10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	for the fiscal year ended December 31, 2006
or
o	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: 000-50447

Pharmion Corporation

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	84-1521333 (I.R.S. Employer Identification No.)
2525 28th Street, Suite 200, Boulder, Colorado (Address of principal executive offices)	80301 (Zip Code)

720-564-9100

(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, $.001 par value per share	Nasdaq Stock Market

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes o     No þ

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 þ     No o

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 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.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o     Accelerated filer þ     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at which the common stock was last sold as of the last business of the registrant’s most recently completed second fiscal quarter was approximately $447,407,664, based on a closing price of $17.03 per share on June 30, 2006.

The number of shares outstanding of the registrant’s classes of common stock, as of the latest practicable date.

Class	Outstanding at March 9, 2007
Common Stock, $.001 par value per share	32,150,006 shares

DOCUMENTS INCORPORATED BY REFERENCE

Specified portions of the registrant’s definitive Proxy Statement, which will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31, 2006, are incorporated by reference into Part III.

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Business		1
	Item 1A.	Risk Factors		18
	Item 1B.	Unresolved Staff Comments		29
	Item 2.	Properties		29
	Item 3.	Legal Proceedings		29
	Item 4.	Submission of Matters to a Vote of Security Holders		29
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		30
	Item 6.	Selected Financial Data		32
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		45
	Item 8.	Financial Statements and Supplementary Data		45
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		45
	Item 9A.	Controls and Procedures		45
	Item 9B.	Other Information		48
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance		48
	Item 11.	Executive Compensation		48
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		48
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		48
	Item 14.	Principal Accountant Fees and Services		49
PART IV
	Item 15.	Exhibits and Financial Statement Schedules		49
2000 Stock Incentive Plan
Incentive Stock Option Agreement
2001 Non-Employee Director Stock Option Plan Agreement
License Agreement
Consent of Independent Registered Public Accounting Firm
Certification Pursuant to Section 302
Certification Pursuant to Section 302
Certification Pursuant to Section 906

PART I

Unless the context requires otherwise, references in this report to “Pharmion,” the “Company,” “we,” “us,” and “our” refer to Pharmion Corporation.

All statements, trend analyses and other information contained in this Form 10-K and the information incorporated by reference which are not historical in nature are forward-looking statements within the meaning of the Private-Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, discussion relative to markets for our products and trends in revenue, gross margins and anticipated expense levels, product development plans and anticipated regulatory filings, as well as other statements including words such as “anticipate,” “believe,” “plan,” “estimate,” “expect” and “intend” and other similar expressions. All statements regarding our expected financial position and operating results, business strategy, financing plans and forecast trends relating to our industry are forward-looking statements. These forward-looking statements are subject to business and economic risks and uncertainties, and our actual results of operations may differ materially from those contained in the forward-looking statements for various reasons, including those identified below under “Risk Factors” beginning on page 18. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. Although we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, except as required under federal securities laws and rules and regulations of the U.S. Securities and Exchange Commission (SEC), and readers should not rely on those forward-looking statements as representing our views as of any date subsequent to the date of this annual report.

Item 1.   Business

Overview

Pharmion Corporation is a global pharmaceutical company that acquires, develops and commercializes innovative products for the treatment of hematology and oncology patients. We have established our own research, regulatory, development and sales and marketing organizations in the United States (U.S.), the European Union (E.U.) and Australia. We have also developed a distributor network to reach the hematology and oncology markets in several additional countries throughout Europe, the Middle East and Asia.

We have established a portfolio of approved products and product candidates focused on the hematology and oncology markets. These include our primary commercial products, Vidaza^® (azacitidine for injection), which we market and sell as an approved treatment for Myelodysplastic Syndromes (MDS) in the U.S., Switzerland, Israel and the Philippines and Thalidomide Pharmion 50mg^tm (Thalidomide Pharmion), a widely used therapy for the treatment of multiple myeloma and certain other forms of cancer, which we sell on a compassionate use or named patient basis in certain countries of Europe. Thalidomide Pharmion is approved in Australia, New Zealand, Turkey, Israel, South Korea and Thailand for the treatment of multiple myeloma after the failure of standard therapies. Together, these products generated total net sales of $219.7 million in 2006, representing 92% of our total net sales in 2006.

We have submitted or expect to submit three marketing applications in 2007 seeking European marketing approval for certain of our product candidates. This includes Thalidomide Pharmion, which is the subject of a marketing authorization application (MAA) that we submitted to the European Medicines Agency (EMEA) for the treatment of untreated multiple myeloma in January 2007 and which was accepted for review by the EMEA in February 2007; satraplatin, for which we intend to submit an MAA for the treatment of second-line hormone refractory prostate cancer during the second quarter of 2007; and Vidaza, which, pending the outcome of our ongoing Phase 3 trial evaluating survival and other response criteria in high-risk MDS patients, will be the subject of a third MAA targeted for submission in late 2007.

During 2006, we consummated a number of transactions that strengthened our therapeutic focus on cancer and added to our growing product portfolio. We also completed significant development and regulatory milestones

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during the year for several of our product candidates. Some of the more notable achievements and transactions in 2006 included the following:

•  The commencement of a broad drug discovery and development collaboration with MethylGene Inc. (MethylGene), under which we obtained commercialization rights to MethylGene’s histone deacetylase (HDAC) inhibitors, including MGCD0103, in North America, Europe, Middle East and certain other markets for oncology indications;

•  The acquisition of Cabrellis Pharmaceuticals Corporation, including the North American and European rights to amrubicin, a fully synthetic anthracycline product candidate currently in multiple Phase 2 clinical trials for the treatment of small cell lung cancer (SCLC);

•  The compilation of positive results of four Phase 3 clinical studies for thalidomide in the treatment of untreated multiple myeloma, and, in January 2007, the submission of an MAA with the EMEA based on these studies seeking marketing approval of Thalidomide Pharmion for this indication in the E.U.;

•  The announcement of top line results from the Phase 3 Satraplatin and Prednisone Against Refractory Cancer (SPARC) study for satraplatin in second-line hormone refractory prostate cancer, which demonstrated a statistically significant benefit in progression-free survival for those patients in the satraplatin treatment arm;

•  The submission of a new drug application (NDA) supplement to add intravenous (IV) administration instructions to the prescribing information for Vidaza, and in January 2007, the announcement that the U.S. Food and Drug Administration (FDA) had approved our NDA supplement, thereby adding another delivery route to the Vidaza product label;

•  The appointment of Dr. Andrew Allen as Chief Medical Officer and, in connection with that appointment, the addition of a team specializing in translational medicine to conduct early-stage development of cancer therapies; and,

•  The filing of an Investigational New Drug application (IND) with the U.S. FDA for a new oral formulation of azacitidine, and, in early 2007, the acceptance of the IND; as a result, we have initiated a Phase 1 clinical study of oral azacitidine in patients with MDS, acute myelogenous leukemia (AML) and malignant solid tumors.

We believe that Pharmion is uniquely positioned in the field of epigenetics, a promising area of cancer research that examines reversible changes in gene regulation and that will remain a primary focus of our research and development activities. Both Vidaza, a deoxyribonucleic acid (DNA) demethylating agent, and MGCD0103, an HDAC inhibitor, have demonstrated specific epigenetic effects on the regulation of gene expression. Research indicates that the combination of HDAC and DNA methyltransferase inhibitors may act synergistically to reverse tumor suppressor gene silencing and induce apoptosis (programmed cell death) in various cancers, and we have initiated clinical studies evaluating Vidaza and MGCD0103 as a combination therapy in hematological cancers. In addition, as research has shown that cancer cell resistance to cytotoxic drugs is often mediated by epigenetic mechanisms, we are currently conducting research on combinations of our epigenetic therapies, Vidaza and MGCD0103, with cytotoxic drugs, including our drug candidates satraplatin and, the most recent addition to our product portfolio, amrubicin.

As a part of our business strategy, we intend to continue to acquire or in-license rights to product candidates, including both pre-clinical and clinical compounds, and enter into research and development collaborations that fully exploit our regulatory, development and commercial capabilities. In particular, we are focused on acquiring products that satisfy significant unmet medical needs for cancer patients and are synergistic with our existing product pipeline.

We had total net sales of $238.6 million in 2006, $221.2 million in 2005 and $130.2 million in 2004. Our product sales by geographic region are detailed in Note 3 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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We were incorporated in Delaware in 1999 and commenced operations in January 2000. Our principal executive offices are located at 2525 28th Street, Boulder, Colorado 80301, and our telephone number is (720) 564-9100. Our website is located at www.pharmion.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments to those reports, are available free of charge on the “Investor Relations” section of our website as soon as reasonably practicable after we have electronically filed them with, or furnished them to, the Securities and Exchange Commission. The reference to our website does not constitute incorporation by reference of the information contained on our website into this Annual Report on Form 10-K.

Our Products

The following table summarizes our principal products and the status of development for each:

Product	Disease/Indication	Territory	Status
Vidaza® (azacitidine for injection)	MDS, other hematological malignancies and solid tumors	Worldwide	•  Approved in the U.S., South Korea, Switzerland, Israel and the Philippines; •  NDA supplement for IV administration approved by U.S. FDA in January 2007; •  Ongoing MDS Phase 3 survival study with top line data expected in 2007; •  Several ongoing Phase 1 and 2 trials in MDS, other hematological malignancies and solid tumors; •  Compassionate use and named patient sales ongoing in Europe.
Thalidomide Pharmion 50mgTM	Multiple myeloma	All countries outside of North America and certain Asian countries	•  Approved in Australia, New Zealand, South Korea, Turkey, Israel and Thailand; •  European MAA for untreated multiple myeloma submitted in January 2007; •  Compassionate use and named patient sales ongoing in Europe.
Satraplatin	Second-line hormone refractory prostate cancer (HRPC)	Europe, Turkey, Middle East, Australia and New Zealand	•  Announced results of Phase 3 SPARC study; •  Intend to file European MAA for 2nd line HRPC in second quarter 2007; •  Survival data expected in third quarter 2007.
Amrubicin	Small cell lung cancer; metastatic breast cancer	North America and Europe	•  Phase 2 studies in SCLC ongoing; •  Phase 2 combination study with Herceptin in metastatic breast cancer planned to initiate in 2007.
MGCD0103	Hematological malignancies, solid tumors	North America, Europe, the Middle East and certain other countries	•  Several Phase 1 and Phase 2 single agent and combination studies ongoing in hematological and solid tumors.
Oral azacitidine	Hematological malignancies, solid tumors	Worldwide	•  IND active in January 2007; •  Phase 1 study initiated in February 2007.

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The primary products in our current portfolio include the following compounds:

Vidaza (azacitidine for injection) is a pyrimidine nucleoside analog that has been shown to reverse the effects of DNA hypermethylation and promote subsequent gene re-expression. We were granted an exclusive worldwide license to Vidaza by Pharmacia & Upjohn Company, now part of Pfizer, Inc., in June 2001. In 2004, we received full approval from the FDA for the treatment for all subtypes of MDS, a bone marrow disease that affects the production of blood cells. This was the FDA’s first approval of a treatment for MDS and Vidaza was the first demethylating agent to be approved by the agency. We launched Vidaza for commercial sale in the U.S. in July 2004. Vidaza has been granted orphan product designation by the FDA, which entitles the drug to market exclusivity for MDS in the U.S. through May 2011. In January 2007, we announced that the FDA had approved our NDA supplement that expands the approved label to add IV administration instructions to the Vidaza prescribing information. IV administration provides an alternative administration method to the previously approved subcutaneous delivery of Vidaza.

In 2006, net sales of Vidaza were $142.2 million, which represented approximately 60% of our total net sales for 2006, compared with $125.6 million in 2005, or approximately 57% of our total net sales for 2005, and $47.1 million in 2004 (6 months only), or approximately 36% of total net sales for 2004.

We currently have an ongoing Phase 3 clinical trial examining the effect of Vidaza on the survival of high risk MDS patients as compared to treatment with best supportive care with or without a chemotherapy agent. Final top line survival data from this study is expected to be available in the third quarter 2007. Pending the outcome of the trial, we intend to use data generated in the study as the basis of a submission of an MAA to the EMEA in late 2007. We began named patient and compassionate use sales of Vidaza in the fourth quarter of 2005 in the E.U. The EMEA granted Vidaza orphan product designation, which, if an MAA for Vidaza is approved, and the criteria for orphan drug designation continue to be met, would entitle the drug to ten years of market exclusivity from the date of MAA approval for the MDS indication in the E.U.

We are also exploring Vidaza’s potential effectiveness in treating other cancers associated with hypermethylation. A significant number of ongoing Phase 2 studies examining the use of Vidaza as a single agent or in combination with other cancer therapies have been initiated by us and independent clinical investigators in AML and other hematological cancers as well as certain solid tumors. Interim results from Phase 1/2 studies evaluating Vidaza in combination with three different HDAC inhibitors were presented at the 48th Annual Meeting and Exposition of the American Society of Hematology (ASH) in December 2006, including interim results from a Phase 1/2 clinical study of Vidaza in combination with MGCD0103 in MDS and AML patients.

Thalidomide Pharmion 50mg^tm (thalidomide) is an oral immunomodulatory and anti-angiogenic agent. We obtained commercialization rights to thalidomide from Celgene Corporation (Celgene) for all countries outside of North America and certain Asian markets in November 2001. Thalidomide has become a standard of care for the treatment of relapsed and refractory multiple myeloma, a cancer of the plasma cells in the bone marrow, and there is a now substantial body of data that demonstrates its benefit as a first-line treatment of this disease. We began selling thalidomide in Europe on a compassionate use or named patient basis under a comprehensive risk management program in the third quarter of 2003. Currently, we have an active MAA filed with the EMEA seeking full regulatory approval for this drug in Europe. However, until we receive a marketing authorization, we will not be permitted to market Thalidomide Pharmion in Europe. To date, Thalidomide Pharmion has been approved as a treatment for relapsed and refractory multiple myeloma in Australia, New Zealand, Turkey, Israel, South Korea and Thailand. In 2006, net sales of Thalidomide Pharmion were $77.5 million, which represented approximately 36% of our total net sales for 2006, compared with $79.4 million, or 32% of our total net sales for 2005, and $65.3 million in 2004, or approximately 50% of total net sales for 2004.

In January 2007, we announced the submission of an MAA with the EMEA seeking marketing authorization of Thalidomide Pharmion as a treatment for untreated multiple myeloma and, in March 2007, we announced that the EMEA had accepted our application for review. Our submission was based

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on a clinical data package comprised of four studies in more than 1,400 patients. These studies, which include both first-line and induction therapy, include the following:

•  IFM 99-06, a three-arm study conducted by the French research group, Intergroup Francophone du Myelome, which demonstrated the superiority of melphalan/prednisone plus thalidomide (MPT) over standard therapy of melphalan/prednisone (MP) alone or a combination of chemotherapies (vincristine/adriamycin/dexamethasone) followed by melphalan and stem cell transplantation (MEL 100). Following an interim analysis, recruitment was stopped on the recommendation of the study’s Data Safety Monitoring Board. At final analysis, the median overall survival in the MPT arm was approximately 53.6 months, compared to 32.2 and 38.6 months, respectively, for the MP and MEL 100 arms.

•  A study conducted by the Italian research group Gruppo Italiano Malattie Ematologiche dell’Adulto that demonstrated the superiority of MPT compared to MP alone. In the randomized study of MPT versus MP alone in 255 elderly patients, MPT had a superior response rate and a significantly higher two-year event-free survival rate (54% versus 27%).

•  MM-003, a Phase 3 randomized study of 470 patients, sponsored by Celgene and supported by us that compared thalidomide plus dexamethasone versus dexamethasone and placebo. In December 2005, an Independent Data Monitoring Committee reviewed the data as part of a pre-specified interim analysis and determined that the trial met the pre-specified efficacy stopping rule for the primary endpoint of time to disease progression. At the final analysis, there was also a significant (p=0.001) improvement in response rate of thalidomide plus dexamethasone of 69.4%, compared to dexamethasone and placebo of 51.1%. Of the thalidomide-treated patients, 43.8% experienced “Very Good” or “Complete Response” compared to 15.8% in the placebo arm (p<0.0001). Time to disease progression was 97.7 weeks in the thalidomide arm of the study versus 28.3 weeks in the placebo arm.

•  A Phase 3 study conducted by the Eastern Cooperative Oncology Group (ECOG) compared thalidomide plus dexamethasone to dexamethasone alone in over 200 patients. The study demonstrated a statistically significant difference in response rates of 61.6% versus 39.6% (p=0.001) at four months with thalidomide plus dexamethasone compared to dexamethasone alone.

We believe that the data from these studies provides compelling evidence of thalidomide’s efficacy in treating multiple myeloma patients. However, thalidomide’s well-documented history of causing birth defects associated with its general and widespread use in the 1950’s and early 1960’s in Europe may delay or prevent an approval of our MAA for Thalidomide Pharmion. Given thalidomide’s history, we commercialize Thalidomide Pharmion in our territories using a proprietary risk management and education program, that we call the Pharmion Risk Management Program, or PRMP. The PRMP is based upon Celgene’s System for Thalidomide Education and Prescribing Safety (S.T.E.P.S.^®) program, and certain proprietary rights controlled by Celgene relating to S.T.E.P.S. were licensed to us as part of our November 2001 agreements with Celgene. Today, thalidomide is available from several sources other than us, yet we believe that Pharmion is the only supplier that sells thalidomide in Europe with a comprehensive risk management program. We are working closely with regulators and patient and thalidomide victims groups to increase the awareness of the widespread availability of thalidomide and the need to regulate the supply of thalidomide in connection with a robust risk management program.

We have been granted orphan drug designation for thalidomide in Europe by the EMEA for the multiple myeloma indication, which, if the MAA is approved and the criteria for orphan drug designation continue to be met, would provide a ten-year period of exclusivity from the date of MAA approval. In addition, under the laws of most European countries, the import of unapproved product for sale on a named patient/compassionate use basis should only be allowed where there is no approved equivalent product available. Therefore, upon approval of Thalidomide Pharmion throughout Europe through the EMEA centralized procedure, the sale of thalidomide by other suppliers should no longer be permitted under national laws. However, we cannot be certain that the regulatory authorities or governments in all of the E.U. member states will enforce these existing laws to prevent the sale of other forms of thalidomide should Thalidomide Pharmion be approved in Europe.

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Satraplatin is the only orally bioavailable platinum-based compound in advanced clinical development. In December 2005, we obtained commercialization rights to satraplatin from GPC Biotech AG (GPC Biotech) for Europe, Turkey, the Middle East, Australia and New Zealand. In 2003, GPC Biotech initiated a Phase 3 registrational clinical trial — called SPARC — to evaluate satraplatin plus prednisone as a second-line chemotherapy treatment for patients with HRPC. In September 2006, we and GPC Biotech announced that the SPARC trial had achieved its primary endpoint of progression-free survival (PFS) demonstrating a statistically significant (p<.00001) 14% improvement in median PFS in patients who received satraplatin plus prednisone (11.1 weeks) compared to patients who received prednisone plus placebo (9.7 weeks). The SPARC trial also demonstrated that the PFS improvement in patients treated with satraplatin increased over time. PFS at the 75th percentile showed an 81% improvement for patients in the satraplatin arm (34.6 weeks) versus patients in the placebo arm (19.1 weeks). At six months, 30% of patients in the satraplatin arm had not progressed, compared to 17% of patients in the control arm. At twelve months, 16% of patients who received satraplatin had not progressed, compared to 7% of patients in the control arm. In addition, patients in the treatment arm experienced a 33% reduction in the risk of disease progression (corresponding to a hazard ratio of 0.67; 95% Confidence Interval: 0.57-0.77) compared with patients who received prednisone plus placebo. In accordance with the recommendation of the independent Data Monitoring Board for the SPARC trial, patients who have not progressed will continue to be treated, and all patients will be followed for overall survival.

We expect to submit an MAA with the EMEA in the second quarter of 2007 based upon this PFS data from the SPARC trial. PFS is a composite endpoint that determines when a patient’s disease has “progressed” based upon a number of clinical criteria relevant to the disease state. Although both the EMEA and the FDA have accepted PFS as a suitable endpoint for some product approvals, in other cases regulatory authorities have indicated that only “overall survival” endpoints will be sufficient for the approval of some cancer therapy candidates. Earlier in 2006, the EMEA advised us it would accept the final analysis of PFS as a basis for an MAA submission for satraplatin, but that the submission must also include available overall survival data from the SPARC trial. Overall survival results are expected in the fall of 2007, during which time the submission is expected to be under active review.

In collaboration with our partner, GPC Biotech, we have initiated a development program to evaluate satraplatin in a wide range of tumors, either as monotherapy or in combination with other compounds.

Amrubicin (amrubicin hydrochloride) is a third-generation fully synthetic anthracycline. We obtained the right to develop and commercialize amrubicin in North America and Europe through our acquisition of Cabrellis Pharmaceuticals Corporation (Cabrellis) in November 2006. Cabrellis licensed these rights to amrubicin from Sumitomo Pharmaceuticals, now part of Dainippon Sumitomo Pharma Co. Ltd. (Sumitomo), in June 2005. Sumitomo synthesized and developed amrubicin in Japan, and attained full regulatory approval of amrubicin as a treatment for lung cancers in that country in 2002. Amrubicin’s approval was based upon Phase 2 studies conducted in Japan that demonstrated clinical efficacy as a single agent. In previously untreated small cell lung cancer (SCLC) patients, amrubicin produced an overall response rate of 76% with median survival of 11.7 months when administered as a single agent. In Phase 2 studies of previously treated SCLC patients (sensitive or relapsed/refractory) conducted after Japanese approval, amrubicin as a single agent has shown overall response rates ranging from 46% to 53%, with median overall survival rates of 9.2 to 11.7 months. In a subsequent clinical trial evaluating amrubicin administered in combination with cisplatin in previously untreated SCLC patients, amrubicin produced an overall response rate of 88% and median survival was extended to 13.6 months. To date, however, there have been no completed clinical studies of amrubicin in patient populations outside of Japan. In order to confirm the results reported in these Japanese studies, we have initiated Phase 2 studies of amrubicin in SCLC. Pending the outcome of those studies, we intend to initiate a Phase 3 registration study before the end of 2007.

In addition, based on clinical experience with the product to date, including the active treatment of more than 6,500 patients in Japan, amrubicin appears to lack the cumulative cardiotoxicity associated with other anthracyclines. We believe that this makes amrubicin a very attractive agent to study in other cancers where older, cardiotoxic anthracyclines are currently used. For example, anthracyclines have established activity against breast cancer, but the cumulative cardiotoxicity of currently available anthracyclines limit their use

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with Herceptin^®, a breast cancer drug marketed by Genentech, Inc. Accordingly, we intend to initiate a clinical study of amrubicin in metastatic breast cancer patients in combination with Herceptin during 2007. We cannot be certain that this study will yield positive results or that amrubicin will prove to have less cardiotoxicity than other anthracyclines.

MGCD0103 is an oral, isotype-selective, small molecule HDAC inhibitor. In January 2006, we obtained commercialization rights from MethylGene Inc. in North America, Europe, Middle East and certain other markets for MethylGene’s HDAC inhibitor compounds, including MGCD0103 and MethylGene’s pipeline of second-generation HDAC inhibitor compounds, for all oncology indications. MGCD0103 is the subject of a broad Phase 2 clinical development program where we, in collaboration with MethylGene, are evaluating the use of MGCD0103 in a variety of cancers where epigenetic factors play a role. Several clinical studies of MGCD0103 are currently underway, including Phase 1/2 combination studies of MGCD0103 and Vidaza in MDS and AML patients and MGCD0103 and Gemzar^® in patients with solid tumors, and Phase 2 monotherapy studies of MGCD0103 in patients with relapsed or refractory lymphoma and relapsed or refractory Hodgkin’s lymphoma.

About Histone Deacetylation — In many cancerous tissues, through the activity of DNA methylation and histone deacetylation, tumor suppressor genes are silenced and not expressed. As a result, cell division becomes unregulated, causing cancer. HDAC inhibitors, such as MGCD0103, are believed to block histone deacetylation and allow tumor suppressor genes to re-express and inhibit cancer progression. MethylGene’s research and observations suggest that only a subset of the known HDAC isoforms may be involved in cancer progression. MGCD0103 is selective for a specific class of HDAC isoform while many other HDAC inhibitors currently in clinical development are “broad-spectrum inhibitors” that target most or all of the HDAC isoform classes. We believe targeted and selective inhibition of cancer-related HDAC isoforms may lead to more effective and less toxic cancer therapies in contrast to broad-spectrum inhibition of HDAC isoforms.

Oral Azacitidine (azacitidine) is an oral formulation of our pyrimidine nucleoside analog, Vidaza. Our oral azacitidine candidate was the result of our internal formulation efforts. We filed an IND for oral azacitidine at the end of 2006 and that IND became effective in late January 2007. In February 2007, we initiated a Phase 1 clinical study of oral azacitidine in patients with MDS, AML and malignant solid tumors. This study will assess the safety, tolerability, bioavailability and pharmacokinetics of escalating single doses of oral azacitidine, and we expect bioavailability data in the second half of 2007. Since oral azacitidine, like Vidaza, is a demethylating agent, its development complements our epigenetics program and invites further study in combination with other oral epigenetics-based therapies, such as MGCD0103. Moreover, there is a significant body of evidence showing that the biological effects of demethylating agents may be improved or extended through sustained DNA demethylation, which could most effectively be provided through oral delivery. As a result, an oral demethylating agent offers the possibility of transforming cancers into chronically managed diseases.

Other Products.  In addition to our primary commercial products, we sell several smaller products in the U.S. and Europe. This includes Innohep^®, a low molecular weight heparin that we sell in the U.S., and Refludan, an anti-thrombin agent that we sell in Europe and other countries outside the U.S. and Canada. Aggregate net sales for these products were approximately $19 million in 2006.

Research and Development

We have expanded our internal medical research and clinical development capabilities in the past fiscal year. In 2006, we announced the formation of our translational medicine group located in San Francisco. Our translational medicine approach focuses on designing preclinical and early clinical development strategies that answer critical questions about the underlying biology of the disease states and the effects of experimental therapeutics to provide scientific foundation to ensure that only the strongest clinical candidates advance to later-stage clinical development. In particular, as part of our early-stage product development efforts, our translational medicine team will seek to identify subsets of patients with a given disease who may be more likely to benefit from treatment with a particular candidate. Once these patient subgroups have been identified, molecular markers (called biomarkers) and associated assays can be developed to pre-identify these patients. These biomarker assays will then be deployed in

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clinical trials to increase the efficiency of drug development. The identification of patients that over-express the Her-2 protein as a predictor of response to Herceptin therapy is an example of this biomarker-based approach to cancer drug development. We believe that by employing novel translational biology tools we can substantially reduce the risk of early-stage development of cancer therapies.

To fully exploit our growing internal formulation and translational medicine expertise, we will consider and, as appropriate, consummate research collaboration, acquisition or in-licensing opportunities with other companies. In particular, we are focused on acquiring early-stage products, technologies or research capabilities that are synergistic with our pipeline product candidates.

Regulatory and Medical Affairs

Our regulatory and medical affairs group is comprised of professionals with significant experience in each of the major markets in which we operate. The difference between an attractive drug candidate and one which is not economically viable for development often hinges on our assessment of the time and resources required to get the drug approved and sold in a particular jurisdiction. Determining the optimal regulatory pathway for commercialization is an integral part of our product candidate selection. We believe our combination of country-specific regulatory expertise and our focus on the hematology and oncology markets provide a significant advantage as we seek to acquire additional product candidates and move our current product candidates forward through the approval process.

Sales, Marketing and Distribution

We have established sales and marketing organizations in the U.S., Europe and Australia.

In the U.S., our field-based organization consists of 110 professionals, including clinical account specialists, medical science liaisons, payor relations specialists, national accounts managers, nurse educators, and field based management. In general, members of our field-based staff have significant experience in pharmaceutical and oncology products sales and marketing. They target hematologists and oncologists who prescribe high volumes of cancer therapies. The field organization includes a medical education team that focuses on the development, presentation and distribution of scientific and clinical information regarding our products and the diseases they treat.

In Europe, our field organization includes a general manager in each of the United Kingdom (U.K.), France, Germany, Spain and Italy, and a general manager for the Nordic countries. These general managers are responsible for all commercial activities in each of their home countries, with some also having responsibility for commercial activities in smaller nearby countries. Each of our subsidiaries employs, in addition to the general manager, a trained physician, regulatory specialists if required by local law, sales representatives, PRMP experts and administrative support staff. In general, we employ nationals in each of our local subsidiaries. All European marketing activities are centrally directed from our U.K. office to ensure consistency across regional markets. In addition, clinical development, regulatory affairs and information technology functions are centrally managed from our U.K. office. In this manner, we seek to develop globally consistent programs and ensure that they are implemented according to local practices. Our Australian sales and marketing organizational structure is consistent with our European structure.

In addition to our own sales organizations, we have access to the hematology and oncology markets in 23 additional countries through relationships with our distributors. Under the agreements governing our relationships with our distributors, we are prohibited from selling or marketing our products on our own behalf in a country covered by one of these agreements until the applicable agreement expires.

In the U.S., we sell to pharmaceutical wholesalers, who in turn distribute product to physicians, retail pharmacies, hospitals, and other institutional customers. In Europe and Australia, we sell directly to retail and hospital pharmacies. Sales into countries where we have partnered with third party distributors are made directly to our partners. Our largest three wholesale customers in the U.S., U.S. Oncology Supply, Cardinal Health and McKesson Corporation generated 19%, 11% and 9%, respectively, of our total consolidated net sales for the year ended December 31, 2006.

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Principal Collaborations and License Agreements

Celgene Agreements:  In 2001, we licensed rights relating to the use of thalidomide from Celgene and separately entered into an exclusive supply agreement for thalidomide with CUK, a company located in the U.K. that was subsequently acquired by Celgene in 2004. Under the agreements, as amended in December 2004, we obtained the exclusive right to market thalidomide in all countries other than the United States, Canada, Mexico, Japan and all provinces of China, except Hong Kong. Under our Celgene agreements, we also obtained exclusive rights to all existing and future clinical data relating to thalidomide developed by Celgene, and an exclusive license to employ Celgene’s patented and proprietary S.T.E.P.S. program as our PRMP in connection with the distribution of thalidomide in these territories. Under agreements with CUK, as amended, CUK is our exclusive supplier of thalidomide formulations that we sell in certain territories licensed to us by Celgene. We pay Celgene a royalty/license fee and CUK product supply payments, each based on our net sales of thalidomide in the countries included within our territory. We have also agreed to fund certain amounts incurred by Celgene for the conduct of thalidomide clinical trials, payable in quarterly installments through the end of 2007. The agreements with Celgene and CUK each have a ten-year term running from the date of receipt of our first regulatory approval for Thalidomide Pharmion in the U.K.

GPC Biotech Agreement — In December 2005, we entered into a co-development and license agreement for the development and commercialization of satraplatin. Under the terms of the agreement, we obtained exclusive commercialization rights for satraplatin in Europe, Turkey, the Middle East, Australia and New Zealand, while GPC Biotech retained rights to the North American market and all other territories. We made upfront payments to GPC Biotech, which included reimbursement for certain satraplatin clinical development costs and funding of ongoing and certain future clinical development to be conducted jointly by us and GPC Biotech. Together, we are pursuing a joint development plan to evaluate satraplatin in a variety of tumor types and will share global development costs, for which we have made an additional financial commitment of $22.2 million. We will also pay GPC Biotech milestone payments based on the achievement of certain regulatory filing, approval and sales milestones. GPC Biotech will also receive royalties on sales of satraplatin in our territories.

We are required to use commercially reasonable efforts to develop and commercialize satraplatin in our territories. Our agreement with GPC Biotech expires on a country-by-country basis upon the expiration of patents covering satraplatin or available market exclusivity for satraplatin in a particular country or, if later, the entry of a significant generic competitor in that country. Upon expiration, we will retain a non-exclusive, fully-paid, royalty-free license to continue the commercialization of satraplatin in our territories.

MethylGene Agreement — In January 2006, we entered into an exclusive license and collaboration agreement for the research, development and commercialization of MethylGene Inc.’s HDAC inhibitors, including MGCD0103, for oncology indications in North America, Europe, the Middle East and certain other markets. Under the terms of the agreement, we made upfront payments to MethylGene totaling $25 million, which included a $5 million equity investment in MethylGene common shares. As of February 28, 2007, our investment in MethylGene was approximately 5.9% of the outstanding shares of common stock. We will make additional milestone payments to MethylGene for MGCD0103 and each additional HDAC inhibitor, based on the achievement of significant development, regulatory and sales goals.

Initially, MethylGene is funding 40% of the development costs for MGCD0103 required to obtain marketing approval in North America while we are funding 60% of such costs. MethylGene will receive royalties on net sales in North America based upon the level of annual sales achieved in our territories. MethylGene has an option as long as it continues to fund development, to co-promote approved products in North America and, in lieu of receiving royalties, to share the resulting net profits equally with us. If MethylGene elects to discontinue development funding, we will be responsible for 100% of development costs incurred thereafter. In all other licensed territories, we are responsible for development and commercialization costs.

Both parties to the agreement are required to use commercially reasonable and diligent efforts to fulfill the research, development and commercialization responsibilities allocated to each party under the agreement. Our agreement with MethylGene expires upon the expiration of patents covering all HDAC inhibitor candidates being developed by the parties or, if earlier, the date all research, development and commercialization activities under the agreement cease.

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Dainippon Sumitomo Pharma Co. Ltd. (Sumitomo) Agreement:  In June 2005, Conforma Therapeutics Corporation (former parent corporation of Cabrellis Pharmaceuticals Corporation) obtained and, in November 2006, we acquired as part of our acquisition of Cabrellis, an exclusive license to develop and commercialize amrubicin in North America and Europe pursuant to a license agreement with Sumitomo. The agreement requires us to purchase, and Sumitomo to supply, all of our requirements for product supply. We are required to pay Sumitomo a transfer price for product supply, determined as a percentage of our net sales of amrubicin, and we would pay Sumitomo additional milestone payments upon the receipt of regulatory approvals in the U.S. and Europe, and upon achieving certain annual sales levels in the U.S. The Sumitomo agreement expires upon the expiration of ten years from the first commercial sale of amrubicin in all countries or, if later, upon the entry of a significant generic competitor in those countries. The milestone payments made to Sumitomo under the amrubicin license agreement are in addition to milestone payments to be paid to the former shareholders of Cabrellis under the terms of the Cabrellis Pharmaceuticals Corporation acquisition agreement. Pursuant to the terms of that agreement, we could pay $12.5 million upon the first approval of amrubicin by each of the regulatory authorities in the U.S. and the E.U. and an additional payment of $10 million upon amrubicin’s approval for a second indication in the U.S. or E.U. for each market.

Pfizer Agreement:  In June 2001, we licensed worldwide, exclusive rights to Vidaza from Pharmacia & Upjohn Company, now a part of Pfizer, Inc. Under the terms of our agreement, we are obligated to pay Pfizer royalties based on net sales of Vidaza. The exclusive license from Pfizer has a term extending for the longer of the last to expire valid patent claim in any given country or ten years from our first commercial sale of the product in a particular country.

Manufacturing and Raw Materials

We currently use, and expect to continue the use of, contract manufacturers for the manufacture of each of our products. Our contract manufacturers are subject to extensive governmental regulation. Regulatory authorities in our markets require that pharmaceutical products be manufactured, packaged and labeled in conformity with current Good Manufacturing Practices (cGMPs). We have established a quality control and quality assurance program, which includes a set of standard operating procedures and specifications designed to ensure that our products are manufactured in accordance with cGMPs, and other applicable domestic and foreign regulations.

Thalidomide.  We obtain two formulations of thalidomide from two different suppliers. Thalidomide Pharmion is formulated, encapsulated and packaged for us by CUK of Great Britain, a wholly-owned subsidiary of Celgene, in a facility that is in compliance with the regulatory standards of each country in which we sell our product. Under the terms of our agreement with CUK, we purchase from CUK all of our required supplies of the product for those countries. CUK subcontracts production of Thalidomide Pharmion to other service providers, including Penn Pharmaceutical Services Limited. The price we pay CUK is subject to an annual audit and, if appropriate, an adjustment is made based upon the fully allocated cost of manufacture. The agreement terminates upon the tenth anniversary of the date upon which we receive regulatory approval for thalidomide in the U.K.

Thalidomide Laphal, which is the thalidomide formulation we sell in France, is formulated, encapsulated and packaged for us by Laphal Industrie, an unaffiliated company, in a facility that is in compliance with the regulatory standards of each of the countries where we sell our product. The price we pay Laphal is subject to an annual adjustment based upon a formula that accounts for increases in the cost of manufacture. Our agreement terminates in March 2013, unless we terminate it prior to its expiration with prior notice to Laphal and subject to the payment of a termination fee. Upon achieving a marking authorization in the E.U. for Thalidomide Pharmion, we will discontinue the sale of the Laphal formulation of thalidomide in France.

Vidaza.  Under the terms of our supply agreements, Ash Stevens, Inc. provides us with supplies of azacitidine drug substance, the active ingredient in Vidaza, and Ben Venue Laboratories, Inc. formulates and fills the product into vials, and labels the finished product for us. Both Ash Stevens and Ben Venue operate facilities that are in compliance with the regulatory standards of each of the countries in which we sell or expect to sell our product. Under the terms of our agreement with Ash Stevens, we are obligated to purchase all of our requirements for azacitidine from Ash Stevens and Ash Stevens is required to manufacture azacitidine exclusively for us. This agreement expires in 2011. Under the terms of our agreement with Ben Venue Laboratories, Inc., we are required to

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purchase at least 65% of our annual requirements for finished Vidaza product from Ben Venue. This agreement expires in 2010. Under each of these agreements, the prices our suppliers charge us for products may increase or decrease annually based upon the percentage change in the Producer Price Index for pharmaceutical preparations. In addition, we have entered into an agreement with a back-up manufacturer for finished and labeled Vidaza product.

Satraplatin.  We entered into a supply agreement with GPC Biotech under which we are obligated to purchase all of our requirements for satraplatin from GPC Biotech, and GPC Biotech has agreed to manufacture and supply our requirements for the product and to maintain certain inventories of satraplatin on our behalf. GPC Biotech subcontracts satraplatin production to various subcontractors, including Johnson Matthey, Inc., which manufactures satraplatin drug substance. Our supply price for the product under this agreement is set at 110% of GPC Biotech’s fully allocated cost of manufacturing the product. This agreement will terminate upon the termination of our Co-Development and License Agreement with GPC Biotech.

Amrubicin.  As part of our license agreement with Sumitomo, we entered into a separate supply agreement under which we are obligated to purchase, and Sumitomo is obligated to supply, all of our requirements for amrubicin. We will pay Sumitomo a transfer price inclusive of royalties based on our net sales of amrubicin, subject to a fixed minimum price specified in the agreement. The supply agreement terminates upon termination of the Sumitomo license agreement.

Patents and Proprietary Rights

Our success depends in part on our ability to obtain and maintain a strong proprietary position both in the U.S. and in other countries for our existing products and the products we acquire or license. To achieve such a position, we rely upon a combination of orphan drug status, data and market exclusivity, trade secrets, know-how, continuing technological innovations and licensing opportunities. In addition, we intend to seek patent protection whenever available for any products or product candidates, particularly in conjunction with our translational medicine research, formulation and manufacturing process development activities and related tools and technology we develop or acquire in the future.

Composition of matter patent protection for Vidaza, thalidomide and amrubicin, has expired or was not pursued. Through our acquisition of Cabrellis, we have an exclusive license in the U.S. and Europe under patents and patent applications owned by Sumitomo that relate to formulations, methods of production, polymorphic forms and combination uses of amrubicin to treat various cancers. The primary issued formulation patent expires in August 2008 and the issued use patent for amrubicin expires in March 2023. We have exclusive rights to a family of patents that relate to uses of thalidomide to treat angiogenesis and cancer. Patent protection for uses of thalidomide expires in February 2014. We own, or co-own with Ash Stevens, Inc., three patent families relating to the production or formulation of Vidaza, of which four patents have issued in the United States. These patents will expire in 2023. We have filed a provisional patent application in the U.S. covering our oral formulation of azacitidine.

We have an exclusive license from GPC Biotech to issued patents and pending patent applications in the E.U. and certain other international markets for satraplatin. Issued patents covering compositions of matter and certain methods of use of satraplatin expire in January and February 2009. We will rely on Supplementary Protection Certificates and regulatory data protection available in the E.U. to extend our period of market exclusivity for satraplatin in the E.U. beyond the expiration date of the basic satraplatin patent. A Supplementary Protection Certificate, if granted, would extend the protection provided by the existing satraplatin patent for five years, that is, until early 2014. Additionally, we licensed from MethylGene in early 2006 exclusive rights in oncology to what currently numbers more than 10 patent families directed to MethylGene’s inhibitors of histone deacetylase, including patents issued in the United States and related pending patent applications in the E.U. and certain other international markets for MGCD0103. The basic patent covering the composition of matter for MGCD0103 expires in September 2022.

The patent positions of pharmaceutical firms like us are generally uncertain and involve complex legal, scientific and factual questions. Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued. Consequently, we do not know whether any of the products or product candidates we acquire or license will result in the issuance of patents or, if any patents are issued, whether they will provide

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significant proprietary protection or will be challenged, circumvented or invalidated. Because unissued patent applications filed in the U.S. prior to November 29, 2000 and patent applications filed within the last 18 months are maintained in secrecy, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of the priority of inventions covered by pending patent applications. Moreover, we may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office or a foreign patent office to determine priority of invention, or in opposition proceedings in a foreign patent office, either of which could result in substantial cost to us, even if the eventual outcome is favorable to us. There can be no assurance that the patents, if issued, would be held valid by a court of competent jurisdiction. An adverse outcome could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease using such technology.

In the absence of or to supplement patent protection for our existing products and any products or product candidates we should acquire in the future, we have sought and intend to continue seeking orphan drug status whenever it is available. To date, we have been granted orphan drug status in the U.S. and the E.U. for Vidaza for the MDS indication and in the E.U. for Thalidomide Pharmion for the multiple myeloma indication. In addition, we intend to seek orphan drug status for amrubicin in both the U.S. and the E.U. for the SCLC indication. If a product which has an orphan drug designation subsequently receives the first regulatory approval for the indication for which it has such designation, the product is entitled to orphan exclusivity, meaning that the applicable regulatory authority may not approve any other applications to market the same drug for the same indication, except in certain very limited circumstances, for a period of seven years in the U.S. and ten years in the E.U. Orphan drug designation does not prevent competitors from developing or marketing different drugs for an indication. See “Government Regulation” for a more detailed description of orphan drug status.

In the E.U., data and market exclusivity provide a period of up to eleven years from the date a product is granted the first marketing approval in the E.U., during which a generic product applicant is not permitted to rely on the dossier of the reference product for the purposes of submitting an application, obtaining marketing authorization or placing the generic product on the market. Unlike orphan drug exclusivity, data and market exclusivity do not prevent a generic manufacturer from filing for regulatory approval of the same or similar drug, even in the same indication for which that drug was previously approved in the E.U., based upon data generated independently by that manufacturer.

We also rely on trade secret protection for our confidential and proprietary information. No assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose such technology, or that we can meaningfully protect our trade secrets. However, we believe that the substantial costs and resources required to develop technological innovations, such as the PRMP, will help us to protect the competitive advantage of our products.

It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual shall be our exclusive property. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information.

Competition

The development and commercialization of new drugs is competitive and we face competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. Our competitors may develop or market products or other novel technologies that are more effective, safer or less costly than any that have been, or are being, developed by us or they may receive regulatory approval for their products earlier than approval received for our products. Our products’ competitive position among other products may be based on, among other things, clinical data showing efficacy and safety, patent protection, patient convenience, availability, acceptance by the medical community, marketing and price.

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A large number of companies are devoting substantial resources to the research, discovery, development and commercialization of anti-cancer drugs. Many of our competitors have substantially greater financial, technical and human resources than those available to us. Merger and acquisition activity in the pharmaceutical and biotechnology industries could result in the concentration of even more resources with our competitors. Competition may increase further as a result of advances made in the commercial applicability of technologies and greater availability of capital for investment in these industries.

Vidaza.  The landscape for MDS drugs has recently become more competitive in the U.S. In the past eighteen months, the FDA approved two new therapies for the treatment of MDS: Dacogen^® with marketing rights held by MGI Pharma, Inc., approved in May 2006, and Revlimid^® from Celgene, approved in December 2005. Dacogen, is a demethylating agent, as is Vidaza, which was approved for all subtypes of MDS and, therefore, is directly competitive with Vidaza. Revlimid, a small molecule compound that affects multiple cellular pathways, was initially approved in the U.S. for a subset of low-risk MDS patients and later approved for multiple myeloma. It is currently being evaluated for a wide range of hematological cancers. In addition, Revlimid is currently under review by the EMEA for a possible marketing approval in the E.U. for both MDS and relapsed and refractory multiple myeloma. Vidaza does not have marketing authorization in the E.U. and, we have not yet filed an MAA seeking approval by the EMEA. There are additional products in clinical development for the treatment of MDS and the enrollment of patients in clinical trials for these additional products may reduce the number of patients that will receive Vidaza treatment. We also face competition for Vidaza from traditional therapies used in the treatment of MDS, including the use of blood transfusions and growth factors.

Thalidomide Pharmion.  The primary products we consider to be competitive with Thalidomide Pharmion in the multiple myeloma market in our territories are Velcade^® from Millennium Pharmaceuticals Inc., a proteasome inhibitor, and, pending approval by the EMEA for relapsed and refractory multiple myeloma, Revlimid from Celgene. In addition, in certain of our markets we face competition from other suppliers of generic or unapproved forms of thalidomide, including the compounding of thalidomide by pharmacists. We also face competition from traditional therapies used in the treatment of multiple myeloma, including the use of chemotherapeutic agents, such as melphalan and dexamethasone.

Satraplatin.  The competitive market for satraplatin may include other drugs either currently marketed or being developed for HRPC, as well as other platinum-based compounds for other cancers. Although there are currently no approved treatments for second-line HRPC, there are several approved treatments for prostate cancers and other agents in development for both advanced HRPC and earlier stages of prostate cancer, which may compete with satraplatin in our territories. We are aware that other companies may be developing orally bioavailable platinum-based compounds. We are not aware, however, of any other orally bioavailable, platinum-based compounds that are approved or in Phase 3 clinical trials.

Amrubicin.  We plan to initiate late stage clinical trials and, if those trials are positive, seek approval for amrubicin in the sensitive or relapsed/refractory SCLC indication. Currently, the only approved single-agent therapy for second-line treatment of SCLC is Hycamtin^® (topotecan) from GlaxoSmithKline plc. There are, however, several products in clinical development for SCLC, including Alimta^® (pemetrexed) from Eli Lilly and Company and picoplatin from Poniard Pharmaceuticals, both of which are currently in a more advanced stage of development than amrubicin.

Government Regulation and Reimbursement

Regulation by governmental authorities in the U.S. and other countries is a significant factor in the manufacture and marketing of our products and in guiding our ongoing research and product development activities. All of our products require regulatory approval by governmental agencies prior to commercialization. In particular, our products are subject to rigorous preclinical and clinical testing and other approval requirements by the FDA and similar regulatory authorities in other countries. Various statutes and regulations also govern or influence the manufacturing, safety, reporting, labeling, storage, record keeping and marketing of our products. The lengthy process of seeking these regulatory approvals, and the subsequent compliance with applicable statutes and regulations, require the expenditure of substantial resources. Any failure by us to obtain, or any delay in obtaining, regulatory approvals could harm our business.

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The Product Approval Process

The clinical development, manufacture and marketing of our products are subject to regulation by various authorities in the U.S., the E.U. and other countries, including the FDA in the U.S. and the EMEA in the E.U. The Federal Food, Drug, and Cosmetic Act and the Public Health Service Act in the U.S. and numerous directives, regulations, local laws and guidelines in the E.U. govern the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of our products. Product development and approval within these regulatory frameworks takes a number of years and involves the expenditure of substantial resources.

Regulatory approval is required in all the major markets in which we, or our licensors, seek to test our products in development. At a minimum, such approval requires the evaluation of data relating to the quality, safety and efficacy of a product for its proposed use. The specific types of data required and the regulations relating to this data differs depending on the territory, the drug involved, the proposed indication and the product’s stage of development.

In general, new chemical compounds are tested in animals until adequate proof of safety is established. Clinical trials for new products are typically conducted in three sequential phases that may overlap. In Phase 1, the initial introduction of the pharmaceutical product into healthy human volunteers, the emphasis is on testing for safety (adverse effects), dosage tolerance, metabolism, distribution, excretion and clinical pharmacology. Phase 2 involves studies in a limited patient population to determine the initial efficacy of the pharmaceutical product for specific targeted indications, to determine dosage tolerance and optimal dosage, and to identify possible adverse side effects and safety risks. Once a compound shows evidence of effectiveness and is found to have an acceptable safety profile in Phase 2 evaluations, Phase 3 trials can be undertaken to more fully evaluate clinical outcomes.

In the U.S., the specific preclinical and chemical data, described above, must be submitted to the FDA as part of an Investigational New Drug application (IND), which, unless the FDA objects, becomes effective 30 days following receipt by the FDA. Phase 1 studies in volunteer human subjects may commence only after the application becomes effective. Prior regulatory approval for healthy human volunteer studies is also required in the member states of the E.U. Currently, following the successful completion of Phase 1 studies, data is submitted in summarized format to the applicable regulatory authority in each E.U. member state as application for the conduct of later Phase 2 studies. These member state regulatory authorities typically have between one and three months in which to raise any objections to the proposed Phase 2 studies, and they often have the right to extend this review period at their discretion.

In the U.S., following completion of Phase 1 studies, further submissions to the FDA are necessary prior to conducting Phase 2 and 3 studies to update the existing IND. The FDA may require additional data before allowing the new studies to commence and could demand that the studies be discontinued at any time if there are significant safety issues. In addition to the regulatory authority review, a study involving human subjects has to be approved by an independent body. The exact composition and responsibilities of this body differs from country to country. In the U.S., for example, each study is currently conducted under the auspices of an independent Institutional Review Board at the institution at which the study is to be conducted. This board considers, among other things, the design of the study, ethical factors, the safety of the human subjects and the possible liability risk for the institution. Independent review requirements also apply in each E.U. member state, where one or more independent ethics committee typically operates similarly to an Institutional Review Board to review the ethics of conducting the proposed study. Authorities in countries other than the U.S. and member E.U. states have slightly different requirements, involving both the conduct of clinical trials and the import/export of pharmaceutical products. It is our responsibility to ensure we conduct our business in accordance with the regulations of each relevant territory.

Information generated in these processes is susceptible to varying interpretations that could delay, limit or prevent regulatory approval at any stage of the approval process. A failure to adequately demonstrate the quality, safety or efficacy of a therapeutic drug under development could delay or prevent regulatory approval of the product. There is no assurance that when clinical trials are completed, either we or our collaborative partners will submit applications, including an MAA, NDA or abbreviated NDA, for the required authorizations to market product candidates or that any such application will be reviewed and approved by the appropriate regulatory authorities in a timely manner, if at all.

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In order to receive marketing approval, we must submit a dossier or application to the relevant regulatory authority for review, which is known in the U.S. as an NDA and in the E.U. as an MAA. The format for each submission is usually specific to each regulatory authority, although in general it includes information on the quality of the chemistry, manufacture and pharmacological aspects of the product as well as the non-clinical and clinical study data. The FDA undertakes the review for the U.S. In the E.U., oncology products are reviewed under the centralized procedure, where a single review can result in one marketing authorization for the entire E.U. Under the centralized procedure, members of the Committee for Medicinal Products for Human Use, or the CHMP, review the application on behalf of the EMEA. The EMEA will, based upon the review by the CHMP, provide an opinion to the European Commission on the safety, quality and efficacy of a product. The decision to grant or refuse an authorization is made by the European Commission. Approval can take several months to several years, or be denied.

The FDA and the EMEA review and approval timelines can differ substantially. In the U.S. for example, the FDA normally sets a deadline for the agency’s review of an NDA. In the E.U., the EMEA approval process for a typical review is set out in a fixed 210-day schedule, although the schedule can be shortened if the EMEA grants an application “accelerated review.” However, at various points during the process, review “clock stops” could occur, at which time applicants are required, for example, to answer questions posed by the CHMP. Such delays can vary in length depending on the scope of the review and the time required for the applicant to submit responses to questions. Therefore, we cannot state with certainty the timeframe for an EMEA review of an MAA for any of our products.

The regulatory approval process can also be affected by a number of other factors. Additional studies or clinical trials can be requested during the review that could delay marketing approval and involve unbudgeted costs. The regulatory authorities can conduct an inspection of relevant facilities, and review manufacturing procedures, operating systems and personnel qualifications. In addition to obtaining regulatory approval for each product, in many cases each drug manufacturing facility must be approved. Further inspections can occur over the life of the product. An inspection of clinical investigation sites by a competent authority may be required as part of the regulatory approval process. As a condition of marketing approval, a regulatory agency may require post-marketing surveillance to monitor for adverse effects, or require additional studies deemed appropriate. After product approval for an initial indication, further clinical studies are usually necessary to gain approval for any additional indications. The terms of an approval, including label content, could be more restrictive than we expected and could affect the marketability of a product.

Compassionate Use/Named Patient Sales in the E.U.

In many markets outside of the U.S., certain regulations permit patients to gain access to unapproved pharmaceutical products, particularly severely ill patients where other treatment options are limited or non-existent. Generally, the supply of pharmaceutical products under these circumstances is termed “compassionate use” or “named patient” supply. In the E.U., each member state has developed its own system under an E.U. Directive that permits an exemption from traditional pharmaceutical regulation of “medicinal products supplied in response to a bona fide unsolicited order, formulated in accordance with specifications of an authorized health care professional and for use by his individual patients on his direct personal responsibility,” where such patients have a “special need” that cannot be satisfied with approved products.

Essentially, two processes for approval operate among the E.U. member states: approval can be given for “cohort” supply, meaning more than one patient can be supplied in accordance with an agreed treatment protocol; or alternatively, as is the case in the majority of the E.U. member states, supply is provided on an individual patient basis. Some countries, such as France, have developed other systems, where an Autorisation Temporaire d’Utilisation (ATU) involves a thorough review and approval by the regulator of a regulatory data package. In France, the applicant then receives an approval to supply. All E.U. member states require assurance of the quality of the product, which is usually achieved by provision of GMP certification. In the majority of markets, the prescribing physician is responsible for the use of the product and in some countries the physician in conjunction with the pharmacist must request approval from the regulator to use the unlicensed pharmaceutical. Outside of the E.U., many countries have developed named patient systems similar to those found in Europe. In each case, products sold on a compassionate use or named patient basis cannot be actively promoted by the drug manufacturer.

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Additionally, in connection with the “special need” requirements described above, under the laws of most European countries, the import of unapproved product for sale on a named patient/compassionate use basis will only be allowed where there is no approved equivalent product available. This is an important consideration with respect to Thalidomide Pharmion, where we face substantial competition from the sale of unlicensed thalidomide by other suppliers. Upon approval of Thalidomide Pharmion throughout Europe through the EMEA centralized procedure, the sale of unlicensed thalidomide by other suppliers should no longer be permitted under national laws.

Orphan Drug Status

The U.S., the E.U. and Australia grants orphan drug designation to drugs intended to treat a “rare disease or condition.” The requirements for achieving orphan drug status vary between the U.S., E.U. and Australia, but are generally dependent on patient populations. If a product, that has been granted an orphan drug designation, subsequently receives its first regulatory approval for the indication for which it holds such designation, the product is entitled to orphan exclusivity, meaning that the applicable regulatory authority may not approve any other applications to market the same drug for the same indication, except in certain very limited circumstances, for a period of seven years in the U.S., ten years in the E.U. and five years in Australia. An orphan drug designation does not prevent competitors from developing or marketing different drugs for an indication. Of our current products, Vidaza has been granted orphan drug designation in the U.S., Europe and Australia and Thalidomide Pharmion has been granted orphan drug designation in Europe and Australia. In addition, we intend to seek orphan drug designation where available in certain indications for amrubicin and MGCD0103.

Post-Approval Regulatory Requirements

Holders of an approved NDA are required to report certain adverse reactions and production problems, if any, to the FDA, and to comply with certain requirements concerning advertising and promotional labeling for their products. Also, quality control and manufacturing procedures must continue to conform to certification of good manufacturing practice (cGMP) after approval, and the FDA periodically inspects manufacturing facilities to assess compliance with cGMP. Accordingly, manufacturers are required to expend significant resources in the areas of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance. We continue to rely upon third-party manufacturers to produce our products. We cannot be certain those manufacturers will remain in compliance with applicable regulations or that future regulatory inspections will not identify compliance issues at the facilities of our contract manufacturers which could disrupt production or distribution, or require substantial resources to correct.

For both currently marketed and future products, failure to comply with applicable regulatory requirements after obtaining regulatory approval can result in the suspension of regulatory approval, and the imposition of civil and criminal sanctions. Renewals for product authorizations in Europe could require additional data, which could result in a license being withdrawn. In the U.S. and the E.U., regulators can revoke, suspend or withdraw approvals of previously approved products, prevent companies and individuals from participating in the drug-approval process, request recalls, seize violative products and obtain injunctions to close manufacturing plants not operating in conformity with regulatory requirements and stop shipments of violative products. In addition, changes in regulations could harm our financial condition and results of operation.

Healthcare Fraud and Abuse Laws

We are further subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular drug. False claims laws prohibit anyone from knowingly or willingly presenting, or causing to be presented for payment to third party payers (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Violations of fraud and abuse laws may be punishable by criminal or civil penalties, or both, as well as the possibility of exclusion from participation in federal health care programs. Our sales and marketing activities may be subject to scrutiny under these laws. Our business could be adversely affected were the government to allege that our practices are in violation of these laws.

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We are subject to the U.S. Foreign Corrupt Practices Act which prohibits corporations and individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity. Under this act, it is illegal to pay, offer to pay or authorize the payment of, anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity.

Government Pricing and Reimbursement Regulations

As a drug marketer, we participate in the Medicaid rebate program established by the Omnibus Budget Reconciliation Act of 1990, and amendments of that law that became effective in 1993. Program participation requires extending comparable discounts under the Public Health Service, or PHS, pharmaceutical pricing program. Under the Medicaid rebate program, we pay a rebate for each unit of our product reimbursed by Medicaid. The PHS pricing program extends discounts comparable to the Medicaid rebate to a variety of community health clinics and other entities that receive health services grants from the PHS, as well as hospitals that serve a disproportionate share of Medicare and Medicaid beneficiaries. The rebate amount is computed each quarter based on our current average manufacturer price and best price for each of our products and reported to the Centers for Medicare and Medicaid Services, or CMS.

In the U.S., there have been a number of legislative and regulatory changes to the health care system that impact the pricing of our products. In particular, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 together with rulemaking by CMS, changed the methodology for Medicare reimbursement of pharmaceutical products administered in physician offices and hospital outpatient facilities, including Vidaza. Although the rate at which physicians were reimbursed for Vidaza under Medicare were initially affected by the new reimbursement methodology, reimbursement rates for Vidaza have stabilized, and we believe the impact of this reimbursement methodology is not likely to be significant to our business in 2007. However, we also believe it is likely that new legislative proposals will be considered by Congress that, if adopted, will affect government drug reimbursement policies. We cannot determine what impact, if any, these new policies might have on our business.

Pricing Controls

Before a pharmaceutical product may be marketed and sold in many foreign countries, the proposed pricing for the product must be approved. The requirements governing product pricing vary widely from country to country and can be implemented disparately at the national level.

The E.U. generally provides options for its member states to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. For example, the regulation of prices of pharmaceutical products in the U. K. is generally designed to provide controls on the overall profits that pharmaceutical companies may derive from their sales to the U.K. National Health Service. Other countries, such as Italy, establish selling prices for pharmaceutical products based on a reference price system, whereby the authorized price for the product is determined based upon an average of the prices in other reference markets in Europe. Still others, such as Spain, establish the selling price for new pharmaceutical products based on a prime cost, plus a profit margin within a range established each year by a governmental authority.

We cannot be certain that any country that has price controls or reimbursement limitations for pharmaceutical products will permit favorable reimbursement and pricing arrangements for our products. In addition, in the U.S. there have been, and we expect that there will continue to be, a number of federal and state proposals to implement governmental pricing control. The impact of these legislative initiatives is unclear, but they may result in additional pricing and reimbursement restrictions, which could adversely impact our revenues.

Third Party Reimbursement

In the U.S., E.U. and elsewhere, sales of pharmaceutical products are dependent in part on the availability of reimbursement to the consumer from third party payers, such as government and private insurance plans. Third party payers are increasingly challenging the prices charged for pharmaceutical products. The E.U. generally

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provides options for its member states to restrict the range of pharmaceutical products for which their national health insurance systems provide reimbursement. In some countries, products may be subject to a clinical and cost effectiveness review by a health technology assessment body. A negative determination by such a body for one of our products could affect the prescribing of the product. For example, in the U.K., the National Institute for Clinical Excellence (NICE), provides guidance to the National Health Service on whether a particular drug is clinically effective and cost effective. Although presented as “guidance,” doctors are expected to take the guidance into account when choosing a drug to prescribe. In addition, third party payers may not make funding available for drugs not given a positive recommendation by the NICE. There is a risk that a negative determination by the NICE will mean fewer prescriptions. We cannot be certain that any of our products will be considered cost effective and that reimbursement to the consumer will be available or will be sufficient to allow us to sell our products on a competitive and profitable basis.

Our present and future business has been and will continue to be subject to various other laws and regulations.

Research and Development Expense

In the years ended December 31, 2006, 2005 and 2004, we incurred research and development expense of $70.1 million, $42.9 million and $28.4 million, respectively.

Employees

As of February 23, 2007, we had 417 employees. We believe that our relations with our employees are good and we have no history of work stoppages.

Item 1A.   Risk Factors.

In evaluating our business, you should carefully consider the risks described below in addition to the other information contained in this report. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. The risks and uncertainties described below are not the only ones we face. Additional risks not presently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations.

We have a history of net losses, and may not maintain profitability in the future.

Except for our fiscal year ended 2005, where we posted net income of $2.3 million, we have incurred annual net losses since our inception. For our most recent fiscal year we incurred a net loss of $91.0 million and, as of December 31, 2006, we had an accumulated deficit of $226.8 million. In addition, as a result of recent product acquisitions, we expect to further increase our expenditures to:

•  commercialize our marketed products;

•  grow our commercial and related support organizations in anticipation of new product approvals;

•  support our development efforts associated with completing clinical trials and seeking regulatory approvals of our products, including regulatory and development expenses associated with our recently-acquired product candidates, amrubicin, MGCD0103 and satraplatin;

•  satisfy our obligations to make milestone payments under the existing license agreements for our product candidates; and

•  acquire additional product candidates or companies.

Accordingly, we do not expect to achieve profitability during our 2007 fiscal year and we are unsure as to when we will again achieve profitability for any substantial period of time. If we fail to achieve profitability within the time frame expected by investors or securities analysts, the market price of our common stock may decline.

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  We depend heavily on our two commercial products, Vidaza and Thalidomide Pharmion, to generate revenues.

Sales of Vidaza and Thalidomide Pharmion account for nearly all of our total product sales. For the fiscal year ended December 31, 2006, Vidaza and Thalidomide Pharmion net sales represented 92% of our total net sales. Neither Vidaza U.S. sales nor Thalidomide Pharmion sales have increased significantly over the past several calendar quarters. Vidaza has faced increased competition from recent launches of two products approved for the U.S. MDS market. Although U.S. Vidaza sales have not declined significantly in the face of these recent product launches, we cannot assure you that Vidaza will gain increased market acceptance from members of the medical community or that the acceptance of Vidaza we have observed thus far will be maintained. The commercial success of Vidaza and future growth in Vidaza sales will depend, among other things, upon:

•  the success of our current survival clinical trial for Vidaza in MDS;

•  our ability to achieve a marketing authorization for Vidaza in Europe and in other countries;

•  continued acceptance by regulators, physicians, patients and other key decision-makers as a safe, superior therapeutic as compared to currently existing or future treatments for MDS;

•  our ability to successfully compete with other approved MDS therapies; and

•  our ability to expand the indications for which we can market Vidaza.

For Thalidomide Pharmion, our sales in 2006 declined slightly from our 2005 sales largely due to the competition we face from sales of thalidomide from generic manufacturers and pharmacy compounding of thalidomide. Currently, we are at a competitive disadvantage to these other thalidomide products, which are sold at a significantly lower price than our Thalidomide Pharmion and without a comprehensive safety program. Therefore, commercial success and future growth of our formulation of thalidomide will depend primarily upon our ability to achieve a marketing authorization for Thalidomide Pharmion in Europe and, upon such approval, our ability to successfully promote Thalidomide Pharmion and achieve the cooperation of regulatory authorities in preventing the sale of other forms of thalidomide.

Any adverse developments with respect to the sale or use of Vidaza and Thalidomide Pharmion could significantly reduce our product revenues and have a material adverse effect on our ability to generate net income and positive net cash flow from operations.

Failure to achieve our sales targets or raise additional funds in the future may require us to delay, reduce the scope of, or eliminate one or more of our planned activities.

Based on our current operating plans, we will need to generate greater sales to achieve and maintain profitability on an annual basis. The product development, including clinical trials, manufacturing development and regulatory approvals of Vidaza, Thalidomide Pharmion, satraplatin, amrubicin and MGCD0103, and the acquisition and development of additional product candidates by us will require a commitment of substantial funds. Additionally, we plan to increase our investment in our development programs and commercial organization in anticipation of possible additional product approvals. As a result, our balance of cash, cash equivalents and short-term investments will decrease significantly until we are able to increase product sales with additional product approvals or raise additional funds in a debt or equity financing. Our future capital requirements are dependent upon many factors and may be significantly greater than we expect.

We believe, based on our current operating plan, including anticipated sales of our products, that our cash, cash equivalents and short-term investments will be sufficient to fund our operations through at least the next twelve months. If our existing resources are insufficient to satisfy our liquidity requirements due to slower than anticipated sales of our products, delays in anticipated marketing approvals for our products or otherwise, or if we acquire additional products or product candidates, we may need to sell additional equity or debt securities. If we are unable to obtain this additional financing, we may be required to delay, reduce the scope of, or eliminate one or more of our planned development, commercialization or expansion activities, which could harm our financial condition and operating results.

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We may not receive regulatory approvals for our product candidates, or approvals may be delayed.

Our growth prospects depend to a large extent upon our ability to obtain regulatory approval of our near-term product candidates in Europe: Thalidomide Pharmion, satraplatin and Vidaza. The regulatory review and approval process to obtain marketing approval, even for a drug that is approved in other jurisdictions, takes many years and requires the expenditure of substantial resources. This process can vary substantially based on the type, complexity, novelty and indication of the product candidate involved. Changes in the regulatory approval policy during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of an application. The regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that data is insufficient for approval and require additional pre-clinical, clinical or other studies. In addition, varying interpretations of the data obtained from pre-clinical and clinical testing by regulatory authorities could delay, limit or prevent regulatory approval of a product candidate.

Thalidomide Pharmion.  In January 2007, we announced that we had submitted an MAA to the EMEA seeking a marketing authorization for Thalidomide Pharmion in the E.U. We believe that the clinical data supporting this submission provides compelling evidence of Thalidomide Pharmion’s efficacy in treating multiple myeloma patients. However, thalidomide’s well-known potential for causing severe birth defects and its negative historical reputation may delay or prevent an approval of our MAA, despite its proven efficacy. In addition, thalidomide continues to be widely available and, in most cases, without a comprehensive safety program. Any report of a birth defect attributed to the current use of thalidomide could compel the regulatory authorities to delay approval or elect not to grant us marketing authorization for Thalidomide Pharmion.

Satraplatin.  We have also recently announced our intention to submit an MAA to the EMEA seeking approval for satraplatin based upon the results achieved in the “SPARC” Phase 3 clinical trial evaluating satraplatin in second line hormone refractory prostate cancer (HRPC). The trial met its primary endpoint by demonstrating a statistically significant improvement in progression-free survival, or PFS, in the satraplatin treatment arm. PFS is a composite endpoint that assesses when a patient’s disease has “progressed” based upon a number of clinical criteria relevant to the disease state. Although both the EMEA and the FDA have accepted PFS as a suitable endpoint for some product approvals, in some cases regulatory authorities have indicated that only “overall survival” endpoints will be sufficient for approvals of some cancer therapy candidates. Earlier in 2006, the EMEA had advised us and our partner, GPC Biotech AG, that it would accept the final analysis of PFS as a basis for an MAA submission for satraplatin, but that the submission must also include available overall survival data from the SPARC trial. We do not expect to have final overall survival data from the SPARC trial until the third quarter of 2007 and, therefore, we cannot assure you that the trial data will show that satraplatin produced any survival advantage or that the EMEA will accept the final overall survival data as a basis for marketing approval of satraplatin.

Vidaza.  We expect final data from our on-going clinical study of Vidaza in 354 high-risk MDS patients, with overall survival as the primary endpoint, in the third quarter of 2007. If the results of this study are positive, we intend to submit a new MAA for Vidaza with the EMEA based on data from this study. We cannot assure you that the results of this study will be positive or, even if the data are positive, that the EMEA will accept the results of the study as the basis for a marketing approval.

The timing of our submissions, the outcome of reviews by the applicable regulatory authorities in each relevant market, and the initiation and completion of clinical trials are subject to uncertainty, change and unforeseen delays. Moreover, favorable results in later stage clinical trials do not ensure regulatory approval to commercialize a product. We will be unable to market Thalidomide Pharmion, Vidaza or satraplatin in Europe if we do not receive marketing authorization from the European Commission. Without such authorization, we will only be able to sell those products, if at all, on a compassionate use or named patient basis in Europe, which will significantly limit our revenues.

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We depend on contract research organizations and our results of clinical trials are uncertain and may not support continued development of a product pipeline, which would adversely affect our business prospects.

We rely on third party contract research organizations (CROs) to perform most of our clinical studies, including document preparation, data management, site identification, screening, training and program management. If there is any dispute or disruption in our relationship with our CROs, or if our CROs do not perform as our contracts and applicable regulations require, our clinical trials may be delayed or disrupted. In addition, we are required to demonstrate the safety and efficacy in any of the products that we develop through extensive preclinical and clinical studies. The results form preclinical and early clinical studies do not always accurately predict results in later, large-scale clinical trials. Moreover, our commercially available products may require additional studies relating either to approved indications or new indications pending approval. If any of our clinical trials for our products fail to achieve its primary endpoint or if safety issues arise, commercialization of that drug candidate could be delayed or halted. In addition, clinical trials involving our commercial products could raise new safety issues of our existing products, which could in turn reduce our revenues.

We face intense competition, which may result in others commercializing competing products before or more successfully than we do.

Our industry is highly competitive. Our success will depend on our ability to acquire, develop and commercialize products and our ability to establish and maintain markets for our products. Potential competitors in North America, Europe and elsewhere include major pharmaceutical companies, specialized pharmaceutical companies and biotechnology firms, universities and other research institutions. Many of our competitors have substantially greater research and development capabilities and experience, and greater manufacturing, marketing and financial resources, than we do. Accordingly, our competitors may develop or license products or other novel technologies that are more effective, safer or less costly than our existing products or products that are being developed by us, or may obtain regulatory approval for products before we do. Clinical development by others may render our products or product candidates noncompetitive.

The primary competition and potential competition for our principal products currently are:

Vidaza.  In the MDS market, Vidaza primarily competes with two products that were recently approved by the FDA: Revlimid^®, from Celgene, approved in late 2005 and Dacogen^® from MGI Pharma, Inc., approved in May 2006. Revlimid was approved by the FDA as a treatment for certain low risk MDS patients and is currently under review for regulatory approval by the EMEA for both low risk MDS and relapsed or refractory multiple myeloma. We also face competition for Vidaza from traditional therapies for the treatment of MDS, including the use of blood transfusions and growth factors.

Thalidomide Pharmion.  To date, Thalidomide Pharmion primarily competes with Velcade^® from Millennium Pharmaceuticals Inc. and traditional therapies used in the treatment of multiple myeloma, including chemotherapeutic agents, such as melphalan and dexamethasone. In addition, because we have only limited patent protection for Thalidomide Pharmion, other generic versions of thalidomide available throughout Europe and other territories where we sell thalidomide without orphan drug exclusivity. Governmental and other pressures to reduce pharmaceutical costs may result in physicians writing prescriptions for these generic products. Increased competition from the sale of competing generic pharmaceutical products could cause a material decrease in sales of our products. Moreover, Revlimid^® from Celgene, is under review by regulatory authorities for a possible approval and in relapsed or refractory multiple myeloma. If approved, Revlimid will also compete with Thalidomide Pharmion in the E.U.

Satraplatin.  We intend to seek an approval for satraplatin as a treatment for second line HRPC in 2007. Currently, there are no approved treatments for this indication. However, satraplatin may face competition from other therapies that are approved for first line or untreated HRPC, including Taxotere^® from Sanofi Aventis SA or other compounds that are in development for HRPC.

Amrubicin.  We are currently planning to initiate late stage clinical trials and, if those trials are positive, seek approval for amrubicin in the sensitive or relapsed/refractory SCLC indication. Currently, compounds approved

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products for second-line treatment of SCLC include Hycamtin^® (topotecan) from GlaxoSmithKline plc. In addition, there are several products in clinical development in SCLC, including Alimta^® (pemetrexed) from Eli Lilly and Company and picoplatin from Poniard Pharmaceuticals, both of which are in a later stage of development than amrubicin.

In addition, there a number of products in earlier stages of development at other biotechnology and pharmaceutical companies that, if successful in clinical trials, may ultimately compete with our commercial and late-stage products listed above and our earlier-stage products.

Adverse reactions or side effects of the products we sell may occur that could result in additional regulatory controls, product withdrawals, adverse publicity and reduced sales.

Regulatory authorities in our markets subject approved products and manufacturers of approved products to continual regulatory review. Previously unknown problems, such as unacceptable toxicities or side effects, may only be discovered after a product has been approved and used in an increasing number of patients. If this occurs, regulatory authorities may impose labeling restrictions on the product that could affect its commercial viability or could require withdrawal of the product from the market. Accordingly, there is a risk that we will discover such previously unknown problems associated with the use of our products in patients, which could limit sales growth or cause sales to decline. In particular, thalidomide has been shown to produce severe birth defects and other toxicities if not used in accordance with safety instructions. Although we sell Thalidomide Pharmion with a rigorous safety program that is designed to prevent these adverse effects, thalidomide is available without a comprehensive safety program in our territories from other suppliers. If Thalidomide Pharmion or any other form of thalidomide is associated with a birth defect or other severe adverse events in our markets, regulatory authorities could force the withdrawal of thalidomide from the market.

If the third party manufacturers upon whom we rely fail to produce our products in the volumes that we require on a timely basis, or to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the commercialization of, or be unable to meet demand for, our products and may lose potential revenues.

We do not manufacture any of our products and we do not plan to develop any capacity to do so. We have contracted with third-party manufacturers to manufacture each of our products. Moreover, most of our suppliers have subcontracted aspects of the manufacturing process to third party service providers, who are not subject to a direct contractual relationship with us. The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Regulatory authorities in our markets require that drugs be manufactured, packaged and labeled in conformity with cGMP regulations and guidelines. Manufacturers of pharmaceutical products often encounter difficulties in production, especially in scaling up initial production. These problems include difficulties with production costs and yields, quality control and assurance and shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Our third-party manufacturers may not perform as agreed or as required by applicable regulations, or may terminate their agreements with us.

To date, we have relied on sole sources for the manufacture of all of our products, including satraplatin, MGCD0103 and amrubicin. Although we are in the process of qualifying a second-source manufacturer for the fill and finishing processes for Vidaza, we do not have operational alternate manufacturing facilities in place at this time. The number of third-party manufacturers with the expertise, required regulatory approvals and facilities to manufacture bulk drug substance on a commercial scale is extremely limited, and it would take a significant amount of time to arrange for alternative manufacturers. If we need to change to other commercial manufacturers, the FDA and comparable foreign regulators must approve these manufacturers’ facilities and processes prior to our use, which would require new testing and compliance inspections, and the new manufacturers would have to be educated in or independently develop the processes necessary for the production of our products.

Any of these factors could cause us to delay or suspend clinical trials, regulatory submissions, required approvals or commercialization of our products or product candidates, entail higher costs and result in our being unable to effectively commercialize our products. Furthermore, if our third-party manufacturers fail to deliver the

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required commercial quantities of bulk drug substance or finished product on a timely basis and at commercially reasonable prices, and we are unable to promptly find one or more replacement manufacturers capable of production at a substantially equivalent cost, in substantially equivalent volume and on a timely basis, we would likely be unable to meet demand for our products and we would lose potential revenues. Moreover, failure of our third party manufacturers to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect product supplies.

If we breach any of the agreements under which we license commercialization rights to products or technology from others, we could lose license rights that are important to our business.

We license commercialization rights to products and technology that are important to our business, and we expect to enter into similar licenses in the future. For instance, we acquired rights to certain intellectual property and technology for Vidaza, thalidomide, satraplatin, amrubicin and MGCD0103 through exclusive licensing arrangements with third parties. Under these licenses we are subject to commercialization and development, sublicensing, royalty, milestone payments, insurance and other obligations. If we fail to comply with any of these requirements, or otherwise breach these license agreements, the licensor may have the right to terminate the license in whole or to terminate the exclusive nature of the license. Loss of any of these licenses or the exclusivity rights provided therein could harm our financial condition and operating results.

Many of our licensing arrangements also require us to work collaboratively with our licensors to jointly develop and commercialize products we have licensed. For example, our agreements with GPC Biotech AG for satraplatin and MethylGene, Inc. for MGCD0103 require joint development of the product candidates, which includes management of a joint development budget and associated personnel. Management of collaborations in the pharmaceutical and biotechnology industry presents numerous challenges and risks. If we are unable to agree with our partners on key decisions concerning product development or marketing, we may be forced to execute a strategy we do not believe is sound or we may be required to initiate litigation or other dispute resolution mechanisms to resolve these differences. These disputes could delay product development or undermine the commercial success of those products, which would have negative consequences for our business.

Our product sales and related financial results may fluctuate, which could affect the price of our common stock.

A number of analysts and investors who follow our stock have developed models to forecast future product sales and expenses. These models are, in turn, based in part on our own estimates of product revenues and expenses that we disclose publicly from time-to-time. Accurate forecasting of operating results is difficult for us as we have only a limited operating history and our products have been commercially available for only a short time. As a result, our operating results may vary significantly from period to period due to many factors, including the amount and timing of sales of our products, underlying demand and wholesaler buying patters for Vidaza, the availability and timely delivery of a sufficient supply of our products, the timing and amount of operating expenses, announcements regarding clinical trial results and product introductions by us or our competitors, the availability and timing of third-party reimbursement and the timing of regulatory submissions and approvals. If our operating results do not match the expectations of securities analysts and investors as a result of these and other factors, the trading price of our common stock will likely decrease.

We are growing rapidly, and if we fail to manage that growth our business could be adversely affected.

We have an aggressive growth plan that will include substantial and increasing investment in research and development, sales and marketing, facilities and general and administrative functions. Our growth plan requires us to manage complexities associated with a larger staff in multiple locations. We will need to generate greater product revenues or raise additional funds to cover a higher level of operating expenses and our ability to do so may depend on many factors we do not control. In addition, we will need to assimilate several new staff members in multiple worldwide locations. If we are unable to manage our ambitious growth plan affectively, our business could suffer.

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We may undertake acquisitions in the future and any difficulties from integrating such acquisitions could damage our ability to attain or maintain profitability

We may acquire additional businesses, products or product candidates that complement or augment our existing business. We will be required to integrate any acquired products into our existing operations, including amrubicin and MGCD0103, products that we have only recently acquired. Managing the development of a new product entails numerous financial and operational risks, including difficulties in attracting qualified employees to develop the products. Integrating any newly acquired business or product could be expensive and time-consuming. We may not be able to integrate any acquired business or product successfully or operate any acquired business profitably. Moreover, if we acquire additional businesses or products we will incur significant acquisition costs and operating expenses, which could harm our financial condition and operating results. In order to undertake future acquisitions, we may need to raise additional funds through public or private debt or equity financing, which may result in dilution for stockholders and the incurrence of indebtedness.

Our failure to successfully acquire, in-license, develop and market additional product candidates would impair our ability to grow and could affect the price of our common stock.

Although we have successfully in-licensed or acquired new products in our recent past, the growth of our product pipeline will continue to depend upon licenses or collaborations with research institutes or other pharmaceutical and biotechnology companies. The success of this strategy depends upon our ability to identify, select and acquire the right pharmaceutical product candidates and technologies. Proposing, negotiating and implementing company acquisitions and licenses or collaborations is a lengthy and complex process. Other companies, including those with substantially greater financial, marketing and sales resources, may compete with us for the acquisition of product candidates and approved products. We may not be able to acquire the rights to additional product candidates and approved products on terms that we find acceptable, or at all.

The timing of customer purchases and the resulting product shipments have a significant impact on the amount of product sales that we recognize in a particular period.

The majority of our sales of Vidaza in the United States are made to independent pharmaceutical wholesalers, including specialty oncology distributors, which, in turn, resell the product to an end user customer (normally a clinic, hospital, alternative healthcare facility or an independent pharmacy). Inventory in the distribution channel consists of inventory held by these wholesalers. Our product sales in a particular period are impacted by increases or decreases in the distribution channel inventory levels. We cannot significantly control or influence the purchasing patterns or buying behavior of independent wholesalers or end users. Although our wholesaler customers typically buy product from us only as necessary to satisfy projected end user demand, we cannot predict future wholesalers buying practices. For example, wholesalers may engage in speculative purchases of product in excess of the current market demand in anticipation of future price increases. Accordingly, purchases by any given customer, during any given period, may be above or below actual patient demand of any of our products during the same period, resulting in fluctuations in product inventory in the distribution channel. If distribution channel inventory levels substantially exceed end user demand, we could experience reduced revenue from sales in subsequent periods due to a reduction in end user demand.

Furthermore, our customer base in the U.S. is highly concentrated. Net sales generated from our largest three wholesale customers in the U.S. totaled approximately 39% of our total consolidated net sales for the year ended December 31, 2006. If any of these customers becomes insolvent or disputes payment of the amount it owes us, it would adversely affect our results of operations and financial condition.

Our effective tax rate has, and likely will continue to, vary significantly from period to period. Increases in our effective tax rate would have a negative effect on our results of operations.

Our effective tax rate has varied significantly since our inception. This is largely due to the fact that we are subject to income taxes in a number of jurisdictions. The tax provision for each country is based on pre-tax earnings or losses in each specific country, and tax losses in one country cannot be used to offset taxable income in other

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countries. As a result, our consolidated effective tax rate has historically been far in excess of U.S. statutory tax rates. We expect this trend will continue for the foreseeable future

Since our inception, we have had minimal or no provision for U.S. income taxes due to incurring losses in the U.S. or, in the case of 2005 and 2006, utilizing net operating loss carryforwards to offset taxable income in the U.S. As of December 31, 2006, we had $22.3 million in U.S. net operating loss carryforwards and $7.3 million in U.S. tax credit carryforwards. Use of these loss and credit carryforwards is subject to annual limitations in accordance with “change in ownership” provisions of Section 382 of the Internal Revenue Code. If we achieve profitability in the U.S. in the future, the reduction in availability of tax loss and credit carryforwards would result in an increase in U.S. income tax expense and our overall effective tax rate. This in turn would result in a reduction in our net income and net income per share.

If product liability lawsuits are brought against us, we may incur substantial liabilities for which we may not be able to obtain sufficient product liability insurance on commercially reasonable terms.

The clinical testing and commercialization of pharmaceutical products involves significant exposure to product liability claims. If losses from such claims exceed our liability insurance coverage, we may incur substantial liabilities. Whether or not we are ultimately successful in product liability litigation, such litigation could consume substantial amounts of our financial and managerial resources, and might result in adverse publicity, all of which would impair our business. We may not be able to maintain our clinical trial insurance or product liability insurance at an acceptable cost, if at all, and this insurance may not provide adequate coverage against potential claims or losses. If we are required to pay a product liability claim, we may not have sufficient financial resources to complete development or commercialization of any of our product candidates and our business and results of operations will be harmed.

Historically, the vast majority of product liability insurers have been unwilling to write any product liability coverage for thalidomide. Although we currently have product liability coverage for thalidomide that we believe is appropriate, if our sales of this product grow in the future, our current coverage may be insufficient. We may be unable to obtain additional coverage on commercially reasonable terms if required, or our coverage may be inadequate to protect us in the event claims are asserted against us. In addition, we might be unable to renew our existing level of coverage if there were a report of a birth defect attributable to the current use of thalidomide, whether or not sold by us.

We may not be able to manage our business effectively if we are unable to attract and retain key personnel.

We are highly dependent on our senior management team, whose services are critical to the successful implementation of our business strategies. Each of our senior executives have entered into an employment agreement with us for a term that runs until the agreement is otherwise terminated by us or them. If we lose the services of our senior management or other key employees, our ability to successfully implement our business strategy could be seriously harmed. Replacing key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize products successfully. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key personnel.

We have limited patent protection for our current products, and we may not be able to obtain, maintain and protect proprietary rights necessary for the development and commercialization of our products or product candidates.

Our commercial success will depend in part on obtaining and maintaining a strong proprietary position for our products both in the U.S., Europe and elsewhere. We currently own or have exclusive rights to issued patents and pending patent applications covering thalidomide from Celgene Corporation, satraplatin from GPC Biotech AG, amrubicin from Dainippon Sumitomo Pharma Co. Ltd. and MGCD0103 from MethylGene Inc. We have limited patent protection for Vidaza, currently consisting of four issued patents covering certain polymorphic forms of Vidaza drug substance and methods of manufacturing drug substance that we either own or co-own with our

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manufacturing partners. In addition, in May 2004 the FDA awarded orphan drug exclusivity to Vidaza for the treatment of MDS patients, which lasts for seven years from the date granted. Given the limited patent protection for Vidaza, we must still rely in large part on orphan drug exclusivity to protect and enhance our competitive position in the U.S., and we will rely on orphan drug designation and data exclusivity available in the E.U. if Vidaza is approved for marketing in Europe. However, orphan drug exclusivity does not prohibit competitors from developing or marketing different drugs for an indication or from independently developing generic versions of Vidaza for different indications. Similarly, the primary European patents we have licensed for satraplatin expire in 2009 and, therefore, we will be relying on supplementary protection certificates to extend patent protection and on data exclusivity available in the E.U. if we achieve marketing approval for this product. Finally, composition of matter patent protection for amrubicin has expired and patents covering the formulation of amrubicin being developed by us will expire in August 2008. Therefore, we will be relying on combination use and polymorphic form patents and we may also benefit from possible orphan drug exclusivity in the small cell lung cancer indication and data exclusivity to protect amrubicin.

In addition, while we are selling Thalidomide Pharmion on a compassionate use and named patient basis, we do not have orphan drug exclusivity and we must rely on use patents licensed to us by Celgene to prevent competitors from selling thalidomide in our markets until we are granted a marketing authorization. We have initiated litigation in Greece and Denmark seeking to enforce our patent, EP 0688211, against thalidomide suppliers in those countries. In each case, the defendants have sought to challenge the validity of that patent in Europe. On June 14, 2006, an opposition proceeding was brought by IPC-Nordic A/S, the defendant in our Danish patent litigation, against granted European patent EP 1264597, which is a second patent that we have licensed from Celgene in Europe. This granted European patent claims the use of thalidomide as a medicament of the treatment of solid or blood-borne tumors. Celgene has filed a response to the opposition brief that was submitted to the European Patent Office in February 2007. Although we intend to vigorously defend our thalidomide patents, we do not know whether the European Patent Office or the Danish or Greek courts will render a decision adverse to our patents.

We also rely on protection derived from trade secrets, process patents, know-how and technological innovation. To maintain the confidentiality of trade secrets and proprietary information, we generally seek to enter into confidentiality agreements with our employees, consultants and collaborators upon the commencement of a relationship with us. However, we may not obtain these agreements in all circumstances. In addition, adequate remedies may not exist in the event of unauthorized use or disclosure of this information. The loss or exposure of our trade secrets, know-how and other proprietary information could harm our operating results, financial condition and future growth prospects. Furthermore, others may have developed, or may develop in the future, substantially similar or superior know-how and technology.

We intend to seek patent protection whenever it is available for any products or product candidates we acquire in the future. However, any patent applications for future products or pending applications for our existing products may not issue as patents, and any patent issued on such products may be challenged, invalidated, held unenforceable or circumvented. Furthermore, the claims in patents that do ultimately issue on those patent applications may not be sufficiently broad to prevent third parties from commercializing competing products. In addition, the laws of various foreign countries in which we compete may not protect the intellectual property on which we may rely to the same extent as do the laws of the U.S. If we fail to obtain adequate patent protection for our products, our ability to compete could be impaired.

Our business is subject to economic, political, regulatory and other risks associated with international sales and operations.

Since we sell our products in Europe, Australia and many additional countries, our business is subject to risks associated with conducting business internationally. We anticipate that sales from international operations will represent an increasing portion of our total sales if new product approvals currently being sought outside the U.S. are granted. In addition, a number of our suppliers are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including:

•  difficulties in compliance with foreign laws and regulations;

•  changes in foreign regulations and customs;

•  changes in foreign currency exchange rates and currency controls;

26

•  changes in a specific country’s or region’s political or economic environment;

•  trade protection measures, import or export licensing requirements or other restrictive actions by the U.S. or foreign governments;

•  negative consequences from changes in tax laws;

•  difficulties associated with staffing and managing foreign operations;

•  longer accounts receivable cycles in some countries; and

•  differing labor regulations.

Our ability to generate sales from our products will depend on reimbursement and drug pricing policies and regulations.

Sales of our products will depend significantly on the extent to which reimbursement for the cost of our products and related treatments will be available to physicians from government health administration authorities, private health insurers and other organizations. Third party payers and governmental health administration authorities increasingly attempt to limit and/or regulate the reimbursement for medical products and services, including branded prescription drugs. Changes in government legislation or regulation, such as the Medicare Act, or changes in private third-party payers’ policies toward reimbursement for our products may reduce reimbursement of our products’ costs to physicians. Decreases in third-party reimbursement for our products could reduce physician usage of the product and may have a material adverse effect on our product sales, results of operations and financial condition.

If our promotional activities fail to comply with applicable laws and regulations, we may be subject to warnings or enforcement action that could harm our business.

We are subject to numerous laws, regulations and guidelines that greatly restrict our promotional activities. For example, FDA regulations prohibit companies from actively promoting approved drugs for off-label uses. In addition, we are subject to various U.S. federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular drug. Due to the breadth of the statutory provisions and the absence of guidance in the form of regulations or court decisions addressing some of our practices, it is possible that our practices might be challenged under anti-kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third-party payers (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Pharmaceutical companies have been charged with violations of false claims laws through off-label promotion activities that resulted submission of improper reimbursement claims. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from federal health care programs (including Medicare and Medicaid). If a court were to find us liable for violating these laws, or if the government were to allege against or convict us of violating these laws, there could be a material adverse effect on our business, including on our stock price.

We are subject to numerous complex regulatory requirements and failure to comply with these regulations, or the cost of compliance with these regulations, may harm our business.

The testing, development and manufacturing of our products are subject to regulation by numerous governmental authorities in the U.S., Europe and elsewhere. These regulations govern or affect the testing, manufacture, safety, labeling, storage, record-keeping, approval, advertising and promotion of our products and product candidates, as well as safe working conditions and the experimental use of animals. Noncompliance with any applicable regulatory requirements can result in refusal of the government to approve products for marketing, criminal prosecution and fines, recall or seizure of products, total or partial suspension of production, prohibitions or limitations on the commercial sale of products or refusal to allow us to enter into supply contracts. Regulatory authorities typically have the authority to withdraw approvals that have been previously granted.

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Our certificate of incorporation, our bylaws, Delaware law and our employment agreements with members of our senior management contain provisions that could discourage, delay or prevent a change in control or management of Pharmion.

Our amended and restated certificate of incorporation, bylaws, Delaware law and our employment agreements with members of senior management contain provisions which could delay or prevent a third party from acquiring shares of our common stock or replacing members of our board of directors, each of which certificate of incorporation provisions can only be amended or repealed upon the consent of 80% of our outstanding shares. Our amended and restated certificate of incorporation allows our board of directors to issue up to 10,000,000 shares of preferred stock. The board can determine the price, rights, preferences and privileges of those shares without any further vote or action by the stockholders. As a result, our board of directors could make it difficult for a third party to acquire a majority of our outstanding voting stock, for example by adopting a stockholders’ rights plan.

Our amended and restated certificate of incorporation also provides that the members of the board are divided into three classes. Each year the terms of approximately one-third of the directors will expire. Our bylaws do not permit our stockholders to call a special meeting of stockholders. Under the bylaws, only our Chief Executive Officer, Chairman of the Board or a majority of the board of directors are able to call special meetings. The staggering of directors’ terms of office and the limitation on the ability of stockholders to call a special meeting may make it difficult for stockholders to remove or replace the board of directors should they desire to do so. Since management is appointed by the board of directors, any inability to effect a change in the board may result in the entrenchment of management. The bylaws also require that stockholders give advance notice to our Secretary of any nominations for director or other business to be brought by stockholders at any stockholders’ meeting. These provisions may delay or prevent changes of control or management, either by third parties or by stockholders seeking to change control or management.

We are also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. Under these provisions, if anyone becomes an “interested stockholder,” we may not enter into a “business combination” with that person for three years without special approval, which could discourage a third party from making a takeover offer and could delay or prevent a change of control. For purposes of Section 203, “interested stockholder” means, generally, someone owning 15% or more of our outstanding voting stock or an affiliate of ours that owned 15% or more of our outstanding voting stock during the past three years, subject to certain exceptions as described in Section 203.

The employment agreements with members of our senior management provide that certain benefits will be payable to the executives in the event we undergo a change in control and the termination of the executive’s employment within two years after such change in control for any reason other than for cause, disability, death, normal retirement or early retirement.

Our stock price has been and may continue to be volatile and your investment in our common stock could suffer a decline in value.

Our common stock has been and in the future may be subject to substantial price volatility. During the period January 1, 2006 to December 31, 2006, the closing price of our common stock ranged from a high of $26.46 per share to a low of $15.65 per share.

Some specific factors that could have a significant effect on our common stock market price include:

•  actual or anticipated fluctuations in our operating results;

•  our announcements or our competitors’ announcements of clinical trial results or regulatory approval of new products;

•  changes in our growth rates or our competitors’ growth rates;

•  the timing or results of regulatory submissions or actions with respect to our products;

•  public concern as to the safety of our products;

•  changes in health care, drug pricing or reimbursement policies in a country where we sell our products;

•  our inability to raise additional capital;

•  our ability to grow through successful product acquisitions and in-licensing agreements;

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•  conditions of the pharmaceutical industry or in the financial markets or economic conditions in general; and

•  changes in stock market analyst recommendations regarding our common stock, other comparable companies or the pharmaceutical industry generally.

Item 1B.   Unresolved Staff Comments

None.

Item 2.   Properties

We lease approximately 29,000 square feet of space in our headquarters in Boulder, Colorado under a lease that expires in 2008. We also lease approximately 26,000 square feet of office space in Windsor in the United Kingdom. That lease expires in 2010 and has a renewal option for an additional five years. We house administrative, development, medical affairs and regulatory personnel in a 22,000 square foot facility in Overland Park, Kansas that is subject to a lease that terminates in 2010. We are completing a build-out of approximately 16,500 square feet of office and laboratory space in San Francisco, California that we expect to occupy later in 2007, pursuant to a lease that expires in 2012.

We also lease clinical development, sales and marketing, and support offices in other parts of the U.S. and abroad. We currently have no manufacturing facilities. We believe that our current facilities are adequate for our needs for the foreseeable future and that, should it be needed, suitable additional space will be available to accommodate expansion of our operations on commercially reasonable terms.

Item 3.   Legal Proceedings

On March 30, 2005 we filed suit against Casso Pharmaceuticals for infringement of European Patent EP 0688211, in connection with Casso’s sales of thalidomide for the treatment of angiogenesis-mediated disorders, including multiple myeloma, in Greece. Similarly, on April 11, 2005 we filed suit under the same patent against IPC-Nordic in Denmark for selling the same thalidomide product for the same disorders. We are the exclusive sub-licensee under EP 0 688 211 throughout Europe, pursuant to an agreement with Celgene Corporation. Celgene is the worldwide exclusive licensee under this patent pursuant to an agreement with the patentee, Children’s Medical Center Corporation. We are seeking injunctive relief that prevents the defendants from making any further sales of thalidomide for the treatment of angiogenesis-mediated disorders, including multiple myeloma, in Greece and Denmark respectively, and damages against the defendants. In reply briefs filed with the courts in these cases, each of the defendants has argued that the EP 0688211 patent is invalid and unenforceable by us. To date, there have been no official actions on the merits of the various proceedings.

In December 2006, our partner GPC Biotech AG (GPC Biotech) announced that Spectrum Pharmaceuticals, Inc. (Spectrum) had filed a Demand for Arbitration seeking to resolve a pending dispute under a co-development and license agreement for satraplatin between GPC Biotech and Spectrum. In the arbitration proceedings, Spectrum alleges that GPC Biotech has breached certain of its obligations under the co-development and license agreement and seeks monetary relief and a ruling that GPC Biotech’s breach provides a basis for termination of that agreement. Under our agreements with GPC Biotech we hold development and commercialization rights to satraplatin in Europe and certain other international markets outside North America. We are not a party to the arbitration proceedings between GPC Biotech and Spectrum. In addition, both the co-development and license agreement between GPC Biotech and Spectrum and the subsequent co-development and license agreement for satraplatin between us and GPC Biotech contain explicit provisions that ensure the survival of our rights to satraplatin, even if the GPC Biotech-Spectrum agreement should terminate for any reason.

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

No matters were submitted to a vote of our security holders through solicitation of proxies or otherwise during the fourth quarter of the fiscal year ended December 31, 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 and Holders

Our common stock is traded on The Nasdaq Stock Market under the symbol “PHRM.” Trading of our common stock commenced on November 6, 2003, following completion of our initial public offering. The following table sets forth, for the periods indicated, the high and low sales prices for our common stock as reported by The Nasdaq Stock Market:

	High		Low
Year Ended December 31, 2005
First Quarter	$	44.55	$	28.75
Second Quarter	$	29.35	$	18.68
Third Quarter	$	30.12	$	21.05
Fourth Quarter	$	22.45	$	16.49
Year Ended December 31, 2006
First Quarter	$	18.31	$	15.65
Second Quarter	$	20.32	$	15.76
Third Quarter	$	21.61	$	15.99
Fourth Quarter	$	26.46	$	21.27

On March 9, 2007, the last reported sale price of our common stock on The Nasdaq Stock Market was $26.86 per share.

American Stock Transfer and Trust Company is the transfer agent and registrar for our common stock. As of the close of business on March 9, 2007, we had approximately 62 holders of record of our common stock. There are no shares of our preferred stock issued and outstanding.

Dividends

We have never paid cash dividends on our preferred or common equity and do not intend to pay such dividends on our common equity in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

Equity Compensation Plan Information
As of December 31, 2006

					Number of Securities
					Remaining Available for
	Number of Securities		Weighted-Average		Future Issuance Under
	to be Issued upon		Exercise Price of		Equity Compensation
	Exercise of		Outstanding Options		Plans (Excluding
	Outstanding Options,		Warrants and		Securities Reflected in
	Warrants and Rights		Rights		Column (a))
Plan Category	(a)		(b)		(c)
Equity compensation plans approved by security holders(1)(2)(3)		3,517,437	$	19.26		2,936,285
Equity compensation plans not approved by security holders		—		—		—
Total		3,517,437	$	19.26		2,936,285

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(1)	As of December 31, 2006, 5,758,000 shares were reserved for issuance under our 2000 Stock Incentive Plan (the “2000 Plan”). This number is subject to an automatic yearly increase pursuant to an evergreen formula. Each year, on the date of our annual meeting of stockholders, the amount of shares reserved for issuance under the 2000 Plan will be increased by 500,000 shares, unless our board of directors determines that a smaller increase or no increase is necessary.
(2)	As of December 31, 2006, 625,000 shares were reserved for issuance under our 2001 Non-Employee Director Stock Option Plan (the “2001 Plan”). This number is subject to an automatic yearly increase pursuant to an evergreen formula. Each year, on the date of our annual meeting of stockholders, the amount of shares reserved for issuance under the 2001 Plan will be increased by 50,000 shares, unless our board of directors determines that a smaller increase or no increase is necessary.
(3)	On June 8, 2006, the stockholders of Pharmion Corporation approved the Company’s 2006 Employee Stock Purchase Plan (the “ESPP”). 1,000,000 shares of common stock were reserved for issuance under the ESPP.

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Registrant and Affiliated Purchasers.

None.

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Performance Graphs

The following graph compares the annual percentage change in our cumulative total stockholder return on our common stock during a period commencing on November 6, 2003, the date our shares began trading, and ending on December 31, 2006 (as measured by dividing (A) the difference between our share price at the end and the beginning of the measurement period by (B) our share price at the beginning of the measurement period) with the cumulative total return of the Nasdaq Stock Market and the Nasdaq Biotech Index during such period. We have not paid any dividends on our common stock, and we do not include dividends in the representation of our performance. The stock price performance on the graph below does not necessarily indicate future price performance.

Comparison of 3 Year Cumulative Total Return

Assumes Initial Investment of $100

December 2006

		November 6,		December 31,		December 31,		December 31,		December 31,
		2003		2003		2004		2005		2006
Pharmion Corporation	Cumulative dollars		100.00		108.93		301.53		126.95		183.90
NASDAQ Composite	Cumulative dollars		100.00		103.77		113.28		115.67		128.49
NASDAQ Biotech	Cumulative dollars		100.00		101.24		107.43		110.47		114.93

Item 6.  Selected Financial Data.

In the table below, we provide you with our selected consolidated financial data which should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes appearing elsewhere in this annual report. We have prepared this information using our audited consolidated financial statements for the years ended December 31, 2006, 2005, 2004, 2003 and 2002. The pro forma net loss attributable to common stockholders per common share and shares used in computing pro forma net loss attributable to common stockholders per common shares reflect the conversion of all outstanding shares of our redeemable convertible preferred stock as of January 1, 2001 or the date of issuance, if later. The net loss per share data and pro forma net loss per share data do not include the effect of any options or warrants outstanding as they would be anti-dilutive. For further discussion of earnings per share, please see note 2 to our consolidated financial statements.

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	Years Ended December 31,
	2006			2005		2004			2003(1)(2)			2002
	(In thousands, except share and per share data)
Consolidated Statements of Operations Data:
Net sales	$	238,646		$	221,244	$	130,171		$	25,539		$	4,735
Operating expenses:
Cost of sales, inclusive of royalties, exclusive of product rights amortization		65,157			59,800		43,635			11,462			1,575
Research and development		70,145			42,944		28,392			24,616			15,049
Acquired in process research		78,763			21,243		—			—			—
Selling, general and administrative		104,943			83,323		66,848			36,109			23,437
Product rights amortization		9,802			9,345		3,395			1,972			375
Total operating expenses		328,810			216,655		142,270			74,159			40,436
Income (loss) from operations		(90,164	)		4,589		(12,099	)		(48,620	)		(35,701	)
Other income (expense) net		6,926			6,474		2,415			(154	)		1,109
Income (loss) before taxes		(83,238	)		11,063		(9,684	)		(48,774	)		(34,592	)
Income tax expense		7,774			8,794		7,853			1,285			105
Net income (loss)		(91,012	)		2,269		(17,537	)		(50,059	)		(34,697	)
Accretion to redemption value of redeemable convertible preferred stock		—			—		—			(10,091	)		(8,576	)
Net income (loss) attributable to common stockholders	$	(91,012	)	$	2,269	$	(17,537	)	$	(60,150	)	$	(43,273	)
Net income (loss) attributable to common stockholders per common share:
Basic	$	(2.84	)	$	0.07	$	(0.63	)	$	(14.70	)	$	(57.58	)
Diluted	$	(2.84	)	$	0.07	$	(0.63	)	$	(14.70	)	$	(57.58	)
Shares used in computing net income (loss) attributable to common stockholders per common share:
Basic		32,015,962			31,836,783		27,933,202			4,093,067			751,525
Diluted		32,015,962			32,875,516		27,933,202			4,093,067			751,525
Pro forma net loss attributable to common stockholders per common share, assuming conversion of preferred stock, basic and diluted (unaudited)		N/A			N/A		N/A		$	(2.66	)	$	(2.47	)
Shares used in computing pro forma net loss attributable to common stockholders per common share, assuming conversion of preferred stock basic and diluted		N/A			N/A		N/A			18,791,015			14,072,707

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	As of December 31,
	2006			2005			2004			2003(1)(2)			2002
	(In thousands)
Consolidated Balance Sheet:
Cash, cash equivalents and short-term investments	$	136,213		$	243,406		$	245,543		$	88,542		$	62,604
Working capital		152,997			226,621			233,366			86,539			60,891
Total assets		326,732			432,630			411,230			145,473			80,847
Convertible notes		—			—			—			13,374			—
Other long-term liabilities		3,679			3,737			3,824			8,144			190
Redeemable convertible preferred stock		—			—			—			—			135,987
Accumulated deficit		(226,839	)		(135,827	)		(138,096	)		(120,559	)		(62,950	)
Total stockholders’ equity (deficit)		273,082			346,624			351,953			104,914			(62,216	)

(1)	We acquired Laphal Developpement S.A. on March 25, 2003 and its operations are included in our results since that date.
(2)	In November 2003 we completed our initial public offering, which resulted in $76.2 million of net proceeds through the issuance of 6,000,000 shares of common stock. Concurrent with effective date of the initial public offering, all outstanding shares of our redeemable convertible preferred stock were converted into 17,030,956 shares of our common stock.

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

The following discussion should be read in conjunction with the financial statements and the related notes that appear elsewhere in this document.

Overview

We are a global pharmaceutical company focused on acquiring, developing and commercializing innovative products for the treatment of hematology and oncology patients. We have established our own regulatory, development and sales and marketing organizations covering the U.S., Europe and Australia. We have also developed a distributor network to cover the hematology and oncology markets in numerous additional countries throughout Europe, the Middle East and Asia. To date, we have acquired the rights to seven products, including four that are currently marketed or sold on a compassionate use or named patient basis, and three other products that are in varying stages of development.

In May 2004, Vidaza was approved for marketing in the U.S. and we commenced sales of the product in July 2004. Pending positive data from an ongoing Phase 3 study expected to be available in the second half of 2007, we plan to file for marketing approval in the E.U. by the end of 2007. Until Vidaza is approved, we intend to sell Vidaza on a compassionate use and named patient basis throughout the major markets in the E.U. In addition to marketing and developing Vidaza, the parenteral formulation of azacitidine, for subcutaneous and IV administration, we are also developing an oral formulation of azacitidine. In January 2007, the FDA accepted our investigational new drug application for oral azacitidine and we have commenced Phase 1 clinical studies for this compound. Bioavailability data from these studies is expected in the second half of 2007.

Thalidomide (including Thalidomide Pharmion and the Laphal thalidomide formulation) is being sold by us on a compassionate use or named patient basis in Europe and other international markets while we pursue marketing authorization in those markets. In February 2007, the European Medicines Agency (EMEA) accepted for review our Marketing Authorization Application (MAA) for Thalidomide Pharmion for the treatment of untreated multiple myeloma. In addition, we sell Innohep^® in the U.S. and Refludan^® in Europe and other international markets.

In December 2005, we entered into a co-development and license agreement with GPC Biotech for satraplatin, the only oral platinum-based compound in advanced clinical trials. Under the terms of the agreement, we obtained exclusive commercialization rights for Europe, Turkey, the Middle East, Australia and New Zealand. Initial data

34

from the Phase 3 study examining satraplatin as a treatment for hormone refractory prostate cancer was presented in February 2007, and we intend to submit an MAA to the EMEA based on this data in the second quarter of 2007.

In January 2006, we entered into a license and collaboration agreement with MethylGene for the research, development and commercialization of MethylGene’s histone deacetylase (HDAC) inhibitors in North America, Europe, the Middle East and certain other international markets, including MGCD0103, MethylGene’s lead HDAC inhibitor, which is currently in several Phase 1 and Phase 2 clinical trials in both solid tumors and hematological disorders.

In November, 2006, we acquired 100% of the outstanding common stock of Cabrellis Pharmaceuticals Corporation and gained the rights to amrubicin, a third-generation synthetic anthracycline currently in advanced Phase 2 development for small cell lung cancer (SCLC) in North America and the E.U. We intend to initiate a Phase 3 registrational study in relapsed/refractory SCLC in the second half of 2007.

With our combination of regulatory, development and commercial capabilities, we intend to continue to build a portfolio of approved products and product candidates targeting the hematology and oncology markets. We had total sales of $238.6 million, $221.2 million and $130.2 million in 2006, 2005 and 2004, respectively.

Critical Accounting Policies

Revenue Recognition

We sell our products to wholesale distributors and, for certain products, directly to hospitals and clinics. Revenue from product sales is recognized when ownership of the product is transferred to our customer, the sales price is fixed and determinable, and collectibility is reasonably assured. Within the U.S. and certain foreign countries revenue is recognized upon shipment (freight on board shipping point) since title to the product passes and our customers have assumed the risks and rewards of ownership. In certain other foreign countries, it is common practice that ownership transfers upon receipt of product and, accordingly, in these circumstances revenue is recognized upon delivery (freight on board destination) when title to the product effectively transfers.

We record allowances for product returns, chargebacks, rebates and prompt pay discounts at the time of sale, and report revenue net of such amounts. In determining allowances for product returns, chargebacks and rebates, we must make significant judgments and estimates. For example, in determining these amounts, we estimate end-customer demand, buying patterns by end-customers and group purchasing organizations from wholesalers and the levels of inventory held by wholesalers. Making these determinations involves estimating whether trends in past buying patterns will predict future product sales.

The nature of our allowances requiring accounting estimates, and the specific considerations we use in estimating their amounts, are as follows:

• Product returns.  Our customers have the right to return any unopened product during the 18-month period beginning 6 months prior to the labeled expiration date and ending 12 months past the labeled expiration date. As a result, in calculating the allowance for product returns, we must estimate the likelihood that product sold to wholesalers might remain in their inventory or in end-customers’ inventories to within 6 months of expiration and analyze the likelihood that such product will be returned within 12 months after expiration.

To estimate the likelihood of product remaining in our wholesalers’ inventory, we rely on information from our wholesalers regarding their inventory levels, measured end-customer demand as reported by third party sources, and on internal sales data. We believe the information from our wholesalers and third party sources is a reliable indicator of trends, but we are unable to verify the accuracy of such data independently. We also consider our wholesalers’ past buying patterns, estimated remaining shelf life of product previously shipped and the expiration dates of product currently being shipped.

Since we do not have the ability to track a specific returned product back to its period of sale, our product returns allowance is primarily based on estimates of future product returns over the period during which customers have a right of return, which is in turn based in part on estimates of the remaining shelf live of our products when sold to customers. Future product returns are estimated primarily based on historical sales and return rates.

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For the years ended December 31, 2006 and 2005, $0.6 million and $0.1 million of product was returned to us, representing approximately 0.24% and 0.04% of net sales revenue, respectively. The allowance for returns was $1.0 million and $0.6 million for December 31, 2006 and 2005, respectively. Due to the small amount of returned product during 2006 and 2005, fluctuations between our estimates and actual product returned were minimal. However, a 10% change in the provision for product returns for the years ended December 31, 2006 and 2005 would have had an approximate $0.1 million effect on our reported net sales for both years.

• Chargebacks and rebates.  Although we sell our products in the U.S. primarily to wholesale distributors, we typically enter into agreements with certain governmental health insurance providers, hospitals, clinics, and physicians, either directly or through group purchasing organizations acting on behalf of their members, to allow purchase of our products at a discounted price and/or to receive a volume-based rebate. We provide a credit to the wholesaler, or a chargeback, representing the difference between the wholesaler’s acquisition list price and the discounted price. Rebates are paid directly to the end-customer, group purchasing organization or government insurer.

As a result of these contracts, at the time of product shipment we must estimate the likelihood that product sold to wholesalers might be ultimately sold to a contracting entity or group purchasing organization. For certain end-customers, we must also estimate the contracting entity’s or group purchasing organization’s volume of purchases.

We estimate our chargeback allowance based on our estimate of the inventory levels of our products in the wholesaler distribution channel that remain subject to chargebacks, and specific contractual and historical chargeback rates. We estimate our Medicaid rebate and commercial contractual rebate accruals based on estimates of usage by rebate-eligible customers, estimates of the level of inventory of our products in the distribution channel that remain potentially subject to those rebates, and terms of our contractual and regulatory obligations.

At December 31, 2006 and 2005, our allowance for chargebacks and rebates was $4.0 million and $2.6 million, respectively. During 2006 and 2005, our estimates, compared with actual chargebacks and rebates processed, fluctuated by approximately 3%. A 3% change in the provision for chargebacks and rebates for the years ended December 31, 2006 and 2005 would have had an approximate $0.5 million and $0.4 million effect on our reported net sales for those years, respectively.

• Prompt pay discounts.  As incentive to expedite cash flow, we offer some customers a prompt pay discount whereby if they pay their accounts within 30 days of product shipment, they may take a 2% discount. As a result, we must estimate the likelihood that our customers will take the discount at the time of product shipment. In estimating our allowance for prompt pay discounts, we rely on past history of our customers’ payment patterns to determine the likelihood that future prompt pay discounts will be taken and for those customers that historically take advantage of the prompt pay discount, we increase our allowance accordingly.

At December 31, 2006 and 2005, our allowance for prompt pay discounts was $0.4 million and $0.5 million, respectively. During 2006 and 2005, our estimates, compared with actual discounts processed, fluctuated by approximately 2%. A 2% change in our provision for prompt pay discounts for the years ended December 31, 2006 and 2005 would have had an approximate $0.1 million effect on our reported net sales for those years.

We have adjusted our allowances for product returns, chargebacks and rebates and prompt pay discounts in the past based on our actual experience, and we will likely be required to make adjustments to these allowances in the future. We continually monitor our allowances and make adjustments when we believe our actual experience may differ from our estimates.

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The following table provides a summary of activity with respect to our allowances for the years ended December 31, 2006 and 2005 (amounts in thousands):

	Product			Chargebacks			Prompt Pay
	Returns			and Rebates			Discounts
Balance at December 31, 2004	$	595		$	2,677		$	315
Provision		94			14,182			3,097
Actual credits or payments issued		(77	)		(14,273	)		(2,957	)
Balance at December 31, 2005		612			2,586			455
Provision		927			16,531			2,623
Actual credits or payments issued		(584	)		(15,141	)		(2,691	)
Balance at December 31, 2006	$	955		$	3,976		$	387

Inventories

Inventories are stated at the lower of cost or market, cost being determined under the first-in, first-out method. We periodically review inventories and items considered outdated or obsolete are reduced to their estimated net realizable value. We estimate reserves for excess and obsolete inventories based on inventory levels on hand, future purchase commitments, product expiration dates and current and forecasted product demand. If an estimate of future product demand suggests that inventory levels are excessive, then inventories are reduced to their estimated net realizable value. For the years ended December 31, 2006, 2005 and 2004, we recorded a provision to reduce the estimated net realizable value of obsolete and short-dated inventory by $0.4 million, $0.6 million, and $1.4 million, respectively.

Long-Lived Assets

Our long-lived assets consist primarily of product rights and property and equipment. In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we evaluate our ability to recover the carrying value of long-lived assets used in our business, considering changes in the business environment or other facts and circumstances that suggest their value may be impaired. If this evaluation indicates the carrying value will not be recoverable, based on the undiscounted expected future cash flows estimated to be generated by these assets, we reduce the carrying amount to the estimated fair value. The process of calculating the expected future cash flows involves estimating future events and trends such as sales, cost of sales, operating expenses and income taxes. The actual results of any of these factors could be materially different than what we estimate. The net book value of our product rights and property and equipment was $102.7 million and $110.7 million at December 31, 2006 and 2005, respectively.

Goodwill

In association with a business acquisition in 2003 and related milestone payments that were made in 2004 and 2005, goodwill was created. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” we do not amortize goodwill. SFAS No. 142 requires us to perform an impairment review of goodwill at least annually. If it is determined that the value of goodwill is impaired, we will record the impairment charge in the statement of operations in the period it is discovered. The process of reviewing for impairment of goodwill is similar to that of long-lived assets in that expected future cash flows are calculated using estimated future events and trends such as sales, cost of sales, operating expenses and income taxes. The actual results of any of these factors could be materially different than what we estimate. The net book value of our goodwill was $14.4 million and $12.9 million at December 31, 2006 and 2005, respectively.

Acquired In-Process Research

The Company has acquired and expects to continue to acquire the rights to develop and commercialize new drug opportunities. The upfront payment to acquire a new drug candidate, as well as future milestone payments, will

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be immediately expensed as acquired in-process research provided that the new drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no alternative future use.

Accounting for Stock-Based Compensation

In December 2004, the financial Accounting Standards Board issued SFAS No. 123R ,“Share-Based Payment”, that requires companies to recognize compensation expense equal to the fair value of stock options or other share-based payments. The Company adopted this standard during the fiscal year ended December 31, 2006 using the modified prospective method.

The Company utilizes the Black-Scholes valuation model to estimate the fair value of stock options. This valuation model requires the input of subjective assumptions, which include risk free interest rate, stock price volatility, option term to exercise and dividend yield. The assumptions are determined on a periodic basis and can vary over time. Our risk free interest rate was derived from the US Treasury yield in effect at the time of grant with terms similar to the contractual life of the option. The expected option life was estimated using data from peer companies in the life science industry with similar equity plans, and stock price volatility was based on historic price volatility measured over a three year period.

Off-Balance Sheet Arrangements

None.

Recently Issued Accounting Standards

FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109”

FIN 48 was issued in July 2006 to clarify the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are effective for the Company beginning on January 1, 2007. The provisions of FIN 48 are to be applied to all tax positions upon initial adoption of this standard. Only income tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of FIN 48. The cumulative effect of applying the provisions of FIN 48 would be reported as an adjustment to the opening balance of retained earnings for that fiscal year. We do not expect that the adoption of FIN 48 will have a material effect on our consolidated financial position or results of operations.

Staff Accounting Bulletin (SAB 108), “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”

In September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108). SAB 108 requires that public companies utilize a “dual-approach” to assessing the quantitative effects of financial misstatements. This dual approach includes both an income statement focused assessment and a balance sheet focused assessment. The guidance in SAB 108 must be applied to annual financial statements for the Company as of December 31, 2006. The adoption of SAB 108 did not have a material effect on our consolidated financial position or results of operations.

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Results of Operations

Comparison of Years Ended December 31, 2006, 2005 and 2004

Net Sales.  Net sales for the years ended December 31, 2006, 2005 and 2004 were as follows.

	2006			2005			2004
	(In thousands)
Net sales — U.S.	$	140,955		$	130,886		$	55,642
Net sales — Europe and other countries	$	97,691		$	90,358		$	74,529
Total net sales	$	238,646		$	221,244		$	130,171
Increase from prior year	$	17,402		$	91,073		$	104,632
% Change from prior year		7.9	%		70.0	%		409.7	%

The increase in net sales for the year ended December 31, 2006 as compared to 2005 is the result of the growth of Vidaza net sales, which increased to $142.2 million in 2006 as compared to $125.6 million in 2005. The increase in Vidaza net sales is due to increased compassionate use and named patient sales in Europe and other international markets. We began selling Vidaza in these markets in late 2005, and the impact of having a full year of sales in 2006 increased sales from $1.9 million in 2005 to $11.6 million in 2006. Thalidomide net sales decreased to $77.5 million for 2006 as compared to $79.4 million for 2005. Thalidomide is sold primarily on a compassionate use and named patient basis in Europe and other international markets. The decrease in Thalidomide sales was offset by increase sales of Innohep, which increased to $10.3 million in 2006 from $7.1 million in 2005.

The increase in net sales for the year ended December 31, 2005 as compared to 2004 is the result of having a whole year of Vidaza sales in 2005 versus one half of a year in 2004 due to the commercial launch of Vidaza in the U.S. on July 1, 2004. Net sales of Vidaza were $125.6 million in 2005 as compared with $47.1 million in 2004. Additionally, Europe and other international markets experienced continued growth in compassionate use and named patient sales of thalidomide resulting in 2005 net sales of $79.4 million versus $65.3 million in 2004. The factors impacting Thalidomide sales vary from country to country, however, the largest impact on the increased sales was the result of expansion into new markets and increase in demand. These growth drivers were partially offset by the strengthening of the U.S. dollar against the euro and British pound sterling during 2005 as well as by a decline in sales in one country due to the implementation of new regulations that limit the reimbursement of drugs sold without marketing authorization, such as thalidomide.

Reductions from gross to net sales, which include provisions for product returns, chargebacks, rebates and prompt pay discounts totaled $20.1 million, $17.4 million and $10.1 million for the years ended, December 31, 2006, 2005 and 2004, respectively. The $2.7 million increase in 2006 over 2005 and the $7.3 million increase in 2005 over 2004 is attributed primarily to the growth of Vidaza sales over the past 3 years. Although the dollar amount of reductions to gross revenues increased in 2006, 2005 and 2004, the reduction as a percentage of gross sales remained essentially stable at 7.8% in 2006, 7.3% in 2005 and 7.2% in 2004.

Cost of sales.  Cost of sales includes the cost of product sold, royalties due on the sales of our products and the distribution and logistics costs related to selling our products. However, product rights amortization is excluded from cost of sales and included with operating expenses. Cost of sales for the years ended December 31, 2006, 2005 and 2004 were as follows.

	2006			2005			2004
	(In thousands)
Cost of sales	$	65,157		$	59,800		$	43,635
Increase from prior year	$	5,357		$	16,165		$	32,173
% Change from prior year		9.0	%		37.0	%		280.7	%
As a % of net sales		27.3	%		27.0	%		33.5	%

Cost of sales increased in 2006 as compared with 2005 due to the increase in net sales for 2006. Cost of sales as a percentage of net sales for 2006 and 2005 remained constant at 27%.

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Cost of sales increased in 2005 as compared with 2004 due to the increase in net sales for 2005. However, cost of sales as a percentage of net sales decreased from 33.5% in 2004 to 27.0% in 2005 due to two factors. First, we had a full year of Vidaza sales in 2005 compared to half of a year in 2004. Vidaza is one of our higher gross margin products with cost of sales as a percent of net sales of approximately 26%. Second, the renegotiation of our Thalidomide license and product supply agreements in December 2004 reduced the overall royalty and product supply costs for Thalidomide. This reduced the cost of net sales for Thalidomide as a percent of net sales from 34% in 2004 to 25% in 2005.

Research and development expenses.  Research and development expenses generally consist of regulatory, clinical and manufacturing development, and medical and safety monitoring costs for all products in development as well as products we currently sell. Research and development expenses for the years ended December 31, 2006, 2005 and 2004 were as follows.

	2006			2005			2004
	(In thousands)
Research and development expenses	$	70,145		$	42,944		$	28,392
Increase from prior year	$	27,201		$	14,552		$	3,776
% Change from prior year		63.3	%		51.3	%		15.3	%

The increase in research and development expenses for the year ended December 31, 2006 over 2005 is due primarily to development expenses associated with satraplatin and the MethylGene HDAC program, which were licensed in December 2005 and January 2006, respectively. Research and development expenses for these products totaled approximately $17.3 million for 2006. Development expenses for Thalidomide and Vidaza also increased by approximately $3.8 million in 2006, as we increased development work on the oral formulation of azacitidine, expanded investigator-initiated development programs for Vidaza and increased our investment in Thalidomide Phase 3 clinical studies for first and second-line multiple myeloma. Finally, personnel related expenses increased by approximately $6.0 million in 2006, as we increased our resources to support the additional compounds we licensed and the increased activities with our existing products.

The increase in research and development expenses for the year ended December 31, 2005 over 2004 is due primarily to $6.1 million of increased spending on clinical study costs related to ongoing survival and alternative dosing studies for Vidaza, $4.0 million on further development studies for thalidomide and $0.5 million for other products. Additionally, employee related costs, including compensation, travel, recruiting and relocation expenses, increased by $1.9 million due to increased staffing levels to support regulatory, clinical development and medical and safety monitoring activities for Vidaza and thalidomide. The remaining increase of $2.1 million is due to costs related to the development of an oral formulation of Vidaza and the establishment of an alternate supplier for Vidaza in Europe.

Due to the significant risks and uncertainties inherent in the clinical development and regulatory approval processes, the cost to complete projects in development is not reasonably estimable. Results from clinical trials may not be favorable. Further, data from clinical trials is subject to varying interpretation, and may be deemed insufficient by the regulatory bodies reviewing applications for marketing approvals. As such, clinical development and regulatory programs are subject to risks and changes that may significantly impact cost projections and timelines. We believe that our research and development expenses will increase significantly in 2007, largely due to the acquisition of amrubicin rights through the November 2006 acquisition of Cabrellis Pharmaceuticals Corporation. In addition, we expect to increase our research and development activities for the HDAC program, as we commence additional Phase 2 clinical studies, as well as for Thalidomide, as we complete ongoing Phase 3 studies in multiple myeloma.

Acquired in-process research.  We incurred charges for acquired in-process research in 2006 and 2005 in connection with the licensing or acquisition of certain product rights. In December 2005, we entered into a co-development and licensing agreement with GPC Biotech AG whereby we acquired commercialization rights to a drug development candidate called satraplatin in Europe, the Middle East, Turkey, Australia and New Zealand. Satraplatin is in Phase 3 development for the treatment of hormone refractory prostate cancer. Under terms of the license agreement, we made an upfront payment to GPC Biotech of $37.1 million in early January 2006, which included $21.2 million for reimbursement for past satraplatin development costs incurred by GPC Biotech. This

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portion of the upfront payment was immediately expensed as acquired in-process research as satraplatin had not yet achieved regulatory approval for marketing and, absent obtaining such approval, has no alternative future use. The remainder of the upfront payment was recorded as prepaid development costs and is being expensed as reimbursable research and development costs we incurred by GPC Biotech.

In January 2006, the Company entered into a license and collaboration agreement for the research, development and commercialization of MethylGene Inc.’s HDAC inhibitors, including its lead compound MGCD0103, in North America, Europe, the Middle East and certain other markets. Under the terms of the agreement, the Company made upfront payments to MethylGene totaling $25.0 million, including $20.5 million for a license fee and the remainder as an equity investment in MethylGene common shares. The $20.5 million license fee was immediately expensed as acquired in-process research as MGCD0103 had not yet achieved regulatory approval for marketing and, absent obtaining such approval, has no alternative future use. In September 2006, the Company made a development milestone payment of $4.0 million to MethylGene Inc. for the initiation of Phase 2 clinical trials for MGCD0103. The $4.0 million payment was immediately expensed as acquired in-process research as MGCD0103 had not yet achieved regulatory approval for marketing and, absent obtaining such approval, had no alternative future use.

In November 2006, we acquired Cabrellis Pharmaceuticals Corporation and gained the rights to amrubicin, a third-generation synthetic anthracycline currently in advanced Phase 2 development for small cell lung cancer in North America and the E.U. Under the terms of the acquisition agreement, we acquired 100% of the outstanding common stock of Cabrellis Pharmaceuticals Corporation for an initial cash payment of $59.0 million ($54.3 million after deducting $4.7 million in net cash held by Cabrellis). Substantially all of the net purchase price was attributed to amrubicin, as no other material net tangible or intangible assets were acquired. The net payment of $54.3 million was immediately expensed as acquired in-process research as amrubicin has not yet achieved regulatory approval for marketing in North America and E.U. and, absent obtaining such approval, has no alternative future use.

Selling, general and administrative expenses.  Selling expenses include salaries and benefits for sales and marketing personnel, advertising and promotional programs, professional education programs and facility costs for our sales offices located throughout Europe, and in Thailand and Australia. General and administrative expenses include personnel related costs for corporate staff, outside legal, tax and auditing services, corporate facilities and insurance costs. Selling, general and administrative expenses for the years ended December 31, 2006, 2005 and 2004 were as follows.

	2006			2005			2004
	(In thousands)
Selling, general and administrative expenses	$	104,943		$	83,323		$	66,848
Increase from prior year	$	21,620		$	16,475		$	30,740
% Change from prior year		25.9	%		24.6	%		85.1	%

Selling, general and administrative expenses have continued to increase significantly over the three year period ended December 31, 2006 due to the establishment and expansion of our commercial organizations in the U.S., Europe, and Australia to support the selling of our products in those markets. Our general and administrative functions also expanded over this period to support the growth of our business.

Sales and marketing expenses totaled $76.0 million for 2006, an increase of $16.9 million over 2005. U.S. field sales and sales management expenses increased by $4.0 million over 2005 as we expanded headcount and related field-based sales activities to respond to a more competitive market for our primary U.S. product, Vidaza. In addition, for these reasons we also increased our investment in marketing and medical education programs for Vidaza in the U.S. by $3.6 million. Sales and marketing costs for Europe and our other international markets increased by $8.2 million over 2005. This growth was due primarily to increased market research and medical education activities for Thalidomide Pharmion, Vidaza, and satraplatin as we prepare for the potential approval and launch of those products in 2008 and 2009.

Sales and marketing expenses totaled $59.1 million for 2005, an increase of $12.3 million over 2004. This increase was primarily the result of continued expansion related to our commercial operations and the associated sales and marketing activities due to having one full year of Vidaza sales in the U.S. for 2005, compared with only

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6 months in 2004, and for continued growth of Thalidomide sales in our international markets. Field sales and sales management expenses in the U.S. increased by $3.2 million in 2005 due to having an expanded sales force for the entire year of 2005. European and international field sales and sales management expenses increased by $4.4 million in 2005 due to increased selling activities to support the increased sales growth of Thalidomide. Most of the international markets were similar to the U.S. in that expansion of staff and related expenses occurred during 2004, creating a partial years worth of expenses compared to a full year of those ongoing expenses in 2005. Marketing expenses increased by $4.7 million in 2005, due almost entirely to the U.S. having a full year of marketing activities for Vidaza sales versus half a year in 2004.

General and administrative expenses totaled $29.0 million for the year ended December 31, 2006, an increase of $4.8 million over 2005. Severance and wind down costs associated with the Cabrellis Pharmaceuticals Corporation acquisition increased general and administrative costs by $1.3 million. In addition, the adoption of SFAS No. 123R resulted in an increase to general and administrative stock compensation expenses of $1.6 million. The remaining increase in general and administrative expenses is due to an increase in general corporate activities to support the growth or our commercial and research and development activities.

General and administrative expenses totaled $24.2 million for the year ended December 31, 2005, an increase of $4.2 million over 2004. The continued expansion of our corporate infrastructure to support the commercial growth of our company caused $2.4 million of the increase in expenses. Of the $2.4 million increase, $0.7 million was for human resources costs related to various professional fees and recruitment and relocation fees, $0.5 million was for increased legal staffing and costs associated with numerous business development projects, $0.4 million increase in stock registration and related fees, $0.3 million increase in directors and officers liability insurance premiums and a $0.5 million increase in facility costs due to a newly relocated and expanded international office. Additionally, the remaining $1.8 million of the $4.2 million increase relates to costs associated with the relocation of our international headquarters.

Product rights amortization.  Product rights amortization expense for the years ended December 31, 2006, 2005 and 2004 was as follows:

	2006			2005			2004
	(In thousands)
Product rights amortization	$	9,802		$	9,345		$	3,395
Increase from prior year	$	457		$	5,950		$	1,423
% Change from prior year		4.9	%		175.2	%		72.2	%

The increase of $5.9 million in amortization expense in 2005 as compared to 2004 is primarily due to the restructuring of our Thalidomide Pharmion license and supply agreements with Celgene in the fourth quarter of 2004, which increased the Thalidomide product rights asset balance by $80 million and the corresponding amortization expense by approximately $6 million per year.

Interest and other income (expense), net.  Interest and other income (expense), net, for the years ended December 31, 2006, 2005 and 2004 was as follows.

	2006			2005			2004
	(In thousands)
Interest and other income, net	$	6,926		$	6,474		$	2,415
Increase from prior year	$	452		$	4,059		$	2,569
% Change from prior year		7.0	%		168.1	%		1,668.2	%

The $0.5 million increase in interest and other income, net for the year ended December 31, 2006 as compared to 2005 is due to the growth of interest income as a result of improved investment returns. Although we experienced a decrease in cash, cash equivalents, and short-term investments as a result of the upfront licensing and milestone payments made to GPC Biotech and MethylGene and for the acquisition of Cabrellis Pharmaceuticals Corporation, this was offset by the improved investment returns due to higher interest rates for investments in 2006. However, we expect interest income to decline in 2007 due to the lower balance of cash and short-term investments.

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The $4.1 million increase in interest and other income (expense), net in 2005 as compared to 2004 is due to the growth of interest income as a result of higher balances of cash, cash equivalents and short-term investments as well as improved investment returns resulting from higher interest rates. The higher cash, cash equivalents, and short-term investments balances were maintained for all of 2005 as compared with 2004 where the increased balance did not occur until a secondary equity offering was completed in July 2004.

Income tax expense.  Income tax expense for the years ended December 31, 2006, 2005 and 2004 was as follows.

	2006			2005			2004
	(In thousands)
Income tax expense	$	7,774		$	8,794		$	7,853
Increase (decrease) from prior year	$	(1,020	)	$	941		$	6,568
% Change from prior year		(11.6	)%		12.0	%		511.1	%

The provision for income taxes reflects management’s estimate of the effective tax rate expected to be applicable in each of our taxing jurisdictions.

Income tax expense totaled $7.8 million for the year ended December 31, 2006, a decrease of $1.0 million from 2005. This decrease is due primarily to a decrease to taxable income in the U.S. and France as a result of increased operating expenses. Although U.S. taxable income was largely offset by net operating loss carryforwards in both 2005 an 2006, we still incur alternative minimum tax expense on net taxable income before consideration of tax loss carryforwards.

Income tax expense totaled $8.8 million for the year ended December 31, 2005 as compared to $7.9 million for the year ended December 31, 2004. The increase of $0.9 million in 2005 is attributable to an increase in taxable income in certain foreign countries as well as incurring alternative minimum tax in the U.S. as a result of being profitable for the first time. Alternative minimum tax was triggered as a result of utilizing approximately $29 million of net operating loss carry-forwards to offset taxable income.

Liquidity and Capital Resources

As of December 31, 2006, we had an accumulated deficit of $226.8 million. Although we achieved profitability during 2005, our recent business development transactions significantly increased our operating expenses, resulting in a $91.0 million loss in 2006. We also expect to incur significant net losses for 2007. To date, our operations have been funded primarily with proceeds from the sale of preferred and common stock and net sales of our products. Net proceeds from our preferred stock sales totaled $125.0 million and our public offerings of common stock completed in November 2003 and July 2004 resulted in combined net proceeds of $314.1 million. We began generating revenue from product sales in July 2002.

Cash, cash equivalents and short-term investments decreased from $243.4 million at December 31, 2005 to $136.2 million at December 31, 2006. This $107.2 million decrease is primarily due to payments totaling $120.4 million in connection with acquisition or licensing of product rights and related prepayments on product development. For 2007, we expect our net use of cash from operating, investing and financing activities will total approximately $60 million.

We expect that our cash on hand at December 31, 2006, along with cash generated from expected product sales, will be adequate to fund our operations for at least the next twelve months. However, we reexamine our cash requirements periodically in light of changes in our business. For example, in the event that we make additional product acquisitions, we may need to raise additional funds. Adequate funds, either from the financial markets or other sources may not be available when needed or on terms acceptable to us. Insufficient funds may cause us to delay, reduce the scope of, or eliminate one or more of our planned development, commercialization or expansion activities. Our future capital needs and the adequacy of our available funds will depend on many factors, including the effectiveness of our sales and marketing activities, the cost of clinical studies and other actions needed to obtain regulatory approval of our products in development, and the timing and cost of any product acquisitions.

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Contractual Obligations

Our contractual obligations as of December 31, 2006 are as follows:

Contractual Obligations	Total		2007		2008		2009		2010		2011		Thereafter
	(In thousands)
Research and Development	$	24,867	$	6,367	$	7,400	$	7,400	$	3,700	$	—	$	—
Operating leases		23,755		4,442		3,886		3,634		2,974		2,694		6,125
Inventory purchase commitments		8,000		8,000		—		—		—		—		—
Product royalty payments		1,200		1,200		—		—		—		—		—
Product acquisition payments		1,000		1,000		—		—		—		—		—
Long-term debt obligations		34		34		—		—		—		—		—
Total — fixed contractual obligations	$	58,856	$	21,043	$	11,286	$	11,034	$	6,674	$	2,694	$	6,125

Research and Development.  In December 2005, we entered into a co-development and licensing agreement for satraplatin with GPC Biotech. Pursuant to that agreement, we made an upfront payment of $37.1 million to GPC Biotech in early January 2006. Of that amount, $21.2 million was allocated to acquired in-process research and charged to expenses in 2005. The remaining amount of $15.9 million represents a prepayment of future clinical development costs. The licensing agreement also stipulates we provide an additional $22.2 million for similar future development costs. This amount is reflected in the schedule above in equal annual amounts for 2007-2010.

We previously entered into two agreements with Celgene to provide funding to support clinical development studies sponsored by Celgene studying thalidomide as a treatment for various types of cancers. Under these agreements, we paid Celgene $4.7 million in 2005, $2.7 million in 2006 and will pay $2.7 million in 2007.

Operating leases.  Our commitment for operating leases relates primarily to our corporate and sales offices located in the U.S., Europe, Thailand and Australia. These lease commitments expire on various dates through 2015.

Inventory purchase commitments.  The contractual summary above includes contractual obligations related to our product supply contracts. Under these contracts, we provide our suppliers with rolling 12-24 month supply forecasts, with the initial 3-6 month periods representing binding purchase commitments.

Product royalty payments.  Pursuant to our Thalidomide Pharmion product license agreement with Celgene, we are required to make additional quarterly payments to the extent that the royalty and license payments due under this agreement do not total at least $300,000 per quarter. These minimum royalty and license payment obligations expire on the date we obtain regulatory approval to market Thalidomide Pharmion in the E.U. The amounts reflected in the summary above represent the minimum amounts due under this agreement.

Product acquisition payments.  We have future payment obligations associated with the June 2005 addition to thalidomide product rights. We paid $5.0 million in June 2005 and $1.0 million in June 2006 for this acquisition and one additional payment of $1.0 million is due in June 2007.

Contingent product acquisition payments.  The contractual summary above reflects only payment obligations for product and company acquisitions that are fixed and determinable. We also have contractual payment obligations, the amount and timing of which are contingent upon future events. In accordance with U.S. generally accepted accounting principles, contingent payment obligations are not recorded on our balance sheet until the amount due can be reasonably determined. Under the terms of the agreement with GPC Biotech, we will pay them up to an additional $30.5 million based on the achievement of certain regulatory filing and approval milestones, up to an additional $75 million for up to five subsequent E.U. approvals for additional indications and we will pay them sales milestones totaling up to $105 million, based on the achievement of significant annual sales levels in our territories. Similarly, under the agreement with MethylGene, our milestone payments for MGCD0103 could reach $141 million, based on the achievement of significant development, regulatory and sales goals. Furthermore, up to $100 million for each additional HDAC inhibitor may be paid, also based on the achievement of significant

44

development, regulatory and sales milestones. Under the terms of the Cabrellis Pharmaceuticals Corporation acquisition agreement, we will pay $12.5 million for each approval of amrubicin by regulatory authorities in the U.S. and the E.U. Additionally, upon amrubicin’s approval for a second indication in the U.S. or E.U., we will pay an additional payment of $10 million for each market. Under the terms of our license agreement for amrubicin, we are also required to make milestone payments of up to $8 million to Dainippon Sumitomo Pharma Co. Ltd. upon the receipt of regulatory approval of amrubicin in the U.S. and E.U. and up to $17.5 million upon achieving certain annual sales levels in the U.S. Finally, under the agreements with Schering AG, payments totaling up to $7.5 million are due if milestones relating to revenue and gross margin targets for Refludan are achieved.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.

Market risk is the risk of change in fair value of a financial instrument due to changes in interest rates, equity prices, creditworthiness, financing, foreign exchange rates or other factors. Our primary market risk exposure relates to changes in interest rates on our cash, cash equivalents and available for sale marketable securities and foreign exchange rates.

We currently invest our excess cash balances in short-term investment grade securities including money market accounts that are subject to interest rate risk. At December 31, 2006, we held $136.2 million in cash, cash equivalents and short-term investments available for sale that are invested in accounts or fixed income securities with current interest rates ranging from approximately 2% to 5%. The amount of interest income we earn on these funds will fluctuate with a change in interest rates. If interest rates increase or decrease 1% annually, our interest income could potentially increase or decrease by $1.3 million, based on our fiscal year-end balance in cash, cash equivalents and short-term investments. However, due to the nature of short-term investment grade securities and money market accounts, an immediate change in interest rates would not have a material impact on our financial position.

We are exposed to movements in foreign exchange rates against the U.S. dollar for inter-company trading transactions and the translation of net assets and earnings of non-U.S. subsidiaries. Our primary operating currencies are the U.S. dollar, British pound sterling, the euro, and Swiss franc. We have not undertaken any foreign currency hedges through the use of forward foreign exchange contracts or options. Foreign currency exposures have been managed solely through managing the currency denomination of our cash balances.

Item 8.   Financial Statements and Supplementary Data.

The financial statements required pursuant to this item are included in Item 15 of this report and are presented beginning on page F-1.

Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A.   Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO have concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in our periodic reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. We have designed our disclosure controls and procedures in such a manner that they provide reasonable assurance that those controls and procedures will meet their objectives. It should be noted, however, that the design of any system of controls is based in part upon certain assumptions

45

about the likelihood of future events, and can therefore only provide reasonable, not absolute assurance that the design will succeed in achieving its stated goals.

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining effective internal control over financial reporting, as defined in Rules 13a-15(f) and 15(d)-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment management believes that, as of December 31, 2006, our internal control over financial reporting is effective based on those criteria.

46

Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in this Item 9A immediately below.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Pharmion Corporation:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Pharmion Corporation 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). Pharmion Corporation’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 the Company’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 Pharmion Corporation 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, Pharmion Corporation 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 consolidated balance sheets of Pharmion Corporation as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2006 of Pharmion Corporation and our report dated March 14, 2007 expressed an unqualified opinion thereon.

/s/  Ernst & Young LLP

Denver, Colorado

March 14, 2007

47

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) occurred during the quarter ended December 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.   Other Information.

None.

PART III

Item 10.   Directors and Executive Officers of the Registrant and Corporate Governance.

The information required by this Item concerning our directors is incorporated by reference from the information set forth in the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive Proxy Statement for the 2007 Annual Meeting of Stockholders to be filed with the Commission within 120 days after the end of our fiscal year ended December 31, 2006 (the “Proxy Statement”). The information required by this Item concerning our executive officers is incorporated by reference from the information set forth in the section of the Proxy Statement entitled “Executive Officers, Directors and Key Employees.” The information required by this Item concerning our standing audit committee is incorporated by reference from the information set forth in the section of the Proxy Statement entitled “Committees of the Board of Directors and Meetings.”

We have adopted a code of conduct and ethics that applies to all of our directors, officers and employees, including our chief executive officer and chief financial and accounting officers. The text of the code of conduct and ethics is available without charge, upon request, in writing to Investor Relations at Pharmion Corporation, 2525 28th Street, Boulder, CO 80301. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to our directors, principal executive and financial officers will be included in a Current Report on Form 8-K filed within four business days following the date of the amendment or waiver, unless web site posting of such amendments or waivers is then permitted by the rules of the SEC and the Nasdaq Stock Market, Inc.

The information required by this Item concerning our equity compensation plan is set forth under Item 5 of this Annual Report on Form 10-K.

Item 11.   Executive Compensation.

The information required by this Item regarding executive compensation is incorporated by reference from the information to be set forth in the section of the Proxy Statement entitled “Executive Compensation.”

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

The information required by this Item regarding security ownership of certain beneficial owners and management is incorporated by reference from the information to be set forth in the section of the Proxy Statement entitled “Security Ownership of Certain Beneficial Owners and Management.” The information required by this Item regarding our equity compensations plans is incorporated by reference from the information set forth in the section of the Proxy Statement entitled “Equity Compensation Plan Information.”

Item 13.   Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item regarding certain relationships and related transactions is incorporated by reference from the information to be set forth in the section of the Proxy Statement entitled “Certain Transactions.”

48

Item 14.   Principal Accountant Fees and Services.

The information required by this Item regarding principal accountant fees and services is incorporated by reference from the information to be set forth in the sections of the Proxy Statement entitled “Report of the Audit Committee,” “Ratification of Selection of Independent Auditors” and “Fees Paid to Ernst & Young.”

PART IV

Item 15.   Exhibits and Financial Statement Schedules.

(a) The following documents are being filed as part of this report:

(1) Consolidated Financial Statements

Reference is made to the Index to Consolidated Financial Statements of Pharmion Corporation appearing on page F-1 of this report.

(2) Consolidated Financial Statement Schedules

The following consolidated financial statement schedule of the Company for each of the years ended December 31, 2006, 2005 and 2004, is filed as part of this Annual Report on Form 10-K and should be read in conjunction with the Consolidated Financial Statements, and the related notes thereto, of the Company. All other schedules are omitted because they are not applicable.

	Page
	Number
Schedule II — Valuation and Qualifying Accounts		S-1

(3) Exhibits

Exhibit
Number			Description of Document
	2	.1(1)	Stock Purchase Agreement, dated March 7, 2003, by and among Pharmion France and the shareholders of Gophar S.A.S.
	3	.1(1)	Amended and Restated Certificate of Incorporation.
	3	.2(1)	Amended and Restated Bylaws.
	4	.1(1)	Specimen Stock Certificate.
	4	.2(1)	Amended and Restated Investors’ Rights Agreement, dated as of November 30, 2001, by and among the Registrant, the founders and the holders of the Registrant’s Preferred Stock.
	4	.3(1)	Series C Omnibus Amendment Agreement, dated as of October 11, 2002 to Amended and Restated Investors’ Rights Agreement, dated as of November 30, 2001, by and among the Registrant, the founders and the holders of the Registrant’s Preferred Stock.
	4	.4(1)	Amendment, dated as of April 8, 2003 to Amended and Restated Investors’ Rights Agreement, dated as of November 30, 2001, by and among the Registrant, the founders and the holders of the Registrant’s Preferred Stock.
	4	.5(1)	Series B Preferred Stock Purchase Warrant, dated November 30, 2001, issued by the Registrant to Celgene Corporation.
	4	.6(1)	Senior Convertible Promissory Note, dated April 8, 2003, issued by the Registrant to Celgene Corporation.
	4	.7(1)	Common Stock Purchase Warrant, dated April 8, 2003, issued by the Registrant to Celgene Corporation.
	4	.8(1)	Convertible Subordinated Promissory Note, dated April 11, 2003, issued by the Registrant to Penn Pharmaceuticals Holdings Limited.
	4	.9(1)	Common Stock Purchase Warrant, dated April 11, 2003, issued by the Registrant to Penn Pharmaceuticals Holdings Limited.
	10	.1(1)*	Amended and Restated 2001 Non-Employee Director Stock Option Plan.

49

Exhibit
Number			Description of Document
	10	.2(1)*	Amended and Restated 2000 Stock Incentive Plan.
	10	.3(1)	Securities Purchase Agreement, dated as of April 8, 2003, by and between the Registrant and Celgene Corporation.
	10	.4(1)	Securities Purchase Agreement, dated as of April 11, 2003, by and between the Registrant and Penn Pharmaceuticals Holdings Limited.
	10	.5(1)	Amended and Restated Distribution and License Agreement, dated as of November 16, 2001, by and between Pharmion GmbH and Penn T Limited.
	10	.6(1)	Amendment No. 1, dated March 4, 2003, to Amended and Restated Distribution and License Agreement, dated as of November 16, 2001, by and between Pharmion GmbH and Penn T Limited.
	10	.7(1)	Supplementary Agreement, dated June 18, 2003, to Amended and Restated Distribution and License Agreement, dated as of November 16, 2001, by and between Pharmion GmbH and Penn T Limited.
	10	.8(1)	License Agreement, dated as of November 16, 2001, by and among the Registrant, Pharmion GmbH and Celgene Corporation.
	10	.9(1)	Amendment No. 1, dated March 3, 2003, to License Agreement, dated as of November 16, 2001, by and among the Registrant, Pharmion GmbH and Celgene Corporation.
	10	.10(1)	Letter Agreement, dated April 2, 2003, by and among the Registrant, Pharmion GmbH and Celgene Corporation regarding clinical funding.
	10	.11(1)	Amendment No. 2, dated April 8, 2003, to License Agreement, dated as of November 16, 2001, by and among the Registrant, Pharmion GmbH and Celgene Corporation.
	10	.12(1)	License and Distribution Agreement, dated as of June 21, 2002, by and between the Registrant and LEO Pharmaceutical Products Ltd. A/S.
	10	.13(1)	License Agreement, dated as of June 7, 2001, by and between the Registrant, Pharmion GmbH and Pharmacia & Upjohn Company.
	10	.14(1)	Interim Sales Representation Agreement, dated as of May 29, 2002, by and between Pharmion GmbH and Schering Aktiengesellschaft.
	10	.15(1)	Distribution and Development Agreement, dated as of May 29, 2002, by and between Pharmion GmbH and Schering Aktiengesellschaft.
	10	.16(1)	First Amendment Agreement dated August 20, 2003 by and between Pharmion GmbH and Schering Aktiengesellschaft.
	10	.17(3)*	Employment Agreement, dated as of February 23, 2004, by and between the Registrant and Patrick J. Mahaffy.
	10	.18(3)*	Amended and Restated Employment Agreement, dated as of March 1, 2004, by and between the Registrant and Judith A. Hemberger.
	10	.19(1)*	Non-Competition and Severance Agreement, dated as of November 29, 2001, by and between the Registrant and Michael Cosgrave.
	10	.20(1)*	Employment Agreement, dated as of January 5, 2001, by and between the Registrant and Michael Cosgrave.
	10	.21(3)*	Amended and Restated Employment Agreement, dated as of March 1, 2004, by and between the Registrant and Erle Mast.
	10	.22(3)*	Amended and Restated Employment Agreement, dated as of March 1, 2004, by and between the Registrant and Gillian C. Ivers-Read.
	10	.23(1)	Office Lease, dated as of April 24, 2002, by and between the Registrant and Centro III, LLC.
	10	.24(1)	First Amendment to Lease, dated as of January 31, 2003, to Office Lease, dated as of April 24, 2002, by and between the Registrant and Centro III, LLC.
	10	.25(2)*	Addendum to Employment Agreement, dated June 15, 2004, by and between the Registrant and Michael Cosgrave.
	10	.26(4)	Amendment No. 2, dated as of December 3, 2004, to Amended and Restated Distribution and License Agreement, dated November 16, 2001, by and between Pharmion GmbH and Celgene U.K. Manufacturing II Limited (formerly Penn T Limited).

50

Exhibit
Number			Description of Document
	10	.27(4)	Letter Agreement, dated as of December 3, 2004, by and between the Registrant, Pharmion GmbH and Celgene Corporation amending the Letter Agreement regarding clinical funding, dated April 2, 2003, between Registrant, Pharmion GmbH and Celgene.
	10	.28(4)	Letter Agreement, dated as of December 3, 2004, by and between the Registrant, Pharmion GmbH and Celgene Corporation amending the License Agreement, dated November 16, 2001, among Registrant, Pharmion GmbH and Celgene.
	10	.29(4)	Lease, dated as of December 21, 2004, by and between Pharmion Limited and Alecta Pensionsförsäkring Ömsesidigit.
	10	.31(5)	Supply Agreement, dated as of March 31, 2005, by and between the Registrant and Ash Stevens, Inc.
	10	.32(6)	Manufacturing and Service Contract, dated as of December 20, 2005, by and between the Registrant and Ben Venue Laboratories, Inc.
	10	.33(6)	Co-Development and License Agreement, dated as of December 19, 2005, by and between the Registrant, Pharmion GmbH and GPC Biotech AG.
	10	.34(6)	Supply Agreement, dated as of December 19, 2005, by and between the Registrant, Pharmion GmbH and GPC Biotech AG.
	10	.35	Pharmion Corporation 2000 Stock Incentive Plan (Amended and Restated effective as of December 6, 2006)
	10	.36	2000 Stock Incentive Plan Agreements (Incentive Stock Option Agreement, Nonqualified Stock Option Agreement and Restricted Stock Unit Agreement)
	10	.37	2001 Non-Employee Director Stock Option Plan Agreement
	10	.38(7)	License Agreement on Amrubicin Hydrochloride, dated as of June 23, 2005, by and between Sumitomo Pharmaceuticals Co., Ltd. and Conforma Therapeutics Corporation
	23	.1	Consent of Independent Registered Public Accounting Firm.
	24	.1	Power of Attorney (reference is made to page 52)
	31	.1	Sarbanes-Oxley Act of 2002, Section 302 Certification for President and Chief Executive Officer.
	31	.2	Sarbanes-Oxley Act of 2002, Section 302 Certification for Chief Financial Officer.
	32	.1	Sarbanes-Oxley Act of 2002, Section 906 Certification for President and Chief Executive Officer and Chief Financial Officer.

(1)	Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-108122) and amendments thereto, declared effective November 5, 2003.
(2)	Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-116252) and amendments thereto, declared effective June 30, 2004.
(3)	Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
(4)	Incorporated by reference to the exhibits to our Annual Report on Form 10-K for the year ended December 31, 2004.
(5)	Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.
(6)	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24B-2 of the Securities Exchange Act of 1934, as amended.
(7)	Confidential treatment has been requested with respect to certain portions of the License Agreement.
*	Management Contract or Compensatory Plan or Arrangement required to be filed pursuant to Item 15(b) of Form 10-K.

51

SIGNATURES

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

Pharmion Corporation

By:  /s/  Patrick J. Mahaffy

Patrick J. Mahaffy

President and Chief Executive Officer

Date: March 14, 2007

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Patrick J. Mahaffy and Erle T. Mast, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Form 10-K, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Form 10-K has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/  Patrick J. Mahaffy Patrick J. Mahaffy	President, Chief Executive Officer and Director (Principal Executive Officer)	March 14, 2007
/s/  Erle T. Mast Erle T. Mast	Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)	March 14, 2007
/s/  Edward J. McKinley Edward J. McKinley	Director	March 14, 2007
/s/  Brian G. Atwood Brian G. Atwood	Director	March 14, 2007
/s/  Thorlef Spickschen Thorlef Spickschen	Director	March 14, 2007
M. James Barrett	Director	March 14, 2007

52

Name	Title	Date
/s/  James Blair James Blair	Director	March 14, 2007
/s/  Cam Garner Cam Garner	Director	March 14, 2007
/s/  John C. Reed John C. Reed	Director	March 14, 2007

53

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Pharmion Corporation Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Stockholders’ Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7
Schedule II — Valuation and Qualifying Accounts	S-1

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Pharmion Corporation

We have audited the accompanying consolidated balance sheets of Pharmion Corporation as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the index at Item 15(a)2. These financial statements and schedule are the responsibility of management. Our responsibility is to express an opinion on these financial statements and schedule 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 consolidated financial position of Pharmion Corporation at December 31, 2006 and 2005, and the consolidated 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. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, effective January 1, 2006, the Company adopted 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 Pharmion Corporation’s 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 and our report dated March 14, 2007 expressed an unqualified opinion thereon.

/s/  ERNST & YOUNG LLP

Denver, Colorado

March 14, 2007

F-2

PHARMION CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share amounts)

	December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	59,903		$	90,443
Short-term investments		76,310			152,963
Accounts receivable, net of allowances of $4,711 and $3,573, respectively		40,299			32,213
Inventories, net		12,411			11,472
Prepaid research and development costs		4,306			16,020
Other current assets		9,739			5,779
Total current assets		202,968			308,890
Product rights, net		95,591			104,045
Goodwill		14,402			12,920
Property and equipment, net		7,121			6,606
Other assets		6,650			169
Total assets	$	326,732		$	432,630
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,612		$	8,456
Accrued and other current liabilities		38,359			73,813
Total current liabilities		49,971			82,269
Long term liabilities:
Deferred tax liability		2,734			2,797
Other long-term liabilities		945			940
Total long term liabilities		3,679			3,737
Total liabilities		53,650			86,006
Stockholders’ equity:
Common stock: par value $0.001, 100,000,000 shares authorized, 32,102,520 and 31,912,751 shares issued and outstanding, respectively		32			32
Preferred stock: par value $0.001, 10,000,000 shares authorized, no shares issued and outstanding		—			—
Additional paid-in capital		488,553			482,893
Deferred compensation		—			(227	)
Accumulated other comprehensive income		11,336			(247	)
Accumulated deficit		(226,839	)		(135,827	)
Total stockholders’ equity		273,082			346,624
Total liabilities and stockholders’ equity	$	326,732		$	432,630

See accompanying notes.

F-3

PHARMION CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per share amounts)

	Years Ended December 31,
	2006			2005		2004
Net sales	$	238,646		$	221,244	$	130,171
Operating expenses:
Cost of sales, inclusive of royalties, exclusive of product rights amortization shown separately below		65,157			59,800		43,635
Research and development		70,145			42,944		28,392
Acquired in-process research		78,763			21,243		—
Selling, general and administrative		104,943			83,323		66,848
Product rights amortization		9,802			9,345		3,395
Total operating expenses		328,810			216,655		142,270
Operating income (loss)		(90,164	)		4,589		(12,099	)
Interest and other income, net		6,926			6,474		2,415
Income (loss) before taxes		(83,238	)		11,063		(9,684	)
Income tax expense		7,774			8,794		7,853
Net income (loss)	$	(91,012	)	$	2,269	$	(17,537	)
Net income (loss) per common share:
Basic	$	(2.84	)	$	0.07	$	(0.63	)
Diluted	$	(2.84	)	$	0.07	$	(0.63	)
Weighted average number of common and common equivalent shares used to calculate net income (loss) per common share:
Basic		32,016			31,837		27,933
Diluted		32,016			32,876		27,933

See accompanying notes.

F-4

PHARMION CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except for share amounts)

						Additional						Other						Total
	Common Stock					Paid-In			Deferred			Comprehensive			Accumulated			Stockholders’
	Shares			Amount		Capital			Compensation			Income			Deficit			Equity
Balance at January 1, 2004		23,948,636		$	24	$	222,218		$	(1,155	)	$	4,386		$	(120,559	)	$	104,914
Comprehensive Loss:
Net loss		—			—		—			—			—			(17,537	)		(17,537	)
Foreign currency translation adjustment		—			—		—			—			3,924			—			3,924
Net unrealized loss on available-for-sale investments		—			—		—			—			(274	)		—			(274	)
Comprehensive loss																			(13,887	)
Exercise of stock options and warrants		1,206,551			1		8,385			—			—			—			8,386
Repurchase of unvested shares of common stock		(6,642	)		—		(4	)		—			—			—			(4	)
Conversion of debt and accrued interest to equity		1,342,170			2		14,160			—			—			—			14,162
Share based compensation		—			—		—			475			—			—			475
Issuance of common stock, net of issuance costs		5,290,000			5		237,902			—			—			—			237,907
Balance at December 31, 2004		31,780,715		$	32	$	482,661		$	(680	)	$	8,036		$	(138,096	)	$	351,953
Comprehensive Loss:
Net income		—			—		—			—			—			2,269			2,269
Foreign currency translation adjustment		—			—		—			—			(8,241	)		—			(8,241	)
Net unrealized loss on available-for-sale investments		—			—		—			—			(42	)		—			(42	)
Comprehensive loss																			(6,014	)
Exercise of stock options		134,120			—		487			—			—			—			487
Repurchase of unvested shares of common stock		(2,084	)		—		(1	)		—			—			—			(1	)
Share based compensation		—			—		—			199			—			—			199
Cancellation of deferred compensation associated with stock option forfeitures		—			—		(254	)		254			—			—			—
Balance at December 31, 2005		31,912,751		$	32	$	482,893		$	(227	)	$	(247	)	$	(135,827	)	$	346,624
Comprehensive Loss:
Net loss		—			—		—			—			—			(91,012	)		(91,012	)
Foreign currency translation adjustment		—			—		—			—			9,302			—			9,302
Net unrealized gain on available-for-sale investments		—			—		—			—			2,281			—			2,281
Comprehensive loss																			(79,429	)
Exercise of stock options		189,769			—		1,259			—			—			—			1,259
Incremental tax benefits from stock exercised		—			—		1,190			—			—			—			1,190
Share based compensation		—			—		3,438			—			—			—			3,438
Reclassification of deferred compensation on adoption of SFAS 123(R)		—			—		(227	)		227			—			—			—
Balance at December 31, 2006		32,102,520		$	32	$	488,553		$	—		$	11,336		$	(226,839	)	$	273,082

See accompanying notes.

F-5

PHARMION CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years Ended December 31,
	2006			2005			2004
Operating activities
Net income (loss)	$	(91,012	)	$	2,269		$	(17,537	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		12,206			11,759			5,609
Share-based compensation expense		3,438			198			476
Amortization of discounts and premiums on short-term investments, net		(476	)		(417	)		(332	)
Other		(327	)		(519	)		(207	)
Changes in operating assets and liabilities:
Accounts receivable, net		(5,423	)		25			(25,432	)
Inventories		66			(8,503	)		1,683
Other current assets		9,162			(17,664	)		(40	)
Other long-term assets		(137	)		41			325
Accounts payable		2,457			(786	)		5,216
Accrued and other current liabilities		(35,646	)		39,544			24,176
Net cash provided by (used in) operating activities		(105,692	)		25,947			(6,063	)
Investing activities
Purchases of property and equipment		(2,473	)		(5,220	)		(1,165	)
Acquisition of business, net of cash acquired		—			(10,072	)		(19	)
Addition to product rights		—			(5,000	)		(80,000	)
Purchase of available-for-sale investments		(106,450	)		(172,896	)		(158,593	)
Sale and maturity of available-for-sale investments		179,388			146,020			32,585
Net cash provided by (used in) investing activities		70,465			(47,168	)		(207,192	)
Financing activities
Proceeds from sale of common stock, net of issuance costs		—			—			237,907
Proceeds from exercise of common stock options and warrants		1,259			486			8,382
Incremental tax benefits from stock options exercised		1,190			—			—
Payment of debt obligations		(1,110	)		(4,261	)		(3,972	)
Net cash provided by (used in) financing activities		1,339			(3,775	)		242,317
Effect of exchange rate changes on cash and cash equivalents		3,348			(4,219	)		2,054
Net increase (decrease) in cash and cash equivalents		(30,540	)		(29,215	)		31,116
Cash and cash equivalents, beginning of year		90,443			119,658			88,542
Cash and cash equivalents, end of year	$	59,903		$	90,443		$	119,658
Noncash items:
Financed product rights acquisition	$	—		$	1,870		$	—
Conversion of debt and accrued interest to common stock		—			—			14,161
Accrual of additional business acquisition consideration		—			—			5,458
Supplemental disclosure of cash flow information:
Cash paid for interest		436			178			486
Cash paid for income taxes		11,373			13,197			1,317

See accompanying notes.

F-6

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Business Operations

Pharmion Corporation (the “Company”) was incorporated in Delaware on August 26, 1999 and commenced operations in January 2000. The Company is engaged in the acquisition, development and commercialization of pharmaceutical products for the treatment of oncology and hematology patients. The Company’s product acquisition and licensing efforts are focused on both development stage products, as well as those approved for marketing. In exchange for distribution and marketing rights, the Company generally grants the seller some combination of development funding, payments for the achievement of clinical, regulatory and commercial milestones and upfront cash payments. The Company has acquired the rights to seven products, including four that are currently marketed or sold on a compassionate use or named patient basis, and three products that are in varying stages of clinical development. The Company has established operations in the United States, Europe and Australia. Through a distributor network, the Company can reach the hematology and oncology community in additional countries in the Middle East and Asia.

2.   Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Pharmion Corporation and all subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents consist of money market accounts and overnight deposits. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Interest income resulting from cash, cash equivalents and short-term investments was $7.9 million, $6.9 million and $2.6 million for the years ended December 31, 2006, 2005, and 2004, respectively.

The Company has entered into several standby letters of credit to guarantee both current and future commitments with office and equipment lease agreements and customer supply public tender commitments. The aggregate amount outstanding under the letters of credit was approximately $2.2 million at December 31, 2006 and is secured by restricted cash held in U.S. and foreign cash accounts. On January 31, 2007, the Company entered into a standby letter of credit to guarantee a future office lease commitment. The amount outstanding under the letter of credit was approximately $0.2 million.

Short-term Investments

Short-term investments consist of investment grade government agency, auction rate, and corporate debt securities due within one year. Investments with maturities beyond one year are classified as short-term based on their highly liquid nature and because such investments represent the investment of cash that is available for current operations. All investments are classified as available-for-sale and are recorded at market value. Unrealized gains and losses are reflected in other comprehensive income. The estimated fair value of the available for sale securities is determined based on quoted market prices or rates for similar instruments.

Inventories

Inventories consist of Vidaza, Innohep, Refludan and Thalidomide (which includes Thalidomide Pharmion and the Laphal thalidomide formulation). Vidaza is sold commercially in the U.S. and, to a lesser extent, on a compassionate use basis within Europe and other international markets. Innohep is sold exclusively in the U.S. market, and Refludan and Thalidomide are both sold within Europe and the other international markets. All of the products are manufactured by third-party manufacturers and delivered to the Company as finished goods. The Company purchases active ingredient for Vidaza which is supplied to the third-party manufacturer. Inventories are stated at the lower of cost or market, cost being determined under the first-in, first-out method. The Company

F-7

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

periodically reviews inventories, and items considered outdated or obsolete are reduced to their estimated net realizable value. For the years ended December 31, 2006, 2005 and 2004, the Company recorded a provision to reduce the estimated net realizable value of obsolete and short-dated inventory by $0.4 million, $0.6 million, and $1.4 million, respectively.

Inventories consisted of the following at December 31, 2006 and 2005 (in thousands).

	2006		2005
Raw material	$	3,709	$	3,444
Finished goods		8,702		8,028
Total inventory	$	12,411	$	11,472

At December 31, 2006, the Company had firm inventory purchase commitments, due within one year, of approximately $8.0 million.

Product Rights

The cost of acquiring the distribution and marketing rights of the Company’s products that are approved for commercial use were capitalized and are being amortized on a straight-line basis over the estimated benefit period of 10-15 years.

Goodwill

In association with a business acquisition in 2003 and related milestone payments that were made in 2004 and 2005, goodwill was created. In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” the Company does not amortize goodwill. SFAS No. 142 requires the Company to perform an impairment review of goodwill at least annually. If it is determined that the value of goodwill is impaired, the Company will record the impairment charge in the statement of operations in the period it is discovered. There have been no impairments of goodwill. During the years ended December 31, 2006 and 2005, the Company recorded increases of approximately $1.5 million and $4.8 million, respectively. Increase to goodwill for the year ended December 31, 2006 represented currency translation adjustments. For the year ended December 31, 2005 the increase to goodwill reflected additional consideration paid to the seller of the business acquired in 2003. The increase in 2005 was partially offset by a reduction of approximately $1.3 million, due to currency translation adjustments.

Property and Equipment

Property and equipment are stated at cost. Leasehold improvements are amortized over the economic life of the asset or the lease term, whichever is shorter. Depreciation and amortization of property and equipment are computed using the straight-line method based on the following estimated useful lives:

	Estimated Useful Life
Computer hardware and software		3 years
Leasehold improvements		3-5 years
Equipment		7 years
Furniture and fixtures		10 years

Long-Lived Assets

Long-lived assets, other than goodwill, consist primarily of product rights and property and equipment. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the recoverability of the carrying value of long-lived assets to be held and used is evaluated if changes in the business environment or

F-8

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

other facts and circumstances that suggest they may be impaired. If this evaluation indicates the carrying value will not be recoverable, based on the undiscounted expected future cash flows generated by these assets, the Company reduces the carrying amount to the estimated fair value.

Revenue Recognition

The Company sells its products to wholesale distributors and, for certain products, directly to hospitals and clinics. Revenue from product sales is recognized when ownership of the product is transferred to the customer, the sales price is fixed and determinable, and collectibility is reasonably assured. Within the U.S. and certain foreign countries revenue is recognized upon shipment (freight on board shipping point) since title to the product passes and the customers have assumed the risks and rewards of ownership. In certain other foreign countries, it is common practice that ownership transfers upon receipt of product and, accordingly, in these circumstances revenue is recognized upon delivery (freight on board destination) when title to the product effectively transfers.

The Company records allowances for product returns, chargebacks, rebates and prompt pay discounts at the time of sale, and reports revenue net of such amounts. In determining allowances for product returns, chargebacks and rebates, the Company must make significant judgments and estimates. For example, in determining these amounts, the Company estimates end-customer demand, buying patterns by end-customers and group purchasing organizations from wholesalers and the levels of inventory held by wholesalers. Making these determinations involves estimating whether trends in past buying patterns will predict future product sales.

The nature of the Company’s allowances requiring accounting estimates, and the specific considerations the Company uses in estimating its amounts, are as follows:

Product returns.  The Company’s customers have the right to return any unopened product during the 18-month period beginning 6 months prior to the labeled expiration date and ending 12 months past the labeled expiration date. As a result, in calculating the allowance for product returns, the Company must estimate the likelihood that product sold to wholesalers might remain in its inventory or in end-customers’ inventories to within 6 months of expiration and analyze the likelihood that such product will be returned within 12 months after expiration.

To estimate the likelihood of product remaining in wholesalers’ inventory, the Company relies on information from its wholesalers regarding their inventory levels, measured end-customer demand as reported by third party sources, and on internal sales data. The Company believes the information from its wholesalers and third party sources is a reliable indicator of trends, but the Company is unable to verify the accuracy of such data independently. The Company also considers its wholesalers’ past buying patterns, estimated remaining shelf life of product previously shipped and the expiration dates of product currently being shipped.

Since the Company does not have the ability to track a specific returned product back to its period of sale, the product returns allowance is primarily based on estimates of future product returns over the period during which customers have a right of return. Such estimates are primarily based on historical sales and return rates as well as estimates of the remaining shelf life of our products sold to customers.

For the years ended December 31, 2006 and 2005, $0.6 million and $0.1 million of product was returned to the Company, respectively, representing approximately 0.24% and 0.04% of net revenue, respectively. The allowance for returns was $1.0 million and $0.6 million for December 31, 2006 and 2005, respectively.

Chargebacks and rebates.  Although the Company sells its products in the U.S. primarily to wholesale distributors, the Company typically enters into agreements with certain governmental health insurance providers, hospitals, clinics, and physicians, either directly or through group purchasing organizations acting on behalf of their members, to allow purchase of Company products at a discounted price and/or to receive a volume-based rebate. The Company provides a credit to the wholesaler, or a chargeback, representing the difference between the

F-9

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

wholesaler’s acquisition list price and the discounted price. Rebates are paid directly to the end-customer, group purchasing organization or government insurer.

As a result of these contracts, at the time of product shipment the Company must estimate the likelihood that product sold to wholesalers might be ultimately sold to a contracting entity or group purchasing organization. For certain end-customers, the Company must also estimate the contracting entity’s or group purchasing organization’s volume of purchases.

The Company estimates its chargeback allowance based on its estimate of the inventory levels of its products in the wholesaler distribution channel that remain subject to chargebacks, and specific contractual and historical chargeback rates. The Company estimates its Medicaid rebate and commercial contractual rebate accruals based on estimates of usage by rebate-eligible customers, estimates of the level of inventory of its products in the distribution channel that remain potentially subject to those rebates, and terms of its contractual and regulatory obligations.

At December 31, 2006 and 2005, the allowance for chargebacks and rebates was $4.0 million and $2.6 million, respectively.

Prompt pay discounts.  As incentive to expedite cash flow, the Company offers some customers a prompt pay discount whereby if they pay their accounts within 30 days of product shipment, they may take a 2% discount. As a result, the Company must estimate the likelihood that its customers will take the discount at the time of product shipment. In estimating the allowance for prompt pay discounts, the Company relies on past history of its customers’ payment patterns to determine the likelihood that future prompt pay discounts will be taken and for those customers that historically take advantage of the prompt pay discount, the Company increases the allowance accordingly.

At December 31, 2006 and 2005, the allowance for prompt pay discounts was $0.4 million and $0.5 million, respectively.

The Company has adjusted the allowances for product returns, chargebacks and rebates and prompt pay discounts in the past based on its actual experience, and the Company will likely be required to make adjustments to these allowances in the future. The Company continually monitors the allowances and makes adjustments when the Company believes actual experience may differ from estimates.

Cost of Sales

Cost of sales includes the cost of product sold, royalties due on the sales of the products and the distribution and logistics costs related to selling the products. Cost of sales does not include product rights amortization expense as it is shown separately.

Risks and Uncertainties

The Company is subject to risks common to companies in the pharmaceutical industry including, but not limited to, uncertainties related to regulatory approvals, dependence on key products, dependence on key customers and suppliers, and protection of proprietary rights.

Advertising Costs

The Company expenses all advertising, promotional and publication costs as incurred. Total advertising costs were approximately $7.2 million, $6.8 million, and $5.6 million for the years ended December 31, 2006, 2005 and 2004, respectively.

F-10

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Translation of Foreign Currencies

The functional currencies of the Company’s foreign subsidiaries are the local currencies, primarily the British pound sterling, euro and Swiss franc. In accordance with SFAS No. 52, Foreign Currency Translation, assets and liabilities are translated using the current exchange rate as of the balance sheet date. Income and expenses are translated using a weighted average exchange rate over the period ending on the balance sheet date. Adjustments resulting from the translation of the financial statements of the Company’s foreign subsidiaries into U.S. dollars are excluded from the determination of net loss and are accumulated in a separate component of stockholders’ equity. Foreign exchange transaction gains and losses are included in the results of operations.

At December 31, 2006 and 2005 the accumulated other comprehensive income due to foreign currency translation adjustments was $9.4 million and $0.1 million, respectively, and the unrealized gain (loss) from available for sale securities was $1.9 million and $(0.3) million, respectively.

Comprehensive Income

The Company reports comprehensive income in accordance with the provisions of SFAS No. 130, Reporting Comprehensive Income. Comprehensive income includes all changes in equity for cumulative translation adjustments resulting from the consolidation of foreign subsidiaries and unrealized gains and losses on available-for-sale securities.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents, investments and accounts receivable. The Company maintains its cash, cash equivalent and investment balances in the form of money market accounts, debt and equity securities and overnight deposits with financial institutions that management believes are creditworthy. The Company has no financial instruments with off-balance-sheet risk of accounting loss.

The Company’s products are sold both to wholesale distributors and directly to hospitals and clinics. Ongoing credit evaluations of customers are performed and collateral is generally not required. Many of the international hospitals and clinics are government supported and may take a significant amount of time to collect. U.S. and international accounts receivable consisted of the following at December 31, 2006 and 2005 (in thousands).

	2006		2005
U.S. accounts receivable, net of allowances	$	14,748	$	11,196
International accounts receivable, net of allowances		25,551		21,017
Total accounts receivable, net of allowances	$	40,299	$	32,213

At December 31, 2006 and 2005, the accounts receivable balance of our customer, Oncology Supply, represented 15% and 11%, respectively, of total net accounts receivable. No other individual customer had accounts receivable balances greater than 10% of total net accounts receivable.

The Company maintains an allowance for potential credit losses based on the financial condition of customers and the aging of accounts. Losses have been within management’s expectations. The provision for bad debts for the years ended December 31, 2006, 2005 and 2004 was $0, $0.7 million and $0.6 million, respectively.

F-11

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net sales generated as a percent of total consolidated net sales, for the three largest customers in the U.S. were as follows for the years ended December 31, 2006, 2005 and 2004:

	Years Ended
	December 31,
	2006			2005			2004
Oncology Supply		19	%		17	%		11	%
Cardinal Health		11	%		15	%		11	%
McKesson Corporation		9	%		14	%		14	%

Net sales generated from international customers were individually less than 5% of consolidated net sales.

Research and Development Costs

Research and development costs include salaries, benefits and other personnel related expenses as well as fees paid to third parties for services. Such costs are expensed as incurred.

Acquired In-Process Research

The Company has acquired and expects to continue to acquire the rights to develop and commercialize new drug opportunities. The upfront payment to acquire a new drug candidate, as well as future milestone payments, will be immediately expensed as acquired in-process research provided that the new drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no alternative future use.

Fair Value of Financial Instruments

Financial instruments consist of cash and cash equivalents, investments, accounts receivable, accounts payable and accrued liabilities. The carrying values of these instruments, other than investments which are recorded at cost, approximate fair value due to their short-term nature. Investments are recorded at fair value.

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 consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Share-Based Compensation

On January 1, 2006, the Company adopted SFAS No. 123R, “Share-Based Payment” which establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period. Under SFAS No. 123R, share-based compensation cost is determined at the grant date using an option pricing model. The value of the award that is ultimately expected to vest is recognized as expense on a straight line basis over the employee’s requisite service period. The Company adopted SFAS No. 123R using the modified prospective method. Under this method, prior periods are not restated for comparative purposes. Rather, compensation for awards outstanding, but not vested, at the date of adoption using the grant date value determined under SFAS No. 123, “Accounting for Share-Based Compensation,” as well as new awards granted after the date of adoption using the grant date value under SFAS No. 123R will be recognized as expense in the statement of operations over the remaining service period of the award.

The Company has estimated the fair value of each award using the Black-Scholes option pricing model, which was developed for use in estimating the value of traded options that have no vesting restrictions and that are freely

F-12

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

transferable. The Black-Scholes model considers, among other factors, the expected life of the award and the expected volatility of the Company’s stock price.

On November 10, 2005 the Financial Accounting Standards Board issued Staff Position No. FAS 123R-3, Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards (“FAS 123R-3”). The Company has elected to adopt the alternative transition method provided in FAS 123R-3 for calculating the tax effects of stock-based compensation pursuant to SFAS No. 123R. The alternative transition method includes a simplified method to establish the beginning balance of the additional paid-in capital pool related to the tax effects of employee stock-based compensation expense, which is available to absorb tax deficiencies recognized subsequent to the adoption of SFAS No. 123R.

Prior to the adoption of SFAS No. 123R, the Company accounted for share-based payment awards to employees and directors in accordance with APB 25 as allowed under SFAS No. 123. In accordance with APB 25, the Company recorded deferred compensation in connection with stock options granted in 2003 under the intrinsic value method. The amount of deferred compensation was equal to the difference between the exercise price of the stock options granted to employees and the higher fair market value of the underlying stock at the date of grant. The deferred compensation was recognized ratably over the vesting period of these options as stock-based compensation expense up to the adoption of SFAS No. 123R. Upon adoption, the unamortized deferred compensation balance was eliminated with a corresponding reduction to additional paid in capital.

Adoption of SFAS No. 123R

Employee share-based compensation expense recognized in 2006 was calculated based on awards ultimately expected to vest and has been reduced for estimated forfeitures at a rate of 15 percent, based on the Company’s historical option cancellations. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Share-based compensation expense recognized under SFAS No. 123R was (in thousands, except for per share data):

	2006
Research and development	$	856
Selling, general and administrative		2,582
Total share-based compensation expense	$	3,438
Share-based compensation expense, per common share:
Basic and Diluted	$	0.11

F-13

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pro Forma Information for Periods Prior to Adoption of SFAS No. 123R

The following pro forma net income and earnings per share were determined as if we had accounted for employee share-based compensation for our employee stock plans under the fair value method prescribed by SFAS No. 123. (in thousands, except for per share data):

	2005			2004
Net income (loss) as reported	$	2,269		$	(17,537	)
Plus: share-based compensation recognized under the intrinsic value method		199			475
Less: share-based compensation under fair value method		(23,619	)		(3,821	)
Pro forma net loss	$	(21,151	)	$	(20,883	)
Net income (loss) per common share:
Basic and diluted, as reported	$	(0.07	)	$	(0.63	)
Basic and diluted, pro forma	$	(0.66	)	$	(0.75	)

As further discussed in Note 11, the pro forma share-based compensation expense for the year ended December 31, 2005 includes $15.8 million of expense associated with the acceleration of vesting of certain options in 2005 to reduce future non-cash compensation expense that would have been recorded following the effective date of SFAS No. 123R.

Net Income (Loss) Per Share

The Company applies SFAS No. 128, “Earnings per Share,” which establishes standards for computing and presenting earnings per share. Basic net income (loss) per common share is calculated by dividing net income (loss) applicable to common stockholders by the weighted average number of unrestricted common shares outstanding for the period. Diluted net loss per common share is the same as basic net loss per common share for the years ended December 31, 2006 and 2004, since the effects of potentially dilutive securities were antidilutive for these periods. Diluted net income per common share for the year ended December 31, 2005 is calculated by dividing net income applicable to common stockholders by the weighted average number of common shares outstanding for the period increased to include all additional common shares that would have been outstanding assuming the issuance of potentially dilutive common shares. Potential incremental common shares include shares of common stock issuable upon exercise of stock options outstanding during the periods presented.

A reconciliation of the weighted average number of shares used to calculate basic and diluted net income (loss) per common share is as follows (in thousands):

	Year Ended December 31,
	2006		2005		2004
Basic		32,016		31,837		27,933
Effect of dilutive securities:
Stock Options		—		1,039		—
Diluted		32,016		32,876		27,933

The total number of potential common shares excluded from the diluted earnings per share computation because they were anti-dilutive was 3.1 million, 1.1 million and 1.6 million for the years ended December 31, 2006, 2005 and 2004, respectively.

F-14

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes.  Under the provisions of SFAS No. 109, a deferred tax liability or asset (net of a valuation allowance) is provided in the financial statements by applying the provisions of applicable tax laws to measure the deferred tax consequences of temporary differences that will result in net taxable or deductible amounts in future years as a result of events recognized in the financial statements in the current or preceding years.

Recently Issued Accounting Standards

FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 10”

FIN 48 was issued in July 2006 to clarify the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are effective for the Company beginning on January 1, 2007. The provisions of FIN 48 are to be applied to all tax positions upon initial adoption of this standard. Only income tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of FIN 48. The cumulative effect of applying the provisions of FIN 48 would be reported as an adjustment to the opening balance of retained earnings for that fiscal year. We do not expect that the adoption of FIN 48 will have a material effect on our consolidated financial position or results of operations.

Staff Accounting Bulletin (SAB 108), “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”

In September 2006, the SEC staff issued Staff Accounting Bulletin (“SAB”) 108 “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108). SAB 108 requires that public companies utilize a “dual-approach” to assessing the quantitative effects of financial misstatements. This dual approach includes both an income statement focused assessment and a balance sheet focused assessment. The guidance in SAB 108 must be applied to annual financial statements for the Company as of December 31, 2006. The adoption of SAB 108 did not have an effect on our consolidated financial position or results of operations.

3.   Geographic Information

Foreign and domestic financial information (in thousands):

			United			Foreign
	Year		States			Entities			Total
Net sales		2006	$	140,955		$	97,691		$	238,646
		2005		130,886			90,358			221,244
		2004		55,642			74,529			130,171
Operating income (loss)		2006	$	(60,834	)	$	(29,330	)	$	(90,164	)
		2005		21,469		$	(16,880	)		4,589
		2004		(16,472	)		4,373			(12,099	)
Total assets		2006	$	129,331		$	197,401		$	326,732
		2005		244,316			188,314			432,630

F-15

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.   Short-term Investments

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of available-for-sale investments by security classification at December 31, 2006 and 2005, were as follows (in thousands):

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
December 31, 2006	Cost		Gain		Loss			Value
Government agencies	$	8,574	$	—	$	(6	)	$	8,568
Corporate debt securities		48,854		11		(8	)		48,857
Auction rate notes		7,311		—		—			7,311
Asset backed securities		11,588		—		(14	)		11,574
Total securities	$	76,327	$	11	$	(28	)	$	76,310

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
December 31, 2005	Cost		Gain		Loss			Value
Government agencies	$	57,123	$	—	$	(171	)	$	56,952
Corporate debt securities		42,926		38		(124	)		42,840
Auction rate notes		30,671		1		—			30,672
Asset backed securities		22,559		2		(62	)		22,499
Total securities	$	153,279	$	41	$	(357	)	$	152,963

During the year ended December 31, 2006, 2005, and 2004, the gross realized gains on sales of available-for-sale securities totaled approximately $1 thousand, $1 thousand and $343 thousand respectively, and the gross realized losses totaled $(10) thousand, $(173) thousand and $(181) thousand, respectively. The gains and losses on available-for-sale securities are based on the specific identification method.

The fair value of available-for-sale securities with unrealized losses at December 31, 2006 were as follows (in thousands):

	Held less than					Held greater than
	12 Months					12 Months					Total
	Estimated		Gross			Estimated		Gross			Estimated		Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2006	Value		Loss			Value		Loss			Value		Loss
Government agencies	$	—	$	—		$	4,013	$	(6	)	$	4,013	$	(6	)
Corporate debt securities		8,237		(8	)		—		—			8,237		(8	)
Asset backed securities		—		—			8,129		(14	)		8,129		(14	)
Total securities	$	8,237	$	(8	)	$	12,142	$	(20	)	$	20,379	$	(28	)

Unrealized losses were due to changes to interest rates associated with securities with short maturities and are deemed to be temporary.

F-16

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The amortized cost and estimated fair value of the available-for-sale securities at December 31, 2006, by maturity, were as follows (in thousands):

			Estimated
Maturity	Amortized Cost		Fair Value
Due within one year	$	36,674	$	36,672
Due after one year through three years		26,519		26,512
Due after three years through five years		2,378		2,370
Due after five years		10,756		10,756
Total securities	$	76,327	$	76,310

5.   License Agreements

The cost value and accumulated amortization associated with the Company’s product rights were as follows (in thousands):

	As of December 31, 2006					As of December 31, 2005
	Gross					Gross
	Carrying		Accumulated			Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
Amortized product rights:
Thalidomide	$	103,555	$	(18,014	)	$	101,837	$	(9,690	)
Refludan		12,208		(4,908	)		12,208		(3,560	)
Innohep		5,000		(2,250	)		5,000		(1,750	)
Total product rights	$	120,763	$	(25,172	)	$	119,045	$	(15,000	)

Amortization expense of $9.8 million, $9.3 million, and $3.4 million was recorded for the years ended December 31, 2006, 2005 and 2004, respectively. The estimated amortization expense for the next five years is approximately $9.9 million per year.

Thalidomide

In 2001, the Company licensed rights relating to the development and commercial use of Thalidomide Pharmion from Celgene and separately entered into an exclusive supply agreement for thalidomide with Celgene U.K. Manufacturing II Limited (formerly known as “Penn T Limited”), or CUK, which was acquired by Celgene in 2004. Under the agreements, as amended in December 2004, in exchange for a payment of $80 million, the territory licensed from Celgene is for all countries other than the United States, Canada, Mexico, Japan and all provinces of China (except Hong Kong).The Company pays (i) Celgene a royalty/license fee of 8% on the Company’s net sales of thalidomide under the terms of the license agreements, and (ii) CUK product supply payments equal to 15.5% of the Company’s net sales of Thalidomide Pharmion under the terms of the product supply agreement. The agreements with Celgene and CUK each have a ten-year term running from the date of receipt of the Company’s first regulatory approval for Thalidomide Pharmion in the United Kingdom.

In connection with a patent dispute, associated with thalidomide, the Company agreed to make a $5.0 million payment in 2005, and additional payments of $1.0 million due in each of 2006 and 2007. Accordingly, these payment amounts have increased the thalidomide product rights.

The Company has also committed to provide funding to support further clinical development studies of thalidomide sponsored by Celgene. Under these agreements, the Company paid Celgene $2.7 million, $4.7 million, and $3.0 million in 2006, 2005 and 2004, respectively, and will pay Celgene $2.7 million in 2007.

F-17

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Vidaza

In 2001, the Company licensed worldwide rights to Vidaza (azacitidine) from Pharmacia & Upjohn Company, now part of Pfizer, Inc. Under terms of the license agreement, the Company is responsible for all costs to develop and market Vidaza and the Company pays Pfizer a royalty of 8% to 20% of Vidaza net sales. No up-front or milestone payments have or will be made to Pfizer. The license has a term extending for the longer of the last to expire of valid patent claims in any given country or ten years from the first commercial sale of the product in a particular country.

Satraplatin

In December 2005, the Company entered into a co-development and license agreement for satraplatin. Under the terms of the agreement, the Company obtained exclusive commercialization rights for Europe, Turkey, the Middle East, Australia and New Zealand, while GPC Biotech retained rights to the North American market and all other territories. The Company made an upfront payment of $37.1 million to GPC Biotech in early January 2006, including an $21.2 million reimbursement for satraplatin clinical development costs incurred prior to the agreement and $15.9 million for funding of ongoing and certain future clinical development to be conducted jointly by the Company and GPC Biotech. The Company and GPC Biotech will pursue a joint development plan to evaluate development activities for satraplatin in a variety of tumor types and will share global development costs, for which the Company has made an additional commitment of $22.2 million, in addition to the $37.1 million in initial payments. The Company will also pay GPC Biotech $30.5 million based on the achievement of certain regulatory filing and approval milestones, and up to an additional $75 million for up to five subsequent European approvals for additional indications. GPC Biotech will also receive royalties on sales of satraplatin in the Company’s territories at rates of 26% to 30% on annual sales up to $500 million, and 34% on annual sales over $500 million. Finally, the Company will pay GPC Biotech sales milestones totaling up to $105 million, based on the achievement of significant annual sales levels in its territories.

Refludan

In May 2002, the Company entered into agreements to acquire the exclusive right to market and distribute Refludan in all countries outside the U.S. and Canada. These agreements, as amended in August 2003, transferred all marketing authorizations and product registrations for Refludan in the individual countries within the Company’s territories. The Company has paid Schering an aggregate of $13 million to date and has capitalized to product rights $12.2 million which is being amortized over a 10 year period during which the Company expects to generate revenue. Additional payments of up to $7.5 million will be due Schering upon achievement of certain milestones. Because such payments are contingent upon future events, they are not reflected in the accompanying financial statements. In addition, the Company pays Schering a 14% royalty on net sales of Refludan until the aggregate royalty payments total $12.0 million measured from January 2004. At that time, the royalty rate will be reduced to 6%.

Innohep

In June 2002, the Company entered into a ten-year agreement with LEO Pharma A/S for the license of the low molecular weight heparin, Innohep. Under the terms of the agreement, the Company acquired an exclusive right and license to market and distribute Innohep in the United States. On the closing date the Company paid $5 million for the license, which is capitalized as product rights and is being amortized over a 10 year period in which the Company expects to generate significant revenues. On the closing date, the Company paid an additional $2.5 million, which was creditable against royalty payments otherwise due during the period ending March 1, 2005. In addition, the Company is obligated to pay LEO Pharma royalties at the rate of 30% of net sales on annual net sales of up to $20 million and at the rate of 35% of net sales on annual net sales exceeding $20 million, less in each case the Company’s purchase price from LEO Pharma of the units of product sold. Furthermore, the agreement

F-18

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

contains a minimum net sales clause that is effective for two consecutive two-year periods. If the company does not achieve these minimum sales levels for two consecutive years, it has the right to pay LEO Pharma additional royalties up to the amount LEO Pharma would have received had the company achieved these net sales levels. If the Company opts not to make the additional royalty payment, LEO Pharma has the right to terminate the license agreement. The second of the two-year terms concluded on December 31, 2006 and, to date, the Company has elected to make the additional royalty payments due LEO Pharma.

Amrubicin

In November, 2006, the Company acquired 100% of the outstanding common stock of Cabrellis Pharmaceuticals Corporation in order to obtain rights to amrubicin, a third-generation synthetic anthracycline currently in advanced Phase 2 development for small cell lung cancer (SCLC) in North America and the E.U. Under the terms of the acquisition agreement, the Company acquired Cabrellis Pharmaceuticals Corporation for an initial cash payment of $59.0 million ($54.3 million after deducting $4.7 million in net cash held by Cabrellis). The net payment of $54.3 million was immediately expensed as acquired in-process research as amrubicin has not yet achieved regulatory approval for marketing in North America and E.U. and, absent obtaining such approval, has no alternative future use.

In June 2005, Conforma Therapeutics Corporation (former parent corporation of Cabrellis Pharmaceuticals Corporation) obtained an exclusive license to develop and commercialize amrubicin in North America and Europe pursuant to a license agreement with Dainippon Sumitomo Pharma Co. Ltd. (“Sumitomo”). We acquired this agreement as part of our acquisition of Cabrellis in November 2006. The agreement requires us to purchase, and Sumitomo to supply, all of our requirements for product supply. We are required to pay Sumitomo a transfer price for product supply, determined as a percentage of our net sales of amrubicin. In addition, we would pay Sumitomo additional milestone payments of up to $8 million upon the receipt of regulatory approvals in the U.S. and Europe, and up to $17.5 million upon achieving certain annual sales levels in the U.S. The Sumitomo agreement expires upon the expiration of ten years from the first commercial sale of amrubicin in all countries or, if later, upon the entry of a significant generic competitor in those countries.

MethylGene

In January 2006, the Company entered into a license and collaboration agreement for the research, development and commercialization of MethylGene Inc.’s HDAC inhibitors, including its lead compound MGCD0103, in North America, Europe, the Middle East and certain other markets. Under the terms of the agreement, the Company made upfront payments to MethylGene totaling $25.0 million, including a $20.5 million license fee and the remainder as an equity investment in MethylGene common shares. The common shares are accounted for as a long-term available-for-sale security, which is classified in other assets and the unrealized gain associated with the investment of $2.0 million at December 31, 2006 is recorded to other comprehensive income.

MGCD0103 is currently in Phase 1 and 2 development and has a number of clinical studies underway. In September 2006, a milestone payment of $4.0 million was paid to MethylGene associated with the Phase 2 clinical trial. Under the terms of the license agreement, MethylGene will initially fund 40% of the preclinical and clinical development for MGCD0103 (and any additional second generation compounds) required, to obtain marketing approval in North America, while the Company will fund 60% of such costs. MethylGene will receive royalties on net sales in North America ranging from 13% to 21%. The royalty rate paid to MethylGene will be determined based upon the level of annual net sales achieved in North America and the length of time development costs are funded by MethylGene. MethylGene will have an option as long as it continues to fund development, to co-promote approved products and, in lieu of receiving royalties, to share the resulting net profits equally with the Company. If MethylGene exercises its right to discontinue development funding, the Company will be responsible for 100% of development costs incurred thereafter.

F-19

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In all other licensed territories, which include Europe, the Middle East, Turkey, Australia, New Zealand, South Africa and certain countries in Southeast Asia, the Company is responsible for development and commercialization costs and MethylGene will receive a royalty on net sales in those markets at a rate of 10% to 13% based on annual net sales.

Milestone payments to MethylGene for MGCD0103 could reach $141.0 million, based on the achievement of significant development, regulatory and sales goals. Furthermore, up to $100.0 million for each additional HDAC inhibitor may be paid, also based on the achievement of significant development, regulatory and sales milestones.

6.   Property and Equipment

	December 31,
	2006			2005
	(In thousands)
Property and equipment:
Computer hardware and software	$	5,348		$	5,640
Furniture and fixtures		2,012			1,978
Equipment		2,073			1,301
Leasehold improvements		4,839			4,498
		14,272			13,417
Less accumulated depreciation		(7,151	)		(6,811	)
Total property and equipment, net	$	7,121		$	6,606

Depreciation expense was $2.4 million, $2.4 million, and $2.2 million for the years ended December 31, 2006, 2005 and 2004, respectively.

7.   Accrued and Other Current Liabilities

	December 31,
	2006		2005
	(In thousands)
Accrued and other current liabilities:
Royalties payable	$	10,893	$	10,697
Income taxes payable		262		3,175
Product rights, deferred licensing revenue and notes payable		990		1,142
Accrued salaries and benefits		9,191		6,103
Accrued product development and operating expenses		17,023		15,596
Co-development and licensing agreement payable (Note 6)		—		37,100
	$	38,359	$	73,813

F-20

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8.   Other Long-term Liabilities

	December 31,
	2006			2005
	(In thousands)
Product rights payable	$	870		$	1,870
Deferred licensing revenue		994			—
Notes payable		71			212
		1,935			2,082
Current portion of product rights, deferred licensing revenue and notes payable		(990	)		(1,142	)
Other long term liabilities	$	945		$	940

Maturities of product rights and notes payable are as follows (in thousands):

2007	$	938
2008		3
2009		—
2010		—
2011		—
	$	941

9.   Leases and Other Commitments

The Company leases office space and equipment under various noncancelable operating lease agreements. One of these agreements has a renewal term which allows the Company to extend this lease up to six years, or through 2013. Rental expense was $3.3 million, $3.5 million, and $2.9 million for the years ended December 31, 2006, 2005 and 2004, respectively.

As of December 31, 2006, future minimum rental commitments, by fiscal year and in the aggregate, for the Company’s operating leases are as follows (in thousands):

2007	$	4,442
2008		3,886
2009		3,634
2010		2,974
2011 and thereafter		8,819
Total minimum lease payments	$	23,755

10.   Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes.  Under the provisions of SFAS No. 109, a deferred tax liability or asset (net of a valuation allowance) is provided in the financial statements by applying the provisions of applicable tax laws to measure the deferred tax consequences of temporary differences that will result in net taxable or deductible amounts in future years as a result of events recognized in the financial statements in the current or preceding years.

At December 31, 2006, the Company has federal, state, and foreign net operating loss carryforwards for income tax purposes of approximately $171 million, which will expire in the years 2019 through 2026 if not utilized. The majority of the tax loss carryforwards relate to the U.S. ($22.3 million) and Switzerland

F-21

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

($139.8 million). The U.S. net operating loss carryforward includes tax deductions totaling $8.3 million attributable to the exercise of stock options. If these benefits are realized for tax purposes, the amount of the benefit will increase additional paid-in capital and will not be reflected in the Company’s provision for income taxes. Stock option deductions of $2.1 million that will be reflected on the Company’s income tax return are excluded from the calculation of the related deferred tax asset, due to the adoption of SFAS No. 123(R). At December 31, 2006, the Company had research and development and orphan drug credit carryforwards in the U.S. of approximately $7.3 million, which will expire in the years 2021 through 2026 if not utilized.

The Internal Revenue Code contains provisions that limit the annual utilization of U.S. net operating loss and tax credit carryforwards if there has been a “change of ownership” as described in Section 382 of the Code. Such an ownership change occurred for the Company in 2006. The annual utilization of net operating loss and credit carryforwards generated prior to the date of ownership change is approximately $12 million.

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

	December 31,
	2006			2005
Deferred tax assets:
Net operating loss carryforwards	$	25,885		$	25,283
Credit carryforwards		7,343			7,212
Product acquisition costs		5,765			—
Organization costs		699			2,044
Allowance on accounts receivable		1,486			1,177
Share-based compensation expense		627			—
Depreciation		277			326
Other		335			380
Total gross deferred tax assets		42,417			36,422
Valuation allowance		(41,473	)		(35,758	)
Deferred tax assets, net of valuation allowance		944			664
Deferred tax liabilities:
Amortization of product rights		(2,450	)		(2,570	)
Prepaid expenses		(853	)		(891	)
Total gross deferred tax liabilities		(3,303	)		(3,461	)
Net deferred tax liability	$	(2,359	)	$	(2,797	)

A valuation allowance was recorded in 2006 and 2005 due to the Company’s inability to determine if it is more likely than not that the deferred tax asset will be realized in future periods.

F-22

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s effective tax rate differs from the federal income tax rate for the following reasons:

	Years Ended
	December 31,
	2006			2005
Expected federal income tax (benefit) expense at statutory rate		(34.0	)%		34.0	%
Effect of nondeductible research and development costs		22.2	%		—
Effect of permanent differences		0.7	%		3.8	%
State income tax, net of federal benefit		0.9	%		3.5	%
Effect of tax credits		(0.2	)%		(6.3	)%
Effect of foreign operations		12.6	%		86.4	%
Utilization of U.S. and foreign tax loss carryforwards		(5.8	)%		(84.4	)%
Deferred tax asset valuation allowance		12.9	%		42.5	%
		9.3	%		79.5	%

The provision (benefit) for income taxes is comprised of the following (in thousands):

	Years Ended December 31,
	2006			2005			2004
Current provision:
Federal	$	310		$	562		$	—
State		1,170			584			619
Foreign		6,641			8,297			7,648
Total		8,121			9,443			8,267
Deferred provision:
Federal		(482	)		7,627			(8,284	)
State		(39	)		717			(714	)
Foreign		(6,027	)		(5,464	)		(2,236	)
Total		(6,548	)		2,880			(11,234	)
Deferred tax valuation allowance		6,201			(3,529	)		10,820
Total	$	7,774		$	8,794		$	7,853

The Company reported income (loss) before taxes from operations within the U.S. and foreign operations for the years ended December 31, 2006, 2005, and 2004 as follows (in thousands).

	December 31,
	2006			2005			2004
Income (loss) before taxes from U.S. operations	$	(54,054	)	$	33,002		$	(14,027	)
Income (loss) before taxes from foreign operations		(29,184	)		(21,939	)		4,343
Total income (loss) before taxes from operations	$	(83,238	)	$	11,063		$	(9,684	)

No provision has been made for income taxes on the undistributed earnings of the Company’s foreign subsidiaries of approximately $43.2 million at December 31, 2006 as the Company intends to indefinitely reinvest such earnings.

F-23

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11.   Stock Option Plans

In 2000, the Company’s Board of Directors approved the 2000 Stock Incentive Plan (the “2000 Plan”). At December 31, 2006, a total of 5,758,000 shares of common stock are reserved under the plan. The 2000 Plan provides for awards of both nonstatutory stock options and incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and stock purchase rights to purchase shares of the Company’s common stock. A total of 1,650,035 shares of common stock are available for future stock option issuance to eligible employees and consultants of the Company as of December 31, 2006.

In 2001, the Company’s Board of Directors approved the 2001 Non-Employee Director Stock Option Plan (the “2001 Plan”). At December 31, 2006, 625,000 shares of common stock are reserved under the plan. The 2001 Plan provides for awards of nonstatutory stock options only. A total of 286,250 shares of common stock are available for future stock option issuance to directors of the Company as of December 31, 2006.

The 2000 Plan and the 2001 Plan are administered by the compensation committee of the Board of Directors, which has the authority to select the individuals to whom awards will be granted and to determine whether and to what extent stock options and restricted stock awards are to be granted, the number of shares of common stock to be covered by each award, the vesting schedule of stock options, generally over a period of four years, and all other terms and conditions of each award. The grants expire seven and ten years from the date of grant for the 2000 and 2001 Plans, respectively.

In September 2003, the Board of Directors amended both the 2000 and 2001 plans to allow for automatic “evergreen” annual additions to the stock options available for grant not to exceed 500,000 shares and 50,000 shares, respectively.

In June 2005, shareholders approved an amendment to both the 2000 and 2001 plans to increase the number of common stock reserved for issuance by 1,500,000 and 100,000 shares, respectively.

Valuation assumptions used to determine fair value of share-based compensation

The employee share-based compensation expense recognized under SFAS No. 123R and presented in the pro forma disclosure required under SFAS No. 123 was determined using the Black-Scholes option valuation model. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. The weighted-average assumptions used include:

	2006			2005			2004
Risk-free interest rate		4.7	%		4.1	%		2.9	%
Expected stock price volatility		42	%		49	%		76	%
Expected option term until exercise		4.3 years			4.0 years			4.6 years
Expected dividend yield		0	%		0	%		0	%

The risk free interest rate was derived from the US Treasury yield in effect at the time of grant with terms similar to the contractual life of the option. The expected life of the options was estimated using peer data of companies in the life science industry with similar equity plans.

The weighted-average fair value per share was $8.73, $10.36 and $20.67 for stock options granted in the years ended December 31, 2006, 2005 and 2004, respectively.

As of December 31, 2006, there was approximately $9.3 million of total unrecognized compensation cost related to nonvested stock options granted under the Company’s plans. This cost is expected to be recognized over a weighted average period of 3.0 years.

F-24

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the option activity for the year ended December 31, 2006 was as follows:

						Weighted Average
						Remaining		Aggregate Intrinsic
				Weighted Average		Contractual Term		Value
	Number of Shares			Exercise Price		(years)		(In thousands)
Outstanding at January 1, 2006		3,386,858		$	20.60
Granted		802,293		$	21.66
Exercised		(189,769	)	$	6.64
Forfeited		(711,823	)	$	31.72
Outstanding, December 31, 2006		3,287,559		$	19.26		5.13	$	28,173
Vested and expected to vest, December 31, 2006		2,938,136		$	19.02		4.98	$	26,589
Exercisable, December 31, 2006		1,879,835		$	18.01		4.24	$	21,246

The intrinsic value of options exercised during the years ended December 31, 2006, 2005 and 2004 was $2.6 million, $3.1 million, and $15.9 million, respectively.

The following table summarizes the options that are outstanding and exercisable at December 31, 2006:

	Options Outstanding						Options Exercisable
			Weighted						Weighted
			Average						Average
			Remaining		Weighted				Remaining		Weighted
	Number of		Contractual		Average		Number of		Contractual		Average
	Shares		Term		Exercise		Shares		Term		Exercise
Range of Exercise Prices	Outstanding		(years)		Price		Outstanding		(years)		Price
$0.40 to 2.40		687,246		2.91	$	1.94		681,578		2.91	$	1.94
$2.41 to 18.20		404,114		4.44	$	14.77		239,948		4.02	$	14.19
$18.21 to 18.49		485,000		5.93	$	18.49		121,250		5.93	$	18.49
$18.50 to 21.54		511,115		6.06	$	20.38		273,901		5.00	$	21.27
$21.55 to 35.15		837,866		6.21	$	25.36		207,190		5.22	$	28.86
$35.16 to 52.27		362,218		5.23	$	42.48		355,968		5.19	$	42.38
Total		3,287,559		5.13	$	19.26		1,879,835		4.24	$	18.01

The following table presents a summary of the Company’s non-vested shares of restricted stock awards as of December 31, 2006:

				Weighted Average
				Fair Value at Grant
	Number of Shares			Date
Non-vested at January 1, 2006		—			—
Granted		253,728		$	21.19
Vested		—		$	—
Forfeited		(23,850	)	$	22.52
Non-vested, December 31, 2006		229,878		$	23.38

F-25

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The restricted stock units vest over a four year period, with 25% of the award vesting on the first year anniversary date. Thereafter, the award vests in equal installments of 6.25% on a quarterly basis. Expense of approximately $0.3 million was recognized in the year ended December 31, 2006 with the remaining expense of approximately $3.5 million to be recognized over a weighted average period of 3.7 years.

On December 6, 2005, the Board of Directors approved the acceleration of vesting for certain unvested incentive and non-qualified stock options granted to employees under the 2000 stock incentive plan. Vesting acceleration was performed on employee options granted prior to April 1, 2005 with an exercise price per share of $21.00 or higher. A total of 839,815 shares of the Company’s common stock became exercisable as a result of the vesting acceleration. The acceleration of vesting was consummated in order to reduce the non-cash compensation expense that would have been recorded in future periods following the effective date of SFAS No. 123(R). The effect of this acceleration is the avoidance of future non-cash expenses of approximately $15.8 million, which is included in the pro-forma net loss for the year ended December 31, 2005 (Note 2).

On May 24, 2006, the Company completed its previously announced Offer to Exchange Outstanding Options to Purchase Common Stock (the “Offer”) under which the Company accepted for exchange certain outstanding options to purchase the Company’s common stock for cancellation and issued new options to purchase a lesser number of shares of common stock at an exercise price per share equal to the fair market value on the closing date of the Offer. The Company’s executive officers and directors were not eligible to participate in the Offer. As a result of the Offer, the Company accepted for cancellation, options to purchase an aggregate of 282,940 shares of common stock and issued new options to purchase an aggregate of 99,825 shares of common stock.

12.   Common Stock Warrants

In November 2001, the Company issued a warrant to purchase 1,701,805 shares of Series B Preferred stock at $2.09 per share to a business partner which was exercisable one year after the date of grant and expired seven years from the date of grant. Based on the estimated fair value of the warrant, development expense in the amount of $0.9 million was recorded in connection with the issuance of this warrant in 2001. Upon conversion of the Company’s preferred shares to common stock in November 2003, the number of shares available under the warrant was automatically modified to 425,451 shares of common stock at $8.36 per share.

In April 2003, the Company issued two warrants in conjunction with the convertible debt issued in 2003. The warrants had a life of five years and could be exercised immediately. A total of 424,242 shares of common stock could be purchased at a price of $11.00 per share under these warrants. The $0.7 million fair value of the warrant was classified as additional paid-in capital with a corresponding amount treated as a debt discount which was being amortized using the interest method.

In June 2004, a stock purchase warrant was exercised by one of the business partners, resulting in the issuance of 44,026 shares of common stock. The option holder utilized the cashless exercise option allowed under the warrant agreement and surrendered 16,580 shares to the Company as consideration for this exercise.

In September 2004, the second business partner exercised two stock purchase warrants which resulted in the issuance of 789,087 shares of common stock. Total exercise proceeds received by the Company were $7.6 million.

13.   Employee Stock Purchase Plan

On June 8, 2006, the stockholders of Pharmion Corporation approved the Company’s 2006 Employee Stock Purchase Plan (the “ESPP”). The initial offering period began on August 1, 2006 and ended on January 31, 2007. Thereafter, unless changed by the Board, each offering will last six months with a single purchase date on the last business day of the offering period. There are 1,000,000 shares of common stock reserved for issuance under the ESPP.

F-26

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Subject to certain maximum stock ownership restrictions, any employee who is customarily employed at least 20 hours per week and five months per calendar year by the Company and has been continuously employed at least 15 days prior to the first day of the offering period is eligible to participate in the current offering. For the initial offering, participating employees may have up to 10% of their base compensation withheld pursuant to the ESPP. Common stock purchased under the ESPP is equal to the lower of 85% of the fair value per share of common stock on the first day of the offering or 85% of the fair market value per share of common stock on the purchase date.

The Company recorded approximately $0.1 million in ESPP compensation expense during the year ended December 31, 2006. At December 31, 2006, there was approximately $0.01 million of total unrecognized compensation expense related to the ESPP, which will be recognized over the remaining one month of the offering period.

The fair value of each option element of the ESPP is estimated on the date of grant using the Black-Scholes option pricing model that applies the assumptions noted in the following table. Expected term represents the six-month offering period for the ESPP. The risk free interest rate was derived from the US Treasury yield in effect at the time of grant with terms similar to the contractual life of the purchase right.

	2006
Risk-free interest rate		5.17%
Expected stock price volatility		41%
Expected option term until exercise		0.5 years
Expected dividend yield		0%

No shares of common stock were issued for restricted stock grants or for purchases under the ESPP during the years ended December 31, 2006, 2005 and 2004.

14.   Employee Savings Plans

The Company sponsors an employee savings and retirement plan which is qualified under section 401(k) of the Internal Revenue Code for its U.S. employees. Under the sponsored plan, the Company matches on a discretionary basis a portion of the participant’s contributions. The matching contributions totaled $0.8 million, $0.4 million, and $0.3 million in 2006, 2005 and 2004, respectively. The Company’s international employees are eligible to participate in retirement plans, subject to the local laws that are in effect for each country. The Company made contributions of $0.5 million annually for these employees in 2006, 2005 and 2004, respectively.

15.   Related Parties

As part of the relocation assistance provided to three officers, during 2002, the Company made loans totaling $400,000 to these individuals. At December 31, 2005 the balance outstanding for these loans was $63,000. The loans were paid in full during 2006.

F-27

PHARMION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

16.   Quarterly Information

	March 31,			June 30,			September 30,			December 31,
	2006			2006			2006			2006
	(In thousands, except per share data)
	(Unaudited)
Net sales	$	56,594		$	60,366		$	61,636		$	60,050
Cost of sales, inclusive of royalties, exclusive of product rights amortization		15,213			16,672			16,629			16,643
Acquired in-process research		20,479			—			4,000			54,284
Loss from operations		(19,183	)		(3,129	)		(2,587	)		(65,265	)
Net loss		(19,736	)		(3,514	)		(3,551	)		(64,211	)
Net loss applicable to common shareholders per share — basic	$	(0.62	)	$	(0.11	)	$	(0.11	)	$	(2.00	)
Net loss applicable to common shareholders per share — diluted	$	(0.62	)	$	(0.11	)	$	(0.11	)	$	(2.00	)

	March 31,		June 30,		September 30,		December 31,
	2005		2005		2005		2005
	(In thousands, except per share data)
	(Unaudited)
Net sales	$	51,737	$	56,257	$	56,805	$	56,445
Cost of sales, inclusive of royalties, exclusive of product rights amortization		13,947		15,120		15,355		15,378
Acquired in-process research		—		—		—		21,243
Income (loss) from operations		5,408		6,492		9,725		(17,036	)
Net income (loss)		4,270		5,554		8,828		(16,383	)
Net income (loss) applicable to common shareholders per share — basic	$	0.13	$	0.17	$	0.28	$	(0.51	)
Net income (loss) applicable to common shareholders per share — diluted	$	0.13	$	0.17	$	0.27	$	(0.51	)

F-28

SCHEDULE II

Valuation and Qualifying Accounts

			Additions
			Charged
	Balance at		to
	Beginning		Expense					Balance at End
Years Ended December 31,	of Period		or Sales		Deductions			of Period
	(In thousands)
2006
Allowances for chargebacks, product returns, cash discounts and doubtful accounts	$	3,573	$	14,386	$	(13,248	)	$	4,711
Inventory reserve		42		371		(183	)		230
2005
Allowances for chargebacks, product returns, cash discounts and doubtful accounts	$	2,210	$	13,437	$	(12,074	)	$	3,573
Inventory reserve		360		606		(924	)		42
2004
Allowances for chargebacks, product returns, cash discounts and doubtful accounts	$	819	$	7,419	$	(6,028	)	$	2,210
Inventory reserve		1,387		1,366		(2,393	)		360

S-1

EXHIBIT INDEX

Exhibit
Number			Description of Document
	2	.1(1)	Stock Purchase Agreement, dated March 7, 2003, by and among Pharmion France and the shareholders of Gophar S.A.S.
	3	.1(1)	Amended and Restated Certificate of Incorporation.
	3	.2(1)	Amended and Restated Bylaws.
	4	.1(1)	Specimen Stock Certificate.
	4	.2(1)	Amended and Restated Investors’ Rights Agreement, dated as of November 30, 2001, by and among the Registrant, the founders and the holders of the Registrant’s Preferred Stock.
	4	.3(1)	Series C Omnibus Amendment Agreement, dated as of October 11, 2002 to Amended and Restated Investors’ Rights Agreement, dated as of November 30, 2001, by and among the Registrant, the founders and the holders of the Registrant’s Preferred Stock.
	4	.4(1)	Amendment, dated as of April 8, 2003 to Amended and Restated Investors’ Rights Agreement, dated as of November 30, 2001, by and among the Registrant, the founders and the holders of the Registrant’s Preferred Stock.
	4	.5(1)	Series B Preferred Stock Purchase Warrant, dated November 30, 2001, issued by the Registrant to Celgene Corporation.
	4	.6(1)	Senior Convertible Promissory Note, dated April 8, 2003, issued by the Registrant to Celgene Corporation.
	4	.7(1)	Common Stock Purchase Warrant, dated April 8, 2003, issued by the Registrant to Celgene Corporation.
	4	.8(1)	Convertible Subordinated Promissory Note, dated April 11, 2003, issued by the Registrant to Penn Pharmaceuticals Holdings Limited.
	4	.9(1)	Common Stock Purchase Warrant, dated April 11, 2003, issued by the Registrant to Penn Pharmaceuticals Holdings Limited.
	10	.1(1)*	Amended and Restated 2001 Non-Employee Director Stock Option Plan.
	10	.2(1)*	Amended and Restated 2000 Stock Incentive Plan.
	10	.3(1)	Securities Purchase Agreement, dated as of April 8, 2003, by and between the Registrant and Celgene Corporation.
	10	.4(1)	Securities Purchase Agreement, dated as of April 11, 2003, by and between the Registrant and Penn Pharmaceuticals Holdings Limited.
	10	.5(1)	Amended and Restated Distribution and License Agreement, dated as of November 16, 2001, by and between Pharmion GmbH and Penn T Limited.
	10	.6(1)	Amendment No. 1, dated March 4, 2003, to Amended and Restated Distribution and License Agreement, dated as of November 16, 2001, by and between Pharmion GmbH and Penn T Limited.
	10	.7(1)	Supplementary Agreement, dated June 18, 2003, to Amended and Restated Distribution and License Agreement, dated as of November 16, 2001, by and between Pharmion GmbH and Penn T Limited.
	10	.8(1)	License Agreement, dated as of November 16, 2001, by and among the Registrant, Pharmion GmbH and Celgene Corporation.
	10	.9(1)	Amendment No. 1, dated March 3, 2003, to License Agreement, dated as of November 16, 2001, by and among the Registrant, Pharmion GmbH and Celgene Corporation.
	10	.10(1)	Letter Agreement, dated April 2, 2003, by and among the Registrant, Pharmion GmbH and Celgene Corporation regarding clinical funding.
	10	.11(1)	Amendment No. 2, dated April 8, 2003, to License Agreement, dated as of November 16, 2001, by and among the Registrant, Pharmion GmbH and Celgene Corporation.
	10	.12(1)	License and Distribution Agreement, dated as of June 21, 2002, by and between the Registrant and LEO Pharmaceutical Products Ltd. A/S.
	10	.13(1)	License Agreement, dated as of June 7, 2001, by and between the Registrant, Pharmion GmbH and Pharmacia & Upjohn Company.
	10	.14(1)	Interim Sales Representation Agreement, dated as of May 29, 2002, by and between Pharmion GmbH and Schering Aktiengesellschaft.
	10	.15(1)	Distribution and Development Agreement, dated as of May 29, 2002, by and between Pharmion GmbH and Schering Aktiengesellschaft.

Exhibit
Number			Description of Document
	10	.16(1)	First Amendment Agreement dated August 20, 2003 by and between Pharmion GmbH and Schering Aktiengesellschaft.
	10	.17(3)*	Employment Agreement, dated as of February 23, 2004, by and between the Registrant and Patrick J. Mahaffy.
	10	.18(3)*	Amended and Restated Employment Agreement, dated as of March 1, 2004, by and between the Registrant and Judith A. Hemberger.
	10	.19(1)*	Non-Competition and Severance Agreement, dated as of November 29, 2001, by and between the Registrant and Michael Cosgrave.
	10	.20(1)*	Employment Agreement, dated as of January 5, 2001, by and between the Registrant and Michael Cosgrave.
	10	.21(3)*	Amended and Restated Employment Agreement, dated as of March 1, 2004, by and between the Registrant and Erle Mast.
	10	.22(3)*	Amended and Restated Employment Agreement, dated as of March 1, 2004, by and between the Registrant and Gillian C. Ivers-Read.
	10	.23(1)	Office Lease, dated as of April 24, 2002, by and between the Registrant and Centro III, LLC.
	10	.24(1)	First Amendment to Lease, dated as of January 31, 2003, to Office Lease, dated as of April 24, 2002, by and between the Registrant and Centro III, LLC.
	10	.25(2)*	Addendum to Employment Agreement, dated June 15, 2004, by and between the Registrant and Michael Cosgrave.
	10	.26(4)	Amendment No. 2, dated as of December 3, 2004, to Amended and Restated Distribution and License Agreement, dated November 16, 2001, by and between Pharmion GmbH and Celgene U.K. Manufacturing II Limited (formerly Penn T Limited).
	10	.27(4)	Letter Agreement, dated as of December 3, 2004, by and between the Registrant, Pharmion GmbH and Celgene Corporation amending the Letter Agreement regarding clinical funding, dated April 2, 2003, between Registrant, Pharmion GmbH and Celgene.
	10	.28(4)	Letter Agreement, dated as of December 3, 2004, by and between the Registrant, Pharmion GmbH and Celgene Corporation amending the License Agreement, dated November 16, 2001, among Registrant, Pharmion GmbH and Celgene.
	10	.29(4)	Lease, dated as of December 21, 2004, by and between Pharmion Limited and Alecta Pensionsförsäkring Ömsesidigit.
	10	.31(5)	Supply Agreement, dated as of March 31, 2005, by and between the Registrant and Ash Stevens, Inc.
	10	.32(6)	Manufacturing and Service Contract, dated as of December 20, 2005, by and between the Registrant and Ben Venue Laboratories, Inc.
	10	.33(6)	Co-Development and License Agreement, dated as of December 19, 2005, by and between the Registrant, Pharmion GmbH and GPC Biotech AG.
	10	.34(6)	Supply Agreement, dated as of December 19, 2005, by and between the Registrant, Pharmion GmbH and GPC Biotech AG.
	10	.35	Pharmion Corporation 2000 Stock Incentive Plan (Amended and Restated effective as of December 6, 2006)
	10	.36	2000 Stock Incentive Plan Agreements (Incentive Stock Option Agreement, Nonqualified Stock Option Agreement and Restricted Stock Unit Agreement)
	10	.37	2001 Non-Employee Director Stock Option Plan Agreement
	10	.38(7)	License Agreement on Amrubicin Hydrochloride, dated as of June 23, 2005, by and between Sumitomo Pharmaceuticals Co., Ltd. and Conforma Therapeutics Corporation
	23	.1	Consent of Independent Registered Public Accounting Firm.
	24	.1	Power of Attorney (reference is made to page 52)
	31	.1	Sarbanes-Oxley Act of 2002, Section 302 Certification for President and Chief Executive Officer.
	31	.2	Sarbanes-Oxley Act of 2002, Section 302 Certification for Chief Financial Officer.
	32	.1	Sarbanes-Oxley Act of 2002, Section 906 Certification for President and Chief Executive Officer and Chief Financial Officer.

(1) Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-108122) and amendments thereto, declared effective November 5, 2003.

(2)	Incorporated by reference to our Registration Statement on Form S-1 (File No. 333-116252) and amendments thereto, declared effective June 30, 2004.
(3)	Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
(4)	Incorporated by reference to the exhibits to our Annual Report on Form 10-K for the year ended December 31, 2004.
(5)	Incorporated by reference to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.
(6)	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24B-2 of the Securities Exchange Act of 1934, as amended.
(7)	Confidential treatment has been requested with respect to certain portions of the License Agreement.
*	Management Contract or Compensatory Plan or Arrangement required to be filed pursuant to Item 15(b) of Form 10-K.

EX-10.35

EXHIBIT 10.35

PHARMION CORPORATION
2000 STOCK INCENTIVE PLAN
(Amended and Restated effective as of December 6, 2006)

1. Purpose

     The purpose of the Plan is to provide a means through which the Company and its Subsidiaries may attract able persons to become and remain employees or directors of the Company and enter and remain in the employ of the Company and its Subsidiaries and to provide a means whereby employees, directors and consultants of the Company and its Subsidiaries can acquire and maintain Common Stock ownership, or be paid incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company and its Subsidiaries and promoting an identity of interest between stockholders and these employees, directors and consultants.

     So that the appropriate incentive can be provided, the Plan provides for granting Incentive Stock Options, Nonqualified Stock Options, Restricted Stock Awards, Restricted Stock Unit Awards and other Stock-based Awards, or any combination of the foregoing.

2. Definitions

     The following definitions shall be applicable throughout the Plan.

     (a) “Affiliate” of any individual or entity means an individual or entity that is directly or indirectly through one or more intermediaries controlled by or under common control with the individual or entity specified.

     (b) “Award” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Restricted Stock Award, Restricted Stock Unit Award, or other Stock-based Award.

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

     (d) “Cause” means the Company or a Subsidiary having cause to terminate a Participant’s employment or service under any existing employment, consulting or any other agreement between the Participant and the Company or a Subsidiary. In the absence of any such an employment, consulting or other agreement, a Participant shall be deemed to have been terminated for Cause if the Committee determines that his termination of employment with the Company or a Subsidiary is on account of (A) incompetence, fraud, personal dishonesty, embezzlement, defalcation or acts of gross negligence or gross misconduct on the part of Participant in the course of his employment or services, (B) a material breach of Participant’s fiduciary duty of loyalty to the Company or a Subsidiary, (C) a Participant’s engagement in conduct that is materially injurious to the Company or a Subsidiary, (D) a Participant’s conviction by a court of competent jurisdiction of, or pleading “guilty” or “no contest” to, (x) a felony, or (y) any other criminal charge (other than minor traffic violations) which could reasonably be expected to have a material adverse impact on Company’s or a Subsidiary’s reputation and standing in the community; (E) public or consistent drunkenness by a Participant or his illegal use of narcotics which is, or could reasonably be expected to become, materially injurious to the reputation or business of the Company or a Subsidiary or which impairs, or could reasonably be expected to impair, the performance of a Participant’s duties to the Company or a Subsidiary; or (F) willful failure by a Participant to follow the lawful directions of a superior officer or the Board, representing disloyalty to the goals of the Company or a Subsidiary.

     (e) “Code” means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations under such section.

     (f) “Committee” means the Board, the Compensation Committee of the Board or such other committee of at least two people as the Board may appoint to administer the Plan.

     (g) “Common Stock” means the common stock par value $0.001 per share, of Pharmion Corporation.

     (h) “Company” means Pharmion Corporation.

     (i) “Date of Grant” means the date on which the granting of an Award is authorized or such other date as may be specified in such authorization.

     (j) “Disability”, with respect to any particular Participant, means disability as defined in such Participant’s employment, consulting or other relevant agreement with the Company or a Subsidiary or, in the absence of any such agreement, disability as defined in the long-term disability plan of the Company or a Subsidiary, as may be applicable to the Participant in question, or, in the absence of such a plan, the complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which a Participant was employed or served when such disability commenced or, if the Participant was retired when such disability commenced, the inability to engage in any substantial gainful activity, in either case as determined by the Committee based upon medical evidence acceptable to it.

     (k) “Disinterested Person” means a person who is (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, or any successor rule or regulation and (ii) an “outside director” within the meaning of Section 162(m) of the Code; provided, however, that clause (i) shall only apply with respect to grants of Awards on and following the date that the officers and directors of the Company first become subject to Section 16(b) of the Exchange Act and clause (ii) shall apply only with respect to grants of Awards with respect to which the Company’s tax deduction could be limited by Section 162(m) of the Code if such clause did not apply.

     (l) “Eligible Person” means any (i) person regularly employed by the Company or a Subsidiary; provided, however, that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director of the Company or a Subsidiary; or (iii) consultant to the Company or a Subsidiary.

     (m) “Exchange Act” means the Securities Exchange Act of 1934.

     (n) “Fair Market Value” on a given date means (i) if the Stock is listed on a national securities exchange, the closing price on the primary exchange with which the Stock is listed and traded on such date, or, if there is no such sale on that date, then the closing price on the next date on which such a sale is reported on the primary exchange; (ii) if the Stock is not listed on a national securities exchange, the amount determined by the Committee to be the fair market value based upon a good faith attempt to value the Stock accurately and computed in accordance with applicable regulations of the Internal Revenue Service; or (iii) notwithstanding clauses (i) — (ii) above, with respect to Awards granted as of the consummation of the IPO, the price at which Stock is initially offered to the public in the IPO.

     (o) “Holder” means a Participant who has been granted an Award.

     (p) “Incentive Stock Option” means an Option granted by the Committee to a Participant under the Plan which is designated by the Committee as an Incentive Stock Option pursuant to Section 422 of the Code.

     (q) “IPO” means the initial underwritten offering of Common Stock to the public through an effective registration statement.

     (r) “Nonqualified Stock Option” means an Option granted under the Plan which is not designated as an Incentive Stock Option.

     (s) “Normal Termination” means termination of employment or service with the Company and all Subsidiaries:

(i)	Upon retirement pursuant to the retirement plan of the Company or a Subsidiary, as may be applicable at the time to the Participant in question;
(ii)	On account of Disability;
(iii)	With the written approval of the Committee; or
(iv)	By the Company or a Subsidiary without Cause.

     (t) “Option” means an Award granted under Section 7 of the Plan.

     (u) “Option Period” means the period described in Section 7(c).

     (v) “Option Price” means the exercise price set for an Option described in Section 7(a).

     (w) “Participant” means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award.

     (x) “Performance Criteria” means the one or more criteria that the Board shall select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that shall be used to establish such Performance Goals may be based on any one of, or combination of, the following: (i) earnings per share; (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation and amortization; (iv) total stockholder return; (v) return on equity; (vi) return on assets, investment, or capital employed; (vii) operating margin; (viii) gross margin; (ix) operating income; (x) net income (before or after taxes); (xi) net operating income; (xii) net operating income after tax; (xiii) pre-tax profit; (xiv) operating cash flow; (xv) sales or revenue targets; (xvi) increases in revenue or product revenue; (xvii) expenses and cost reduction goals; (xviii) improvement in or attainment of working capital levels; (xix) economic value added (or an equivalent metric); (xx) market share; (xxi) cash flow; (xxii) cash flow per share; (xxiii) share price performance; (xxiv) debt reduction; (xxv) implementation or completion of projects or processes; (xxvi) customer satisfaction; (xxvii); stockholders’ equity; and (xxviii) other measures of performance selected by the Board. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in an applicable Award agreement. The Board shall, in its sole discretion, define the manner of calculating the Performance Criteria it selects to use for such Performance Period.

     (y) “Performance Goals” means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or a relevant index. At the time of the grant of any Award, the Board is authorized to determine whether, when calculating the attainment of Performance Goals for a Performance Period: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude the effects of any statutory adjustments to corporate tax rates; and (v) to exclude the effects of any “extraordinary items” as determined under generally accepted accounting principles. In addition, the Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals.

     (z) “Performance Period” means the period of time selected by the Board over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of an Award. Performance Periods may be of varying and overlapping duration, at the sole discretion of the Board.

     (aa) “Plan” means the Company’s 2000 Stock Incentive Plan (Amended and Restated effective as of December 6, 2006).

     (bb) “Restricted Period” means, with respect to any share of Restricted Stock, the period of time determined by the Committee during which such Award is subject to the restrictions set forth in Section 8.

     (cc) “Restricted Stock” means shares of Stock issued or transferred to a Participant subject to forfeiture and the other restrictions set forth in Section 8.

     (dd) “Restricted Stock Award” means an Award of Restricted Stock granted under Section 8 of the Plan.

     (ee) “Restricted Stock Unit Award” means an Award based on notional units representing the right to receive shares of Stock or, at the discretion of the Committee, cash on the Settlement Date.

     (ff) “Restricted Stock Unit Award Agreement” means the agreement between the Company and a Participant evidencing the terms and conditions of an individual Restricted Stock Unit Award subject to the terms and conditions provided in Section 9 herein.

     (gg) “Securities Act” means the Securities Act of 1933, as amended.

     (hh) “Settlement Date” means the date on which a Restricted Stock Unit Award is settled for shares of Stock or cash, as set forth in Section 9 hereof.

     (ii) “Stock” means the Common Stock or such other authorized shares of stock of the Company as from time to time may be authorized for use under the Plan.

     (jj) “Stock Option Agreement” means the agreement between the Company and a Participant who has been granted an Option pursuant to Section 7 or 8 which defines the rights and obligations of the parties as required in Section 7(d) or 8.

     (kk) “Subsidiary” means any subsidiary of the Company as defined in Section 424(f) of the Code.

3. Effective Date, Amendments, Duration and Shareholder Approval

     The Plan, as amended and restated, is effective as of December 6, 2006. The Plan was reapproved by the stockholders of the Company on September 23, 2003, and the stockholders of the Company approved an amendment to increase the number of shares of Stock that may be offered under the Plan by an additional 1,500,000 shares on June 1, 2005, from 2,758,000 shares to 4,258,000 shares. The Plan was further amended and restated (i) effective as of February 9, 2006 to allow for the grant of Restricted Stock Unit Awards and to add restrictions on option prices and the vesting of Awards, (ii) effective as of June 8, 2006 to add restrictions on repricing, and (iii) effective as of December 6, 2006 to amend the definition of Fair Market Value.

     The expiration date of the Plan, after which no Awards may be granted hereunder, shall be September 23, 2013; provided, however, that the administration of the Plan shall continue in effect until all matters relating to the payment of Awards previously granted have been settled.

4. Administration

     The Committee shall administer the Plan. Unless otherwise determined by the Board, each member of the Committee shall, at the time he takes any action with respect to an Award under the Plan, be a Disinterested Person, but only to the extent that such definition applies. The majority of the members 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 or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee.

     Subject to the provisions of the Plan, the Committee shall have exclusive power to:

     (a) Select the Eligible Persons to participate in the Plan;

     (b) Determine the nature and extent of the Awards to be made to each Eligible Person;

     (c) Determine the time or times when Awards will be made to Eligible Persons;

     (d) Determine the duration of each Option Period and Restricted Period and the Settlement Date;

     (e) Determine the conditions to which the payment of Awards may be subject;

     (f) Prescribe the form of Stock Option Agreement or other form or forms evidencing Awards; and

     (g) Cause records to be established in which there shall be entered, from time to time as Awards are made to Participants, the date of each Award, the number of Incentive Stock Options, Nonqualified Stock Options, shares of Restricted Stock, Restricted Stock Unit Awards and other Stock-based Awards granted by the Committee to each Participant, the expiration date, the Settlement Date, the Option Period and the duration of any applicable Restricted Period.

     The Committee shall have the authority to interpret the Plan and, subject to the provisions of the Plan, to establish, adopt, or revise such rules and regulations and to make all such determinations relating to the Plan as it may deem necessary or advisable for the administration of the Plan. The Committee’s interpretation of the Plan or any documents evidencing Awards granted pursuant thereto and all decisions and determinations by the Committee with respect to the Plan shall be final, binding, and conclusive on all parties unless otherwise determined by the Board. Notwithstanding anything to the contrary herein, unless the stockholders of the Company have approved such an action within twelve (12) months prior to such an event, neither the Board nor the Committee shall have the authority to reduce the Option Price of any outstanding Option under the Plan, whether by amendment, exchange, or other action having the effect of a reduction in the Option Price of an outstanding Option.

5. Grant of Awards; Shares Subject to the Plan

     The Committee may, from time to time, grant Awards of Options, Restricted Stock, Restricted Stock Unit Awards and other Stock-based Awards to one or more Eligible Persons; provided, however, that:

     (a) Subject to Section 12, the aggregate number of shares of Stock reserved and available for issuance pursuant to Awards under the Plan is 4,258,000, as increased annually on the date of each annual meeting of the Company’s stockholders following an IPO by an amount of shares equal to the lesser of (i) 500,000 shares of Stock or (ii) such lesser number of shares as determined by the Board;

     (b) Except as set forth in Section 5(d), such shares shall be deemed to have been used in payment of Awards only to the extent they are actually delivered and not where the Fair Market Value equivalent of such shares for a Stock-based Award is paid in cash. In the event any Award shall be surrendered, terminate, expire, or be forfeited, the number of shares of Stock no longer subject thereto shall thereupon be released and shall thereafter be available for new Awards under the Plan;

     (c) Stock delivered by the Company in settlement of Awards under the Plan may be authorized and unissued Stock or Stock held in the treasury of the Company or may be purchased on the open market or by private purchase; and

     (d) Following the date that the exemption from the application of Section 162(m) of the Code described in Section 15 (or any other exemption having similar effect) ceases to apply to Awards, no Participant may receive Options or stock appreciation rights under the Plan with respect to more than 125,000 shares of Stock in any one year. For this purpose, such shares shall be deemed to have been used in payment of Awards whether they are actually delivered or where the Fair Market Value equivalent of such shares for a stock appreciation right is paid in cash.

6. Eligibility

     Participation shall be limited to Eligible Persons who have received written notification from the Committee, or from a person designated by the Committee, that they have been selected to participate in the Plan.

7. Discretionary Grant of Stock Options

     The Committee is authorized to grant one or more Incentive Stock Options or Nonqualified Stock Options to any Eligible Person; provided, however, that no Incentive Stock Options shall be granted to any Eligible Person who is not an employee of the Company or a Subsidiary. Each Option so granted shall be subject to the following conditions, or to such other conditions as may be reflected in the applicable Stock Option Agreement.

     (a) Option price. The exercise price (“Option Price”) per share of Stock for each Option shall be set by the Committee at the time of grant but, subject to Section 7(e), shall not be less than the Fair Market Value of a share of Stock at the Date of Grant. Notwithstanding the foregoing, an Incentive Stock Option or Nonqualified Stock Option may be

granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner consistent with the provisions of Section 424(a) of the Code.

     (b) Manner of exercise and form of payment. Options which have become exercisable may be exercised by delivery of written notice of exercise to the Committee accompanied by payment of the Option Price. The Option Price may be paid in cash or by bank check (acceptable to the Committee) or, in the discretion of the Committee, (i) in shares of Stock (valued at the Fair Market Value at the time the Option is exercised) having in the aggregate a value equal to the aggregate Option Price, (ii) in other property having a fair market value on the date of exercise equal to the aggregate Option Price, or (iii) following the date of the IPO, by delivering to the Committee a copy of irrevocable instructions to a stockbroker to deliver promptly to the Company an amount of sale or loan proceeds sufficient to pay the aggregate Option Price; provided, however, that the Company shall not directly or indirectly, extend or maintain credit, or arrange for the extension of credit, in the form of a personal loan to or for any director or executive officer of the Company under (iii) above, or otherwise, in violation of Section 402 of the Sarbanes-Oxley Act of 2002.

     (c) Option Period and Expiration. Options shall vest and become exercisable in such manner and on such date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the “Option Period”); provided, however, that, except in the event of death or Disability of the Holder or upon any corporate transaction described in clauses A, B or C of Section 12 in which such Option is not assumed or continued: (i) no Options that vest based on the satisfaction of Performance Goals shall vest at a rate more favorable to the Holder than over a one (1)-year period measured from the date of grant; and (ii) other than Options that vest based on the satisfaction of Performance Goals, no Option shall vest at a rate more favorable to the Holder than over a three (3)-year period measured from the date of grant (which vesting may be in monthly, quarterly or other ratable increments determined by the Board in its discretion). In no event shall an Option vest over a period of more than ten (10) years. Unless otherwise specifically determined by the Committee, the vesting of an Option shall occur only while the Participant is employed or rendering services to the Company or its Subsidiaries and all vesting shall cease upon a Holder’s termination of employment or services for any reason. If an Option becomes exercisable in installments, such installments or portions thereof which become exercisable shall remain exercisable until the Option expires. Unless otherwise stated in the applicable Option Agreement, the Option shall expire earlier than the end of the Option Period in the following circumstances:

(i) If prior to the end of the Option Period, the Holder shall undergo a Normal Termination, the Option shall expire on the earlier of the last day of the Option Period or the date that is three months after the date of such Normal Termination. In such event, the Option shall remain exercisable by the Holder until its expiration, but only to the extent the Option was vested and exercisable at the time of such Normal Termination.

(ii) If the Holder dies prior to the end of the Option Period and while still in the employ or service of the Company or a Subsidiary, or within three months of Normal Termination, the Option shall expire on the earlier of the last day of the Option Period or the date that is twelve months after the date of death of the Holder. In such event, the Option shall remain exercisable by the person or persons to whom the Holder’s rights under the Option pass by will or the applicable laws of descent and distribution until its expiration, but only to the extent the Option was vested and exercisable by the Holder at the time of death.

(iii) If the Holder ceases employment or service with the Company and all Subsidiaries for reasons other than Normal Termination or death, the Option shall expire immediately upon such cessation of employment or service.

     (d) Stock Option Agreement — Other Terms and Conditions. Each Option granted under the Plan shall be evidenced by a Stock Option Agreement, which shall contain such provisions as may be determined by the Committee and, except as may be specifically stated otherwise in such Stock Option Agreement, which shall be subject to the following terms and conditions:

(i) Each Option issued pursuant to this Section 7 or portion thereof that is exercisable shall be exercisable for the full amount or for any part thereof.

(ii)	Each share of Stock purchased through the exercise of an Option issued pursuant to this Section 7 shall be paid for in full at the time of the exercise. Each Option shall cease to be exercisable, as to any share of Stock, when the Holder purchases the share or when the Option expires.
(iii)	Options issued pursuant to this Section 7 shall not be transferable by the Holder except by will or the laws of descent and distribution and shall be exercisable during the Holder’s lifetime only by him; provided, however, that the Committee may at any time upon the request of a Holder allow for the transfer of any Option, subject to such conditions or limitations as it may establish.
(iv)	Each Option issued pursuant to this Section 7 shall vest and become exercisable by the Holder in accordance with the vesting schedule established by the Committee and set forth in the Stock Option Agreement.
(v)	Each Stock Option Agreement may contain a provision that, upon demand by the Committee for such a representation, the Holder shall deliver to the Committee at the time of any exercise of an Option issued pursuant to this Section 7 a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of an Option issued pursuant to this Section 7 shall be a condition precedent to the right of the Holder or such other person to purchase any shares. In the event certificates for Stock are delivered under the Plan with respect to which such investment representation has been obtained, the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such representation and to restrict transfer in the absence of compliance with applicable federal or state securities laws.
(vi)	Each Incentive Stock Option Agreement shall contain a provision requiring the Holder to notify the Company in writing immediately after the Holder makes a disqualifying disposition of any Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including any sale) of such Stock before the later of (a) two years after the Date of Grant of the Incentive Stock Option or (b) one year after the date the Holder acquired the Stock by exercising the Incentive Stock Option.

     (e) Incentive Stock Option Grants to 10% Stockholders. Notwithstanding anything to the contrary in this Section 7, if an Incentive Stock Option is granted to a Holder who owns stock representing more than 10% of the voting power of all classes of stock of the Company or of a Subsidiary, the Option Period shall not exceed five years from the Date of Grant of such Option and the Option Price shall be at least 110% of the Fair Market Value (on the Date of Grant) of the Stock subject to the Option.

     (f) $100,000 Per Year Limitation for Incentive Stock Options. To the extent the aggregate Fair Market Value (determined as of the Date of Grant) of Stock for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Subsidiaries) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options.

     (g) Voluntary Surrender. The Committee may permit the voluntary surrender of all or any portion of any Nonqualified Stock Option issued pursuant to this Section 7 to be conditioned upon the granting to the Holder of a new Option for the same or a different number of shares as the Option surrendered or require such voluntary surrender as a condition precedent to a grant of a new Option to such Participant. Such new Option shall be exercisable at an Option Price, during an Option Period, and in accordance with any other terms or conditions specified by the Committee at the time the new Option is granted, all determined in accordance with the provisions of the Plan without regard to the Option Price, Option Period, or any other terms and conditions of the Nonqualified Stock Option surrendered.

8. Restricted Stock Awards

     (a) Award of Restricted Stock.

(i)	The Committee shall have the authority (1) to grant Restricted Stock, (2) to issue or transfer Restricted Stock to Eligible Persons, and (3) to establish terms, conditions and restrictions applicable to such Restricted Stock, including the Restricted Period, which may differ with respect to each grantee, the time or times at which Restricted Stock shall be granted or become vested and the number of shares to be covered by each grant.
(ii)	The Holder of a Restricted Stock Award shall execute and deliver to the Company an Award agreement with respect to the Restricted Stock setting forth the restrictions applicable to such Restricted Stock. If the Committee determines that the Restricted Stock shall be held in escrow rather than delivered to the Holder pending the release of the applicable restrictions, the Holder additionally shall execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, and (ii) the appropriate blank stock powers with respect to the Restricted Stock covered by such agreements. If a Holder shall fail to execute a Restricted Stock agreement and, if applicable, an escrow agreement and stock powers, the Award shall be null and void. Subject to the restrictions set forth in Section 8(b), the Holder shall generally have the rights and privileges of a stockholder as to such Restricted Stock, including the right to vote such Restricted Stock. At the discretion of the Committee, cash dividends and stock dividends, if any, with respect to the Restricted Stock may be either currently paid to the Holder or withheld by the Company for the Holder’s account. Unless otherwise determined by the Committee no interest will accrue or be paid on the amount of any cash dividends withheld. Unless otherwise determined by the Committee, cash dividends or stock dividends so withheld by the Committee shall be subject to forfeiture to the same degree as the shares of Restricted Stock to which they relate.
(iii)	Upon the Award of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Holder to be issued and, if it so determines, deposited together with the stock powers with an escrow agent designated by the Committee. If an escrow arrangement is used, the Committee shall cause the escrow agent to issue to the Holder a receipt evidencing any stock certificate held by it registered in the name of the Holder.

     (b) Restrictions.

(i) Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable Award agreement: (1) if an escrow arrangement is used, the Holder shall not be entitled to delivery of the stock certificate; (2) the shares shall be subject to the restrictions on transferability set forth in the Award agreement; (3) the shares shall be subject to forfeiture to the extent provided in Section 8(d) and the Award Agreement and, to the extent such shares are forfeited, the stock certificates shall be returned to the Company, and all rights of the Holder to such shares and as a shareholder shall terminate without further obligation on the part of the Company.

(ii) The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of the Restricted Stock Award, such action is appropriate.

     (c) Restricted Period. The Restricted Period of Restricted Stock shall commence on the Date of Grant and shall expire from time to time as to that part of the Restricted Stock indicated in a schedule established by the Committee and set forth in a written Award agreement, provided, however, that except in the event of death or Disability or upon any corporate transaction described in clauses A, B or C of Section 12: (i) no Restricted Stock Awards that vest based on the satisfaction of Performance Goals shall vest at a rate more favorable to the Holder than over a one (1)-year period measured from the date of grant; and (ii) other than Restricted Stock Awards that vest based on the satisfaction of Performance Goals, no Restricted Stock Award shall vest at a rate more favorable to the Holder than over a three (3)-year period measured from

the date of grant (which vesting may be in monthly, quarterly or other ratable increments determined by the Board in its discretion). In no event shall a Restricted Stock Award vest over a period of more than ten (10) years.

     (d) Forfeiture Provisions. Except to the extent determined by the Committee and reflected in the underlying Award agreement, in the event a Holder terminates employment with the Company and all Subsidiaries during a Restricted Period, that portion of the Award with respect to which restrictions have not expired (“Non-Vested Portion”) shall be treated as follows.

(i)	Upon the voluntary resignation of a Participant or discharge by the Company or a Subsidiary for Cause, the Non-Vested Portion of the Award shall be completely forfeited.
(ii)	Upon Normal Termination, the Non-Vested Portion of the Award shall be prorated for service during the Restricted Period and shall be received as soon as practicable following termination.
(iii)	Upon death, the Non-Vested Portion of the Award shall be prorated for service during the Restricted Period and paid to the Participant’s beneficiary as soon as practicable following death.

     (e) Delivery of Restricted Stock. Upon the expiration of the Restricted Period with respect to any shares of Stock covered by a Restricted Stock Award, the restrictions set forth in Section 8(b) and the Award agreement shall be of no further force or effect with respect to shares of Restricted Stock which have not then been forfeited. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Holder, or his beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or stock dividends credited to the Holder’s account with respect to such Restricted Stock and the interest thereon, if any.

     (f) Stock Restrictions. Each certificate representing Restricted Stock awarded under the Plan shall bear the following legend until the end of the Restricted Period with respect to such Stock:

     “Transfer of this certificate and the shares represented hereby is restricted pursuant to the terms of a Restricted Stock Agreement, dated as of                     , between Pharmion Corporation and. A copy of such Agreement is on file at the offices of Pharmion Corporation.”

     Stop transfer orders shall be entered with the Company’s transfer agent and registrar against the transfer of legended securities.

9. Restricted Stock Unit Awards

     (a) General. Restricted Stock Unit Awards granted hereunder shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate, including the time or times at which Restricted Stock Unit Awards shall be granted or become vested and the number of shares of Stock to be covered by each grant, any of which terms and conditions may differ with respect to each grantee. The terms and conditions of each Restricted Stock Unit Award shall be evidenced by a Restricted Stock Unit Award Agreement. No shares of Stock shall be issued at the time a Restricted Stock Unit Award grant is made, and the Company will not be required to set aside a fund for the payment of any such Restricted Stock Unit Award; provided, however, that for purposes of Section 5(a) hereof, the shares of Stock subject to a Restricted Stock Unit shall be deemed reserved for issuance at the time such Restricted Stock Unit Award is granted.

     (b) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Committee may impose such restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate, provided, however, that except in the event of death or Disability or upon any corporate transaction described in clauses A, B or C of Section 12: (i) no Restricted Stock Unit Awards that vest based on the satisfaction of Performance Goals shall vest at a rate more favorable to the Holder than over a one (1)-year period measured from the date of grant; and (ii) other than Restricted Stock Awards that vest based on the satisfaction of Performance Goals, no Restricted Stock Award shall vest at a rate more favorable to the Holder than over a three (3)-year period measured from the date of grant (which vesting may be in monthly, quarterly or other ratable increments determined by the Committee in its discretion).

     (c) Settlement of Restricted Stock Unit Awards. Upon a date or dates on or following the vesting of a Restricted Stock Unit Award, as shall be determined by the Committee and set forth in a Participant’s Restricted Stock Unit Award Agreement (the “Settlement Date(s)”), unless earlier forfeited, the Company shall settle the Restricted Stock Unit Award by delivering a number of shares of Stock then vested and not otherwise forfeited under the Restricted Stock Unit Award. The Company may, in the Committee’s sole discretion, settle a Restricted Stock Unit Award in cash in lieu of the delivery of shares of Stock or partially in cash and partially in shares of Stock. A settlement in cash shall be based on the Fair Market Value of the shares of Stock otherwise to be delivered on the Settlement Date.

     (d) Creditor’s Rights. A Holder of a Restricted Stock Unit Award shall have no rights other than those of a general creditor of the Company. Restricted Stock Unit Awards represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Restricted Stock Unit Award Agreement.

     (e) Forfeiture Provisions. Except to the extent determined by the Committee and reflected in the underlying Restricted Stock Unit Award Agreement, in the event a Holder terminates employment with the Company and all Subsidiaries for any reason prior to the vesting of any Restricted Stock Unit Awards, that portion of the Restricted Stock Unit Award that has not vested on the date Holder’s employment with the Company and all Subsidiaries is terminated shall be completely forfeited.

     (f) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Committee, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.

     (g) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Stock covered by a Restricted Stock Unit Award, as determined by the Committee and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of theCommittee, such dividend equivalents may be converted into additional shares of Stock covered by the Restricted Stock Unit Award in such manner as determined by the Committee. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.

     (h) Compliance with Section 409A of the Code. Notwithstanding anything to the contrary set forth herein, any Restricted Stock Unit Award granted under the Plan that is not exempt from the requirements of Section 409A of the Code shall contain such provisions so that such Restricted Stock Unit Award will comply with the requirements of Section 409A of the Code. Such restrictions, if any, shall be determined by the Committee and contained in the Restricted Stock Unit Award Agreement evidencing such Restricted Stock Unit Award. For example, such restrictions may include, without limitation, a requirement that any Stock that is to be issued in a year following the year in which the Restricted Stock Unit Award vests must be issued in accordance with a fixed pre-determined schedule.

10. Other Stock-Based Awards

     The Committee may grant any other cash, stock or stock-related Awards to any eligible individual under this Plan that the Committee deems appropriate, including, but not limited to, stock appreciation rights, limited stock appreciation rights, phantom stock Awards, the bargain purchase of Stock and Stock bonuses. Any such benefits and any related agreements shall contain such terms and conditions as the Committee deems appropriate. Such Awards and agreements need not be identical. With respect to any benefit under which shares of Stock are or may in the future be issued for consideration other than prior services, the amount of such consideration shall not be less than the amount (such as the par value of such shares) required to be received by the Company in order to comply with applicable state law.

11. General

     (a) Additional Provisions of an Award. Awards under the Plan also may be subject to such other provisions (whether or not applicable to the benefit awarded to any other Participant) as the Committee determines appropriate including, without limitation, provisions to assist the Participant in financing the purchase of Stock upon the exercise of Options, provisions for the forfeiture of or restrictions on resale or other disposition of shares of Stock acquired under any Award, provisions giving the Company the right to repurchase shares of Stock acquired under any Award in the event the Participant elects to dispose of such shares, and provisions to comply with Federal and state securities laws and Federal and state tax withholding requirements. Any such provisions shall be reflected in the applicable Award agreement.

Anything herein to the contrary notwithstanding, the Company shall not directly or indirectly extend or maintain credit, or arrange for the extension of credit, in the form of a personal loan to or for any director or executive officer of the Company through the Plan in violation of Section 402 of the Sarbanes-Oxley Act of 2002 (“Section 402 of SOX”), and to the extent that any form of payment would, in the opinion of the Company’s counsel, result in a violation of Section 402 of SOX, such form of payment shall not be available.

     (b) Privileges of Stock Ownership. Except as otherwise specifically provided in the Plan, no person shall be entitled to the privileges of stock ownership in respect of shares of Stock which are subject to Awards hereunder until such shares have been issued to that person.

     (c) 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 governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any shares of Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received advice of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Stock to be offered or sold under the Plan. If the shares of Stock offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act, the Company may restrict the transfer of such shares and may legend the Stock certificates representing such shares in such manner as it deems advisable to ensure the availability of any such exemption.

     (d) Tax Withholding. Notwithstanding any other provision of the Plan, the Company or a Subsidiary, as appropriate, shall have the right to deduct from all Awards cash and/or Stock, valued at Fair Market Value on the date of payment (or the Settlement Date, as applicable), in an amount necessary to satisfy all Federal, state or local taxes as required by law to be withheld with respect to such Awards and, in the case of Awards paid in Stock, the Holder or other person receiving such Stock may be required to pay to the Company or a Subsidiary, as appropriate, prior to delivery of such Stock, the amount of any such taxes which the Company or Subsidiary is required to withhold, if any, with respect to such Stock. Subject in particular cases to the disapproval of the Committee, the Company may accept shares of Stock of equivalent Fair Market Value in payment of such withholding tax obligations if the Holder of the Award elects to make payment in such manner.

     (e) Claim to Awards and Employment Rights. No individual shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. Neither the Plan nor any action taken hereunder shall be construed as giving any individual any right to be retained in the employ or service of the Company or a Subsidiary.

     (f) Designation and Change of Beneficiary. Each Participant may file with the Committee a written designation of one or more persons as the beneficiary who shall be entitled to receive the rights or amounts payable with respect to an Award due under the Plan upon his death. A Participant may, from time to time, revoke or change his beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by the Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate.

     (g) Payments to Persons Other Than Participants. If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

     (h) No Liability of Committee Members. No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his behalf in his capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own fraud or willful bad faith; provided, however, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

     (i) Governing law. The Plan shall be governed by and construed in accordance with the internal laws of the State of Colorado without regard to the principles of conflicts of law thereof.

     (j) Funding. No provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Holders shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law.

     (k) Nontransferability. A person’s rights and interest under the Plan, including amounts payable, may not be sold, assigned, donated, or transferred or otherwise disposed of, mortgaged, pledged or encumbered except, in the event of a Holder’s death, to a designated beneficiary to the extent permitted by the Plan, or in the absence of such designation, by will or the laws of descent and distribution; provided, however, the Committee may, in its sole discretion, allow for transfer of Awards other than Incentive Stock Options to other persons or entities, subject to such conditions or limitations as it may establish.

     (l) Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountant of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan by any person or persons other than himself.

     (m) Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company or any Subsidiary except as otherwise specifically provided in such other plan.

     (n) Expenses. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

     (o) Pronouns. Masculine pronouns and other words of masculine gender shall refer to both men and women.

     (p) 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.

     (q) Termination of Employment. For all purposes herein, a person who transfers from employment or service with the Company to employment or service with a Subsidiary or vice versa shall not be deemed to have terminated employment or service with the Company or a Subsidiary.

     (r) Repurchase of Options or Shares. At any time prior to the IPO, the Board may in its discretion, and on terms it considers appropriate, require a Holder, or the executors or administrators of a Holder’s estate, to sell back to the Company all of his or her Restricted Stock, Options, or shares acquired through the expiration exercise of Options, in the event such optionee’s employment or service with the Company is terminated.

12. Changes in Capital Structure

     Awards granted under the Plan and any agreements evidencing such Awards, the maximum number of shares of Stock subject to all Awards under the Plan and the maximum number of shares of Stock with respect to which any one person may be granted Options or stock appreciation rights during any year may be subject to adjustment or substitution, as determined by the Committee in its sole discretion, as to the number, price or kind of a share of Stock or other consideration subject to such Awards or as otherwise determined by the Committee to be equitable (i) in the event of changes in the outstanding Stock or in the capital structure of the Company by reason of stock dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the Date of Grant of any such Award or (ii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, Participants in the Plan, or (iii) subject to Section 4 hereof, for any other reason which the Committee, in its sole discretion, determines otherwise warrants equitable adjustment because it interferes with the intended operation of the Plan. Any adjustment to Incentive Stock Options under this Section 12 shall take into account that adjustments which constitute a “modification” within the meaning of Section 424(h)(3) of the Code may have an adverse tax impact on such Incentive Stock Options and the Committee may, in its sole discretion, provide for a different adjustment or no adjustment in order to preserve the tax effects of Incentive Stock Options. Unless otherwise determined by the Committee, in its sole discretion, any adjustments or substitutions under this Section 12 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act, if applicable. Further, following the date that the exemption from the application of Section 162(m) of the Code described in Section 15 (or any other exemption having similar effect) ceases to apply to Awards, with respect to Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code, such adjustments or substitutions shall, unless otherwise determined by the Committee in its sole discretion, be made only to the extent that the Committee determines that such adjustments or substitutions may be made without a loss of deductibility for such Awards under Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.

     Notwithstanding the above, in the event of any of the following:

     A. The Company is merged or consolidated with another corporation or entity such that after such merger or consolidation the Company is not the surviving entity or the ultimate parent of the surviving entity;

     B. All or substantially all of the assets of the Company or the Common Stock are acquired by another person or entity;

     C. The reorganization or liquidation of the Company; or

     D. The Company shall enter into a written agreement to undergo an event described in clauses A, B or C above,

then the Committee may, in its discretion and upon at least 10 days advance notice to the affected persons, cancel any outstanding Awards and pay to the Holders thereof, in cash or Stock, the value of such Awards based upon the price per share of Stock received or to be received by other shareholders of the Company in the event. The terms of this Section 12 may be varied by the Committee in any particular Award agreement.

13. Nonexclusivity of the Plan

     Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholder of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases.

14. Amendments and Termination

     The Board may at any time terminate the Plan. Subject to Sections 4 and 12, with the express written consent of an individual Participant, the Board or the Committee may cancel or reduce or otherwise alter outstanding Awards if, in its judgment, the tax, accounting, or other effects of the Plan or potential payouts thereunder would not be in the best interest of the Company. The Board or the Committee may, at any time, or from time to time, amend or suspend and, if suspended, reinstate, the Plan in whole or in part; provided, however, that without further stockholder approval neither the Board nor the Committee shall make any amendment to the Plan which would:

     (a) Materially increase the maximum number of shares of Stock which may be issued pursuant to Awards, except as provided in Section 12;

     (b) Extend the maximum Option Period;

     (c) Extend the termination date of the Plan; or

     (d) Change the class of persons eligible to receive Awards under the Plan.

15. Effect of Section 162(m) of the Code

     The Plan, and all Awards issued thereunder, are intended to be exempt from the application of Section 162(m) of the Code, which restricts under certain circumstances the Federal income tax deduction for compensation paid by a public company to named executives in excess of $1 million per year. The exemption is based on Treasury Regulation Section 1.162-27(f) with the understanding that such regulation generally exempts from the application of Section 162(m) of the Code compensation paid pursuant to a plan that existed before a company becomes publicly held. Under such Treasury Regulation, this exemption is available to the Plan for the duration of the period that lasts until the earlier of (i) the expiration or material modification of the Plan, (ii) the exhaustion of the maximum number of shares of Stock available for Awards under the Plan, as set forth in Section 5(a), or (iii) the first meeting of shareholders of the Company at which directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the IPO occurs. To the extent that the Committee determines as of the Date of Grant of an Award that (i) the Award is intended to comply with Section 162(m) of the Code and (ii) the exemption described above is no longer available with respect to such Award, such Award shall not be effective until any stockholder approval required under Section 162(m) of the Code has been obtained.

*                     *                     *

As adopted by the Board of Directors of
Pharmion Corporation as of February 3, 2000,
and amended and restated through adoption on February 9, 2006,
June 8, 2006 and to become effective as of December 6, 2006.

By: /s/ PATRICK J. MAHAFFY

Title: President and Chief Executive Officer

EX-10.36

EXHIBIT 10.36

INCENTIVE STOCK OPTION AGREEMENT
UNDER THE
PHARMION CORPORATION
2000 STOCK INCENTIVE PLAN

     THIS AGREEMENT is made effective as of the «Date», by and between Pharmion Corporation, a Delaware corporation (the “Company”), and «Name» (the “Optionee”).

W I T N E S S E T H:

     WHEREAS, the Optionee is now employed by or otherwise providing services as a consultant or a director (all references to employee or employment shall include consultants and directors and their respective consulting relationship or directorship with the Company, as applicable) to the Company, and the Company desires to have the Optionee remain in such employment and to afford the Optionee the opportunity to acquire ownership of the Company’s common stock, par value $0.001 per share (the “Stock”), so that the Optionee may have a direct proprietary interest in the Company’s success;

     NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows:

     1. Grant of Options. Subject to the terms and conditions set forth herein and in the Company’s 2000 Stock Incentive Plan (the “Plan”), as amended, the Company hereby grants to the Optionee, during the period commencing on the date of this Agreement (the “Grant Date”) and ending 7 years from the date hereof (the “Termination Date”), the right and option (the right to purchase any one share of Stock hereunder being an “Option”) to purchase from the Company, at a price of $ per share (the “Exercise Price”), an aggregate of «Shares» shares of Stock (the “Options”).

     2. Limitations on Exercise of Options. Subject to early expiration of the Options upon a termination of employment with the Company as set forth in Section 3 below and compliance with the terms and conditions set forth herein, the Options may be exercised only after they vest and only with respect to whole shares. The Options shall vest as follows: 1/4 of the Options on and after the first anniversary of the Grant Date, an additional 1/48 of the Options on the «Day» day on and after each of the 13^th through the 47^th month following the Grant Date and the remainder of the Options on and after the fourth anniversary of the Grant Date.

     3. Termination of Employment. (a) If, prior to the Termination Date, the Optionee shall cease to be employed by the Company by reason of termination by the Company without Cause (as defined in the Plan), Disability (as defined in the Plan), retirement pursuant to the retirement policies of the Company or voluntary termination with the written consent of the Company (each a “Normal Termination”), then (i) all vesting with respect to the Options shall cease, (ii) all unvested Options shall expire as of the date of such Normal Termination, and (iii) the Options that were vested as of the date of such Normal Termination shall remain exercisable

until the earlier of the Termination Date or the date that is 3 months after the date of such Normal Termination.

     (a) If the Optionee shall cease to be employed by the Company prior to the Termination Date by reason of death or shall die during the 3-month period in Section 3(a) above, then (i) all vesting with respect to the Options shall cease, (ii) all unvested Options (to the extent not already expired) shall expire as of the date of death, and (iii) all Options that were vested as of the date of death shall remain exercisable by the executor or administrator of the estate of the Optionee or the person or persons to whom the Options shall have been validly transferred by the executor or administrator pursuant to will or the laws of descent and distribution (as applicable) until the earlier of the Termination Date or the date that is 12 months after the date of death.

     (b) If the Optionee shall cease to be employed by the Company for any reason other than as set forth in Sections 3(a) and (b) above, the Options (whether vested or unvested) shall expire immediately upon such cessation of employment.

     (c) After the expiration of any exercise period described in either of paragraphs 3(a), 3(b) or 3(c) hereof, the Options shall terminate together with all of the Optionee’s rights hereunder, to the extent not previously exercised.

     4. Method of Exercising Option. (a) The Optionee may exercise any or all of the vested Options (representing whole shares only) by delivering to the Company a written notice signed by the Optionee stating the number of Options that the Optionee has elected to exercise at that time and full payment of the purchase price of the shares to be thereby purchased from the Company. Payment of the purchase price of the shares may be made by cash or a certified or bank cashier’s check payable to the order of the Company, or by such other means as shall be acceptable to the Company in its discretion.

     (a) At the time of exercise, the Optionee shall pay to the Company such amount as the Company deems necessary to satisfy its obligation, if any, to withhold Federal, state or local income or other taxes incurred by reason of the exercise or the transfer of shares thereupon.

     5. Issuance of Shares. As promptly as practical after receipt of such written notification and full payment of such purchase price and any required income tax withholding amount, the Company shall issue or transfer to the Optionee the number of shares with respect to which Options have been so exercised, and shall deliver to the Optionee a certificate or certificates therefor, registered in the Optionee’s name.

     6. Company; Optionee. (a) The term “Company” as used in this Agreement with reference to employment or service shall include the Company and its subsidiaries. The term “subsidiary” as used in this Agreement shall mean any subsidiary of the Company as defined in Section 424(f) of the Code.

     (a) Whenever the word “Optionee” is used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Options may be transferred by will or

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by the laws of descent and distribution, the word “Optionee” shall be deemed to include such person or persons.

     7. Non-Transferability. The Options are not transferable by the Optionee otherwise than by will or the laws of descent and distribution and are exercisable during the Optionee’s lifetime only by the Optionee. No assignment or transfer of the Options, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Options shall terminate and become of no further effect.

     8. Incentive Stock Options. The Options granted hereunder are intended to be incentive stock options within the meaning of Section 422 of the Code. The Optionee agrees to notify the Company in writing within 30 days of any disposition (whether by sale, exchange, gift or otherwise) of shares of Stock purchased under this Agreement within two years from the date hereof or one year from the date of exercise of the Options with respect to such shares.

     9. Rights as Stockholder. The Optionee or a transferee of the Options shall have no rights as a stockholder with respect to any share covered by the Options until the Optionee shall have become the holder of record of such share, and no adjustment shall be made for dividends or distributions or other rights in respect of such share for which the record date is prior to the date upon which the Optionee shall become the holder of record thereof.

     10. Compliance with Law. Notwithstanding any of the provisions hereof, the Optionee hereby agrees that the Optionee will not exercise the Options, and that the Company will not be obligated to issue or transfer any shares to the Optionee hereunder, if the exercise hereof or the issuance or transfer of such shares shall constitute a violation by the Optionee or the Company of any provisions of any law or regulation of any governmental authority. Any determination in this connection by the Board of Directors shall be final, binding and conclusive. The Company shall in no event be obliged to register any securities pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended) or to take any other affirmative action in order or cause the exercise of the Options or the issuance or transfer of shares pursuant thereto to comply with any law or regulation of any governmental authority.

     11. Notice. Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided, provided that, unless and until some other address be so designated, all notices or communications by the Optionee to the Company shall be mailed or delivered to the Company at its principal executive office, and all notices or communications by the Company to the Optionee may be given to the Optionee personally or may be mailed to the Optionee at the Optionee’s last known address, as reflected in the Company’s records.

     12. Binding Effect. Subject to Section 6 hereof, this Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

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     13. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the state of Colorado, without regard to the principles of conflicts of law thereof.

     14. Plan. The terms and provisions of the Plan are incorporated herein by reference. In the event of a conflict or inconsistency between discretionary terms and provisions of the Plan and the express provisions of this Agreement, this Agreement shall govern and control. In all other instances of conflicts or inconsistencies or omissions, the terms and provisions of the Plan shall govern and control.

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NONQUALIFIED STOCK OPTION AGREEMENT
UNDER THE
PHARMION CORPORATION
2000 STOCK INCENTIVE PLAN

     THIS AGREEMENT is made effective as of the «Date», by and between Pharmion Corporation, a Delaware corporation (the “Company”), and «Name» (the “Optionee”).

W I T N E S S E T H:

     WHEREAS, the Optionee is now employed by or otherwise providing services as a consultant or a director (all references to employee or employment shall include consultants and directors and their respective consulting relationship or directorship with the Company, as applicable) to the Company, and the Company desires to have the Optionee remain in such employment and to afford the Optionee the opportunity to acquire ownership of the Company’s common stock, par value $0.001 per share (the “Stock”), so that the Optionee may have a direct proprietary interest in the Company’s success;

     NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows:

     1. Grant of Options. Subject to the terms and conditions set forth herein and in the Company’s 2000 Stock Incentive Plan (the “Plan”), as amended, the Company hereby grants to the Optionee, during the period commencing on the date of this Agreement (the “Grant Date”) and ending 7 years from the date hereof (the “Termination Date”), the right and option (the right to purchase any one share of Stock hereunder being an “Option”) to purchase from the Company, at a price of $ per share (the “Exercise Price”), an aggregate of «Shares» shares of Stock (the “Options”).

     2. Limitations on Exercise of Options. Subject to early expiration of the Options upon a termination of employment with the Company as set forth in Section 3 below and compliance with the terms and conditions set forth herein, the Options may be exercised only after they vest and only with respect to whole shares. The Options shall vest as follows: 1/4 of the Options on and after the first anniversary of the Grant Date, an additional 1/48 of the Options on the «Day» day on and after each of the 13^th through the 47^th month following the Grant Date and the remainder of the Options on and after the fourth anniversary of the Grant Date.

     3. Termination of Employment. (a) If, prior to the Termination Date, the Optionee shall cease to be employed by the Company by reason of termination by the Company without Cause (as defined in the Plan), Disability (as defined in the Plan), retirement pursuant to the retirement policies of the Company or voluntary termination with the written consent of the Company (each a “Normal Termination”), then (i) all vesting with respect to the Options shall cease, (ii) all unvested Options shall expire as of the date of such Normal Termination, and (iii) the Options that were vested as of the date of such Normal Termination shall remain exercisable

until the earlier of the Termination Date or the date that is 3 months after the date of such Normal Termination.

     (b) If the Optionee shall cease to be employed by the Company prior to the Termination Date by reason of death or shall die during the 3-month period in Section 3(a) above, then (i) all vesting with respect to the Options shall cease, (ii) all unvested Options (to the extent not already expired) shall expire as of the date of death, and (iii) all Options that were vested as of the date of death shall remain exercisable by the executor or administrator of the estate of the Optionee or the person or persons to whom the Options shall have been validly transferred by the executor or administrator pursuant to will or the laws of descent and distribution (as applicable) until the earlier of the Termination Date or the date that is 12 months after the date of death.

     (c) If the Optionee shall cease to be employed by the Company for any reason other than as set forth in Sections 3(a) and (b) above, the Options (whether vested or unvested) shall expire immediately upon such cessation of employment.

     (d) After the expiration of any exercise period described in either of paragraphs 3(a), 3(b) or 3(c) hereof, the Options shall terminate together with all of the Optionee’s rights hereunder, to the extent not previously exercised.

     4. Method of Exercising Option. (a) The Optionee may exercise any or all of the vested Options (representing whole shares only) by delivering to the Company a written notice signed by the Optionee stating the number of Options that the Optionee has elected to exercise at that time and full payment of the purchase price of the shares to be thereby purchased from the Company. Payment of the purchase price of the shares may be made by cash or a certified or bank cashier’s check payable to the order of the Company, or by such other means as shall be acceptable to the Company in its discretion.

     (b) At the time of exercise, the Optionee shall pay to the Company such amount as the Company deems necessary to satisfy its obligation, if any, to withhold Federal, state or local income or other taxes incurred by reason of the exercise or the transfer of shares thereupon.

     5. Issuance of Shares. As promptly as practical after receipt of such written notification and full payment of such purchase price and any required income tax withholding amount, the Company shall issue or transfer to the Optionee the number of shares with respect to which Options have been so exercised, and shall deliver to the Optionee a certificate or certificates therefor, registered in the Optionee’s name.

     6. Company; Optionee. (a) The term “Company” as used in this Agreement with reference to employment or service shall include the Company and its subsidiaries. The term “subsidiary” as used in this Agreement shall mean any subsidiary of the Company as defined in Section 424(f) of the Code.

     (b) Whenever the word “Optionee” is used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Options may be transferred by will or

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by the laws of descent and distribution, the word “Optionee” shall be deemed to include such person or persons.

     7. Non-Transferability. The Options are not transferable by the Optionee otherwise than by will or the laws of descent and distribution and are exercisable during the Optionee’s lifetime only by the Optionee. No assignment or transfer of the Options, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Options shall terminate and become of no further effect.

     8. Nonqualified Stock Options. The Options granted hereunder are not intended to be incentive stock options within the meaning of Section 422 of the Code.

     9. Rights as Stockholder. The Optionee or a transferee of the Options shall have no rights as a stockholder with respect to any share covered by the Options until the Optionee shall have become the holder of record of such share, and no adjustment shall be made for dividends or distributions or other rights in respect of such share for which the record date is prior to the date upon which the Optionee shall become the holder of record thereof.

     10. Compliance with Law. Notwithstanding any of the provisions hereof, the Optionee hereby agrees that the Optionee will not exercise the Options, and that the Company will not be obligated to issue or transfer any shares to the Optionee hereunder, if the exercise hereof or the issuance or transfer of such shares shall constitute a violation by the Optionee or the Company of any provisions of any law or regulation of any governmental authority. Any determination in this connection by the Board of Directors shall be final, binding and conclusive. The Company shall in no event be obliged to register any securities pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended) or to take any other affirmative action in order to cause the exercise of the Options or the issuance or transfer of shares pursuant thereto to comply with any law or regulation or any governmental authority.

     11. Notice. Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided, provided that, unless and until some other address be so designated, all notices or communications by the Optionee to the Company shall be mailed or delivered to the Company at its principal executive office, and all notices or communications by the Company to the Optionee may be given to the Optionee personally or may be mailed to the Optionee at the Optionee’s last known address, as reflected in the Company’s records.

     12. Binding Effect. Subject to Section 6 hereof, this Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

     13. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the state of Colorado, without regard to the principles of conflicts of law thereof.

     14. Plan. The terms and provisions of the Plan are incorporated herein by

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reference. In the event of a conflict or inconsistency between discretionary terms and provisions of the Plan and the express provisions of this Agreement, this Agreement shall govern and control. In all other instances of conflicts or inconsistencies or omissions, the terms and provisions of the Plan shall govern and control.

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RESTRICTED STOCK UNIT AGREEMENT
under the
PHARMION CORPORATION
2000 STOCK INCENTIVE PLAN

          THIS RESTRICTED STOCK UNIT AGREEMENT is made effective as of the <<DATE>> (the “Grant Date”), by and between Pharmion Corporation, a Delaware corporation (the “Company”), and <<NAME>> (the “Holder”).

W I T N E S S E T H:

          WHEREAS, the Holder is now employed by or otherwise providing services as a consultant or a director (all references to employee or employment shall include consultants and directors and their respective consulting relationship or directorship with the Company, as applicable) to the Company, and the Company desires to have the Holder remain in such employment and to afford the Holder the opportunity to benefit from the appreciation of the Company’s common stock, par value $0.001 per share (the “Stock”), so that the Holder may have a direct proprietary interest in the Company’s success;

          NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows:

     1. Grant of Restricted Stock Units. The Company hereby grants to the Holder, as of the Grant Date, pursuant to the terms and conditions of the Plan, a Restricted Stock Unit Award of <<number>> Restricted Stock Units. Each Restricted Stock Unit is a notional unit representing the right to receive one share of Stock, subject to the terms and conditions set forth herein. No Stock shall be issued or delivered to the Holder at the time the Restricted Stock Unit Award is granted.

     2. Vesting of Restricted Stock Units. Subject to Holder’s continued employment or service with the Company as set forth in Section 4 below and compliance with the terms and conditions set forth herein, 1/4 of the Restricted Stock Units shall vest on and after the first anniversary of the Grant Date, an additional 3/48 of the Restricted Stock Units shall vest on and after each three month anniversary through the 45^th month following the Grant Date and the remainder of the Restricted Stock Units shall vest on the fourth anniversary of the Grant Date.

     3. Settlement of Restricted Stock Units.

          (a) Subject to the Plan and other applicable provisions of this Agreement, on each Settlement Date (as defined below), the Company will issue to the Holder all shares of Stock underlying this Award that have vested on or before such Settlement Date and which have not been issued previously, by the delivery to the Holder of a certificate or certificates therefore, registered in the Holder’s name. Certificates will only be issued in whole shares.

          (b) If no Stock Sale Agreement (as defined below) is in effect on a Settlement Date, the Committee, in its sole discretion, may instead deliver cash in lieu of any or all shares of Stock deliverable on such Settlement Date, with the amount of cash due being equal to the Fair Market Value of the shares of Stock for which cash is substituted.

          (c) For purposes of this Restricted Stock Unit Agreement, “Settlement Date” shall mean (i) each of March 1, June 1, September 1 and December 1 (or, if on any such date the primary exchange on which the Stock is listed is not open for trading, then the next succeeding day on which such exchange is open for trading), and (ii) the date on which any of the following transactions is consummated by the Company: (A) The Company is merged or consolidated with another corporation or entity such that after such merger or consolidation the Company is not the surviving entity or the ultimate parent of the surviving entity; (B) all or substantially all of the assets of the Company or the shares of the Company’s common stock are acquired by another person or entity; or (C) the reorganization or liquidation of the Company.

     4. Termination of Employment. In the event the Holder terminates employment with the Company and all Subsidiaries for any reason prior to the vesting date of any Restricted Stock Unit Awards, that portion of the Restricted Stock Unit Award that has not fully vested on the date the Holder’s employment with the Company and all Subsidiaries is terminated shall be completely forfeited.

     5. Company; Holder.

          (a) The term “Company” as used in this Restricted Stock Unit Agreement with reference to employment or service shall include the Company and its Subsidiaries. The term “subsidiary” as used in this Restricted Stock Unit Agreement shall mean any subsidiary of the Company as defined in Section 424(f) of the Code.

          (b) Whenever the word “Holder” is used in any provision of this Restricted Stock Unit Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Restricted Stock Units may be transferred by will or by the laws of descent and distribution, the word “Holder” shall be deemed to include such person or persons.

     6. Non-Transferability. The Restricted Stock Units are not transferable by the Holder otherwise than by will or the laws of descent and distribution. No assignment or transfer of the Restricted Stock Units, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Restricted Stock Units shall terminate and be of no further effect.

     7. Withholding. The tax payment and withholding obligations of the Company with respect to each Settlement Date shall be satisfied by one of the methods described below, as applicable for such Settlement Date:

          (a) In the event no Stock Sale Agreement (as defined below) is in effect on a Settlement Date on which Stock is issued hereunder, the Company shall have the right to deduct from each such issuance that number of shares of Stock valued at their Fair Market Value (as defined in the Plan) equal to the minimum Federal, state and local taxes required by law to be paid or withheld with respect to such issuance (hereinafter, “Tax Obligations”).

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          (b) If so directed by Holder in an agreement then in effect between the Company and Holder (a “Stock Sale Agreement”), upon any issuance of shares of Stock underlying the Restricted Stock Units, the Company shall sell on Holder’s behalf on each Settlement Date that number of shares of Stock otherwise deliverable to Holder on such Settlement Date in order to generate cash to satisfy the Tax Obligations with respect to such Settlement Date in accordance with such Stock Sale Agreement.

          (c) If, on any Settlement Date, all or any portion of the Restricted Stock Unit is settled in cash in accordance with paragraph 3(b) above, then the Company will withhold from such cash an amount equal to the full amount of the Tax Obligations with respect to such Settlement Date, provided that if the cash delivered is insufficient to cover the full amount of such Tax Obligations, the Company may elect to withhold shares of Stock in accordance with paragraph 7(a) above in satisfaction of the remaining Tax Obligations.

Notwithstanding the foregoing, Holder hereby acknowledges and understands that, in the event the applicable method above is unavailable or otherwise fails to fully satisfy the Tax Obligations with respect to any Settlement Date, (i) the Company shall have the right to either withhold from other amounts payable by the Company to Holder, or require Holder to pay Company the amount necessary to fully reimburse the Company for such Tax Obligations, and (ii) unless Holder fully reimburses the Company for the Tax Obligations, the Company shall have no obligation to issue shares pursuant to this Restricted Stock Unit Award.

     8. Rights as Stockholder. The Holder or a transferee of the Restricted Stock Units shall have no rights as a stockholder (including, without limitation, voting and dividend rights) with respect to any share covered by the Restricted Stock Units until the Holder shall have become the holder of record of such share, and no adjustment shall be made for dividends or distributions or other rights in respect of such share for which the record date is prior to the date upon which the Holder shall become the holder of record thereof.

     9. Compliance with Law. Notwithstanding any of the provisions hereof, the Holder hereby agrees that the Company will not be obligated to issue or transfer any shares to the Holder hereunder, if the issuance or transfer of such shares shall constitute a violation by the Holder or the Company of any provisions of any law or regulation of any governmental authority. Any determination in this connection by the Board shall be final, binding and conclusive. The Company shall in no event be obliged to register any securities pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended) or to take any other affirmative action in order to cause the issuance or transfer of shares pursuant to this Restricted Stock Unit Agreement to comply with any law or regulation or any governmental authority.

     10. Award not a Service Contract. This Restricted Stock Unit Award is not an employment or service contract, and nothing in this Agreement shall be deemed to create in any way whatsoever any obligation on the Holder’s part to continue in the service of the Company or an Affiliate, or on the part of the Company or an Affiliate to continue such service. In addition, nothing in this Restricted Stock Unit Award shall obligate the Company or an Affiliate, their respective stockholders, boards of directors, officers or employees to continue any relationship with the Holder as an employee, director or consultant for the Company or an Affiliate.

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     11. Unsecured Obligation. This Restricted Stock Unit Award is unfunded, and as a holder of vested Restricted Stock Units subject to this Award, the Holder shall be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares of Stock pursuant to Section 3 of this Agreement.

     12. Notice. Every notice or other communication relating to this Restricted Stock Unit Agreement shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided, provided that, unless and until some other address be so designated, all notices or communications by the Holder to the Company shall be mailed or delivered to the Company at its principal executive office, and all notices or communications by the Company to the Holder may be given to the Holder personally or may be mailed to the Holder at the Holder’s last known address, as reflected in the Company’s records.

     13. Binding Effect. Subject to Section 5 hereof, this Restricted Stock Unit Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

     14. Miscellaneous. The rights and obligations of the Company under this Restricted Stock Unit Agreement shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by the Company’s successors and assigns. The Holder agrees upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of this Restricted Stock Unit Award.

     15. Compliance with Section 409A. Notwithstanding anything herein to the contrary, if at the time of Holder’s termination of employment or service with the Company Holder is a “specified employee” as defined in Section 409A of the Code, and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment or service is necessary in order to prevent the imposition of any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Holder) until the date that is 6 months following Holder’s termination of employment or service (or the earliest date as is permitted under Section 409A of the Code).

     16. Governing Law. This Restricted Stock Unit Agreement shall be construed and interpreted in accordance with the laws of the state of Colorado, without regard to the principles of conflicts of law thereof.

     17. Plan. The terms and provisions of the Plan are incorporated herein by reference. In the event of a conflict or inconsistency between discretionary terms and provisions of the Plan and the express provisions of this Restricted Stock Unit Agreement, this Restricted Stock Unit Agreement shall govern and control. In all other instances of conflicts or inconsistencies or omissions, the terms and provisions of the Plan shall govern and control.

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     THE UNDERSIGNED HOLDER ACKNOWLEDGES RECEIPT OF THIS RESTRICTED STOCK UNIT AGREEMENT AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF RESTRICTED STOCK UNITS HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS RESTRICTED STOCK UNIT AGREEMENT AND THE PLAN.

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EX-10.37

EXHIBIT 10.37

NONQUALIFIED STOCK OPTION AGREEMENT
under the
PHARMION CORPORATION
2001 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

     THIS AGREEMENT is made effective as of the      , 200      , by and between Pharmion Corporation, a Delaware corporation (the “Company”), and           (the “Optionee”).

W I T N E S S E T H:

     WHEREAS, the Optionee is now a Non-Employee Director on the Board of Directors with the Company (qualified as neither an employee nor an officer), and the Company desires to retain the Optionee’s services as a Non-Employee Director and to afford the Optionee the opportunity to acquire ownership of the Company’s common stock, par value $0.001 per share (the “Stock”), so that the Optionee may have a direct proprietary interest in the Company’s success;

     NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto hereby agree as follows:

     1. Grant of Options. Subject to the terms and conditions set forth herein and in the Company’s 2001 Non-Employee Director Stock Option Plan (the “Plan”), as amended, the Company hereby grants to the Optionee, during the period commencing on the date of this Agreement (the “Grant Date”) and ending ten (10) years from the date hereof (the “Termination Date”), the right and option (the right to purchase any one share of Stock hereunder being an “Option”) to purchase from the Company, at a price of $  per share (the “Exercise Price”), an aggregate of 7,500 shares of Stock (the “Options”).

     2. Limitations on Exercise of Options. Subject to early termination of the Options in the event an Optionee ceases to be a member of the Board for any reason as set forth in Section 3 below and in compliance with the terms and conditions set forth herein, the Options may be exercised only after they vest and only with respect to whole shares. The Options shall vest as follows: 1/4 of the Options on and after the first anniversary of the Grant Date, an additional 1/48 of the Options on the day on and after each of the 13^th through the 47^th month following the Grant Date and the remainder of the Options on and after the fourth anniversary of the Grant Date.

     3. Termination of Employment. (a) If, prior to the Termination Date, the Optionee shall cease to be employed by the Company by reason of termination by the Company without Cause (as defined in the Plan), Disability (as defined in the Plan), retirement pursuant to the retirement policies of the Company or voluntary termination with the written consent of the Company (each a “Normal Termination”), then (i) all vesting with respect to the Options shall cease, (ii) all unvested Options shall expire as of the date of such Normal Termination, and (iii) the Options that were vested as of the date of such Normal Termination shall remain exercisable

until the earlier of the Termination Date or the date that is 90 days after the date of such Normal Termination.

     (b) If the Optionee shall cease to be employed by the Company prior to the Termination Date by reason of death or shall die during the 90-day period in Section 3(a) above, then (i) all vesting with respect to the Options shall cease, (ii) all unvested Options (to the extent not already expired) shall expire as of the date of death, and (iii) all Options that were vested as of the date of death shall remain exercisable by the executor or administrator of the estate of the Optionee or the person or persons to whom the Options shall have been validly transferred by the executor or administrator pursuant to will or the laws of descent and distribution (as applicable) until the earlier of the Termination Date or the date that is 12 months after the date of death.

     (c) If the Optionee shall cease to be employed by the Company for any reason other than as set forth in Sections 3(a) and (b) above, the Options (whether vested or unvested) shall expire immediately upon such cessation of employment.

     (d) After the expiration of any exercise period described in either of paragraphs 3(a), 3(b) or 3(c) hereof, the Options shall terminate together with all of the Optionee’s rights hereunder, to the extent not previously exercised.

     4. Method of Exercising Option. (a) The Optionee may exercise any or all of the vested Options (representing whole shares only) by delivering to the Company a written notice signed by the Optionee stating the number of Options that the Optionee has elected to exercise at that time and full payment of the purchase price of the shares to be thereby purchased from the Company. Payment of the purchase price of the shares may be made by cash or a certified or bank cashier’s check payable to the order of the Company, or by such other means as shall be acceptable to the Company in its discretion.

     (b) At the time of exercise, the Optionee shall pay to the Company such amount as the Company deems necessary to satisfy its obligation, if any, to withhold Federal, state or local income or other taxes incurred by reason of the exercise or the transfer of shares thereupon.

     5. Issuance of Shares. As promptly as practical after receipt of such written notification and full payment of such purchase price and any required income tax withholding amount, the Company shall issue or transfer to the Optionee the number of shares with respect to which Options have been so exercised, and shall deliver to the Optionee a certificate or certificates therefor, registered in the Optionee’s name.

     6. Company; Optionee. (a) The term “Company” as used in this Agreement with reference to employment or service shall include the Company and its subsidiaries. The term “subsidiary” as used in this Agreement shall mean any subsidiary of the Company as defined in Section 424(f) of the Code.

     (b) Whenever the word “Optionee” is used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Options may be transferred by will or

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by the laws of descent and distribution, the word “Optionee” shall be deemed to include such person or persons.

     7. Non-Transferability. The Options are not transferable by the Optionee otherwise than by will or the laws of descent and distribution and are exercisable during the Optionee’s lifetime only by the Optionee. No assignment or transfer of the Options, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Options shall terminate and become of no further effect.

     8. Nonqualified Stock Options. The Options granted hereunder are not intended to be incentive stock options within the meaning of Section 422 of the Code.

     9. Rights as Stockholder. The Optionee or a transferee of the Options shall have no rights as a stockholder with respect to any share covered by the Options until the Optionee shall have become the holder of record of such share, and no adjustment shall be made for dividends or distributions or other rights in respect of such share for which the record date is prior to the date upon which the Optionee shall become the holder of record thereof.

     10. Compliance with Law. Notwithstanding any of the provisions hereof, the Optionee hereby agrees that the Optionee will not exercise the Options, and that the Company will not be obligated to issue or transfer any shares to the Optionee hereunder, if the exercise hereof or the issuance or transfer of such shares shall constitute a violation by the Optionee or the Company of any provisions of any law or regulation of any governmental authority. Any determination in this connection by the Board of Directors shall be final, binding and conclusive. The Company shall in no event be obliged to register any securities pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended) or to take any other affirmative action in order to cause the exercise of the Options or the issuance or transfer of shares pursuant thereto to comply with any law or regulation or any governmental authority.

     11. Notice. Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided, provided that, unless and until some other address be so designated, all notices or communications by the Optionee to the Company shall be mailed or delivered to the Company at its principal executive office, and all notices or communications by the Company to the Optionee may be given to the Optionee personally or may be mailed to the Optionee at the Optionee’s last known address, as reflected in the Company’s records.

     12. Binding Effect. Subject to Section 6 hereof, this Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

     13. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the state of Colorado, without regard to the principles of conflicts of law thereof.

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     14. Plan. The terms and provisions of the Plan are incorporated herein by reference. In the event of a conflict or inconsistency between discretionary terms and provisions of the Plan and the express provisions of this Agreement, this Agreement shall govern and control. In all other instances of conflicts or inconsistencies or omissions, the terms and provisions of the Plan shall govern and control.

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EX-10.38

EXHIBIT 10.38

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 24B-2 OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED

License Agreement

on

Amrubicin Hydrochloride (SM-5887)

by and between

Sumitomo Pharmaceuticals Co., Ltd.

and

Conforma Therapeutics Corporation

Executed on June 23, 2005

TABLE OF CONTENTS

RECITALS	1
1. DEFINITIONS	1
2. GRANT OF RIGHTS	6
2.1. Exclusive Right	6
2.2. Sublicense	6
2.3. License Grant Back to SUMITOMO	6
3. CONSIDERATION	6
3.1. Up-front and Milestone Payments	6
3.2. Bonus Payments	7
3.3. Sublicensee Payments	7
3.4. Non-Refundability	7
4. DEVELOPMENT	7
4.1. Technology Transfer	7
4.2. Implementation of Development	8
4.2.1. Implementation of Development	8
4.2.2. Joint Steering Committee	8
4.2.3. Development Plan	9
4.3. Clinical Supplies for Development	10
4.3.1. Supply of Product	10
4.3.2. Specifications	10
4.3.3. Labeling and Packaging	11
5. MARKETING AND PROMOTION	11
5.1. Commercially Reasonable Efforts to Market	11
5.2. Commercialization Plan	11
5.3. Minimum Sales	12
5.4. Sales Outside the Territory	12
5.5. Labels and Packages	12
5.6. Competing Product	13
6. SUPPLY OF PRODUCT	13
6.1. Supply of Product	13
6.1.1. Supply Agreement	13
6.1.2. Requirements	13
6.1.3. Specifications	14
6.1.4. Delivery	14
6.2. Payment	14
6.2.1. Purchase Price during the Initial Period	14
6.2.2. Payments Procedure	14
6.2.3. Adjustments to Purchase Price After the Initial Period	15
6.2.4. Adjustment related to Combination Product	16
6.3. Forecast and Order	16
6.3.1. Supply Forecast	16
6.3.2. Firm Order	17
6.3.3. Quantity	17
6.3.4. Quality Assurance Tests	17
6.3.5. Retention of Samples	17
6.3.6. Labeling and Packaging	18
6.3.7. Backup/Complementary Source for the Manufacture of Compound or Product	18
6.4. Termination	18
7. TRADEMARK	18
7.1. Grant of Right	18
7.2. Ownership	18
7.3. Filing, Prosecution and Maintenance	18
7.4. Royalties for Trademark	19

7.5. Infringement by Third Party	19
8. REGULATORY AFFAIRS AND INSPECTIONS	20
8.1. Acquisition and Maintenance of Authorization	20
8.2. Maintenance of Data	20
8.3. Inspections by Regulatory Authority	21
8.4. Inspections by Parties	21
8.5. Pharmacovigilance / Drug Safety Matters	21
9. PATENTS and Updated Technology	22
9.1. Updated Technology	22
9.2. Rights to Improvements	22
9.3. Application and Maintenance of Patents	22
9.4. No Warranty	23
9.5. Infringement by Third Party	23
9.6. Infringement Alleged by Third Party	24
10. RECORDS	24
10.1. Records	24
10.2. Examination by Certified Public Accountant	24
11. TAXATION	25
11.1. Responsibility for Tax	25
11.2. Withholding Tax	25
12. FINANCIAL MATTERS	25
12.1. Late Payments	25
12.2. Manner of Payment	25
13. CONFIDENTIALITY	26
13.1. Non-disclosure	26
13.2. Limited Purposes	26
13.3. Exceptions	26
13.3.1. Information Otherwise Available	26
13.3.2. Governmentally Required Disclosures	26
13.4. Publication Procedure	27
13.5. Return of Information	27
13.6. Additional Permitted Disclosures	27
13.7. Terms and Conditions of this Agreement	27
13.8. Previous Confidential Agreement	27
14. TERM AND TERMINATION	28
14.1. Expiration	28
14.2. Termination by CONFORMA	28
14.3. Termination for Breach	28
14.4. Termination for Bankruptcy	28
14.5. Termination for Patent Challenge	28
14.6. Termination for Change of Control	28
14.7. Consequences of Termination	29
14.7.1. Responsibilities of CONFORMA	29
14.7.2. Responsibilities of SUMITOMO	29
14.7.3. Regulatory Responsibilities of Both Parties	29
14.7.4. Ancillary Agreements	29
14.8. Outstanding Payments	29
14.9. Survival Clauses	29
15. INDEMNIFICATION	30
15.1. Indemnification by SUMITOMO	30
15.2. Indemnification by CONFORMA	30
15.3. Procedure	31
15.4. No Lost Profit	31
16. REPRESENTATIONS, WARRANTIES AND COVENANTS	31
16.1. Execution of Agreement	31
16.2. Additional SUMITOMO Representations	32
16.3. Material Facts	32

16.4. Manufacture of Compound and Product	32
16.5. Express Warranties	32
17. MISCELLANEOUS PROVISIONS	33
17.1. Headings	33
17.2. Severability	33
17.3. Entire Agreement; Amendment	33
17.4. Assignability	33
17.5. Independent Party	33
17.6. Notice and Reports	33
17.7. Waiver	34
17.8. Force Majeure	34
17.9. Dispute Resolution and Arbitration	34
17.10. Applicable Law	35
17.11. Language	35
17.12. Counterparts	35
Annex 1.6	37
Annex 1.27	38
Annex 1.30	39
Annex 4.2.3	40
Annex 16.2	41

License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

This License Agreement is executed on this June 23, 2005, by and between

SUMITOMO PHARMACEUTICALS Co., Ltd.

a company duly established under the laws of Japan and having its principal place of business at 12-2, Kyobashi 1-chome, Chuo-ku, Tokyo, 104-8356, Japan (hereinafter “SUMITOMO”)

and

Conforma Therapeutics Corporation

a company duly established under the laws of Delaware, USA and having its principal place of business at 9393 Towne Centre Drive, Suite 240, San Diego, CA, USA (hereinafter “CONFORMA “)

RECITALS

WHEREAS, SUMITOMO has developed and commercialized a certain anti-cancer drug (“Product” as defined in Section 1) containing a compound known as Amrubicin Hydrochloride or SM-5887 (“Compound” as defined in Section 1) in Japan;

WHEREAS, SUMITOMO desires to develop and commercialize the Product also in countries other than Japan through licensing;

WHEREAS, CONFORMA has an interest in the development of the Product in North America and European countries (“Territory” as defined in Section 1) and has an interest in obtaining rights to develop and market the Product there;

WHEREAS, SUMITOMO and CONFORMA have exchanged certain information under the Confidential Disclosure Agreement on Amrubicin dated August 12, 2004 in order to evaluate the possibility of business collaboration on the Product;

WHEREAS, CONFORMA, as a result of above evaluation, desires to receive certain rights to develop and commercialize the Product in the Territory and SUMITOMO desires to grant such rights to CONFORMA;

NOW THEREFORE, in consideration hereof, the Parties hereby agree as follows:

1.	DEFINITIONS
	As used herein, the following terms shall have the respective meanings set forth below unless the context clearly requires other meanings
1.1.	“Affiliate” or “Affiliates” shall mean any corporation or business entity controlling, controlled by or under common control with a Party to this Agreement. For the purpose of the foregoing, “control” shall mean the direct or indirect ownership of more than fifty percent (50%) of the voting stock in such corporation or other entity, or the de facto decision-making power in such corporation or entity
1.2.	“Annex” or “Annexes” shall mean any document attached to this Agreement with the title of “Annex” which constitutes a part of this Agreement and is legally binding.
1.3.	“Authorization” shall mean an approval or a permit to market the Product, including

page 1

License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

	pricing and reimbursement approval where required, in any of the countries within the Territory which is granted by the Regulatory Authority.
1.4.	“Combination Product” shall mean a Finished Product sold by CONFORMA, its Affiliates or its Sublicensees that contains a Compound together with at least one other active pharmaceutical ingredient.
1.5.	“Commercially Reasonable Efforts” shall mean efforts consistent with those generally utilized by companies of a similar size for their own internally developed pharmaceutical products of similar market potential, at a similar stage of their product life taking into account the existence of other competitive products in the market place or under development, the proprietary position of the product, the regulatory structure involved, the anticipated profitability of the product and other relevant factors. It is understood that such product potential may change from time to time based upon changing scientific, business and marketing and return on investment considerations.
1.6.	“Compound” shall mean the compound known as Amrubicin (international nonproprietary name) hydrochloride which is generically known as (+)-(7S, 9S)-9-acetyl-9-amino-7-[(2-deoxy-b-D-erythro-pentopyranosyl)             oxy]-7,8,9, 10-tetrahydro-6,11-dihydroxy-5,12-naphthacenedione hydrochloride as more fully described in Annex 1.6 hereto.
1.7.	“Control” or “Controlled by” shall mean, with respect to any item of Information, Patent or Know-how, possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise, to assign, or grant a license, sublicense or other right to or under, such Information, Patent or Know-how as provided for herein without violating the terms of any agreement or other arrangement with any Third Party.
1.8.	“Data Protection” shall mean certain data exclusivity and market exclusivity available to the Product under a pharmaceutical law, regulation or any other governmental decree or order of a certain country within the Territory.
1.9.	“Development” in the Territory shall mean all the activities necessary to obtain the Authorization, including, but not limited to, pre-clinical studies, clinical studies, and preparation of the documents for the submission to the Regulatory Authority.
1.10.	“Effective Date” shall mean the date on which this Agreement is executed.
1.11.	“EMEA” shall mean the European Medicines Agency, or any successor regulatory authority in Europe.
1.12.	“Europe” shall mean the countries comprising the European Union on the date of the first submission for the Authorization of the Product to EMEA or to the Regulatory Authorities of one of the Major European Countries.
1.13.	“Finished Product” shall mean a packaged and labeled Product for commercial sale under Authorization.
1.14.	“Generic Product(s)” shall mean any pharmaceutical products having the same active pharmaceutical ingredient and sold for the same indication and in same dosage form as the Compound.
1.15.	“Generic Product Entry” shall mean, for a given country of the Territory, the first day of the first calendar quarter for which publicly reported quantity of sales in units of Generic Product(s) during such quarter exceed twenty percent (20%) of the aggregate quantity of all units of Generic Product(s) and Product sold in the relevant country during the same calendar quarter.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

1.16.	“Improvements” shall mean, whether patentable or not, new compositions and processes pertaining directly to the Compound and/or the Product, or new techniques of using, applying, administering, or manufacturing the Compound and/or the Product which are owned or Controlled by CONFORMA or its Affiliates during the term of this Agreement.
1.17.	“IND” shall mean an investigational new drug application filed with the FDA for authorizations to commence human clinical trials, or its equivalent in other countries within the Territory, as applicable.
1.18.	“Initial Period” shall mean, on a country-by-country basis and on a Product-by-Product basis, the period from the Effective Date through the later of:

(a)	the end of the calendar month following the tenth (10th) anniversary of the Launch; or
(b)	the Generic Product Entry.

1.19.	“Know-how” shall mean, whether patentable or not, all the proprietary information or data related to the research and development of the Compound and/or the Product, or those related to the marketing, using, sale or distribution of the Finished Product which is owned or Controlled by SUMITOMO or its Affiliates as of the Effective Date or during the term of this Agreement, including without limitation all the data, documentation and other information contained in or making up the regulatory filings made by SUMITOMO or its Affiliates for the Product outside the Territory.
1.20.	“Launch” shall mean, on a county-by-country basis, the date of the first commercial sale of the Finished Product by CONFORMA, its Affiliate or its Sublicensee in a given country after Authorization in such country. For the avoidance of doubt, the first commercial sale of the Finished Product shall mean the date on which CONFORMA, its Affiliates, and/or the Sublicensee ship the first Finished Product in such given country to distributors, wholesalers or other end users.
1.21.	“Licensee” shall mean any company or legal entity other than SUMITOMO’s Affiliates which is granted by SUMITOMO a right to import, use, develop, register, market, promote, distribute and/or sell the Compound and/or the Product outside the Territory.
1.22.	“Major European Countries” shall mean any or all of the United Kingdom, Germany, France, Spain and Italy.
1.23.	“Manufacturing Technology” shall mean all methods, processes, technology, information, data, results of tests, studies, and analyses, whether patentable or not which are specifically related to the manufacturing process of the Compound and/or Product, owned or Controlled by SUMITOMO or its Affiliates as of the Effective Date or during the term of this Agreement.
1.24.	“NDA” shall mean a new drug application filed with the FDA for authorization to market a pharmaceutical product or its equivalent in other countries within the Territory, as applicable.
1.25.	“Net Sales” shall be defined as the gross amount invoiced by CONFORMA, its Affiliates, and/or its Sublicensees upon sales of the Finished Product to unaffiliated Third Parties, less the following items pertaining to such Finished Product, consistent with U.S. GAAP:

(a) trade quantity and cash discounts actually allowed;

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

(b)	commissions, discount, refunds, rebates, charge backs, retroactive price adjustment, and any other allowance paid to Third Parties that effectively reduce net selling price;
(c)	actual Finished Product returns and allowances;
(d)	freight, shipping, packing, and insurance charges;
(e)	use, sales or other taxes, duties or tariffs applicable to the import, export or sale of Finished Products (excluding taxes based on the selling party’s income); and
(f)	any other similar or customary deductions, as consistent with U.S. GAAP.

1.26.	“Party” shall mean SUMITOMO or CONFORMA and “Parties” shall mean SUMITOMO and CONFORMA.
1.27.	“Patent” or “Patents” shall mean any or all patents and patent applications filed or owned or Controlled by SUMITOMO or its Affiliates as of the Effective Date or during the term of this Agreement in any country within the Territory which cover the Compound, the Product, the Finished Product and/or its use, including any continuation, continuation in part, divisional or reissue patent application(s), re-examinations, renewals, substitutions, provisionals, inventor’s certificates or patent addition(s), or patent(s) filed thereon and any extension(s) thereof (by way of example, an extension by supplementary protection certificate) and any patents issuing therefrom; provided, however, that in the event any claimed invention theretofore covered by the Patents shall no Ionger be covered thereby for any reason whatsoever, including expiration, renunciation, abandonment, disclaimer, withdrawal, failure to maintain, or an adjudication of invalidity by a court of competent jurisdiction from the judgment of which no further appeal can be taken, such invention shall be deemed automatically excluded from the term “Patents” to such extent. Annex 1.27 is the list of the Patents as of the Effective Date which is to be updated from time to time by mutual agreement.
1.28.	“Product” shall mean pharmaceutical products for human use containing the Compound as a pharmaceutically active ingredient in unlabeled vial.
1.29.	“Regulatory Authority” shall mean the governmental organization or the administrative body subject to state supervision which has authority to regulate pharmaceutical affairs in a country within the Territory, and more specifically, which has authority to grant marketing authorizations for pharmaceutical products and/or authority to decide prices of pharmaceutical products in such country.
1.30.	“Specifications” shall mean, after the NDA filing in the USA, those specifications for the Product mutually agreed upon by the Parties and set forth in the NDA filed in the USA. Prior to such application, Specifications shall refer to the specifications for the Product as tested mutually agreed upon by the Parties and pursuant to the IND opened in the USA. Prior to the IND, Specifications shall refer to the specifications for the Product described in Annex 1.30, which may be changed or modified with the prior written agreement of the Parties.
1.31.	“Sublicensee” shall mean any company or legal entity other than CONFORMA’s Affiliates which is sublicensed by CONFORMA all or a part of CONFORMA’s rights granted hereof.
1.32.	“Supply Agreement” shall have the meaning ascribed to it in Section 6.
1.33.	“Territory” shall mean North America and Europe.
1.34.	“Third Party” or “Third Parties” shall mean any or all persons or entities other than (a)

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

	SUMITOMO, any of its Affiliates or Licensees or (b) CONFORMA, any of its Affiliates or Sublicensees.
1.35.	“Trademark” or “Trademarks” shall mean any or all trademarks or tradenames to be selected by CONFORMA pursuant to Section 7.1. for use on and in connection with the Finished Product in the Territory.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

2.	GRANT OF RIGHTS
2.1.	Exclusive Right
	Subject to the terms and conditions of this Agreement, SUMITOMO (on behalf of itself and its Affiliates) hereby grants to CONFORMA and CONFORMA hereby accepts an exclusive right and license (even as to SUMITOMO and its Affiliates), with a right to sublicense as set forth in Section 2.2, under the Patents and the Know-how (a) to import and use the Compound and the Product, (b) to develop, register, import, use, market, promote, distribute and sell the Product or Finished Product, and (c) to use the Trademark, each of (a), (b) and (c) within the Territory. The right and license granted to CONFORMA under this Section 2.1. excludes the right to manufacture the Compound and the Product in Initial Period.
2.2.	Sublicense
	CONFORMA may sublicense its rights hereof to its Affiliates and/or a Third Party, provided that in case of sublicense to a Third Party, CONFORMA shall obtain SUMITOMO’s prior written consent which shall not be unreasonably withheld, conditioned or delayed. CONFORMA shall ensure that any such Sublicensee complies with at least the same obligations as CONFORMA assumes under this Agreement and the Supply Agreement, and CONFORMA shall make to SUMITOMO the same milestone payments, bonus payments, payment for the Product, royalties for the Manufacturing Technology and the Trademark license, as those which CONFORMA should pay if it developed or marketed the Product by itself.
2.3.	License Grant Back to SUMITOMO
	CONFORMA grants to SUMITOMO a non-exclusive, perpetual, royalty-free license, with a right to sublicense, of the Improvements to develop, register, manufacture, import, use, market, promote, distribute and sell the Compound and/or Product outside the Territory.
	During the term of this Agreement, CONFORMA shall advise SUMITOMO as soon as commercially reasonable of any Improvements necessary or useful for the development or commercialization of the Product outside the Territory.
3.	CONSIDERATION
	In partial consideration of the rights and licenses granted to CONFORMA hereof, CONFORMA shall pay SUMITOMO according to the schedule set forth in Section 3.1 and 3.2. The remaining consideration shall be paid as a part of the Purchase Price and as a royalty for the Trademark according to the Supply Agreement and Section 7.4. of this Agreement, respectively.
3.1.	Up-front and Milestone Payments

CONFORMA shall pay to SUMITOMO, up to a total amount of [***] US Dollars (US$ [***]) within thirty (30) days after the first occurrence of the following events:

[Events]	[Payments]
(i) On signing:	USD [***] million
(ii) Upon first-patient-in of the first clinical trial of the Product sponsored by CONFORMA:	USD [***] million
(iii) On receipt of Authorization in the USA:	USD [***] million
(iv) On receipt of first Authorization in Europe:	USD [***] million

*** Confidential Treatment Requested

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

3.2.	Bonus Payments
	CONFORMA shall pay to SUMITOMO the following one-time bonus payments within ninety (90) days from the end of the first calendar year in which total annual Net Sales in the Territory exceeds:

[Events]	[Payments]
(i) USD 25 million:	USD [***] million
(ii) USD 50 million	USD [***] million
(iii) USD 100 million	USD [***] million

	In case foregoing two events occur in the same calendar year, CONFORMA shall pay both bonus payments to SUMITOMO at the same time.
3.3.	Sublicensee Payments
	In the event that CONFORMA receives any up-front or milestone payments, excluding equity investment or reimbursement of expenses, from its Sublicensee as a consideration of the sublicense of CONFORMA’s rights granted hereof, (a) if received by CONFORMA during the period from the Effective Date through the Launch (the “Development Period”), CONFORMA shall pay to SUMITOMO [***] percent ([***]%) of any such amounts received during the Development Period within thirty (30) days of receipt; and (b) if received by CONFORMA after the last day of the Development Period, the amount of such payments shall be deemed to be Net Sales.
3.4.	Non-Refundability
	Unless otherwise agreed in this Agreement, all the payments set forth in this Section 3 are non-refundable once they have been paid, and are not creditable to other payment obligations of CONFORMA.
4.	DEVELOPMENT
4.1.	Technology Transfer

(i)	As soon as commercially reasonable after the Effective Date of this Agreement, SUMITOMO shall disclose and make available to CONFORMA, free of charge, all the Know-how to the extent necessary or useful to the Development.
(ii)	CONFORMA shall provide SUMITOMO, free of charge, with the following information which CONFORMA, its Affiliates, and its Sublicensees obtain from the Development or marketing activities in the Territory, as soon as commercially reasonable after CONFORMA acquires such information, or if specifically so designated below, at SUMITOMO’s request:

a)	abstracts and summaries of the Development data, and at SUMITOMO’s request, copies thereof,
b)	copies of documents submitted to or filed with the Regulatory Authority,
c)	safety and efficacy data,
d)	new indication or new formulation which may be applied to the Product.

*** Confidential Treatment Requested

page 7

License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

	Subject to Section 13 of this Agreement, SUMITOMO, its Affiliates and its Licensees shall be free to use the foregoing information provided by CONFORMA for the purposes of developing or marketing the Product outside the Territory, pursuant to Section 2.3.
(iii)	SUMITOMO shall provide CONFORMA, free of charge, with the following information which SUMITOMO, its Affiliates and its Licensees obtain from the development or marketing activities outside the Territory, as soon as commercially reasonable after SUMITOMO acquires such information, or if specifically so designated below, at CONFORMA’s request:

a)	abstracts and summaries of the development data, at CONFORMA’s request, copies thereof,
b)	copies of documents submitted to or filed with regulatory authorities outside the Territory, at CONFORMA’s request,
c)	safety and efficacy data,
d)	new indication or new formulation which may be applied to the Product.

Subject to Section 13 of this Agreement, CONFORMA, its Affiliates and its Sublicensees shall be free to use the foregoing information provided by SUMITOMO for the purposes of developing or marketing the Product in the Territory, pursuant to Sections 2.1 and 2.2.

(iv)

SUMITOMO shall disclose the Manufacturing Technology only to the extent necessary for CONFORMA to obtain Authorization in the Territory. In connection with the foregoing, if SUMITOMO establishes and maintains a Drug Master File (“DMF”) with the Regulatory Authority, SUMITOMO grants CONFORMA, its Affiliates and its Sublicensees a right to reference to the data included in the DMF for incorporation into the NDA and agrees to provide such further written authorizations as may be required to effectuate this right of reference.

4.2. Implementation of Development

4.2.1. Implementation of Development

CONFORMA shall have the sole responsibility for conducting the clinical Development in the Territory. The cost of clinical Development in the Territory shall be borne by CONFORMA. The cost of non-clinical Development activities in the Territory initiated by CONFORMA after the Effective Date shall be borne by CONFORMA.

CONFORMA undertakes to give SUMITOMO progress reports of the Development on a semi annual basis covering items such as the status of recruitment and registration of the patients, the result of each trial and the status of preparation of the regulatory documents for IND or NDA.

It is understood and agreed that SUMITOMO has a right to participate in the investigators meetings held in the Territory and in the meetings with Regulatory Authorities in the Territory, provided that SUMITOMO’s participation shall be passive and without a right to comment.

4.2.2. Joint Steering Committee

In order to facilitate the development of the Product and share the information and coordinate each Party’s development activities in and outside the Territory, CONFORMA and

page 8

License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

SUMITOMO shall organize and hold a Joint Steering Committee meeting at least twice in each calendar year but no more than four times a year, unless required by exceptional circumstances. The meetings will be held in the form of face-to-face meeting, teleconference or videoconference. The Joint Steering Committee shall consist of two (2) representatives of each Party. The Parties shall hold the first Joint Steering Committee meeting within sixty (60) days of the Effective Date.

The Joint Steering Committee shall have responsibility to:

(i)	discuss the development plan (including any revisions thereof) for the Product in the Territory, with the general time schedule (“Development Plan” as more fully described in Section 4.2.3.);
(ii)	discuss protocols of clinical studies for the Development;
(iii)	ensure the appropriate sharing of data and information relating to the Development of the Product in the Territory and the development of the Product outside the Territory;
(iv)	review and evaluate CONFORMA’s Development activities and the Development efforts, including but not limited to the Development strategy and study protocols;
(v)	discuss the coordination of each Party’s respective Development activities relating to the Product;
(vi)	discuss a coordinated publication strategy for the Product;
(vii)	review the requirements of the Compound and the Product for the Development by CONFORMA, including forecasts thereof; and
(viii)	discuss the expansion of indications, Improvements and life cycle management.
4.2.3.	Development Plan

CONFORMA shall have the sole responsibility for designing and implementing the Development Plan in the Territory provided that such design and implementation is done using Commercially Reasonable Efforts. CONFORMA shall have the final decision making right with respect to the Development Plan, provided that such decisions are made in a commercially reasonable manner and that CONFORMA presents the draft of the Development Plan to SUMITOMO at least thirty (30) days prior to the Joint Steering Committee meetings, explains the draft to SUMITOMO and refers to SUMITOMO’s comments and opinions in the Joint Steering Committee meetings before finalizing the Development Plan, and provided further that in the event of a material delay in the Development, SUMITOMO has the rights described below.

The Development Plan shall contain an estimated timeline for clinical studies and the filing of NDA or its equivalent documents in the Territory [***].

The draft for the Development Plan as of the Effective Date is attached hereto as Annex 4.2.3.

CONFORMA shall use Commercially Reasonable Efforts to implement the Development Plan, contingent on SUMITOMO fulfilling its obligations under Sections 4.1(i), 4.1(iii) and 4.3.1 of this Agreement. Any revision of the Development Plan requires the discussions in the Joint Steering Committee meetings as described above.

*** Confidential Treatment Requested

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

	If CONFORMA foresees or becomes aware of any material delay in the Development Plan that would delay the planned NDA filing date, CONFORMA shall provide SUMITOMO with a description of the nature of the delay and a revised Development Plan within thirty (30) days after becoming aware of such delay and CONFORMA and SUMITOMO shall hold a Joint Steering Committee meeting within thirty (30) days thereafter.
	If there is a material delay in the implementation of the Development Plan and CONFORMA is not able to demonstrate to SUMITOMO’s reasonable satisfaction that it used Commercially Reasonable Efforts in carrying out the Development Plan under this Section 4.2.3., SUMITOMO may terminate the rights granted to CONFORMA under thisAgreement pursuant to Section 14.3. However, in case such material delay would occur only in Europe, SUMITOMO may terminate this Agreement only with respect to Europe, and upon such termination, all the member states of the Europe shall be excluded from the Territory.
	If the delay is attributable to CONFORMA’s negligence or willful misconduct with respect to Section 4.2.3, SUMITOMO may, at its discretion, terminate this Agreement in its entirety pursuant to Section 14.3., but upon shorter notice period of thirty (30) days.
	In addition to the draft of the Development Plan, CONFORMA shall send to SUMITOMO all the draft of the study protocols before finalization and refer to SUMITOMO’s comment.
4.3.	Clinical Supplies for Development

4.3.1. Supply of Product

SUMITOMO shall supply CONFORMA, its Affiliates’ and/or Sublicensees’ with their requirements for Product for use in Development. Product supplied by SUMITOMO for Development purposes shall be provided free of charge in quantities not to exceed eight thousand (8000) 50mg vials. If CONFORMA requires supplies of the Product in excess of this amount, SUMITOMO shall supply such excess amounts of Product to CONFORMA at the Minimum Price as defined in Section 6.2.1 or the Supply Agreement.

CONFORMA shall place its first order for clinical supplies no later than thirty (30) days following the Effective Date, to be delivered no later than January 15, 2006. CONFORMA shall place subsequent orders for clinical supplies at least six (6) months prior to the desired delivery date. SUMITOMO will use commercially reasonable efforts to meet CONFORMA’s requested quantities and delivery dates. SUMITOMO shall notify CONFORMA of the specific delivery date and quantity for each subsequent order no later than (2) months following CONFORMA’s order.

Additionally, SUMITOMO shall use commercially reasonable efforts to deliver one hundred (100) 50mg vials of Product no later than September 30, 2005 which CONFORMA will use for the purposes of certifying Third Parties who will conduct release testing, labeling and packaging.

The trade term which applies to the transaction of the Compound and the Product under this Section 4.3 shall be FCA (INCOTERMS 2000) Kansai International Airport, Japan.

4.3.2. Specifications

All the Product for clinical trials supplied by SUMITOMO shall conform to the Specifications and cGMP of the USA.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

4.3.3. Labeling and Packaging

	CONFORMA shall label and package the Product for Development.
5.	MARKETING AND PROMOTION
5.1.	Commercially Reasonable Efforts to Market
	CONFORMA shall use Commercially Reasonable Efforts to commercialize the Finished Product in the Territory as soon as reasonably practicable given applicable business and market conditions and the regulatory environment and contingent on SUMITOMO fulfilling its obligations under Sections 4.1.(i) and 4.1.(iii) of this Agreement and to supply the Product under Section 6 or the Supply Agreement.
5.2.	Commercialization Plan
	Within sixty (60) days after completion of the last clinical trial for the NDA for the first country in which an NDA is to be made, CONFORMA shall provide SUMITOMO with a three (3) year commercialization plan (“Commercialization Plan”) which will be updated by the end of third quarter every year. The Commercialization Plan shall include CONFORMA’s launch plans, such as publication planning, opinion development, positioning and pricing strategies, campaign development and annual marketing strategy for the Product as well as annual sales forecast of the Product in value separately for North America and Europe. CONFORMA’s commercialization plans shall set forth that CONFORMA will launch the Finished Product in the USA within three (3) months from the date on which the Authorization is granted in the USA and launch the Finished Product at least in three of five Major European Countries within one (1) year after receipt of Authorization in each such country.
	If CONFORMA foresees or becomes aware of any material delay in the commercialization plan that would delay the actual Launch date of the Finished Product more than ninety (90) days, CONFORMA will provide SUMITOMO with a description of the nature of the delay and a revised Annual Commercialization Plan for the impacted countries within sixty (60) days after becoming aware of such delay.
	If CONFORMA is not able to demonstrate to SUMITOMO’s reasonable satisfaction that there are reasonable commercial reasons for the material delay of the Launch date such as reasons related to pricing and reimbursement, SUMITOMO may terminate the rights granted to CONFORMA under this Agreement pursuant to Section 14.3. However, in case such material delay would occur only in Europe, SUMITOMO may terminate this Agreement only with respect to Europe, and upon such termination, all the member states of the Europe shall be excluded from the Territory
	If the delay is attributable to CONFORMA’s negligence or willful misconduct with respect to this Section 5.2., SUMITOMO may, at its discretion, terminate this Agreement in its entirety pursuant to Section 14.3., but upon shorter notice period of thirty (30) days.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

5.3.	Minimum Sales
	CONFORMA shall achieve the minimum sales which is seventy percent (70%) of the annual sales forecast as specified in the Commercialization Plan (“Minimum Sales”). For the purpose of defining CONFORMA’s Minimum Sales requirement, only the sales forecast specified in the latest Commercialization Plan prior to the start of the relevant calendar year shall be binding, and with respect to the Minimum Sales requirement for the period covering the first Launch in the Territory to December 31st of such year, CONFORMA may update the sales forecast by the time of the expected Authorization date in the USA. If CONFORMA fails to achieve the Minimum Sales for any consecutive two (2) calendar years in North America or Europe, SUMITOMO may, at its discretion, terminate this Agreement pursuant to Section 14.3. or convert CONFORMA’s exclusive license to non-exclusive upon thirty (30) days’ written notice with respect to the area where CONFORMA cannot achieve the Minimum Sales (i.e., North America or Europe); provided, however, that CONFORMA may, in lieu of such termination or conversion, agree prior to the expiration of such thirty (30) day period to pay to SUMITOMO an amount equal to the Minimum Sales minus the actual sales during the relevant period multiplied by 1/2 of the Calculated Price (e.g., 1/2 of [***]% or 1/2 of [***]%, as the case may be). For the avoidance of doubt, if the Minimum Sales were $10 million and the actual sales for the applicable period were $7 million and the Calculated Price is [***]%, the payment would be equal to $[***].
	In the event that SUMITOMO elects to convert the exclusive license to non-exclusive, CONFORMA will provide commercially reasonable support to SUMITOMO or its designee in their efforts to obtain additional Authorizations in the relevant geographic area. CONFORMA is not entitled to receive any compensation in relation to such support.
5.4.	Sales Outside the Territory
	CONFORMA and its Affiliates shall not market the Finished Product outside the Territory or export the Product or the Finished Product to countries outside the Territory and shall terminate any agreements with any Sublicenses who market the Finished Product outside the Territory or export the Product or the Finished Product to countries outside the Territory.
	SUMITOMO and its Affiliates shall not market the Finished Product in the Territory or export the Product or the Finished Product to countries within the Territory and shall terminate any agreements with any Licensees who market the Finished Product within the Territory or export the Product or the Finished Product to countries within the Territory.
5.5.	Labels and Packages
	The package and label of the Product, and advertising and promotional materials for the Product shall appropriately include relevant Patent information in accordance with the laws in each country within the Territory and such other information as required by the laws in each country within the Territory, and shall also indicate for the USA and the Major European Countries, at SUMITOMO’s request and to the extent the laws and regulations of the Territory permit, that the Product is manufactured and marketed under a license from SUMITOMO. Upon the reasonable request of SUMITOMO, CONFORMA shall provide SUMITOMO, free of charge, with samples of labels, packages, advertising and promotional materials used in the designated countries in the Territory for information purposes.

*** Confidential Treatment Requested

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

5.6.	Competing Product
	During the Initial Period, CONFORMA shall not market, promote or sell any pharmaceutical product which contains an anthracycline anti-cancer agent as an active ingredient which is directly competitive in the market (“Competing Product”) in any country within the Territory.
	Notwithstanding the above, in case CONFORMA acquires any Competing Product marketed, promoted and/or sold in any country within the Territory as a result of merger, acquisition or transfer of business, then CONFORMA shall divest or license out the right to such Competing Product to a Third Party within one hundred and eighty (180) days of the acquisition of such Competing Product.
	The failure to comply with the provision in this Section 5.6. will give SUMITOMO:

(i)	the right to immediately terminate this Agreement without cure period with respect to the affected country pursuant to Section 14.3, upon notice; or
(ii)	the right to convert the exclusive license hereof to non-exclusive with respect to the affected country on prior written notice to CONFORMA.

	In the event that SUMITOMO elects to exercise the right of the foregoing clause (ii), CONFORMA will provide reasonable support to SUMITOMO or its designee in their efforts to obtain additional Authorizations in such country. CONFORMA is not entitled to receive any compensation in relation to such support.
6.	SUPPLY OF PRODUCT
6.1.	Supply of Product

6.1.1. Supply Agreement

Within six (6) months of the Effective Date the Parties shall enter into a separate document (“Supply Agreement”) which, unless otherwise agreed by both Parties, restates the terms and conditions set forth in this Section 6. and is supplemented by such other terms and conditions as are customary in the supply of pharmaceutical products. In the event the Parties fail to agree on the terms and conditions of the Supply Agreement within such six (6) month period, the provisions of Section 6. shall control.

6.1.2. Requirements

SUMITOMO will supply CONFORMA with the Product to be sold by CONFORMA, its Affiliates and Sublicensees. CONFORMA shall purchase from SUMITOMO all the Product to be sold by CONFORMA, its Affiliates and Sublicensees in the countries during the Initial Period.

In the event that CONFORMA desires to purchase the Product from Third Parties or to manufacture the Product itself for use by CONFORMA, its Affiliates or Sublicensees in countries where the Initial Period has expired, CONFORMA shall provide SUMITOMO with two (2) years’ prior notice thereof.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

6.1.3. Specifications

All of the Product supplied by SUMITOMO shall conform to the Specifications and cGMP of the USA. With respect to the GMP of other relevant countries, CONFORMA shall inform SUMITOMO of the specific requirements thereof in writing in a timely manner if such requirements are different from cGMP of the USA. SUMITOMO shall use its Commercially Reasonable Efforts to satisfy such special requirements.

6.1.4. Delivery

	All the Product shall be delivered to CONFORMA FCA (Incoterms 2000) at Kansai International Airport, Japan.
6.2.	Payment

6.2.1. Purchase Price during the Initial Period

The price for the Product shall be calculated semiannually based on Net Sales of the Product for each of the first six months and second six months of each calendar year (the “Semiannual Periods”) with respect to the Product to be sold in the countries during the Initial Period in the following manner:

The price at which the Product should be sold by SUMITOMO to CONFORMA, its Affiliates or Sublicensees (the “Purchase Price”) shall be the higher of the following:

(i) The amount resulting from the application of the following formula (the “Calculated Price”):

	(A × B) ÷ C
	Where:
A =	Net Sales during the relevant Semiannual Period;
	B =   [***] ([***]%) until the end of the month of the second (2nd) anniversary of the first Launch in the Territory, and thereafter, [***] ([***]%);
	C =   the number of fifty (50) mg vials of the Product actually sold by CONFORMA, its Affiliates or Sublicensees during the relevant Semiannual Period;
or
(ii)	[***] per fifty (50) mg unlabeled vial (the “Minimum Price”).
	The Purchase Price will include the manufacturing cost of the Product and running royalties for the licenses for Patents, Know-how and Trademarks granted with respect thereto under this Agreement.
6.2.2.	Payments Procedure

(i) SUMITOMO shall invoice CONFORMA in US Dollars (“USD”) only after a shipment of the Product is available under FCA as set forth in Section 6.1.4 above. Payment for each shipment shall be made within two (2) months from the date of invoice and as directed by SUMITOMO.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

(ii) At each shipment, SUMITOMO shall issue the invoice based on the Minimum Price calculated in USD at the average of Telegraphic Transfer Middle (TTM) rate published by the Bank of Tokyo Mitsubishi on the last banking day of the month proceeding the month of shipment.

(iii) Within two (2) months of the end of each Semiannual Period CONFORMA shall calculate the Net Sales and the Calculated Price of the said Semiannual Period in USD. With respect to sales of any Finished Products invoiced in a currency other than USD, the Net Sales hereunder shall be converted from local currency to USD by CONFORMA and such exchange shall be determined based on the USD equivalent exchange rate as reported in the Unites States Federal Reserve Statistical Release: Foreign Exchange Rates (Annual), available on-line at http://www.federalreserve.gov/releases/ for said calendar year.

(iv) CONFORMA shall provide SUMITOMO with a financial report showing the Net Sales and Calculated Price within two (2) months of the end of each Semiannual Period.

(v) If the Calculated Price in the relevant Semiannual Period calculated in accordance with the foregoing is higher than the Minimum Price by CONFORMA, CONFORMA shall pay the difference as running royalties for the rights granted hereunder by the end of third month following the end of said Semiannual Period with the financial report for such Semiannual Period including the information of annual sales volume, Net Sales, Calculated Price and amount of running royalties with the exchange rate applied.

(vi) The Parties shall treat such financial reports and information as confidential under Section 13 of this Agreement and shall cause their respective accounting firms to retain all such financial reports and information in confidence.

6.2.3. Adjustments to Purchase Price After the Initial Period

With respect to the Product to be sold in the countries where the Initial Period has expired, SUMITOMO will continue the supply of the Product to CONFORMA under the conditions of clause (i) below unless CONFORMA elects to pursue the option under clause (ii) below.

(i) If CONFORMA, its Affiliates or Sublicensees wish to continue to purchase the Product from SUMITOMO, the Purchase Price shall be adjusted to the higher of (a) the price defined as [***] percent ( [***] %) of the Net Sales divided by the number of fifty (50) mg vials of the Product actually sold by CONFORMA, its Affiliates or Sublicensees or (b) the new Minimum Price that the Parties will discuss in good faith and agree to. In the event the Parties fail to agree upon the new Minimum Price, the Minimum Price shall remain [***] per fifty (50) mg unlabeled vial.

(ii) If CONFORMA, its Affiliates or Sublicensees decide to purchase the Product from a Third Party or manufacture the Product by itself, upon the request of CONFORMA and the provision to SUMITOMO of two (2) years’ notice pursuant to Section 6.1.2, SUMITOMO will license to CONFORMA, its Affiliates or its Sublicensees the Know-how and Manufacturing Technology which is necessary or useful for manufacturing the Compound and Product. In such event, as consideration of such license, CONFORMA shall pay to SUMITOMO [***] percent ( [***] %) of the Net Sales of the Finished Product manufactured by CONFORMA, its Affiliates or its Sublicensees until the twenty fifth (25th) anniversary of the date of the first Launch.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

(iii) SUMITOMO may decide after ten (10) years from the first Launch of CONFORMA to discontinue manufacturing the Product with two (2) years prior notice to CONFORMA. In such event, SUMITOMO shall (A) grant to CONFORMA, its Affiliate or its Sublicensee a royalty-free license for the Know-how and Manufacturing Technology which is necessary or useful for manufacturing the Compound and Product; (B) provide CONFORMA, its Affiliate or its Sublicensee with any technical data incorporated in the Know-How, and SUMITOMO shall promptly provide related documentation; and (C) assist CONFORMA, its Affiliate or its Sublicensee with the working up and use of the Know-How and Manufacturing Technology and with the training of personnel to the extent which may reasonably be necessary in relation to the manufacture of the Product by CONFORMA, its Affiliate or its Sublicensee.

6.2.4. Adjustment related to Combination Product

Notwithstanding the other provisions of this Section 6.2.4, with respect to any Combination Product, the Parties shall meet approximately one (1) year prior to the anticipated first Launch of such Combination Product to negotiate in good faith and agree to the Minimum Price applied to such Combination Product, as well as an appropriate adjustment to Net Sales which will be calculated as a fraction determined as follows:

Net Sales of the Combination Product  x	A
	A+B

Where “A” above represents the standard sales price of the Finished Product, containing the same amount of the Compound as the sole active ingredient as the Combination Product in question, in the given country and “B” above represents the standard sales price of the ready-for-sale form of a product containing the same amount of the other active pharmaceutical ingredient(s) that is contained in the Combination Product in question in the given country. If such products are not sold separately, the Parties shall use good faith efforts to agree on an appropriate mechanism for adjustment of the Net Sales for such Combination Product. In the event the parties fail to agree on the Minimum Price to be applied to such Combination Product or the mechanism for adjustment of such Net Sales, the Minimum Price shall remain [***] per fifty (50) mg unlabeled vial.

6.3. Forecast and Order

6.3.1. Supply Forecast

(i) Eighteen (18) months prior to the expected first delivery date of Product for the first Launch in the Territory, the Parties shall discuss the projected quantity requirements for the Product for the first three (3) years following the first Launch in the Territory.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

(ii) Twelve (12) months prior to the beginning of the calendar quarter which contains the expected date of the first Launch in the Territory, CONFORMA shall provide SUMITOMO with a good faith forecast of projected quantity requirements for the Product for the forthcoming three (3) years beginning with the calendar quarter six (6) months after the delivery of such forecast, including the quarterly quantities of the Product for the first year and the yearly quantities of the Product for the subsequent two years. The first quarter of the forecast shall be deemed as a firm order. CONFORMA shall designate a delivery date within the applicable calendar quarter at the time the forecast becomes a firm order. CONFORMA shall update such forecast for the three (3) year period on a rolling basis by the end of every calendar quarter thereafter during the term of this Agreement and the forecast for each first calendar quarter shall become a firm order on a rolling basis.

6.3.2. Firm Order

The quantity of the Product in the firm order shall not be less than seventy five percent (75%) nor more than one hundred and twenty five percent (125%) of the quantity specified in the latest forecast for the same quarter. In case the quantity in the firm order exceeds one hundred and twenty five percent (125%) of that in the latest forecast, SUMITOMO’s failure to supply the quantities exceeding one hundred and twenty five percent (125%) of that in the latest forecast shall not constitute a breach of this Agreement.

6.3.3. Quantity

The minimum order quantity (lot) per shipment shall not be less than the actual batch size of 8000 vials.

6.3.4. Quality Assurance Tests

CONFORMA shall be responsible for (i) performing quality assurance testing of all Products in accordance with the Specifications and (ii) notifying SUMITOMO of the result, within forty (40) days after receipt at CONFORMA’s facilities of each shipment of the Product. On CONFORMA’s failure to reject any Product within forty five (45) days of receipt, CONFORMA shall be deemed to have accepted such Product. In the event that the tests performed by CONFORMA indicate that a shipment of Product does not meet the Specifications, SUMITOMO shall as soon as is commercially reasonable replace the quantity of the Product affected. In such event, SUMITOMO shall be offered an opportunity to re-test such Product and if tests performed by CONFORMA and SUMITOMO reach inconsistent results, the Parties agree to have the Product tested by a reputable Third Party testing organization selected jointly by the Parties and to cooperate in the furnishing of necessary analytical methodology, subject to appropriate safeguards of confidentiality, to such testing organization. The decision of such Third Party organization shall be binding upon both Parties and the Party whose test results led to the false conclusion with respect to the Product meeting, or failing to meet, Specifications shall bear the costs of such analysis and of the replacement shipment of Product, if any; provided that if CONFORMA’s test results led to a false conclusion, the initial shipment of Product shall be sent to CONFORMA.

6.3.5. Retention of Samples

SUMITOMO shall retain samples from each lot of the Product in quantities sufficient for complete analysis and manufacturing batch records of each lot of the Product, until the first (1st) anniversary of the expiration of the shelf life of such lot.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

6.3.6. Labeling and Packaging

CONFORMA shall label and package the Product for the Territory at a facility to be determined by CONFORMA, in its sole discretion in conformity with all the laws and regulations including GMP of the relevant countries in the Territory.

6.3.7. Backup/Complementary Source for the Manufacture of Compound or Product

SUMITOMO shall maintain a reasonable amount of safety stock for the Product and the Compound and/or the main stable intermediate in a quantity to be agreed to by CONFORMA and SUMITOMO no later than eighteen (18) months prior to the expected first delivery date of Product for the first Launch in the Territory. In case of necessity, SUMITOMO and CONFORMA will discuss the backup /complementary source.

6.4.	Termination
	In the event the Supply Agreement is executed, the Supply Agreement shall automatically terminate in the event of the early termination of this Agreement for any reason. Upon the expiration of this Agreement, the Supply Agreement will continue in effect, but each Party may terminate the Supply Agreement upon two (2) years’ notice, which notice may be delivered up to two (2) years prior to the expiration date of this Agreement.
7.	TRADEMARK
7.1.	Grant of Right
	“Calsed” is the first candidate of the Trademark in the Territory but Parties shall discuss and agree on the selection of the Trademark if Calsed is not available or not suitable as a Trademark in the Territory. However, in the event of disagreement between Parties, CONFORMA has the final decision-making right. Then, SUMITOMO shall file, prosecute and maintain the Trademark at its own cost in each country within the Territory in which CONFORMA shall market the Finished Product.
7.2.	Ownership
	SUMITOMO shall own the Trademark.
7.3.	Filing, Prosecution and Maintenance
	SUMITOMO shall diligently prosecute and maintain the Trademark at its sole cost and expense and shall keep CONFORMA reasonably advised as to the status of the maintenance of the Trademark and any clearance, applications and registrations for any substitute Trademarks. SUMITOMO will consult with CONFORMA in a timely manner, as it relates to the Territory, concerning:

(i)	scope and content of any application or amendment in connection with the Trademark prior to filing such application or amendment
(ii)	content of any proposed responses to official actions in connection with the Trademark.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

	If SUMITOMO fails to timely file for or to maintain a registration for the Trademark following a request by CONFORMA, or to pay any fee required to maintain the Trademark, CONFORMA shall have the right, at its expense, to clear, file, prosecute and maintain the applications and registrations for the Trademark in SUMITOMO’s name and on SUMITOMO’s behalf.
7.4.	Royalties for Trademark

(i)  Even after the expiration of this Agreement, as far as CONFORMA purchases the Product from SUMITOMO, the license set forth in Section 2.1(c) shall remain in full force and effect and the royalties for such license are included in the Purchase Price as defined in Section 6 or the Supply Agreement.

(ii)  In case CONFORMA purchases the Product from a supplier other than SUMITOMO, or CONFORMA manufactures the Product by itself, and CONFORMA wishes to continue to use the Trademark in the Territory, the license set forth in Section 2.1(c) shall remain in full force and effect and CONFORMA shall pay to SUMITOMO royalties for such license at a rate of [***] percent ([***]%) of Net Sales in relevant countries, on a country-per-country basis until the twenty fifth (25^th) anniversary of the date of the first Launch of the Finished Product. Payment for above royalties shall be made within ninety (90) days from the date from the end of calendar year and be accompanied by the financial report as described in Section 6 or the Supply Agreement.

7.5.	Infringement by Third Party
	Each Party shall notify the other promptly upon learning of any actual, alleged, or threatened infringement of the Trademark applicable to a Product or of any unfair trade practices, trade dress imitation, passing off of counterfeit goods, or like offenses. Upon learning of such offense, CONFORMA shall have the first right to respond to and defend any such infringement or offense. In the event CONFORMA elects to do so, SUMITOMO will cooperate with and provide assistance and authority to CONFORMA, provided that such assistance is economically reasonable. In the event that CONFORMA elects, within ninety (90) days of notification thereof, not to respond to or defend any such infringement or offense or abandons such defense, then, in such event, SUMITOMO shall have the option to do so, provided that CONFORMA will cooperate with and provide assistance to SUMITOMO, and provided that such assistance is economically reasonable.
	The Party bringing the foregoing action shall do so at its own cost and expense. The Party not bringing such action agrees to join in such action as a plaintiff if necessary to prosecute the action. Any damages or other monetary awards recovered from settlement or judgment from such an action shall be allocated first to reimburse the costs and expenses of the Party bringing the action, then to reimburse the costs and expenses, if any, of the other Party (except for costs associated with the other Party being represented by counsel of its own choice). Any amounts remaining shall be deemed as the Net Sales and the Parties shall agree on an appropriate royalty rate to adequately share such incremental Net Sales reflecting the principles set forth in Section 7.4.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

8.	REGULATORY AFFAIRS AND INSPECTIONS
8.1.	Acquisition and Maintenance of Authorization
	CONFORMA shall have the sole responsibility for preparing and filing the INDs and the NDA for the Product with the Regulatory Authority in the countries where CONFORMA has an intention to market the Finished Product. CONFORMA shall immediately notify SUMITOMO of the submission of any IND and NDA for the Product and of the grant of any Authorization. CONFORMA shall be responsible for applying for and obtaining any extensions of the Data Protection period in countries where CONFORMA markets the Product.
	CONFORMA shall use Commercially Reasonable Efforts to make regulatory filings in the countries where CONFORMA has an intention to market the Finished Product, contingent on SUMITOMO fulfilling its obligations under Sections 4.1(i) and 4.1(iii) of this Agreement and supply obligations under Section 6 or the Supply Agreement.
	CONFORMA shall be solely responsible for any actions, including but not limited to clinical trials after obtaining the Authorization, at its expense to maintain each Authorization in the countries where CONFORMA markets the Product.
	CONFORMA shall be responsible for all interactions with Regulatory Authorities in the Territory. Authorization shall be held by CONFORMA in CONFORMA’s name in the Territory. CONFORMA will have the sole responsibility for applying for, obtaining and maintaining Authorization in the Territory. All expenses necessary for applying for, obtaining and maintaining Authorization in the Territory shall be borne by CONFORMA. At CONFORMA’s request, SUMITOMO shall cooperate in the preparation and maintenance of all regulatory filings for the Finished Product filed by CONFORMA, including, without limitation, preparing sections of regulatory filings that are applicable to the manufacturing activities of SUMITOMO or to preclinical, clinical and commercial data generated by SUMITOMO.
8.2.	Maintenance of Data
	SUMITOMO shall keep and maintain all the reports, data and raw data which SUMITOMO provides to CONFORMA and which constitute parts of or basis of the NDA for the Product submitted by CONFORMA for the period which the laws and regulations of the countries where CONFORMA markets or intends to market the Product require. In order to ensure the foregoing, CONFORMA shall inform SUMITOMO of such period. If there are any Affiliates or Third Party which produced all or parts of the foregoing reports, data, and raw data for SUMITOMO, SUMITOMO shall have such Affiliate or seek to have such Third Party comply with the foregoing obligation of maintenance.
	In the event that SUMITOMO notifies CONFORMA of its intent to use the reports, data and raw data obtained by CONFORMA for the purpose of the NDA for the Product outside the Territory, CONFORMA shall keep and maintain all such reports, data and raw data for the period which the laws and regulations of the each country outside the Territory requires. In order to ensure the foregoing, SUMITOMO shall inform CONFORMA of such period of each county outside the Territory. If there is any Affiliate or Third Party which produces all or parts of the foregoing reports, data, and raw data for CONFORMA, CONFORMA shall have such Affiliate or seek to have such Third Parties comply with the foregoing obligation of maintenance.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

8.3.	Inspections by Regulatory Authority
	SUMITOMO shall accept, have its Affiliate accept, and seek to have the Third Parties who cooperate with or assist SUMITOMO regarding the development or manufacture of the Product outside the Territory, if any, to accept, the inspection by the Regulatory Authority if it is required for CONFORMA to obtain or maintain the Authorization. CONFORMA will use Commercially Reasonable Efforts to obtain the information of such inspection in advance and forward it to SUMITOMO. SUMITOMO shall permit CONFORMA or its Affiliates to be present at any inspection by Regulatory Authorities and shall provide advance notice of any such inspection.
	In the event that SUMITOMO uses the reports, data and raw data obtained by CONFORMA for the purpose of the NDA for the Product outside the Territory, CONFORMA shall accept, have its Affiliate accept, and seek to have the Third Parties who cooperate with or assist CONFORMA regarding the Development, if any, to accept, the inspection by the regulatory authorities of the countries outside the Territory if it is required to obtain or maintain the marketing authorization for the Product in such country. SUMITOMO shall use Commercially Reasonable Efforts to obtain the information of such inspection in advance and forward it to CONFORMA.
	In case of requests from Regulatory Authorities regarding specific historical reports, the Parties agree to reasonably collaborate to meet those requests.
8.4.	Inspections by Parties
	CONFORMA may inspect SUMITOMO’s or its Affiliate’s facilities during each entity’s normal business hours upon reasonable prior notice and SUMITOMO shall accept or shall have its Affiliate accept such inspection to the extent such facilities relate to the manufacture of the Compound or the Product or the maintenance of the reports, data and raw data referred to in Section 8.2.
	SUMITOMO may inspect CONFORMA’s or its Affiliate’s facilities during each entity’s normal business hours upon reasonable prior notice and CONFORMA shall accept or shall have its Affiliate accept such inspection to the extent such facilities relate to the Development, manufacture, or distribution of the Product in the Territory.
	Each Party shall use Commercially Reasonable Efforts to have the Third Parties who are entrusted or contracted out to a part of each Party’s responsibility under this Agreement, if any, to accept the foregoing inspections by the other Party.
8.5.	Pharmacovigilance / Drug Safety Matters
	The Parties agree to inform each other about adverse events occurring or having occurred in connection with the use of the Compound or the Product which comes into its knowledge. The Parties agree to handle data and information about adverse events occurring or having occurred in connection with the use of the Compound or the Product according to the respective ICH-Guidelines, FDA requirements, requirements of the relevant European registration authorities, requirements of the Regulatory Authority and/or requirements of any other relevant regulatory authority.
	The Parties shall execute a separate agreement specifying the procedure for the information exchange of the adverse drug reactions which may occur during the Development no later than the Initiation by CONFORMA of the first clinical trial of the Product in the Territory (“Clinical Pharmacovigilance Agreement”).

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

	After completion of the last clinical trial for the NDA for the first country in which an NDA is to be made but no later than the expected date when CONFORMA obtains the first Authorization in the Territory, the Parties shall execute another agreement which includes handling of post marketing studies and spontaneous or literature reports, surveillance, etc. in relation to Compound, Product, and Finished Product in the Territory by CONFORMA, its Affiliates or its Sublicensees, and outside Territory by SUMITOMO, its Affiliates or its Licensees, specifying the procedure for the information exchange of the adverse events which may occur after the Launch (“Post Marketing Pharmacovigilance Agreement”).
	SUMITOMO shall be solely responsible for reporting adverse events to the regulatory authorities outside the Territory. CONFORMA, as the Party owning the IND, NDA or Authorization, shall be solely responsible for reporting adverse drug experiences to the Regulatory Authorities in the respective territories.
	The Parties will maintain a safety database for the Product, that allows them to manage safety data collected and fulfill their regulatory requirements in their respective Territory.
9.	PATENTS and Updated Technology
9.1.	Updated Technology
	During the term of this Agreement, SUMITOMO shall advise CONFORMA as soon as commercially reasonable of any improvements or inventions concerning the Compound and/or the Product or its use made by either SUMITOMO or any of its Affiliates, Licensees or Third Parties contracted by SUMITOMO, as well as status of each Patent and acquisition of new Patent. The foregoing improvements or inventions constitute parts of the rights granted to CONFORMA under Section 2.1, except for those rights which SUMITOMO has acquired or obtained pursuant to a license from a Third Party which is subject to the payment of consideration by SUMITOMO, in which case SUMITOMO shall only be obliged to grant a license to such improvements or inventions to CONFORMA to the extent permitted by the arrangement with such Third Party and the grant of such license to CONFORMA shall be subject to the payment of reasonable additional compensation by CONFORMA, provided that SUMITOMO shall use its Commercially Reasonable Efforts to obtain from such Third Party the right to license such improvements or inventions to CONFORMA, and use its Commercially Reasonable Efforts to mitigate the consideration thereof. With respect to an additional compensation for such improvements or inventions, the Parties shall negotiate in good faith a reasonable compensation for license grant to CONFORMA.
9.2.	Rights to Improvements
	As between SUMITOMO and CONFORMA, CONFORMA or its Affiliates own all right, title and interest in and to all the Improvements, subject to the SUMITOMO’s right to the Improvements as set forth in Section 2.3. CONFORMA or its Affiliates have the right to file a patent in the Territory and outside the Territory related to such Improvements.
	During the term of this Agreement, CONFORMA shall inform SUMITOMO as soon as commercially reasonable of any patent applications covering an Improvement.
9.3.	Application and Maintenance of Patents
	SUMITOMO shall, subject to the provisions of Section 9.4, at its cost, be responsible for diligently preparing, filing, maintaining, and renewing the Patents in the Territory.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

	SUMITOMO shall be responsible for applying for and obtaining any patent term extensions, including supplementary protection certificate; provided, however, that should SUMITOMO decide not apply for, continue to prosecute or maintain a Patent in the Territory because SUMITOMO reasonably believes that such Patent can no longer provide exclusivity protection for the Compound or Product in the Territory, SUMITOMO shall so notify CONFORMA and then CONFORMA may take over the prosecution and/or maintenance of the Patent from SUMITOMO at its own cost.
9.4.	No Warranty
	SUMITOMO will use Commercially Reasonable Efforts to obtain the grant of the Patents by the governmental patent office in each country in the Territory where SUMITOMO elects to apply for Patents, but gives no warranty that Patents will be granted or upheld in such country or in any other country within the Territory. CONFORMA acknowledges that the rights granted hereunder may not provide market exclusivity in the Territory and that SUMITOMO makes no representations or warranties regarding the existence of market exclusivity. Even if no patent protection is obtained in the Territory, it shall not provide a basis for termination, rescission or cancellation of this Agreement, nor shall it entitle any Party to demand a revision or renegotiation of this Agreement or any of its provisions.
9.5.	Infringement by Third Party
	Each Party shall promptly notify the other of any infringement of the Patents or threat of such infringement by a Third Party in the Territory which the Party comes to know. In the event of the foregoing infringement or threat, SUMITOMO will, at SUMITOMO’s option and at its sole cost and expense, commence appropriate legal action to stop or prevent such infringement. Only SUMITOMO has the right to engage in any legal action and, once engaged, has the sole right to pursue such action, in its complete and sole discretion, provided that SUMITOMO shall refer to the suggestions or opinions of CONFORMA. CONFORMA shall provide SUMITOMO, upon the request of SUMITOMO and at the cost of SUMITOMO, with support which is necessary for SUMITOMO to show the infringement or the damage in the action, provided that such support is economically reasonable.
	Within sixty (60) days after receiving or giving above notice, SUMITOMO shall notify CONFORMA of whether SUMITOMO commence legal action to stop or prevent the infringement. If SUMITOMO decides not to commence legal action or fails to initiate such action within thirty (30) days after giving a notice to CONFORMA of its decision of commencement of legal action, CONFORMA has the right, but not the obligation to begin action at CONFORMA’s option and at CONFORMA’s sole cost and expense. In such event, SUMITOMO shall provide CONFORMA, at the cost of CONFORMA, with support which is necessary for CONFORMA to initiate and maintain the action, provided that such support is economically reasonable.
	Notwithstanding the foregoing paragraph, in the event that the Third Party asserts, as a defense or as a counterclaim that the Patent is invalid or unenforceable, then each Party shall promptly notify the other Party. SUMITOMO shall have the first right, but not the obligation, to respond to such defense or defend against such counterclaim, provided that no settlement or consent judgment or other voluntary final disposition may be entered into without the consent of CONFORMA if such settlement would effect CONFORMA’s rights under this Agreement.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

	Neither Party shall settle such action without the consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed. Any resulting award, judgment or settlement amount in favor of SUMITOMO or CONFORMA in the action under this Section 9.5. shall be first allocated to cover the cost and expenses, including reasonable attorney’s fees, which each Party has spent for the action, and shall be split [***] percent ( [***] %) to CONFORMA and [***] percent ( [***] %) to SUMITOMO.
9.6.	Infringement Alleged by Third Party
	If any Third Party claims or alleges that CONFORMA, its Affiliates, or Sublicensee infringes such Third Party’s patent or other intellectual property by manufacturing, importing, using, marketing, promoting, distributing or selling the Product in the Territory, CONFORMA has the right, but not the obligation to defend against such Third Party at its sole cost and expense. However, if CONFORMA needs the technical information of SUMITOMO to defend against such Third Party which CONFORMA does not have, SUMITOMO shall provide it to CONFORMA. CONFORMA agrees to use the technical information provided by SUMITOMO under this Section 9.6. only for the purpose of defending against the Third Party alleging the infringement.
	Notwithstanding the foregoing paragraph, in the event that the Third Party asserts in a claim that the Patent is invalid or unenforceable, then CONFORMA shall promptly notify SUMITOMO. SUMITOMO shall have the first right, but not the obligation, to respond to such claim provided that no settlement or consent judgment or other voluntary final disposition may be entered into without the consent of CONFORMA if such settlement would effect CONFORMA’s rights under this Agreement, provided however, that CONFORMA shall not withhold such consent unreasonably.
10.	RECORDS
10.1.	Records
	CONFORMA shall maintain and retain all records relating to sales, sales contracts, invoices, accounts, medical enquiries and other transactions directly related to the Product that may be necessary for the purpose of calculating, Net Sales under this Agreement for a period of not less than five (5) years from the date on which such records arose.
10.2.	Examination by Certified Public Accountant
	SUMITOMO has the right to have independent certified public accountant selected by and retained at the expense of SUMITOMO with approval of CONFORMA, which shall not be unreasonably withheld, examine during normal working hours of CONFORMA and at a date previously agreed upon with CONFORMA the books and records kept by CONFORMA and its Affiliate to the extent necessary to verify the accuracy of the Finished Product sales or payments made in this Agreement, if any, reports presented and payments made to SUMITOMO hereunder. Such examination shall not be more often than once per calendar year and for not more than two (2) previous years. Any deviations shall either be credited or paid by the other Party, as the case may be. CONFORMA shall ensure that corresponding provisions are contained in the sublicense agreements with Third Parties. SUMITOMO agrees that the report of above examination by certified public accountant to SUMITOMO shall be limited to the information relevant to verification of the accuracy of Product sales or payments in this Agreement, if any, reports presented and payments made to SUMITOMO hereunder.

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

11.	TAXATION
11.1.	Responsibility for Tax
	Subject to Section 11.2 below, CONFORMA is solely responsible for the payment of any and all taxes arising from the existence or operation of its business or from the performance of its obligations hereunder including, without limitation, income taxes, withholding taxes, employee payroll and social security and welfare taxes which may be imposed upon CONFORMA in accordance with applicable laws. Likewise, subject to Section 11.2 below, SUMITOMO is solely responsible for the payment of any taxes arising from the existence or operation of its business, the income and profits resulting therefrom or from the performance of its obligations hereunder and for any and all obligations which may arise from its employment of any persons including, without limitation, any personnel of SUMITOMO dedicated to the manufacturing of the Compound.
11.2.	Withholding Tax
	If a withholding tax is imposed on any event payment, payment for the Product, or royalty hereof is enacted, CONFORMA shall deduct the amount of any such applicable withholding tax from the amount due to SUMITOMO and pay over such withholding tax deducted to the relevant taxing authorities. CONFORMA shall not provide any gross-up amount with respect to any applicable withholding tax. CONFORMA shall provide SUMITOMO with the official receipts and such other evidence of payment of any such applicable withholding tax as SUMITOMO may request in writing promptly following such request. SUMITOMO shall provide documentation to CONFORMA as reasonably requested to minimize withholdings otherwise required by the taxing authorities. CONFORMA shall render SUMITOMO reasonable assistance in order to allow SUMITOMO to obtain the benefit of any present and future treaty for the avoidance of double taxation in force between Japan and the respective countries in the Territory.
12.	FINANCIAL MATTERS
12.1.	Late Payments
	In case CONFORMA fails to make each payment required hereof by the due date, SUMITOMO will charge CONFORMA a penalty at the lower of (i) interest accruing on any such unpaid balance at the average year-to-date rate London Inter-Bank Offering Rate (LIBOR) in effect from time to time plus two percent (2 %) per annum or (ii) the highest rate allowable under applicable law.
12.2.	Manner of Payment
	All amounts due to either CONFORMA or SUMITOMO under this Agreement shall be paid by wire transfer to such bank account as CONFORMA or SUMITOMO, as the case may be, may direct from time to time. All bank expenses incurred by CONFORMA or SUMITOMO in making such wire transfer shall be on its own account.
	All payments required under this Agreement shall be made in USD.

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13.	CONFIDENTIALITY
13.1.	Non-disclosure
	SUMITOMO and CONFORMA agree to hold in strict confidence any and all information disclosed by the other and identified in writing as confidential whether disclosed prior to the Effective Date or thereafter (“Confidential Information”), in accordance with these efforts taken by each Party to protect its own information, data or other tangible or intangible property that it regards as proprietary or confidential but using not less than reasonable diligent efforts.
13.2.	Limited Purposes
	The receiving Party shall not use the Confidential Information for any purpose other than in connection with exercising its rights and fulfilling its obligations hereof. The receiving Party will not disclose any such Confidential Information to any person other than to its officers, employees, legal counsel or technical advisors, or to officers, employees, legal counsel or technical advisors of any of its Affiliates, provided that they have a clear need to know such Confidential Information in connection with the performance of their professional responsibilities under this Agreement, and provided further that they are bound by the confidentiality and non-use obligations substantially similar to those in this Section 13. The receiving Party shall further take all reasonable steps to prevent its officers, employees, legal counsel or technical advisors, or any others having access to the Confidential lnformation, from disclosing to any Third Party or making unauthorized use of any Confidential Information, or from committing any acts or making any omissions that may result in a violation of this Section 13.
13.3.	Exceptions

13.3.1. Information Otherwise Available

Neither Party shall have any obligation of confidentiality or non-use with respect to any portion of the Confidential lnformation which:

(i)	at the time of disclosure by the other Party, is in the public domain;
(ii)	after disclosure by the other Party, enters the public domain by means other than a breach of this Agreement by the receiving Party;
(iii)	the receiving Party can establish by competent proof is in its possession at the time of disclosure by the other Party or thereafter is independently developed by persons in its employment who had no contact with and were not aware of the content of the Confidential lnformation; or
(iv)	the receiving Party obtains from a Third Party not bound by a duty of confidentiality.

13.3.2. Governmentally Required Disclosures

Each Party may disclose Confidential Information disclosed to it by the other Party to the extent that such disclosure is reasonably necessary for the following reasons:

(i)	for regulatory filings, including without limitation filings with the U.S. Securities and Exchange Commission, and filings with regulatory authorities permitted hereunder;
(ii)	to comply with a subpoena or an order issued by a court or other tribunal of competent jurisdiction, provided however, that the receiving Party shall immediately provide a notice to the disclosing Party so that the disclosing Party may seek a

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License Agreement Amrubicin Hydrochloride (SM-5887)
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protective order or other remedy from relevant court or tribunal.

13.4.	Publication Procedure
	When a Party plans to publish the results of the studies conducted in the course of the development in and outside Territory, such Party shall submit the draft of the publication, translated into English, to the other Party at least six (6) weeks prior to the planned submission for publication for approval. Any such publication shall need the other Party’s prior written consent, which shall not be unreasonably withheld. Any comment, reasonable request for modification, or reasonable rejection must be made within four (4) weeks from receipt of the draft. Thereafter, the draft is deemed to be approved. However, for the elimination of any doubt, CONFORMA will have the sole right to decide upon its own publication strategy in the Territory.
13.5.	Return of Information
	Unless otherwise set forth in this Agreement, title and all rights to, and emanating from, the ownership of all Confidential Information disclosed under this Agreement shall remain vested in the disclosing Party. Upon written request of the disclosing Party, the receiving Party shall return to the disclosing Party all written materials and documents within sixty (60) days, as well as any computer software or other media, in their possession, made available or supplied by the disclosing Party to the receiving Party that contains Confidential Information, together with any copies thereof, except for one copy which may be retained by the receiving Party only for the purpose of determining the receiving Party’s continuing obligations or exercising its rights hereunder.
13.6.	Additional Permitted Disclosures
	Each Party may provide the Confidential Information to a Third Party which is interested in obtaining the license or sublicense of the Product in its Territory, provided that such Third Party has signed a confidentiality agreement containing essentially similar provisions of confidentiality as contemplated hereof. In addition, CONFORMA may disclose the terms and conditions of this Agreement to potential investors or financial advisors for purposes of due diligence in connection with a financing or other financial transaction involving CONFORMA.
13.7.	Terms and Conditions of this Agreement
	The Parties agree to keep the terms and conditions of this Agreement confidential and neither Party shall disclose any such terms and conditions to the public or to Third Parties, except as set forth in Sections 13.2, 13.3 and 13.6, without the prior written consent of the other Party.
13.8.	Previous Confidential Agreement
	Upon the execution of this Agreement, information which has been protected by the provisions of the Secrecy Agreement on “SM-5887“ executed between the Parties on August 12, 2004, shall be covered by this Section 13 and the provisions of the above Secrecy Agreement shall no longer be effective.
	The provisions of this Section 13 shall survive the termination or expiration of this Agreement for ten (10) years.

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14.	TERM AND TERMINATION
14.1.	Expiration
	Unless sooner terminated pursuant to the provisions hereof, this Agreement shall expire on the date when the Initial Period has expired in all the countries in the Territory.
14.2.	Termination by CONFORMA
	In the occurrence of safety or toxicology issues CONFORMA may terminate this Agreement at any time by providing SUMITOMO with thirty (30) days’ prior written notice.
14.3.	Termination for Breach
	Upon a material breach of any term of this Agreement or the Supply Agreement by one Party, the other Party may give written notice of such breach to the breaching Party. Should the breaching Party fail to cure such breach within sixty (60) days of such notice, the other Party may terminate this Agreement with further sixty (60) days’ notice. In addition to this right to terminate this Agreement in its entirety, SUMITOMO shall have the right to terminate the rights granted to CONFORMA under this Agreement on a country-by-country basis as set forth in Sections 4.2.3, 5.2 and 5.6.
14.4.	Termination for Bankruptcy
	This Agreement may be terminated by SUMITOMO within thirty (30) days upon written notice in case CONFORMA becomes insolvent or makes an assignment for the benefit of creditors or become involved in receivership, bankruptcy or other insolvency or debtor relief proceedings, or any similar proceedings, or in proceedings, voluntary or forced, whereby CONFORMA is limited in the free and unrestrained exercise of its own judgment as to the carrying out of the terms of this Agreement.
14.5.	Termination for Patent Challenge
	Until the expiry of all Patents in all countries in the Territory, SUMITOMO shall have the right to terminate this Agreement if CONFORMA or its Affiliate takes, or actively assists a Third Party in taking, any action to challenge or contest the title or validity of any of the Patents.
14.6.	Termination for Change of Control
	In addition to the rights under Section 5.6 in case a Change in Control occurs for CONFORMA and the Third Party in such Change of Control transaction has a Competing Product in the Territory (“Competing Party”), CONFORMA shall notify SUMITOMO of this event and the Parties shall discuss in good faith how to ensure that sale of the Product is not adversely affected by the Change of Control, and modify this Agreement as necessary. If the Parties are unable to reach an agreement after ninety (90) days, SUMITOMO shall have thirty (30) days to terminate this Agreement with sixty (60) days’ written notice to CONFORMA. For purposes of this Section 14.6, a “Change of Control” shall mean a transaction in which a single Third Party becomes the beneficial owner of fifty percent (50%) or more of the combined voting power of the outstanding securities of CONFORMA or a sale or other disposition to a Third Party of all or substantially all of the assets or business of CONFORMA, by means of a merger, reorganization or similar corporate transaction.

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14.7. Consequences of Termination

14.7.1. Responsibilities of CONFORMA

Upon the termination by CONFORMA pursuant to Section 14.2. or the termination by SUMITOMO pursuant to Section 14.3., 14.4., and 14.5., CONFORMA shall:

(i)	transfer and assign to SUMITOMO or its designee CONFORMA’s right and title to all INDs and NDAs relating to the Product and all other applications, clinical trial agreements (to the extent assignable and non-cancelable) and data obtained in the course of the Development;
(ii)	provide to SUMITOMO or its designee all existing and reasonably available marketing information; and
(iii)	grant to SUMITOMO a non-exclusive, perpetual, royalty-free license, with a right to sublicense, of the Improvements to develop, register, manufacture, import, use, market, promote, distribute and sell the Compound and/or Product in the Territory.

In addition to the foregoing, in the event that the termination notice under Section 14.5. is issued by SUMITOMO after the initiation of any clinical trials for the Product by CONFORMA in the USA, CONFORMA shall, at its cost and expenses, complete any ongoing trial to which the patients have already been enrolled before the issuance of the termination notice. However, from the issuance of the termination notice until the effective date of the termination notice, CONFORMA is not required to initiate any new studies.

14.7.2. Responsibilities of SUMITOMO

Upon termination by CONFORMA pursuant to Section 14.3, SUMITOMO shall grant to CONFORMA for the Territory an exclusive, perpetual paid-up license, including a right to sublicense, to all the Patents and Know-how, which SUMITOMO has a right as of the termination date, to the extent necessary for CONFORMA or its Sublicensees to continue all pending Development activities or marketing and sales activities relating to the Product in the Territory.

14.7.3. Regulatory Responsibilities of Both Parties

Even after the termination for any ground, each Party shall comply with the regulatory requirements which the Regulatory Authority of the relevant countries imposes on the Parties, if any.

14.7.4. Ancillary Agreements

Unless otherwise agreed in the Supply Agreement or otherwise by the Parties, the termination of this Agreement with respect to all countries in the Territory in entirety shall cause the automatic termination of all ancillary agreements related hereto, including but not limited to Supply Agreement.

14.8.	Outstanding Payments
	Termination of this Agreement by a Party, for any reason, will not release CONFORMA from any obligation to make any payments to SUMITOMO which were due and payable prior to the effective date of termination.
14.9.	Survival Clauses
	Even after this Agreement is terminated or has expired in all countries within the Territory, the following Sections shall survive in addition to any Sections which by their terms survive

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	termination or expiration of this Agreement: Sections 1, the first paragraph of Section 2.3, Section 6, 7.1, 7.2, 7.4, 7.5, 8.2, 8.5, 9.5, 9.6, 10, 11, 12, 13, 14.7, 14.8, 14.9, 15, 16.5 and 17.
15.	INDEMNIFICATION
15.1.	Indemnification by SUMITOMO
	Subject only to the provisions of this Agreement and the Supply Agreement (if executed), SUMITOMO hereby agrees to indemnify and hold harmless CONFORMA, its Affiliates and Sublicensees, and the officers, directors, agents, representatives and employees of each of them, upon demand, against all losses, costs, claims, proceedings, actions, damages, liabilities, penalties and expenses, including reasonable legal fees and expenses (“Losses”), suffered or incurred by any of them, arising out of, resulting from or in connection with claims brought by a Third Party that are based upon:

(i)	the performance or breach of this Agreement and the Supply Agreement (if executed) by SUMITOMO; or
(ii)	non-compliance of the Compound or the Product to the Specifications, provided that the Compound or Product is supplied by SUMITOMO or its Affiliate; or
(iii)	the development activities, regulatory approval, distribution, sale, marketing and promotion of the Product outside the Territory by SUMITOMO, its Affiliates or its Licensees; or
(iv)	except as expressly set forth in Section 15.2, any damage or injury to a Third Party arising from any use or misuse of the Product sold by SUMITOMO, its Affiliates or its Licensees except for those sold to CONFORMA, its Affiliates, or the Sublicensees, including any adverse effects caused by or arising from the Product;
except to the extent such Losses are due to the gross negligence or willful misconduct, or failure to act of CONFORMA.

15.2.

Indemnification by CONFORMA

Subject only to the provisions of this Agreement and the Supply Agreement (if executed), CONFORMA hereby agrees to indemnify and hold harmless SUMITOMO, its Affiliates, and Licensees, and the officers, directors, agents, representatives and employees of each of them, upon demand, against all Losses suffered or incurred by any of them, arising out of, resulting from or in connection with claims brought by a Third Party that are based upon:

(i)	the performance or breach of this Agreement and the Supply Agreement (if executed) by CONFORMA;
(ii)	the Development, registration of the Authorization, distribution, sale, marketing and promotion of the Product in the Territory by CONFORMA, its Affiliates or the Sublicensees;
(iii)	the packaging or labeling of the Product by CONFORMA or its Affiliates or a Third Party on behalf of CONFORMA; or
(iv)	except as expressly set forth in Section 15.1., any damage or injury to a Third Party arising from any use or misuse or mishandling of the Product sold by CONFORMA, its Affiliates or its Sublicensees, including any adverse effects caused by or arising

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License Agreement Amrubicin Hydrochloride (SM-5887)
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from the Product;

	except to the extent such Losses are due to the gross negligence or willful misconduct, or failure to act of SUMITOMO.
15.3.	Procedure
	If any Third Party notifies any party hereto (the ”Indemnified Party“) with respect to any matter that may give rise to a claim for indemnification against the other Party hereto (the ”Indemnifying Party“) under this Section 15, then the Indemnified Party will notify the Indemnifying Party thereof promptly and in any event within thirty (30) days after receiving any written notice from a Third Party; provided that no delay on the part of the Indemnified Party in notifying the Indemnifying Party will relieve the Indemnifying Party from any obligation hereunder unless, and then solely to the extent that, the Indemnifying Party is prejudiced thereby. Once the Indemnified Party has given notice of the matter to the Indemnifying Party, the Indemnified Party may defend against the matter in any manner it reasonably may deem appropriate. If the Indemnifying Party notifies the Indemnified Party within thirty (30) days after the date the Indemnified Party has given notice of the matter that the Indemnifying Party is assuming the defense of such matter, then (i) the Indemnifying Party will defend the Indemnified Party against the matter with counsel of its choice reasonably satisfactory to the Indemnified Party, (ii) the Indemnified Party may retain separate counsel at its sole cost and expense, except that the Indemnifying Party will be responsible for the fees and expenses of such separate co-counsel to the extent the Indemnified Party concludes in good faith that the Indemnifying Party and the Indemnified Party have a potential or actual conflict of interest which necessitates separate counsel, (iii) the Indemnified Party will not consent to the entry of a judgment or enter into any settlement with respect to the matter without the written consent of the Indemnifying Party, which shall not be withheld or delayed unreasonably, and (iv) the Indemnifying Party will not consent to the entry of a judgment with respect to the matter or enter into any settlement that does not include a provision whereby the plaintiff or claimant in the matter releases the Indemnified Party from all liability with respect thereto, without the written consent of the Indemnified Party, which shall not be withheld or delayed unreasonably.
15.4.	No Lost Profit
	Except as expressly set forth in this Agreement, the indemnification provisions set forth in this Section 15 shall be the exclusive remedy of the Parties for monetary damages under this Agreement and the Supply Agreement (if executed). IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY, ITS AFFILIATES, ITS LICENSEES, ITS SUBLICENSEES, AND ITS DEVELOPMENT PARTNERS, OFFICERS, DIRECTORS, AGENTS, REPRESENTATIVES OR EMPLOYEES FOR ANY LOST PROFITS, LOSS OF BUSINESS, LOSS OF CONTRACTS, DIMINISHED GOODWILL, DIMINISHED REPUTATION, OR CONSEQUENTIAL, INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY OR SPECIAL DAMAGES ARISING FROM OR IN CONNECTION WITH THIS AGREEMENT.
16.	REPRESENTATIONS, WARRANTIES AND COVENANTS
16.1.	Execution of Agreement
	Each Party represents and warrants to the other Party at the time of the execution of this Agreement that:

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License Agreement Amrubicin Hydrochloride (SM-5887)
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(i)	it has the cooperate power and authority to execute and deliver this Agreement, and to perform its obligations hereunder;
(ii)	the execution, delivery and performance of this Agreement by each Party have been duly and validly authorized and approved by proper corporate action on the part of such Party; and
(iii)	it has no legal obligations or commitments to Third Parties inconsistent with this Agreement.

16.2.	Additional SUMITOMO Representations
	SUMITOMO represents and warrants to CONFORMA that:

(i)

it has not (in any manner that is inconsistent with or would interfere with the rights granted to CONFORMA in this Agreement) previously assigned, transferred, conveyed or otherwise encumbered any right, title or interest in or to the Patents or Know-how in the Territory, granted to any Third Party any license to use the Patents or Know-how in the Territory, or granted any covenant not to sue for any use of the Patents or Know-how in the Territory ; and

(ii)

to the best of its knowledge, as of the Effective Date no claim of ownership, invalidity or patent infringement has been asserted by any Third Party against SUMITOMO with respect of the Patents or the Manufacturing Technology; provided, however, that SUMITOMO is aware of the patent described in Annex 16.2.

16.3.	Material Facts
	Each Party represents and warrants that it has disclosed all information in its possession or control which is material to the other Party entering into this Agreement, and such information does not contain any untrue statement of material fact or omit to state a material fact.
16.4.	Manufacture of Compound and Product
	SUMITOMO warrants that the manufacturing processes of the Compound and Product are to continue to be consistent with the Specifications, including conformity with GMP of Japan and will, at all times that Product is supplied to CONFORMA, its Affiliates or its Sublicensees, be consistent with the Specifications, including conformity with cGMP of the USA.
16.5.	Express Warranties
	The Parties intend and agree that this Agreement is not subject to the Uniform Commercial Code in force in any state of the USA, and that no warranties exist beyond these stated in this Agreement. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS SECTION 16, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

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License Agreement Amrubicin Hydrochloride (SM-5887)
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17.	MISCELLANEOUS PROVISIONS
17.1.	Headings
	The headings and captions used in this Agreement are for the convenience of the Parties only and are not to be construed to define, limit or affect the construction or interpretation hereof.
17.2.	Severability
	In the event that any provision of this Agreement is found to be invalid or unenforceable, then such provision shall not render any other provision of this Agreement invalid or unenforceable, and all other provisions shall remain in full force and effect and shall be enforceable, unless the provisions which have been found to be invalid or unenforceable shall substantially affect the remaining rights or obligations granted or undertaken by either Party. The Parties agree to attempt to substitute for any invalid or unenforceable provision which achieves to the greatest extent possible the economic objectives of the invalid or unenforceable provision.
17.3.	Entire Agreement; Amendment
	This Agreement, including Annexes attached hereto, contains the entire agreement of the Parties regarding the subject matter hereof and supersedes all prior agreements, understandings or conditions, whether oral or written, regarding the same.
	This Agreement may not be changed, modified, amended or supplemented except by a written agreement signed by both Parties. The Parties acknowledge and agree that they intend to enter into a Supply Agreement which shall provide for additional rights and obligations on each of their parts as set forth in each of those agreements.
17.4.	Assignability
	This Agreement and the rights and obligations established hereunder may not be assigned or transferred by either Party without the prior written consent of the other Party, such consent of which shall not to be unreasonably withheld, conditioned or delayed; provided, however, that either Party may, without such consent, assign this Agreement and its rights and obligations hereunder to an Affiliate, to the purchaser of all or substantially all of its assets related to the Product or the Party’s business, or to its successor entity or acquirer in the event of a merger, consolidation or change in control of the Party. In addition, CONFORMA acknowledges and agrees that SUMITOMO plans to merge with DAINIPPON PHARMACEUTICAL CO., LTD. as of October 1, 2005, and SUMITOMO’s rights and obligations hereof will be assigned to the surviving company, Dainippon Sumitomo Pharma Co., Ltd. upon such merger. Notwithstanding the foregoing, in the event of a Change of Control in CONFORMA, Section 14.6 of this Agreement shall govern.
17.5.	Independent Party
	This Agreement does not constitute either Party as being the agent or legal representative of the other for any purpose whatsoever. Neither Party is granted any right or authority to assume or to create any obligation or responsibility, express or implied, on behalf of, or in the name of the other, with regard to any manner or thing whatsoever, unless otherwise specifically and express agreed upon in writing.
17.6.	Notice and Reports
	All notices, consents or approvals required by this Agreement shall be in writing and

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License Agreement Amrubicin Hydrochloride (SM-5887)
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personally delivered, or sent by internationally recognized overnight courier service or by facsimile (confirmed by such international courier service) to the Parties at the following addresses or such other addresses as may be designated in writing by the respective Party. Notices shall be deemed effective on the seventh (7^th) day of sending, provided that the receipt by the Party is confirmed by the record.

If to CONFORMA:	If to SUMITOMO:
Attn.: Vice President,	Attn.: General Manager,
Corporate Development	Corporate Licensing
9393 Towne Centre Drive, Suite 240	12-2, Kyobashi 1-chome,
San Diego, California 92121	Chuo-ku, Tokyo, 104-8356, Japan
Tel-No: (858) 657-0300	Tel-No: +81-3-5159-2511
Fax-No: (858) 657-0343	Fax-No: +81-3-5159-1981

	Any change in an address or fax number shall be the subject of a required notice under this Agreement.
17.7.	Waiver
	The failure of any Party to enforce at any time any provision of this Agreement, or any right with respect thereto, or to exercise any election herein provided, shall in no way be considered to be a waiver of such provision, right or election, or in any way affect the validity of this Agreement. The exercise by any Party of any right or election under the terms or covenants herein shall not preclude or prejudice any Party from exercising the same or any other right it may have under this Agreement, irrespective of any previous action or proceeding taken by the Parties hereunder.
17.8.	Force Majeure
	A Party shall not be liable for non-performance or delay in performance caused by any event reasonably beyond the control of such Party including, without limitation, wars (declared or undeclared), hostilities, revolutions, riots, civil disturbances, national emergencies, strikes, lockouts, shortage of energy, computer viruses, epidemics, fires, floods, earthquakes, other forces of nature, explosions, embargoes, or any other acts of God, or any laws, proclamations, regulations, ordinances, or other acts or orders of any court, government or governmental agency. Any occurrence of Force Majeure shall be reported promptly to the other Party.
17.9.	Dispute Resolution and Arbitration
	In the event that any dispute arising between the Parties relating to this Agreement cannot be resolved by their respective staffs, said dispute shall be referred promptly to the Managing Director of SUMITOMO and the Chief Executive Officer of CONFORMA, who shall make a good faith effort to resolve the matter within ninety (90) days from the date of any such referral. If the matter has not been resolved utilizing the process set forth above, either or both Parties may elect to pursue definitive resolution through binding arbitration, which the Parties agree to accept in lieu of litigation or other legally available remedies, except for injunctive relief where such relief is necessary to protect a Party from irreparable harm pending the outcome of arbitration. Any such arbitration shall be settled in

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License Agreement Amrubicin Hydrochloride (SM-5887)
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	accordance with the Rules of Arbitration of the International Chamber of Commerce by three arbitrators chosen in accordance with said Rules.
	The arbitration will be conducted in English and will be held in the city of Honolulu, Hawaii. Judgment upon the award rendered may be entered in any court having jurisdiction thereof.
	Nothing in this Section 17.9 will preclude any Party from seeking interim or provisional relief from a court of competent jurisdiction, including a temporary restraining order, preliminary injunction or other interim equitable relief, concerning a dispute either prior to or during any arbitration if necessary to protect the interests of such Party or to preserve the status quo pending the arbitration proceeding.
17.10.	Applicable Law
	This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to the principles of conflict of laws that would result in the application of any law other than the State of New York.
17.11.	Language
	The language of this Agreement and of any communication between the Parties shall be in English unless otherwise mutually agreed.
17.12.	Counterparts
	This Agreement shall be executed in two counterparts, each of which shall be considered and shall have the force and effect of an original.

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License Agreement Amrubicin Hydrochloride (SM-5887)
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IN WITNESS WHEREOF, the Parties have executed this Agreement by their duly authorized representatives, as of the day and year first written above.

Conforma Therapeutics Corporation	Sumitomo Pharmaceuticals Co., Ltd.
June 23, 2005	June 23, 2005
/s/ Lawrence C. Fritz, Ph.D.	/s/ Yasuo Okamoto
Lawrence C. Fritz, Ph.D.	Yasuo Okamoto
President and Chief Executive Officer	President

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Annex 1.6

Compound

Amrubicin Hydrochloride (SM-5887) is anthracycline anti-cancer agent.

Chemical name:	(+)-(7 S,9 S)-9-acetyl-9-amino-7-[(2-deoxy-b-D-erythro-pentopyranosyl)oxy ] - 7,8,9, 10-tetrahydro-6,11-dihydroxy-5,12-naphthacenedione hydrochloride
Nonproprietry name:	Amrubicin (INN) Hydrochloride
Additional name:	SM-5887
Structural formula:

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License Agreement Amrubicin Hydrochloride (SM-5887)
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Annex 1.27

Patents

1. Formulation

Title: STABILIZED ANTHRACYCLINE PREPARATION CONTAINING L-CYSTEINE

Japan: 2603480 (registered)

	Date of
Countries	Application	Patent Number		Status
United States	1988/8/2		4952566	registered
Canada	1988/8/5		1324959	registered
Austria	1988/8/4	EP 302729		registered
Belgium	1988/8/4	EP 302729		registered
Swizerland	1988/8/4	EP 302729		registered
Germany	1988/8/4	EP 302729		registered
Spain	1988/8/4	EP 302729		registered
France	1988/8/4	EP 302729		registered
United Kingdom	1988/8/4	EP 302729		registered
Greece	1988/8/4	EP 302729		registered
Italy	1988/8/4	EP 302729		registered
Netherland	1988/8/4	EP 302729		registered
Sweden	1988/8/4	EP 302729		registered
Denmark	1988/8/4		173317	registered
Finland	1988/8/1		91483	registered
Norway	1988/8/3		175134	registered

2. [***]

3. [***]

4. [***]

5. [***]

6. [***]

7. [***]

*** Confidential Treatment Requested

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License Agreement Amrubicin Hydrochloride (SM-5887)
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Annex 1.30

Specifications

[***]

*** Confidential Treatment Requested

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

Annex 4.2.3

Development Plan

[***]

*** Confidential Treatment Requested

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License Agreement Amrubicin Hydrochloride (SM-5887)
Sumitomo Pharmaceuticals Co., Ltd. — Conforma Therapeutics Corporation

Annex 16.2

[***]

*** Confidential Treatment Requested

page 41

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. 333-111158, 333-122474, 333-130200, 333-135362) and Form S-3 (No. 333-122473) of Pharmion Corporation and in the related Prospectus of our reports dated March 14, 2007, with respect to the consolidated financial statements and schedule of Pharmion Corporation, Pharmion Corporation management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Pharmion Corporation, included in this Annual Report (Form 10-K) for the year ended December 31, 2006.

/s/ ERNST & YOUNG LLP

Denver, Colorado
March 14, 2007

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Patrick J. Mahaffy, certify that:

1. I have reviewed this Annual Report on Form 10-K of Pharmion Corporation;

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 Rules 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 quarterly 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 (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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 (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

/s/ PATRICK J. MAHAFFY  

Patrick J. Mahaffy 

President and Chief Executive Officer (Principal Executive Officer) 

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION — PRINCIPAL FINANCIAL OFFICER

CERTIFICATIONS

I, Erle T. Mast, certify that:

1. I have reviewed this annual report on Form 10-K of Pharmion Corporation;

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 Rules 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 quarterly 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 (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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 (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

/s/ ERLE T. MAST  

Erle T. Mast 

Chief Financial Officer (Principal Financial Officer) 

EX-32.1

EXHIBIT 32.1

SECTION 906 CERTIFICATION

CERTIFICATION

     In connection with the Annual Report of Pharmion Corporation (the “Company”) on Form 10-K for the period ending December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Patrick J. Mahaffy, the Chief Executive Officer of the Company, and Erle T. Mast, the Chief Financial Officer of the Company, each hereby certifies that:

1.	The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ PATRICK J. MAHAFFY	/s/ ERLE T. MAST
Patrick J. Mahaffy	Erle T. Mast
Chief Executive Officer	Chief Financial Officer
(Principal Executive Officer)	(Principal Financial Officer)
Dated: March 14, 2007	Dated: March 14, 2007