Targeted biologics are protein or nucleic acid-based drugs designed to specifically act on a target for therapeutic benefit. Examples of targeted biologics include antibodies, soluble receptors and short interfering RNA, or siRNA, molecules. Targeted biologics often provide therapeutic benefit that is not easily accomplished with small molecules, such as protein-activated disease pathways in arthritis, cancer and Crohn’s disease.

As a class, antibody-based drugs have been highly successful from a number of scientific and commercial perspectives, including the ability to therapeutically modulate protein-activated pathways with typically fewer side effects compared to small molecule drugs. Additionally, antibodies can also address protein-activated pathways that to date have not been therapeutically addressed by small molecules because these pathways are difficult to “drug”.

Targeted biologics comprise the fastest growing sector of the biopharmaceutical industry in terms of revenue. Sales of targeted biologics exceeded $22.0 billion in 2006. One class of first-generation targeted biologics — antibody-based therapeutics — accounted for over 80% of the targeted biologic product sales on the market in 2006.

Avastin, one of the most prominent targeted biologics, had sales of approximately $2.5 billion in 2006, and is projected to become the largest selling cancer treatment by 2008. In addition, Enbrel, the leading soluble receptor-based product, had sales of approximately $4.4 billion in 2006.

The power of PROfusion is based on its ability to engineer protein variants from DNA to RNA to protein without using cells, while also directly attaching a unique tag to each protein variant made. In biology, DNA makes RNA and RNA makes protein. The tag that PROfusion attaches to each protein variant is the unique mRNA that was used to synthesize that specific protein variant. This means that each protein variant is directly tagged with the mRNA sequence that encodes the protein variant to which it is attached.

Angiocept is a highly potent, specific and complete VEGFR-2 pathway antagonist. It is designed to inhibit tumor angiogenesis, the formation of new blood vessels in tumors, which is vital to the progression of tumor growth. Anti-angiogenic drugs that block the formation of these new blood vessels have emerged as an important new drug category in the treatment of cancer. Cancer cells secrete a variety of protein activators or growth factors that bind to receptors and promote angiogenesis.

The Company’s phase 1 clinical trial results to date are consistent with the mechanism that Angiocept is acting as an antagonist to its intended target, human VEGFR-2. The Company is planning multiple phase 2 trials in oncology to establish the potentially broad applicability of Angiocept.

The Company is initially developing an intravenous formulation of Angiocept for the treatment of glioblastoma multiforme, or GBM. GBM is highly malignant and the fastest growing type of brain tumor, and there is a significant need for improved treatments.

Research and development expenses were $10.4 million and $3.6 million in the six months ended June 30, 2007 and 2006, respectively, an increase of $6.8 million, or 187%.

Interest income was $436,000 and $39,000 in the six months ended June 30, 2007 and 2006, respectively, an increase of $424,000, or 1087%.

Interest expense was $195,000 and $207,000 in the six months ended June 30, 2007 and 2006, respectively, a decrease of $12,000, or 6%.