Sickle cell anemia is the most common genetic disease among individuals of African descent and is prevalent worldwide. According to the National Institute of Health and the American Medical Association, there are at least 70,000 patients with sickle cell anemia in the United States. There are also a number of genetic variants closely related to sickle cell anemia, which, together with sickle cell anemia, are referred to as sickle cell disease. In the United States, sickle cell anemia affects approximately one in every 500 African-American births and one in every 1,000 to 1,400 Hispanic American births. Approximately 1,000 children are born with sickle cell anemia in the United States each year.

Treatment options for patients with sickle cell anemia are currently extremely limited. For patients with particularly severe disease, hydroxyurea, a cancer chemotherapeutic agent, is used on a chronic basis to reduce the incidence of vaso-occlusive crises.

Epilepsy represents a large and growing market opportunity. According to the Epilepsy Foundation, there is an estimated prevalence of 2.5 million patients in the United States, with approximately 180,000 new cases diagnosed in the United States each year. Sales of drugs currently marketed for the treatment of epilepsy totaled approximately $6.9 billion in the United States during 2003, according to IMS Health. These sales included prescriptions of these drugs for both epilepsy and other indications, including neuropathic pain. Despite the variety of drugs currently available, approximately one-third of the epilepsy patient population remains resistant to currently available medical treatment.

The Company’s second most advanced drug candidate, ICA-69673, is a small molecule ion channel activator that targets a potassium channel located primarily on the membrane of nerve cells, or neurons, present in particular regions of the central and peripheral nervous system. The Company is developing ICA-69673 for the treatment of epilepsy and neuropathic pain. The Company expect to complete this initial Phase I clinical trial in mid-2004. ICA-69673 is taken orally and is being developed with the goal of achieving a once-a-day or twice-a-day dosing schedule.

Since the Company’s inception in 1992, the Company has built significant capabilities for the discovery and development of drugs that act upon ion channel targets. These core capabilities provide the Company with several important competitive advantages, including efficiencies in target identification and validation both within as well as across research programs. It is further believed that by integrating a number of scientific and drug development disciplines the Company is able to discover and develop small molecule compounds that are more selective and specific for the medically relevant ion channel, thereby enabling the Company to identify and develop drug candidates that may have a reduced likelihood of adverse side effects and clinical failure.

Research and development expense increased by $2.7 million, or 19%, to $17.2 million for the year ended December 31, 2003 from $14.5 million for the year ended December 31, 2002.

General and administrative expense increased by $596,000, or 33%, to $2.4 million for the year ended December 31, 2003 from $1.8 million for the year ended December 31, 2002.