Financial Statements For the Year Ended

Financial Statements For the Year Ended December 31, 2004

(URL http://www.medicinova.com)

Representative Officer: Takashi Kiyoizumi, President & CEO

Date of Meeting of Board of Directors for Approving Financial Statements: March 22,

Interim Dividend System: N/A

Date of Annual Meeting of Shareholders: To be

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

1. The financial statements for the years ended December 31, 2004 and 2003 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

ended December 31, 2004: N/A

Year ended December 31, 2003: N/A

Year ended December 31, 2004: 500,000 shares

Year ended December 31, 2003: 500,000 shares

(3) Financial Condition

2004: 500,000 shares

December 31, 2003: 500,000 shares

December 31, 2004: 0 shares

December 31, 2003: 0 shares

2. Financial Results Forecast for the

six months ending June 30, 2005 and the Year Ending December 31, 2005

(Reference) Expected loss per share

(for full year): $0.39

Notes to use or disclosure of financial results forecast.

The above estimates are based on certain assumptions made by the Company s

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 the control of the Company, which may cause the Company s actual results to differ materially from the above estimates. These risks include the risk

factors detailed in the Company s Securities and Exchange Commission filings. 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.

There is nothing to be noted regarding a corporate group because MEDICINOVA, INC. (hereinafter the Company, we, our or

us ) has no affiliated companies.

The Company aims at becoming a global pharmaceutical company specialized in acquiring, developing and selling innovative drugs for diseases and conditions

with no established effective treatment. In seeking and acquiring license to product candidates, the Company follows its basic policy that:

While there are no plans to do so in the foreseeable future, the Company will pursue maximization of stockholders value when it distributes profit.

However, the Company is still at the early stage of business development. It is our policy for the time being to retain earnings to appropriate them for the growth and development of the operations.

The Company may determine that it has become necessary and important to reduce the investing unit according to the future upward movement of the

Company s share price in order to encourage more investment by investors and to increase the liquidity of the Company s shares.

It is expected that the Company will continue to report net loss at least for the next several years. Accordingly, we believe that it is inappropriate to

use financial indices as business management targets of the Company for the time being. Moreover, we believe it is also inappropriate to use non-financial indices such as the development progress of product candidates as targets because they are not

established as standard indices.

The Company seeks to be a pioneer in developing and selling therapeutic drugs for diseases for which effective treatments have not been established. Major

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

In developing these product candidates, the Company uses 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 and thereby to increase 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.

The Company continues to identify and acquire licenses for product candidates in the late pre-clinical or early clinical development stage. The Company

utilizes its 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. The Company is in active negotiations to acquire licenses for additional product

candidates, making the best use of this advantage. In pursuing licenses for product candidates, the Company conducts 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 will be mitigated by expanding and further diversifying of our pipelines of product candidates.

The Company intends to actively pursue strategic collaborations with

major biotechnological or pharmaceutical companies to draw on their expertise on development, pharmaceutical regulation and commercialization. The Company has made contact with several companies that have shown interest in its partnership program.

In the area of the 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. Once favorable results are obtained in the

clinical trial stage for product candidates developed through these efforts, we will endeavor to realize a quick return on our investment.

While developing the existing product candidate portfolio, the Company 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 the fastest implementation of our development programs.

The Company must steadily carry out business strategies described in Section 2.5. In pursuing these strategies, the following risks may adversely effect

the business of the Company:

We are a specialty pharmaceutical company still in the development stage

with a limited operating history. We have incurred significant net losses since our inception. For the year ended December 31, 2003, we had a net loss of $6.2 million. 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 related to employee stock options and warrants issued to the founders. We expect 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 non-cash warrant-based compensation, will continue to reduce our stockholders equity and working capital. Development

expenses are expected to increase in connection with our planned clinical trials for product candidates and any other development projects that we may

initiate. In addition, the general and administrative expenses and expenses necessary to operate as a public company are also expected to increase. Consequently, it is expected that significant and incremental operating losses will be recorded 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 earned any product revenue and have funded our operations primarily from private sales of our securities. The only

source of revenues of 2004 was 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. In 2003, we earned no revenues. The Company anticipates that it will continue to receive modest revenues for rendering consulting services. Prior to commercialization of a product candidate, consulting revenues, together with strategic

collaboration fees and upfront and milestone payments related to out-licensing will be our primary source of revenues. To obtain revenues from sales of product candidates, the Company must succeed, either alone or with third parties, in obtaining

regulatory approval for the development, manufacturing and marketing of drugs with market potential. There is a risk that we may not succeed in these activities or may not generate sufficient revenues to support continuing business operations or to

achieve profitability.

The Company has acquired several licenses to develop and sell product

candidates. Currently, the Company is a licensee for the following six compounds that are incorporated in the development of our seven product candidates.

We are obligated to develop and commercialize these product candidates in accordance with terms and conditions agreed with licensors. Fulfillment of

some or all of the terms and conditions of the license arrangements is dependent on numerous factors, including some factors that are beyond the control of the Company. These license arrangements may be terminated if we materially breach our

obligations thereunder and fail to correct the breach within a specified period of time. If any of the license agreements is terminated, then we would have no further rights to develop and commercialize the licensed product candidate. The

termination of any license agreement may significantly and adversely affect our business.

candidates are in the clinical development stage and require regulatory approval for commercial sale. The regulatory approval process is long, complex and costly. It often takes several

years to complete the clinical development necessary to commercialize a drug, and delays or failure may occur at any stage that may result in failure to

generate revenues from marketing and sales of products derived from product candidates. Of the large number of drug candidates being developed by pharmaceutical companies only a small percentage result in the submission of a new drug application to

the Food and Drug Administration (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 experienced significant setbacks in advanced clinical trials even after promising results in earlier trials. The Company may face the following

risks in connection with clinical trials:

To date, FDA has accepted Investigational New Drug (IND) applications for three of our seven product candidates. We are not

allowed to conduct human clinical trials in the United States on other five product candidates until IND applications are accepted and there is no assurance that FDA will give approval for these applications. The commencement of clinical trials may

be delayed for other reasons, including delays in:

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

Many of these factors described

above may also ultimately lead to refusal of regulatory approval of a present or future product candidate. If the Company experiences delays in clinical trials, the commercial prospects for product candidates will be harmed and product revenues will

Since the Company s capacity and resources to develop new drugs are