Commercialization Strategy

We have established and intend to pursue future strategic alliances and licensing agreements with pharmaceutical companies to enhance our ability to develop and commercialize our product candidates.

Alliance for Aversion® opioid analgesic products in the US, Canada and Mexico

On October 30, 2007, we and King Pharmaceuticals Research and Development, Inc. (“King”), a wholly-owned subsidiary of King Pharmaceuticals, Inc., entered into a License, Development and Commercialization Agreement (the “King Agreement”) to develop and commercialize in the United States, Canada and Mexico (the “King Territory”) certain opioid analgesic products utilizing our proprietary Aversion® Technology. For a $30 million upfront payment, the King Agreement initially provided King with an exclusive license in the King Territory for Acurox® with Niacin (oxycodone HCl/niacin) Tablets and Acuracet® with Niacin (oxycodone HCl/APAP/niacin) Tablets, utilizing Aversion® Technology and an option to license in the King Territory all future opioid analgesic products developed utilizing Aversion® Technology.

King has exercised its option to license two additional product candidates including Vycavert® with Niacin (hydrocodone bitartrate/APAP/niacin) Tablets and an undisclosed opioid analgesic tablet product, each of which utilize our Aversion® Technology. All Aversion® opioid product candidates licensed to King includes formulations with and without niacin.

We are responsible for using commercially reasonable efforts to develop Acurox® with Niacin Tablets through regulatory approval by the FDA. The King Agreement provides that we or King may develop additional opioid analgesic product candidates utilizing our Aversion® Technology and, if King exercises its option to license such additional product candidates, they will be subject to the milestone and royalty payments and other terms of the King Agreement.

A joint steering committee oversees development and commercialization strategies for Aversion® opioid analgesic products licensed to King. We are responsible for all Acurox® with Niacin Tablet development activities, the development and regulatory expenses for which are reimbursed by King. After NDA approval King will be responsible for commercializing Acurox® Tablets (with and without niacin) in the U.S. With respect to all other products licensed by King pursuant to the Agreement in all King Territories, King will be responsible, at its own expense, for development, regulatory, and commercialization activities.

All products developed pursuant to the King Agreement will be manufactured by King or a third party contract manufacturer under the direction of King.

The King Agreement provides for King’s payment to us of a $3.0 million fee upon King’s exercise of its option for each future opioid product candidate. In the event that King does not exercise its option for a future opioid product candidate, King may be required to reimburse us for certain of our expenses relating to such future opioid product candidate. Further, we may receive up to $23 million in additional non-refundable milestone payments for each product candidate licensed to King, including Acurox® without Niacin Tablets, which achieve certain regulatory milestones in specific countries in the King Territory. We can also receive a one-time $50 million sales milestone payment upon the first attainment of $750 million in net sales of all of our licensed products across all King Territories. In addition, for sales occurring following the one year anniversary of the first commercial sale of the first licensed product sold, King will pay us a royalty at one of 6 rates ranging from 5% to 25% based on the level of combined annual net sales for all products licensed by us to King across all King Territories, with the highest applicable royalty rate applied to such combined annual sales.

We encourage you to review the Company’s filings with Securities and Exchange Commission for more details about the King Agreement.