10-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2006

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 000-50564

RENOVIS, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-3353740
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Two Corporate Drive, South San Francisco, CA	94080
(Address of principal executive offices)	(Zip Code)

(650) 266-1400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  ¨    NO  x

Indicate by check mark whether registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act. YES  ¨    NO  x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined Rule 12b-2 of the Exchange Act). Check one:

Large accelerated filer  ¨            Accelerated filer  x                Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  ¨    NO  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates was $326,115,546 computed by reference to the last sales price of $15.31 as reported by the NASDAQ Global Market (formerly the NASDAQ National Market), as of the last business day of the Registrant’s most recently completed second fiscal quarter, June 30, 2006.

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of March 1, 2007 was 29,558,364.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for the 2007 Annual Meeting of Stockholders are incorporated by reference into Part III of this report.

RENOVIS, INC.

FORM 10-K — ANNUAL REPORT

FOR THE YEAR ENDED DECEMBER 31, 2006

TABLE OF CONTENTS

	Page
PART I
Item 1         Business	2
Item 1A      Risk Factors	14
Item 1B      Unresolved Staff Comments	27
Item 2         Properties	27
Item 3         Legal Proceedings	27
Item 4         Submission of Matters to a Vote of Security Holders	27
PART II
Item 5         Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer     Purchases of Equity Securities	28
Item 6         Selected Financial Data	30
Item 7         Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A      Quantitative and Qualitative Disclosures About Market Risk	41
Item 8         Financial Statements and Supplementary Data	42
Item 9         Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	68
Item 9A      Controls and Procedures	68
Item 9B      Other Information	68
PART III
Item 10       Directors and Executive Officers of the Registrant	70
Item 11       Executive Compensation	70
Item 12       Security Ownership of Certain Beneficial Owners and Management and Related     Stockholder Matters	70
Item 13       Certain Relationships and Related Transactions	70
Item 14       Principal Accounting Fees and Services	70
PART IV
Item 15       Exhibits and Financial Statement Schedules	71
SIGNATURES	76

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PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K, including the sections entitled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements.

Forward-looking statements include, but are not limited to, statements about:

• the progress, timing and completion of the research, development and clinical trials for any of our current or future product candidates;

• sufficiency of our cash reserves;

• our relationships with licensees, partners and collaborators;

• filing for and receipt of future regulatory approvals or clearances;

• our ability, or the ability of our collaborators, to market, commercialize and achieve market acceptance for our future product candidates;

• our future financial performance; and

• our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others.

Forward-looking statements also include, but are not limited to, expectations of future revenues, future levels of research and development spending, general and administrative spending, levels of capital expenditures and operating results, sufficiency of our capital resources and our intention to seek revenue from product sales, upfront fees and milestone payments and royalties resulting from the licensing of our intellectual property. Further, there can be no assurance that the necessary regulatory approvals will be obtained, that we will be able to develop commercially viable products or that any of our programs will be partnered with pharmaceutical companies or other partners. These statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include those listed under “Risk Factors” and elsewhere in this annual report and other risks detailed in our reports filed with the Securities and Exchange Commission. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “could”, “should”, “expects”, “intends”, “seeks”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “projects”, “potential”, “target”, “continue” or the variations on these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, based on information available at the time the statements are made, we cannot guarantee future results, levels of activity, performance or achievements. We do not intend to update any of the forward-looking statements after the date of this report or to conform these statements to the new information, changes in assumptions or actual results.

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Item 1. Business

Overview

Renovis is a science-driven, biopharmaceutical company that seeks to discover, develop, and commercialize therapeutics for major medical needs in the areas of neurological and inflammatory diseases. We apply our integrated capabilities in preclinical research and development, including molecular biology, medicinal chemistry, in vitro and in vivo pharmacology, drug metabolism and pharmacokinetics, toxicology and informatics, to identify and select small molecule drug candidates that meet stringent standards for development. This approach has yielded multiple lead candidates from diverse, proprietary chemical series in our late-stage preclinical programs for pain and inflammation. We are engaged in an exclusive, worldwide collaboration with Pfizer Inc. (Pfizer) to discover and develop product candidates targeting the vanilloid receptor, VR1, for the potential treatment of pain and other major medical needs. Our unpartnered preclinical programs are focused on identifying antagonists of the purinergic receptors, P2X7 and P2X3, as novel potential treatments for a broad spectrum of pain and inflammatory conditions.

Based on the progress demonstrated in the table above and our planned activities in 2007, we currently expect Pfizer to begin clinical development of a VR1 antagonist in 2007 and we currently expect to begin clinical development of product candidates from our P2X7 and P2X3 programs during 2008.

We were incorporated in Delaware on January 5, 2000. Our office is located at Two Corporate Drive, South San Francisco, California 94080, and our telephone number is (650) 266-1400. Our website address is www.renovis.com.

Our Drug Discovery Approach

The goal of our drug discovery organization is to discover and develop small molecule drugs to treat major medical needs in the areas of neurological and inflammatory diseases. We select molecular targets that have a biologically or chemically validated role in a neurological or inflammatory disease process affecting many patients for which we believe there is an opportunity for significant improvement in the safety, dosing, or effectiveness of existing treatment options. We believe such targets offer us opportunities to efficiently identify and develop best-in-class or first-in-class product candidates.

Renovis scientists integrate a broad range of drug discovery capabilities, including medicinal chemistry, cell biology and high throughput screening, in vivo pharmacology, toxicology and safety, as well as an extensive series of in vitro and in vivo metabolic and safety profiling assays, to conduct preclinical research and development and create human drug candidates. The integration of these efforts begins very early in the drug

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discovery process at Renovis to guide the design of compounds with drug-like characteristics. Our approach focuses on identifying the optimal balance of properties required for a best-in-class human therapeutic, such as potency, selectivity, safety, exposure, dosing frequency and patient compliance much earlier in the discovery process than in a traditional high-throughput screening approach.

We believe this early integration of a broad spectrum of drug discovery capabilities is a critical element that distinguishes our drug discovery approach. With a less integrated approach, organizations frequently focus narrowly on optimizing molecules for a single desired trait such as potency or metabolism and subsequently encounter difficulty in adding other important chemical characteristics, such as oral bioavailability or an ability to penetrate into the central nervous system. We believe our fully integrated drug discovery approach may lead to better preclinical and clinical success rates with small molecule drug candidates that have the potential to become best-in-class human therapeutics.

Our scientists design and create proprietary focused screening libraries for the identification and generation of chemical leads in our drug discovery programs. The identification of drug-like lead molecules is a critical step in the drug discovery process and we invest significant time and effort in library design and synthesis to ensure that the compounds incorporate critical drug-like properties. These focused screening libraries are synthesized at Renovis (or by one or more of our preferred global vendors) for our internal drug discovery screens. Where appropriate, we focus our research on families of related molecular targets to improve our ability to leverage our proprietary screening libraries across multiple drug discovery programs. In our VR1, P2X7, and P2X3 programs we were successful in rapidly identifying multiple proprietary molecules from our focused chemical screening libraries that are potent and selective antagonists of the receptors and which offered promising opportunities for rapid development toward our goal of securing best or first-in-class status.

We believe the overall efficiency and effectiveness of our drug discovery approach depends upon our drug discovery philosophy, our disciplined adherence to our target selection criteria, the design and synthesis of proprietary chemical libraries, our focus on strongly enabled patent portfolios covering the composition of matter of our lead compounds and chemical series, and a commitment to best-in-class and first-in-class opportunities.

Drug Discovery Programs

Our drug discovery and development programs focus on new therapeutic approaches for neurological and inflammatory diseases.

Neurological Diseases

In the area of neurological diseases we are currently focused on identifying and developing new treatments for pain. In our programs that address various forms of pain, our strategy is to pursue novel mechanisms of analgesia, or pain relief, that are superior to those of existing pain treatments. Our goal in each program is to identify and develop orally bioavailable analgesics suitable for once-daily dosing that demonstrate superior efficacy in multiple chronic pain indications, such as osteoarthritic pain, or pain associated with osteoarthritis, and neuropathic pain, or nerve pain. We believe that small molecules that inhibit the vanilloid receptor 1 (VR1) or the purinergic receptors P2X3 and P2X7 have the potential to meet this goal.

Chronic Pain Market Opportunity

The world wide pain management market for 2008 is estimated to exceed $29.8 billion. Currently marketed treatment options for chronic pain include narcotics, non-steroidal anti-inflammatories and COX2 inhibitors for inflammatory pain and antidepressants and anticonvulsants (e.g. Neurontin^® and Lyrica^®) for neuropathic pain. The existing treatment options for chronic inflammatory pain have limitations including physical dependence, gastrointestinal bleeding, increased risk of serious cardiovascular events (heart attack and stroke) and liver damage. The most prevalent treatments for neuropathic pain demonstrate central nervous system side effects such as sedation, dizziness and cognitive defects. In addition, many patients do not experience satisfactory pain

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relief. We believe the shortcomings of existing therapies provide an opportunity for new classes of therapies for chronic pain. Accordingly, the goal for our drug discovery programs focused on pain is to identify and develop well-tolerated, orally bioavailable therapies, suitable for once daily dosing with efficacy equivalent to or greater than currently marketed treatment options in a broad range of chronic pain states.

VR1 Antagonist Program

Key mediators of pain signaling are ion channels, which regulate the flow of different ions, or charged atoms, between the inside and outside of neurons, or nerve cells. The transient receptor potential (TRP) ion channels constitute a large and diverse family, several of which are thought to mediate pain signaling and are attractive targets for drug discovery. The best known of these is the VR1 receptor. We believe drugs that block VR1, preventing it from activating nerve cell signaling, could be effective, non-narcotic analgesics for the treatment of chronic pain and could also be effective for treating non-neurological conditions such as urinary incontinence, irritable bowel syndrome and asthma.

Accumulated evidence indicates that VR1 plays an important role in the development and maintenance of various pain states, including inflammatory and neuropathic pain; furthermore, in our collaboration with Pfizer, we have demonstrated oral analgesic efficacy in preclinical models of these conditions. In addition to our preclinical results, VR1 research conducted by others has expanded significantly over the past several years and the analgesic potential of inhibiting VR1 has been demonstrated by various approaches, including gene knockouts, VR1 receptor antagonism and human clinical data. In VR1 knockout mice that were bred to omit the VR1 gene, researchers have observed reduced pain sensation. In studies with experimental VR1 antagonists, researchers have shown robust analgesic effects in multiple animal models of inflammatory, osteoarthritis, and neuropathic pain that suggest broad potential for VR1 antagonists in these various disease states. Results from early clinical trials provided the first clinical evidence that VR1 antagonists may alleviate the pain and hyperalgesia, or heightened sensitivity to pain, associated with inflammation and injury in humans. In a placebo-controlled study in healthy volunteers, a VR1 antagonist drug candidate reduced the areas of induced flares compared with placebo at a well-tolerated dose. Collectively, these preclinical and clinical findings strongly suggest that VR1 antagonists have the potential to treat a broad spectrum of pain conditions.

In addition to pain, VR1 may play a role in several other areas of major medical need. For example, the expression of VR1 in sensory neurons and a layer of the lining of the bladder known as the urothelium, may explain the success in Phase II trials of a potent VR1 agonist known as RTX in treating urinary incontinence. If this effect is attributable to desensitisation of the VR1 receptor, VR1 antagonism may achieve a similar positive effect on bladder function. Similarly, VR1 agonists have also been effective in clinical trials involving gastrointestinal disorders such as irritable bowel syndrome, gastro-esophageal reflux disease and fecal urgency which suggests that antagonism of VR1 may have value in these disease states. VR1 is also suspected in certain airway diseases, such as asthma, based on the presence of the receptor in sensory nerves throughout the airways and the detection of natural agonists of VR1 in the lungs of asthma patients. While there is strong preclinical evidence for the involvement of VR1 in numerous areas of major medical need, there are no approved therapies known to function as VR1 antagonists and limited clinical trial data to confirm the preclinical evidence. Thus, if successfully developed, VR1 antagonists would represent a novel class of treatments.

Our collaboration with Pfizer to identify, develop and commercialize VR1 antagonists is our most advanced preclinical program. We began our internal VR1 drug discovery program in 2003 and combined efforts with Pfizer following the execution of our collaborative research agreement in May 2005. In June 2006, Pfizer nominated a VR1 antagonist molecule from the collaboration for studies to enable a potential Investigational New Drug Application (IND). Based on the progress of the program to date and our planned activities in 2007, we expect that Pfizer will nominate at least one additional molecule for IND-enabling studies and initiate human clinical studies during 2007. We are eligible to receive milestone payments of more than $170.0 million and double-digit royalties on worldwide net sales of products successfully developed and commercialized under this collaboration.

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P2X3, P2X2/3 Antagonist Program

The P2X3 and P2X2/3 receptors are members of a family of ligand-gated ion channels known as purinergic receptors. We believe that the P2X3 and P2X2/3 receptors are promising therapeutic targets for major medical needs in the areas of chronic pain and bladder dysfunction. These receptors are present in a restricted subset of primary sensory neurons, and preclinical studies examining their function suggest that they may have important roles in pain signaling and bladder function in humans. Studies conducted using small molecule antagonists of P2X3 and P2X2/3, as well as gene knockdown experiments, have demonstrated profound pain relief in multiple preclinical models of chronic inflammatory and neuropathic pain as well as urinary incontinence without apparent safety concerns.

We are conducting a drug discovery program to identify and develop product candidates that act as antagonists of the P2X3 and P2X2/3 receptors. To our knowledge, there are no marketed therapies or ongoing clinical trials of molecules that target this novel mechanism for the treatment of pain and urinary incontinence. We have successfully identified proprietary small molecule antagonists of P2X3 and are actively engaged in the optimization of these lead candidates to support the selection of a candidate for IND-enabling preclinical studies. Based on our progress to date and our planned activities in 2007, we expect to commence clinical development of a first-in-class P2X3 antagonist drug candidate during 2008.

Inflammatory Diseases

P2X7 Antagonist Program

Consistent with our focus on families of related molecular targets, we are pursuing a drug discovery program to identify and develop antagonists of the purinergic receptor, P2X7, which represents a promising molecular target for potential new therapies in the areas of rheumatoid arthritis (RA) and inflammatory bowel disease (IBD). Approximately 2.1 million Americans suffer from RA and approximately 1 million more are afflicted with the two most common forms of IBD, ulcerative colitis and Crohn’s disease. There is an urgent need for safe and effective small molecule therapies for these inflammatory conditions as current treatment options are often complex combination therapies including IV infusions or injections. In addition, many patients do not respond to available therapies or are unable to tolerate current treatments. Side effects of current RA and IBD treatments include increased risk of serious infections, sepsis, tuberculosis and rare cases of opportunistic infections that can be fatal.

The P2X7 receptor is a member of the purinergic family of ligand-gated ion-channels. In contrast to the P2X3 and P2X2/3 receptors which are present primarily in sensory neurons and represent targets for potential new therapies to treat chronic pain, the P2X7 receptor is found primarily in cells of the immune systems where it is thought to play a role in inflammatory processes important to human disease states. P2X7 has been shown to initiate processing and release of IL-1 family cytokines such as IL-1ß and IL-18, which are believed to play a critical role in the inflammation underlying diseases like RA and IBD. Published research with knockout mice indicates that the absence of P2X7 reduces inflammatory responses and the severity of induced arthritis. In addition to this preclinical evidence of the role of P2X7 in inflammatory diseases, a major pharmaceutical company has reported positive clinical results from a Phase II study of a small molecule P2X7 antagonist in RA patients.

Our goal for this program has been to design best-in-class P2X7 receptor antagonists that are distinguished by their potency, selectivity, pharmacokinetic properties and safety profiles. To date, we have identified and validated novel, orally bioavailable, potent, selective P2X7 antagonists from multiple proprietary chemical series. We have recently selected a lead molecule for IND enabling studies and we are continuing to optimize the characteristics of lead candidates as back-up candidates. Based on our progress to date and our planned activities in 2007, we expect to commence clinical development of a best-in-class P2X7 antagonist drug candidate during 2008.

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Other Programs

Exploratory Programs

In addition to our VR1, P2X3, and P2X7 drug discovery programs, we conduct limited exploratory research on an ongoing basis to identify promising molecular targets to add to our preclinical pipeline in the future. For example, we have identified potent, small molecule antagonists of TRPV4, which is a member of the family of transient receptor potential ion channels that also includes the VR1 receptor. Preliminary research indicates that TRPV4 may be an attractive target for chronic pain. We have made similar progress in an exploratory program involving a key regulator of the endo-cannabinoid system, Fatty Acid Amide Hydrolase (FAAH). Research suggests that FAAH could be a novel mechanism for new therapies to treat a range of neurological conditions, including chronic pain, Parkinson’s disease, and anxiety.

NXY-059 and Cytoprotectants

In May 2003, our exclusive licensee, AstraZeneca, initiated two multi-national Phase III clinical trials (SAINT I and SAINT II) to test our neuroprotectant drug candidate, NXY-059, versus placebo in acute ischemic stroke patients. NXY-059 had been previously shown to reduce infarct size and preserve brain function in experimental models of acute ischemic stroke. In May 2005, we announced, in coordination with AstraZeneca, that the first of these two clinical trials, SAINT I, involving approximately 1,700 patients, achieved its primary endpoint by showing a statistically significant reduction versus placebo of disability in patients after an acute ischemic stroke (p=0.038). In October 2006, we reported that the second Phase III clinical trial with NXY-059, which involved more than 3,200 patients, did not demonstrate a statistically significant reduction on the primary endpoint of stroke-related disability in patients treated with NXY-059. After reviewing the data from this study, AstraZeneca announced its decision to discontinue development of NXY-059.

Based on the benefit of NXY-059 treatment observed in the SAINT I trial, we independently developed proprietary, orally available nitrone compounds similar to NXY-059 that acted as cytoprotectants that reduced damage to vital tissues in experimental models of ischemia, or restricted oxygen. However, following the results of the SAINT II trial, we have discontinued further development of these compounds.

Strategy

Our primary goal is to create a proprietary pipeline of potential first- and best-in-class product candidates for major medical needs in the areas of neurological and inflammatory diseases. The key elements of our strategy for achieving this goal are to:

Build a balanced portfolio of product candidates.    We believe that our scientific expertise is broadly applicable to a wide range of neurological and inflammatory diseases and that expanding our product portfolio will mitigate some of the risks associated with drug development. We intend to advance our preclinical product candidates into clinical development as rapidly as practicable. We believe our scientific expertise enables us to effectively identify and capitalize on external product candidates and we may acquire or in-license such opportunities in the future. We also intend to undertake new discovery projects to identify novel product opportunities for internal development or collaboration.

Focus research and development efforts in market opportunities with large unmet medical needs.    Our drug discovery efforts generally target diseases that represent attractive commercial opportunities and that are underserved by available therapeutic alternatives. Shortcomings of currently available treatments may include limited efficacy, side effects or method of delivery. In particular, we believe that orally available drugs that treat disease with a high degree of specificity without these shortcomings will have strong commercial potential.

Pursue best-in-class and first-in-class opportunities involving families of related disease targets.    We select molecular targets that have a biologically or chemically validated role in a neurological or inflammatory disease process for which we believe our proprietary chemical library may yield drug-like

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lead compounds. The molecular targets we select are not proprietary and, therefore, we seek targets that we believe offer us an opportunity to efficiently identify and develop best-in-class or first-in-class product candidates that could have important competitive advantages in the marketplace.

Take an integrated approach to the early identification and design of lead compounds.    We integrate a broad range of drug discovery capabilities early in the discovery process with a focus on rapidly identifying the optimal balance of properties required for a best-in-class human therapeutic, such as potency, selectivity, safety, exposure, dosing frequency and patient compliance. These capabilities include medicinal chemistry, cell biology and high throughput screening, in vivo pharmacology, toxicology and safety, as well as an extensive series of in vitro and in vivo metabolic and safety profiling assays. We believe this early integration of a broad spectrum of drug discovery capabilities is a critical element that distinguishes our drug discovery approach.

Develop orally available, small molecule drugs.    Our drug discovery and development efforts generally focus on orally available small molecule drugs. The major commercial advantage of small molecule product candidates is the potential for oral administration. In addition, small molecule drugs can be manufactured by conventional methods, resulting in lower manufacturing costs and higher margins than for other types of drugs, such as protein therapeutics.

Establish selective corporate collaborations to assist in the development and commercialization of our products while retaining significant commercial rights.    We intend to selectively form corporate collaborations to leverage our internal resources to undertake projects that are beyond our resources while retaining significant economic rights to our products. Such projects include establishing a broad-based sales capability and completing large and costly clinical trials.

Strategic Alliances

We believe that strategic alliances with the right partners can improve our ability to build a sustainable pipeline of product candidates. Our existing agreements with Pfizer and Genentech allow us to leverage their expertise in the clinical development and commercialization of drugs to treat major medical needs of large patient populations.

Pfizer

In May 2005, we entered into a collaborative research agreement and a license and royalty agreement with Pfizer to research, develop and commercialize small molecule compounds that target VR1. The collaboration focuses on treatments for pain and other diseases and disorders. Under the agreements, we received an upfront license fee of $10.0 million in July 2005. In addition to the upfront license fee, the Pfizer collaboration also provides us with research funding in excess of $7.0 million during the first two years of the collaboration. Pfizer has the option to extend the research period for up to two additional years from June 2007 subject to additional funding requirements. Additionally, upon the successful achievement of research, development and commercialization milestones for each product resulting from the collaboration, we will be eligible to receive milestone payments greater than $170.0 million in aggregate. In addition to milestone payments, we will be entitled to receive double-digit royalties on net sales by Pfizer upon commercialization of a product generated by the collaboration.

Genentech

In December 2003, we entered into a collaborative research, development and license agreement with Genentech for the discovery and development of drugs that inhibit pathological or tumor angiogenesis and promote nerve re-growth following nervous system injury. Under the terms of the agreement, Genentech paid us an upfront license and technology access fee of approximately $5.3 million in January 2004 and made a $3.0 million equity purchase concurrent with our initial public offering. The funded research under this agreement ended in February 2006. We are also eligible to receive future milestones and royalty payments on therapeutic

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products emerging from the collaboration that are developed and commercialized by Genentech. In exchange, Genentech obtained exclusive worldwide rights to research, develop, manufacture and commercialize protein-based therapeutics and other drug compositions for the treatment of cancer and other diseases in which mechanisms underlying new blood vessel growth play a significant role. Unless Genentech exercises certain rights and makes additional payments to us, we will have the right to develop and commercialize products arising from the collaboration that are specifically useful for the treatment of central and peripheral nervous system diseases and conditions. We would be required to make royalty payments and, in certain cases, milestone payments to Genentech on products that we develop and commercialize under the collaboration.

Intellectual Property

Patents, Trade Secrets and Licenses

The following factors are important to our success:

• receiving patent protection for our product candidates;

• not infringing on the intellectual property rights of others;

• preventing others from infringing our intellectual property rights; and

• maintaining our patent rights and trade secrets.

We actively seek, when appropriate, protection for our products, technologies and proprietary information through U.S. and foreign patents. In addition, we rely upon trade secrets and contractual arrangements to protect our proprietary information.

As of December 31, 2006, we owned more than 35 U.S. patents, 45 U.S. patent applications, 30 foreign patents and 60 foreign patent applications related to our technologies, compounds and their applications in pharmaceutical development or their use as pharmaceuticals. As of December 31, 2006, we have licensed, from institutions such as the Oklahoma Medical Research Foundation (OMRF), the University of Kentucky Research Foundation (UKRF), the Regents of the University of California (the Regents) and others, the exclusive rights to more than 30 U.S. patents, 5 U.S. patent applications, 100 foreign patents and 15 foreign patent applications related to our technologies, compounds and their applications in pharmaceutical development or their use as pharmaceuticals. We face the risk that one or more of the above patent applications may be denied. We also face the risk that our issued patents may be challenged or circumvented or may otherwise not provide protection for any commercially viable products we develop. We also note that U.S. patents and patent applications may be subject to interference proceedings and U.S. patents may be subject to reexamination proceedings in the U.S. Patent and Trademark Office (and foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent office), which proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, reexamination and opposition proceedings may be costly. In the event that we seek to enforce any of our owned or exclusively licensed patents against an infringing party, it is likely that the party defending the claim will seek to invalidate the patents we assert, which, if successful, would result in the entire loss of our patent or the relevant portion of our patent and not just with respect to that particular infringer. Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations.

In addition, our ability to assert our patents against a potential infringer depends on our ability to detect the infringement in the first instance. Many countries, including certain European countries, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties in some circumstances (for example, the patent owner has failed to “work” the invention in that country, or the third party has patented improvements). In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent. Compulsory licensing of life-saving drugs is also becoming

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increasingly popular in developing countries either through direct legislation or international initiatives. Such compulsory licenses could be extended to include some of our product candidates, which could limit our potential revenue opportunities. Moreover, the legal systems of certain countries, particularly certain developing countries, do not favor the aggressive enforcement of patent and other intellectual property protection which makes it difficult to stop infringement.

Our success will also depend in part upon our not infringing patents issued to others. If our product candidates are found to infringe the patents of others, our development, manufacture and sale of such potential products could be severely restricted or prohibited. In this regard, we have received correspondence from a third party alleging that we infringe certain patents held by the third party. We do not believe there is a reasonable basis for this action claiming that we are infringing any valid and enforceable patents of such third party. To date, we have not been subject to any infringement actions. Although we do not believe that these patents seriously harm our ability to develop and commercialize our products, we cannot be certain of this. It is likely that in the future we will encounter other similar situations which will require us to determine whether we need to license a technology or face the risk of defending an infringement claim.

Patent litigation can involve complex factual and legal questions and its outcome is uncertain. Any claim relating to infringement of patents that is successfully asserted against us may require us to pay substantial damages. Even if we were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. Furthermore, as a result of a patent infringement suit brought against us or our strategic partners or licensees, we or our strategic partners or licensees may be forced to stop or delay developing, manufacturing or selling potential products that are claimed to infringe a third party’s intellectual property unless that party grants us or our strategic partners or licensees rights to use its intellectual property. In such cases, we may be required to obtain licenses to patents or proprietary rights of others in order to continue to commercialize our products. However, we may not be able to obtain any licenses required under any patents or proprietary rights of third parties on acceptable terms, or at all. Even if our strategic partners, licensees or we were able to obtain rights to the third party’s intellectual property, these rights may be non-exclusive, thereby giving our competitors access to the same intellectual property. Ultimately, we may be unable to commercialize some of our potential products or may have to cease some of our business operations as a result of patent infringement claims, which could severely harm our business.

Much of our technology and many of our processes depend upon the knowledge, experience and skills of our scientific and technical personnel. To protect rights to our proprietary know-how and technology, we generally require all employees, contractors, consultants, advisors, visiting scientists and collaborators as well as potential collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential information. The agreements with employees and consultants also require disclosure and assignment to us of ideas, developments, discoveries and inventions. These agreements may not effectively prevent disclosure of our confidential information or provide meaningful protection for our confidential information.

Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual property rights or personnel.

We also use as advisors and consultants individuals who are currently employed by universities. Most of these individuals are parties to agreements pursuant to which some of the work product created by these individuals belongs to their respective universities. While we and these individuals try to maintain records which make it clear that the work these individuals do for us is not subject to their agreements with universities, it is always possible that a university will assert an ownership claim to the work of one or more of these individuals.

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OMRF and UKRF.    We hold the exclusive, worldwide license to specified intellectual property related to NXY-059, a novel free radical trapping neuroprotectant, owned by OMRF and UKRF pursuant to a license agreement entered into in July 1992. In consideration for this technology license, we are obligated to pay OMRF and UKRF low-single digit royalties on any future net sales of products relating to our license, subject to a minimum annual royalty payment of $25,000 through the year the FDA first approves an NDA and $100,000 annually thereafter. The license agreement terminates upon the later of the expiration of the last of any patent rights to licensed products that are developed under the agreement or 15 years from the effective date of the agreement. We may terminate the license agreement for any reason following six months written notice to OMRF and UKRF.

The Regents of the University of California.    We hold two exclusive, worldwide licenses to specified intellectual property related to targets and potential protein biotherapeutics relevant for inhibition of tumor angiogenesis and other pathological diseases and for nerve regeneration and repair owned by the Regents pursuant to license agreements entered into in June 2001 and November 2002, respectively, each as amended in December 2003. In consideration for these technology licenses, we paid license fees to the Regents. We are required to make additional annual payments on the November 2002 license. We are also obligated to pay the Regents royalties on any future net sales relating to our licenses subject to specified minimum annual royalty payments of $25,000 for products developed under the June 2001 license and $50,000 for products developed under the November 2002 license. In addition, we are obligated to make payments to the Regents based on meeting certain regulatory and clinical milestones. The June 2001 license automatically terminates upon the date of expiration of the last to expire patent under the license. The November 2002 license automatically terminates on or after December 31, 2018.

Government Regulation

The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical products. These agencies and other federal, state and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion of our products.

The process required by the FDA before product candidates may be marketed in the United States generally involves the following:

• preclinical laboratory and animal tests;

• submission of an IND which must become effective before clinical trials may begin;

• adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug candidate for its intended use;

• pre-approval inspection of manufacturing facilities and selected clinical investigators; and

• FDA approval of a New Drug Application, or NDA, or NDA supplement, for an approval of a new indication if the product is already approved for another indication.

The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any new approvals for our products will be granted on a timely basis, if at all.

Prior to commencing the first clinical trial with a product candidate, we must submit an IND to the FDA. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions about the conduct of the clinical trial. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Our submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to the existing IND

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must be made for each successive clinical trial conducted during product development, and the FDA must grant permission for each clinical trial to start and continue. Further, an independent institutional review board for each medical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center. Regulatory authorities or an institutional review board or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.

For purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap.

• Phase I: Studies are initially conducted in a limited patient population to test the product candidate for safety, dosage tolerance, absorption, metabolism, distribution and excretion in healthy humans or patients.

• Phase II: Studies are conducted in a limited patient population to identify possible adverse effects and safety risks, to determine the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. Multiple Phase II clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase III clinical trials. In some cases, a sponsor may decide to run what is referred to as a “Phase IIb” evaluation, which is a second, confirmatory Phase II trial that could, if positive, serve as a pivotal trial in the approval of a product candidate.

• Phase III: When Phase II evaluations demonstrate that a dosage range of the product is effective and has an acceptable safety profile, Phase III trials are undertaken in large patient populations to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety in an expanded patient population at multiple clinical trial sites.

The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase IV studies may be made a condition to be satisfied after a drug receives approval. The results of Phase IV studies can confirm the effectiveness of a product candidate and can provide important safety information to augment the FDA’s voluntary adverse drug reaction reporting system.

The results of product development, preclinical studies and clinical trials are submitted to the FDA as part of an NDA, or as part of an NDA supplement. The FDA may deny approval of an NDA or NDA supplement if the applicable regulatory criteria are not satisfied, or it may require additional clinical data and/or an additional pivotal Phase III clinical trial. Even if such data are submitted, the FDA may ultimately decide that the NDA or NDA supplement does not satisfy the criteria for approval. Once issued, the FDA may withdraw product approval if ongoing regulatory standards are not met or if safety problems occur after the product reaches the market. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products which have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs.

Satisfaction of FDA requirements or similar requirements of state, local and foreign regulatory agencies typically takes several years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease. Typically, if a drug product is intended to treat a chronic disease, as is the case with some of the product candidates we are developing, safety and efficacy data must be gathered over an extended period of time, which can range from six months to three years or more. Government regulation may delay or prevent marketing of product candidates or new diseases for a considerable period of time and impose costly procedures upon our activities. The FDA or any other regulatory agency may not grant approvals for new indications for our product candidates on a timely basis, if at all. Success in early stage clinical trials does not ensure success in later stage clinical trials. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. Even if a product candidate receives regulatory approval, the approval may be significantly limited to specific disease states, patient populations and dosages. Further, even after regulatory approval is obtained, later discovery of

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previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. Delays in obtaining, or failures to obtain, additional regulatory approvals for NXY-059 would harm our business. In addition, we cannot predict what adverse governmental regulations may arise from future U.S. or foreign governmental action.

Any products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the drug. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with good manufacturing practices, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. We cannot be certain that we or our present or future suppliers will be able to comply with the good manufacturing practices regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution, or withdraw approval of the NDA for that drug.

The FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available drugs for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturers’ communications on the subject of off-label use.

The FDA’s policies may change and additional government regulations may be enacted which could prevent or delay regulatory approval of our product candidates or approval of new indications for our product candidates. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.

Competition

We compete in the segments of the pharmaceutical market that treat neurological and inflammatory diseases, which are highly competitive. We face significant competition from most pharmaceutical companies as well as many biotechnology companies that are also researching and selling products designed to treat neurological and inflammatory diseases. Many of our competitors have significantly greater financial, manufacturing, marketing and product development resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing and in obtaining regulatory approvals for drugs. These companies also have significantly greater research capabilities than we do. In addition, many universities and private and public research institutes are actively researching neurological and inflammatory diseases, some in direct competition with us. In addition, we also must compete with these organizations to recruit scientists and clinical development personnel.

We believe that our ability to successfully compete will depend on, among other things:

• efficacy, safety and reliability of our product candidates;

• timing and scope of regulatory approval;

• the speed at which we develop product candidates;

• completion of clinical development and laboratory testing and obtaining regulatory approvals for product candidates;

• our ability to manufacture and sell commercial quantities of a product to the market;

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• product acceptance by physicians and other health care providers;

• quality and breadth of our technology;

• skills of our employees and our ability to recruit and retain skilled employees;

• protection of our intellectual property; and

• availability of substantial capital resources to fund development and commercialization activities.

Employees

As of December 31, 2006, we had approximately 111 full-time employees, including 34 Ph.D.s. Of the full-time employees, 83 were engaged in research and development and 28 were engaged in general and administrative activities. On January 23, 2007, we announced a restructuring that reduced the number of full-time positions in the company to approximately 70 full-time employees. We believe our relations with our employees are good.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) are available free of charge on our Internet website as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the Securities and Exchange Commission, or SEC. Our website address is www.renovis.com. We can furnish without charge to you, upon written or oral request, copies of our reports. You should direct any request to John C. Doyle, Senior Vice President, Corporate Development and Chief Financial Officer, Renovis, Inc., Two Corporate Drive, South San Francisco, California 94080.

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Item 1A. Risk Factors

An investment in our common stock is very risky. You should carefully consider the risks described below, together with all of the other information in this report before making a decision to invest in our common stock. If any of the following risks actually occur, our business, financial condition, results of operations and growth prospects could be adversely affected. In this case, the trading price of our common stock could decline and you may lose all or part of your investment in our common stock. Additional risks and uncertainties, not presently known to us, or that we presently deem as immaterial, may also adversely affect our business. If any of these additional risks and uncertainties occur, the trading price of our common stock could decline, and you might lose all or part of your investment.

Risks Related to Our Company

We are an early stage biopharmaceutical company without commercial products, and we cannot assure you that we will successfully develop and commercialize potential products.

You must evaluate us in light of the uncertainties and complexities inherent in an early stage biopharmaceutical company. All of our product candidates are in early stages of development and the commercialization of those products will not occur, if at all, for at least the next several years. Our future success is dependent upon, among other factors, our ability to develop viable product candidates, successfully complete clinical trials and obtain regulatory approval for those product candidates. All of our early stage drug discovery programs are focused on unproven molecular disease targets and will require extensive additional research and development prior to the commercial introduction of any product candidates. There can be no assurance that any of our research and development and clinical trial efforts, or those of our strategic partners and licensees, will result in viable new products. For example, in October 2006, AstraZeneca, our exclusive licensee for our lead product candidate, NXY-059, indicated its intention to discontinue the development of NXY-059 following the announcement that NXY-059 did not meet the primary or secondary endpoints in a pivotal Phase III study. Also, in August 2005, based on results of our Phase II clinical trials with REN-1654 in patient volunteers with post-herpetic neuralgia and sciatica, we announced that we were discontinuing development of REN-1654 as an oral medication and, in June 2005, we announced our decision to discontinue efforts to develop REN-850 for the treatment of multiple sclerosis. Finally, in July 2004, we announced our decision to discontinue efforts to commercialize REN-213, an intravenous drug candidate we were developing for the treatment of acute post-operative pain.

We depend on the efforts of our strategic partners and licensees to develop and commercialize many of our product candidates.

We cannot control the time or resources that our strategic partners or licensees devote to our collaborations with those parties, nor can we control our strategic partners’ or licensees’ business decisions. In addition, our collaborators may not perform their obligations as expected. Changes in a collaborator's business strategy or business combinations involving a collaborator may adversely affect that party’s willingness or ability to successfully meet its obligations. Disagreements between us and our collaborators may lead to delays in or termination of the research, development or commercialization of product candidates or result in time-consuming and expensive negotiations, litigation or arbitration. The failure of our strategic partners or licensees to successfully complete their obligations in a timely manner or the termination or breach of agreements by these parties, could materially harm our business, financial condition and results of operations.

Clinical trials have in the past and may in the future fail to demonstrate the safety and efficacy of our product candidates, which could prevent or significantly delay their regulatory approval and may adversely affect our business and stock price.

Any failure or substantial delay in completing clinical trials for our product candidates may severely harm our business. Before obtaining regulatory approval for the sale of any of our potential products or the potential

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products of our current and future strategic partners and licensees, we and our strategic partners or licensees must subject these product candidates to extensive preclinical and clinical testing to demonstrate their safety and efficacy in humans. The success of this preclinical and clinical testing is critical to achieving our product development goals. If our product development efforts are unsuccessful, we will not obtain regulatory approval for them, we will not generate sales from them, and our business and results of operations would be adversely affected.

Clinical trials are expensive, time-consuming and typically take years to complete. In connection with clinical trials, we face the risks that:

• a product candidate may not prove to be efficacious;

• we may discover that a product candidate may cause harmful side effects;

• patients may die or suffer other adverse medical effects for reasons that may not be related to the product candidate being tested;

• the results may not confirm the positive results of earlier trials; and

• the results may not meet the level of statistical significance required by the FDA, or other regulatory agencies.

The results in early phases of clinical testing are based upon limited numbers of patients and a limited follow-up period and success in early phase trials may not be indicative of results in a large number of patients or long-term efficacy. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late stage clinical trials even after achieving promising results in earlier development activities, including previous late-stage clinical trials. For example, the results from the Phase III SAINT I trial for our lead product candidate, NXY-059, were not predictive of results obtained in the second and larger Phase III clinical trial, SAINT II, and following the announcement of the results of the SAINT II clinical trial and the decision by AstraZeneca to discontinue the development of NXY-059, our stock price declined significantly. Failure to demonstrate the safety and effectiveness of our product candidates in larger patient populations could prevent or significantly delay their regulatory approval and may adversely affect our business and our stock price.

Failure to enroll patients for clinical trials may cause delays in developing our product candidates.

We may encounter delays or rejections if we or our strategic partners or licensees are unable to enroll enough patients to complete clinical trials. Patient enrollment depends on many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites, the eligibility criteria for the trial and the number and size of ongoing clinical trials sponsored by others that seek to enroll similar patients. When one product candidate is evaluated in multiple clinical trials simultaneously, patient enrollment in ongoing trials can be adversely affected by negative results from completed trials. Any delays in planned patient enrollment may result in increased costs and delays, which could harm our ability to develop products.

The contract research organizations and independent clinical investigators that we and our strategic partners or licensees rely upon to conduct preclinical studies and clinical trials may not be diligent, careful or timely, and may make mistakes in the conduct of these studies.

We depend on contract research organizations, or CROs, and independent clinical investigators to conduct certain preclinical studies and clinical trials under their agreements with us or our collaborators. Before AstraZeneca decided to discontinue development of NXY-059, we depended on CROs to conduct clinical trials of NXY-059 under their agreements with AstraZeneca. In our preclinical research programs, we depend on CROs to conduct certain medicinal chemistry and in vivo testing activities that we are not staffed to perform ourselves. The personnel at these CROs are not our employees and we cannot control the amount or timing of

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resources that they devote to our programs. Our contracts with CROs may involve fixed fees. If the costs of performing the research activities or clinical trials exceed estimates, the CROs may fail to devote sufficient time and resources to our drug discovery and development programs, fail to enroll patients as rapidly as expected, or otherwise fail to perform in a satisfactory manner. Failure of the CROs to meet their obligations could adversely affect the development of our product candidates and delay the regulatory approval and commercial introduction of our product candidates. Moreover, these independent investigators and CROs may also have relationships with other commercial entities, some of which may compete with us. If independent investigators and CROs assist our competitors, it could harm our competitive position.

If we or our strategic partners or licensees fail to obtain U.S. regulatory approvals for product candidates under development, we will not be able to generate revenue in the U.S. market from the commercialization of product candidates.

We must receive FDA approval for each of our product candidates before we can commercialize or sell that product candidate in the United States. The FDA can limit or deny its approval for many reasons, including:

• a product candidate may be found to be unsafe or ineffective;

• regulators may interpret data from preclinical testing and clinical trials differently and less favorably than the way we interpret it;

• regulators may not approve the manufacturing processes or facilities that we or our strategic partners or licensees use; and

• regulators may change their approval policies or adopt new regulations.

Failure to obtain FDA approval or any delay or setback in obtaining such approval could:

• adversely affect our ability to market any drugs we develop independently or with strategic partners or licensees;

• impose additional costs and diminish any competitive advantages that we may attain; and

• adversely affect our ability to generate royalties or product revenues.

Any such failures or delays in the regulatory approval process for any of our product candidates would delay or diminish our receipt of product revenues, if any, and would materially adversely affect our business, financial condition and results of operations.

Even if we obtain FDA approval, our product candidate may not be approved for all indications that we request, which could limit the uses of our product and adversely impact our potential royalties and product sales. If FDA approval of a product is granted, such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-marketing follow-up studies. As to any product for which marketing approval is obtained, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping related to the product will be subject to extensive regulatory requirements. The subsequent discovery of previously unknown problems with the product may result in restrictions on the product, including withdrawal of the product from the market. We may be slow to adapt, or we may never adapt, to changes in existing requirements or adoption of new requirements or policies.

If we fail to comply with applicable U.S. regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, injunctions, civil penalties and criminal prosecution.

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If we or our strategic partners or licensees fail to obtain regulatory approvals in other countries for product candidates under development, we will not be able to generate revenue in such countries from the commercialization of product candidates.

In order to market our products outside of the United States, we and our strategic partners and licensees must comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries may include all of the risks detailed above regarding FDA approval in the United States. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory processes in others. Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such approval could have the same adverse effects detailed above regarding FDA approval in the United States, including the risks that our product candidate may not be approved for all indications that we request, which could limit the uses of our product and adversely impact our potential royalties and product sales, and that such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-marketing follow-up studies.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Even if our product candidates are approved and commercialized, competitive products may impede market acceptance of our products.

Hospitals, physicians or patients may conclude that our potential products are less safe or effective or otherwise less attractive than existing drugs. Even if approved and commercialized, any future product candidates may fail to achieve market acceptance with hospitals, physicians or patients. If our products do not receive market acceptance for any reason, our revenue potential could be diminished which would materially adversely affect our business, financial condition and results of operations. Further, our competitors may develop new products that could be more effective or less costly, or that may seem more cost-effective, than our products.

Most of our competitors have substantially greater capital resources, research and development staffs, facilities and experience in conducting clinical trials and obtaining regulatory approvals, as well as in manufacturing and marketing pharmaceutical products. As a result, they may achieve product commercialization or patent protection earlier than we can, if at all. Hospitals, physicians, patients or the medical community in general may not accept and use any products that we may develop.

We have no experience selling, marketing or distributing products and no internal capability to do so.

If we receive regulatory approval to commence commercial sales of any of our product candidates for which we have retained marketing rights, we will have to establish a sales and marketing organization with appropriate technical expertise and supporting distribution capability. At present, we have no sales or marketing personnel. Factors that may inhibit our efforts to commercialize our products without strategic partners or licensees include:

• our inability to recruit and retain adequate numbers of effective sales and marketing personnel;

• the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe our products;

• the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage against companies with broader product lines; and

• unforeseen costs associated with creating an independent sales and marketing organization.

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As an alternative to establishing our own sales and marketing organization, we may engage a pharmaceutical or other healthcare company with an existing distribution system and direct sales organization to assist us. We may not be able to successfully establish sales and distribution capabilities either on our own or in collaboration with third parties or gain market acceptance for our products. To the extent we enter co-promotion or other licensing arrangements, any revenues we receive will depend on the efforts of third parties, and we may not succeed.

If our partners, licensees or contract manufacturers of our products fail to devote sufficient time and resources to our concerns, or if their performance is substandard, our clinical trials and product introductions may be delayed and our costs may rise.

We have no manufacturing facilities, and we have no experience in the commercial manufacturing of drugs and no experience in designing drug manufacturing processes. We depend on our partners, licensees and contract manufacturers to produce our product candidates for clinical trials and to manufacture, supply, store and distribute any resulting products.

While we have not experienced problems with our partners, licensees or contract manufacturers to date, our reliance on these third parties exposes us to the following risks, any of which could delay or prevent the completion of our clinical trials, the approval of our product candidates by the FDA or other regulatory agencies, or the commercialization of our products, result in higher costs or deprive us of potential product revenues:

• Drug manufacturers are obliged to operate in accordance with FDA-mandated current good manufacturing practices, or cGMPs. A failure of any of our partners, licensees or contract manufacturers to establish and follow cGMPs and to document their adherence to such practices may lead to significant delays in the availability of material for clinical trials and may delay or prevent filing or approval of marketing applications for our products.

• Changing contract manufacturers may be difficult and the number of potential manufacturers is limited. Changing manufacturers may require re-validation of the manufacturing processes and procedures in accordance with FDA-mandated cGMPs. Such re-validation may be costly and time-consuming. It may be difficult or impossible for us to find replacement manufacturers on acceptable terms quickly, or at all.

Drug manufacturers are subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies to ensure strict compliance with cGMPs, other government regulations and corresponding foreign standards. We are not aware of any violations by our partners, licensees or contract manufacturers of any of these regulations or standards. While we are obligated to audit the performance of our contractor manufacturers, we do not have control over their compliance with these regulations and standards. Failure by our partners, licensees, contract manufacturers or us to comply with applicable regulations could result in sanctions that would have a material adverse effect on our business, including fines, injunctions, civil penalties, failure of the government to grant premarket approval of drugs, delays, suspension or withdrawal of approvals, seizures or recalls of product, operating restrictions and criminal prosecutions.

We or our strategic partners or licensees may not be able to manufacture our product candidates in commercial quantities, which would prevent us from commercializing our product candidates.

To date, our product candidates have been manufactured in small quantities for preclinical and clinical trials. If any of these product candidates are approved by the FDA or other regulatory agencies for commercial sale, they will need to be manufactured in larger quantities. We or our strategic partners or licensees, as applicable, may not be able to successfully increase the manufacturing capacity, whether in collaboration with contract manufacturers or independently, for any of our product candidates in a timely or economic manner, or at all. Significant scale-up of manufacturing may require additional validation studies, which the FDA must review and approve. If we or our strategic partners or licensees are unable to successfully increase the manufacturing capacity for a product candidate, the regulatory approval or commercial launch of that product candidate may be

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delayed or there may be a shortage in supply. Our product candidates require precise, high quality manufacturing. Failure to achieve and maintain these high manufacturing standards, including the incidence of manufacturing errors, could result in patient injury or death, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously hurt our business.

If we are unable to retain and recruit qualified scientists or if any of our key executives, key employees or key consultants discontinues his or her employment or consulting relationship with us, it may delay our development efforts or otherwise harm our business.

We are highly dependent on the key members of our management and scientific staff, especially our chief executive officer, Corey Goodman, Ph.D. and our Senior Vice President of Research and Development, Michael Kelly, Ph.D. The loss of any of our key employees or key consultants could impede the achievement of our research and development objectives. Furthermore, recruiting and retaining qualified scientific personnel to perform research and development work in the future is critical to our success. We may be unable to attract and retain personnel on acceptable terms given the competition among biotechnology, pharmaceutical and health care companies, universities and non-profit research institutions for experienced scientists. We maintain “key man” insurance on Dr. Goodman. We do not maintain “key man” insurance policies on any of our other officers or employees. All of our employees are employed “at will” and, therefore, each employee may leave our employment at any time.

Among other equity incentive compensation, we have granted deferred stock units and stock options as a method of attracting and retaining employees, motivating performance and aligning the interests of employees with those of our stockholders. Due to fluctuations in the trading price of our common stock, a substantial portion of the stock options held by our employees have exercise prices that are significantly higher than the current trading price of our common stock. If we are unable to implement and maintain equity compensation arrangements that provide sufficient incentives, we may be unable to retain our existing employees and attract additional qualified candidates.

In January 2007, we announced a restructuring plan, which included a reduction in headcount. The planning and implementation of our restructuring has placed, and may continue to place a strain on our managerial, operational and other resources. In addition, the restructuring may negatively affect our employee turnover, recruiting and retention, and may not enable us to reduce our costs to the extent anticipated. If we are unable to retain our existing employees, including qualified scientific personnel, and attract additional qualified candidates our business and results of operations could be adversely affected.

We have a history of losses and we may never achieve sustained profitability.

Since our inception, we have incurred significant net losses, including net losses of $28.4 million, $32.0 million, $39.9 million, $41.9 million and $25.1 million, respectively, for the years ended December 31, 2006, 2005, 2004, 2003 and 2002. As of December 31, 2006, our cumulative net loss was $182.3 million. None of our product candidates has completed development or received required regulatory approvals and, consequently, we have not generated revenues from the sale of products and do not expect to do so for at least the next several years. Even if one or more of our product candidates is commercialized, we expect to incur substantial losses for the foreseeable future. The development and sale of our products will require completion of clinical trials and significant additional research and development activities. We expect to continue to incur significant operating expenditures in the foreseeable future as we:

• expand our research and development programs; and

• advance new product candidates into clinical development from our existing research programs.

We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures. We will need to generate significant revenues to achieve profitability. Our ability to generate revenues and achieve profitability depends on successful completion of clinical trials, our additional

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research and development efforts, our ability to successfully commercially introduce our products, market acceptance of our products, the competitive position of our products and the other risk factors set forth in this report. We may not be able to generate these revenues, and we may never achieve profitability. Our failure to achieve, sustain and/or increase profitability on a quarterly or annual basis could negatively impact the market price of our common stock.

If we cannot raise additional capital on acceptable terms, we may be unable to complete clinical trials, obtain regulatory approvals or commercialize our product candidates.

We believe that existing cash reserves will fund our planned activities for more than the next 12 months. However, we will require substantial future capital in order to continue to conduct the research and development, clinical and regulatory activities necessary to bring our product candidates to market and to establish commercial manufacturing, sales and marketing capabilities. During the year ended December 31, 2006, our net cash used in operating activities was $19.0 million and we had capital expenditures of $3.0 million. Our future capital requirements depend on many factors, including:

• the progress of preclinical development and laboratory testing and clinical trials;

• the time and costs involved in obtaining regulatory approvals;

• delays that may be caused by evolving requirements of regulatory agencies;

• the number of product candidates we pursue;

• the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims;

• our plans to establish sales, marketing and/or manufacturing capabilities;

• our ability to establish, enforce and maintain selected strategic alliances and activities required for product commercialization;

• the acquisition of technologies, products or other companies and other business opportunities that require financial commitments; and

• our revenues, if any, from successful development and commercialization of our products.

We intend to seek additional funding through strategic collaborations. We face intense competition from many other companies in the pharmaceutical and biotechnology industry for corporate collaborations, as well as for establishing relationships with academic and research institutions and for obtaining licenses to proprietary technology. If we are unable to attract and retain corporate partners to develop, introduce and market our products, our business may be materially and adversely affected. Our strategy and any reliance on corporate partners, if we are able to establish such collaborative relationships, are subject to additional risks. Our collaborators may not devote sufficient resources to the development, introduction and marketing of our products or may not pursue further development and commercialization of products resulting from collaborations with us. If a corporate partner elects to terminate its relationship with us, our ability to develop, introduce and market our products may be significantly impaired and we may be forced to discontinue the product altogether. We may not be able to negotiate alternative corporate partnership agreements on acceptable terms, if at all. The failure of any collaboration efforts could have a material adverse effect on our ability to develop, introduce and market our products and, consequently, could have a material adverse effect on our business, results of operations and financial condition.

In addition to strategic collaborations, we may seek funding through private or public sales of our securities, entering into credit arrangements or licensing all or a portion of our technology. This funding may significantly dilute existing stockholders or may limit our rights to our technology.

In October 2006, we filed a registration statement on Form S-3 with the SEC to be able to sell from time to time up to $150.0 million of any combination of debt securities, common stock, preferred stock and warrants.

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The SEC has not declared this registration statement effective and securities may not be sold, nor may offers to buy the securities be accepted, prior to the time this registration statement becomes effective. The terms of any offering will be determined at the time of such offering. In addition, in 2005 we filed a registration statement on Form S-3 with the SEC to be able to sell from time to time up to $100.0 million of any combination of debt securities, common stock, preferred stock and warrants. The SEC declared this registration statement effective in May 2005. In September 2005, we sold 4,000,000 shares of common stock to the public under this registration statement at $13.50 per share for gross proceeds of $54.0 million. As of December 31, 2006, $46.0 million remains available under this registration statement.

We may not be able to obtain additional funding on reasonable terms, or at all. If we cannot obtain adequate funds, we may:

• terminate or delay preclinical development or clinical trials for one or more of our product candidates;

• delay establishment, or fail to establish, sales, marketing and/or manufacturing capabilities;

• curtail significant product development programs that are designed to identify new product candidates;

• not be in a position to acquire technologies or pursue other business opportunities that require financial commitments; and/or

• relinquish rights to our technologies or product candidates.

Risks Related to Our Industry

Claims that we infringe a third party’s intellectual property may give rise to burdensome litigation, result in potential liability for damages or stop our development and commercialization efforts.

Third parties may assert patent or other intellectual property infringement claims against us or our strategic partners or licensees with respect to technologies used in our potential products. While we have conducted patent searches to determine whether the technologies used in our products infringe patents held by third parties, we expect that numerous patent applications are currently pending and may be filed in the future for technologies generally related to our technologies, including many patent applications that remain confidential after filing. Due to these factors and the inherent uncertainty in conducting patent searches, we may violate third-party patent rights that we have not yet identified.

U.S. and foreign patents have been issued to third parties in the same fields as some of our product candidates. There may also be patent applications filed by these or other parties in the United States and various foreign jurisdictions that are in the same fields as some of our product candidates. These patent applications, if issued, could subject us to infringement actions. Although we have received communications from a third party alleging that we may infringe certain patents held by the third party, we do not believe there is a reasonable basis for an action claiming that we are infringing any valid and enforceable patents of such third party. To date we have not been subject to any infringement actions.

The owners or licensees of these and other patents may file one or more infringement actions against us. Patent litigation can involve complex factual and legal questions and its outcome is uncertain. Any claim relating to infringement of patents that is successfully asserted against us may cause us to pay substantial damages.

Even if we were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. Furthermore, as a result of a patent infringement suit brought against us or our strategic partners or licensees, we or our strategic partners or licensees may be forced to stop or delay developing, manufacturing or selling potential products that are claimed to infringe a third party’s intellectual property unless that party grants us or our strategic partners or licensees rights to use its intellectual property. In such cases, we may be required to obtain licenses to patents or

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proprietary rights of others in order to continue to commercialize our products. However, we may not be able to obtain any licenses required under any patents or proprietary rights of third parties on acceptable terms, or at all. Even if our strategic partners, licensees or we were able to obtain rights to the third party’s intellectual property, these rights may be non-exclusive, thereby giving our competitors access to the same intellectual property. Ultimately, we may be unable to commercialize some of our potential products or may have to discontinue development of a product candidate or cease some of our business operations as a result of patent infringement claims, which could severely harm our business.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain product candidates, which could severely harm our business.

If we are unable to protect our intellectual property rights, our competitors may develop and market products with similar features that may reduce demand for our potential products.

The following factors are important to our success:

• receiving patent protection for our product candidates;

• not infringing on the intellectual property rights of others;

• preventing others from infringing our intellectual property rights; and

• maintaining our patent rights and trade secrets.

We will be able to protect our intellectual property rights in patents and trade secrets from unauthorized use by third parties only to the extent that such intellectual property rights are covered by valid and enforceable patents or are effectively maintained as trade secrets.

We try to protect our proprietary position by filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. Because the patent position of biotechnology and pharmaceutical companies involves complex legal and factual questions, the issuance, scope and enforceability of patents cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. U.S. patents and patent applications may also be subject to interference proceedings and U.S. patents may be subject to reexamination proceedings in the U.S. Patent and Trademark Office (and foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent office), which proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, reexamination and opposition proceedings may be costly. Thus, any patents that we own or license from others may not provide any protection against competitors. Our pending patent applications, those we may file in the future or those we may license from third parties may not result in patents being issued. If issued, they may not provide us with proprietary protection or competitive advantages against competitors with similar technology. Furthermore, others may independently develop similar technologies or duplicate any technology that we have developed. We rely on third-party payment services for the payment of foreign patent annuities and other fees. Non-payment or delay in payment of such fees, whether intentional or unintentional, may result in loss of patents or patent rights important to our business.

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Many countries, including certain countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties (for example, in cases in which the patent owner has failed to “work” the invention in that country, or the third party has patented improvements). In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent. Compulsory licensing of life-saving drugs is also becoming increasingly popular in developing countries either through direct legislation or international initiatives. Such compulsory licenses could be extended to include some of our product candidates, which could limit our potential revenue opportunities. Moreover, the legal systems of certain countries, particularly certain developing countries, do not favor the aggressive enforcement of patent and other intellectual property protection which makes it difficult to stop infringement.

In addition, our ability to enforce our patent rights depends on our ability to detect infringement. It is difficult to detect infringers who do not advertise the compounds that are used in their products. Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations.

We also rely on trade secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. We try to protect this information by entering into confidentiality agreements with parties that have access to it, such as our strategic partners, collaborators, employees and consultants. Any of these parties may breach these agreements and disclose our confidential information or our competitors might learn of the information in some other way. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business, financial condition and results of operations could be materially adversely affected.

Governmental and third-party payors may impose sales and pharmaceutical pricing restrictions or controls on our potential products that could limit our future product revenues and adversely affect profitability.

The commercial success of our potential products is substantially dependent on whether third-party reimbursement is available for the ordering of our products by the medical profession for use by their patients. Medicare, Medicaid, health maintenance organizations and other third-party payors may not cover or provide adequate payment for our potential products. They may not view our potential products as cost-effective and reimbursement may not be available to consumers or may not be sufficient to allow our potential products to be marketed on a competitive basis. Likewise, legislative or regulatory efforts to control or reduce health care costs or reform government health care programs could result in lower prices or rejection of our potential products. Changes in reimbursement policies or health care cost containment initiatives that limit or restrict reimbursement for our products may cause our future product revenues, if any, to decline.

Competition in the biotechnology and pharmaceutical industries is intense, and if we fail to compete effectively our financial results will suffer.

Our business is characterized by extensive research efforts, rapid developments and intense competition. Our competitors may have or may develop superior technologies or approaches to the development of competing products, which may provide them with competitive advantages. Our potential products may not compete successfully. We believe that successful competition in our industry depends on product efficacy, safety, reliability, availability, timing, scope of regulatory approval, acceptance and price, among other things. Important factors to our success also include speed in developing product candidates, completing clinical development and laboratory testing, obtaining regulatory approvals and manufacturing and selling commercial quantities of potential products to the market.

We expect competition to increase as technological advances are made and commercial applications broaden. In commercializing our initial product candidates and any additional product candidates, we will face substantial competition from pharmaceutical, biotechnology and other companies, universities and research institutions.

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Many of our competitors have substantially greater capital resources, research and development staffs, facilities and experience in conducting clinical trials and obtaining regulatory approvals, as well as in manufacturing and marketing pharmaceutical products. Many of our competitors may achieve product commercialization or patent protection earlier than we achieve commercialization or patent protection, if at all. Furthermore, we believe that some of our competitors have used, and may continue to use, litigation to gain a competitive advantage.

Rapid technological change could make our products obsolete.

Biopharmaceutical technologies have undergone rapid and significant change and we expect that they will continue to do so. Any compounds, products or processes that we or our strategic partners or licensees develop may become obsolete or uneconomical before achieving significant revenues. Rapid technological change could also make our products obsolete or uneconomical.

We face potential product liability exposure far in excess of our limited insurance coverage.

The use of any of our product candidates in clinical trials, and the sale of any approved products, may expose us to product liability claims. These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling our products. We have obtained limited product liability insurance coverage for our clinical trials in the amount of $1 million per occurrence and $1 million in the aggregate. However, our insurance may not reimburse us or may not be sufficient to reimburse us for expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for any of our product candidates in development, we intend to expand our insurance coverage to include the sale of commercial products, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing. On occasion, juries have awarded large judgments in class action lawsuits based on drugs that had unanticipated side effects. In addition, the pharmaceutical and biotechnology industries, in general, have been subject to significant medical malpractice litigation. A successful product liability claim or series of claims brought against us would decrease our cash reserves and could cause our stock price to fall.

Our activities involve hazardous materials and we may be liable for any resulting contamination or injuries.

Our research activities involve the use of hazardous materials. We cannot eliminate the risk of accidental contamination or injury from these materials. If an accident occurs, we may be liable for any resulting damages, which may decrease our cash reserves and could cause our stock price to fall.

If we are unable to complete our assessment as to the adequacy of our internal control over financial reporting within the required time periods as required by Section 404 of the Sarbanes-Oxley Act of 2002, or in the course of such assessments identify and report material weaknesses in our controls, our investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company’s internal controls over financial reporting in their Annual Reports on Form 10-K. This report is required to contain an assessment by management of the effectiveness of the company’s internal controls over financial reporting. In addition, the independent registered public accounting firm auditing a public company’s financial statements must attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting. Although our management has determined, and our independent registered public accounting firm has attested, that our internal control over financial reporting was effective as of December 31, 2006, and we intend to continue to diligently and vigorously review our internal controls over financial reporting in order to ensure

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compliance with the Section 404 requirements, if our independent registered public accounting firm is not satisfied in the future with our internal controls over financial reporting or the level at which these controls are documented, designed, operated or reviewed, or if said firm interprets the requirements, rules or regulations differently from us, then they may decline to attest to management’s assessment or may issue a report that is qualified or has a scope limitation. We anticipate to continue to expend resources in developing the necessary documentation and testing procedures required by Section 404; however, there is a risk that in the future we will not comply with all of the requirements imposed by Section 404. In addition, the very limited sized of our organization could lead to conditions that could be considered material weaknesses, such as those related to segregation of duties that is possible in larger organizations but significantly more difficult in smaller organizations. Also, controls related to our general information technology infrastructure may not be as comprehensive as in the case of a larger organization with more sophisticated capabilities and more extensive resources. It unclear how such circumstances could be interpreted in the future in the context of an assessment of internal controls over financial reporting. If we fail to implement required new or improved controls, we may be unable to comply with the requirements of Section 404 in the future. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline or could limit our ability to obtain additional financing.

Risks Related to Our Common Stock

Our stock price has fluctuated significantly and we expect that it may continue to do so.

An active public market for our common stock may not be sustained. The stock market, particularly in recent years, has experienced significant volatility particularly with respect to pharmaceutical and biotechnology stocks. The volatility of pharmaceutical and biotechnology stocks often does not relate to the operating performance of the companies represented by the stock. Other price fluctuations are directly attributable to performance. In October 2006, following the announcement of results from the pivotal Phase III study (SAINT II) of our lead product candidate, NXY-059, and the decision of our exclusive licensee, AstraZeneca, to discontinue development of NXY-059, our stock price declined significantly.

Factors that could cause volatility in the market price of our common stock include:

• the results from our clinical trial programs and any future trials we may conduct;

• developments in the clinical trials of potentially similar competitive products;

• FDA or international regulatory actions;

• failure of any of our product candidates, if approved, to achieve commercial success;

• announcements of the introduction of new products by us or our competitors;

• market conditions in the pharmaceutical and biotechnology sectors;

• developments concerning intellectual property rights;

• litigation or public concern about the safety of our potential products;

• comments by securities analysts;

• actual and anticipated fluctuations in our quarterly operating results;

• deviations in our operating results from the estimates of securities analysts;

• rumors relating to us or our competitors;

• additions or departures of key personnel;

• third party reimbursement policies; and

• developments concerning current or future collaborations, strategic alliances or similar relationships.

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These and other external factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management.

Future sales of common stock by our existing stockholders may cause our stock price to fall.

The market price of our common stock could decline as a result of sales by our existing stockholders of shares of common stock in the market, or the perception that these sales could occur. These sales might also make it more difficult for us to sell equity securities at a time and price that we deem appropriate.

Our directors and management exercise significant control over our company.

If acting together, our directors and executive officers and their affiliates can influence our management and affairs and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company and might affect the market price of our common stock.

Provisions of Delaware law or our charter documents and stockholder rights plan could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for stockholders to change management.

Provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. This is because these provisions may prevent or frustrate attempts by stockholders to replace or remove our current management.

These provisions include:

• a classified board of directors;

• a prohibition on stockholder action through written consent;

• a requirement that special meetings of stockholders be called only by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors;

• advance notice requirements for stockholder proposals and nominations;

• a requirement of approval of not less than 66 ²/3% of all outstanding shares of our capital stock entitled to vote to amend any bylaws by stockholder action, or to amend certain provisions of our certificate of incorporation; and

• the authority of the Board of Directors to issue preferred stock with such terms as the Board of Directors may determine.

As a result, these provisions and others available under Delaware law could limit the price that investors are willing to pay in the future for shares of our common stock.

In addition, in March 2005, we adopted a stockholder rights plan. Although the rights plan will not prevent a takeover, it is intended to encourage anyone seeking to acquire our company to negotiate with our board prior to attempting a takeover by potentially significantly diluting an acquirer’s ownership interest in our outstanding capital stock. The existence of the rights plan may also discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock.

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We have never paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.

We have paid no cash dividends on any of our classes of capital stock to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our businesses. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

On September 1, 2003, we commenced a lease on 60,235 square feet of office and laboratory space in South San Francisco, California. The space rented under this lease increased to 70,235 total square feet on May 1, 2006. The lease expires on August 31, 2009, although we have an option to extend the lease until August 31, 2012. On October 31, 2003, we entered into a sublease for our former office and laboratory space in South San Francisco. The agreement for our former facility expired on October 1, 2005. We believe that our current facility is adequate for our current needs.

Item 3. Legal Proceedings

We are not currently a party to any material legal proceedings. We may from time to time become a party to various legal proceedings arising in the ordinary course of business.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of the security holders during the fourth quarter of 2006.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is traded on the NASDAQ Global Market under the symbol RNVS. The following table sets forth the range of the high and low intraday prices per share of our common stock on the NASDAQ Global Market. These prices represent quotations among dealers without adjustments for retail markups, markdowns or commissions, and may not represent prices of actual transactions.

	High		Low
Fiscal Year Ended December 31, 2005:
First Quarter	$	14.44	$	7.64
Second Quarter	$	19.25	$	6.34
Third Quarter	$	16.54	$	11.80
Fourth Quarter	$	17.10	$	12.40
Fiscal Year Ended December 31, 2006:
First Quarter	$	24.01	$	15.05
Second Quarter	$	21.23	$	13.40
Third Quarter	$	16.00	$	10.53
Fourth Quarter	$	15.46	$	2.99

As of March 1, 2007, there were approximately 253 holders of record of our common stock. This number does not include the number of persons whose shares are in nominee or in “street name” accounts through brokers.

Dividend Policy

We have never declared or paid cash dividends on our capital stock. We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business.

Securities Authorized for Issuance under Equity Compensation Plans

The information required by this Item concerning the Company’s equity compensation plans is discussed in Note 10 to the financial statements contained in Part II Item 8 of this annual report.

Recent Sales of Unregistered Securities

On November 8, 2006, Renovis contributed 10,000 shares of the Company’s common stock to custodial accounts for each of the two minor children of a recently deceased employee of the company in exchange for an aggregate purchase price of $20.00, which is equal to the par value of the shares. These shares were issued in accordance with the exemption from registration provided under Section 4(2) of the Securities Act of 1933, as amended, or such other exemptions as may be available.

Use of Proceeds from Registered Securities

Our Registration Statement on Form S-1 (Reg. No. 333-109806) in connection with our initial public offering was declared effective by the SEC on February 4, 2004. We completed our initial public offering on February 10, 2004 for gross proceeds of $75.9 million. The Company paid the underwriters a commission of $5.3 million and incurred offering expenses of $2.2 million. After deducting the underwriters’ commission and the offering expenses, the Company received net proceeds of approximately $68.4 million.

Our Registration Statement on Form S-3 (Reg. No. 333-122762) was declared effective by the SEC on May 23, 2005. We completed a public offering under this Registration Statement on September 28, 2005 for

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gross proceeds of $54.0 million. The Company paid the underwriters a commission of $3.2 million and incurred offering expenses of $0.3 million. After deducting the underwriters’ commission and the offering expenses, the Company received net proceeds of approximately $50.4 million.

No payments for such expenses were made directly or indirectly to (i) any of our directors, officers or their associates, (ii) any person(s) owning 10% or more of any class of our equity securities or (iii) any of our affiliates.

The net proceeds have been invested into investment grade securities and money market accounts.

We have begun to use, and intend to continue to use, these proceeds for general corporate purposes, including clinical trials, research and development expenses, general and administrative expenses, manufacturing expenses and potential acquisitions of companies, products and technologies that complement our businesses.

Performance Graph⁽¹⁾

The following graph and related table compare the cumulative stockholder return on our common stock with the cumulative total return of the Nasdaq Composite Index (Nasdaq) and the Nasdaq Biotechnology Index (Nasdaq Biotech) for the period beginning on February 4, 2004, the date of our initial public offering and ending on December 31, 2006. The stock price performance on the graph below is not necessarily indicative of future price performance, and we do not make or endorse any predictions as to future stockholder returns.

The following graph and related table assumes that $100.00 was invested on February 4, 2004, the date of our initial public offering, in our common stock or the designated index, including reinvestment of dividends. We have not declared or paid any dividends on our common stock.

Cumulative Total Return

⁽¹⁾ This section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act or the Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Issuer Purchases of Equity Securities

We did not repurchase any shares of common stock during fiscal 2006.

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Item 6. Selected Financial Data

You should read the following selected financial data together with our financial statements and related notes appearing in Part II Item 8 of this report and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section appearing in Part II Item 7 of this report. The historical results are not necessarily indicative of results of any future periods.

	Year ended December 31,
	2006			2005			2004			2003			2002
	(in thousands, except per share data)
Statement of Operations Data:
Contract revenue	$	10,428		$	6,647		$	2,625		$	4,500		$	—
Operating expenses:
Research and development		28,112			30,724			33,899			21,805			10,944
General and administrative		15,595			10,087			9,750			7,141			5,266
Acquired in-process research and development		—			—			—			17,305			8,882
Total operating expenses		43,707			40,811			43,649			46,251			25,092
Loss from operations		(33,279	)		(34,164	)		(41,024	)		(41,751	)		(25,092	)
Interest income (expense), net		4,903			2,184			1,083			(121	)		15
Net loss	$	(28,376	)	$	(31,980	)	$	(39,941	)	$	(41,872	)	$	(25,077	)
Deemed dividend upon issuance of Series E convertible preferred stock		—			—			—			(43,393	)		—
Net loss applicable to common stockholders	$	(28,376	)	$	(31,980	)	$	(39,941	)	$	(85,265	)	$	(25,077	)
Basic and diluted net loss per share applicable to common stockholders	$	(0.97	)	$	(1.24	)	$	(1.84	)	$	(87.93	)	$	(41.94	)
	At December 31,
	2006			2005			2004			2003			2002
	(in thousands)
Balance Sheet Data
Cash, cash equivalents and short-term investments	$	99,107		$	118,889		$	86,959		$	41,437		$	17,415
Total assets		107,301			126,612			96,125			52,551			25,866
Long-term liabilities		3,684			6,372			3,039			1,672			2,343
Convertible preferred stock		—			—			—			123,266			59,388
Total stockholders’ equity (net capital deficiency)		93,086			108,598			82,776			(78,552	)		(39,762	)

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth above under the caption “Business – Risk Factors.” You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements for the year ended December 31, 2006 and the related notes appearing in Part II Item 8 of this report.

Overview

We are a biopharmaceutical company focused on the discovery and development of drugs to treat major medical needs in the areas of neurological and inflammatory diseases. Our integrated capabilities in preclinical research and development, including medicinal chemistry, bioinformatics, molecular biology and pharmacology, enable us to identify and select drug candidates that meet stringent standards for development. This approach has yielded multiple lead candidates in our preclinical programs for pain and inflammation. Our proprietary preclinical programs are focused on identifying antagonists of selected purinergic receptors as novel potential treatments for a broad spectrum of pain and inflammatory conditions. In addition, we have entered into a collaboration with Pfizer to discover and develop product candidates targeting the vanilloid receptor, VR1, for the potential treatment of pain and other diseases and disorders, as well as a collaboration with Genentech in the areas of nerve growth and anti-angiogenesis.

Our business strategy is to become an integrated biopharmaceutical company by creating a pipeline of potential first- and best-in-class product candidates for major medical needs, primarily in the areas of neurological and inflammatory diseases. We are pursuing this goal by investing strategically in our internal drug discovery activities and by applying our expertise to the identification and potential acquisition of external programs that are complementary to our own.

In October 2006, we announced the results of a pivotal Phase III study (SAINT II) of NXY-059, a novel free radical trapping neuroprotectant, in acute ischemic stroke that was conducted by our exclusive licensee, AstraZeneca. The SAINT II study did not demonstrate a statistically significant reduction on the primary endpoint of stroke-related disability in patients treated with NXY-059, as assessed versus placebo using the modified Rankin Scale. In addition, no statistically significant treatment benefit was seen with NXY-059 on secondary endpoints measuring the drug candidate’s effects on neurological impairment and the reduction of the incidence of symptomatic intracranial hemorrhage when administered with the approved thrombolytic agent, rt-PA. The SAINT II data showed that NXY-059 was well tolerated and the mortality rate was comparable in the treatment and placebo groups. After reviewing the data from this study, AstraZeneca decided to discontinue development of NXY-059. We have not incurred any asset impairment or additional liabilities associated with AstraZeneca’s decision to discontinued the development of NXY-059. We intend to thoroughly evaluate potential future development options for NXY-059, but have no present plans to conduct further clinical trials with this drug candidate.

We have a limited history of operations. Since our inception we have generated all of our revenues from agreements with corporate partners. During certain periods in 2004 and 2005, we conducted one or more Phase I and Phase II clinical trials with three product candidates that we subsequently discontinued based on our review of data generated in the studies. Each of these product candidates was obtained through a license agreement or acquisition from a third party.

In May 2005, we entered into a collaborative research agreement and a license and royalty agreement with Pfizer to research, develop and commercialize small molecule compounds that target the vanilloid receptor, VR1. The collaboration focuses on treatments for pain and other diseases and disorders. Under the agreements, we received an upfront license fee of $10.0 million in July 2005. We have deferred the upfront license fee and are recognizing it as contract revenue on a straight-line basis over the estimated research period of two years through

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June 2007. In addition to the upfront license fee, the Pfizer collaboration also provides us with research funding in excess of $7.0 million which is being recognized over the estimated research period. Pfizer has the option to extend the research period for up to two additional years from June 2007 subject to additional funding requirements. Additionally, upon the successful achievement of research, development and commercialization milestones for each product resulting from the collaboration, we will be eligible to receive milestone payments greater than $170.0 million in aggregate. In addition to milestone payments, we will be entitled to receive double-digit royalties on net sales by Pfizer upon commercialization of a product generated by the collaboration. We began recognizing revenue under these agreements in the third quarter of 2005. For the years ended December 31, 2006 and 2005, we recognized $10.1 million and $4.3 million, respectively, in contract revenue. Revenue recognized in 2006 included milestone revenue of $1.5 million that we earned in connection with the progression of a product candidate from the VR1 collaboration into advanced preclinical studies.

In December 2003, we entered into a collaborative research, development and license agreement with Genentech for the discovery and development of drugs that inhibit pathological or tumor angiogenesis and promote nerve re-growth following nervous system injury. Under the terms of the agreement, Genentech paid us an upfront license and technology access fee of approximately $5.3 million in January 2004 and made a $3.0 million equity purchase concurrent with our initial public offering. The upfront payment was deferred and recognized as contract revenue on a straight-line basis over the research period, which ended in February 2006. While the research period has ended, the agreement with Genentech remains in effect. We are eligible to receive future milestones and royalty payments on therapeutic products emerging from the collaboration that are developed and commercialized by Genentech. In exchange, Genentech obtained exclusive worldwide rights to research, develop, manufacture and commercialize protein-based therapeutics and other drug compositions for the treatment of cancer and other diseases in which mechanisms underlying new blood vessel growth play a significant role. Unless Genentech exercises certain rights and makes additional payments to us, we will have the right to develop and commercialize products arising from the collaboration that are specifically useful for the treatment of central and peripheral nervous system diseases and conditions. We would be required to make royalty payments and, in certain cases, milestone payments to Genentech on products that we develop and commercialize under the collaboration. As of December 31, 2006, we have not incurred any such payments under the agreement with Genentech.

As of December 31, 2006, we had an accumulated deficit of $182.3 million and approximately $99.1 million in cash, cash equivalents and short-term investments. We anticipate that our current cash, cash equivalents and short-term investments will enable us to maintain our currently planned operations for more than the next 12 months. However, changes to our current operating plan may require us to consume our capital resources sooner than we expect.

We expect to incur substantial losses for the foreseeable future as we:

• expand our research and development programs;

• advance new product candidates into clinical development from our existing research; and

• acquire, license or otherwise invest in technology, product candidates and businesses that are complementary to our own.

Revenues

We do not expect to generate revenue from product sales or royalties in the foreseeable future. We seek to generate revenue from a combination of research funding, product sales, upfront fees and milestone payments in connection with collaborative or strategic relationships, and royalties resulting from the license of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of milestone payments we may receive from our collaborative or strategic relationships, as well as those we may receive upon the sale of our products, to the extent any are successfully commercialized. Revenue

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derived from collaborative and strategic relationships helps us fund our operations and may increase in the future if we are successful in achieving milestones in our existing collaborations, licensing our technology and establishing new collaborations or strategic relationships. If we are unsuccessful in these goals, our revenues will decline and we may be required to limit our research and development, clinical trial, manufacturing and marketing efforts.

Research and Development Expenses

Our research and development (R&D) expenses consist primarily of costs associated with research, preclinical development and clinical trials involving product opportunities in the areas of neurological and inflammatory diseases.

The expenses we incur in connection with our research, preclinical and clinical development consist primarily of:

• employee compensation (including non-cash expenses for stock-based compensation);

• supplies and materials;

• costs for consultants, contract research and clinical trials (including non-cash expenses for stock-based compensation to non-employees);

• license fees;

• facilities and overhead costs;

• funded R&D at other companies and research institutions;

• manufacturing of drug supplies for our programs; and

• depreciation of equipment.

R&D costs, including some upfront fees and milestones paid to collaborators, are expensed as incurred. The timing of upfront fees and milestone payments in the future may cause variability in our future R&D expenses.

During the years ended December 31, 2006, 2005 and 2004, we incurred research and development expenses of $28.1 million, $30.7 million and $33.9 million, respectively. All of the research and development expense incurred in 2006 related to our preclinical R&D programs. The majority of research and development expense incurred in 2005 and 2004 relates to our preclinical R&D programs and clinical development activities. For the years ended December 31, 2005 and 2004, we incurred $25.4 million and $22.5 million, respectively, in R&D expense relating to our preclinical programs and $5.3 million and $11.4 million, respectively, in R&D expense relating to clinical development activities. During the years ended December 31, 2006 and 2005, research and development expense decreased by $2.6 million and $3.2 million, respectively. The decrease in research and development expense in the past two years primarily reflected our decisions to end two clinical development programs, both of which involved multiple Phase II clinical studies that were in progress during 2004 and the first two quarters of 2005. Preclinical R&D expense increased in 2006 from 2005 and 2004 as a result of our investments in preclinical activities in the areas of neurological and inflammatory diseases. The increase in expense in 2006 is the result of adding key personnel in chemistry and pharmacology to support expansion of our preclinical programs, including our proprietary programs to identify antagonists of the purinergic receptors, P2X7 and P2X3. We also maintained our effort to identify and advance molecules within our collaboration with Pfizer, and we invested in certain exploratory programs that represent future opportunities to further expand our internal pipeline.

Our clinical development efforts during 2004 were focused exclusively on initiating and conducting multiple Phase II clinical trials with REN-213 and REN-1654. We discontinued clinical development activities involving REN-213 and REN-1654 during 2004 and 2005, respectively. Our preclinical R&D activities during

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2004 included toxicology and efficacy studies of various development candidates in preclinical models of pain and inflammatory disease as well as formulation and manufacturing of drug supply for these studies. The preclinical R&D amount of $22.5 million was expended primarily on employee costs, supplies and materials and infrastructure related to neurobiology, chemistry, cell biology and related functions associated with our earlier stage research programs.

Development timelines and costs are difficult to estimate and may vary significantly for each product candidate and from quarter to quarter. The process of seeking regulatory approvals, and the subsequent compliance with applicable regulations, requires the expenditure of substantial resources.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation, including non-cash, stock-based compensation, for employees in executive and operational functions, including finance, legal, human resources and business development. Other significant costs include facilities costs and professional fees for accounting and legal services, including legal services associated with obtaining and maintaining patents.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. We review our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included in this report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

Our revenues are generated by complex collaborative research and licensing arrangements. Revenues under such agreements may include upfront payments, research funding, milestone payments and royalties. In accordance with Emerging Issues Task Force (EITF) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, we evaluate whether the delivered element under these arrangements has value to our collaborative partner or licensee on a stand-alone basis and whether objective and reliable evidence of fair value of the undelivered element exists. Arrangements with multiple deliverables that do not meet these criteria are treated as one unit of accounting for purposes of revenue recognition.

Revenues from nonrefundable upfront technology license fees, for product candidates where we are providing continuing services related to product development, are deferred and recognized as revenues ratably over the estimated period of performance under the research agreement. The performance period is estimated at the inception of the arrangement and is periodically reevaluated. The reevaluation of the performance period may shorten or lengthen the period during which the deferred revenue is recognized, which would result in an acceleration or delay of expected revenue recognition.

Research funding is recognized as revenue as the related effort is performed.

Milestone payments we receive under collaborative arrangements are recognized as revenues upon achievement of the milestone events, which represent the culmination of the earnings process, and when collectability is reasonably assured. Milestone payments are triggered either by the results of our research efforts or by events external to us, such as regulatory approval to market a product or the achievement of specified sales

34

levels by a marketing partner or licensee. Accordingly, the milestone payments are substantially at risk at the inception of the contract, and the amounts of the payments assigned thereto are commensurate with the milestone achieved. Upon the achievement of a milestone event, we have no future performance obligations related to that milestone as the milestone payments we receive are nonrefundable.

Stock Compensation

Effective January 1, 2006, we adopted the fair value recognition provision of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which requires the recognition of the fair value of stock-based compensation. Under the fair value recognition provisions for SFAS 123(R), stock-based compensation cost is estimated at the grant date based on the fair value of the awards expected to vest and recognized as expense ratably over the requisite service period of the award. We have used the Black-Scholes valuation model to estimate fair value of our stock-based awards which requires various judgmental assumptions including estimating stock price volatility, forfeiture rates and expected life. Our computation of expected volatility is based on a combination of peer companies’ historical volatilities and our market-based implied volatility. In addition, we consider many factors when estimating expected forfeitures and expected life, including types of awards, employee class and historical experience. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period.

We adopted SFAS 123(R) using the modified prospective method which requires the application of the accounting standard as of January 1, 2006. Our financial statements in 2006 reflect the impact of SFAS 123(R). In accordance with the modified prospective method, the financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R).

Upon the adoption of SFAS 123(R) in January 2006, the deferred stock compensation balance of $4.9 million was reclassified to additional paid-in-capital.

Clinical Study Activities and Other Expenses from Third-Party Contract Research Organizations

Some of our research and development, including certain preclinical and clinical study activity, is conducted by various third parties, including contract research organizations, which may also provide contractually defined administration and management services. We recognize expenses for these contracted activities based upon a variety of factors, including estimated and actual labor hours, actual and estimated patient enrollment rates, clinical site initiation activities and other activity-based factors. On a regular basis, our estimates of these costs are reconciled to actual invoices from the service providers, and adjustments are made accordingly.

Results of Operations

Comparison of the Twelve Months Ended December 31, 2006, 2005 and 2004

Revenue

Total revenue and dollar and percentage changes for each of the three years ending December 31, 2006 are as follows (dollar amounts are in thousands):

	2006			2005			2004
Pfizer collaboration	$	10,100		$	4,350		$	—
Genentech collaboration		328			2,297			2,625
Total revenue	$	10,428		$	6,647		$	2,625
Dollar increase	$	3,781		$	4,022
Percentage increase		57	%		153	%

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The increase in revenue in 2006 as compared to 2005 resulted from a collaborative research agreement and a license and royalty agreement with Pfizer that we signed in May 2005. Under the agreements with Pfizer we received an upfront license fee of $10.0 million in July 2005. We recorded the upfront license fee as deferred revenue and are recognizing it as contract revenue on a straight-line basis over the estimated research period of two years. In addition to the upfront license fee, the agreements with Pfizer also provide the Company with total research funding of more than $7.0 million during the two-year research period. Revenue recognized in 2006 included milestone revenue of $1.5 million that we earned in connection with the progression of a product candidate from the VR1 collaboration into advanced preclinical studies. Revenue recognized under a collaborative agreement with Genentech decreased in 2006 as compared to 2005 as the funded research period ended in February 2006 and all collaborative revenue was fully earned in the first quarter of 2006.

The year-over-year increase in revenue in 2005 as compared to 2004 is mainly attributable to the collaborative research agreement and license and royalty agreement with Pfizer that was executed in May 2005.

We expect that any revenue we may earn will fluctuate from year over year as a result of the timing and amount of any milestone payments we earn or any new collaborations we may enter into in the future. For the year ending December 31, 2007, we presently anticipate contract revenue from existing agreements of approximately $4.3 million to $8.8 million.

Research and Development Expenses

Total research and development expenses and dollar and percentage changes for each of the three years ending December 31, 2006 are as follows (dollar amounts are in thousands):

	2006			2005			2004
Total R&D expense	$	28,112		$	30,724		$	33,899
Dollar decrease	$	(2,612	)	$	(3,175	)
Percentage decrease		(9	)%		(9	)%

Specific changes in R&D expense in 2006 as compared to 2005 are as follows:

• clinical development costs, manufacturing costs of clinical trial supplies and costs of outside services decreased by $4.2 million primarily due to our decisions to end two clinical development programs;

• amortization of intangible assets decreased to $0 in 2006 from $1.1 million as the underlying intangible assets were fully amortized as of the end of 2005;

• expense related to equity instruments issued for consulting services decreased by $0.3 million primarily due to certain noncash compensation charges recorded in 2005 that are not recurring in 2006;

• employee compensation decreased by $0.6 million primarily due to the termination of two clinical programs in 2005;

• license fees decreased by $0.4 million primarily due to lower costs incurred on administration of license agreements;

• non-cash stock based compensation for options granted to employees increased by $2.4 million primarily due to our accounting for employee stock based compensation under the fair value method in accordance with SFAS 123(R) as of January 1, 2006. Prior to January 1, 2006 we accounted for options granted to employees using the intrinsic value method in accordance with APB 25. During the year ended December 31, 2006, we recorded $4.8 million in expense in accordance with SFAS 123(R). During year ended December 31, 2005, we recorded $2.4 million in expense utilizing the intrinsic value method of measuring stock compensation in accordance with APB 25;

• costs of supplies and materials increased by $1.1 million primarily due to increased pre-clinical activities performed in-house; and

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• overhead expenses including employee training, depreciation of fixed assets and property tax increased by $0.9 million primarily due to increases in underlying expenses.

Specific changes in R&D expense in 2005 as compared to 2004 are as follows:

• external clinical trial costs, manufacturing cost of clinical trial supplies and other costs related to pharmacology and in vivo studies decreased by $4.7 million primarily due to our decisions to end two clinical development programs and cancellations of certain other clinical projects;

• non-cash stock based compensation for options granted to employees, accounted for under the intrinsic value method in accordance with APB 25, decreased by $0.8 million;

• employee related expense increased by $1.3 million due to increased headcount and increases in merit pay, partially offset by decreases in recruiting and relocation related expenses; and

• overhead expenses including information technology and building operating cost increased by $0.8 million primarily due to increases in underlying expenses.

We expect R&D expenses, excluding non-cash stock-based compensation and approximately $0.9 million in restructuring expense that we will record in the first quarter of 2007, to decrease in 2007 as a result of voluntary attrition and the effect of our restructuring in January 2007.

General and Administrative Expenses

Total general and administrative (G&A) expenses and dollar and percentage changes for each of the three years ending December 31, 2006 are as follows (dollar amounts are in thousands):

	2006			2005			2004
Total G&A expense	$	15,595		$	10,087		$	9,750
Dollar increase	$	5,508		$	337
Percentage increase		55	%		3	%

Increases in G&A expense in 2006 as compared to 2005 are as follows:

• non-cash stock based compensation for options granted to employees and non-employee directors increased by $3.8 million primarily due to our accounting for employee stock based compensation under the fair value method in accordance with SFAS 123(R) as of January 1, 2006. During the year ended December 31, 2006, we recorded $5.2 million in expense under the fair value method of measuring stock compensation in accordance with SFAS 123(R). During the year ended December 31, 2005, we recorded $1.4 million in expense utilizing the intrinsic value method of measuring stock compensation in accordance with APB 25;

• employee compensation increased by $1.3 million primarily due to an increase in G&A headcount;

• outside services increased by $0.6 million primarily due to increased corporate development activities;

• overhead expenses including employee training, depreciation of fixed assets and property tax increased by $0.7 million primarily due to increases in underlying expenses; and

• legal expense decreased by $0.6 million primarily due to lower costs associated with intellectual property matters.

Specific changes in G&A expense in 2005 as compared to 2004 are as follows:

• professional and consulting service expenses increased by $1.1 million primarily due to compliance with the Sarbanes-Oxley Act of 2002 and for business development activities; and

• legal expenses decreased by $0.5 million primarily due to lower costs associated with intellectual property matters.

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We expect G&A expenses, excluding non-cash stock-based compensation and approximately $0.2 million in restructuring expense that we will record in the first quarter of 2007, to decrease in 2007 as compared to 2006 following our restructuring in January 2007.

Interest Income

Total interest income and dollar and percentage changes for each of the three years ending December 31, 2006 are as follows (dollar amounts are in thousands):

	2006			2005			2004
Total interest income	$	5,382		$	2,561		$	1,445
Dollar increase	$	2,821		$	1,116
Percentage increase		110	%		77	%

The increase in interest income in 2006 and 2005 was primarily attributable to a higher rate of return on our investment portfolio and higher average investment balances due to our common stock offering in September 2005, which resulted in net proceeds of $50.4 million.

Interest Expense

Total interest expense and dollar and percentage changes for each of the three years ending December 31, 2006 are as follows (dollar amounts are in thousands):

	2006			2005			2004
Total interest expense	$	(479	)	$	(377	)	$	(362	)
Dollar increase	$	102		$	15
Percentage increase		27	%		4	%

The increase in interest expense in 2006 was primarily due to the higher aggregate debt balances and higher borrowing interest rates. Interest expense was nominally higher in 2005 than 2004.

2007 Financial Guidance

For the year ending December 31, 2007, the Company presently anticipates:

• total contract revenue from existing agreements of approximately $4.3 million to $8.8 million; and

• total operating expenses of approximately $28.0 million to $32.0 million, excluding non-cash, stock-based compensation to be recognized in accordance with SFAS 123(R) and approximately $1.1 million in restructuring expense that we will record in the first quarter of 2007.

Liquidity and Capital Resources

To date, we have funded our operations primarily through the sale of equity securities as well as through equipment and leasehold improvement financing. As of December 31, 2006, we had received approximately $222.6 million from the sale of equity securities. In February 2004, we received approximately $71.4 million from our initial public offering of common stock and concurrent private placement with Genentech. In September 2005, we completed a public offering of common stock under which we received net proceeds of approximately $50.4 million. In addition, since inception to December 31, 2006, we financed the purchase of equipment and leasehold improvements with debt totaling approximately $15.2 million, of which $5.2 million was outstanding at December 31, 2006. The remaining obligations are secured by the purchased equipment and leasehold improvements, bear interest at rates ranging from approximately 8.8% to 10.67% and are due in monthly installments through September 2010.

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As of December 31, 2006, we had $99.1 million in cash, cash equivalents and short-term investments as compared to $118.9 million as of December 31, 2005, a decrease of $19.8 million. The decrease resulted primarily from cash used in operating activities, capital purchases and principal payments on outstanding debt related to capital purchases. Our cash and investments are invested in a diversified portfolio of financial instruments, including money market instruments, corporate notes and bonds, government or governmental agency securities and other debt securities issued by financial institutions and other issuers with strong credit ratings.

Net cash used in operating activities was $19.0 million, $19.5 million and $25.2 million for the years ended December 31, 2006, 2005 and 2004, respectively. The $0.5 million decrease in cash used in operations in 2006 as compared to 2005 primarily reflected a decrease in net operating loss of $3.6 million as a result of an increase in contract revenue of $3.8 million, offset by an increase in operating expense of $2.9 million. The $5.7 million decrease in cash used in operations in 2005 as compared to 2004 primarily reflected a decrease in net operating loss of $8.0 million as a result of an increase in contract revenue of $4.0 million and a decrease in operating expense of $2.8 million.

In January 2007 we implemented a restructuring plan which resulted in the Company reducing its workforce by approximately 40% of its positions. The intention of the restructuring is to reduce spending while maintaining the research and development capabilities needed to advance the Company’s late stage preclinical drug discovery program. As a result of the restructuring and broader efforts to reduce spending on general and administrative activities, we expect operating expenses of approximately $28.0 million to $32.0 million, excluding non-cash, stock-based compensation expense to be recognized in accordance with SFAS 123(R) and approximately $1.1 million in restructuring expense that we will record in the first quarter of 2007.

Net cash provided by investing activities was $50.5 million for the year ended December 31, 2006 as compared to net cash used by investing activities of $30.8 million and $44.2 million for the year ended December 31, 2005 and 2004, respectively. These fluctuations resulted primarily from timing differences in the investment purchases, sales and maturities and the fluctuations in our portfolio mix between cash equivalents and short-term investments. We expect similar fluctuations to continue in the future. Capital equipment purchases for 2006, 2005 and 2004 were $3.0 million, $2.6 million and $2.2 million, respectively. Capital equipment purchases for 2007 are expected to be approximately $1.0 million.

Net cash provided by financing activities was $2.3 million, $53.0 million and $73.3 million for the years ended December 31, 2006, 2005 and 2004, respectively. Cash provided by financing activities in 2005 was higher than 2006 primarily due to the completion of a public offering of common stock under which we received net proceeds of approximately $50.4 million in 2005. Net cash provided by financing activities for the year ended December 31, 2004 was higher than 2005 primarily due to our initial public offering and concurrent private placement with Genentech in which we received $71.4 million.

The following summarizes our long-term contractual obligations as of December 31, 2006 (dollar amounts are in thousands):

	Total		2007		2008		2009		2010		Thereafter
Operating leases	$	5,394	$	1,952	$	2,037	$	1,405	$	—	$	—
Equipment financing		5,158		2,147		1,619		1,150		242		—
Interest related to equipment financing		732		414		225		85		8	$	—
Total	$	11,284	$	4,513	$	3,881	$	2,640	$	250	$	—

Our future capital uses and requirements depend on numerous forward-looking factors. These factors include but are not limited to the following:

• the progress of preclinical development and laboratory testing and clinical trials;

• the time and costs involved in obtaining regulatory approvals;

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• delays that may be caused by evolving requirements of regulatory agencies;

• the number of product candidates we pursue;

• the costs involved in filing and prosecuting patent applications and enforcing or defending patent claims;

• our plans to establish or acquire sales, marketing and/or manufacturing capabilities;

• our ability to establish, enforce and maintain selected strategic alliances and activities required for product commercialization;

• the acquisition of technologies, products and other business opportunities that require financial commitments; and

• our revenues, if any, from successful development and commercialization of our products.

Based upon our current operating plan we believe that our cash and cash equivalents as of December 31, 2006 will be sufficient to meet our projected operating requirements for more than the next 12 months.

Until we can generate significant cash from our operations, we expect to continue to fund our operations with existing cash resources. We will be required to seek additional sources of funding to complete development and commercialization of our products. When we raise funds in the future, we may be required to raise those funds through public or private financings, strategic relationships or other arrangements. We cannot assure you that such funding will be available on terms attractive to us, or at all. Furthermore, any additional equity financing will be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. Our inability to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategy.

We did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. Therefore, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships. We do not have relationships or transactions with persons or entities that derive benefits from their non-independent relationship with us or our related parties.

In October 2006, we filed a registration statement on Form S-3 with the SEC to be able to sell from time to time up to $150.0 million of any combination of debt securities, common stock, preferred stock and warrants. The SEC has not declared this registration statement effective and securities may not be sold, nor may offer to buy the securities be accepted, prior to the time this registration statement becomes effective. The terms of any offering will be determined at the time of such offering. In 2005 we filed a registration statement on Form S-3 with the SEC to be able to sell from time to time up to $100.0 million of any combination of debt securities, common stock, preferred stock and warrants. The SEC declared this registration statement effective in May 2005. In September 2005, we sold 4,000,000 shares of common stock to the public under this registration statement at $13.50 per share for gross proceeds of $54 million. As of December 31, 2006, $46.0 million remains available under this registration statement.

Recent Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006 and is required to be adopted by us in the first quarter of fiscal 2007. As of December 31, 2006, we have

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federal and state net operating loss carryforwards of approximately $92.3 million and $89.2 million, respectively, and federal and state research and development credits of approximately $3.0 million and $3.2 million, respectively, that may be subject to annual limitation, due to certain substantial changes in ownership, under the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of net operating loss and credit carryforwards before utilization. As of December 31, 2006, all of our deferred tax assets have been fully offset by a valuation allowance because the realization of these assets is dependent upon future earnings. We are currently evaluating the effect that the adoption of FIN 48 will have on our results of operations and financial condition.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because the majority of our investments are in short-term marketable securities. Due to the nature of our short-term investments, we believe that we are not subject to any material market risk exposure. We do not have any foreign currency or other derivative financial instruments.

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Item 8. Financial Statements and Supplementary Data

RENOVIS, INC.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	43
Balance Sheets	44
Statements of Operations	45
Statements of Stockholders’ Equity (Net Capital Deficiency)	46
Statements of Cash Flows	47
Notes to Financial Statements	48

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Renovis, Inc.

We have audited the accompanying balance sheets of Renovis, Inc. as of December 31, 2006 and 2005, and the related statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Renovis, Inc. at December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, on January 1, 2006, Renovis, Inc. changed its method of accounting of stock-based compensation in accordance with guidance provided in Statement of Financial Accounting Standards No. 123(R), Share-Based Payment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Renovis, Inc.’s internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2007 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Palo Alto, California

March 2, 2007

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RENOVIS, INC.

BALANCE SHEETS

(in thousands, except share and per share data)

	December 31,
	2006			2005
Assets
Current assets:
Cash and cash equivalents	$	41,958		$	8,149
Short-term investments		57,149			110,740
Prepaids and other current assets		928			1,082
Total current assets		100,035			119,971
Property and equipment, net		7,052			6,428
Other assets		214			213
	$	107,301		$	126,612
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	517		$	1,050
Accrued compensation		2,503			2,018
Loan payable, current portion		2,147			1,531
Deferred revenue		3,400			5,328
Other accrued liabilities		1,964			1,715
Total current liabilities		10,531			11,642
Loan payable, noncurrent portion		3,011			2,908
Deferred revenue, noncurrent portion		—			2,500
Other long-term liabilities		673			964
Commitments
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized at December 31, 2006 and 2005; none issued and outstanding		—			—
Common stock, $0.001 par value; 100,000,000 shares authorized at December 31, 2006 and 2005; 29,455,058 and 28,927,205 shares issued and outstanding at December 31, 2006 and 2005, respectively		29			29
Additional paid-in capital		275,439			267,454
Deferred stock compensation		—			(4,898	)
Accumulated other comprehensive loss		(44	)		(25	)
Accumulated deficit		(182,338	)		(153,962	)
Total stockholders’ equity		93,086			108,598
	$	107,301		$	126,612

The accompanying notes are an integral part of these financial statements.

44

RENOVIS, INC.

STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	Years ended December 31,
	2006			2005			2004
Contract revenues	$	10,428		$	6,647		$	2,625
Operating expenses:
Research and development		28,112			30,724			33,899
General and administrative		15,595			10,087			9,750
Total operating expenses		43,707			40,811			43,649
Loss from operations		(33,279	)		(34,164	)		(41,024	)
Interest income		5,382			2,561			1,445
Interest expense		(479	)		(377	)		(362	)
Net loss		(28,376	)		(31,980	)		(39,941	)
Basic and diluted net loss per share applicable to common stockholders	$	(0.97	)	$	(1.24	)	$	(1.84	)
Shares used to compute basic and diluted net loss per share applicable to common stockholders		29,213,098			25,722,393			21,670,435

The accompanying notes are an integral part of these financial statements.

45

RENOVIS, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY (NET CAPITAL DEFICIENCY)

(in thousands, except share data)

	Common Stock				Additional Paid-in Capital			Notes Receivable from Stockholders			Deferred Stock Compensation			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity (Net Capital Deficiency)
	Shares		Amount
Balance at December 31, 2003	1,348,128		$	1	$	18,982		$	(43	)	$	(15,451	)	$	—		$	(82,041	)	$	(78,552	)
Issuance of common stock upon IPO, net of issuance costs	6,325,000			7		68,338			—			—			—			—			68,345
Issuance of common stock to an investor	250,000			—		3,000			—			—			—			—			3,000
Conversion of preferred stock to common stock upon IPO	16,208,583			16		123,250			—			—			—			—			123,266
Issuance of common stock upon exercise of stock options	72,360			—		182			—			—			—			—			182
Issuance of common stock under employee stock purchase plan	60,885			—		589			—			—			—			—			589
Vesting of common stock from early exercise of stock options	233,384			—		312			—			—			—			—			312
Repurchase of common stock for cash	(32,026	)		—		(37	)		—			—			—			—			(37	)
Repayment and forgiveness of promissory notes from stockholders	—			—		—			43			—			—			—			43
Fair market value of stock options granted to consultants and others for services	—			—		1,450			—			(141	)		—			—			1,309
Amortization of deferred stock compensation, net of cancellations	—			—		(1,783	)		—			6,429			—			—			4,646
Comprehensive loss-unrealized loss on investments in securities	—			—		—			—			—			(386	)		—			(386	)
Net loss	—			—		—			—			—			—			(39,941	)		(39,941	)
Comprehensive loss	—			—		—			—			—			—			—			(40,327	)
Balance at December 31, 2004	24,466,314			24		214,283			—			(9,163	)		(386	)		(121,982	)		82,776
Issuance of common stock upon secondary offering, net of issuance costs	4,000,000			4		50,425			—			—			—			—			50,429
Issuance of common stock upon exercise of options and warrants	248,011			1		606			—			—			—			—			607
Vesting of common stock from early exercise of stock options	81,638			—		128			—			—			—			—			128
Issuance of common stock under employee stock purchase plan and 401K matching	123,131			—		1,220			—			—			—			—			1,220
Issuance of common stock to consultants for services	12,500			—		133			—			—			—			—			133
Repurchase of common stock for cash	(4,389	)		—		(5	)		—			—			—			—			(5	)
Fair market value of stock options granted to consultants and others for services	—			—		1,107			—			—			—			—			1,107
Amortization of deferred stock compensation, net of cancellations	—			—		(443	)		—			4,265			—			—			3,822
Comprehensive gain—unrealized gain on investments in securities	—			—		—			—			—			361			—			361
Net loss	—			—		—			—			—			—			(31,980	)		(31,980	)
Comprehensive loss	—			—		—			—			—			—			—			(31,619	)
Balance at December 31, 2005	28,927,205			29		267,454			—			(4,898	)		(25	)		(153,962	)		108,598
Issuance of common stock upon exercise of options	330,778			—		854			—			—			—			—			854
Vesting of common stock from early exercise of stock options	54,974			—		66			—			—			—			—			66
Issuance of common stock under employee stock purchase plan and 401K matching	117,101			—		933			—			—			—			—			933
Issuance of common stock to nonemployees	25,000			—		131			—			—			—			—			131
Fair market value of stock options granted to consultants and others for services	—			—		863			—			—			—			—			863
Reversal of unamortized deferred stock compensation upon adoption of SFAS No. 123R	—			—		(4,898	)		—			4,898			—			—			—
Shared-based compensation recognized pursuant to SFAS No. 123R	—			—		10,036			—			—			—			—			10,036
Comprehensive loss—unrealized loss on investments in securities	—			—		—			—			—			(19	)		—			(19	)
Net loss	—			—		—			—			—			—			(28,376	)		(28,376	)
Comprehensive loss	—			—		—			—			—			—			—			(28, 395	)
Balance at December 31, 2006	29,455,058		$	29	$	275,439		$	—		$	—		$	(44	)	$	(182,338	)	$	93,086

The accompanying notes are an integral part of these financial statements.

46

RENOVIS, INC.

STATEMENTS OF CASH FLOWS

(in thousands)

	Years ended December 31,
	2006			2005			2004
Cash flows from operating activities
Net loss	$	(28,376	)	$	(31,980	)	$	(39,941	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,025			2,829			2,903
Share-based compensation		10,036			3,822			4,646
Loss on disposal of fixed assets		387			328			—
Noncash interest and issuances of equity		1,192			1,421			1,449
Changes in assets and liabilities:
Prepaids and other current assets		154			76			483
Other assets		—			48			721
Accounts payable		(533	)		(651	)		1,016
Accrued compensation		485			600			689
Deferred revenue		(4,428	)		5,203			2,625
Other accrued liabilities		23			(1,240	)		197
Net cash used in operating activities	$	(19,035	)	$	(19,544	)	$	(25,212	)
Cash flows from investing activities
Capital expenditures		(3,036	)		(2,557	)		(2,159	)
Proceeds from disposal of fixed assets		—			46			—
Purchases of short-term investments		(105,063	)		(179,422	)		(220,330	)
Sales of short-term investments		124,375			95,971			116,750
Maturities of short-term investments		34,259			55,125			61,500
Net cash provided by (used in) investing activities	$	50,535		$	(30,837	)	$	(44,239	)
Cash flows from financing activities
Principal payments on loan payable		(1,810	)		(1,665	)		(2,159	)
Proceeds from loan payable		2,529			2,536			3,316
Proceeds from issuance of common stock, net of repurchases		1,590			52,079			72,079
Proceeds from repayment of stockholder notes		—			—			43
Net cash provided by financing activities	$	2,309		$	52,950		$	73,279
Net increase in cash and cash equivalents		33,809			2,569			3,828
Cash and cash equivalents at beginning of period		8,149			5,580			1,752
Cash and cash equivalents at end of period	$	41,958		$	8,149		$	5,580
Supplemental disclosure of cash flow information
Interest paid	$	437		$	332		$	293
Supplemental schedule of noncash financing activities
Deferred stock compensation	$	—		$	—		$	371

The accompanying notes are an integral part of these financial statements.

47

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

The Company and Nature of Operation and Basis of Preparation

Renovis, Inc. (the Company or Renovis) was incorporated in the State of Delaware on January 5, 2000. We are a biopharmaceutical company focused on the discovery and development of drugs to treat major medical needs in the areas of neurological and inflammatory diseases. We are located in South San Francisco, California.

The Company has sustained operating losses since inception and expects such losses to continue over the next several years. Management plans to continue to finance the Company’s operations with a combination of equity issuances, debt arrangements and revenues from corporate alliances with pharmaceutical companies. If adequate funds are not available, the Company may be required to delay, reduce the scope of, or eliminate one or more of its research or development programs.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Prior to January 1, 2006, we accounted for employee share-based compensation under Accounting Principles Board, Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). In accordance with APB 25, we used the intrinsic value method to account for employee share-based compensation expense and presented the amortization of deferred compensation as a separate line item on the statement of operations. We reclassified the amortization of deferred compensation to research and development expense and general and administrative expense for the years ended December 31, 2005 and 2004 to conform to the current period presentation. Additionally, upon the adoption of SFAS 123(R) in January 2006, the deferred stock compensation balance of $4.9 million was reclassified to additional paid-in-capital.

Business Segments

Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information, requires an enterprise to report segment information based on how management internally evaluates the operating performance of its business units (segments). Our operations are confined to one business segment; the discovery and development of pharmaceutical products.

Revenue Recognition

The Company’s revenues are generated by complex collaborative research and licensing arrangements. Revenues under such agreements may include upfront payments, research funding, milestone payments and royalties. In accordance with Emerging Issues Task Force (EITF) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, we evaluate whether the delivered element under these arrangements has value to our collaborative partner or licensee on a stand-alone basis and whether objective and reliable evidence of fair value of the undelivered element exists. Arrangements with multiple deliverables that do not meet these criteria are treated as one unit of accounting for the purposes of revenue recognition.

Revenues from nonrefundable upfront technology license fees, for product candidates where we are providing continuing services related to product development, are deferred and recognized as contract revenue

48

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

ratably over the estimated period of performance under the research agreement. The performance period is estimated at the inception of the arrangement and is periodically reevaluated. The reevaluation of the performance period may shorten or lengthen the period during which the deferred revenue is recognized, which would result in an acceleration or delay of expected revenue recognition.

Research funding is recognized as revenue as the related effort is performed.

Milestone payments we receive under collaborative arrangements are recognized as revenue upon achievement of the milestone events, which represent the culmination of the earnings process, and when collectability is reasonably assured. Milestone payments are triggered either by the results of our research efforts or by events external to us, such as regulatory approval to market a product or the achievement of specified sales levels by a marketing partner or licensee. Accordingly, the milestone payments are substantially at risk at the inception of the contract, and the amounts of the payments assigned thereto are commensurate with the milestone achieved. Upon the achievement of a milestone event, we have no future performance obligations related to that milestone as the milestone payments we receive are nonrefundable.

Research and Development

Research and development costs, which include related salaries, contractor fees, administrative expenses, and allocations of overhead costs, are charged to expense as incurred. License and milestone obligations that we must pay prior to regulatory approval to market a product related to the licensed technology are also charged to research and development expense.

Cash, Cash Equivalents and Short-Term Investments

The Company invests its excess cash in bank deposits, money market accounts and other marketable securities. The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.

The Company has designated its investment securities as available-for-sale. The Company considers its available-for-sale portfolio as available for use in current operations. Accordingly, all investments have been classified as short-term, even though the stated maturity date may be one year or more beyond the current balance sheet date. Available-for-sale securities are carried at fair value and unrealized gains and losses are included in other comprehensive income (loss) and reported as a separate component of stockholders’ equity (net capital deficiency). Realized gains and losses and declines in value judged to be other-than-temporary, if any, on available-for-sale securities are included in the statement of operations. The cost of securities sold is based on the specific identification method. Interest on marketable securities is included in interest income.

Concentration of Credit Risk

Cash and cash equivalents consist of financial instruments that potentially subject the Company to concentrations of credit risk to the extent recorded on the balance sheets. The Company has established guidelines for investment of its excess cash that it believes maintain safety and liquidity through diversification of counterparties and maturities.

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash and cash equivalents, short-term investments and loans payable. The carrying values of the Company’s financial instruments approximate fair value.

49

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Property and Equipment, Net

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization are recorded using the straight-line method over the estimated useful lives of the respective assets, generally three to seven years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the related assets.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The impairment loss, if recognized, would be based on the excess of the carrying value of the impaired asset over its respective fair value. Impairment, if any, is assessed using discounted cash flows.

Income Taxes

The Company utilizes the liability method of accounting for income taxes as required by SFAS No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Currently, there is no provision for income taxes as the Company has incurred operating losses to date and a valuation allowance has been provided on the net deferred tax assets.

Stock-Based Compensation

Effective January 1, 2006, we adopted the fair value recognition provision of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which requires the recognition of the fair value of stock-based compensation. Under the fair value recognition provisions for SFAS 123(R), stock-based compensation cost is estimated at the grant date based on the fair value of the awards expected to vest and recognized as expense ratably over the requisite service period of the award. We have used the Black-Scholes valuation model to estimate fair value of our stock-based awards which requires various judgmental assumptions including estimating stock price volatility, forfeiture rates and expected life. Our computation of expected volatility is based on a combination of peer companies’ historical volatilities and our market-based implied volatility. In addition, we consider many factors when estimating expected forfeitures and expected life, including types of awards, employee class and historical experience. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period.

The Company adopted SFAS 123(R) using the modified prospective method which requires the application of the accounting standard as of January 1, 2006. Our financial statements in 2006 reflect the impact of SFAS 123(R). In accordance with the modified prospective method, the financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R). See Note 10 Stockholders’ Equity for further details.

SFAS 123(R) eliminates the ability to account for share-based compensation transactions, as the Company formerly did, using the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). Prior to January 1, 2006, the Company accounted for stock

50

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

options granted to employees using the intrinsic value method in accordance with APB 25. We have elected to use the simplified method to calculate the beginning pool of excess tax benefits as described in FASB FSP 123(R)-3.

Recent Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006 and is required to be adopted by us in the first quarter of fiscal 2007. As of December 31, 2006, we have federal and state net operating loss carryforwards of approximately $92.3 million and $89.2 million, respectively, and federal and state research and development credits of approximately $3.0 million and $3.2 million, respectively, that may be subject to annual limitation, due to certain substantial changes in ownership, under the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of net operating loss and credit carryforwards before utilization. As of December 31, 2006, all of our deferred tax assets have been fully offset by a valuation allowance because the realization of these assets is dependent upon future earnings. We are currently evaluating the effect that the adoption of FIN 48 will have on our results of operations and financial condition.

2. Comprehensive Loss

SFAS No. 130, Reporting Comprehensive Income, requires components of other comprehensive income, including gains and losses on available-for-sale investments, to be included as part of total comprehensive income. Comprehensive loss for the years ended December 31, 2006, 2005 and 2004 are as follows (in thousands):

	2006			2005			2004
Net loss	$	(28,376	)	$	(31,980	)	$	(39,941	)
Unrealized gains (loss) on available-for-sale securities		(19	)		361			(386	)
Comprehensive loss	$	(28,395	)	$	(31,619	)	$	(40,327	)

3. Net Loss per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock subject to repurchase by the Company, preferred stock, options and warrants are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

51

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

	Years ended December 31,
	2006			2005			2004
	(in thousands, except share and per share data)
Historical
Numerator:
Net loss applicable to common stockholders	$	(28,376	)	$	(31,980	)	$	(39,941	)
Denominator:
Weighted-average common shares outstanding		29,275,744			25,849,923			22,002,893
Less: Weighted-average unvested common shares subject to repurchase		(62,646	)		(127,530	)		(332,458	)
Denominator for basic and diluted net loss per share		29,213,098			25,722,393			21,670,435
Basic and diluted net loss per share applicable to common stockholders	$	(0.97	)	$	(1.24	)	$	(1.84	)
Historical outstanding dilutive securities not included in diluted net loss per share calculation
Options to purchase common stock		3,657,866			2,637,749			2,434,859
Warrants		33,358			33,358			57,222
		3,691,224			2,671,107			2,492,081

4. Collaboration and License Agreements

Pfizer

On May 26, 2005, the Company entered into a collaborative research agreement and a license and royalty agreement with Pfizer to research, develop and commercialize small molecule compounds which work by targeting the vanilloid receptor (VR1). The collaboration focuses on treatments for pain and other diseases and disorders.

Under the agreements, the Company received an upfront license fee of $10.0 million in July 2005. In addition to the upfront license fee, the agreements with Pfizer also provide the Company with research funding in excess of $7.0 million over a two-year research period. The funded research period ends in June 2007. Pfizer also has the option to extend the agreements for up to two additional years subject to additional funding requirements. Additionally, the Company will be eligible to receive research, development, approval and commercialization milestone payments resulting in total potential payments to the Company of greater than $170.0 million through successful achievement of research development and commercialization milestones for each product candidate resulting from the collaboration. Upon commercialization of a product resulting from the collaboration, the Company would be entitled to receive royalties on net sales by Pfizer.

The Company applied EITF Issue No. 00-21 in evaluating the appropriate accounting for the agreements, which became effective on June 28, 2005. In accordance with this guidance, the Company identified the initial license transfer and the research and development services as the deliverables under the agreements and concluded that they should be accounted for as a single unit of accounting based upon the determination that these deliverables were linked and did not have stand-alone value. The Company also determined that the achievement of each milestone for which it is eligible for milestone payments represents a separate earnings process. The Company believes that each of these milestones, such as the commencement of a Phase I clinical trial or the filing of a New Drug Application, or an NDA, is well-defined, substantive, measurable and reasonable relative to risk and effort. Accordingly, the Company concluded that such payments should be recognized as revenue when the milestone is achieved and collectability is reasonably assured.

52

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

In accordance with the evaluation discussed above, the Company began amortizing the upfront payment from Pfizer ratably in the third quarter of 2005 over the estimated research term of two years. During the years ended December 31, 2006 and 2005, the Company recognized $10.1 million and $4.3 million, respectively, in revenue related to the agreements. Revenue recognized in 2006 included milestone revenue of $1.5 million that was earned in connection with specific progress of the VR1 collaboration into advanced preclinical studies. As of December, 2006, deferred revenue under the agreements was $3.4 million, of which $2.5 million related to the upfront payment received in July 2005.

Genentech

On December 31, 2003, the Company entered into a collaborative research, development and license agreement with Genentech for the discovery and development of drugs that inhibit pathological or tumor angiogenesis and promote nerve re-growth following nervous system injury. Under the terms of the agreement, Genentech paid the Company an upfront license and technology access fee of $5.3 million in January 2004 and made a $3.0 million equity purchase concurrent with our initial public offering. The Company deferred the $5.3 million upfront payment and began recognizing it on a straight-line basis over the two-year estimated research period of the agreement. In July 2005, the Company revised the estimated completion date of the research period under the agreement by two months to February 2006 from the previous estimate of December 2005. Accordingly, the Company recognized the remaining deferred revenue on a straight-line basis through February 2006. During the years ended December 31, 2006 and 2005, the Company recognized $0.3 million and $2.3 million, respectively, in revenue related to this agreement. The funded research period under this agreement ended in February 2006. The Company is eligible to receive future milestone and royalty payments on therapeutic products emerging from the collaboration that are developed and commercialized by Genentech.

53

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

5. Cash, Cash Equivalents and Short-Term Investments

The following is a summary of cash, cash equivalents and short-term investments as of December 31, 2006 and 2005 (in thousands):

	December 31, 2006
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Cash	$	4,367	$	—	$	—		$	4,367
Money market funds		165		—		—			165
Commercial paper		78,977		3		(46	)		78,934
Auction rate certificates		5,000		—		—			5,000
Corporate bonds		2,153		—		(4	)		2,149
U.S. government bonds		8,489		3		—			8,492
	$	99,151	$	6	$	(50	)	$	99,107
Reported as:
Cash and cash equivalents								$	41,958
Short-term investments									57,149
								$	99,107
Estimated fair value of short-term investments by contractual maturity at December 31, 2006:
Maturing in less than one year								$	52,149
Maturing in one to five years									—
Maturing in five to ten years									—
Maturing in greater than ten years									5,000
Total								$	57,149
	December 31, 2005
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Cash	$	2,427	$	—	$	—		$	2,427
Money market funds		3,036		—		—			3,036
Commercial paper		2,687		—		(1	)		2,686
Auction rate certificates		99,375		—		—			99,375
Corporate bonds		903		—		(3	)		900
U.S. government bonds		10,486		—		(21	)		10,465
	$	118,914	$	—	$	(25	)	$	118,889
Reported as:
Cash and cash equivalents									8,149
Short-term investments									110,740
								$	118,889
Estimated fair value of short-term investments by contractual maturity at December 31, 2005:
Maturing in less than one year								$	11,365
Maturing in one to five years									—
Maturing in five to ten years									1,650
Maturing in greater than ten years									97,725
Total								$	110,740

54

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

The Company’s marketable auction securities with contractual maturities greater than one year have interest reset features. The interest rate of these securities reset at approximately every 30 days, typically through a remarketing process or based on an index.

To date, the Company has not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value. The Company recognizes an impairment charge when the decline in the estimated fair value of a marketable security below the amortized cost is determined to be other-than-temporary. The Company considers various factors in determining whether to recognize an impairment charge, including the duration of time and the severity to which the fair value has been less than amortized cost, any adverse changes in the investee’s financial condition and our intent and ability to hold the marketable security for a period of time sufficient to allow for any anticipated recovery in market value.

There were no material gross realized losses or gains on the sale of available-for-sale securities during the years ended December 31, 2006 and 2005.

6. Property and Equipment

Property and equipment consists of the following (in thousands):

	December 31,
	2006			2005
Computer equipment and software	$	3,365		$	3,221
Laboratory and office equipment		9,163			8,177
Leasehold improvements		1,749			1,095
		14,277			12,493
Less accumulated depreciation		(7,225	)		(6,065	)
Property and equipment, net	$	7,052		$	6,428

Depreciation expense was $2.0 million for the year ended December 31, 2006 and $1.8 million for each of the years ended December 31, 2005 and 2004.

7. Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):

	December 31,
	2006		2005
Professional fees	$	400	$	569
Facilities-related		408		356
Proceeds from early exercise of stock options		38		104
Outside services		437		199
Deferred rent		291		139
Accrued other		390		348
Other accrued liabilities	$	1,964	$	1,715

55

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

8. Loans Payable

In February 2004, the Company entered into a credit facility with a lender that provided up to an aggregate of $5 million to finance the purchase of laboratory and computer equipment and certain leasehold improvements. In March 2005, the lender provided for a new credit facility of $3.5 million which was available for the Company to draw down through December 31, 2005. The draw down period was extended through December 31, 2006 by the lender. As of December 31, 2006, the Company had borrowed an aggregate of approximately $8.5 million under these facilities, of which $5.2 million was outstanding at that date. Payments are due in monthly installments over a period ranging from 42 to 48 months at interest rates ranging from 8.80% to 10.67% and are secured by the assets financed.

Future principal payments under the loans payable are as follows (in thousands):

	Loans Payable
Year ending December 31,
2007	$	2,147
2008		1,619
2009		1,150
2010		242
Total principal payments required		5,158
Less current portion		(2,147	)
Noncurrent portion	$	3,011

9. Operating Leases

The Company leases its laboratory and office facilities under an operating lease arrangement that expires in August 2009. The Company has the option to extend the lease at this location in South San Francisco, California through August 2012.

Rent expense was $1.7 million for the year ended December 31, 2006. Rent expense was $1.6 million for the year ended December 31, 2005 (net of $0.2 million sublease income) and $1.8 million for the year ended December 31, 2004 (net of $0.3 million sublease income).

Future minimum lease payments as of December 31, 2006 under noncancelable operating leases are as follows (in thousands):

	Operating Leases
Year ending December 31,
2007	$	1,952
2008		2,037
2009		1,405
and thereafter		—
Total minimum payments required	$	5,394

56

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

10. Stockholders’ Equity

Common Stock

On February 10, 2004, the Company sold 6,325,000 shares of common stock to the public in its initial public offering and realized net proceeds of approximately $68.3 million. Additionally, concurrent with the initial public offering the Company completed a private placement with Genentech for 250,000 shares of common stock for proceeds of $3.0 million (Note 4).

On September 28, 2005, the Company sold 4,000,000 shares of common stock through a public offering and realized net proceeds of approximately $50.4 million.

Through December 31, 2006, the Company has issued 555,554 shares of its common stock to founders of the Company under restricted stock purchase agreements. Under the terms of the restricted stock purchase agreements, shares purchased generally vest over a three- to four-year period. Unvested shares are subject to repurchase by the Company at the original issuance price. The restricted common stock was fully vested as of December 31, 2006. As of December 31, 2005, there were 6,583 shares subject to repurchase by the Company.

Stock Plans

Amended 2003 Stock Plan

Effective January 3, 2005, the Board of Directors approved the Amended and Restated Renovis, Inc. 2003 Stock Plan (Amended 2003 Plan), giving effect to certain amendments to the previously approved Renovis, Inc. 2003 Stock Plan. The Board of Directors approved further amendments to the Amended 2003 Plan on January 3, 2007. A total of 333,333 shares of the Company’s common stock were initially reserved for issuance under the Amended 2003 Plan. The Amended 2003 Plan also includes additional shares of common stock that have or will have become available for issuance under the Company’s predecessor stock option plans. Additionally, commencing in 2005 and on each January 15 thereafter during the term of the Amended 2003 Plan, the number of shares reserved for issuance under the Amended 2003 Plan is increased by the lesser of (i) 3.5% of the Company’s outstanding shares of common stock on that date, (ii) 1,055,555 shares, or (iii) such lesser number determined by our Board of Directors. On January 16, 2007, the Board authorized and reserved an additional 1,034,527 shares of the Company’s common stock for issuance under the Amended 2003 Plan.

The Amended 2003 Plan permits the Company to grant incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, deferred stock units, dividend equivalents, performance share awards, stock payments and other stock related benefits, or any combination thereof to employees or consultants of the Company. The Amended 2003 Plan provides that the automatic option grants for independent directors to purchase 11,111 shares and the chairman of the Board of Directors to purchase 22,222 shares shall be granted annually on a date determined by the Board of Directors at its discretion, which date shall, to the extent practicable, be consistent with the date on which annual “replenishment” grants of options are made to employees generally (the Annual Grant Date). The Board of Directors at its discretion may change the Annual Grant Date from year to year. Each eligible member of the Board of Directors must continue to serve through the Annual Grant Date in order to receive an automatic option grant.

Stock options awarded to employees may be granted at an exercise price no less than the fair market value, as defined in the Amended 2003 Plan, of the common stock on the date of grant. Options become exercisable as determined by the Board of Directors, generally at the rate of 1/48^th per month such that the options will be fully vested after four years. Options granted under the Amended 2003 Plan expire no more than ten years after the date of grant.

57

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

The predecessor plans to the Amended 2003 Plan allowed for the early exercise of options before they had vested. Shares issued as a result of early exercise are subject to a repurchase option by the Company upon termination of the purchaser’s employment or services at the exercise price paid by the option holder. The repurchase right lapses over a period of time as determined by the Board of Directors. The Company may exercise its repurchase options within 90 days of such voluntary or involuntary termination. As of December 31, 2006 and 2005, there were a total of 22,825 and 80,403 shares subject to repurchase relating to the early exercise of options at weighted-average exercise prices of $1.66 and $1.32 per share, respectively.

In accordance with EITF Issue No. 00-23, Issues Related to Accounting for Stock Compensation under APB Opinion No. 25 and FASB Interpretation No. 44, stock options granted or modified after March 21, 2002, that are subsequently exercised for cash prior to vesting are treated differently from prior grants and related exercises. The consideration received for an exercise of an option granted after the effective date of the new guidance is considered to be a deposit of the exercise price, and the related dollar amount is recorded as a liability. The shares and liability are reclassified into equity as the award vests. The shares subject to repurchase are not included in the accompanying Statements of Stockholders’ Equity. The Company has appropriately applied the guidance for stock options granted after March 21, 2002 and recorded a liability on the balance sheets relating to 22,825 and 77,799 shares issued pursuant to options exercised that were unvested as of December 31, 2006 and 2005, respectively, of $38,000 and $104,000.

The following table summarizes stock option activity under the Amended 2003 Plan:

	Shares Available for Grant		Number of Options		Weighted- Average Exercise Price
Balance at December 31, 2003	83,866		2,200,389		$	2.38
Shares authorized	333,333		—			—
Options granted	(541,464	)	541,464		$	8.60
Options canceled	222,010		(222,010	)	$	3.12
Shares repurchased	32,026		—		$	1.12
Options exercised	—		(305,744	)	$	1.62
Balance at December 31, 2004	129,771		2,214,099		$	3.94
Shares authorized	863,984		—			—
Options granted	(821,799	)	821,799		$	11.75
Shares issued	(20,000	)	—		$	12.70
Options canceled	254,419		(254,419	)	$	8.30
Shares repurchased	4,389		—		$	1.27
Options exercised	—		(312,747	)	$	2.23
Balance at December 31, 2005	410,764		2,468,732		$	6.31
Shares authorized	1,016,319		—			—
Options granted	(1,420,686	)	1,420,686		$	17.66
Options canceled	136,788		(136,788	)	$	11.91
Options exercised	—		(383,752	)	$	2.35
Balance at December 31, 2006	143,185		3,368,878		$	11.32

Inducement Stock Options

In July and August 2004, Renovis granted employment inducement stock options covering a total of 220,760 shares to certain newly hired executives. These options were granted without stockholder approval

58

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

pursuant to NASDAQ Marketplace Rule 4350 (i)(1)(A)(iv) and in accordance with Renovis’ standard stock option terms, including a 10-year term and four year vesting, and were granted at exercise prices equal to the fair market value on the date of grant. These options become exercisable at the rate of 25% at the end of the first year, with the remaining balance vesting ratably over the next three years, or 1/48^th of the original number of shares per month.

The following table summarizes the inducement stock option activities:

	Shares Available for Grant		Number of Options		Weighted- Average Exercise Price
Shares authorized	220,760		—			—
Options granted	(220,760	)	220,760		$	8.07
Balance at December 31, 2004	—		220,760		$	8.07
Options canceled	—		(83,843	)	$	7.73
Options exercised	—		(5,000	)	$	7.64
Balance at December 31, 2005	—		131,917		$	8.30
Options canceled	—		(88,421	)	$	7.76
Options exercised	—		(2,000	)	$	9.41
Balance at December 31, 2006	—		41,496		$	9.41

Employment Commencement Incentive Plan

The Board of Directors approved the Renovis, Inc. 2006 Employment Commencement Incentive Plan (the 2006 Plan), effective February 7, 2006. The number of shares of common stock reserved for issuance under the 2006 Plan was 424,392.

The 2006 Plan provided the Company with the ability to grant specified types of equity awards including non-qualified stock options, restricted stock, stock appreciation rights, performance shares, dividend equivalents, deferred stock and stock payment awards to newly hired employees. New employees that are otherwise eligible to receive grants under the 2006 Plan may receive all types of awards approved under these plans. A majority of the independent members of the Company’s Board of Directors or the compensation committee of the Board of Directors determine which new employees receive awards under the 2006 Plan and the terms and conditions of such awards, within certain limitations set forth in the 2006 Plan. The awards granted pursuant to the 2006 Plan are intended to be inducement awards pursuant to NASDAQ Marketplace Rule 4350(i)(1)(A)(iv). The 2006 Plan was not subject to the approval of the Company’s stockholders.

Options granted under the 2006 Plan have a 10-year term, and are granted at exercise prices equal to the fair market value on the date of grant. These options generally become exercisable at the rate of 25% at the end of the first year, with the remaining balance vesting ratably over the next three years, or 1/48^th of the original number of shares per month such that the options will be fully vested after four years. Only an employee who has not previously been an employee or director of the Company or a subsidiary, or following a bona fide period of non-employment by the Company or a subsidiary, is eligible to participate in the 2006 Plan and only if he or she is granted an award in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or a subsidiary. Shares available for grant under the 2006 Plan expired upon expiration of the 2006 Plan at December 31, 2006.

59

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

In January 2005, the Board of Directors approved a similar plan, the Renovis, Inc. 2005 Employment Commencement Incentive Plan (the 2005 Plan). The number of shares of common stock reserved for issuance under the 2005 Plan was 250,000. The 2005 Plan has similar terms as the 2006 Plan as described above. Shares available for grant under the 2005 Plan expired upon expiration of the 2005 Plan at December 31, 2005.

The following table summarizes the 2006 Plan activity as of December 31, 2006:

	Shares Available for Grant		Number of Options		Weighted- Average Exercise Price
Shares authorized	424,392		—			—
Shares issued	(50,000	)	—		$	15.62
Options granted	(211,292	)	211,292		$	15.07
Options canceled	300		(300	)	$	15.62
Plan shares expired	(163,400	)	—			—
Balance at December 31, 2006	—		210,992		$	15.07

The following table summarizes the 2005 Plan activity as of December 31, 2006:

	Shares Available for Grant		Number of Options		Weighted- Average Exercise Price
Shares authorized	250,000		—			—
Options granted	(38,300	)	38,300		$	14.18
Options canceled	1,200		(1,200	)	$	12.48
Plan shares expired	(212,900	)	—			—
Balance at December 31, 2005	—		37,100		$	14.23
Options canceled	—		(600	)	$	16.42
Balance at December 31, 2006	—		36,500		$	14.20

The following tables summarize information about stock options outstanding as of December 31, 2006 for all stock plans (including the Inducement Stock Options, the 2005 Plan and the 2006 Plan):

Options Outstanding					Options Exercisable
Exercise Price	Number Outstanding	Weighted- Average Remaining Contractual Life (In Years)	Weighted- Average Exercise Price		Number Exercisable	Weighted- Average Remaining Contractual Life (In Years)	Weighted- Average Exercise Price
$0.81-$4.50	990,674	6.59	$	2.99	967,849	6.60	$	3.02
$5.40-$11.70	952,989	7.91	$	10.53	596,554	7.87	$	10.30
$11.81-$16.42	490,023	9.12	$	14.15	89,419	8.09	$	13.44
$18.19	1,220,880	9.04	$	18.19	350,793	9.05	$	18.19
$20.37-$21.66	3,300	9.16	$	21.54	—	—	$	—
$0.81-$21.66	3,657,866	8.09	$	11.54	2,004,615	7.47	$	8.30

60

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

The aggregate intrinsic value of outstanding options is $876,000 and is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for 465,738 shares of outstanding options that were in-the-money at December 31, 2006. The aggregate intrinsic value of exercisable options is $838,000 for 445,851 shares of exercisable options that were in-the-money at December 31, 2006. As of December 31, 2006, there were 1,877,751 shares of vested and outstanding options with a weighted-average exercise price of $8.31 per share and weighted-average remaining contractual life of 7.47 years. The aggregate intrinsic value of outstanding vested options is $788,000 for 418,522 shares of outstanding and vested options that were in-the-money at December 31, 2006.

As of December 31, 2006, there was approximately $14.6 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under our equity incentive plans. That cost was expected to be recognized over a weighted-average period of 2.99 years. In January 2007, the Company repurchased certain outstanding under-water options from the officers of the Company at $0.001 per share, which resulted in an immediate recognition of unrecognized stock-based compensation of approximately $7.3 million related to the outstanding unvested options. Also in January 2007, the Company committed to a restructuring plan in which the Company reduced its workforce by 40%. After the repurchase of outstanding unvested options from officers of the Company and reduction in workforce, there was approximately $6.2 million of total unrecognized compensation cost related to unvested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of approximately 3.03 years.

The total intrinsic value of options exercised during the years ended December 31, 2006, 2005 and 2004 was $4.8 million, $2.6 million and $423,000, respectively, determined as of the date of exercise. The estimated fair value of shares vested during the years ended December 31, 2006, 2005 and 2004 was $8.8 million, $7.8 million and $5.8 million, respectively. The weighted average fair value of options granted during the years ended December 31, 2006 and 2005 was $9.72 and $7.87 per share, respectively. All options granted in 2006 and 2005 had exercise prices equal to the fair market value of the stock on the grant dates.

The following table summarizes information about stock options granted to employees during the year ended December 31, 2004 (including inducement stock options):

Exercise Price:	Weighted Average Fair Value		Weighted Average Exercise Price
Equal to market price on grant date	$	5.79	$	8.73
Exceeded market price on grant date		7.85		12.60
Was less than market price on grant date		9.47		5.40

Employee Stock Purchase Plan

The Company has an employee stock purchase plan for all eligible employees. Under the plan, shares of the Company’s common stock may be purchased over an offering period with a maximum duration of two years at 85% of the lower of the fair market value on the first day of the applicable offering period or on the last day of the six-month purchase period. Employees may purchase shares having a purchase price not exceeding 20% of their gross compensation during an offering period. To be eligible to participate in the Purchase Plan an employee must be scheduled to work more than 20 hours per week for at least five calendar months per year. During the years ended December 31, 2006 and 2005, the Company issued 106,139 and 109,214 shares of common stock, respectively, under the Purchase Plan.

At December 31, 2006, 714,064 shares of common stock were available for future issuance under the plan. The employee stock purchase plan contains an “evergreen” provision that automatically increases, on each

61

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

January 1, the number of shares reserved for issuance under the Purchase Plan by the lesser of 194,444 or 0.75% of the Company’s outstanding shares on such date, or a lesser amount as determined by our Board of Directors. On January 16, 2007, the Board authorized and reserved an additional 194,444 shares of the Company’s common stock for issuance under the Purchase Plan.

Stockholder Rights Plan

On March 23, 2005, our Board of Directors adopted a Stockholder Rights Plan (Rights Plan). On April 11, 2005, the Company filed with the Delaware Secretary of State a Certificate of Designations setting forth the terms of the Company’s Series A Junior Participating Preferred Stock, par value $0.001 per share (Preferred Shares) in connection with the adoption of the Rights Plan by our Board of Directors. The Company has agreed to initially reserve 100,000 Preferred Shares for issuance upon exercise of the rights under the Rights Plan from and after the date of distribution.

The rights issued pursuant to the Rights Plan expire on April 12, 2015 and are exercisable upon the earlier of ten business days after a person or group either (i) announces the acquisition of 15% or more of the Company’s outstanding common stock or (ii) commences a tender offer, which would result in ownership by the person or group of 15% or more of the Company’s outstanding common stock. Upon exercise, all rights holders except the potential acquirer will be entitled to acquire the Company’s common stock at a discount. The Company is entitled to redeem the rights in whole at any time on or before the tenth day following acquisition by a person or group of 15% or more of the Company’s common stock.

The rights under the Rights Plan were not distributed in response to any specific effort to acquire control of the Company. The rights under the Rights Plan are designed to assure that all our stockholders receive fair and equal treatment in the event of any proposed takeover of the Company and to guard against partial tender offers, open market accumulations and other potentially abusive tactics to gain control of the Company, while not foreclosing a fair acquisition bid for the Company.

Stock Options Granted to Nonemployees

Stock compensation arrangements to non-employees are accounted for in accordance with SFAS 123(R) and EITF Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services, using a fair value approach. The compensation costs of these arrangements are subject to re-measurement over the vesting terms as earned. During the years ended December 31, 2006, 2005 and 2004, the Company granted options to purchase 48,111, 30,611 and 42,787 shares of common stock to consultants at a weighted-average exercise price of $17.43, $11.70 and $8.31 per share, respectively. The related compensation expense, calculated in accordance with EITF Issue No. 96-18 and recorded by the Company, was $863,000, $1.1 million and $775,000 in 2006, 2005 and 2004, respectively.

The weighted average assumptions for the Black-Scholes model used in determining the fair value of options granted to non-employees are as follows:

	Year ended December 31,
	2006		2005		2004
Dividend yield:	0		0		0
Risk-free interest rate:	4.5	%	4.3	%	4.4	%
Volatility:	65	%	80	%	80	%
Maximum contractual life (from grant date)	10		10		10

62

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Restricted Stock Awards

During the year ended December 31, 2005, the Company issued 20,000 shares of common stock with a weighted average price of $12.70 per share to three consultants in exchange for services. Of the 20,000 shares of common stock, 10,000 shares are restricted and subject to repurchase by the Company at the original issuance. The repurchase right lapses ratably each quarter over a period of two years from the date of issuance. As of December 31, 2006 and 2005, 2,500 and 7,500 of these shares were subject to repurchase by the Company, respectively. The weighted average grant-date value of the unvested stock was $16.57 per share.

In May 2006, the Company granted 50,000 shares of restricted stock at $15.62 per share to an employee. The restricted shares vest at 25% on each anniversary date from the vesting commencement date such that the award is fully vested on the 4^th anniversary. The individual’s employment was terminated on January 3, 2007 and the unvested 50,000 shares were cancelled and returned to the shares reserved for issuance under the 2003 Stock Plan upon termination.

Warrants

In connection with our equipment loan agreements, we issued warrants to the lenders to purchase an aggregate of 51,210 shares of preferred stock in 2001 and 2002. These warrants were converted into warrants for 57,222 shares of common stock upon conversion of the preferred stock to common stock following the closing of the Company’s initial public offering in February 2004. The warrants are exercisable for the longer of 10 years from the issuance date or the seventh anniversary of the Company’s initial public offering. In July 2005, warrants for 23,864 shares of common stock were exercised. As of December 31, 2006, warrants for 29,290 and 4,068 shares of common stock with exercise prices of $7.37 and $9.24, respectively, remained outstanding.

Shares Reserved for Future Issuance

At December 31, 2006, the Company had reserved shares of common stock for future issuances as follows:

Outstanding options	3,657,866
2003 Employee Stock Purchase Plan	714,064
Options available for grant	143,185
Warrants	33,358
	4,548,473

63

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Pro forma Information for Periods Prior to the Adoption of SFAS 123(R)

Prior to the adoption of SFAS 123(R), the Company provided the disclosures required under SFAS 123, Accounting for Stock-Based Compensation, as amended by SFAS 148. The pro-forma information for years ended December 31, 2005 and 2004 is as follows:

	December 31,
	2005			2004
Net loss applicable to common stockholders, as reported	$	(31,980	)	$	(39,941	)
Plus: Employee stock compensation expense based on the intrinsic value method		3,822			4,646
Less: Employee stock compensation expense determined under the fair value method for all awards		(7,818	)		(5,937	)
Pro forma net loss	$	(35,976	)	$	(41,232	)
Net loss per share:
Basic and diluted, as reported	$	(1.24	)	$	(1.84	)
Basic and diluted, pro forma	$	(1.40	)	$	(1.90	)

Impact of the Adoption of SFAS No. 123(R)

The Company adopted SFAS 123(R) using the modified prospective transition method beginning January 1, 2006. During periods following adoption of SFAS 123(R), the Company recorded stock-based compensation expense for awards granted prior to, but not yet vested, as of December 31, 2005, as if the fair value method required for pro forma disclosure under SFAS 123 were in effect for expense recognition purposes, adjusted for estimated forfeitures. For stock-based awards granted after January 1, 2006, the Company recognized compensation expense based on the estimated grant date fair value method using the Black-Scholes valuation model. The Company recognizes compensation expense using a straight-line amortization method. Because SFAS 123(R) requires that stock-based compensation expense be based on awards that are ultimately expected to vest, stock-based compensation expense has been reduced for estimated forfeitures. When estimating forfeitures, we consider voluntary termination behaviors as well as trends of actual option forfeitures. The impact on the results of operations of recording stock-based compensation for the year ended December 31, 2006 was as follows (in thousands, except per share amounts):

Research and development	$	4,830
General and administrative		5,206
Total stock-based compensation	$	10,036
Effect on loss per share, basic and diluted	$	(0.34	)

Due to our net loss position, a tax benefit was not realized during the year ended December 31, 2006.

In November 2005, the FASB issued Staff Position (FSP) No. FAS 123(R)-3, Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards (FSP 123R-3). The Company has elected to adopt the alternative transition method provided in the FSP 123R-3 for calculating the tax effects of stock-based compensation pursuant to SFAS 123(R). The alternative transition method includes simplified methods to establish the beginning balance of the APIC pool related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and Statements of Cash Flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS 123(R).

64

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Prior to the adoption of SFAS 123(R), the intrinsic value of the Company’s unvested stock options was recorded as deferred stock compensation as of December 31, 2005. Upon the adoption of SFAS 123(R) in January 2006, the deferred stock compensation balance of $4.9 million was reclassified to additional paid-in-capital.

Valuation Assumptions

The Company calculated the fair value of each option grant on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. The weighted-average assumptions used are as follows:

	Year ended December 31,
	2006		2005		2004
Equity incentive plans:
Expected volatility	66	%	80	%	80	%
Risk-free interest rate	4.5	%	3.8	%	3.3	%
Dividend yield	0		0		0
Expected life of options (in years)	4.23		5		5
Employee stock purchase plan:
Expected volatility	110	%	80	%	80	%
Risk-free interest rate	4.9	%	3.5	%	2.5	%
Dividend yield	0		0		0
Expected life of options (in years)	0.5-2		0.5		0.5

The Company’s computation of expected volatility is based on a combination of historical volatilities of peer companies and market-based implied volatility from traded options on the Company’s common stock. Peer companies’ historical volatilities are used in the determination of expected volatility due to the short trading history of the Company’s common stock, which began trading on February 5, 2004. In selecting the peer companies, the Company considered the following factors: industry, stage of life cycle, size and financial leverage. The computation of the expected volatility for our employee stock purchase plan is based upon a combination of our historical volatility and our market-based implied volatility. Our computation of expected life of the options is determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

The weighted average fair value of purchase rights granted under the employee stock purchase plan was $3.77, $4.38 and $3.14 per share in 2006, 2005 and 2004, respectively.

11. Income Taxes

There is no provision for income taxes because we have incurred losses. Deferred income taxes reflect the tax effect of net operating loss, capitalized research and development costs and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income taxes.

65

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Significant components of the Company’s deferred tax assets are as follows (in thousands):

	December 31,
	2006			2005
Deferred tax assets:
Federal and state net operating loss carryforwards	$	37,436		$	26,141
Federal and state research credits		5,059			3,620
Capitalized research and development		13,668			15,821
Capitalized start-up costs		849			1,698
Other		4,277			2,156
Total deferred tax assets		61,289			49,436
Valuation allowance		(61,289	)		(49,436	)
Net deferred tax assets	$	—		$	—

Realization of the deferred tax assets is dependent upon the generation of future taxable income, if any, the amount and timing of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $11.9 million and $13.8 million for the years ended December 31, 2006 and 2005, respectively.

As of December 31, 2006, the Company had net operating loss carryforwards for federal income tax purposes of approximately $92.3 million which expire in the years 2020 to 2026 and federal research and development tax credits of approximately $3.0 million which expire in the years 2020 to 2026. The Company also has state net operating loss carryforwards of approximately $89.2 million which expire beginning in 2012 and state research and development tax credits of approximately $3.2 million which have no expiration date.

Utilization of the Company’s net operating loss may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss before utilization.

12. Subsequent Event

On January 4, 2007, the Company entered into stock option cancellation agreements with the officers of the Company. Under the terms of these stock option cancellation agreements, the officers surrendered certain options to purchase shares of the Company’s common stock (“Options”) to the Company for cancellation in exchange for $0.001 per share, the par value of the Company’s common stock. The officers relinquished all right, title or interest in those Options. In aggregate, Options to purchase 1,005,000 shares were cancelled. The shares reserved for issuance under the cancelled Options were immediately available for future grants to non-executive employees under the Company’s Amended and Restated 2003 Stock Plan. The Company will incur a non-cash share-based payment charge of approximately $7.3 million related to the cancellation and repurchase of unvested stock options from the officers in the quarter ended March 31, 2007.

On January 22, 2007, the Company committed to a restructuring plan in which the Company reduced its workforce by approximately 40% of its positions with the intention of reducing spending while maintaining the research and development capabilities needed to advance the Company’s later-stage preclinical drug discovery programs. The Company expects this restructuring to be substantially completed by the end of the first quarter of 2007 and currently expects to incur a restructuring charge of approximately $1.1 million in the first quarter of 2007, primarily associated with termination benefits.

66

RENOVIS, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

13. Selected Quarterly Financial Data (Unaudited)

The following tables summarize the unaudited quarterly financial data for the last two fiscal years (in thousands except share and per share data):

	Year Ended December 31, 2006
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	2,478		$	3,650		$	2,150		$	2,150
Net loss		(7,135	)		(5,831	)		(7,434	)		(7,976	)
Net loss per share—basic and diluted		(0.25	)		(0.20	)		(0.25	)		(0.27	)
Weighted average shares used in computing basic and diluted loss per share		28,976,250			29,178,167			29,303,319			29,389,130
	Year Ended December 31, 2005
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Revenues	$	656		$	656		$	2,691		$	2,644
Net loss		(9,990	)		(9,980	)		(6,300	)		(5,710	)
Net loss per share—basic and diluted		(0.41	)		(0.41	)		(0.25	)		(0.20	)
Weighted average shares used in computing basic and diluted loss per share		24,527,116			24,625,270			24,850,866			28,848,414

67

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

Not applicable.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process, and it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

The Company’s principal executive and financial officers reviewed and evaluated the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form 10-K. Based on that evaluation, the Company’s principal executive and financial officers concluded that the Company’s disclosure controls and procedures are effective in timely providing them with material information relating to the Company, as required to be disclosed in the reports the Company files under the Exchange Act.

(b) Management’s Report on Internal Control Over Financials Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on the assessment using those criteria, management concluded that as of December 31, 2006, our internal control over financial reporting was effective. The Company’s independent registered public accountants, Ernst & Young LLP, audited our financials statements included in this Annual Report on Form 10-K and have issued an audit report on management’s assessment of the Company’s internal control over financials reporting as well as the effectiveness of the Company’s internal control over financial report. The report on the audit of internal control over financial reporting appears below.

(c) Change in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially effect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

68

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Renovis, Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting that Renovis, Inc. maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Renovis, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of Renovis, Inc.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Renovis, Inc. maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Renovis, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of Renovis, Inc as of December 31, 2006 and 2005, and the related statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006 and our report dated March 2, 2007 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Palo Alto, California

March 2, 2007

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PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by this item will be contained in our definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the Annual Meeting of our Stockholders (the “Proxy Statement”), which is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2006, and is incorporated in this report by reference.

Renovis’ written Code of Business Conduct and Ethics applies to all of its directors and employees, including its executive officers. The Code of Business Conduct and Ethics is available on Renovis’ website at http://www.investors.renovis.com. Changes to or waivers of the Code of Business Conduct and Ethics will be disclosed on the same website.

Item 11. Executive Compensation

The information required by this item will be set forth in the Proxy Statement and is incorporated in this report by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item will be set forth in the Proxy Statement and is incorporated in this report by reference.

Item 13. Certain Relationships and Related Transactions

The information required by this item will be set forth in the Proxy Statement and is incorporated in this report by reference.

Item 14. Principal Accounting Fees and Services

The information required by this item will be set forth in the Proxy Statement and is incorporated in this report by reference.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Exhibits and Financial Statement Schedules:

(1) Financial Statements

See the “Index to Financial Statements” in Part II Item 8 of this report.

(2) Financial Statement Schedules

Not applicable.

(3) Exhibits

A list of exhibits required by Item 601 of Regulation S-K filed with this Form 10-K or incorporated by reference is found in the Exhibit Index immediately following Part IV of this report.

(b) Exhibits:

Those exhibits required by Item 601 of Regulation S-K filed or incorporated by reference is found in the Exhibit Index immediately following Part IV of this report.

(c) Financial Statement Schedules:

See Item 15(a)(2) above.

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EXHIBIT INDEX

Exhibit Number	Description of Document
3.1(6)	Amended and Restated Certificate of Incorporation of the Registrant.
3.2(1)	Amended and Restated Bylaws of the Registrant.
3.3(6)	Certificate of Amendment of Amended and Restated Certificate of Incorporation.
3.4(10)	Certificate of Designations of the Series A Junior Participating Preferred Stock.
4.1(10)	Specimen Common Stock Certificate.
4.2(11)	Specimen Preferred Stock Certificate.
4.3(11)	Form of Debt Security.
4.4(12)	Form of Senior Indenture, between the Registrant and one or more trustees to be named.
4.5(12)	Form of Subordinated Indenture, between the Registrant and one or more trustees to be named.
4.6(11)	Form of Warrant.
4.7(1)	Amended and Restated Investor Rights Agreement, dated as of August 7, 2003, by and among the Registrant and holders of the Registrant’s preferred stock.
4.8(1)	Warrant for the purchase of shares of Series B Preferred Stock, dated April 27, 2001, issued by the Registrant to GATX Ventures, Inc.
4.9(1)	Warrant for the purchase of shares of Series B Preferred Stock, dated April 27, 2001, issued by the Registrant to TBCC Funding Trust II.
4.10(1)	Warrant for the purchase of shares of Series B Preferred Stock, dated October 10, 2001, issued by the Registrant to GATX Ventures, Inc.
4.11(1)	Equipment Loan and Security Agreement, dated July 24, 2002, with GATX Ventures, Inc. and Transamerica Commercial Finance Corporation.
4.12(1)	Warrant for the purchase of shares of Series C Preferred Stock, dated July 24, 2002, issued by the Registrant to GATX Ventures, Inc.
4.13(1)	Warrant for the purchase of shares of Series C Preferred Stock, dated July 24, 2002, issued by the Registrant to TBCC Funding Trust II.
4.14(8)	Equipment Loan and Master Security Agreement, dated February 26, 2004, with Oxford Finance Corporation.
4.15(9)	Equipment Loan Promissory Note to Master Security Agreement dated March 25, 2005, with Oxford Finance Corporation.
4.16(9)	Rights Agreement, dated as of March 24, 2005, between the Registrant and Wells Fargo Shareowner Services.
10.1(3)	Form of Indemnity Agreement between the Registrant and each officer and director.
10.3(1)*	Amended and Restated 2003 Equity Incentive Plan.
10.4(1)*	2000 Equity Incentive Plan.
10.5(5)*	Employee Stock Purchase Plan.

72

Exhibit Number	Description of Document
10.6(19)*	Amended and Restated Employment Agreement dated January 30, 2007, by and between the Registrant and Corey S. Goodman. Ph.D.
10.7(19)*	Form of Amended and Restated Employment Agreement by and between the Registrant and Executive Officers
10.9(2)(7)	License Agreement, dated as of July 15, 1992, by and among Centaur Pharmaceuticals, Inc., the Oklahoma Medical Research Foundation and the University of Kentucky Research Foundation.
10.10(2)(7)	First Amendment to License Agreement, dated as of June 29, 1995, by and among Centaur Pharmaceuticals, Inc., the Oklahoma Medical Research Foundation and the University of Kentucky Research Foundation.
10.11(2)(7)	Development, License and Marketing Agreement, dated as of June 26, 1995, by and between Centaur Pharmaceuticals, Inc. and Astra AB.
10.12(2)	Amendment to Development, License and Marketing Agreement, dated as of July 8, 1997, by and between Centaur Pharmaceuticals, Inc. and Astra AB.
10.13(2)	Amendment to Development, License and Marketing Agreement, dated as of October 7, 1997, by and between Centaur Pharmaceuticals, Inc. and Astra AB.
10.14(2)(7)	Third Amendment to Development, License and Marketing Agreement, dated as of June 18, 2002, by and between Centaur Pharmaceuticals, Inc. and Astra AB.
10.15(2)(7)	Supply Agreement, dated as of June 26, 1995, by and between Centaur Pharmaceuticals, Inc. and Astra AB.
10.16(2)(7)	Amendment to Supply Agreement, dated June 18, 2002, by and between Centaur Pharmaceuticals, Inc. and AstraZeneca AB.
10.17(2)(7)	License Agreement, dated as of January 15, 1998, by and between Centaur Pharmaceuticals, Inc. and Cutanix Corporation.
10.18(2)	Amendment No. 1 to License Agreement, dated as of June 18, 1998, by and between Centaur Pharmaceuticals, Inc. and Cutanix Corporation.
10.19(2)(7)	Second Amendment to License Agreement and Termination of Services and Supply Agreement, dated as of September 13, 2002, by and between Centaur Pharmaceuticals, Inc. and Cutanix Corporation.
10.20(4)(7)	Patent License and Research Collaboration Agreement, dated July 15, 2003, by and between the Company and Merck & Co., Inc.
10.21(4)(7)	License Agreement, dated December 27, 2002, by and between the Company and The Regents of the University of California.
10.22(2)(7)	Sublease, dated August 5, 2003, by and between the Company and Tularik Inc.
10.23(3)	Asset Purchase Agreement, dated as of July 26, 2003, by and between the Registrant and Centaur Pharmaceuticals, Inc.
10.24(3)	Amendment to Asset Purchase Agreement, dated as of October 23, 2002, by and between the Registrant and Centaur Pharmaceuticals, Inc.
10.25(4)(7)	Collaborative Research, Development and License Agreement, dated as of December 31, 2003, by and between the Registrant and Genentech, Inc.

73

Exhibit Number	Description of Document
10.26(4)(7)	License Agreement, dated as of June 1, 2001, by and between the Registrant and The Regents of the University of California.
10.27(4)(7)	First Amendment to License Agreement, dated as of December 15, 2002, by and between the Registrant and The Regents of the University of California.
10.28(4)	Second Amendment to License Agreement, dated as of December 23, 2003, by and between the Registrant and The Regents of the University of California.
10.29(4)(7)	License Agreement, dated as of November 25, 2002, by and between the Registrant and The Regents of the University of California.
10.30(18)*	Amended and Restated 2003 Stock Plan.
10.31*	Amended and Restated 2005 Employment Commencement Incentive Plan and form of stock option agreement.
10.32*	Amended and Restated 2006 Employment Commencement Incentive Plan and form of stock option agreement.
10.33(13)(7)	Collaborative Research Agreement, dated May 26, 2005 by and between the Registrant and Pfizer, Inc.
10.34(13)(7)	License and Royalty Agreement, dated May 26, 2005 by and between Registrant and Pfizer, Inc.
10.35(14)*	Marlene F. Perry Employment Commencement Nonstatutory Stock Option.
10.36*	Amendment of Marlene F. Perry Employment Commencement Nonstatutory Stock Option
10.37(15)*	Transition and Separation Agreement., effective as of May 31, 2006, by and between the Company and Dushyant Pathak, Ph.D.
10.38(16)*	2007 Employment Commencement Incentive Plan and form of stock option agreement.
10.39(16)*	Confidential Separation Agreement, effective January 3, 2007, by and between the Registrant and Tito A. Serafini.
10.40(17)*	Form of Stock Option Cancellation Agreement by and between the Registrant and Executive Officers.
10.41(19)*	Form of Deferred Stock Unit Award Grant Notice and Agreement by and between the Company and officers.
10.42(19)*	Form of Deferred Stock Unit Award Grant Notice and Agreement by and between the Company and employees.
23.1	Consent of Ernst & Young LLP, independent registered public accounting firm.
31.1	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.
32.1	Section 1350 Certification of Chief Executive Officer.
32.2	Section 1350 Certification of Chief Financial Officer.

 * Management contract or compensatory plan.

(1) Incorporated by reference to the Company’s Registration Statement on Form S-1 (SEC File No. 333-109806) filed on October 17, 2003.

(2) Incorporated by reference to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-109806) filed on October 23, 2003.

74

(3) Incorporated by reference to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-109806) filed on November 21, 2003.

(4) Incorporated by reference to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-109806) filed on January 16, 2004.

(5) Incorporated by reference to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-109806) filed on January 29, 2004.

(6) Incorporated by reference to Amendment No. 5 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-109806) filed on February 3, 2004.

(7) Confidential treatment granted as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission.

(8) Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, filed on March 30, 2004.

(9) Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed on March 28, 2005.

(10) Incorporated by reference to the Company’s Current Report on Form 8-K (SEC file No. 000-50564) filed on April 11, 2005.

(11) To be filed by amendment to the Company’s Registration Statement on Form S-3 (SEC file No. 333-122762) filed on February 11, 2005 or by a report filed under the Exchange Act and incorporated therein by reference.

(12) Incorporated by reference to the Company’s Registration Statement on Form S-3 (SEC file No. 333-122762) filed on February 11, 2005.

(13) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (SEC File No. 000-50564) filed on August 12, 2005.

(14) Incorporated by reference to the Company’s Registration Statement on Form S-8 (SEC File No. 333-123638) filed on March 29, 2005.

(15) Incorporated by reference to the Company’s Current Report on Form 8-K (SEC file No. 000-50564) filed June 2, 2006.

(16) Incorporated by reference to the Company’s Current Report on Form 8-K (SEC file No. 000-50564) filed on January 4, 2007.

(17) Incorporated by reference to the Company’s Current Report on Form 8-K (SEC file No. 000-50564) filed on January 8, 2007.

(18) Incorporated by reference to the Company’s Registration Statement on Form S-8 (SEC File No. 333-140136) filed on January 22, 2007.

(19) Incorporated by reference to the Company’s Current Report on Form 8-K (SEC file No. 000-50564) filed on February 1, 2007.

75

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	RENOVIS, INC.
Dated: March 14, 2007	By:	/S/    COREY S. GOODMAN
		Corey S. Goodman President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/S/    COREY S. GOODMAN, PH.D.         Corey S. Goodman	Director, President and Chief Executive Officer (Principal Executive Officer)	March 14, 2007
/S/    JOHN C. DOYLE         John C. Doyle	Senior Vice President, Corporate Development and Chief Financial Officer (Principal Financial and Accounting Officer)	March 14, 2007
/S/    BRUCE L. A. CARTER, PH. D.         Bruce L. A. Carter	Director	March 14, 2007
/S/    NANCY M. CROWELL         Nancy M. Crowell	Director	March 14, 2007
/S/    ANTHONY B. EVNIN, PH.D.         Anthony B. Evnin	Director	March 14, 2007
/S/    JOHN H. FRIEDMAN         John H. Friedman	Director	March 14, 2007
/S/    EDWARD E. PENHOET, PH.D.         Edward E. Penhoet	Director	March 14, 2007
/S/    JUDITH A. HEMBERGER, PH.D.         Judith A. Hemberger	Director	March 14, 2007
/S/    JOHN P. WALKER         John P. Walker	Director	March 14, 2007

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EX-10.31

Exhibit 10.31

AMENDED AND RESTATED

RENOVIS, INC.

2005 EMPLOYMENT COMMENCEMENT INCENTIVE PLAN

Adopted by the Board of Directors January 3, 2007

ARTICLE 1

PURPOSE

1.1 GENERAL.

(a) ELIGIBLE STOCK AWARD RECIPIENTS. Only Eligible Participants may receive Awards under the Plan.

(b) GENERAL PURPOSE. The purpose of the Plan is to promote the success and enhance the value of Renovis, Inc. (the “Company”) by linking the personal interests of Eligible Participants to those of Company stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Eligible Participants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation will be largely dependent.

ARTICLE 2

DEFINITIONS AND CONSTRUCTION

2.1 DEFINITIONS. The following words and phrases shall have the following meanings:

(a) “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Performance Share award, a Dividend Equivalents award, a Stock Payment award, or a Deferred Stock award granted to an Eligible Participant pursuant to the Plan.

(b) “Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award.

(c) “Board” means the Board of Directors of the Company.

(d) “Change of Control” means and includes each of the following:

(1) the acquisition, directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d) and 14(d) of the Exchange Act and the rules thereunder) of “beneficial ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the election of directors (“voting securities”) of the Company that represent 50% or more of the combined voting power of the Company’s then outstanding voting securities, other than

(A) an acquisition by a trustee or other fiduciary holding securities

under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or

(B) an acquisition of voting securities by the Company or a corporation owned, directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company, or

(C) an acquisition of voting securities pursuant to a transaction described in clause (3) below that would not be a Change of Control under clause (3);

Notwithstanding the foregoing, the following event shall not constitute an “acquisition” by any person or group for purposes of this subsection (d): an acquisition of the Company’s securities by the Company which causes the Company’s voting securities beneficially owned by a person or group to represent 50% or more of the combined voting power of the Company’s then outstanding voting securities; provided, however, that if a person or group shall become the beneficial owner of 50% or more of the combined voting power of the Company’s then outstanding voting securities by reason of share acquisitions by the Company as described above and shall, after such share acquisitions by the Company, become the beneficial owner of any additional voting securities of the Company, then such acquisition shall constitute a Change of Control; or

(2) during any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clauses (1) or (3) of this subsection (d)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(3) the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case other than a transaction

(A) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

(B) after which no person or group beneficially owns voting

2

securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (B) as beneficially owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or

(4) the Company’s stockholders approve a liquidation or dissolution of the Company.

The Committee shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change of Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change of Control and any incidental matters relating thereto.

(e) “Code” means the Internal Revenue Code of 1986, as amended.

(f) “Committee” means the Board or the Compensation Committee of the Board as further described in Article 11.

(g) “Deferred Stock” means a right to receive a specified number of shares of Stock during specified time periods pursuant to Article 8.

(h) “Director” means a member of the Board.

(i) “Disability” means, for purposes of this Plan, that the Participant qualifies to receive long-term disability payments under the Company’s long-term disability insurance program, as it may be amended from time to time.

(j) “Dividend Equivalents” means a right granted to a Participant pursuant to Article 8 to receive the equivalent value (in cash or Stock) of dividends paid on Stock.

(k) “Eligible Participant” means any Employee who has not previously been an Employee or Director of the Company or a Subsidiary, or is commencing employment with the Company or a Subsidiary following a bona fide period of non-employment by the Company or a Subsidiary, if he or she is granted an Award in connection with his or her commencement of employment with the Company or a Subsidiary and such grant is an inducement material to his or her entering into employment with the Company or a Subsidiary. The Board may in its discretion adopt procedures from time to time to ensure that an Employee is eligible to participate in the Plan prior to the granting of any Awards to such Employee under the Plan (including, without limitation, a requirement, that each such Employee certify to the Company prior to the receipt of an Award under the Plan that he or she has not been previously employed by the Company or a Subsidiary, or if previously employed, has had a bona fide period of non-employment, and that the grant of Awards under the Plan is an inducement material to his or her agreement to enter into employment with the Company or a Subsidiary).

(l) “Employee” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Subsidiary.

(m) “Equity Restructuring” means a non-reciprocal transaction between the

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Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the shares of Stock (or other securities of the Company) or the share price of Stock (or other securities) and causes a change in the per share value of the Stock underlying outstanding Awards.

(n) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(o) “Fair Market Value” shall mean, as of any date, the value of Stock determined as follows:

(1) If the Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the date of determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable;

(2) If the Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Stock on the date prior to the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable; or

(3) In the absence of an established market for the Stock, the Fair Market Value thereof shall be determined in good faith by the Committee.

(p) “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto. Incentive Stock Options may not be granted under the Plan.

(q) “Independent Director” means a Director who is not an Employee of the Company and who qualifies as “independent” within the meaning of NASD Rule 4200(a)(14), if the Company’s securities are traded on the Nasdaq National Market, or the requirements of any other established stock exchange on which the Company’s securities are traded, as such rules or requirements may be amended from time to time.

(r) “NASD” means the National Association of Securities Dealers, Inc.

(s) “Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock Option.

(t) “Option” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock at a specified price during specified time periods. An Option must be a Non-Qualified Stock Option.

(u) “Participant” means an Eligible Participant who has been granted an Award pursuant to the Plan.

(v) “Performance Share” means a right granted to a Participant pursuant to Article 8, to receive cash, Stock, or other Awards, the payment of which is contingent upon achieving certain performance goals established by the Committee.

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(w) “Plan” means this Renovis, Inc. 2005 Employment Commencement Incentive Plan, as it may be amended from time to time.

(x) “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and to risk of forfeiture.

(y) “Stock” means the common stock of the Company and such other securities of the Company that may be substituted for Stock pursuant to Article 10.

(z) “Stock Appreciation Right” or “SAR” means a right granted pursuant to Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of shares of Stock on the date the SAR is exercised over the Fair Market Value on the date the SAR was granted as set forth in the applicable Award Agreement.

(aa) “Stock Payment” means (a) a payment in the form of shares of Stock, or (b) an option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to Article 8.

(bb) “Subsidiary” means any corporation or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

ARTICLE 3

SHARES SUBJECT TO THE PLAN

3.1 NUMBER OF SHARES.

(a) Subject to Article 10, the aggregate number of shares of Stock which may be issued or transferred pursuant to Awards under the Plan shall be 250,000 shares.

The payment of Dividend Equivalents in conjunction with any outstanding Awards shall not be counted against the shares available for issuance under the Plan.

(b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan. Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, shares of Stock issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary shall not be counted against shares of Stock available for grant pursuant to this Plan.

3.2 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.

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ARTICLE 4

ELIGIBILITY AND PARTICIPATION

4.1 ELIGIBILITY.

(a) GENERAL. Awards may be granted only to Eligible Participants. All Options granted under the Plan shall be Non-Qualified Stock Options.

(b) FOREIGN PARTICIPANTS. In order to assure the viability of Awards granted to Participants employed in foreign countries, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom. Moreover, the Committee may approve such supplements to, or amendments, restatements, or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose; provided, however, that no such supplements, amendments, restatements, or alternative versions shall increase the share limitations contained in Section 3.1 of the Plan.

4.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all eligible individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any right to be granted an Award pursuant to this Plan.

ARTICLE 5

STOCK OPTIONS

5.1 GENERAL. Options may be granted to Eligible Participants on the following terms and conditions:

(a) EXERCISE PRICE. The exercise price per share of Stock subject to an Option shall be determined by the Committee and set forth in the Award Agreement; provided that the exercise price for any Option shall not be less than par value of a share of Stock on the date of grant.

(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, provided that the term of any Option granted under the Plan shall not exceed ten years, and provided further, that such Option shall be exercisable for not less than one year after the date of the Participant’s death. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.

(c) PAYMENT. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, cash, promissory note bearing interest at no less than such rate as shall then preclude the imputation of interest under the Code, shares of Stock held for longer than six months having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, or other property acceptable to the Committee (including through the

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delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price, provided that payment of such proceeds is then made to the Company upon settlement of such sale), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option in any method which would violate Section 13(k).

(d) EVIDENCE OF GRANT. All Options shall be evidenced by a written Award Agreement between the Company and the Participant. The Award Agreement shall include such additional provisions as may be specified by the Committee.

ARTICLE 6

RESTRICTED STOCK AWARDS

6.1 GRANT OF RESTRICTED STOCK. Restricted Stock may be awarded to any Eligible Participant in such amounts and subject to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be evidenced by a written Restricted Stock Award Agreement.

6.2 ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.

6.3 FORFEITURE. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited; provided, however, that the Committee may provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

6.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.

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ARTICLE 7

STOCK APPRECIATION RIGHTS

7.1 GRANT OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right may be granted to any Eligible Participant selected by the Committee. A Stock Appreciation Right may be granted (a) in connection and simultaneously with the grant of an Option, (b) with respect to a previously granted Option, or (c) independent of an Option. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement.

7.2 COUPLED STOCK APPRECIATION RIGHTS.

(a) A Coupled Stock Appreciation Right (“CSAR”) shall be related to a particular Option and shall be exercisable only when and to the extent the related Option is exercisable.

(b) A CSAR may be granted to a Participant for no more than the number of shares subject to the simultaneously or previously granted Option to which it is coupled.

(c) A CSAR shall entitle the Participant (or other person entitled to exercise the Option pursuant to the Plan) to surrender to the Company unexercised a portion of the Option to which the CSAR relates (to the extent then exercisable pursuant to its terms) and to receive from the Company in exchange therefor an amount determined by multiplying the difference obtained by subtracting the Option exercise price from the Fair Market Value of a share of Stock on the date of exercise of the CSAR by the number of shares of Stock with respect to which the CSAR shall have been exercised, subject to any limitations the Committee may impose.

7.3 INDEPENDENT STOCK APPRECIATION RIGHTS.

(a) An Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any Option and shall have a term set by the Committee. An ISAR shall be exercisable in such installments as the Committee may determine. An ISAR shall cover such number of shares of Stock as the Committee may determine. The exercise price per share of Stock subject to each ISAR shall be set by the Committee; provided, however, that, the Committee in its sole and absolute discretion may provide that the ISAR may be exercised subsequent to a termination of employment or service, as applicable, or following a Change of Control, or because of the Participant’s retirement, death or Disability, or otherwise.

(b) An ISAR shall entitle the Participant (or other person entitled to exercise the ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the ISAR from the Fair Market Value of a share of Stock on the date of exercise of the ISAR by the number of shares of Stock with respect to which the ISAR shall have been exercised, subject to any limitations the Committee may impose.

7.4 PAYMENT AND LIMITATIONS ON EXERCISE.

(a) Payment of the amounts determined under Section 7.2(c) and 7.3(b) above shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee.

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(b) To the extent any payment under Section 7.2(c) or 7.3(b) is effected in Stock it shall be made subject to satisfaction of all provisions of Article 5 above pertaining to Options.

ARTICLE 8

OTHER TYPES OF AWARDS

8.1 PERFORMANCE SHARE AWARDS. Any Eligible Participant selected by the Committee may be granted one or more Performance Share awards which may be denominated in a number of shares of Stock or in a dollar value of shares of Stock and which may be linked to any one or more specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.

8.2 DIVIDEND EQUIVALENTS.

(a) Any Eligible Participant selected by the Committee may be granted Dividend Equivalents based on the dividends declared on the shares of Stock that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Stock by such formula and at such time and subject to such limitations as may be determined by the Committee.

8.3 STOCK PAYMENTS. Any Eligible Participant selected by the Committee may receive Stock Payments in the manner determined from time to time by the Committee. The number of shares shall be determined by the Committee and may be based upon specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter.

8.4 DEFERRED STOCK. Any Eligible Participant selected by the Committee may be granted an award of Deferred Stock in the manner determined from time to time by the Committee. The number of shares of Deferred Stock shall be determined by the Committee and may be linked to specific performance criteria determined to be appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. Stock underlying a Deferred Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless otherwise provided by the Committee, a Participant awarded Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Deferred Stock Award has vested and the Stock underlying the Deferred Stock Award has been issued.

8.5 TERM. The term of any Award of Performance Shares, Dividend Equivalents, Stock Payments or Deferred Stock shall be set by the Committee in its discretion.

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8.6 EXERCISE OR PURCHASE PRICE. The Committee may establish the exercise or purchase price of any Award of Performance Shares, Deferred Stock or Stock Payments; provided, however, that such price shall not be less than the par value of a share of Stock, unless otherwise permitted by applicable state law.

8.7 EXERCISE UPON TERMINATION OF EMPLOYMENT OR SERVICE. An Award of Performance Shares, Dividend Equivalents, Deferred Stock and Stock Payments shall only be exercisable or payable while the Participant is an Employee of the Company; provided, however, that the Committee in its sole and absolute discretion may provide that an Award of Performance Shares, Dividend Equivalents, Stock Payments or Deferred Stock may be exercised or paid subsequent to a termination of employment or service, as applicable, or following a Change of Control, or because of the Participant’s retirement, death or Disability, or otherwise.

8.8 FORM OF PAYMENT. Payments with respect to any Awards granted under this Article 8 shall be made in cash, in Stock or a combination of both, as determined by the Committee.

8.9 AWARD AGREEMENT. All Awards under this Article 8 shall be subject to such additional terms and conditions as determined by the Committee and shall be evidenced by a written Award Agreement.

ARTICLE 9

PROVISIONS APPLICABLE TO AWARDS

9.1 STAND-ALONE AND TANDEM AWARDS. Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

9.2 AWARD AGREEMENT. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.

9.3 LIMITS ON TRANSFER. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. No Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution.

9.4 BENEFICIARIES. Notwithstanding Section 9.3, a Participant may, in the

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manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.

9.5 STOCK CERTIFICATES. Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed or traded. All Stock certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee.

ARTICLE 10

CHANGES IN CAPITAL STRUCTURE

10.1 ADJUSTMENTS.

(a) EQUITY RESTRUCTURING. In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Section 10.1(b):

(1) The number and type of securities subject to each outstanding Award and the exercise price or grant price per share thereof, as well as any other applicable terms and conditions of each outstanding Award (including, without limitation, any performance targets or criteria with respect thereto), will be proportionately adjusted. The adjustments provided under this Section 10.1(a)(1) shall be nondiscretionary and shall be final and binding on the affected Participant and the Company.

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(2) The Committee shall make such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitation in Section 3.1).

(b) OTHER CHANGES IN CAPITAL STRUCTURE. In the event that the Committee determines that other than an Equity Restructuring, any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), reorganization, merger, consolidation, combination, repurchase, liquidation, dissolution, or sale transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Stock or other securities of the Company, issuance or warrants or other rights to purchase Stock or other securities of the Company or other similar corporate transaction or event, in the Committee’s sole discretion, affects the Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Committee shall, in such manner as it may deem equitable, adjust any or all of:

(1) The number and kind of shares of Stock (or other securities or property) with respect to which Awards may be granted or awarded (including, but not limited to, adjustments of the limitation in Section 3.1 on the maximum number and kind of shares which may be issued);

(2) The number and kind of shares of Stock (or other securities or property) subject to outstanding Awards; and

(3) The grant or exercise price per share with respect to any outstanding Award, as well as any other applicable terms and conditions of each outstanding Award (including, without limitation, any performance targets or criteria with respect thereto).

10.2 ACCELERATION UPON A CHANGE OF CONTROL. If a Change of Control occurs and a Participant’s Awards are not converted, assumed, or replaced by a successor, such Awards shall become fully exercisable and all forfeiture restrictions on such Awards shall lapse. Upon, or in anticipation of, a Change of Control, the Committee may cause any and all Awards outstanding hereunder to terminate at a specific time in the future and shall give each Participant the right to exercise such Awards during a period of time as the Committee, in its sole and absolute discretion, shall determine. In the event that the terms of any agreement between the Company or any Subsidiary or affiliate and a Participant contains provisions that conflict with and are more restrictive than the provisions of this Section 10.2, this Section 10.2 shall prevail and control and the more restrictive terms of such agreement (and only such terms) shall be of no force or effect.

10.3 OUTSTANDING AWARDS – CERTAIN MERGERS. Subject to any required action by the stockholders of the Company, in the event that the Company shall be the surviving corporation in any merger or consolidation (except a merger or consolidation as a result of which the holders of shares of Stock receive securities of another corporation), each Award outstanding on the date of such merger or consolidation shall pertain to and apply to the securities that a holder of the number of shares of Stock subject to such Award would have received in such merger or consolidation.

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10.4 OUTSTANDING AWARDS – OTHER CHANGES. In the event of any other change in the capitalization of the Company or corporate change other than those specifically referred to in this Article 10, the Committee may, in its absolute discretion, make such adjustments in the number and class of shares subject to Awards outstanding on the date on which such change occurs and in the per share grant or exercise price of each Award as the Committee may consider appropriate to prevent dilution or enlargement of rights.

10.5 NO OTHER RIGHTS. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to an Award or the grant or exercise price of any Award.

ARTICLE 11

ADMINISTRATION

11.1 COMMITTEE. Unless and until the Board delegates administration to the Committee as set forth below, the Plan shall be administered by the Board, which shall, in such event, constitute the “Committee” for the purposes of this Plan. Any action taken by the Board in connection with the administration of the Plan shall not be deemed approved by the Board unless such actions are approved by a majority of the Independent Directors. The Board may delegate administration of the Plan to the Committee, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated; provided, however, that such Committee be comprised of a majority of or solely two or more Independent Directors. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.

The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. Any action taken by the Board in connection with the administration of the Plan shall continue to not be deemed approved by the Board unless such actions are approved by a majority of the Independent Directors. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may only be filled by the Board.

11.2 ACTION BY THE COMMITTEE. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a

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quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

11.3 AUTHORITY OF COMMITTEE. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:

(a) Adopt procedures from time to time in the Committee’s discretion to ensure that an Employee is eligible to participate in the Plan prior to the granting of any Awards to such Employee under the Plan (including, without limitation, a requirement, if any, that each such Employee certify to the Company prior to the receipt of an Award under the Plan that he or she has not been previously employed by the Company or a Subsidiary, or if previously employed, has had a bona-fide period of non-employment, and that the grant of Awards under the Plan is an inducement material to his or her agreement to enter into employment with the Company or a Subsidiary).

(b) Designate Participants to receive Awards;

(c) Determine the type or types of Awards to be granted to each Participant;

(d) Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;

(e) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines;

(f) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;

(g) Prescribe the form of each Award Agreement, which need not be identical for each Participant;

(h) Decide all other matters that must be determined in connection with an Award;

(i) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

(j) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and

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(k) Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.

12.4 DECISIONS BINDING. The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.

ARTICLE 12

EFFECTIVE AND EXPIRATION DATE

12.1 EFFECTIVE DATE. The Plan is effective as of the date of its adoption by the Board (the “Effective Date”).

12.2 EXPIRATION DATE. The Plan will expire on, and no Award may be granted pursuant to the Plan after December 31, 2005 (the “Expiration Date”). Any Awards that are outstanding on the Expiration Date shall remain in force according to the terms of the Plan and the applicable Award Agreement. Each Award Agreement shall provide that it will expire on the tenth anniversary of the date of grant of the Award to which it relates.

ARTICLE 13

AMENDMENT, MODIFICATION, AND TERMINATION

13.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however, that to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required.

13.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant.

ARTICLE 14

GENERAL PROVISIONS

14.1 NO RIGHTS TO AWARDS. No Participant, employee, or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Participants, employees, and other persons uniformly.

14.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the rights of a stockholder of the Company unless and until shares of Stock are in fact issued to such person in connection with such Award.

14.3 WITHHOLDING. The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Committee may in its discretion and in

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satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of shares of Stock which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such Award within six months after such shares of Stock were acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.

14.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment at any time, nor confer upon any Participant any right to continue in the employ of the Company or any Subsidiary.

14.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.

14.6 INDEMNIFICATION. To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her, provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

14.7 RELATIONSHIP TO OTHER BENEFITS. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

14.8 EXPENSES. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

16

14.9 TITLES AND HEADINGS. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

14.10 FRACTIONAL SHARES. No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

14.11 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

14.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities Act of 1933, as amended, any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act of 1933, as amended, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.

14.13 GOVERNING LAW. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware.

ARTICLE 15

GENERAL PROVISIONS

15.1 STOCKHOLDER APPROVAL NOT REQUIRED. It is expressly intended that approval of the Company’s stockholders not be required as a condition of the effectiveness of the Plan, and the Plan’s provisions shall be interpreted in a manner consistent with such intent for all purposes. Specifically, Rule 4350(i) promulgated by the NASD generally requires stockholder approval for stock option plans or other equity compensation arrangements adopted by companies whose securities are listed on the Nasdaq National Market pursuant to which stock awards or stock may be acquired by officers, directors, employees, or consultants of such companies. NASD Rule 4350(i)(1)(A)(iv) provides an exception to this requirement for issuances of securities to a person not previously an employee or director of the issuer, or following a bona fide period of non-employment, as an inducement material to the individual’s entering into employment with the issuer, provided such issuances are approved by either the issuer’s compensation committee comprised of a majority of independent directors or a majority

17

of the issuer’s independent directors. Awards under this Plan may only be made to Eligible Participants who have not previously been an Employee or director of the Company or a Subsidiary, or following a bona fide period of non-employment by the Company or a Subsidiary, as an inducement material to the Eligible Participant’s entering into employment with the Company or a Subsidiary. Awards under the Plan will be approved by (i) the Company’s Compensation Committee comprised of a majority of the Company’s Independent Directors or (ii) a majority of the Company’s Independent Directors. Accordingly, pursuant to NASD Rule 4350(i)(1)(A)(iv), the issuance of Awards and the shares of Common Stock issuable upon exercise or vesting of such Awards pursuant to this Plan are not subject to the approval of the Company’s stockholders.

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RENOVIS, INC.

STOCK OPTION GRANT NOTICE AND STOCK OPTION AGREEMENT

UNDER THE 2005 EMPLOYMENT COMMENCEMENT INCENTIVE PLAN

Renovis, Inc. (the “Company”), pursuant to its 2005 Employment Commencement Incentive Plan (the “Plan”) hereby grants to the Optionee listed below (“Optionee”), an option to purchase the number of shares of the Company’s Stock set forth below. This option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement and the Plan, each of which are attached hereto and incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Agreement.

Optionee:

Date of Stock Option Agreement:

Grant Date:

Vesting Commencement Date:

Exercise Price per Share:

Total Number of Shares Granted:

Total Exercise Price:

Expiration Date:

Type of Option:	This Option is a Non-Qualified Stock Option
Vesting Schedule:	the vesting commencement date for this option shall be the date indicated above, and such options shall be vested and exercisable as to 1/4 of the shares one year after the vesting commencement date and 1/48 of the shares shall vest monthly thereafter over the next three years.

By his or her signature and the Company’s signature below, Optionee agrees to be bound by the terms and conditions of the Plan and the Stock Option Agreement attached hereto. Optionee has reviewed the Stock Option Agreement and the Plan in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this option and fully understands all provisions of the Grant Notice, the Stock Option Agreement and the Plan. Optionee agrees that Optionee has not been previously employed in any capacity by the Company or a Subsidiary, or if previously employed, has had a bona-fide period of non-employment, and that the grant of this Option is an inducement material to Optionee’s agreement to enter into employment with the Company or Subsidiary. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the administrator of the Plan upon any questions arising under the Plan or this option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.

RENOVIS, INC.	OPTIONEE:
By:	By:
Print Name:	Print Name:
Title:
Address:	Address:

GRANT NOTICE PAGE 1

RENOVIS, INC.

2005 EMPLOYMENT COMMENCEMENT INCENTIVE PLAN

STOCK OPTION AGREEMENT

Pursuant to the Stock Option Grant Notice (“Grant Notice”) to which this Stock Option Agreement (this “Agreement”) is attached, Renovis, Inc. (the “Company”) has granted to the Optionee an option under the Company’s 2005 Employment Commencement Incentive Plan (the “Plan”) to purchase the number of shares of Stock indicated in the Grant Notice at the exercise price indicated in the Grant Notice. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Agreement.

ARTICLE I

DEFINITIONS; INCORPORATION OF TERMS

1.1 General. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan.

1.2 Incorporation of Terms of Plan. The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference.

ARTICLE II

GRANT OF OPTION

2.1 Grant of Option. In consideration of the Optionee’s agreement to commence and remain in the employ of the Company or its Subsidiaries and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to the Optionee the Option to purchase any part or all of an aggregate of the number of shares of Stock set forth in the Grant Notice, upon the terms and conditions set forth in this Agreement. The Option shall be a Non-Qualified Stock Option.

2.2 Purchase Price. The purchase price of the shares of Stock subject to the Option per share shall be as set forth in the Grant Notice, without commission or other charge; provided, however, that the exercise price shall not be less than the par value of a share of Stock, unless otherwise permitted by applicable law.

2.3 Consideration to the Company. In consideration of the granting of the Option by the Company, the Optionee agrees to render faithful and efficient services to the Company or any Subsidiary, with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in the Plan or this Agreement shall confer upon the Optionee any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without cause.

STOCK OPTION AGREEMENT PAGE 1

ARTICLE III

PERIOD OF EXERCISABILITY

3.1 Commencement of Exercisability.

(a) Subject to Sections 3.3 and 5.10, the Option shall become exercisable in such amounts and at such times as are set forth in the Grant Notice.

(b) No portion of the Option which has not become exercisable at Termination of Service (as defined in Section 3.3 below) shall thereafter become exercisable, except as may be otherwise provided by the Committee or as set forth in a written agreement between the Company and the Optionee.

3.2 Duration of Exercisability. The installments provided for in Section 3.1(a) are cumulative. Each such installment which becomes exercisable pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable under Section 3.3.

3.3 Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:

(a) The expiration of ten years from the Grant Date; or

(b) The expiration of three months following the date of the Optionee’s Termination of Service, unless such Termination of Service occurs by reason of the Optionee’s death or Disability or as set forth in a written agreement with the Company; or

(c) The expiration of twelve months following the date of the Optionee’s Termination of Service by reason of the Optionee’s Disability; or

(d) The expiration of eighteen months following the date of the Optionee’s Termination of Service by reason of the Optionee’s death.

(e) For purposes of this Agreement, “Termination of Service” means the time when the employment relationship between the Optionee and the Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death or Disability; but excluding (a) a termination where there is a simultaneous reemployment or continuing employment of the Optionee by the Company or any Subsidiary or a parent corporation thereof (within the meaning of Section 422 of the Code), (b) at the discretion of the Committee, a termination which results in a temporary severance of the employee-employer relationship, and (c) at the discretion of the Committee, a termination which is followed by the simultaneous establishment of a consulting relationship by the Company or a Subsidiary with the former Employee. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Service for the purposes of this Agreement, and all questions of whether particular leaves of absence for Optionees constitute Terminations of Service. Notwithstanding any other provision of the Plan or this Agreement, the Company or any Subsidiary has an absolute and unrestricted right to terminate the Optionee’s employment and/or consultancy at any time for any reason whatsoever, with or without cause.

STOCK OPTION AGREEMENT PAGE 2

ARTICLE IV

EXERCISE OF OPTION

4.1 Person Eligible to Exercise. Except as provided in Sections 5.2(b) and 5.2(c), during the lifetime of the Optionee, only the Optionee may exercise the Option or any portion thereof. After the death of the Optionee, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by the Optionee’s beneficiary designated in accordance with Section 9.4 of the Plan. If no beneficiary has been designated or survives the Optionee, the Option may be exercised by the person entitled to such exercise pursuant to the Optionee’s will or the laws of descent and distribution.

4.2 Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3.

4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company or the Secretary’s office of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3:

(a) An Exercise Notice in writing signed by the Optionee or the other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Committee. Such notice shall be substantially in the form attached as Exhibit A (or such other form as is prescribed by the Committee); and

(b)    (i) Full payment (in cash or by check) for the shares with respect to which the Option or portion thereof is exercised, to the extent permitted under applicable laws; or

(ii) To the extent permitted under applicable laws, through the delivery of a notice that the Optionee has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price, provided, that payment of such proceeds is made to the Company upon settlement of such sale; or

(iii) With the consent of the Committee, any combination of the consideration provided in the foregoing subparagraphs (i) and (ii); and

(c) A bona fide written representation and agreement, in such form as is prescribed by the Committee, signed by the Optionee or other person then entitled to exercise such Option or portion thereof, stating that the shares of Stock are being acquired for the Optionee’s own account, for investment and without any present intention of distributing or reselling said shares or any of them except as may be permitted under the Securities Act of 1933, as amended (the “Securities Act”), and then applicable rules and regulations thereunder, and that the Optionee or other person then entitled to exercise such Option or portion thereof will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the shares by such person is contrary to the representation and agreement referred to above. The Committee may, in its absolute discretion, take whatever additional actions it deems appropriate to ensure the observance and performance of such representation and agreement and to effect compliance with the Securities Act and

STOCK OPTION AGREEMENT PAGE 3

any other federal or state securities laws or regulations. Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on an Option exercise does not violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing Stock issued on exercise of the Option shall bear an appropriate legend referring to the provisions of this subsection (c) and the agreements herein. The written representation and agreement referred to in the first sentence of this subsection (c) shall, however, not be required if the shares to be issued pursuant to such exercise have been registered under the Securities Act, and such registration is then effective in respect of such shares; and

(d) Full payment to the Company (or other employer corporation) of all amounts which, under federal, state, local or foreign tax law, it is required to withhold upon exercise of the Option. With the consent of the Committee, shares of Stock issuable to the Optionee upon exercise of the Option, having a Fair Market Value at the date of Option exercise equal to the statutory minimum sums required to be withheld, may be used to make all or part of such payment; and

(e) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option.

4.4 Conditions to Issuance of Stock Certificates. The shares of Stock deliverable upon the exercise of the Option, or any portion thereof, shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any certificate or certificates for shares of Stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions:

(a) The admission of such shares to listing on all stock exchanges on which such Stock is then listed; and

(b) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; and

(c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and

(d) The receipt by the Company of full payment for such shares, including payment of all amounts which, under federal, state or local tax law, the Company (or other employer corporation) is required to withhold upon exercise of the Option; and

(e) The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience.

4.5 Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until certificates representing such shares shall have been issued by the Company to such holder.

STOCK OPTION AGREEMENT PAGE 4

ARTICLE V

OTHER PROVISIONS

5.1 Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement; provided, however, any action taken by the Board in connection with the administration of the Plan shall not be deemed approved by the Board unless such actions are approved by a majority of the Independent Directors.

5.2 Option Not Transferable.

(a) Subject to Section 5.2(b), the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution unless and until the Option has been exercised, or the shares underlying such Option have been issued, and all restrictions applicable to such shares have lapsed. Neither the Option nor any interest or right therein shall be liable for the debts, contracts or engagements of the Optionee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

(b) Notwithstanding any other provision in this Agreement, with the consent of the Committee, the Option may be transferred to, exercised by and paid to certain persons or entities related to the Optionee, including but not limited to members of the Optionee’s family, charitable institutes or trusts or other entities whose beneficiaries or beneficial owners are members of the Optionee’s family or to such other persons or entities as may be expressly approved by the Committee (each a “Permitted Transferee”), pursuant to such conditions and procedures as the Committee may require.

(c) Unless transferred to a Permitted Transferee in accordance with Section 5.2(b), during the lifetime of the Optionee, only the Optionee may exercise the Option or any portion thereof. Subject to such conditions and procedures as the Committee may require, a Permitted Transferee may exercise the Option or any portion thereof during the Optionee’s lifetime. After the death of the Optionee, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by the Optionee’s beneficiary designated in accordance with Section 9.4 of the Plan. If no beneficiary has been designated or survives the Optionee, the Option may be exercised by the person entitled to such exercise pursuant to the Optionee’s will or the laws of descent and distribution.

STOCK OPTION AGREEMENT PAGE 5

5.3 Restrictive Legends and Stop-Transfer Orders.

(a) The share certificate or certificates evidencing the shares of Stock purchased hereunder shall be endorsed with any legends that may be required by state or federal securities laws.

(b) The Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) The Company shall not be required: (i) to transfer on its books any shares of Stock that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, or (ii) to treat as owner of such shares of Stock or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such shares shall have been so transferred.

5.4 Shares to Be Reserved. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Stock as will be sufficient to satisfy the requirements of this Agreement.

5.5 Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary, and any notice to be given to the Optionee shall be addressed to the Optionee at the address given beneath the Optionee’s signature on the Grant Notice. By a notice given pursuant to this Section 5.5, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to the Optionee shall, if the Optionee is then deceased, be given to the Optionee’s designated beneficiary if any, or the person otherwise entitled to exercise his or her Option pursuant to Section 4.1 by written notice under this Section 5.5. Any notice shall be deemed duly given when sent via email or enclosed in a properly sealed envelope or wrapper addressed as aforesaid and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

5.6 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

5.7 Stockholder Approval Not Required. The Plan will not be submitted for approval by the Company’s stockholders. As more particularly described in Section 15.1 of the Plan, pursuant to NASD Rule 4350(i)(1)(A)(iv), the issuance of this Option and the shares of Common Stock issuable upon exercise or vesting of such Option pursuant to the Plan are not subject to the approval of the Company’s stockholders.

5.8 Construction. This Agreement shall be administered, interpreted and enforced under the laws of the State of Delaware without regard to conflicts of laws thereof.

5.9 Conformity to Applicable Laws. The Optionee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations. The Optionee also acknowledges that the Plan is intended to conform with the requirements of rules promulgated by the NASD and, without limiting the foregoing, in particular NASD Rule 4350(i)(1)(A)(iv). Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

STOCK OPTION AGREEMENT PAGE 6

5.10 Amendments. This Agreement may not be modified, amended or terminated except by an instrument in writing, signed by the Optionee or such other person as may be permitted to exercise the Option pursuant to Section 4.1 and by a duly authorized representative of the Company.

STOCK OPTION AGREEMENT PAGE 7

EXHIBIT A

TO GRANT NOTICE AND STOCK OPTION AGREEMENT

FORM OF EXERCISE NOTICE

Effective as of today,             ,         , the undersigned (“Optionee”) of this Exercise Notice (the “Agreement”) hereby elects to exercise Optionee’s option to purchase                      shares of common stock (the “Shares”) of Renovis, Inc. (the “Company”) under and pursuant to the Renovis, Inc. 2005 Employment Commencement Incentive Plan (the “Plan”) and the Grant Notice and Stock Option Agreement dated             ,         , (the “Option Agreement”). Capitalized terms used herein without definition shall have the meanings given in the Option Agreement.

Grant Date:	____________________
Number of Shares as to which Option is Exercised:	____________________
Exercise Price per Share:	$
Total Exercise Price:	$
Certificate to be issued in name of:	____________________
Cash Payment delivered herewith:	$                     (Representing the full Exercise Price for the Shares, as well as any applicable withholding tax)

Type of Option: This Option is a Non-Qualified Stock Option.

1. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement. Optionee agrees to abide by and be bound by their terms and conditions.

2. Rights as Stockholder. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Shares subject to the Option, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Article 10 of the Plan.

3. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

4. Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.

EXERCISE NOTICE PAGE 1

5. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Optionee or by the Company forthwith to the Committee, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Committee shall be final and binding on the Company and on Optionee.

6. Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware excluding that body of law pertaining to conflicts of law. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.

7. Notices. Any notice required or permitted hereunder shall be given in accordance with the provisions set forth in Section 5.5 of the Option Agreement.

8. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

9. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof.

ACCEPTED BY:	SUBMITTED BY:
RENOVIS, INC.	OPTIONEE
By:
Name:	Optionee
Its:
	Address:

EXERCISE NOTICE PAGE 2

EX-10.32

Exhibit 10.32

AMENDED AND RESTATED

RENOVIS, INC.

2006 EMPLOYMENT COMMENCEMENT INCENTIVE PLAN

ADOPTED BY THE BOARD OF DIRECTORS JANUARY 3, 2007

ARTICLE 1

PURPOSE

1.1 GENERAL.

(a) ELIGIBLE STOCK AWARD RECIPIENTS. Only Eligible Participants may receive Awards under the Plan.

(b) GENERAL PURPOSE. The purpose of the Plan is to promote the success and enhance the value of Renovis, Inc. (the “Company”) by linking the personal interests of Eligible Participants to those of Company stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Eligible Participants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation will be largely dependent.

ARTICLE 2

DEFINITIONS AND CONSTRUCTION

2.1 DEFINITIONS. The following words and phrases shall have the following meanings:

(a) “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Performance Share award, a Dividend Equivalents award, a Stock Payment award, or a Deferred Stock award granted to an Eligible Participant pursuant to the Plan.

(b) “Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award.

(c) “Board” means the Board of Directors of the Company.

(d) “Change of Control” means and includes each of the following:

(1) the acquisition, directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d) and 14(d) of the Exchange Act and the rules thereunder) of “beneficial ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the election of directors (“voting securities”) of the Company that represent 50% or more of the combined voting power of the Company’s then outstanding voting securities, other than

(A) an acquisition by a trustee or other fiduciary holding securities

under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or

(B) an acquisition of voting securities by the Company or a corporation owned, directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company, or

(C) an acquisition of voting securities pursuant to a transaction described in clause (3) below that would not be a Change of Control under clause (3).

Notwithstanding the foregoing, the following event shall not constitute an “acquisition” by any person or group for purposes of this subsection (d): an acquisition of the Company’s securities by the Company which causes the Company’s voting securities beneficially owned by a person or group to represent 50% or more of the combined voting power of the Company’s then outstanding voting securities; provided, however, that if a person or group shall become the beneficial owner of 50% or more of the combined voting power of the Company’s then outstanding voting securities by reason of share acquisitions by the Company as described above and shall, after such share acquisitions by the Company, become the beneficial owner of any additional voting securities of the Company, then such acquisition shall constitute a Change of Control; or

(2) during any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clauses (1) or (3) of this subsection (d)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(3) the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case other than a transaction

(A) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

(B) after which no person or group beneficially owns voting

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securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (B) as beneficially owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or

(4) the Company’s stockholders approve a liquidation or dissolution of the Company.

The Committee shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change of Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change of Control and any incidental matters relating thereto.

(e) “Code” means the Internal Revenue Code of 1986, as amended.

(f) “Committee” means the Board or the Compensation Committee of the Board as further described in Article 11.

(g) “Deferred Stock” means a right to receive a specified number of shares of Stock during specified time periods pursuant to Article 8.

(h) “Director” means a member of the Board.

(i) “Disability” means, for purposes of the Plan, that the Participant qualifies to receive long-term disability payments under the Company’s long-term disability insurance program, as it may be amended from time to time.

(j) “Dividend Equivalents” means a right granted to a Participant pursuant to Article 8 to receive the equivalent value (in cash or Stock) of dividends paid on Stock.

(k) “Eligible Participant” means any Employee who has not previously been an Employee or Director of the Company or a Subsidiary, or is commencing employment with the Company or a Subsidiary following a bona fide period of non-employment by the Company or a Subsidiary, if he or she is granted an Award in connection with his or her commencement of employment with the Company or a Subsidiary and such grant is an inducement material to his or her entering into employment with the Company or a Subsidiary. The Board may in its discretion adopt procedures from time to time to ensure that an Employee is eligible to participate in the Plan prior to the granting of any Awards to such Employee under the Plan (including, without limitation, a requirement, that each such Employee certify to the Company prior to the receipt of an Award under the Plan that he or she has not been previously employed by the Company or a Subsidiary, or if previously employed, has had a bona fide period of non-employment, and that the grant of Awards under the Plan is an inducement material to his or her agreement to enter into employment with the Company or a Subsidiary).

(l) “Employee” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Subsidiary.

(m) “Equity Restructuring” means a non-reciprocal transaction between the

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Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the shares of Stock (or other securities of the Company) or the share price of Stock (or other securities) and causes a change in the per share value of the Stock underlying outstanding Awards.

(n) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(o) “Fair Market Value” means, as of any date, the value of Stock determined as follows:

(1) If the Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the date of determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable;

(2) If the Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Stock on the date prior to the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable; or

(3) In the absence of an established market for the Stock, the Fair Market Value thereof shall be determined in good faith by the Committee.

(p) “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto. Incentive Stock Options may not be granted under the Plan.

(q) “Independent Director” means a Director who is not an Employee of the Company and who qualifies as “independent” within the meaning of NASD Rule 4200(a)(14), if the Company’s securities are traded on the Nasdaq National Market, or the requirements of any other established stock exchange on which the Company’s securities are traded, as such rules or requirements may be amended from time to time.

(r) “NASD” means the National Association of Securities Dealers, Inc.

(s) “Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock Option.

(t) “Option” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock at a specified price during specified time periods. An Option must be a Non-Qualified Stock Option.

(u) “Participant” means an Eligible Participant who has been granted an Award pursuant to the Plan.

(v) “Performance Share” means a right granted to a Participant pursuant to Article 8, to receive cash, Stock, or other Awards, the payment of which is contingent upon achieving certain performance goals established by the Committee.

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(w) “Plan” means this Renovis, Inc. 2006 Employment Commencement Incentive Plan, as it may be amended from time to time.

(x) “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and to risk of forfeiture.

(y) “Stock” means the common stock of the Company and such other securities of the Company that may be substituted for Stock pursuant to Article 10.

(z) “Stock Appreciation Right” or “SAR” means a right granted pursuant to Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of shares of Stock on the date the SAR is exercised over the Fair Market Value on the date the SAR was granted as set forth in the applicable Award Agreement.

(aa) “Stock Payment” means (a) a payment in the form of shares of Stock, or (b) an option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to Article 8.

(bb) “Subsidiary” means any corporation or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

ARTICLE 3

SHARES SUBJECT TO THE PLAN

3.1 NUMBER OF SHARES.

(a) Subject to Article 10, the aggregate number of shares of Stock which may be issued or transferred pursuant to Awards under the Plan shall be 250,000 shares.

The payment of Dividend Equivalents in conjunction with any outstanding Awards shall not be counted against the shares available for issuance under the Plan.

(b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan. Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, shares of Stock issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary shall not be counted against shares of Stock available for grant pursuant to the Plan.

3.2 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.

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ARTICLE 4

ELIGIBILITY AND PARTICIPATION

4.1 ELIGIBILITY.

(a) GENERAL. Awards may be granted only to Eligible Participants. All Options granted under the Plan shall be Non-Qualified Stock Options.

(b) FOREIGN PARTICIPANTS. In order to assure the viability of Awards granted to Participants employed in foreign countries, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom. Moreover, the Committee may approve such supplements to, or amendments, restatements, or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose; provided, however, that no such supplements, amendments, restatements, or alternative versions shall increase the share limitations contained in Section 3.1 of the Plan.

4.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all eligible individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any right to be granted an Award pursuant to the Plan.

ARTICLE 5

STOCK OPTIONS

5.1 GENERAL. Options may be granted to Eligible Participants on the following terms and conditions:

(a) EXERCISE PRICE. The exercise price per share of Stock subject to an Option shall be determined by the Committee and set forth in the Award Agreement; provided, that the exercise price for any Option shall not be less than Fair Market Value of a share of Stock on the date of grant.

(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the time or times at which an Option may be exercised in whole or in part; provided, that the term of any Option granted under the Plan shall not exceed ten years; and provided, further, that such Option shall be exercisable for not less than one year after the date of the Participant’s death. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.

(c) PAYMENT. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation, cash, promissory note bearing interest at no less than such rate as shall then preclude the imputation of interest under the Code, shares of Stock held for longer than six months having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, or other property acceptable to the Committee (including through the

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delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided, that payment of such proceeds is then made to the Company upon settlement of such sale), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option in any method which would violate Section 13(k).

(d) EVIDENCE OF GRANT. All Options shall be evidenced by a written Award Agreement between the Company and the Participant. The Award Agreement shall include such additional provisions as may be specified by the Committee.

ARTICLE 6

RESTRICTED STOCK AWARDS

6.1 GRANT OF RESTRICTED STOCK. Restricted Stock may be awarded to any Eligible Participant in such amounts and subject to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be evidenced by a written Restricted Stock Award Agreement.

6.2 ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.

6.3 FORFEITURE. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited; provided, however, that the Committee may provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

6.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.

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ARTICLE 7

STOCK APPRECIATION RIGHTS

7.1 GRANT OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right may be granted to any Eligible Participant selected by the Committee. A Stock Appreciation Right may be granted (a) in connection and simultaneously with the grant of an Option, (b) with respect to a previously granted Option, or (c) independent of an Option. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement.

7.2 COUPLED STOCK APPRECIATION RIGHTS.

(a) A Coupled Stock Appreciation Right (“CSAR”) shall be related to a particular Option and shall be exercisable only when and to the extent the related Option is exercisable.

(b) A CSAR may be granted to a Participant for no more than the number of shares subject to the simultaneously or previously granted Option to which it is coupled.

(c) A CSAR shall entitle the Participant (or other person entitled to exercise the Option pursuant to the Plan) to surrender to the Company unexercised a portion of the Option to which the CSAR relates (to the extent then exercisable pursuant to its terms) and to receive from the Company in exchange therefor an amount determined by multiplying the difference obtained by subtracting the Option exercise price from the Fair Market Value of a share of Stock on the date of exercise of the CSAR by the number of shares of Stock with respect to which the CSAR shall have been exercised, subject to any limitations the Committee may impose.

7.3 INDEPENDENT STOCK APPRECIATION RIGHTS.

(a) An Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any Option and shall have a term set by the Committee. An ISAR shall be exercisable in such installments as the Committee may determine. An ISAR shall cover such number of shares of Stock as the Committee may determine. The exercise price per share of Stock subject to each ISAR shall be set by the Committee; provided, however, that the Committee in its sole and absolute discretion may provide that the ISAR may be exercised subsequent to a termination of employment or service, as applicable, or following a Change of Control, or because of the Participant’s retirement, death or Disability, or otherwise.

(b) An ISAR shall entitle the Participant (or other person entitled to exercise the ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the ISAR from the Fair Market Value of a share of Stock on the date of exercise of the ISAR by the number of shares of Stock with respect to which the ISAR shall have been exercised, subject to any limitations the Committee may impose.

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7.4 PAYMENT AND LIMITATIONS ON EXERCISE.

(a) Payment of the amounts determined under Section 7.2(c) and 7.3(b) above shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee.

(b) To the extent any payment under Section 7.2(c) or 7.3(b) is effected in Stock it shall be made subject to satisfaction of all provisions of Article 5 above pertaining to Options.

ARTICLE 8

OTHER TYPES OF AWARDS

8.1 PERFORMANCE SHARE AWARDS. Any Eligible Participant selected by the Committee may be granted one or more Performance Share awards which may be denominated in a number of shares of Stock or in a dollar value of shares of Stock and which may be linked to any one or more specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.

8.2 DIVIDEND EQUIVALENTS. Any Eligible Participant selected by the Committee may be granted Dividend Equivalents based on the dividends declared on the shares of Stock that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Stock by such formula and at such time and subject to such limitations as may be determined by the Committee.

8.3 STOCK PAYMENTS. Any Eligible Participant selected by the Committee may receive Stock Payments in the manner determined from time to time by the Committee. The number of shares shall be determined by the Committee and may be based upon specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter.

8.4 DEFERRED STOCK. Any Eligible Participant selected by the Committee may be granted an award of Deferred Stock in the manner determined from time to time by the Committee. The number of shares of Deferred Stock shall be determined by the Committee and may be linked to specific performance criteria determined to be appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. Stock underlying a Deferred Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless otherwise provided by the Committee, a Participant awarded Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Deferred Stock award has vested and the Stock underlying the Deferred Stock award has been issued.

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8.5 TERM. The term of any Award of Performance Shares, Dividend Equivalents, Stock Payments or Deferred Stock shall be set by the Committee in its discretion.

8.6 EXERCISE OR PURCHASE PRICE. The Committee may establish the exercise or purchase price of any Award of Performance Shares, Deferred Stock or Stock Payments; provided, however, that such price shall not be less than the par value of a share of Stock, unless otherwise permitted by applicable state law.

8.7 EXERCISE UPON TERMINATION OF EMPLOYMENT OR SERVICE. An Award of Performance Shares, Dividend Equivalents, Deferred Stock and Stock Payments shall only be exercisable or payable while the Participant is an Employee of the Company; provided, however, that the Committee in its sole and absolute discretion may provide that an Award of Performance Shares, Dividend Equivalents, Stock Payments or Deferred Stock may be exercised or paid subsequent to a termination of employment or service, as applicable, or following a Change of Control, or because of the Participant’s retirement, death or Disability, or otherwise.

8.8 FORM OF PAYMENT. Payments with respect to any Awards granted under this Article 8 shall be made in cash, in Stock or a combination of both, as determined by the Committee.

8.9 AWARD AGREEMENT. All Awards under this Article 8 shall be subject to such additional terms and conditions as determined by the Committee and shall be evidenced by a written Award Agreement.

ARTICLE 9

PROVISIONS APPLICABLE TO AWARDS

9.1 STAND-ALONE AND TANDEM AWARDS. Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

9.2 AWARD AGREEMENT. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.

9.3 LIMITS ON TRANSFER. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. No Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution.

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9.4 BENEFICIARIES. Notwithstanding Section 9.3, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.

9.5 STOCK CERTIFICATES. Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed or traded. All Stock certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee.

ARTICLE 10

CHANGES IN CAPITAL STRUCTURE

10.1 ADJUSTMENTS.

(a) EQUITY RESTRUCTURING. In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Section 10.1(b):

(1) The number and type of securities subject to each outstanding Award and the exercise price or grant price per share thereof, as well as any other applicable terms and conditions of each outstanding Award (including, without limitation, any performance targets or criteria with respect thereto), will be proportionately adjusted. The adjustments provided under this Section 10.1(a)(1) shall be nondiscretionary and shall be final and binding on the affected Participant and the Company.

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(2) The Committee shall make such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitation in Section 3.1).

(b) OTHER CHANGES IN CAPITAL STRUCTURE. In the event that the Committee determines that other than an Equity Restructuring, any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), reorganization, merger, consolidation, combination, repurchase, liquidation, dissolution, or sale transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Stock or other securities of the Company, issuance or warrants or other rights to purchase Stock or other securities of the Company or other similar corporate transaction or event, in the Committee’s sole discretion, affects the Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Committee shall, in such manner as it may deem equitable, adjust any or all of:

(1) The number and kind of shares of Stock (or other securities or property) with respect to which Awards may be granted or awarded (including, but not limited to, adjustments of the limitation in Section 3.1 on the maximum number and kind of shares which may be issued);

(2) The number and kind of shares of Stock (or other securities or property) subject to outstanding Awards; and

(3) The grant or exercise price per share with respect to any outstanding Award, as well as any other applicable terms and conditions of each outstanding Award (including, without limitation, any performance targets or criteria with respect thereto). In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Stock or the share price of the Stock, the Committee shall make such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change with respect to (i) the aggregate number and type of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1); (ii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (iii) the grant or exercise price per share for any outstanding Awards under the Plan.

10.2 ACCELERATION UPON A CHANGE OF CONTROL. If a Change of Control occurs and a Participant’s Awards are not converted, assumed, or replaced by a successor, such Awards shall become fully exercisable and all forfeiture restrictions on such Awards shall lapse. Upon, or in anticipation of, a Change of Control, the Committee may cause any and all Awards outstanding hereunder to terminate at a specific time in the future and shall

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give each Participant the right to exercise such Awards during a period of time as the Committee, in its sole and absolute discretion, shall determine. In the event that the terms of any agreement between the Company or any Subsidiary or affiliate and a Participant contains provisions that conflict with and are more restrictive than the provisions of this Section 10.2, this Section 10.2 shall prevail and control and the more restrictive terms of such agreement (and only such terms) shall be of no force or effect.

10.3 OUTSTANDING AWARDS – CERTAIN MERGERS. Subject to any required action by the stockholders of the Company, in the event that the Company shall be the surviving corporation in any merger or consolidation (except a merger or consolidation as a result of which the holders of shares of Stock receive securities of another corporation), each Award outstanding on the date of such merger or consolidation shall pertain to and apply to the securities that a holder of the number of shares of Stock subject to such Award would have received in such merger or consolidation.

10.4 OUTSTANDING AWARDS – OTHER CHANGES. In the event of any other change in the capitalization of the Company or corporate change other than those specifically referred to in this Article 10, the Committee may, in its absolute discretion, make such adjustments in the number and class of shares subject to Awards outstanding on the date on which such change occurs and in the per share grant or exercise price of each Award as the Committee may consider appropriate to prevent dilution or enlargement of rights.

10.5 NO OTHER RIGHTS. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to an Award or the grant or exercise price of any Award.

ARTICLE 11

ADMINISTRATION

11.1 COMMITTEE. Unless and until the Board delegates administration to the Committee as set forth below, the Plan shall be administered by the Board, which shall, in such event, constitute the “Committee” for the purposes of the Plan. Any action taken by the Board in connection with the administration of the Plan shall not be deemed approved by the Board unless such actions are approved by a majority of the Independent Directors. The Board may delegate administration of the Plan to the Committee, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated; provided, however, that such Committee be comprised of a majority of or solely two or more Independent Directors. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in the Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.

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The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. Any action taken by the Board in connection with the administration of the Plan shall continue to not be deemed approved by the Board unless such actions are approved by a majority of the Independent Directors. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may only be filled by the Board.

11.2 ACTION BY THE COMMITTEE. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

11.3 AUTHORITY OF COMMITTEE. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:

(a) Adopt procedures from time to time in the Committee’s discretion to ensure that an Employee is eligible to participate in the Plan prior to the granting of any Awards to such Employee under the Plan (including, without limitation, a requirement, if any, that each such Employee certify to the Company prior to the receipt of an Award under the Plan that he or she has not been previously employed by the Company or a Subsidiary, or if previously employed, has had a bona fide period of non-employment, and that the grant of Awards under the Plan is an inducement material to his or her agreement to enter into employment with the Company or a Subsidiary);

(b) Designate Participants to receive Awards;

(c) Determine the type or types of Awards to be granted to each Participant;

(d) Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;

(e) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines;

(f) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;

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(g) Prescribe the form of each Award Agreement, which need not be identical for each Participant;

(h) Decide all other matters that must be determined in connection with an Award;

(i) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

(j) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and

(k) Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.

12.4 DECISIONS BINDING. The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.

ARTICLE 12

EFFECTIVE AND EXPIRATION DATE

12.1 EFFECTIVE DATE. The Plan is effective as of the date of its adoption by the Board (the “Effective Date”).

12.2 EXPIRATION DATE. The Plan will expire on, and no Award may be granted pursuant to the Plan after December 31, 2006 (the “Expiration Date”). Any Awards that are outstanding on the Expiration Date shall remain in force according to the terms of the Plan and the applicable Award Agreement. Each Award Agreement shall provide that it will expire on the tenth anniversary of the date of grant of the Award to which it relates.

ARTICLE 13

AMENDMENT, MODIFICATION, AND TERMINATION

13.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however, that to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required.

13.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant.

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ARTICLE 14

GENERAL PROVISIONS

14.1 NO RIGHTS TO AWARDS. No Participant, employee, or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Participants, employees, and other persons uniformly.

14.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the rights of a stockholder of the Company unless and until shares of Stock are in fact issued to such person in connection with such Award.

14.3 WITHHOLDING. The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of the Plan. The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of shares of Stock which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such Award within six months after such shares of Stock were acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.

14.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment at any time, nor confer upon any Participant any right to continue in the employ of the Company or any Subsidiary.

14.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.

14.6 INDEMNIFICATION. To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided, he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to

16

which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

14.7 RELATIONSHIP TO OTHER BENEFITS. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

14.8 EXPENSES. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

14.9 TITLES AND HEADINGS. The titles and headings of the Articles and Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

14.10 FRACTIONAL SHARES. No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

14.11 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

14.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities Act of 1933, as amended, any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act of 1933, as amended, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.

14.13 GOVERNING LAW. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware.

14.14 SECTION 409A OF THE CODE. In the event any provision of the Plan, or the application thereof, is or becomes inconsistent with Section 409A of the Code and any regulations promulgated thereunder, such provision shall be void or unenforceable or in the sole discretion of the Committee shall be deemed amended to comply with Section 409A and any regulations promulgated thereunder. The other provisions of the Plan shall remain in full force and effect.

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ARTICLE 15

GENERAL PROVISIONS

15.1 STOCKHOLDER APPROVAL NOT REQUIRED. It is expressly intended that approval of the Company’s stockholders not be required as a condition of the effectiveness of the Plan, and the Plan’s provisions shall be interpreted in a manner consistent with such intent for all purposes. Specifically, Rule 4350(i) promulgated by the NASD generally requires stockholder approval for stock option plans or other equity compensation arrangements adopted by companies whose securities are listed on the Nasdaq National Market pursuant to which stock awards or stock may be acquired by officers, directors, employees, or consultants of such companies. NASD Rule 4350(i)(1)(A)(iv) provides an exception to this requirement for issuances of securities to a person not previously an employee or director of the issuer, or following a bona fide period of non-employment, as an inducement material to the individual’s entering into employment with the issuer; provided, such issuances are approved by either the issuer’s compensation committee comprised of a majority of independent directors or a majority of the issuer’s independent directors. Awards under the Plan may only be made to Eligible Participants who have not previously been an Employee or director of the Company or a Subsidiary, or following a bona fide period of non-employment by the Company or a Subsidiary, as an inducement material to the Eligible Participant’s entering into employment with the Company or a Subsidiary. Awards under the Plan will be approved by (i) the Company’s Compensation Committee comprised of a majority of the Company’s Independent Directors or (ii) a majority of the Company’s Independent Directors. Accordingly, pursuant to NASD Rule 4350(i)(1)(A)(iv), the issuance of Awards and the shares of Common Stock issuable upon exercise or vesting of such Awards pursuant to the Plan are not subject to the approval of the Company’s stockholders.

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RENOVIS, INC.

STOCK OPTION GRANT NOTICE AND STOCK OPTION AGREEMENT

UNDER THE 2006 EMPLOYMENT COMMENCEMENT INCENTIVE PLAN

Renovis, Inc. (the “Company”), pursuant to its 2006 Employment Commencement Incentive Plan (the “Plan”) hereby grants to the Optionee listed below (“Optionee”), an option to purchase the number of shares of the Company’s Stock set forth below. This Option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement and the Plan, each of which are attached hereto and incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Agreement.

Optionee:

Date of Stock Option Agreement:

Grant Date:

Vesting Commencement Date:

Exercise Price per Share:

Total Number of Shares Granted:

Total Exercise Price:

Expiration Date:

Type of Option:	This Option is a Non-Qualified Stock Option
Vesting Schedule:	1/4th of the Shares Granted vest on the first anniversary of the Vesting Commencement Date, and 1/48th of the Shares Granted vest monthly thereafter over the next three years, provided that the option holder has not had a Termination of Service (as described in the Stock Option Agreement attached hereto) prior to each vesting date.

By his or her signature and the Company’s signature below, Optionee agrees to be bound by the terms and conditions of the Plan and the Stock Option Agreement attached hereto. Optionee has reviewed the Stock Option Agreement and the Plan in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Grant Notice, the Stock Option Agreement and the Plan. Optionee agrees that Optionee has not been previously employed in any capacity by the Company or a Subsidiary, or if previously employed, has had a bona-fide period of non-employment, and that the grant of this Option is an inducement material to Optionee’s agreement to enter into employment with the Company or Subsidiary. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the administrator of the Plan upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the residence address indicated below.

RENOVIS, INC.		OPTIONEE:
By:		By:
Print Name:	John C. Doyle	Print Name:
Title	S.V.P. Finance/Operations & CFO
Address:	Renovis, Inc. Two Corporate Drive South San Francisco, CA 94080	Address:

GRANT NOTICE PAGE 1

RENOVIS, INC.

2006 EMPLOYMENT COMMENCEMENT INCENTIVE PLAN

STOCK OPTION AGREEMENT

Pursuant to the Stock Option Grant Notice (“Grant Notice”) to which this Stock Option Agreement (this “Agreement”) is attached, Renovis, Inc. (the “Company”) has granted to the Optionee an option under the Company’s 2006 Employment Commencement Incentive Plan (the “Plan”) to purchase the number of shares of Stock indicated in the Grant Notice at the exercise price indicated in the Grant Notice. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement.

ARTICLE I

DEFINITIONS; INCORPORATION OF TERMS

1.1 General. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan.

1.2 Incorporation of Terms of Plan. The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference.

ARTICLE II

GRANT OF OPTION

2.1 Grant of Option. In consideration of the Optionee’s agreement to commence and remain in the employ of the Company or its Subsidiaries and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to the Optionee the Option to purchase any part or all of an aggregate of the number of shares of Stock set forth in the Grant Notice, upon the terms and conditions set forth in this Agreement. The Option shall be a Non-Qualified Stock Option.

2.2 Purchase Price. The purchase price per share of the shares of Stock subject to the Option shall be as set forth in the Grant Notice, without commission or other charge; provided, however, that the exercise price shall not be less than the Fair Market Value of a share of Stock, unless otherwise permitted by applicable law.

2.3 Consideration to the Company. In consideration of the granting of the Option by the Company, the Optionee agrees to render faithful and efficient services to the Company or any Subsidiary, with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in the Plan or this Agreement shall confer upon the Optionee any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without cause.

STOCK OPTION AGREEMENT PAGE 1

ARTICLE III

PERIOD OF EXERCISABILITY

3.1 Commencement of Exercisability.

(a) Subject to Sections 3.3 and 5.10, the Option shall become exercisable in such amounts and at such times as are set forth in the Grant Notice.

(b) No portion of the Option which has not become exercisable at Termination of Service (as defined in Section 3.3 below) shall thereafter become exercisable, except as may be otherwise provided by the Committee or as set forth in a written agreement between the Company and the Optionee.

3.2 Duration of Exercisability. The installments provided for in Section 3.1(a) are cumulative. Each such installment which becomes exercisable pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable under Section 3.3.

3.3 Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:

(a) The expiration of ten years from the Grant Date; or

(b) The expiration of three months following the date of the Optionee’s Termination of Service, unless such Termination of Service occurs by reason of the Optionee’s death or Disability or as set forth in a written agreement with the Company; or

(c) The expiration of twelve months following the date of the Optionee’s Termination of Service by reason of the Optionee’s Disability; or

(d) The expiration of eighteen months following the date of the Optionee’s Termination of Service by reason of the Optionee’s death.

(e) For purposes of this Agreement, “Termination of Service” means the time when the employment relationship between the Optionee and the Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death or Disability; but excluding (a) a termination where there is a simultaneous reemployment or continuing employment of the Optionee by the Company or any Subsidiary or a parent corporation thereof (within the meaning of Section 422 of the Code), (b) at the discretion of the Committee, a termination which results in a temporary severance of the employee-employer relationship, and (c) at the discretion of the Committee, a termination which is followed by the simultaneous establishment of a consulting relationship by the Company or a Subsidiary with the former Employee. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Service for the purposes of this Agreement, and all questions of whether particular leaves of absence for Optionees constitute Terminations of Service. Notwithstanding any other provision of the Plan or this Agreement, the Company or any Subsidiary has an absolute and unrestricted right to terminate the Optionee’s employment and/or consultancy at any time for any reason whatsoever, with or without cause.

STOCK OPTION AGREEMENT PAGE 2

ARTICLE IV

EXERCISE OF OPTION

4.1 Person Eligible to Exercise. Except as provided in Sections 5.2(b) and 5.2(c), during the lifetime of the Optionee, only the Optionee may exercise the Option or any portion thereof. After the death of the Optionee, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by the Optionee’s beneficiary designated in accordance with Section 9.4 of the Plan. If no beneficiary has been designated or survives the Optionee, the Option may be exercised by the person entitled to such exercise pursuant to the Optionee’s will or the laws of descent and distribution.

4.2 Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3.

4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company or the Secretary’s office of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3:

(a) An Exercise Notice in writing signed by the Optionee or the other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Committee. Such notice shall be substantially in the form attached as Exhibit A hereto (or such other form as is prescribed by the Committee); and

(b)    (i) Full payment (in cash or by check) for the shares with respect to which the Option or portion thereof is exercised, to the extent permitted under applicable laws; or

(ii) To the extent permitted under applicable laws, through the delivery of a notice that the Optionee has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price, provided, that payment of such proceeds is made to the Company upon settlement of such sale; or

(iii) With the consent of the Committee, any combination of the consideration provided in the foregoing subparagraphs (i) and (ii); and

(c) A bona fide written representation and agreement, in such form as is prescribed by the Committee, signed by the Optionee or other person then entitled to exercise such Option or portion thereof, stating that the shares of Stock are being acquired for the Optionee’s own account, for investment and without any present intention of distributing or reselling said shares or any of them except as may be permitted under the Securities Act of 1933, as amended (the “Securities Act”), and then applicable rules and regulations thereunder, and that the Optionee or other person then entitled to exercise such Option or portion thereof will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the shares by such person is contrary to the representation and agreement referred to above. The Committee may, in its absolute discretion, take whatever additional actions it deems appropriate to ensure the observance and performance of such representation and agreement and to effect compliance with the Securities Act and

STOCK OPTION AGREEMENT PAGE 3

any other federal or state securities laws or regulations. Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on an Option exercise does not violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing Stock issued on exercise of the Option shall bear an appropriate legend referring to the provisions of this subsection (c) and the agreements herein. The written representation and agreement referred to in the first sentence of this subsection (c) shall, however, not be required if the shares to be issued pursuant to such exercise have been registered under the Securities Act, and such registration is then effective in respect of such shares; and

(d) Full payment to the Company (or other employer corporation) of all amounts which, under federal, state, local or foreign tax law, it is required to withhold upon exercise of the Option. With the consent of the Committee, shares of Stock issuable to the Optionee upon exercise of the Option, having a Fair Market Value at the date of Option exercise equal to the statutory minimum sums required to be withheld, may be used to make all or part of such payment; and

(e) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option.

4.4 Conditions to Issuance of Stock Certificates. The shares of Stock deliverable upon the exercise of the Option, or any portion thereof, shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any certificate or certificates for shares of Stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions:

(a) The admission of such shares to listing on all stock exchanges on which such Stock is then listed; and

(b) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; and

(c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and

(d) The receipt by the Company of full payment for such shares, including payment of all amounts which, under federal, state or local tax law, the Company (or other employer corporation) is required to withhold upon exercise of the Option; and

(e) The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience.

4.5 Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until certificates representing such shares shall have been issued by the Company to such holder.

STOCK OPTION AGREEMENT PAGE 4

ARTICLE V

OTHER PROVISIONS

5.1 Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement; provided, however, any action taken by the Board in connection with the administration of the Plan shall not be deemed approved by the Board unless such actions are approved by a majority of the Independent Directors.

5.2 Option Not Transferable.

(a) Subject to Section 5.2(b), the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution unless and until the Option has been exercised, or the shares underlying such Option have been issued, and all restrictions applicable to such shares have lapsed. Neither the Option nor any interest or right therein shall be liable for the debts, contracts or engagements of the Optionee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

(b) Notwithstanding any other provision in this Agreement, with the consent of the Committee, the Option may be transferred to, exercised by and paid to certain persons or entities related to the Optionee, including but not limited to members of the Optionee’s family, charitable institutes or trusts or other entities whose beneficiaries or beneficial owners are members of the Optionee’s family or to such other persons or entities as may be expressly approved by the Committee (each a “Permitted Transferee”), pursuant to such conditions and procedures as the Committee may require.

(c) Unless transferred to a Permitted Transferee in accordance with Section 5.2(b), during the lifetime of the Optionee, only the Optionee may exercise the Option or any portion thereof. Subject to such conditions and procedures as the Committee may require, a Permitted Transferee may exercise the Option or any portion thereof during the Optionee’s lifetime. After the death of the Optionee, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by the Optionee’s beneficiary designated in accordance with Section 9.4 of the Plan. If no beneficiary has been designated or survives the Optionee, the Option may be exercised by the person entitled to such exercise pursuant to the Optionee’s will or the laws of descent and distribution.

STOCK OPTION AGREEMENT PAGE 5

5.3 Restrictive Legends and Stop-Transfer Orders.

(a) The share certificate or certificates evidencing the shares of Stock purchased hereunder shall be endorsed with any legends that may be required by state or federal securities laws.

(b) The Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) The Company shall not be required: (i) to transfer on its books any shares of Stock that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, or (ii) to treat as owner of such shares of Stock or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such shares shall have been so transferred.

5.4 Shares to Be Reserved. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Stock as will be sufficient to satisfy the requirements of this Agreement.

5.5 Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary, and any notice to be given to the Optionee shall be addressed to the Optionee at the address given beneath the Optionee’s signature on the Grant Notice. By a notice given pursuant to this Section 5.5, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to the Optionee shall, if the Optionee is then deceased, be given to the Optionee’s designated beneficiary if any, or the person otherwise entitled to exercise his or her Option pursuant to Section 4.1 by written notice under this Section 5.5. Any notice shall be deemed duly given when sent via email or enclosed in a properly sealed envelope or wrapper addressed as aforesaid and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

5.6 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

5.7 Stockholder Approval Not Required. The Plan will not be submitted for approval by the Company’s stockholders. As more particularly described in Section 15.1 of the Plan, pursuant to NASD Rule 4350(i)(1)(A)(iv), the issuance of this Option and the shares of Common Stock issuable upon exercise or vesting of such Option pursuant to the Plan are not subject to the approval of the Company’s stockholders.

5.8 Construction. This Agreement shall be administered, interpreted and enforced under the laws of the State of Delaware without regard to conflicts of laws thereof.

5.9 Conformity to Applicable Laws. The Optionee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations. The Optionee also acknowledges that the Plan is intended to conform with the requirements of rules promulgated by the NASD and, without limiting the foregoing, in particular NASD Rule 4350(i)(1)(A)(iv). Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

STOCK OPTION AGREEMENT PAGE 6

5.10 Amendments. This Agreement may not be modified, amended or terminated except by an instrument in writing, signed by the Optionee or such other person as may be permitted to exercise the Option pursuant to Section 4.1 and by a duly authorized representative of the Company.

5.11 Section 409A. Notwithstanding any other provision of the Plan, this Agreement or the Grant Notice, the Plan, this Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the U.S. Internal Revenue Code of 1986, as amended (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). The Committee may, in its discretion, adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Committee determines are necessary or appropriate to comply with the requirements of Section 409A.

STOCK OPTION AGREEMENT PAGE 7

EXHIBIT A

TO GRANT NOTICE AND STOCK OPTION AGREEMENT

FORM OF EXERCISE NOTICE

Effective as of today,             ,         , the undersigned (“Optionee”) of this Exercise Notice (the “Agreement”) hereby elects to exercise Optionee’s option to purchase                      shares of common stock (the “Shares”) of Renovis, Inc. (the “Company”) under and pursuant to the Renovis, Inc. 2006 Employment Commencement Incentive Plan (the “Plan”) and the Grant Notice and Stock Option Agreement dated             ,          (the “Option Agreement”). Capitalized terms used herein without definition shall have the meanings given in the Option Agreement.

Grant Date:	____________________
Number of Shares as to which Option is Exercised:	____________________
Exercise Price per Share:	$
Total Exercise Price:	$
Certificate to be issued in name of:	____________________
Cash Payment delivered herewith:	$                     (Representing the full Exercise Price for the Shares, as well as any applicable withholding tax)

Type of Option: This Option is a Non-Qualified Stock Option.

1. Representations of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement. Optionee agrees to abide by and be bound by their terms and conditions.

2. Rights as Stockholder. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Shares subject to the Option, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Article 10 of the Plan.

3. Tax Consultation. Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee’s purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

4. Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns.

EXERCISE NOTICE PAGE 1

5. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Optionee or by the Company forthwith to the Committee, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Committee shall be final and binding on the Company and on Optionee.

6. Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware excluding that body of law pertaining to conflicts of law. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.

7. Notices. Any notice required or permitted hereunder shall be given in accordance with the provisions set forth in Section 5.5 of the Option Agreement.

8. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.

9. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof.

ACCEPTED BY:	SUBMITTED BY:
RENOVIS, INC.	OPTIONEE
By:
Name:	Optionee
Its:
	Address:

EXERCISE NOTICE PAGE 2

EX-10.36

Exhibit 10.36

RENOVIS, INC.

AMENDMENT OF EMPLOYMENT COMMENCEMENT

NONSTATUTORY STOCK OPTION AGREEMENT

THIS AMENDMENT OF EMPLOYMENT COMMENCEMENT NONSTATUTORY STOCK OPTION AGREEMENT (the “Amendment”) is entered into as of this 3^rd day of January, 2007 (the “Effective Date”), between Marlene F. Perry (the “Optionee”) and Renovis, Inc., a Delaware corporation (the “Company”).

RECITALS

WHEREAS, the Optionee has previously been granted an option to purchase 43,496 shares of the Company’s common stock (the “Option”) pursuant to an Employment Commencement Nonstatutory Stock Option Agreement between the Company and the Optionee, effective as of October 5, 2004 and the related Stock Option Grant Notice (together, the “Option Agreement”); and

WHEREAS, the parties wish to amend the Option Agreement to clarify the effect of certain changes in capitalization of the Company on the Option, pursuant to the terms and conditions set forth below.

AGREEMENT

NOW THEREFORE, in consideration of the foregoing and the mutual agreements contained herein and intending to be legally bound hereby, the parties hereby agree as follows, effective as of the Effective Date:

1. Definition of Equity Restructuring. For purposes of this Amendment, “Equity Restructuring” means a non-reciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the shares of Stock (or other securities of the Company) or the share price of Stock (or other securities) and causes a change in the per share value of the Stock underlying the Option.

2. Amendment of Changes in Capital Structure Provision. Section 7 of the Option Agreement is hereby amended as follows:

(a) Section 7(a) of the Option Agreement is hereby amended in its entirety to read as follows:

“(a) Equity Restructuring. In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Section 7(d), the number and type of securities subject to the Option and the exercise price per share thereof, as well as any other applicable terms and conditions of the Option, will be proportionately adjusted. The adjustments provided under this Section 7(a) shall be nondiscretionary and shall be final and binding on the Optionee and the Company.”

(b) Section 7(d) of the Option Agreement is hereby amended in its entirety to read as follows:

“(d) Outstanding Option – Other Changes. In the event that the Committee determines that other than an Equity Restructuring, any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), reorganization, merger, consolidation, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Stock or other securities of the Company, issuance or warrants or other rights to purchase Stock or other securities of the Company or other similar corporate transaction or event, in the Committee’s sole discretion, affects the Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Option, then the Committee shall, in such manner as it may deem equitable, adjust the number and kind of shares of Stock (or other securities or property) subject to the Option, the exercise price per share thereof, and/or any other applicable terms and conditions of the Option.”

3. Complete Agreement. This Amendment and the Option Agreement together constitute the entire agreement between Optionee and the Company with respect to the Option and they are the complete, final and exclusive embodiment of their agreement with regard to this subject matter. This Amendment is entered into without reliance on any promise or representation other than those expressly contained herein.

4. Applicable Law. This Amendment shall be governed by the law of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first written above.

RENOVIS, INC.
By:	/s/ John C. Doyle
Name:	John C. Doyle
Title:	Senior Vice President, Finance & Operations, Chief Financial Officer
OPTIONEE
/s/ Marelene F. Perry
Marlene F. Perry

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-112826, 333-131751, 333-123638 and 333-140136) pertaining to the Renovis, Inc. Amended and Restated 2003 Stock Plan, Amended and Restated 2003 Equity Incentive Plan, 2000 Equity Incentive Plan, Stand-Alone Option Grant to Marlene F. Perry, 2005 Employment Commencement Incentive Plan, 2006 Employment Commencement Incentive Plan, 2007 Employment Commencement Incentive Plan and the Employee Stock Purchase Plan, and in the Registration Statements (Form S-3 Nos. 333-137900 and 333-122762) of our reports dated March 2, 2007 with respect to the financial statements of Renovis, Inc., Renovis, Inc. management’s assessment of the effectiveness of internal controls over financial reporting, and the effectiveness of internal control over financial reporting of Renovis, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2006.

/s/ Ernst & Young LLP

Palo Alto, California

March 12, 2007

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Corey S. Goodman, certify that:

1. I have reviewed this annual report on Form 10-K of Renovis, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2007

By:	/S/    COREY S. GOODMAN
	Name: Corey S. Goodman Title: President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John C. Doyle, certify that:

1. I have reviewed this annual report on Form 10-K of Renovis, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2007

By:	/s/    John C. Doyle
	Name: John C. Doyle
	Title: Senior Vice President, Corporate Development and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

I, Corey S. Goodman, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i) the Annual Report of Renovis, Inc. on Form 10-K for the year ended December 31, 2006, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods covered by the Annual Report.

In Witness Whereof, the undersigned have set his hands hereto as of the 14^th day of March, 2007.

By:	/s/    Corey S. Goodman
	Name: Corey S. Goodman
	Title: President and Chief Executive Officer

Dated: March 14, 2007

This certification accompanies the Form 10-K to which it relates to, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by references into any filings of Renovis, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

I, John C. Doyle, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i) the Annual Report of Renovis, Inc. on Form 10-K for the year ended December 31, 2006, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods covered by the Annual Report.

In Witness Whereof, the undersigned have set his hands hereto as of the 14^th day of March, 2007.

By:	/S/    JOHN C. DOYLE
	Name: John C. Doyle Title: Vice President, Corporate Development and Chief Financial Officer

Dated: March 14, 2007

This certification accompanies the Form 10-K to which it relates to, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by references into any filings of Renovis, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.