Financial Statements For the Six Months Ended

Financial Statements For the Six Months Ended June 30, 2005

Contact: Joji Suzuki, Vice President,

Finance, TEL: (03) 3519-5010

Date of Meeting of Board of Directors for Approving Financial Statements: August 15, 2005

Interim Dividend System: N/A

Date of Interim Dividend Payment: N/A

System of trading unit of shares: Adopted (Unit: 1,000 shares)

The following discussion and analysis should be read in conjunction with our financial statements and notes thereto included in this report and the financial

statements and notes thereto included in our Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission on August 15, 2005. Operating results are not necessarily indicative of results that may occur in future periods.

This report includes forward-looking statements that are subject to risks

and uncertainties, many of which are beyond our control. Our actual results will differ from those anticipated in these forward looking statements as a result of various factors, including those set forth below under the caption Risk

Factors and these differences may be material. Forward-looking statements discuss matters that are not historical facts. Forward-looking statements include, but are not limited to, forecasts, discussions regarding our operating strategy,

growth strategy, acquisition strategy, cost savings initiatives, industry, economic conditions, financial condition, liquidity and capital resources and results of operations. In this report, for example, we make forward-looking statements regarding

forecasts and our expectations about the rate of revenue growth and the reasons for that expected growth and our achievement of profitability. Such statements include, but are not limited to, statements preceded by, followed by or that otherwise

include the words believe, expect, anticipate, intend, estimate, project, can, could, may, will, would or similar

expressions. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. You should not rely unduly on these forward-looking statements,

which speak only as of the date on which they were made. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

1. The financial statements for the six months ended June 30, 2005 and 2004

and for the year ended December 31, 2004 are prepared in accordance with accounting principles generally accepted in the United States (U.S.). Unless otherwise noted, all amounts are expressed in U.S. dollars.

(1) Operating Results

The six months ended June 30, 2005: N/A

The six months ended June 30, 2004: N/A

The year ended December 31, 2004: N/A

The six months ended June 30, 2005: 79,558,668 shares

The six months ended June 30,

2004: 500,000 shares

The year ended December 31, 2004: 500,000 shares

(2) Financial Position

June 30, 2005: 98,855,856 shares

June 30, 2004: 500,000 shares

December 31, 2004: 500,000 shares

June 30, 2004: 0 shares

December 31, 2004: 0 shares

2. Financial Results Forecast for the Year Ending December 31, 2005

(Reference) Expected loss per share (for full year):

Notes to use or disclosure of financial results forecast.

The above estimates are based on certain assumptions made by our management as of the date hereof. These assumptions are based on

management s experience and perception of current conditions, trends, expected future developments and other factors believed to be appropriate in the circumstances. Such estimate is subject to a number of assumptions, risks and uncertainties,

many of which are beyond our control, which may cause our actual results to differ materially from the above estimates. These risks include the risk factors detailed in our Securities and Exchange Commission filings, including our Quarterly Report

on Form 10-Q filed with the U.S. Securities and Exchange Commission on August 15, 2005. Our independent auditors have not compiled or been involved in the preparation of the forecasted results for 2005. Accordingly, they assume no responsibility for

the accuracy or presentation of this information.

We have acquired rights in various product candidates that are based on proven pharmacology, but have features distinct from existing treatments. In

developing these product candidates, we use two

different approaches: strategic core programs and partnering programs. We believe that these approaches enable us to diversify our development risks with

respect to these product candidates. The intention is to advance development of existing and future product candidates without excessive reliance on any single program, thereby increasing the likelihood of long-term success. Moreover, we believe

that this dual pathway development approach significantly enhances our ability to generate near-term revenue opportunities through the partnering programs, and long-term sustained revenue opportunities through strategic core programs.

We continue to identify and acquire licenses for product candidates in the late pre-clinical or early clinical development stage. We utilizes our

industry contacts to identify and acquire product candidates with high potential and extensive pre-clinical or early clinical data from Japanese pharmaceutical companies, which is one of our advantages over other specialty drug companies in the U.S.

market. We are in active negotiations to acquire licenses for additional product candidates, making the best use of this advantage. In pursuing licenses for product candidates, we conduct extensive examinations not only on the patent rights and

therapeutic needs addressed, but also on the market opportunities, level of competition and strategic fit with existing programs. We believe that risks inherent in drug invention and development can be mitigated by expanding and further diversifying

our pipelines of product candidates.

We intend to actively pursue strategic collaborations with major

biotechnological or pharmaceutical companies to draw on their expertise on development, pharmaceutical regulation and commercialization. We have made contact with several companies that have shown interest in our partnership program. In the area of

strategic core programs, we will continue to seek additional licensors of product candidates, potential co-marketing partners and potential future licensees outside the U.S. market.

While developing the existing product candidate portfolio, we have also carefully assembled a management team of leaders with extensive experience in all

aspects of the drug development process from acquisition of product candidates through commercialization. The management team will be further strengthened in the near future by adding selected leaders who will contribute to the improvement of our

core competencies and efficient implementation of our development programs.

In pursuing the strategies described in Section 2.5, the following risks may adversely affect our business.

We are a development stage specialty pharmaceutical company with a limited

operating history. We have incurred significant net losses since our inception. For the year ended December 31, 2004, we had

a net loss of $48.3 million, including $34.3 million of non-cash stock-based compensation charges. For the six months ended June 30, 2005, we had a net loss

of $12.0 million. We expect our annual net losses to increase over the next several years as we expand and incur significant clinical development costs. These losses have reduced our stockholders equity and, excluding the portion related to

stock-based compensation, will continue to reduce our stockholders equity and working capital.

We expect our development expenses to increase in connection with our planned clinical trials for our product candidates and any other development

projects that we may initiate. In addition, we expect to incur increased general and administrative expenses as well as the increased costs to operate as a public company. Consequently, we expect to continue to incur significant and increasing

operating losses for the foreseeable future.

We have not received, and do not expect to

receive for at least the next several years, any revenues from the commercialization of our product candidates. To date, we have not generated any product revenue and have funded our operations primarily from sales of our securities. Our only source

of revenues since inception has been from development management services rendered to Asahi Kasei Pharma Corporation and Argenes Inc., both Japanese pharmaceutical companies, in connection with their clinical development of pharmaceutical product

candidates. Our contract with Asahi Kasei Pharma has been completed and we do not expect to generate further revenue from that agreement. We anticipate that we will continue to receive modest revenues for rendering consulting services and that,

prior to our commercialization of a product candidate, our consulting revenues, together with out-licensing upfront and milestone payments, will be our primary source of revenues. To obtain revenues from sales of our product candidates, we must

succeed, either alone or with third parties, in developing, obtaining regulatory approval for, and manufacturing and marketing drugs with market potential. We may never succeed in these activities, and may not generate sufficient revenues to

continue our business operations or achieve profitability.

We license the rights to develop and market our product candidates.

Currently, we have licensed six compounds for the development of seven product candidates. They are:

We are obligated to develop and commercialize these product candidates in accordance with mutually agreed upon terms and conditions. Our ability to

satisfy some or all of the terms and conditions of our licensing arrangements is dependent on numerous factors, including some factors that are outside of our control. Our licensing arrangements may be terminated if we breach our obligations under

the agreements materially and fail to cure a breach within a specified period of time.

If any of our license agreements is terminated, then we would have no further rights to develop and

commercialize the product candidate which is the subject of the license. The termination of any of our license agreements would significantly and adversely affect our business.

seven product candidates are in clinical development, the process that is required to receive regulatory approval for commercial sale. The regulatory approval process is long, complex and costly. It may take several years to complete the clinical

development necessary to commercialize a drug, and delays or failure can occur at any stage which may result in our inability to market and sell products derived from our product candidates and to generate product revenues. Of the large number of

drugs in development, only a small percentage result in the submission of a new drug application to the Food and Drug Administration, or FDA, and even fewer are approved for commercialization. Interim results of clinical trials do not necessarily

predict final results, and success in pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced

clinical trials even after promising results in earlier trials.

In connection with clinical trials, we face risks that:

To date, the FDA has accepted Investigational New Drug, or IND, applications for five of our seven product candidates. We have filed Clinical Trial

Authorization, or CTA, applications, the equivalent of a U.S. IND, in nine European countries to conduct a Phase II study for MN-166 in patients with multiple sclerosis. Four of these applications are approved and the remaining five are under active

review. We cannot conduct human clinical trials in the United States or in Eastern Europe on our remaining product candidate until an IND or CTA application is in effect and there can be no assurance that the regulatory authorities, including the

FDA, will allow our applications to go into effect.

commencement of clinical trials can be delayed for a variety of other reasons, including delays in:

Once a clinical trial has begun, it may be delayed, suspended or terminated due to a number of factors,

Many of these factors described above may also ultimately lead to denial of

regulatory approval of a current or potential product candidate. If we experience delays in our clinical trials, the commercial prospects for our product candidates will be harmed, and our ability to generate product revenues will be delayed.