The movement disorders market can generally be divided into hyperkinetic and hypokinetic disorders but also includes disorders such as Restless Legs Syndrome. Hyperkinetic movement disorders are generally characterized by involuntary, purposeless movements that flow randomly from one body part to another. This market includes approximately 350,000 people in the United States and Canada. There are currently no FDA-approved treatments for this group of disorders in the United States.

Hypokinetic movement disorders are generally characterized by tremor, slowness of movement, and progressive loss of control over body movements. The most prevalent of these disorders is Parkinson’s disease. According to the National Parkinson’s Foundation, there are approximately 1 million people in the United States and Canada with Parkinson’s disease. Of the patient population with Parkinson’s disease, according to a market research, it is estimated that as many as 100,000 of these patients are in the advanced stages of Parkinson’s disease. Although current oral medications are initially effective in treating the symptoms of mild to moderate Parkinson’s disease, over time most patients progress and develop motor response complications, which limit the long term or overall utility of current treatments. Advanced stage patients spend their days suffering with unpredictable function due to fluctuating symptoms, also known as “on-off” swings, leading to a severely impaired quality of life.

Restless Legs Syndrome is characterized by an overwhelming urge to move the legs caused by uncomfortable or unpleasant sensations in the legs. These sensations typically occur during periods of inactivity and generally become more pronounced at night, sometimes leading to sleep deprivation. According to a market research, Restless Legs Syndrome afflicts as many as 30 million people worldwide, and it is estimated that there may be more than 1 million people in the United States and Canada with Restless Legs Syndrome severe enough to warrant treatment. Schizophrenia is a devastating chronic mental disorder that, according to the National Alliance for Research on Schizophrenia and Depression, affects an estimated 50 million people worldwide. According to the United States Surgeon General, there are more than 2 million people in the United States suffering from schizophrenia in any given year.

Tetrabenazine is a highly selective and reversible dopamine depletor that the Company markets under the brand name Nitoman in Canada and that is marketed as Xenazine in Europe by Cambridge Laboratories Limited, or Cambridge. Tetrabenazine, the only product ever approved for the treatment of hyperkinetic movement disorders, is approved for marketing in eight countries and is currently under regulatory review for approval in several additional countries. The Company has completed Phase III pivotal trials in the United States for the use of tetrabenazine as a treatment for chorea associated with Huntington’s disease.

Lisuride is a highly potent dopamine agonist currently available in Europe as an oral therapy for the treatment of Parkinson’s disease, a progressive and degenerative neurological disorder that causes loss of control over body movements. Lisuride acts to mimic dopamine’s function in the brain by stimulating dopamine receptors. The Company is currently conducting clinical trials in Europe to evaluate the safety and efficacy of its two lisuride product candidates: Lisuride Subcutaneous and Lisuride Transdermal. Lisuride Subcutaneous is under development to be administered by an external pump that infuses lisuride under the skin to deliver continuous, stable levels of dopaminergic stimulation to treat advanced Parkinson’s disease. The Company also plans to seek orphan drug and fast track designations from the FDA for Lisuride Subcutaneous as a treatment for advanced Parkinson’s disease. Lisuride Transdermal is under development as a weekly patch placed on the skin that is intended to conveniently deliver continuous, stable levels of dopaminergic stimulation for up to seven days. In addition to studying lisuride as a treatment for Parkinson’s disease, NeuroBiotec has completed a pilot study suggesting that Lisuride Transdermal may also be an effective and convenient therapy to control the symptoms of Restless Legs Syndrome.

D-Serine is an oral, selective amino acid co-agonist that, along with another amino acid, glycine, stimulates the activation of the N-methyl-D-aspartic acid, or NMDA, receptor in the brain. The Company is developing D-Serine for the treatment of schizophrenia, a chronic, severe and disabling CNS disorder.

PPI-03306 selectively modulates a key enzyme involved in the synthesis of serotonin. PPI-03306 is a product candidate in early development for the treatment of sleep apnea, a disorder characterized by interrupted breathing during sleep.

Cost of revenues for the year ended December 31, 2004 totaled $0.5 million, as compared to $0 for the years ended December 31, 2003 and 2002.

Research and development expenses increased from $0.6 million for the year ended December 31, 2002, to $7.0 million for the year ended December 31, 2003, and to $11.7 million for the year ended December 31, 2004.

Sales and marketing expenses increased from $0 for the year ended December 31, 2002, to $1.2 million for the year ended December 31, 2003, and to $2.6 million for the year ended December 31, 2004.

Other income (expense), net, totaled ($1.3) million for the year ended December 31, 2004, a decrease of $1.3 million from $0 for the years ended December 31, 2003 and 2002.