potent, selective and reversible inhibitor of 5LO that the Company is developing as a once-daily, oral drug to treat inflammation in the blood vessel wall. In March 2006, the Company filed an Investigational New Drug (“IND”) application with the FDA outlining the Company’s Phase 2 clinical program, which initially consisted of two trials for VIA-2291. Each of these clinical trials was initiated during 2006 to study the safety and efficacy of VIA-2291 in patients with existing cardiovascular disease. Using biomarkers of inflammation, medical imaging techniques and bioassays of plaque, the Company is evaluating and determining VIA-2291’s ability to reduce vascular inflammation in atherosclerotic plaque. The Company enrolled 50 patients in a Phase 2 study of VIA-2291 at clinical sites in Italy for patients who had a carotid endarterectomy (“CEA”) procedure. In addition, the Company enrolled 191 patients in a second Phase 2 study at 15 clinical sites in the United States and Canada for patients with acute coronary syndrome (“ACS”) who experienced a recent heart attack.

In October 2007, the Company’s Data Safety Monitoring Board (“DSMB”) performed a review of both safety and efficacy data related to the Company’s CEA and ACS clinical trials to determine the progress in the clinical program and the patient safety of VIA-2291. Based on this review, the DSMB observed a continued acceptable safety profile and evidence of a consistent pharmacological effect of VIA-2291 as would be predicted given its proposed mechanism of action. The DSMB recommended the studies continue as planned.

Following the results of the DSMB review, the Company began enrolling patients in a third Phase 2 clinical trial that utilized Positron Emission Tomography with fluorodeoxyglucose tracer (“FDG-PET”) to measure the impact of VIA-2291 on reducing atherosclerotic plaque inflammation in treated patients. The Company enrolled 52 patients following an acute coronary syndrome event, such as heart attack or stroke, into the 24 week, randomized, double blind, placebo-controlled study, which was run at five clinical sites in the United States and Canada. Endpoints in the study included reduction in atherosclerotic plaque inflammation as measured by serial FDG-PET scans. The last patient visit was reported in December 2009 and completion of data analysis and reporting of clinical trial results are anticipated in the first half of 2010.

As more fully described under Part I, Item 1 “Business — VIA-2291 Clinical Trial Results,” on November 9, 2008, the Company announced the results of its ACS and CEA Phase 2 clinical trials at the AHA conference in New Orleans, Louisiana. In both the ACS trial and the CEA trial, VIA-2291 effectively inhibited production of leukotrienes. The ACS trial met its primary endpoint by demonstrating a significant change from baseline in Leukotriene B4 (“LTB4”) production at all doses tested (p<0.001). The CEA trial missed its primary endpoint of percentage reduction in macrophage inflammatory cells in plaque tissue, but met key secondary endpoints including reduction of high sensitivity C-reactive protein (“hs-CRP”) (p<0.01). VIA-2291 was generally well-tolerated in both trials.

In May 2009, the Company announced results of a sub-study of the ACS Phase 2 clinical trial of VIA-2291 at the AHA Arteriosclerosis, Thrombosis and Vascular Biology Annual Conference 2009 in Washington D.C. The purpose of the sub-study was to evaluate the effect of VIA-2291 25mg, 50mg and 100mg doses relative to placebo from baseline in patients dosed with VIA-2291 for 24 weeks. After completion of the initial 12 weeks of dosing, more than 85 of the 191 total ACS patients continued on to receive an additional 12 weeks of dosing on top of current standard medical care and received a 64 slice MDCT scan at baseline and 24 weeks. Evaluable scans from patients treated with placebo showed significantly more evidence of new plaque lesions from VIA-2291 treated patients. MDCT scans of patients with low density plaques demonstrated statistically significant, lower plaque volumes in combined VIA-2291 treated groups compared to placebo. Together these results suggest that VIA-2291 may reduce the progression of unstable coronary plaques that lead to heart attacks and stroke.

In June 2009, the Company announced that it held an end of Phase 2a meeting with the FDA. The Company reviewed safety and biologic activity data from the VIA-2291 CEA and ACS trials with the FDA and received guidance, including suggestions from the FDA on the Company’s potential Phase 3 trial design.

The Company completed enrollment and last patient clinical visit in the FDG-PET Phase 2 clinical trial and results are expected to be reported in the first half of 2010.

The Company plans to consider business collaborations with large biotechnology or pharmaceutical companies to conduct additional clinical trials required for regulatory approval.

Roche Licensed Assets

In December 2008, the Company entered into two exclusive, worldwide Research, Development and Commercialization agreements with Roche for two sets of compounds that we believe represent novel potential drugs for treatment of cardiovascular and metabolic disease. The first license is for Roche’s THR beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche’s preclinical DGAT1 metabolic disorders program. Under the terms of the agreements, the Company assumes control of all development and commercialization of the compounds, and will own exclusive worldwide rights for all potential indications.

Roche will receive up to $22.8 million in upfront and milestone payments, the majority of which is tied to the achievement of product development and regulatory milestones. In addition, once products containing the compounds are approved for marketing, Roche will receive single-digit royalties based on net sales, subject to certain reductions.

The Company must use commercially reasonable efforts to conduct clinical and commercial development programs for products containing the compounds. Under the license for the THR beta agonist, if the Company has not completed a Phase 1 clinical trial with respect to a lead product containing this compound within three years, then either the Company must commit to developing another of Roche’s compounds or Roche may terminate the license for that compound.

If the Company determines that it is not reasonable to continue clinical trials or other development of the compounds, it may elect to cease further development and Roche may terminate the licenses. If the Company determines not to pursue the development or commercialization of the compounds in the United States, Japan, the United Kingdom, Germany, France, Spain, or Italy, Roche may terminate the licenses for such territories.

The Roche license will expire, unless earlier terminated pursuant to other provisions of the licenses, on the last to occur of (i) the expiration of the last valid claim of a licensed patent covering the manufacture, use or sale of products containing the compounds, or (ii) ten years after the first sale of a product containing the compounds.

The THR beta agonist is an orally administered, small-molecule beta-selective thyroid hormone receptor agonist designed to specifically target receptors in the liver involved in metabolism and cholesterol regulation, and avoid side effects associated with thyroid hormone receptor activation outside the liver. Roche has completed preclinical studies of the THR beta agonist. These studies demonstrated a rapid reduction of non-HDL cholesterol and the drug was shown to be synergistic with statins in animal studies. The Company will investigate the possibility of using the THR beta agonist in combination with statins for the treatment of hypercholesterolemia. In addition, in animal studies insulin sensitization and glucose lowering were observed making this compound a possible treatment of patients with type 2 diabetes in combination with other diabetes medications.

DGAT1 is an enzyme that catalyzes triglyceride synthesis and fat storage. Triglycerides are the principal component of fat, which is the major repository for storage of metabolic energy in the body. Overweight and obese individuals have significantly greater triglyceride levels, making them more prone to diabetes and its associated metabolic complications. DGAT1 inhibitors are believed to be an innovative class of compounds that modify lipid metabolism. In studies of obese animals, DGAT1 inhibitors have been shown to induce weight loss and improve insulin sensitization, glucose tolerance and lipid levels. These observations suggest DGAT1 inhibitors may have the potential to treat obesity, diabetes and dyslipidemia. The Company intends to identify potential clinical candidates from the compounds in this program and determine which compounds may be moved into further preclinical development.

Going Concern

To further expand the Company’s product candidate pipeline, the Company continues to engage in discussions regarding the purchase or license of additional preclinical or clinical compounds that the Company believes may be of interest in treating cardiovascular and metabolic disease.

Through December 31, 2009, the Company has been primarily engaged in developing initial procedures and product technology, recruiting personnel, screening and in-licensing of target compounds, clinical trial activity, and raising capital. The Company is organized and operates as one operating segment.

The Company has incurred losses since inception as it has devoted substantially all of its resources to research and development, including early-stage clinical trials. As of December 31, 2009, the Company’s accumulated deficit was approximately $81.6 million. The Company expects to incur substantial and increasing losses for the next several years as it continues to expend substantial resources seeking to successfully research, develop, manufacture, obtain regulatory approval for, and commercialize its product candidates.

The Company has not generated any revenues to date, and does not expect to generate any revenues from licensing, achievement of milestones or product sales until it is able to commercialize product candidates or execute a collaboration agreement. The Company cannot estimate the actual amounts necessary to successfully complete the successful development and commercialization of its product candidates or whether, or when, it may achieve profitability.

Until the Company can establish profitable operations to finance its cash requirements, the Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to raise substantial additional capital through public or private equity or debt financings, the establishment of credit or other funding facilities, collaborative or other strategic arrangements with corporate sources or other sources of financing, the availability of which cannot be assured. On June 5, 2007, the Company raised $11.1 million through the Merger with Corautus to cover existing obligations and provide operating cash flows. In July 2007, the Company entered into a securities purchase agreement that provided for issuance of 10,288,065 shares of common stock for approximately $25.0 million in gross proceeds. As more fully described in Note 6 in the notes to the financial statements, in March 2009, the Company entered into a Note and Warrant Purchase Agreement (the “Loan Agreement”) with its principal stockholder and one of its affiliates (the “Lenders”) whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million (the “March 2009 Loan”). The Company secured the March 2009 Loan with all of its assets, including the Company’s intellectual property. On March 12, 2009, the Company borrowed the initial $2.0 million available under the Loan Agreement. Subsequently, the Company made $2.0 million borrowings under the Loan Agreement on May 19, 2009, June 29, 2009, August 14, 2009, and the Company borrowed the final $2.0 million available under the Loan Agreement on September 11, 2009. According to the terms of the original Loan Agreement, the debt was due to the Lenders on September 14, 2009. The parties agreed to extend the repayment terms and, as more fully described in Note 12 in the notes to the financial statements, on February 26, 2010, the Lenders agreed to modify the Loan Agreement to further extend the repayment terms to April 1, 2010. The Lenders did not modify the interest rate or offer any concessions in the amended Loan Agreement. The Company had $2.2 million in cash at December 31, 2009. As more fully described in “Other Information” in Part II, Item 9B and in Note 12 in the Notes to the Financial Statements, in March 2010, the Company entered into a Note and Warrant Purchase Agreement (the “2010 Loan Agreement”) with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million (the “March 2010 Loan”). The Company secured the March 2010 Loan with all of its assets, including the Company’s intellectual property. On March 29, 2010, the Company borrowed an initial $1.25 million available under the 2010 Loan Agreement. Management believes that the total amount of cash borrowed under the March 2010 loan, if fully drawn, will enable the Company to meet its current obligations into the third quarter of 2010. Management does not believe that existing cash resources will be sufficient to enable the Company to meet its ongoing working capital requirements for the next twelve months and the Company will need to raise substantial additional funding in the near term to repay amounts owed under the loan, which are due April 1, 2010, and to meet its ongoing working capital requirements. As a result, there are substantial doubts that the Company will be able to continue as a going concern and, therefore, may be unable to realize its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classifications of liabilities that may be necessary should the Company be unable to continue as a going concern.

The Company cannot guarantee to its stockholders that the Company’s efforts to raise additional private or public funding will be successful. If adequate funds are not available in the near term, the Company may be required to:

	•		terminate or delay clinical trials or studies of VIA-2291;
	•		terminate or delay the preclinical development of one or more of its other preclinical candidates;
	•		curtail its licensing activities that are designed to identify molecular targets and small molecules for treating cardiovascular disease;
	•		relinquish rights to product candidates, development programs, or discovery development programs that it may otherwise seek to develop or commercialize on its own; and
	•		delay, reduce the scope of, or eliminate one or more of its research and development programs, or ultimately cease operations.

All outstanding principal and accrued interest under the March 2009 Loan are due on April 1, 2010. The Company will not be able to repay the March 2009 Loan when it becomes due on April 1, 2010. When the Company does not repay the March 2009 Loan at maturity, it will be in default under the March 2009 loan agreement and the Lenders may terminate the March 2009 Loan, demand immediate payment of all amounts borrowed by the Company and take possession of all collateral securing the March 2009 Loan, including our intellectual property rights, which could cause the Company to cease operations.

Revenue

The Company has not generated any revenue to date and does not expect to generate any revenue from licensing, achievement of milestones or product sales until the Company is able to commercialize product candidates or execute a collaboration arrangement.

Research and Development Expenses

The Company is focused on the development of compounds for the treatment of cardiovascular and metabolic disease. The Company completed the ACS and CEA Phase 2 clinical trials for VIA-2291, and has completed enrollment and the last patient visit in the ongoing FDG-PET Phase 2 clinical trial for VIA-2291. In November 2008, the Company announced the results of its ACS and CEA Phase 2 clinical trials at the AHA Conference, and the Company reported results from an MDCT sub-study of its ACS Phase 2 clinical trial in May of 2009. In June 2009, the Company announced that it held an end of Phase 2a meeting with the FDA. The Company reviewed safety and biologic activity data from the VIA-2291 CEA and ACS trials with the FDA and received guidance, including suggestions from the FDA on the Company’s potential Phase 3 trial design. In December 2009, the Company announced its last patient visit and expects to report the results of the FDG-PET Phase 2 clinical trial in the first half of 2010. In addition to the VIA-2291 compound, the Company’s pipeline consists of the THR beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes, and DGAT1, a set of preclinical compounds for the treatment of metabolic disorders and dyslipidemia.

Research and development (“R&D”) expense represented 46% and 58% of total operating expense for the years ended December 31, 2009 and 2008, respectively, and 56% for the period from June 14, 2004 (date of inception) to December 31, 2009. The Company expenses research and development costs as incurred. Research and development expenses are those incurred in identifying, in-licensing, researching, developing and testing product candidates. These expenses primarily consist of the following:

	•		compensation of personnel associated with research and development activities, including consultants, investigators, and contract research organizations (“CROs”);
	•		in-licensing fees;

	•		laboratory supplies and materials;
	•		costs associated with the manufacture of product candidates for preclinical testing and clinical studies;
	•		preclinical costs, including toxicology and carcinogenicity studies;
	•		fees paid to professional service providers for independent monitoring and analysis of the Company’s clinical trials;
	•		depreciation and equipment; and
	•		allocated costs of facilities and infrastructure.

The following reflects the breakdown of the Company’s research and development expenses generated internally versus externally for the years ended December 31, 2009 and 2008, and for the period from June 14, 2004 (date of inception) to December 31, 2009:

										Period from
										June 14, 2004
		Years Ended								(Date of Inception)to
		December 31,				December 31,				December 31,
		2009				2008				2009
Externally generated research and development expense		$	3,639,215			$	7,906,799			$	28,705,191
Internally generated research and development expense			2,416,000				3,897,254				12,200,987
Total		$	6,055,215			$	11,804,053			$	40,906,178

Externally generated research and development expenses consist primarily of the following:

										Period from
										June 14, 2004
		Years Ended								(Date of Inception) to
		December 31,				December 31,				December 31,
		2009				2008				2009
Externally generated research and development expense
In-licensing expenses		$	400,000			$	25,000			$	5,270,000
CRO and investigator expenses			1,090,115				4,841,760				10,749,339
Consulting expenses			1,120,131				1,239,447				6,418,669
Other			1,028,969				1,800,592				6,267,183
Total		$	3,639,215			$	7,906,799			$	28,705,191

Internally generated research and development expenses consist primarily of the following:

										Period from
										June 14, 2004
		Years Ended								(Date of Inception) to
		December 31,				December 31,				December 31,
		2009				2008				2009
Internally generated research and development expense
Personnel and related expenses		$	1,693,205			$	2,771,734			$	8,507,159
Stock-based compensation expense			275,961				320,624				1,095,794
Travel and entertainment expense			170,249				320,616				1,155,619
Other			276,585				484,280				1,442,415
Total		$	2,416,000			$	3,897,254			$	12,200,987

The Company does not presently segregate total research and development expenses by individual project because our research is focused on atherosclerosis and cardiometabolic disease as a unitary field of study. Although the Company has a mix of preclinical and clinical research and development, personnel working on the programs are combined, financial expenditures are combined, and reporting has not matured to the point where they are separate and distinct projects. The Company cannot reliably allocate the personnel costs, consulting costs, and other resources dedicated to these efforts to individual projects, as we are conducting our research on an integrated basis.

Assuming the Company is able to raise additional financing, it is expected that there will be significant research and development expenses for the foreseeable future. Clinical trial activity in the CEA and ACS Phase 2 clinical trials and related expenses have decreased as a result of completing the studies, and expenses for the ongoing FDG-PET trial have decreased and will continue to decrease as the last patient visit was reported in December 2009. The Company began the development of its preclinical metabolic assets in 2009 and the Company expects expenses to increase substantially over the next several years. The ultimate level and timing of research and development spending is difficult to predict due to the uncertainty inherent in the timing of raising additional financing, the timing and extent of progress in our research programs, and initiation and progress of clinical trials. In addition, the results from the Company’s preclinical and clinical research and development activities, as well as the results of trials of similar therapeutics under development by others, will influence the number, size and duration of planned and unplanned trials. As the Company’s research efforts mature, we will continue to review the direction of our research based on an assessment of the value of possible future compounds emerging from these efforts. Based on this continuing review, the Company expects to establish discrete research programs and evaluate the cost and potential for cash inflows from commercializing products, partnering with others in the biotechnology or pharmaceutical industry, or licensing the technologies associated with these programs to third parties.

The Company believes that it is not possible at this time to provide a meaningful estimate of the total cost to complete our ongoing projects and to bring any proposed products to market. The potential use of compounds targeting atherosclerotic plaque inflammation as a therapy is an emerging area. Costs to complete current or future development programs could vary substantially depending upon the projects selected for development, the number of clinical trials required and the number of patients needed for each study. It is possible that the completion of these studies could be delayed for a variety of reasons, including difficulties in enrolling patients, incomplete or inconsistent data from the preclinical or clinical trials, difficulties evaluating the trial results and delays in manufacturing. Any delay in completion of a trial would increase the cost of that trial, which would harm our results of operations. Due to these uncertainties, the Company cannot reasonably estimate the size, nature or timing of the costs to complete, or the amount or timing of the net cash inflows from our current activities. Until the Company obtains further relevant preclinical and clinical data, and progresses further through the FDA regulatory process, the Company will not be able to estimate our future expenses related to these programs or when, if ever, and to what extent we will receive cash inflows from resulting products.

General and Administrative

General and administrative expense consists primarily of personnel costs, including salaries, incentive and other compensation, travel and entertainment expenses, for personnel in executive, finance, accounting, business development, information technology and human resource functions. Other costs include facility costs not otherwise included in research and development expense, professional fees for legal and accounting services, and public company expenses, including investor relations, transfer agent fees and printing expenses.

Interest Income, Interest Expense and Other Expenses

Interest income consists of interest earned on cash and cash equivalents. Interest expense consists primarily of interest due on secured notes payable and on capital leases, and amortization of discount on notes payable — affiliate. Other expenses consist of net realized and unrealized gains and losses associated with foreign currency transactions, and unrealized gains and losses associated with the warrant obligation.

Results of Operations

Comparison of the years ended December 31, 2009 and 2008

The following table summarizes the Company’s results of operations with respect to the items set forth in such table for the years ended December 31, 2009 and 2008 together with the change in such items in dollars and as a percentage:

		For the Years Ended
		December 31,				December 31,
		2009				2008				$ Change				% Change
Revenue		$	—			$	—			$	—				—
Research and development expense			6,055,215				11,804,053				(5,748,838	)			(49	)%
General and administrative expense			7,198,320				8,657,166				(1,458,846	)			(17	)%
Interest income			—				189,656				(189,656	)			—
Interest expense			7,733,390				6,029				7,727,361				—
Other income			8,601				2,764				5,837				211	%

Revenue. The Company did not generate any revenue in the year ended December 31, 2009 and 2008, respectively, and does not expect to generate any revenue from licensing, achievement of milestones or product sales until the Company is able to commercialize product candidates or execute a collaboration arrangement.

Research and Development Expense. Research and development expense decreased 49%, or approximately $5.7 million, from $11.8 million in the year ended December 31, 2008 to $6.1 million in the year ended December 31, 2009. Clinical trial and preclinical related CRO and investigator clinical trial related expenses decreased by approximately $3.8 million from $4.8 million in the year ended December 31, 2008 to $1.0 million in the year ended December 31, 2009. The ACS Phase 2 clinical trial was completed in 2008, resulting in a $2.5 million decrease in CRO and investigator expenses. The CEA Phase 2 clinical trial was also completed in 2008 resulting in a $800,000 decrease in CRO and investigator expenses. FDG-PET CRO and investigator expenses decreased $500,000 as last patient visit occurred in 2009. Lab data analysis and other R&D expenses decreased $700,000 from $1.8 million in the year ended December 31, 2008 to $1.1 million in the year ended December 31, 2009 primarily due to an $800,000 decrease in ACS expenses, a $300,000 decrease in CEA expenses from the completion of the ACS and CEA Phase 2 clinical trials in 2008, and a $100,000 decrease in FDG-PET expenses due to the completion of patient clinical visits in late 2009; net of an increase of $100,000 in expenses associated with the DNA isolation and genotyping study associated with the development of VIA-2291, and net of an increase of $400,000 in drug development expenses for one of the Roche compounds. Employee related expenses including salary, benefits, stock-based compensation, travel and entertainment expense, information technology and facilities expenses, decreased $1.5 million from $3.9 million in the year ended December 31, 2008 to $2.4 million in the year ended December 31, 2009 primarily due to personnel turnover and pay adjustments. In-licensing expenses increased $400,000 from $0 in the year ended December 31, 2008 to $400,000 in the year ended December 31, 2009 due to the in-licensing of two Roche compounds in the year ended December 31, 2009. Consulting expenses decreased $100,000 from $1.2 million in the year ended December 31, 2008 to $1.1 million in the year ended December 31, 2009.

General and Administrative Expense. General and administrative expense decreased 17%, or approximately $1.5 million, from $8.7 million in the year ended December 31, 2008 to $7.2 million in the year ended December 31, 2009 which reflects the Company’s efforts to reduce operating expenses. Employee related expenses, including salary and benefits, stock-based compensation and travel and entertainment expenses decreased $300,000 from $4.3 million in the year ended December 31, 2008 to $4.0 million in the year ended December 31, 2009, primarily due to a decrease in travel, while salary, benefits and stock-based compensation expenses did not change significantly in the year ended December 31, 2009 from expenses incurred in the year ended December 31, 2008. Corporate and facilities general and administrative expenses decreased $900,000 from $3.6 million in the year ended December 31, 2008 to $2.7 million in the year ended December 31, 2009 primarily due to a $300,000 decrease in audit and legal expense, and a $600,000 decrease in investor relations and other public company expenses. Consulting expenses decreased $300,000 from $800,000 in the year ended December 31, 2008 to $500,000 in the year ended December 31, 2009 due primarily to the timing of business development consulting services.

Interest Income. Interest income decreased approximately $200,000, from approximately $200,000 in the year ended December 31, 2008 to $0 in the year ended December 31, 2009. The Company did not have sufficient excess cash reserves to justify the expected cost of investments in the year ended December 31, 2009.

Interest Expense. Interest expense increased $7,727,000 from $6,000 in the year ended December 31, 2008 to $7,733,000 in the year ended December 31, 2009. The $7,733,000 in interest expense in the year ended December 31, 2009 consisted of $789,000 interest on the note payable — affiliate and $6,944,000 in interest expense incurred in the amortization of the discount on the $10.0 million notes payable — affiliate.

Other Income. Other income increased $6,000 from $3,000 in the year ended December 31, 2008 to $9,000 in the year ended December 31, 2009. Unrealized losses on foreign exchange transactions increased $28,000 from unrealized gains of $24,000 in the year ended December 31, 2008 to $4,000 in unrealized losses in the year ended December 31, 2009; realized gains on foreign exchange transactions increased $30,000 from realized losses of $17,000 in the year ended December 31, 2008 to realized gains of $13,000 in the year ended December 31, 2009. The foreign exchange transactions were incurred primarily in connection with the CEA Phase 2 clinical trial. Losses on the disposal of fixed assets decreased $4,000 from $4,000 in the year ended December 31, 2008 to approximately $0 in the year ended December 31, 2009.

Income Tax Expense. There is no income tax provision (benefit) for federal or state income taxes as the Company has incurred operating losses since inception and a full valuation allowance has also been in place since inception.

Liquidity and Capital Resources

The Company does not have commercial products from which to generate cash resources. As a result, from June 14, 2004 (date of inception) to December 31, 2009, the Company has financed its operations primarily through a series of issuances of secured convertible notes, the generation of interest income on the borrowed funds, the Merger with Corautus, a private placement through a public equities transaction, and debt. The Company expects to incur substantial and increasing losses for the next several years as it continues to expend substantial resources seeking to successfully research, develop, manufacture, obtain regulatory approval for, and commercialize its product candidates.

The Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to raise substantial additional financing through public or private equity or debt financings, collaborative or other strategic arrangements with corporate sources or other sources of financing, until it is able to establish profitable operations. The Company received approximately $11.1 million in cash through the Merger with Corautus that was consummated on June 5, 2007, and the Company issued 10,288,065 shares of common stock for $25.0 million in gross proceeds in the private placement equity financing which closed in July and August of 2007.

In March 2009, the Company entered into the Loan Agreement with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million as more fully described in Note 6 in the notes to the financial statements. The Company secured the March 2009 Loan with all of its assets, including the Company’s intellectual property. On March 12, 2009, the Company borrowed an initial amount of $2.0 million. During the three months ended June 30, 2009, the Company borrowed $2.0 million on May 19, 2009, and another $2.0 million on June 29, 2009. During the three months ended September 30, 2009, the Company borrowed $2.0 million on August 14, 2009, and a final $2.0 million on September 11, 2009. According to the terms of the original Loan Agreement, the debt was due to the Lenders on September 14, 2009. The parties agreed to extend the repayments terms and, as more fully described in Note 12 in the notes to the financial statements, on February 26, 2010, the Lenders agreed to modify the Loan Agreement to further extend the repayment terms to April 1, 2010. The Lenders did not modify the interest rate or offer any concessions in the amended Loan Agreement. The Company will not be able to repay the loan when it becomes due on April 1, 2010. When the Company does not repay the loan at maturity, it will be in default under the March 2009 loan agreement and the Lenders may terminate the March 2009 Loan, demand immediate payment of all amounts borrowed by the Company and take possession of all collateral securing the March 2009 Loan, which could cause the Company to cease operations.

Management believes that the $2.2 million of cash on hand at December 31, 2009 is sufficient for the Company, under normal continuing operations, to meet its current operating cash requirements through the end of March 2010. As more fully described in “Other Information” in Part II, Item 9B and in Note 12 in the Notes to the Financial Statements, in March 2010, the Company entered into the 2010 Loan Agreement with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $3.0 million. The Company secured the March 2010 Loan with all of its assets, including the Company’s intellectual property. On March 29, 2010, the Company borrowed an initial $1.25 million available under the 2010 Loan Agreement. Management believes that the total amount of cash borrowed under the March 2010 Loan, if fully drawn, will enable the Company to meet its current obligations into the third quarter of 2010. Management does not believe that existing cash resources will be sufficient to enable the Company to meet its ongoing working capital requirements for the next twelve months and the Company will need to raise substantial additional funding in the near term to repay amounts owed under the March 2009 Loan, which are due April 1, 2010, and to meet its working capital requirements. As a result, there are substantial doubts that the Company will be able to continue as a going concern and, therefore, may be unable to realize its assets and discharge its liabilities in the normal course of business. Management is continuously exploring financing alternatives, including raising additional capital through private or public equity or debt financings, the establishment of credit or other funding facilities, entering into collaborative or other strategic arrangements with corporate sources or other sources of financing, which may include partnerships for product development and commercialization, merger, sale of assets or other similar transactions.

Global market and economic conditions have been, and continue to be, disrupted and volatile. The Company cannot provide assurance that additional financing will be available in the near term when needed, particularly in light of the current economic environment and adverse conditions in the financial markets, or that, if available, financing will be obtained on terms favorable to the Company or to the Company’s stockholders. Having insufficient funds may require the Company to delay, scale back, or eliminate some or all research and development programs, including clinical trial activities, or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than the Company would otherwise choose. Failure to obtain adequate financing in the near term will adversely affect the Company’s ability to operate as a going concern and may require the Company to cease operations. If the Company raises additional capital by issuing equity securities, its

existing stockholders’ ownership will be diluted. In addition, to the extent the vested warrants granted to the Lenders to purchase an aggregate of 83,333,333 shares of common stock at an exercise price of $0.12 per share or the warrants granted to the Lenders to purchase an aggregate of 17,647,059 shares (of which 7,352,941 are vested as of March 29, 2010) at an exercise price of $0.17 per share, are exercised by the Lenders, existing stockholders’ ownership in the Company will be significantly diluted. Any new debt financing the Company enters into may involve covenants that restrict its operations. The loans with the Lenders include restrictive covenants relating to the Company’s ability to incur additional indebtedness, make future acquisitions, consummate asset dispositions, grant liens and pledge assets, pay dividends or make other distributions, incur capital expenditures and make restricted payments. The Company may also be required to pledge all or substantially all of its assets, including intellectual property rights, as collateral to secure any debt obligations. The Company’s obligations under the loans are secured by all of the Company’s assets, including its intellectual property and any additional pledge of its assets would require the consent of the Lenders. In addition, if the Company raises additional funds through collaborative or other strategic arrangements, the Company may be required to relinquish potentially valuable rights to its product candidates or grant licenses on terms that are not favorable to the Company.

Prior to the Merger and the private placement, the Company issued secured convertible notes for a total of $24.4 million from June 14, 2004 (date of inception) to December 31, 2009 to finance its operations. All of the $24.4 million in secured convertible notes have been converted to equity as of December 31, 2007. No convertible notes were issued in the years ended December 31, 2009 and 2008.

The Company’s cash on hand decreased $1.9 million from $4.1 million at December 31, 2008 to $2.2 million at December 31, 2009. In the year ended December 31, 2009, the Company received $10.0 million in cash inflows and disbursed $11.9 million in cash outflows resulting in the $1.9 million decrease in cash. Cash inflows consisted of the $10.0 million in proceeds from borrowings on the affiliate loan arrangement and $2,000 from employee stock option exercises. Cash outflows consisted of $4.0 million in payments for payroll and related expenses, $2.9 million in payments for research and development related expenses, $1.6 million in payments to consultants for consulting services, $1.2 million in payments for legal services, $1.0 million in payments for corporate expenses, including audit fees, board fees, and public company expenses, and $1.2 million in payments for travel reimbursement, facilities and other office related expenses.

The Company used $11.9 million and $18.9 million in net cash from operations in the years ended December 31, 2009 and 2008, respectively, and $65.5 million for the period from June 14, 2004 (date of inception) to December 31, 2009. The $7.0 million decrease in the net cash used in operations was comprised of an $703,000 increase in net loss from $20.3 million in the year ended December 31, 2008 to $21.0 million in the year ended December 31, 2009, a $65,000 decrease in the change in net assets, a $50,000 decrease in the change in net liabilities, a $6.9 million increase in the change in amortization of the discount on notes payable, a $789,000 increase in the change in interest payable to affiliate, and a decrease of $36,000 in stock-based compensation expense. The $703,000 increase in net loss was the result of a decrease of $5.7 million in research and development expenses and a $1.5 million decrease in general and administrative expenses, offset by a decrease of $190,000 in interest income and a $7.7 million increase in interest expense. For the period from June 14, 2004 (date of inception) to December 31, 2009, the Company used $65.5 million of net cash in operating activities which was comprised of inception-to-date net losses of $81.6 million, net of $11.5 million non-cash expenses, including $4.0 million inception-to-date stock-based compensation expense, $600,000 in depreciation and deferred rent expenses, $6.9 million in interest expense from the amortization of the discount on notes payable, and net of $4.6 million net increase in the change in net assets and liabilities. The Company cannot be certain if, when or to what extent it will receive cash inflows from the commercialization of its product candidates. The Company expects its clinical, research and development expenses to be substantial and to increase over the next few years as it continues the advancement of its product development programs.

The Company used $16,000 and $141,000 in net cash from investing activities in the years ended December 31, 2009 and 2008, respectively, and obtained $10.1 million cash from investing activities for the period from June 14, 2004 (date of inception) to December 31, 2009. The Company used $16,000 and $141,000 in cash for capital expenditures in the years ended December 31, 2009 and 2008, respectively. From June 14, 2004 (date of inception) to December 31, 2009, the Company received $11.1 million in cash from the Merger with Corautus, net of an additional $350,000 in capitalized Merger costs and $664,000 in capital expenditures.

The Company received $10.0 million in cash from financing activities through a loan arrangement with its principal stockholder in the year ended December 31, 2009. There were no debt financings in the year ended December 31, 2008, and there were no equity financings in the years ending December 31, 2009 and 2008. The Company received $2,000 in cash from employee exercises of stock options in the years ended December 31, 2009 and 2008. The Company used $0 and $2,000 of cash from financing activities in capital equipment lease payments in the years ended December 31, 2009 and 2008, respectively. From June 14, 2004 (date of inception) to December 31, 2009, the Company received $57.6 million in net cash provided by financing activities, including $10.0 million in new notes payable borrowings from the principal stockholder in the year ended December 31, 2009, $24.4 million of cash received through the issuance of secured convertible debt, $23.1 million of net cash received through the equity financing completed in 2007, and $100,000 of cash received from employee and consultant exercises of stock options.

Contractual Obligation and Commitments

The following table describes the Company’s contractual obligations and commitments as of December 31, 2009:

		Payments Due by Period
						Less Than												After
		Total				1 Year				1-3 Years				4-5 Years				5 Years
Operating lease obligations (1)		$	1,385,584			$	437,597			$	808,245			$	139,742			$	—
Notes and related interest payable — affiliate (2)			10,789,041				10,789,041				—				—				—
Uncertain tax positions (3)			—				—				—				—				—
Licensing agreements (4)			—				—				—				—				—
		$	12,174,625			$	11,226,638			$	808,245			$	139,742			$	—

Off-Balance Sheet Arrangements

The Company has not engaged in any off-balance sheet activities.

Critical Accounting Policies

The Company’s discussion and analysis of its financial condition and results of operations are based on its financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Note 2 in the Notes to the Financial Statements includes a summary of the Company’s significant

accounting policies and methods used in the preparation of the Company’s financial statements. On an ongoing basis, the Company’s management evaluates its estimates and judgments, including those related to accrued expenses and the fair value of its common stock. The Company’s management bases its estimates on historical experience, known trends and events, and various other factors that it believes to be reasonable under the circumstances, which form its basis for management’s judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company’s management believes the following accounting policies and estimates are most critical to aid in understanding and evaluating the Company’s reported financial results.

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: (i) we are required to make assumptions about matters that are uncertain at the time of the estimate; and (ii) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience, facts available to date, and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the financial statements as soon as they became known. The estimates are subject to variability in the future due to external economic factors as well as the timing and cost of future events. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our financial statements are fairly stated in accordance with GAAP, and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our financial statements.

Research and Development Accruals

As part of the process of preparing its financial statements, the Company is required to estimate expenses that the Company believes it has incurred, but has not yet been billed for. This process involves identifying services and activities that have been performed by third party vendors on the Company’s behalf and estimating the level to which they have been performed and the associated cost incurred for such service as of each balance sheet date in its financial statements. Examples of expenses for which the Company accrues include professional services, such as those provided by certain CROs and investigators in conjunction with clinical trials, and fees owed to contract manufacturers in conjunction with the manufacture of clinical trial materials. The Company makes these estimates based upon progress of activities related to contractual obligations and also information received from vendors.

A substantial portion of our preclinical studies and all of the Company’s clinical trials have been performed by third-party CROs and other vendors. For preclinical studies, the significant factors used in estimating accruals include the percentage of work completed to date and contract milestones achieved. For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, duration of enrollment and percentage of work completed to date.

The Company monitors patient enrollment levels and related activities to the extent possible through internal reviews, correspondence and status meetings with CROs, and review of contractual terms. The Company’s estimates are dependent on the timeliness and accuracy of data provided by our CROs and other vendors. If we have incomplete or inaccurate data, we may either underestimate or overestimate activity levels associated with various studies or trials at a given point in time. In this event, we could record adjustments to research and development expenses in future periods when the actual activity level become known. No material adjustments to preclinical study and clinical trial expenses have been recognized to date.

Incentive Award Accruals

The Company accrues for liabilities under discretionary employee and executive incentive award plans. These estimated liabilities are based upon progress against corporate objectives approved by the Board of Directors, compensation levels of eligible individuals, and target bonus percentage level of employees. The Board of Directors and the Compensation Committee of the Board of Directors review and evaluate the performance against these objectives and ultimately determine what discretionary payments are made. Included in accrued liabilities at December 31, 2009 and December 31, 2008, we have accrued $1,308,043 and $727,539, respectively, for liabilities associated with these employee and executive incentive award plans. As described in Note 12 to the financial statements, on March 26, 2010, the Company’s Board of Directors approved a restructuring of the Company to reduce its workforce and operating costs effective March 31, 2010. The impact of the restructuring included reversal of $531,000 of incentive award accruals recorded as of December 31, 2009 related to terminated employees, which will be reflected in the quarter ended March 31, 2010.

Stock-based Compensation

On January 1, 2006, the Company adopted new accounting guidance for accounting for stock-based compensation. Under the fair value recognition provisions of this accounting guidance, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. The Company elected the modified-prospective method, under which prior periods are not revised for comparative purposes. The valuation provisions of the accounting guidance apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified. Estimated compensation for grants that were outstanding as of the effective date of this new guidance are now being recognized over the remaining service period using the compensation cost estimated for the required pro forma disclosures.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based awards. The determination of the fair value of stock-based awards on the date of grant using an option-pricing model is affected by the value of the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends.

Prior to June 5, 2007, the Company was a privately-held company and its common stock was not publicly traded. The fair value of stock options granted from January 2006 through June 5, 2007 (date of completion of the Merger with Corautus), and related stock-based compensation expense, were determined based upon quoted stock prices of Corautus, the exchange ratio of shares in the Merger, and a private company 10% discount for grants prior to March 31, 2007, as this represented the best estimate of market value to use in measuring compensation. Subsequent to the Merger, the Company, now publicly held, uses the closing stock price of the Company’s common stock on the date the options are granted to determine the fair market value of each option. The Company revalues each non-employee option quarterly based on the closing stock price of the Company’s common stock on the last day of the quarter. The Company also revalues options when there is a change in employment status.

The Company estimates the expected term of options granted by taking the average of the vesting term and the contractual term of the option. As of December 31, 2009, the Company estimates common stock price volatility using a hybrid approach consisting of the weighted-average of actual historical volatility using a look back period of approximately two years, representing the period of time the Company’s stock has been publicly traded, blended with an average of selected peer group volatility for approximately six years, consistent with the expected life from grant date. The volatility for the Company and the selected peer group was approximately 130% and 104%, respectively, as of December 31, 2009, and the blended volatility rate was approximately 114% as of December 31, 2009. The Company will continue to incrementally increase the look back period of the Company’s common stock and percent of actual historical volatility until historical data meets or exceeds the estimated term of the options. Prior to the year ended December 31, 2009, the Company used peer group calculated volatility as the Company is a development stage company with limited stock price history from which to forecast stock price volatility. The risk-free interest rates used in the valuation model are based on U.S. Treasury issues with remaining terms similar to the expected term on the options. The Company does not anticipate paying any dividends in the foreseeable future and therefore used an expected dividend yield of zero.

The Company calculated an annualized forfeiture rate of 2.82% and 4.0% using historical data for the years ended December 31, 2009 and 2008, respectively. This rate was used to exclude future forfeitures in the calculation of stock-based compensation expense as of December 31, 2009 and 2008, respectively.

The assumptions used to value option and restricted stock award grants for the years ended December 31, 2009 and 2008 are as follows:

		Years Ended
		December 31,				December 31,
		2009				2008
Expected life from grant date			6.08 – 7.96				2.75 – 6.25
Expected volatility			105% – 114	%			79% – 82	%
Risk free interest rate			2.89% – 3.07	%			1.52% – 3.49	%
Dividend yield			—				—

The following table summarizes stock-based compensation expense related to stock options and warrants for the years ended December 31, 2009 and 2008 and for the period from June 14, 2004 (date of inception) to December 31, 2009, which was included in the statements of operations in the following captions:

										Period from
										June 14, 2004
		Years Ended								(Date of Inception)to
		December 31,				December 31,				December 31,
		2009				2008				2009
Research and development expense		$	260,226			$	319,990			$	1,079,426
General and administrative expense			941,540				979,061				2,804,862
Total		$	1,201,766			$	1,299,051			$	3,884,288

If all of the remaining non-vested and outstanding stock option awards that have been granted became vested, we would recognize approximately $1.7 million in compensation expense over a weighted average remaining period of 1.6 years. However, no compensation expense will be recognized for any stock option awards that do not vest.

The following table summarizes stock-based compensation expense related to employee restricted stock awards for the years ended December 31, 2009 and 2008 and for the period from June 14, 2004 (date of inception) to December 31, 2009, which was included in the statements of operations in the following captions:

										Period from
										June 14, 2004
		Years Ended								(Date of Inception) to
		December 31,				December 31,				December 31,
		2009				2008				2009
Research and development expense		$	15,734			$	634			$	16,368
General and administrative expense			47,655				1,893				49,548
Total		$	63,389			$	2,527			$	65,916

If all of the remaining non-vested restricted stock awards that have been granted became vested, we would recognize approximately $61,000 in compensation expense over a weighted average remaining period of 1.0 years. However, no compensation expense will be recognized for any stock option awards that do not vest.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15. “Exhibits and Financial Statement Schedules.”

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A(T). CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. As of the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this Annual Report on Form 10-K, were effective at the reasonable assurance level to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Internal control over financial reporting refers to the process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

	1.		Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
	2.		Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
	3.		Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework set forth in the report entitled “Internal Control — Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2009.

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

On March 26, 2010, the Company entered into a Note and Warrant Purchase Agreement (the “2010 Loan Agreement”) with the Lenders whereby the Lenders agreed to lend to the Company in the aggregate up to $3,000,000, pursuant to the terms of promissory notes (collectively, the “2010 Notes”) delivered under the 2010 Loan Agreement (the “2010 Loan Transaction”). On March 29, 2010, the Company borrowed an initial amount of $1,250,000. Subject to the Lenders’ approval, the Company may borrow in the aggregate up to an additional $1,750,000 at subsequent closings pursuant to the terms of the 2010 Loan Agreement and 2010 Notes.

The 2010 Notes are secured by a lien on all of the assets of the Company. Amounts borrowed under the 2010 Notes accrue interest at the rate of fifteen percent (15%) per annum, which increases to eighteen percent (18%) per annum following an event of default. Unless earlier paid in accordance with the terms of the 2010 Notes, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) December 31, 2010, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20,000,000, and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity.

Pursuant to the 2010 Loan Agreement, the Company issued to the Lenders warrants (the “2010 Warrants”) to purchase an aggregate of 17,647,059 shares (the “2010 Warrant Shares”) of common stock at $0.17 per share. The number of 2010 Warrant Shares is equal to the $3,000,000 maximum aggregate principal amount that may be borrowed under the 2010 Loan Agreement, divided by the $0.17 per share exercise price of the 2010 Warrants. The 2010 Warrant Shares vest based on the amount of borrowings under the 2010 Notes. Based on the $1,250,000 borrowing at the initial closing, 7,352,941 of the 2010 Warrant Shares vested immediately on the date of grant. At each subsequent closing, the 2010 Warrants will vest with respect to the additional amount borrowed by the Company. The 2010 Warrant Shares, to the extent they are vested and exercisable, are exercisable at any time until March 26, 2015.

On March 26, 2010 the Company’s Board of Directors approved a restructuring of the Company to reduce its workforce and operating costs effective March 31, 2010. The reduction in workforce decreased total employees by approximately 63% to a total of six employees, and increased the focus of future operating expense on research and development activities. This decision resulted in recording a charge to operating expenses of approximately $69,000 in March 2010. This charge includes cash costs of restructuring, principally related to severance and related medical costs for terminated employees, of approximately $413,000, and non-cash charges of approximately $187,000 related to the fair value of excess facilities at the Company’s corporate headquarters, offset by approximately $531,000 related to the reversal of previously recorded incentive award accruals recorded as of December 31, 2009. In addition to this restructuring charge, the Company will pay terminated employees approximately $183,000 for amounts accrued for unused vacation and sick pay. The total estimated cash cost of the restructuring costs, and amounts to be paid for accrued vacation and sick pay, is approximately $596,000. The Company expects that restructuring decisions will reduce operating costs for 2010 by approximately $1,320,000, with approximately $88,000 of this amount being non-cash related to excess facility costs at the Company’s corporate headquarters. The personnel-related restructuring charges that the Company expects to incur are subject to a number of assumptions and actual results may differ. The Company may also incur other material charges not currently contemplated due to the events that may occur as a result of, or associated with, the restructuring plan.

In connection with the restructuring and reduction in workforce, the employment of James G. Stewart, Senior Vice President, Chief Financial Officer and Secretary, will terminate effective March 31, 2010. Among the positions also affected by the reduction in workforce is the Senior Vice President of Business Development.

In connection with the 2010 Loan Transaction and the 2010 Warrants, on March 26, 2010, the Company also amended the Second Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) with the Lenders and certain stockholders of the Company (the Lenders and certain stockholders collectively, the “Stockholders”), to include the 2010 Warrants Shares in the Registration Rights Agreement, pursuant to which the Company has granted certain demand, shelf and “piggyback” registration rights to such Stockholders to register their shares of common stock with the SEC so that such shares become freely tradeable without restriction under the Securities Act.

The Lenders beneficially owned in the aggregate approximately 90% of the Company’s common stock immediately prior to the 2010 Loan Transaction. Fred B. Craves, Ph.D., a member of the Company’s Board of Directors, is the founder, chairman, and a manager of Bay City Capital LLC, the beneficial owner of the shares held by the Investors. Dr. Craves also owns 22.0588% of the membership interests in Bay City Capital LLC. Douglass Given, the chairman of the Company’s Board of Directors is an investment partner of Bay City Capital LLC.

The 2010 Loan Transaction was approved by the Company’s Board of Directors on March 26, 2010 following the recommendation of a special committee of the Company’s Board of Directors.

The 2010 Loan Agreement, the 2010 Notes, the 2010 Warrants and the amendment to the Registration Rights Agreement (collectively, the “Filed Agreements”) have been filed as exhibits to this Form 10-K to provide investors and security holders with information regarding their terms. They are not intended to provide any other factual information about the Company. The representations, warranties, and covenants contained in the Filed Agreements were made only for purpose of the Filed Agreements and as of specific dates, were solely for the benefit of the parties to the Filed Agreements, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Filed Agreements. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the Filed Agreements instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors and security holders (other than the Lenders who are a party to the Filed Agreements) are not third-party beneficiaries under the Filed Agreements and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Filed Agreements, which subsequent information may or may not be fully reflected in the Company’s public disclosures.

The 2010 Warrants issued to the Lenders were offered and issued pursuant to a private placement in reliance upon the exemption from registration pursuant to Rule 506 under the Securities Act. Each Lender represented to the Company that it is an “accredited investor” as defined in Rule 501(a) of Regulation D and that such Lender is acquiring the securities for investment purposes for such Lender’s own account and not with a view toward distribution of the securities. The Company advised the Lenders that the 2010 Warrants and the securities underlying the 2010 Warrants have not been registered under the Securities Act and may not be sold unless they are registered under the Securities Act or sold pursuant to a valid exemption from registration under the Securities Act. The 2010 Warrants issued to the Lenders contain legends that the 2010 Warrants have not been registered under the Securities Act and states the restrictions on transfer and resale as described above. Additionally, the Company did not engage in any general solicitation or advertisement in connection with the issuance of the 2010 Warrants.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item with respect to directors is incorporated herein by reference to the information regarding directors included in our proxy statement for our 2010 Annual Meeting of Stockholders. The information required by this item with respect to our executive officers is set forth in Part I, Item 1 of this report under the caption “Executive Officers of the Registrant.” Information required by Item 405 of Regulation S-K will be set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our proxy statement for our 2010 Annual Meeting of Stockholders and is incorporated herein by reference.

The information required by this item regarding our audit committee members and our audit committee financial expert is incorporated herein by reference from the information provided under the heading “Meetings and Committees of the Board of Directors — The Audit Committee” in our proxy statement for our 2010 Annual Meeting of Stockholders.

The information required by this item with respect to our code of business conduct and ethics is incorporated herein by reference to the information included in our proxy statement for our 2010 Annual Meeting of Stockholders.

The information required by this item regarding material changes to the procedures by which our stockholders may recommend nominees to our board of directors is incorporated herein by reference from the information provided under the heading “Meetings and Committees of the Board of Directors — The Nominating and Governance Committee” in our proxy statement for our 2010 Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to the information regarding executive compensation included in our proxy statement for our 2010 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated herein by reference to the information regarding security ownership of certain beneficial owners and management and related stockholder matters included in our proxy statement for our 2010 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference to the information regarding certain relationships and related transactions, and director independence included in our proxy statement for our 2010 Annual Meeting of Stockholders.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required under this item is incorporated herein by reference to the information regarding principal accountant fees and services included in our proxy statement for our 2010 Annual Meeting of Stockholders.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

1. Financial Statements and Financial Statement Schedules

The Company’s Financial Statements included in Item 8 include:

Report of Independent Registered Public Accounting Firm			F-1
Balance Sheets as of December 31, 2009 and 2008			F-2
Statements of Operations for the years ended December 31, 2009 and 2008, and for the period from inception (June 14, 2004) to December 31, 2009			F-3
Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2009, 2008, 2007, 2006, 2005 and for the period from inception (June 14, 2004) to December 31, 2004			F-4
Statements of Cash Flow for the years ended December 31, 2009 and 2008, and for the period from inception (June 14, 2004) to December 31, 2009			F-5
Notes to the Financial Statements			F-6

2. Financial Statement Schedules

All other schedules not listed above have been omitted, because they are not applicable or not required, or because the required information is included in the financial statements or notes thereto.

3. Exhibits required to be filed by Item 601 of Regulation S-K.

Exhibit
Number		Description
2.1		Agreement and Plan of Merger and Reorganization, dated February 7, 2007, as amended, by and among Corautus Genetics Inc., Resurgens Merger Corp., and VIA Pharmaceuticals, Inc. (filed as Exhibit 2.1 to the Form 8-K filed on February 8, 2007 and incorporated herein by reference)
3.1		Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Form 10-K filed on March 22, 2005 and incorporated herein by reference)
3.2		Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Form 10-KSB filed on March 30, 2000 and incorporated herein by reference)
3.3		Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.3 to the Form 10-K filed on March 28, 2003 and incorporated herein by reference)
3.4		Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.4 to the Form 10-K filed on March 28, 2003 and incorporated herein by reference)
3.5		Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.5 to the Form 10-K filed on March 28, 2003 and incorporated herein by reference)
3.6		Amended and Restated Certificate of Designation of Preferences and Rights of Series C Preferred Stock (filed as Annex H to the Form S-4/A filed on December 19, 2002 and incorporated herein by reference)
3.7		Certificate of Amendment to the Restated Certificate of Incorporation (Increase in Authorized Shares) (filed as Exhibit 3.7 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)
3.8		Certificate of Amendment to the Restated Certificate of Incorporation (Reverse Stock Split) (filed as Exhibit 3.8 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)
3.9		Certificate of Amendment to the Restated Certificate of Incorporation (Name Change) (filed as Exhibit 3.9 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)

Exhibit
Number		Description
3.10		Fourth Amended and Restated Bylaws (filed as Exhibit 3.1 to the Form 8-K filed on April 17, 2008 and incorporated herein by reference)
4.1		Warrant issued to Trout Partners LLC, dated July 31, 2007 (filed as Exhibit 99.1 to the Form 8-K filed on August 6, 2007 and incorporated herein by reference)
4.2		Warrant issued to Redington, Inc., dated March 1, 2008 (filed as Exhibit 4.2 to the Form 10-K filed on March 28, 2008 and incorporated herein by reference)
4.3		Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Fund, L.P., dated March 12, 2009 (filed as Exhibit 4.1 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
4.4		Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Co-Investment Fund, L.P., dated March 12, 2009 (filed as Exhibit 4.2 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
4.5		Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Fund, L.P., dated March 26, 2010
4.6		Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Co-Investment Fund, L.P., dated March 26, 2010
4.7		Second Amended and Restated Registration Rights Agreement, dated as of March 12, 2009, by and among VIA Pharmaceuticals, Inc. and the parties named therein (filed as Exhibit 4.3 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
4.8		Amendment No. 1 to the Second Amended and Restated Registration Rights Agreement, dated as of March 26, 2010, by and among VIA Pharmaceuticals, Inc. and the parties named therein
10.1		Note and Warrant Purchase Agreement, dated as of March 12, 2009 by and among VIA Pharmaceuticals, Inc., Bay City Capital Fund IV, L.P. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.1 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
10.2		Note and Warrant Purchase Agreement, dated as of March 26, 2010 by and among VIA Pharmaceuticals, Inc., Bay City Capital Fund IV, L.P. and Bay City Capital Fund IV Co-Investment Fund, L.P.
10.3		Promissory Note, dated as of March 12, 2009, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV, L.P. (filed as Exhibit 10.2 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
10.4		Promissory Note, dated as of March 12, 2009, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.3 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
10.5		First Amendment to Promissory Note, dated as of September 11, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV, L.P. (filed as Exhibit 10.1 to the Form 8-K filed on September 11, 2009 and incorporated herein by reference)
10.6		First Amendment to Promissory Note, dated as of September 11, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.2 to the Form 8-K filed on September 11, 2009 and incorporated herein by reference)
10.7		Second Amendment to Promissory Note, dated as of September 11, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV, L.P. (filed as Exhibit 10.1 to the Form 8-K filed on October 30, 2009 and incorporated herein by reference)
10.8		Second Amendment to Promissory Note, dated as of September 11, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.2 to the Form 8-K filed on October 30, 2009 and incorporated herein by reference)
10.9		Third Amendment to Promissory Note, dated as of September 11, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV, L.P. (filed as Exhibit 10.1 to the Form 8-K filed on December 22, 2009 and incorporated herein by reference)

Exhibit
Number		Description
10.10		Third Amendment to Promissory Note, dated as of September 11, 2009, by VIA Pharmaceuticals, Inc. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.2 to the Form 8-K filed on December 22, 2009 and incorporated herein by reference)
10.11		Promissory Note, dated as of March 26, 2010, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV, L.P.
10.12		Promissory Note, dated as of March 26, 2010, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV Co-Investment Fund, L.P.
10.13		Form of Securities Purchase Agreement, dated June 29, 2007, by and among VIA Pharmaceuticals, Inc. and the Investors named therein (filed as Exhibit 10.1 to the Form 8-K filed on July 3, 2007 and incorporated herein by reference)
10.14		Exclusive License Agreement, effective August 10, 2005, between VIA Pharmaceuticals, Inc. and Abbott Laboratories (filed as Exhibit 10.4 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)
10.15		Research, Development and Commercialization Agreement, dated as of December 18, 2008, by and between Hoffmann-La Roche Inc., F. Hoffmann-La Roche Ltd and VIA Pharmaceuticals, Inc. (filed as Exhibit 10.1 to the Form 8-K filed on December 23, 2008 and incorporated herein by reference)
10.16		Research, Development and Commercialization Agreement, dated as of December 18, 2008, by and between Hoffmann-La Roche Inc., F. Hoffmann-La Roche Ltd and VIA Pharmaceuticals, Inc. (filed as Exhibit 10.2 to the Form 8-K filed on December 23, 2008 and incorporated herein by reference)
10.17		Employment Agreement, dated as of August 10, 2004, by and between VIA Pharmaceuticals, Inc. and Lawrence K. Cohen (filed as Exhibit 10.2 to the Form 8-K filed on June 11, 2007 and incorporated herein by reference)
10.18		Amendment to Employment Agreement, dated as of June 4, 2007, by and between VIA Pharmaceuticals, Inc. and Lawrence K. Cohen (filed as Exhibit 10.3 to the Form 8-K filed on June 11, 2007 and incorporated herein by reference)
10.19		Letter Agreement, dated as of October 3, 2006, between VIA Pharmaceuticals, Inc. and James G. Stewart (filed as Exhibit 10.6 to the Form 8-K filed on June 11, 2007 and incorporated herein by reference)
10.20		Amendment to Letter Agreement, dated as of June 4, 2007, by and between VIA Pharmaceuticals, Inc. and James G. Stewart (filed as Exhibit 10.7 to the Form 8-K filed on June 11, 2007 and incorporated herein by reference)
10.21		Letter Agreement, dated as of December 21, 2007, between VIA Pharmaceuticals, Inc. and Rebecca Taub (filed as Exhibit 10.15 to the Form 10-K filed on March 28, 2008 and incorporated herein by reference)
10.22		Consulting Agreement, dated as of January 29, 2009, by and between VIA Pharmaceuticals, Inc. and Adeoye Olukotun (filed as Exhibit 10.1 to the Form 8-K filed on February 3, 2009 and incorporated herein by reference)
10.23		VIA Pharmaceuticals, Inc. 2004 Stock Plan (filed as Exhibit 10.8 to the Form 8-K filed on June 11, 2007 and incorporated herein by reference)
10.24		VIA Pharmaceuticals, Inc. standard form of stock option agreement (filed as Exhibit 10.9 to the Form 8-K filed on June 11, 2007 and incorporated herein by reference)
10.25		VIA Pharmaceuticals, Inc. early exercise form of stock option agreement (filed as Exhibit 10.10 to the Form 8-K filed on June 11, 2007 and incorporated herein by reference)
10.26		Standard Director Form of Option Agreement (filed as Exhibit 10.18 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)
10.27		Conversion Agreement, dated as of May 11, 2007, between Corautus Genetics Inc. and Boston Scientific Corporation (filed as Exhibit 10.19 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)
10.28		Change in Control Agreement by and between VIA Pharmaceuticals, Inc and Lawrence K. Cohen, Ph.D., dated December 21, 2007 (filed as Exhibit 10.1 to the Form 8-K/A filed on December 21, 2007 and incorporated herein by reference)
10.29		Change in Control Agreement by and between VIA Pharmaceuticals, Inc and James G. Stewart, dated December 21, 2007 (filed as Exhibit 10.2 to the Form 8-K/A filed on December 21, 2007 and incorporated herein by reference)

Exhibit
Number		Description
10.30		Change in Control Agreement by and between VIA Pharmaceuticals, Inc and Rebecca Taub, M.D., dated January 14, 2008 (filed as Exhibit 10.25 to the Form 10-K filed on March 28, 2008 and incorporated herein by reference)
10.31		VIA Pharmaceuticals, Inc. Form of Stock Option Agreement (filed as Exhibit 10.1 to the Form 8-K filed on December 19, 2007 and incorporated herein by reference)
10.32		VIA Pharmaceuticals, Inc. 2007 Incentive Award Plan (filed as Exhibit A to the Definitive Proxy Statement filed on November 5, 2007 and incorporated herein by reference)
10.33		Office Lease, dated October 13, 2005, between VIA Pharmaceuticals, Inc. and James P. Edmondson, as amended by Lease Amendment No. One, dated January 15, 2008 (filed as Exhibit 10.28 to the Form 10-K filed on March 28, 2008 and incorporated herein by reference)
10.34		Lease, dated July 24, 2006, between VIA Pharmaceuticals, Inc. and 100 & RW CRA LLC, as amended by First Extension and Modification of Lease, dated January 15, 2008 (filed as Exhibit 10.29 to the Form 10-K filed on March 28, 2008 and incorporated herein by reference)
21.1		Subsidiaries of VIA Pharmaceuticals, Inc.
23.1		Consent of Independent Registered Public Accounting Firm
31.1		Principal Executive Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Principal Financial Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002).
32.2		Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 31, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, on behalf of the registrant in the capacities indicated.

Signatures		Titles		Date
/s/ Lawrence K. Cohen		President, Chief Executive Officer and		March 31, 2010
Lawrence K. Cohen		Director
/s/ James G. Stewart		Senior Vice President, Chief Financial		March 31, 2010
James G. Stewart		Officer and Secretary
/s/ Douglass B. Given   Douglass B. Given		Chairman of the Board of Directors		March 31, 2010
/s/ Mark N.K. Bagnall   Mark N.K. Bagnall		Director		March 31, 2010
/s/ Fred B. Craves   Fred B. Craves		Director		March 31, 2010
/s/ David T. Howard   David T. Howard		Director		March 31, 2010
/s/ John R. Larson   John R. Larson		Director		March 31, 2010

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
VIA Pharmaceuticals, Inc.
San Francisco, CA

We have audited the accompanying balance sheets of VIA Pharmaceuticals, Inc. (a development stage company) (the “Company”), as of December 31, 2009 and 2008, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2009, and for the period from June 14, 2004 (date of inception) to December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009, and for the period from June 14, 2004 (date of inception) to December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is a development stage enterprise engaged in the research and development of cardiovascular disease. As discussed in Note 1 to the financial statements, the deficiency in working capital at December 31, 2009 and Company’s operating losses since inception raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 1 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Deloitte & Touche LLP

San Francisco, California
March 30, 2010

VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

		December 31,				December 31,
		2009				2008
ASSETS
Current assets:
Cash and cash equivalents		$	2,189,742			$	4,064,545
Prepaid expenses and other current assets			155,361				604,080
Total current assets			2,345,103				4,668,625
Property and equipment-net			170,617				291,804
Other non-current assets			40,374				40,374
Total		$	2,556,094			$	5,000,803
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable		$	705,887			$	753,824
Accrued expenses and other liabilities			2,226,720				2,652,458
Interest payable — affiliate			789,041				—
Notes payable — affiliate — net of discount of $4,374			9,995,626				—
Total current liabilities			13,717,274				3,406,282
Deferred rent			37,450				30,637
Total liabilities			13,754,724				3,436,919
Commitments and contingencies
Shareholders’ equity (deficit):
Common stock, $0.001 par value-200,000,000 shares authorized at December 31, 2009 and December 31, 2008, respectively; 20,646,374 and 20,592,718 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively			20,646				20,593
Preferred stock Series A, $0.001 par value-5,000,000 shares authorized at December 31, 2009 and December 31, 2008, respectively; 0 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively			—				—
Convertible preferred stock Series C, $0.001 par value-17,000 shares authorized at December 31, 2009 and December 31, 2008, respectively; 2,000 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively; liquidation preference of $2,000,000			2				2
Additional paid-in capital			70,385,287				62,169,530
Deficit accumulated in the development stage			(81,604,565	)			(60,626,241	)
Total shareholders’ equity (deficit)			(11,198,630	)			1,563,884
Total		$	2,556,094			$	5,000,803

See accompanying notes

VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

										Period from
										June 14, 2004
										(Date of
		Years Ended								Inception) to
		December 31,				December 31,				December 31,
		2009				2008				2009
Revenue		$	—			$	—			$	—
Operating expenses:
Research and development			6,055,215				11,804,053				40,906,178
General and administration			7,198,320				8,657,166				29,046,053
Merger transaction costs			—				—				3,824,090
Total operating expenses			13,253,535				20,461,219				73,776,321
Operating loss			(13,253,535	)			(20,461,219	)			(73,776,321	)
Other income (expense):
Interest income			—				189,656				914,628
Interest expense			(7,733,390	)			(6,029	)			(8,738,483	)
Other income (expense)-net			8,601				2,764				(4,389	)
Total other income (expense)			(7,724,789	)			186,391				(7,828,244	)
Net Loss		$	(20,978,324	)		$	(20,274,828	)		$	(81,604,565	)
Loss per share of common stock-basic and diluted		$	(1.05	)		$	(1.03	)
Weighted average shares outstanding-basic and diluted			19,939,848				19,606,526

See accompanying notes

VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the Period June 14, 2004 (Date of Inception) To December 31, 2009

																																										Deficit
		Preferred								Preferred																																Accumulated				Accumulated
		Series A								Series C								Common Stock								Treasury Stock								Additional				Deferred				in the				Other				Total				Total
		Shares								Shares								Shares								Shares								Paid-in				Stock				Development				Comprehensive				Stockholders’				Comprehensive
		Issued				Amount				Issued				Amount				Issued				Amount				Issued				Amount				Capital				Compensation				Stage				Income				Equity (Deficit)				Income (Loss)
BALANCE — June 14, 2004 (date of inception)			—			$	—				—			$	—				—			$	—				—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Issuance of common stock — net of issuance costs			—				—				—				—				371,721				1,000				—				—				—				—				—				—				1,000				—
Stock-based compensation — net			—				—				—				—				—				—				—				—				6,360				(4,675	)			—				—				1,685				—
Net loss			—				—				—				—				—				—				—				—				—				—				(1,084,924	)			—				(1,084,924	)			—
BALANCE — December 31, 2004			—				—				—				—				371,721				1,000				—				—				6,360				(4,675	)			(1,084,924	)			—				(1,082,239	)			—
Issuance of common stock — net of issuance costs			—				—				—				—				37,172				100				—				—				900				—				—				—				1,000				—
Exercise of common stock options			—				—				—				—				10,965				30				—				—				266				—				—				—				296				—
Stock-based compensation — net			—				—				—				—				—				—				—				—				1,124				4,568				—				—				5,692				—
Net loss			—				—				—				—				—				—				—				—				—				—				(8,804,220	)			—				(8,804,220	)			—
BALANCE — December 31, 2005			—				—				—				—				419,858				1,130				—				—				8,650				(107	)			(9,889,144	)			—				(9,879,471	)			—
Exercise of common stock options			—				—				—				—				25,181				67				—				—				1,360				—				—				—				1,427				—
Issuance of series A preferred stock			3,234,900				8,703				—				—				—				—				—				—				12,174,797				—				—				—				12,183,500				—
Stock-based compensation — net			—				—				—				—				—				—				—				—				—				107				—				—				107				—
Stock based compensation — stock options			—				—				—				—				—				—				—				—				434,837				—				—				—				434,837				—
Unrealized gain from foreign currency hedges			—				—				—				—				—				—				—				—				—				—				—				12,582				12,582				12,582
Net loss			—				—				—				—				—				—				—				—				—				—				(8,626,887	)			—				(8,626,887	)			(8,626,887	)
Total comprehensive loss																																																						$	(8,614,305	)
BALANCE — December 31, 2006			3,234,900			$	8,703				—			$	—				445,039			$	1,197				—			$	—			$	12,619,644			$	—			$	(18,516,031	)		$	12,582			$	(5,873,905	)
Issuance of common stock — net of issuance costs			—				—				—				—				10,288,065				10,288				—				—				23,130,072				—				—				—				23,140,360				—
Exercise of common stock options			—				—				—				—				317,369				854				—				—				41,469				—				—				—				42,323				—
Repurchase and retirement of common stock			—				—				—				—				(42,283	)			(95	)			—				—				(5,654	)			—				—				—				(5,749	)			—
Issuance of series A preferred stock			3,540,435				9,524				—				—				—				—				—				—				13,324,698				—				—				—				13,334,222				—
Merger			(6,775,335	)			(18,227	)			2,000				2				8,699,067				7,463				(2,014	)			(10,276	)			10,818,077				—				—				—				10,797,039				—
Stock-based compensation — warrants			—				—				—				—				—				—				—				—				21,954				—				—				—				21,954				—
Stock based compensation — stock options			—				—				—				—				—				—				—				—				926,574				—				—				—				926,574				—
Unrealized gain from foreign currency hedges			—				—				—				—				—				—				—				—				—				—				—				4,302				4,302				4,302
Net loss			—				—				—				—				—				—				—				—				—				—				(21,835,382	)			—				(21,835,382	)			(21,835,382	)
Total comprehensive loss																																																						$	(21,831,080	)
BALANCE — December 31, 2007			—			$	—				2,000			$	2				19,707,257			$	19,707				(2,014	)		$	(10,276	)		$	60,876,834			$	—			$	(40,351,413	)		$	16,884			$	20,551,738
Exercise of common stock options			—				—				—				—				32,711				33				—				—				2,247				—				—				—				2,280				—
Repurchase and retirement of treasury stock			—				—				—				—				—				—				2,014				10,276				(10,276	)			—				—				—				—				—
Issuance of restricted common stock			—				—				—				—				852,750				853				—				—				1674				—				—				—				2,527				—
Stock-based compensation — warrants			—				—				—				—				—				—				—				—				47,525				—				—				—				47,525				—
Stock based compensation — stock options			—				—				—				—				—				—				—				—				1,251,526				—				—				—				1,251,526				—
Unrealized gain from foreign currency hedges			—				—				—				—				—				—				—				—				—				—				—				(16,884	)			(16,884	)			(16,884	)
Net loss			—				—				—				—				—				—				—				—				—				—				(20,274,828	)			—				(20,274,828	)			(20,274,828	)
Total comprehensive loss																																																						$	(20,291,712	)
BALANCE — December 31, 2008			—			$	—				2,000			$	2				20,592,718			$	20,593				—			$	—			$	62,169,530			$	—			$	(60,626,241	)		$	—			$	1,563,884
Exercise of common stock options			—				—				—				—				57,615				57				—				—				1,875				—				—				—				1,932				—
Retirement of restricted common stock			—				—				—				—				(3,959	)			(4	)											4
Stock-based compensation — restricted stock			—				—				—				—				—				—				—				—				63,389				—				—				—				63,389				—
Stock based compensation — stock options			—				—				—				—				—				—				—				—				1,201,766				—				—				—				1,201,766				—
Issuance of warrants — affiliate			—				—				—				—				—				—				—				—				6,948,723				—				—				—				6,948,723				—
Net loss			—				—				—				—				—				—				—				—				—				—				(20,978,324	)			—				(20,978,324	)			(20,978,324	)
Total comprehensive loss																																																						$	(20,978,324	)
BALANCE — December 31, 2009			—			$	—				2,000			$	2				20,646,374			$	20,646				—			$	—			$	70,385,287			$	—			$	(81,604,565	)		$	—			$	(11,198,630	)