10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2005

¨ 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 0-23272

NPS PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	87-0439579
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

383 Colorow Drive, Salt Lake City, Utah	84108-1256
(Address of Principal Executive Offices)	(Zip Code)

(801) 583-4939

(Registrant’s Telephone Number, Including Area Code)

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 Par Value Preferred Stock Purchase Rights

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

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of 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.  ¨

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  ¨ Accelerated Filer  x Non-accelerated filer  ¨

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

The aggregate market value of the Common Stock held by non-affiliates of the Registrant was $433,088,000 as of June 30, 2005, based upon the closing price for the shares of common stock reported on The Nasdaq Stock Market on such date.

As of February 28, 2006, there were 46,089,377 shares of Common Stock, par value $0.001 per share, outstanding.

Documents incorporated by reference: Portions of the Registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on May 11, 2006, to be filed with the Commission not later than 120 days after the close of the Registrant’s fiscal year, have been incorporated by reference, in whole or in part, into Part III Items 10, 11, 12, 13 and 14 of this Annual Report on Form 10-K.

PART I

This Annual Report on Form 10-K and the documents incorporated by reference into this report contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations and are subject to uncertainty and changes in circumstances. We cannot guarantee the accuracy of such statements, and you should be aware that results and events could differ materially from those contained in such statements. You should consider carefully the statements set forth in Item 1A of this report entitled “Risk Factors.”

ITEM 1. Business

Overview

Our objective is to build a profitable biopharmaceutical company by discovering, developing and commercializing small molecule drugs and recombinant proteins. Our current product candidates are primarily for the treatment of bone and mineral disorders, gastrointestinal disorders and central nervous system disorders. Our product portfolio consists of one U.S. Food and Drug Administration, or FDA, approved product, one product candidate which is currently undergoing regulatory review for marketing approval in the U.S. and Europe, and other product candidates in various stages of clinical development and preclinical development. Though we independently develop many of our product candidates, we have entered into collaboration agreements for several of our programs.

Our FDA approved product, cinacalcet HCl, has received marketing approval in the U.S., the European Union and Canada, for the treatment of secondary hyperparathyroidism in chronic kidney disease patients on dialysis and for the treatment of elevated calcium levels in patients with parathyroid carcinoma. We have licensed to Amgen worldwide rights to cinacalcet HCl, with the exception of Japan, China, North and South Korea, Hong Kong and Taiwan, where we have licensed such rights to Kirin Brewery, Ltd. Amgen developed and is marketing cinacalcet HCl in the U.S. under the brand name Sensipar^® and in Europe under the brand name Mimpara^®. Kirin is presently in Phase III clinical trials with cinacalcet HCl. Both Amgen and Kirin have contractually committed to pay us royalties on their sales of cinacalcet HCl.

PREOS^® is our most advanced product candidate. PREOS^® is our brand name for recombinant, full-length human parathyroid hormone which we are developing as a potential treatment for post-menopausal osteoporosis. In May 2005, we filed a New Drug Application or NDA, with the FDA seeking approval to market PREOS^® in the U.S. The PDUFA date for the PREOS^® NDA is March 10, 2006. “PDUFA date” refers to the date that the FDA is expected to notify a drug sponsor about the approval status of an NDA. We have granted to Nycomed Danmark ApS, or Nycomed, the exclusive right to market and sell PREOS^® in Europe. Nycomed also assumed responsibility to file all necessary regulatory filings to obtain marketing approval for PREOS^® in Europe. Nycomed filed its European marketing authorization application, or MAA, with the European Medicines Evaluation Authority, or EMEA, in March 2005. The Committee for Medicinal Products for Human Use of the EMEA, or the CHMP, has adopted a positive opinion recommending authorization for Nycomed to market

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PREOS^® in Europe. The CHMP recommendation is generally the last step prior to receipt of marketing authorization by the EMEA. If marketing approval from the EMEA is granted, Nycomed intends to market PREOS^® in Europe under the brand name PREOTACT^® and expects to be ready to launch PREOTACT^® in Europe during the second half of 2006. In October 2005, we entered into an agreement with Allergan, Inc. to co-promote Allergan’s proprietary drug, Restasis^®, an ophthalmic product approved for the treatment of Keratoconjuctivitis sicca, or dry eye. In August 2004, we entered into an agreement with Amgen to promote Amgen’s proprietary drug, Kineret^®, a biologic therapy approved for the treatment of moderate to severe rheumatoid arthritis. We have agreed with Amgen that we will end our promotion of Kineret^® effective March 31, 2006. We believe our activities under these agreements have allowed us to develop and train our sales organization as we prepare for the commercial launch of PREOS^® if and when approved by the FDA.

We are conducting a pivotal Phase III clinical trial with teduglutide, our analog of glucagon-like peptide 2, in patients with short bowel syndrome. We have also completed a Phase IIa proof-of-concept clinical trial in patients with Crohn’s disease and based upon the results of that trial we plan to advance the clinical development of teduglutide for Crohn’s disease. Our corporate licensee, GlaxoSmithKline, is engaged in Phase I clinical development activities with a calcilytic compound licensed from us for potential use in osteoporosis. Our corporate licensees, AstraZeneca AB and Janssen Pharmaceutica A.V., a subsidiary of Johnson & Johnson, are also engaged in Phase I clinical development activities with compounds licensed from us for potential use in central nervous system disorders. We are also evaluating the potential use of our proprietary compound isovaleramide in a variety of central nervous system disorders.

Strategy

We intend to achieve our objective through the following strategy:

Build a diversified pipeline of products addressing a variety of medical conditions. We are developing a diverse pipeline of product candidates that are in various stages of clinical and preclinical development. Our portfolio approach allows us to reduce our exposure to the impact of any single product failure and increases our flexibility to focus on our most promising programs. We believe this strategy increases the likelihood that we will successfully develop commercially viable pharmaceutical products.

Develop sales, marketing and manufacturing capabilities and build-up inventory to facilitate product commercialization, either internally or through contract relationships. In order to commercialize our proprietary drug candidates and to exploit our co-promotion rights, we have developed and continue to develop sales and marketing capabilities, both internally and through contract relationships. We have also developed and continue to develop pre-launch and commercial-scale production capabilities through agreements with contract manufacturers.

Collaborate or out-license to reduce our risk and accelerate the commercialization of select product candidates. We believe collaborators with clinical development and marketing expertise in specific therapeutic areas will facilitate more rapid entry into the market for certain of our products and accelerate their acceptance by healthcare providers and third-party payors. We selectively enter into collaboration agreements and licenses with pharmaceutical and biotechnology companies to enhance our financial flexibility. This strategy allows us to devote greater resources to proprietary programs and to pursue a greater number of product candidates than would otherwise be possible.

In-license or acquire complementary products, technologies or companies. In addition to our internal discovery efforts, we intend to pursue our product portfolio strategy by identifying and evaluating potential products and technologies developed by third parties that we believe fit within our overall portfolio strategy.

Continue to develop and leverage our core discovery competencies and proprietary expertise. We believe that the continued evaluation and selection of candidates in our product development pipeline will be effective based in part on the ability of our scientists to apply techniques within our core competencies. We intend to continue to use these abilities to identify molecular targets for the development of new drugs and to identify, evaluate and select drug candidates in a way that allocates resources to compounds meriting continued evaluation and advancement. Our multidisciplinary discovery teams focus on developing a broad product pipeline covering a variety of disorders, while focusing on bone and mineral and central nervous system disorders.

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Our Product Development Programs

This table summarizes our product development programs by therapeutic area. A description of each product or program follows the table.

Product or Program	Target Indication(s)	Status	Commercial Rights
Bone and Mineral Disorders
PREOS	Osteoporosis	NDA (U.S.) MAA (Europe)	Proprietary Nycomed
Calcilytic Compounds	Osteoporosis	Phase I	GlaxoSmithKline **
Cinacalcet HCl	Secondary Hyperparathyroidism	Commercialization	Amgen
	Parathyroid Carcinoma	Commercialization	Amgen
	Secondary Hyperparathyroidism	Phase III (Japan)	Kirin
	Primary Hyperparathyroidism	Phase II completed	Amgen
Gastrointestinal Disorders
Teduglutide	Short Bowel Syndrome	Phase III	Proprietary
	Crohn’s Disease	Phase II	Proprietary
Metabotropic Glutamate Receptors (mGluR5) Antagonists	GERD	Preclinical	AstraZeneca **
Central Nervous System Disorders
Isovaleramide	Central Nervous System Disorders	Phase I	Proprietary
Metabotropic Glutamate Receptors (mGluRs)	Psychiatric and Neurologic Disorders and Pain	Phase I	AstraZeneca**
Glycine Reuptake Inhibitors	Schizophrenia and Dementia	Phase I	Janssen
Antiepileptic Drugs	Epilepsy, migraine, neuropathic pain	Discovery	Proprietary

** We retain co-promotion rights in the U.S. for product candidates from these collaborations.

Bone and Mineral Disorders

Overview. Our products and programs in the field of bone and mineral disorders include PREOS^® and calcilytic compounds, for osteoporosis, and cinacalcet HCl for hyperparathyroidism. Bone and mineral disorders include a range of diseases affecting nearly every major organ system in the body. The most common bone and mineral disorder is osteoporosis, an age-related disease characterized by reduced bone mineral density and increased susceptibility to fractures. Although bone loss is a universal consequence of ageing, the process is accelerated in women following menopause. Osteoporosis is often diagnosed only after a fracture occurs. Fractures of the hip, spine or wrist can result in serious long-term disability and mortality.

Hyperparathyroidism is also classified as a bone and mineral disorder. Persons with hyperparathyroidism experience an oversecretion of parathyroid hormone by the parathyroid glands located in the neck. Symptoms of hyperparathyroidism may include bone loss and pain, bone deformities, muscle weakness, severe generalized itching and abnormal calcification of soft tissues, including the heart. Patients may also experience depression and cognitive dysfunction. Hyperparathyroidism is characterized as either primary or secondary. Primary hyperparathyroidism is generally an age-related disorder that is characterized by enlargement of one of the four parathyroid glands. Secondary hyperparathyroidism is primarily a physiological response to failing kidney function. When a person has reduced kidney function, their body is unable to maintain proper levels of calcium, vitamin D and phosphorus in the blood. To compensate, parathyroid glands enlarge and produce increased amounts of parathyroid hormone in an attempt to increase calcium.

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PREOS and Calcilytic Compounds for Osteoporosis

We are pursuing two separate but related programs for the treatment of osteoporosis. We are developing PREOS^® internally and we are pursuing calcilytic compounds in conjunction with GlaxoSmithKline.

PREOS. PREOS^® is our brand name for recombinant, full-length, human parathyroid hormone that we are developing as a potential treatment of post-menopausal osteoporosis. Clinical studies have demonstrated that daily subcutaneous dosing with PREOS^® causes parathyroid hormone levels to rise rapidly and then return to normal levels within a few hours, thereby stimulating new bone formation.

Market Opportunity. The National Osteoporosis Foundation estimates that approximately 8 million American women aged 50 and over have osteoporosis and another 34 million men and women have low bone mass and are at high risk of osteoporotic fractures. This number is expected to rise to 52 million men and women by 2010, and is expected to climb to 61 million by 2020, making low bone mass and osteoporosis a significant health threat. A study published in the Journal of the American Medical Association demonstrated that nearly one-half of post-menopausal women have undetected low bone mineral density, and women identified with low bone mineral density were at a significantly increased risk of fracture. In addition, 50 percent of women over age 50 in the United States will suffer an osteoporosis-related fracture during their lifetime. According to the National Osteoporosis Foundation, osteoporosis is responsible for more than 1.5 million fractures annually. The consequences of osteoporotic fractures can be devastating, potentially resulting in pain, disfigurement, disability and death. Additionally, the costs associated with osteoporosis and osteoporosis related fractures are significant. In the United States alone, expenditures for osteoporosis and related fractures in 2002 were estimated at $18.0 billion, and rising.

Current therapies for osteoporosis include anti-resorptive agents like bisphosphonates, raloxifene, a selective estrogen receptor modulator, and calcitonin, and the anabolic agent teriparatide, a recombinant parathyroid-hormone fragment, marketed by Lilly in the U.S. under the brand name Forteo^®. With the exception of teriparatide, all of these therapies act to prevent further bone loss by inhibiting bone resorption. These other therapies have been shown to reduce the incidence of fracture, and increase bone mass over a period of years, but they have not been shown to stimulate new bone formation at a rate comparable to parathyroid hormone therapy. However, we were encouraged by the results of a study with PREOS^® entitled “Parathyroid Hormone and Alendronate in Combination For the Treatment of Osteoporosis”, or the PaTH study, where PREOS^® was used before or concurrently with the bisphosphonate alendronate. The results of the PaTH study, which are discussed in more detail below, show that this approach provides additional benefits over what is currently seen with traditional monotherapy.

Because post-menopausal osteoporosis is a chronic disease that requires many years of attention and management, we believe that there exists a significant unmet need for an improved approach to treating women with this often devastating disease.

PREOS^® Development and Commercialization Status. In May 2005, we filed an NDA with the FDA seeking approval to market PREOS^® in the U.S. The PDUFA date for the PREOS^® NDA is March 10, 2006. Our corporate licensee, Nycomed, filed an MAA with the EMEA in March 2005 seeking approval to market PREOS^® in Europe. The CHMP has adopted a positive opinion recommending authorization for Nycomed to market PREOS^® in Europe. The CHMP recommendation is generally the last step prior to receipt of marketing authorization by the EMEA. Prior to filing the NDA and MAA, we completed the Phase III clinical trial TOP Study for PREOS^®. The TOP Study, was a double-blind, placebo-controlled, multi-center clinical trial designed to demonstrate the ability of PREOS^® to reduce fractures and build new bone in women with osteoporosis. The TOP Study evaluated the effects of PREOS^® in post-menopausal osteoporotic women with or without an existing osteoporotic spinal fracture who were not receiving drug or hormone therapy for osteoporosis. The study successfully met the primary endpoint of reducing the incidence of new or worsened vertebral fractures in postmenopausal women with an average bone mass measurement of 3.0 standard deviations below what is normal for pre-menopausal women. Women who participated in the study received daily, subcutaneous injections of PREOS^® or placebo. Dosing in this study lasted for 18 months. The TOP Study enrolled over 2,600 patients and dosing was completed in September 2003. We believe the results from the Pivotal Phase III clinical trial demonstrated safety and efficacy with respect to PREOS^®. The most frequently observed adverse events in our clinical trials with this drug candidate were hypercalcemia, hypercalciura and nausea. Women who finished their participation in the TOP Study were able to receive additional treatment with PREOS^®. We refer to this study as the Open Label Extension Study, or the OLES study. Women who received PREOS^® in the TOP Study may receive an additional 6 months of PREOS^® treatment for a total of 24 months treatment. Women who received placebo in the TOP Study may receive 18 months of PREOS^® treatment. In addition, we are conducting another clinical study with PREOS^® we refer to as the “Treatment Extension Study” or the TRES Study. In this study, we will collect additional information on longer term use with PREOS^®.

In addition, PREOS^® was tested in a clinical trial coordinated by the University of California at San Francisco and sponsored by the National Institutes of Health. This 24-month, randomized, double-blind trial is referred to as the PaTH

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study. This trial was designed to test whether PREOS^® is more effective in building bone mineral density than alendronate, marketed by Merck as Fosamax^®, and whether the combination of PREOS^® and alendronate is more effective in building bone mineral density than either therapy alone. In the first year of the two-year PaTH Study, postmenopausal women with low bone mineral density were randomized to receive daily subcutaneous injections of PREOS^® or oral doses of alendronate or the two drugs concurrently. In the second year, patients who had received PREOS^® alone during the first year were randomly assigned in equal numbers to receive a placebo or alendronate; patients who had received alendronate and PREOS^® together or alendronate alone were given only alendronate for the second year. The PaTH Study showed that one year of PREOS^® followed by one year of alendronate was more effective at building bone than two years of alendronate alone. Results of the study also indicated that those patients who received PREOS^® and gained bone mass continued to build bone mass when they were treated with alendronate after they stopped receiving PREOS^®.

In April 2004 we entered into a distribution and license agreement with Nycomed, granting Nycomed the right to develop and market PREOS^® in Europe, including the Commonwealth of Independent States and Turkey. Under the agreement, Nycomed is responsible for European clinical development, registration, and marketing of PREOS^®. Nycomed also made an equity investment in NPS of $40.0 million by purchasing common shares, and agreed to pay us up to $25.0 million in milestones upon regulatory approvals and achievement of certain sales targets, and pay us royalties on sales of PREOS^® in Europe. Nycomed will also be responsible for conducting Phase IIIb and IV clinical trials in Europe, representing a minimum additional investment of $25.0 million. Nycomed filed its MAA with the EMEA in March 2005. The Committee for Medicinal Products for Human Use of the EMEA, or the CHMP, has adopted a positive opinion recommending authorization for Nycomed to market PREOS^® in Europe. The CHMP recommendation is generally the last step prior to receipt of marketing authorization by the EMEA. If marketing approval from the EMEA is granted, Nycomed intends to market PREOS^® in Europe under the brand name PREOTACT^® and expects to be ready to launch PREOTACT^® in Europe during the second half of 2006. When and if PREOS^® receives marketing approval from the EMEA, Nycomed intends to market PREOS^® in Europe under the brand name PREOTACT^®.

In an effort to develop and train a sales organization in preparation for the commercial launch of PREOS^®, we have entered into agreements with two other pharmaceutical companies to co-promote two FDA approved drugs. In October 2005, we entered into an agreement with Allergan, Inc. to co-promote Allergan’s proprietary drug, Restasis^®, an ophthalmic product approved for the treatment of Keratoconjuctivitis sicca, or dry eye. In August 2004, we entered into an agreement with Amgen to promote Amgen’s proprietary drug, Kineret^®, a biologic therapy approved for the treatment of moderate to severe rheumatoid arthritis. We have retained the services of Ventiv Pharma Services to recruit, train, and assist us in managing the sales organization promoting Restasis^® and Kineret^®. We have agreed with Amgen that we will end our promotion of Kineret^® effective March 31, 2006. We believe our co-promotion efforts under these agreements have accelerated the creation of a sales force for our anticipated launch of PREOS^® if and when approved by the FDA.

Calcilytic Compounds Development Status. We are pursuing another treatment for osteoporosis that focuses on the discovery and development of orally administered drugs called calcilytic compounds. Calcilytic compounds are small molecule antagonists of the calcium receptor that temporarily increase the secretion of the body’s own parathyroid hormone, which may result in the formation of new bone. In animal studies, we demonstrated that intermittent increases in circulating levels of parathyroid hormone can be obtained through the use of calcilytics. In these studies, we observed that increased levels of parathyroid hormone achieved by this mechanism are equivalent to those achieved by an injection of parathyroid hormone sufficient to cause bone growth. As a result, we believe that orally administered calcilytic drugs that act on the parathyroid cell calcium receptors could provide a cost-effective treatment for osteoporosis.

In November 1993, we entered into a collaborative research and worldwide exclusive license agreement with GlaxoSmithKline for the research, development and commercialization of calcium receptor active compounds for the treatment of osteoporosis and other bone metabolism disorders, excluding hyperparathyroidism. We have conducted preclinical studies in conjunction with GlaxoSmithKline on some of the lead compounds identified in this program. In December 2000, GlaxoSmithKline initiated a proof-of-principle Phase I clinical trial with a calcilytic compound for which we received a $1.0 million milestone payment. The purpose of this trial was to establish the safety of calcilytic compounds in humans. In November 2003, GlaxoSmithKline initiated new Phase I clinical studies with more advanced compounds for which we received an additional $2.0 million milestone payment. GlaxoSmithKline is presently conducting Phase I clinical trials with a compound identified under the collaboration.

GlaxoSmithKline has paid us a total of $35.7 million for license fees, research support, milestone payments and equity purchases as part of our collaboration. We will receive additional payments of up to an aggregate of $11.0 million if certain clinical milestones are achieved. Our agreement also provides for royalties on any sales by GlaxoSmithKline of commercialized products based on compounds identified in this collaboration. In addition to the milestone and royalty payments, we have a limited right to co-promote any products that are developed through our collaboration and we will receive co-promotion revenue if we elect to exercise these rights. Upon termination, the rights and licenses we granted GlaxoSmithKline revert to us. In December 2003, we entered into an agreement with GlaxoSmithKline to amend the agreement to terminate the collaborative research portion of the agreement effective May 31, 2003. The amendment also permits us to conduct our own research and development efforts with calcilytic compounds not in the class of compounds being pursued by GlaxoSmithKline. We are not permitted to commercialize any compounds arising from our work if GlaxoSmithKline is commercializing a compound. We also granted to GlaxoSmithKline a right of first negotiation to acquire a license to calcilytic compounds discovered by us after May 31, 2003.

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Cinacalcet HCl for Hyperparathyroidism

Cinacalcet HCl is our orally active, small molecule calcimimetic compound presently being developed and commercialized by our corporate licensees, Amgen and Kirin Brewery. In contrast to calcilytic compounds, calcimimetic compounds activate the parathyroid cell calcium receptor and decrease the secretion of parathyroid hormone.

Sensipar^® is the trademark Amgen uses in the United States for cinacalcet HCl. Mimpara^® is the trademark Amgen uses for cinacalcet HCl in Europe.

Parathyroid hormone is produced by four parathyroid glands located in the neck. Serum levels of parathyroid hormone directly influence serum levels of calcium. As the body needs additional calcium, the parathyroid glands release additional parathyroid hormone. When there is excess serum calcium, the parathyroid glands release less parathyroid hormone.

Hyperparathyroidism is a medical condition in which excessive amounts of parathyroid hormone circulate in the blood. It is typically characterized as being either primary or secondary. Generally, primary hyperparathyroidism is an age-related disorder that results from one or more non-cancerous tumor(s) causing the affected parathyroid gland(s) to become enlarged and overactive, secreting excessive levels of parathyroid hormone. As a result, serum calcium levels become high, bones may lose calcium, and kidneys may excrete too much calcium. Symptoms may include loss of bone density, muscle weakness, depression and cognitive dysfunction. There are currently no approved pharmaceutical therapies for the treatment of primary hyperparathyroidism. Surgical removal of the affected parathyroid gland(s) from the neck region is presently the only effective treatment.

Secondary hyperparathyroidism results from other disease states and is most often associated with renal dysfunction. Normal functioning healthy kidneys convert the hormone calcitriol into the active form of vitamin D. Vitamin D helps in intestinal absorption of dietary calcium. Chronic kidney disease generally results in (1) reduced intestinal absorption of calcium due to reduced vitamin D levels, and (2) reduced removal of phosphorous from the blood, elevating serum phosphate which then combines with serum calcium to further reduce serum calcium levels. This in turn leads to the chronic overproduction of parathyroid hormone as the body tries to raise serum calcium levels. Symptoms of secondary hyperparathyroidism include excessive bone loss, bone pain and chronic, severe itching. Current treatments for secondary hyperparathyroidism, in addition to cinacalcet, include phosphate binders and vitamin D supplements. Cinacalcet is an orally administered calcimimetic compound that interacts with the calcium receptor on parathyroid cells and thereby decreases the production of parathyroid hormone in such cells. Parathyroid hormone acts in the kidneys and bones to elevate levels of calcium in the blood.

Cincalcet HCl and Secondary HPT. In October 2003, the National Kidney Foundation released Clinical Practice Guidelines for Bone Metabolism and Disease in Chronic Kidney Disease. These guidelines set goals for the four key measures involved in managing secondary hyperparathyroidism: the serum level of parathyroid hormone; the product of the serum level of calcium multiplied by the serum level of phosphorus (“Ca x P”); serum level of calcium; and serum level of phosphorous. Traditional therapies such as phosphate binders and vitamin D supplements lower parathyroid hormone levels only by increasing one or more of the other measures, particularly calcium and/or Ca x P levels. Thus, under traditional therapies, patients and their physicians have typically had to choose between elevated parathyroid hormone or elevated calcium and/or Ca x P levels. Elevated parathyroid hormone levels cause excessive bone loss, bone pain and chronic, severe itching, while elevated calcium and/or Ca x P levels can lead to calcification of the heart and blood vessels and increases the risk of kidney stones.

Cinacalcet HCl is the only FDA approved medication that simultaneously lowers all four of the key measures. By directly suppressing production of parathyroid hormone, cinacalcet HCl also causes serum levels of calcium, Ca x P and phosphorus to decline, providing patients and their physicians an effective treatment to avoid both elevated parathyroid hormone and elevated calcium and Ca x P.

Cinacalcet HCl and Primary HPT. In primary hyperparathyroidism, surgical removal of all or part of the involved parathyroid gland(s) is the only treatment currently approved for primary hyperparathyroidism. An estimated 75% of all primary hyperparathyroidism patients undergo surgery.

Cinacalcet HCl may be a therapeutic alternative to surgery for patients with primary hyperparathyroidism. Cinacalcet HCl could be particularly useful for the estimated 10% of primary hyperparathyroidism patients with multi-parathyroid gland involvement, whose only treatment option would otherwise be surgery. A common side-effect of the surgery is permanent hypoparathyroidism, or insufficient amounts of parathyroid hormone in the blood. Cinacalcet HCl has not been approved by the FDA for the treatment of primary hyperparathyroidism.

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Status of Regulatory Approvals

United States. In March 2004, Amgen received FDA approval for cinacalcet HCl for the treatment of secondary hyperparathyroidism in chronic kidney disease patients on dialysis, often referred to as “Stage V” Chronic Kidney Disease, or CKD, patients, and for the treatment of hypercalcemia, or excess serum calcium levels, in patients with parathyroid carcinoma. These are the only indications for which cinacalcet HCl has received approval to date in the United States. Amgen is commercializing cinacalcet HCl in the U.S. under the trade name Sensipar^®.

Amgen has also applied to the FDA for approval of cinacalcet HCl for treatment of secondary hyperparathyroidism in certain pre-dialysis chronic kidney disease patients (those referred to as “Stage III” or “Stage IV” CKD patients) and for treatment of primary hyperparathyroidism.

Europe. In October 2004, Amgen received EMEA approval for cinacalcet HCl for treatment in the European Union of secondary hyperparathyroidism in Stage V chronic kidney disease patients and for treatment of hypercalcemia in patients with parathyroid carcinoma. These are the only indications for which cinacalcet HCl as received approval to date in the European Union. Amgen is commercializing cinacalcet HCl in Europe under the trade name Mimpara^®.

Payments from Amgen and Kirin for Cinacalcet HC1

Amgen has paid to us $38.5 million, which consists of license fees, research support payments, milestone payments (including the milestone payment for the filing of an NDA) and equity purchases of our common stock. Amgen will pay us up to an additional $7.0 million if it achieves other development and regulatory milestones. Amgen is also paying us royalties on sales of cinacalcet HCl in its territories which totaled $14.7 million through 2005. In December 2004, we completed a private placement of $175.0 million in Secured 8.0% Notes due March 30, 2017. These notes are secured by our royalty and milestone payment rights under our agreement with Amgen. Also, while the notes are outstanding, all payments from Amgen will go to the payment of interest and principal on the notes.

Kirin has paid to us $21.0 million in license fees, research and development support payments and milestone payments, and under the terms of our agreement is required to pay us up to an additional $4.0 million upon accomplishment of additional milestones. Kirin is also required to pay us royalties on any sales of cinacalcet HCl in its territories.

Gastrointestinal Disorders

Overview. Our products and programs in this field include teduglutide, which we are developing as a potential treatment of short bowel syndrome and Crohn’s disease, and mGluR5 antagonists for gastroesophageal reflux disease, or GERD. The gastrointestinal tract is involved in the digestion and the absorption of nutrients. It also plays an important role in the excretion of toxic chemicals, pathogens and byproducts of metabolic and digestive processes, and in balancing the absorption and secretion of electrolytes and water. People who suffer from gastrointestinal disorders often experience adverse consequences on the quality of their life.

Short bowel syndrome is a severe malabsorption disorder affecting the ability of the gastrointestinal tract to absorb nutrients and water that typically arises after extensive resection of the small bowel. Patients with this problem suffer from malnutrition, severe diarrhea, dehydration, fatigue and weight loss due to a loss in the ability to absorb adequate amounts of nutrients and water. Treatment includes special dietary management and, often, parenteral nutrition.

Crohn’s disease is a chronic disorder characterized by inflammation of the gastrointestinal tract. The inflammation can lead to obstruction or blockage of the intestine, the development of sores or ulcers within the intestinal tract, diarrhea, and malnutrition or the presence of nutritional deficiencies. Treatment includes medications to manage the inflammation and associated complications and/or surgery to reduce or eliminate the obstruction, and administration of vitamins and other nutritional supplements.

GERD is a condition in which the backflow or reflux of acid from the stomach into the esophagus usually associated with common heartburn is frequent or severe enough to cause significant complications. These complications may include breaks in the lining of the esophagus or esophageal erosions, esophageal ulcer, and narrowing of the esophagus or esophageal stricture. In some patients, the normal esophageal lining or epithelium may be replaced with abnormal epithelium. This condition has been linked to cancer of the esophagus. Aspiration of gastric contents into the lungs, asthma and inflammation of the vocal cords or throat may also be caused by GERD.

Teduglutide for Short Bowel Syndrome and Crohn’s Disease. Teduglutide is an analog of glucagon-like peptide 2, a naturally occurring hormone that regulates proliferation of the cells lining the small intestine. We are independently developing teduglutide for the treatment of gastrointestinal disorders such as short bowel syndrome and Crohn’s disease.

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Animal studies have demonstrated that teduglutide stimulates the repair and regeneration of cells lining the small intestine, expanding the surface area for absorption of nutrients. In animal studies conducted by us in collaboration with outside researchers, teduglutide induced an approximately 50 percent increase in the weight of the small intestine within 14 days of administration. Further, these studies suggest the growth-promoting properties of teduglutide appear to be highly tissue-specific, predominantly affecting the small intestine.

Teduglutide Market Opportunity. Scientific journal articles and our own market studies indicate that a range of 12,000 to 25,000 individuals in North America are afflicted with short bowel syndrome. Many of these patients require parenteral nutrition, the cost of which can exceed $100,000 annually per patient. Currently only somatropin (rDNA origin) for injection (human growth hormone) is approved by the FDA for the treatment of short bowel syndrome in patients receiving specialized nutritional support. We believe that the short bowel syndrome market is attractive because of the high cost of treating patients and the absence of any effective drug therapies. We have been granted orphan drug designation for teduglutide for short bowel syndrome from the FDA, which provides, subject to several restrictions, seven years of marketing exclusivity once a product is approved for treatment of diseases that afflict fewer than 200,000 patients. The Commission of the European Communities has also designated teduglutide an orphan medicinal product for the treatment of short bowel syndrome.

The Crohn’s & Colitis Foundation of America estimates that as many as one million people in the United States have inflammatory bowel disease with approximately one-half of those being afflicted with Crohn’s disease. There currently is no cure for Crohn’s disease. The goal of medical treatment is to suppress the inflammatory response and bring the symptoms under control. Medical therapy is then used to decrease the frequency of the disease flares and to maintain remission. We believe that teduglutide may provide a more effective therapy than current treatment therapies.

Teduglutide Development Status. We are currently enrolling patients in a pivotal Phase III clinical study in adult short bowel syndrome patients to measure the ability of teduglutide to reduce a patient’s dependency on total parenteral nutrition. We completed a Phase II study in adults with short bowel syndrome where after 21 days of treatment, the patients, all of whom were dependent on parenteral nutrition, showed significant improvements in intestinal function. An important result of the improved intestinal function in these patients was a statistically significant increase in fluid and nutrient absorption. Histological examination of tissue from patient biopsies showed a statistically significant increase in the number and size of epithelial cells lining the small intestine. The drug appeared to be safe and well-tolerated. A Phase IIa proof-of-concept clinical study with teduglutide in patients with Crohn’s disease has been completed. The four-arm, eight-week, clinical trial compared three doses of teduglutide delivered by daily subcutaneous injection to a placebo. The study was designed to evaluate the drug’s safety and potential efficacy in the treatment of Crohn’s disease. Overall, the study results showed a positive and consistent trend toward efficacy and a dose response favoring the highest dose group: 36.8% of patients receiving the highest dose of teduglutide reached clinical remission, Crohn’s Disease Activity Index score, or CDAI score, of less than 150 points, at week two versus 16.7% of the placebo group, while 55.6% of patients in the highest dose group reached clinical remission by week eight compared to 33.3% of the placebo group. Teduglutide was well tolerated with no serious adverse events related to the drug. The most common treatment-related adverse event in the trial was redness at the injection site. Study investigators plan to submit the trial results for presentation at a future medical meeting. Although the study was not powered to demonstrate statistical significance and the primary end point, the percentage of patients who achieved remission or at least a 100-point reduction from their baseline CDAI score at week 8, was not met due to the relatively small number of study subjects and a high placebo response, we believe the high clinical remission rates seen in patients receiving the highest dose of teduglutide support further dose-ranging efficacy studies of teduglutide in patients with Crohn’s disease.

mGluR5 for GERD. Together with AstraZeneca, we have begun to pursue a line of discovery work in finding antagonists of the mGluR5 receptor for the possible treatment of GERD. Specifically, we are testing compounds that may reduce the transient relaxation of the lower esophageal sphincter, which results in fluid from the stomach entering the esophagus a condition referred to as reflux. Our work with AstraZeneca and the identification and characterization of mGluR5 antagonists is in the preclinical development stage. A more detailed description of our metabotropic glutamate receptor, or mGluR, program and our collaboration with AstraZeneca can be found below under Central Nervous System Disorders.

Central Nervous System Disorders

Overview. Our products and programs in this field include mGluR modulators, isovaleramide, and other antiepileptic drugs (AEDs), and glycine reuptake inhibitors. Central nervous system disorders are broad, complex and debilitating diseases that are a major focus of current medical research. However, few central nervous system disorders are able to be effectively treated, creating an opportunity for novel therapies. Central nervous system disorders affect a broad portion of the population through diseases such as epilepsy, bipolar disorder, stroke, Alzheimer’s disease, Parkinson’s disease, dementia, anxiety, depression, schizophrenia, migraine and pain. Recent market research reports indicate that nearly $50.6 billion is expended annually in retail prescription drug sales for central nervous system related products on a worldwide basis. However, many of these treatments are palliative with significant side effects and a need for new and improved treatments exist. We are addressing central nervous system disorders on a number of different fronts.

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Metabotropic Glutamate Receptor Program. Since 1996, we have been working to find compounds that act on targets in the central nervous system called mGluRs. There are three principal groups of mGluRs and several subtypes of mGluRs within those groups that differ in their chemical composition, their effects on cellular metabolism and their location throughout the central nervous system. Published research indicates that the different mGluR subtypes are involved in diseases such as anxiety, schizophrenia, Parkinson’s disease and chronic pain among others. We believe that it is possible to pursue the development of a number of products that will provide novel treatments for various central nervous system disorders. Because these molecular receptors are structurally related to calcium receptors, we have been able to leverage our expertise in calcium receptors to create proprietary methods for screening drug candidates active at mGluRs and that are selective for each of the various mGluR subtypes.

In March 2001, we entered into an agreement with AstraZeneca under which we collaborate exclusively in an extensive program around a number of mGluR subtypes. We granted AstraZeneca exclusive rights to commercialize mGluR subtype-selective compounds. In November 2005, we amended the agreement to extend the term through March 2009. Under the agreement, we are required to co-direct the research and pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel, through March 2009 unless earlier terminated by AstraZeneca or us upon six months advance written notice. If certain milestones are met, AstraZeneca is required to pay us up to $30.0 million.

AstraZeneca is also required to pay us royalties on sales of products that include those compounds. We have the right to co-promote any resulting product in the United States and Canada and receive co-promotion revenue, if any. Should we elect to co-promote products, in some circumstances we will be required to share in the development and regulatory costs associated with those products, and we may not receive some late-stage milestone payments. For more information about our agreement with AstraZeneca, see the section entitled “Collaborative Research, Development and License Agreements.”

We have discovered a number of compounds that activate or inhibit mGluRs and that are highly selective for specific subtypes of mGluRs. Our animal studies with a number of these compounds have demonstrated their potential as drug candidates for the treatment of central nervous system disorders such as psychiatric and neurologic disorders. We are working with AstraZeneca to develop these and other mGluR active compounds. AstraZeneca is engaged in Phase I clinical development activities with a compound active at mGluRs licensed from us.

Isovaleramide. Isovaleramide is a proprietary small organic molecule compound. Efforts are underway to evaluate the drug’s utility on various central nervous system disorders. Preclinical studies show that isovaleramide is effective in a number of animal models of epilepsy, spasticity and pain. We have completed several Phase I clinical trials with isovaleramide to evaluate its safety and tolerability and its ability to be delivered in a controlled release formulation. Our analysis of the data indicates that the drug was safe and well tolerated in those studies. Initial formulation studies demonstrated that the compound is amenable to multiple controlled release formulation technologies. We are presently evaluating further clinical trials with this compound.

Glycine Reuptake Inhibitors for Schizophrenia and Dementia. We collaborated with Janssen on glycine reuptake inhibitors to identify prospective drug candidates for schizophrenia and dementia. Janssen has now assumed full responsibility for the development of product candidates identified under the collaboration. We are not expending any significant resources in the program. In November 2001 we received a milestone payment from Janssen as a result of the selection of a preclinical compound for further development as a potential treatment for schizophrenia. We have been informed that Janssen has begun a Phase I clinical study with a product candidate from this collaboration. We will receive additional milestone payments of up to $20.5 million from Janssen, if certain milestones are met, and royalties on sales of any drugs developed or sold by Janssen under this collaboration agreement. We also have the right to co-promote, in Canada, any products developed under the collaboration.

Antiepileptic Drugs. NPS chemists and biologists are working together to identify and characterize proprietary compounds as possible treatments for epilepsy and other CNS disorders such as migraine and neuropathic pain. This project is currently in the later stages of the drug discovery pipeline.

Internal Discovery Research

Through internal discovery efforts, we have developed a diverse product pipeline covering a variety of disorders. This pipeline allows us to reduce the impact of any single product failure and increases our flexibility to focus on our most promising programs. The continued expansion of our product pipeline is based on the ability of our scientists to apply techniques related to our core competencies such as the use of proteins as therapeutics, manipulating G-Protein Coupled Receptors (GPCRs) and finding compounds that act on those receptors. Our current discovery research activities span the spectrum from target identification and validation through late stage preclinical safety assessment.

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Our internal discovery research group comprises 99 staff members, 31 of which hold doctorate degrees, with 52 members in our Salt Lake City location and 47 members in our Toronto location. The disciplines within our discovery research group include medicinal chemistry, molecular and cellular biology, pharmacology, physiology, and drug metabolism and pharmacokinetics, and bioanalytical chemistry. Areas of expertise within the group include bone and mineral metabolism, gastrointestinal physiology and pharmacology, and central nervous system physiology and pharmacology. We intend to continue our focus on scientific discovery by retaining creative scientists who we believe can make breakthrough discoveries leading to innovative products.

Collaborative Research, Development and License Agreements

We selectively enter into collaboration agreements and licenses with pharmaceutical and biotechnology companies to leverage our financial investment in our discovery, development and commercialization programs. These agreements generally include payments to us for research we perform under the agreement, payments for the achievement of specified milestones, and royalties on sales of products developed under the terms of the particular agreement. In return for these financial benefits, we grant to the particular collaborator an exclusive license to the technology that is the subject of the collaboration as well as to the products developed under the agreement. This strategy allows us to devote greater resources to selected programs and to pursue a greater number of programs and products than would otherwise be possible. In addition, we believe collaborators with clinical development and marketing expertise in specific therapeutic areas will facilitate more rapid entry into the market for our products and accelerate their acceptance by healthcare providers and third-party payors. These agreements generally contain provisions restricting the transfer of such agreements to a third party upon a change of control of the company, sale of substantially all of the assets of the company or a sale of a majority of the voting shares of the company, without first obtaining the written consent of the collaborator. In some instances, the collaborator has the right to terminate the agreement on the occurrence of such an event. We currently have collaborative research, development or license agreements, or co-promotion agreements, with several collaborators, including Allergan, Amgen, AstraZeneca, GlaxoSmithKline, Janssen, Kirin and Nycomed.

We also enter into research support agreements with various academic and other not-for-profit institutions. These agreements generally require us to fund certain research at the institution over a specific period of time in exchange for which we acquire the right to use the results of the research and obtain an option to exclusively license from the institution any inventions made during the term of the research on terms mutually agreed to at that time.

Allergan. In October 2005, we entered into an agreement with Allergan to co-promote Restasis^®, an ophthalmic product approved for the treatment of Keratoconjuctivitis sicca, or dry eye. Under the terms of the agreement, Allergan will supply product, promotional materials, sales training and other support. We are required to promote Restasis^® to rheumatologists in the United States with a minimum number of sales representatives, make a minimum number of sales calls during the term of the agreement and spend a minimum annual amount on promotional expenses. If we achieve certain annual sales objectives, we will receive a percentage of the incremental sales of Restasis^® generated through our promotional activities. We may also receive a percentage of Allergan’s sales of Restasis^® to rheumatologists in the United States after the expiration of the term for a period of three years, provided that we agree to renew the term of the agreement and that the agreement is not terminated due to our material breach or by us prior to the end of the term as described below. The agreement has a four-year term, which may be extended for an additional one-year period upon the mutual consent of the parties. Either party may terminate the agreement should the other party commit a material breach that is not cured within 60 days of written notice of the breach. The agreement may also be terminated immediately on the occurrence of certain other customary events. We may also terminate the agreement at the end of 2007 if we fail to achieve certain annual sales objectives during both the 2006 and 2007 calendar years under the agreement. Upon termination of the agreement all rights granted to us under the agreement will revert back to Allergan.

Amgen. In August 2004, we entered into an agreement with Amgen to promote Kineret^®, a biologic therapy for the treatment of moderate to severe rheumatoid arthritis, in the United States. Under the terms of the agreement, Amgen is required to supply product, promotional materials, training and support us in our promotional efforts. We are required to promote Kineret^® with a minimum number of sales representatives. In return for our promotional efforts we will receive a percentage of incremental Kineret^® revenues. The initial term of the agreement is for two years following promotion commencement and will automatically renew on an annual basis for successive one-year terms, unless either party provides notice of non-renewal to the other party not less than 90 days prior to the end of the then-current term. Either party may terminate the agreement should the other party commit a material breach that is not cured within 10 days of written notice of such material breach. The agreement may also be terminated immediately upon the occurrence of certain other events. Either party may terminate the agreement after the first anniversary date upon 90 days prior written notice for commercial reasons related to sales of Kineret^®. After the second anniversary date either party may terminate the agreement upon not less than

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90 days prior written notice. We have agreed with Amgen to end our promotion of Kineret^® effective March 31, 2006. Upon termination of the agreement all rights granted to us under the agreement will revert back to Amgen.

In December 1995, we entered into a development and license agreement with Amgen in which we granted Amgen the exclusive right to develop and commercialize cinacalcet HCl and related compounds for the treatment of hyperparathyroidism and any other indications other than osteoporosis worldwide, excluding the areas we licensed to Kirin consisting of Japan, China, Hong Kong, North and South Korea and Taiwan. If our agreement with Kirin is terminated, Amgen’s territory becomes worldwide. Under the terms of our agreement, Amgen is authorized and responsible to conduct, fund and pursue all aspects of the development, submissions for regulatory approvals, manufacture and commercialization of compounds licensed under the agreement, including cinacalcet HCl, in its territories. Amgen paid us an initial up-front license fee of $10.0 million upon signing the agreement, Amgen also purchased 1.0 million shares of our common stock at $7.50 per share in connection with the license, and agreed to pay us up to $400,000 per year in development support for five years, which obligation has now expired. In addition, if specified milestones are achieved, Amgen is required to make milestone payments of up to $26.0 million and must pay royalties to us on any sales of cinacalcet HCl or other related compounds. To date, Amgen has paid to us $19.0 million in milestone payments and $14.7 million in royalties under this agreement. We may terminate the agreement if Amgen breaches the agreement and does not cure the breach within 120 days of receiving notice of the breach. Amgen may terminate the agreement for any reason on 90 days’ prior written notice. If there is a termination for a reason other than our breach of the agreement, the technology, patent and commercialization rights to all compounds licensed under the agreement including cinacalcet HCl would revert to us. Furthermore, if Amgen terminates the agreement none of its payments to us are refundable.

AstraZeneca. In March 2001, we entered into an exclusive research collaboration and license agreement with AstraZeneca to collaborate on the discovery, development and marketing of small molecule therapies for the treatment of various disorders of the central nervous system. In November 2005, we amended the agreement to extend the term through March 2009. Specifically, the collaboration focuses on the identification of small molecules active on protein structures known as mGluRs. We granted AstraZeneca an exclusive license to the worldwide development and commercialization of any mGluR-active compounds identified under the collaboration. During the research term, we will work together on the identification of mGluR-active compounds. We are required to co-direct the research and pay for an equal share of the preclinical research costs including capital and a minimum number of personnel, through March 2009, unless earlier terminated by AstraZeneca or us upon six months advance written notice. Once compounds have been selected for development, AstraZeneca will conduct and fund product development, including all human clinical trials, regulatory submissions, commercialization and manufacturing. We have the right to co-promote any resulting product in the United States and Canada and receive co-promotion revenue, if any. Should we elect to co-promote products, in some circumstances we will be required to share proportionately in the development and regulatory costs associated with those products. If we elect not to co-promote, we are entitled up to an aggregate of $30.0 million in milestone payments and royalties on any sales of products developed and marketed under the agreement. To date no milestone payments have been earned under the agreement. We may terminate the agreement if AstraZeneca breaches the agreement and does not cure the breach within 60 days of receiving notice of the breach. After two years of the research program, either party may terminate the agreement on six months’ prior written notice. After the research term, AstraZeneca may terminate the agreement at anytime upon 90 days’ prior written notice. Termination by AstraZeneca for reasons other than our breach or insolvency will result in the return to us of all rights we granted and the related technology, including improvements. Termination by AstraZeneca for our breach or insolvency would result in the assignment to AstraZeneca of rights to certain of our patents and technology related to mGluR-active compounds. Similarly, termination by us for AstraZeneca’s breach or insolvency would result in AstraZeneca’s assignment of rights to certain patents and technology to us.

GlaxoSmithKline. In November 1993, we entered into a collaborative research and worldwide exclusive license agreement with GlaxoSmithKline for the research, development and commercialization of calcium receptor active compounds for the treatment of osteoporosis and other bone metabolism disorders, excluding hyperparathyroidism. We initially received from GlaxoSmithKline an upfront license fee payment of $6.0 million and we later began receiving payments from GlaxoSmithKline in support of our research efforts under the initial research term of the agreement. GlaxoSmithKline also has a first right to negotiate for an exclusive license regarding other company research for indications within the field of bone metabolism disorders, and an exclusive right to negotiate for a license to compounds developed under the agreement for indications outside the field of bone metabolism disorders, which rights expire upon termination of this agreement. Once compounds have been selected for development, GlaxoSmithKline has the authority and responsibility to conduct and fund all product development, including clinical trials and regulatory submissions, and manufacturing. We have the right to co-promote, in the United States, products resulting from the collaboration. In addition to research funding, and inclusive of prior milestone payments and the upfront license fee, GlaxoSmithKline has agreed to pay us up to an aggregate of $23.0 million as it achieves certain additional development or marketing milestones. GlaxoSmithKline must also pay us royalties on any sales of products for osteoporosis and other bone metabolism disorders that include compounds developed

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by GlaxoSmithKline under the agreement, and a percentage of profits from co-promotion of such products. To date, we have received license fee, milestone and research and development support payments totaling $23.1 million under this agreement. GlaxoSmithKline may terminate the agreement on 30 days’ written notice after a six-month waiting period. Additionally, in the event we breach the agreement, GlaxoSmithKline may terminate the agreement on 60 days’ written notice for our breach. If GlaxoSmithKline terminates the agreement, none of their payments to us are refundable unless such termination is due to our material breach which is not cured, in which case we would be required to return to GlaxoSmithKline all milestone payments received by us, other than the initial license fee. Upon termination, the rights and licenses we granted GlaxoSmithKline revert to us. In December 2003, we amended the agreement to provide for the termination of the collaborative research portion of the agreement effective May 31, 2003. The amendment permits us to conduct our own research and development efforts with certain calcilytic compounds subject to a limitation on our ability to commercialize any compounds arising from our work if GlaxoSmithKline is developing or commercializing a calcilytic compound. We also granted to GlaxoSmithKline a right of first negotiation to acquire a license to the calcilytic compounds we develop on our own.

Janssen. In October 1998, we entered into a collaborative agreement with Janssen for the research, development and commercialization of new drugs for the treatment of schizophrenia and dementia. The research phase of this collaboration ended in October 2000. In addition, Janssen controls and is responsible for development and commercialization of the compounds, including manufacturing, and including all costs and expenses associated with the development and commercialization efforts. While Janssen has the right to market products worldwide, we may co-promote, in Canada, any products developed under the agreement. We will receive up to an aggregate of $21.5 million in milestone payments if Janssen reaches certain milestones, and royalties from any product sales resulting from the collaboration. To date, we have received research support and milestone payments totaling $2.9 million under this agreement. We may terminate the agreement if Janssen breaches the agreement and does not cure the breach within 60 days of receiving notice of the breach. In that case, all rights granted to Janssen revert to us. Janssen may terminate, for any reason, on 90 days notice to us. If Janssen terminates, other than for our breach, then the rights to any compounds or products are transferred to us. We can also terminate Janssen’s rights if Janssen does not launch the product in the United States, but we must pay a royalty to Janssen on product sales after that termination. If Janssen terminates the agreement, none of their payments to us are refundable

Kirin. In June 1995, we entered into a collaborative research and license agreement with Kirin to develop and commercialize cinacalcet HCl and other related compounds for the treatment of hyperparathyroidism and any other indications other than osteoporosis and bone metabolism disorders in Japan, China, Hong Kong, North and South Korea and Taiwan. Kirin is responsible for all costs associated with developing, obtaining regulatory approvals and commercializing products within its territories. The agreement also requires Kirin to use reasonable good faith efforts to introduce a product to market. Kirin paid us an initial up-front license fee of $5.0 million and agreed to pay us certain milestone payments on the achievement of specified events up to an aggregate of $13.0 million. To date, we have received $9.0 million in milestone payments from Kirin. Kirin is required to pay us royalties on any sales of products containing cinacalcet HCl or a similar compound within its territories. We may terminate the agreement if Kirin breaches the agreement and does not cure the breach within 90 days of receiving notice of the breach. In this event, Amgen would receive rights to develop and commercialize cinacalcet HCl for the treatment of hyperparathyroidism and other indications except osteoporosis, in the terminated territories. Kirin may terminate the agreement for any reason on 90 days’ prior written notice, and on a country by country basis on specified conditions relating to market size. If Kirin terminates the agreement, Amgen would receive rights to develop and commercialize cinacalcet HCl for the treatment of hyperparathyroidism and other indications, except osteoporosis, in the terminated territories. If Kirin terminates the agreement, none of their payments to us are refundable. We are advised that Kirin and Amgen have executed a separate data sharing agreement related to clinical data under their separate agreements with us. We have also authorized them to enter into a manufacturing agreement with one or more manufacturing companies for clinical and commercial supplies.

Nycomed. In April 2004, we signed a distribution and license agreement with Nycomed in which we granted Nycomed the exclusive right to develop and market PREOS^® in Europe. Nycomed also agreed to make an equity investment in NPS of $40.0 million through the purchase of 1.33 million shares of NPS common stock in the form of a private placement. We closed on the equity investment on July 7, 2004. The agreement also requires Nycomed to pay us up to $25.0 million in milestone payments upon regulatory approvals and achievement of certain sales targets and to pay us royalties on product sales. Nycomed has also committed to participate in fifty percent of the costs incurred in the conduct of certain Phase IIIb clinical trials up to a maximum contribution of $12.5 million and to expend at least $12.5 million in the conduct of certain Phase IV clinical studies. To date, we have received $2.1 million in milestone payments under this agreement. Nycomed may terminate the agreement for reasons related to the commercial viability of PREOS^® at any time upon provision of six months written notice. In that event ownership to all technology, products, regulatory filings and know how revert back to us. Either party may terminate the agreement should the other party commit a material breach that is not cured within 60 days of written notice of such material breach. In the event of termination related to material breach by Nycomed, all technology, patents, regulatory filings and know how revert back to us. Should the agreement be terminated for material breach by us, then all rights granted to Nycomed under the agreement are to be licensed or assigned to Nycomed to convey ownership in such rights in the Nycomed territory to Nycomed.

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Sponsored and Government Funded Research Programs

We have entered into certain research and license agreements that require us to make research support payments to academic or research institutions when the research is performed. Additional payments may be required upon the accomplishment of research milestones by the institutions or as license fees or royalties to maintain the licenses.

In February 1993, we entered into a patent license agreement with The Brigham and Women’s Hospital, an affiliate of Harvard University Medical School. The patent license agreement grants us an exclusive license to certain calcium receptor and inorganic ion receptor technology covered by patents we jointly own with the hospital. Under the patent license agreement, we are responsible for all costs relating to obtaining regulatory approval from the FDA or any other federal, state or local government agency and carrying out any clinical studies, relating to the technology. The Brigham and Women’s Hospital is also entitled to a royalty on any sales of certain products under the patent license agreement, and we have committed to promote sales of any licensed products for hyperparathyroidism for which we receive regulatory approval. Brigham and Women’s Hospital may terminate the patent agreement if we breach the terms of the patent agreement and do not cure the breach within 60 days of receiving notice of the breach. Certain violations of terms of the patent agreement, if pursued by Brigham and Women’s Hospital, might result in the exclusive, royalty-free license of the technology to Brigham and Women’s Hospital or other adverse consequences.

We have also entered into a license agreement with Dr. Daniel J. Drucker and his Canadian corporation 1149336 Ontario Inc. The license agreement grants to us an exclusive license under Dr. Drucker’s patent portfolio for glucagon-like peptide-2, or GLP-2, and its therapeutic uses. Under the license agreement we have agreed to ensure that reasonable commercial efforts are used to develop and commercialize any product covered by the licensed patents. The agreement requires us to pay annual nonrefundable license maintenance fees, royalties on sales and milestone payments. If we default on any of the material obligations under the agreement Dr. Drucker may terminate the license agreement and all rights granted under the agreement will revert to Dr. Drucker.

New Drug Development and Approval Process

Regulation by governmental authorities in the United States and other countries is a significant factor in the manufacture and marketing of pharmaceuticals and in our ongoing research and development activities. All of our product candidates will require regulatory approval by governmental agencies prior to commercialization. In particular, all of our drug candidates are subject to rigorous preclinical testing and clinical trials and other premarketing approval requirements by the FDA and regulatory authorities in other countries. In the United States, various federal, and in some cases state statutes and regulations also govern or affect the manufacturing, safety, labeling, storage, record keeping and marketing of such products. The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources. Regulatory approval, when and if obtained, may significantly limit the indicated uses for which our products may be marketed. Further, approved drugs, as well as their manufacturers, are subject to ongoing review and discovery of previously unknown problems with such products may result in restrictions on their manufacture, sale or use or in their withdrawal from the market.

The steps required by the FDA before our drug candidates may be marketed in the United States include, among other things:

• the performance of preclinical laboratory and animal tests and formulation studies;

• the submission to the FDA of an Investigational New Drug application, or IND, which must become effective before human clinical trials may commence;

• the completion of adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug; and

• the submission and FDA approval of a new drug application or NDA.

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

Prior to commencing a clinical trial, we must submit an IND to the FDA. The IND becomes effective 30 days after receipt by the FDA, unless within the 30-day period, the FDA raises concerns or questions with respect to the conduct of the trial. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the study can begin. The submission of an IND may not result in FDA authorization to commence a clinical trial. Further, an independent institutional review board at the medical center or centers proposing to conduct the trial must review and approve the plan for any clinical trial before it commences.

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Human clinical trials are typically conducted in three sequential phases that may overlap:

• PHASE I: the drug is initially introduced into healthy human subjects or patients and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion.

• PHASE II: involves studies in a limited patient population to identify possible adverse effects and safety risks, to determine the efficacy of the product for specific targeted diseases and to determine optimal dosage.

• PHASE III: when Phase II evaluations demonstrate that a dosage range of the product is effective and has an acceptable safety profile, Phase III trials are undertaken to further evaluate dosage and clinical efficacy and to further test for safety in an expanded patient population at geographically dispersed clinical study sites.

We cannot be certain that we or any of our collaborative partners will successfully complete Phase I, Phase II or Phase III testing of any compound within any specific time period, if at all. Furthermore, the FDA or the study sponsor may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.

The results of product development, preclinical studies and clinical trials are submitted to the FDA as part of an NDA. The FDA may withhold approval for an NDA if the applicable regulatory criteria are not satisfied or may require additional clinical data. Even if such data is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. If approved, the FDA may withdraw product approval if compliance with regulatory standards is not maintained or if problems occur after the product reaches the market. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs.

The FDA’s fast track program is intended to facilitate the development and expedite the review of drugs intended for the treatment of serious or life-threatening diseases and that demonstrate the potential to address unmet medical needs for such conditions. Under this program, the FDA can, for example, review portions of an NDA for a fast track product before the entire application is complete, thus potentially beginning the review process at an earlier time. We cannot guarantee that the FDA will grant any requests that we may make for fast track designation, that any fast track designation would affect the time of review, or that the FDA will approve the NDA submitted for any of our drug candidates, whether or not fast track designation is granted. Additionally, the FDA’s approval of a fast track product can include restrictions on the product’s use or distribution, such as permitting use only for specified medical procedures or limiting distribution to physicians or facilities with special training or experience. Approval of fast track products can be conditional with a requirement for additional clinical studies after approval.

Satisfaction of the above FDA requirements or similar requirements of state, local and foreign regulatory agencies typically takes several years and the actual time required may vary substantially, based upon the type, complexity and novelty of a product or indication.

Government regulation may delay or prevent marketing of potential products for a considerable period of time and impose costly procedures upon our or our partner’s activities. The FDA or any other regulatory agency may not grant any approvals on a timely basis, if at all. Success in early stage clinical trials does not assure success in later stage clinical trials. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. Even if a product receives regulatory approval, the approval may be significantly limited to specific indications and dosages. Further, even if regulatory approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. Delays in obtaining, or failures to obtain regulatory approvals may have a material adverse effect on our business. In addition, we cannot predict what adverse governmental regulations may arise from future United States or foreign governmental action.

Any products manufactured or distributed by us or our partners pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the drug. Drug manufacturers are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA for compliance with Current Good Manufacturing Practice, or cGMP, regulations which impose certain procedural and documentation requirements upon us and our contract manufacturers. We cannot be certain that we or our present or future suppliers will be able to comply with the cGMP regulations and other FDA regulatory requirements.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan

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drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the disease for which it has such designation, the product is entitled to orphan exclusivity. For example, the FDA may not approve any other applications to market the same drug for the same disease, except in very limited circumstances, for seven years. We intend to file for orphan drug designation for those diseases which meet the criteria for orphan exclusivity. Although obtaining FDA approval to market a product with orphan drug exclusivity can be advantageous, there can be no assurance that it would provide us with a material commercial advantage.

Steps similar to those in the United States must be undertaken in virtually every other country comprising the market for our product candidates before any such product can be commercialized in those countries. The approval procedure and the time required for approval vary from country to country and may involve additional testing. There can be no assurance that approvals will be granted on a timely basis, or at all. In addition, regulatory approval of prices is required in most countries other than the United States. There can be no assurance that the resulting prices would be sufficient to generate an acceptable return to us. In addition, the impact of recent changes to Medicare prescription drug benefits is uncertain.

Patents and Other Proprietary Technology

Our intellectual property portfolio includes patents, patent applications, trade secrets, know-how and trademarks. Our success will depend in part on our ability to obtain additional patents, maintain trade secrets and operate without infringing the proprietary rights of others, both in the United States and in other countries. We periodically file patent applications to protect the technology, inventions and improvements that may be important to the development of our business. We rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position.

We file patent applications on our own behalf as assignee and, when appropriate, have filed and expect to continue to file, applications jointly with our collaborators. These patent applications cover compositions of matter, methods of treatment, methods of discovery, use of novel compounds and novel modes of action, as well as recombinantly expressed receptors and gene sequences that are important in our research and development activities. Some of our principal intellectual property rights related to processes, compounds, uses and techniques related to calcium receptor science are now protected by issued United States patents. We intend to file additional patent applications relating to our technology and to specific products, as we think appropriate.

We hold patents directed to potential therapeutic products such as new chemical entities, pharmaceutical compositions and methods of treating diseases. We hold patents directed also to nucleic acid and amino acid sequences of novel cellular receptors and methods of screening for compounds active at such cellular receptors. We continue actively to seek patent protection for these and related technologies in the United States and in foreign countries.

We have been issued approximately 185 patents in the U.S. and have been granted approximately 706 patents in other countries. Eleven issued U.S. patents cover technology related to parathyroid hormone. These patents have expiration dates (not including any patent term extensions) ranging from 2008 to 2018. Seven issued U.S. patents cover technology related to calcilytic compounds. These patents have expiration dates (not including any patent term extensions) ranging from 2016 to 2019. Fifteen issued U.S. patents cover calcimimetics (including cinacalcet HCl) and calcium receptor technology. These patents have expiration dates (not including any patent term extensions) ranging from 2013 to 2017. Twelve issued U.S. patents cover technology related to teduglutide and GLP-2, certain of which are licensed from 1149336 Ontario Inc. These patents have expiration dates (not including any patent term extensions) ranging from 2015 to 2018. Four issued U.S. patents cover technology related to isovaleramide. These patents have expiration dates (not including any patent term extensions) ranging from 2013 to 2020. Seven issued U.S. patents cover technology related to delucemine. These patents have expiration dates (not including any patent term extensions) ranging from 2013 to 2018. Eight issued U.S. patents cover technology related to metabotropic glutamate receptors. These patents have expiration dates (not including any patent term extensions) ranging from 2016 to 2020. Fourteen issued U.S. patents cover technology related to glycine reuptake inhibitors. These patents have expiration dates (not including any patent term extensions) ranging from 2016 to 2022.

We also rely on trade secrets and contractual arrangements to protect our trade secrets. Much of the know-how important to our technology and many of its processes are dependent upon the knowledge, experience and skills of our key scientific and technical personnel and are not the subject of pending patent applications or issued patents. To protect our rights to know-how and technology, we require all of our employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit the unauthorized use of, and restrict the disclosure of, confidential information and require disclosure and assignment to us of their ideas, developments, discoveries and inventions.

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In connection with our research and development activities, we have sponsored research at various university and government laboratories. For example, we have executed license and research agreements regarding research in the area of calcium and other ion receptors with The Brigham and Women’s Hospital. We have also sponsored work at other government and academic laboratories for various evaluations, assays, screenings and other tests. Generally, under these agreements, we fund the work of investigators in exchange for the results of the specified work and the right or option to a license to any patentable inventions that may result in certain designated areas. If the sponsored work produces patentable subject matter, we generally have the first right to negotiate for license rights related to that subject matter. Any resulting license would be expected to require us to pay royalties on net sales of licensed products.

Competition

We and our collaborators and licensees are pursuing areas of product development in which we believe there is a potential for extensive technological innovation in relatively short periods of time. We operate in a field in which new discoveries occur at a rapid pace. Our competitors may succeed in developing technologies or products that are more effective than ours, or in obtaining regulatory approvals for their drugs more rapidly than we are able to, which could render our products obsolete or noncompetitive. Competition in the pharmaceutical industry is intense and is expected to continue to increase. Many competitors, including biotechnology and pharmaceutical companies, are actively engaged in research and development in areas where we are also developing products, including the fields of osteoporosis, hyperparathyroidism, and central nervous system disorders. Current therapies for osteoporosis include supplementing dietary calcium and vitamin D, estrogen replacement therapy in post-menopausal women, bisphosphonates, raloxifene, a selective estrogen receptor modulator, calcitonin, and Lilly’s teriparatide, a recombinant parathyroid-hormone fragment, called Forteo^®. With the exception of Forteo^®, all of these therapies act to prevent further bone loss by inhibiting bone resorption. These therapies have been shown to reduce the incidence of fracture, but they have only a limited positive effect on bone mineral density. These products only arrest further bone loss, and may not be effective treatments for all patients. For example, Fosamax^®, a bisphosphonate sold by Merck, showed a reduction in fractures but an increase in bone mineral density of only seven to ten percent over three years. Lilly launched Forteo^® in the United States in 2002 and in Europe in 2003. Forteo^® will compete directly with PREOS^® as a bone-building agent for the treatment of osteoporosis patients at high risk for fracture. Lilly’s product is the first to market in the treatment of osteoporosis using an injectable bone-building drug. Lilly has also announced that it is investigating alternate methods of delivery of Forteo^®. Other competitors are also developing potential therapies for osteoporosis that have more desirable delivery methods which may make it difficult for us to compete.

Many of our competitors have substantially greater financial, technical, marketing and personnel resources. In addition, some of them have considerable experience in preclinical testing, human clinical trials and other regulatory approval procedures. Moreover, certain academic institutions, governmental agencies and other research organizations are conducting research in the same areas in which we are working. These institutions are becoming increasingly aware of the commercial value of their findings and are more actively seeking patent protection and licensing arrangements to collect royalties for the technology that they have developed. These institutions may also market competitive commercial products on their own or through joint ventures and will compete with us in recruiting highly qualified scientific personnel. Our ability to compete successfully will depend, in part, on our ability to:

• develop marketing, sales and distribution capabilities for our proprietary products;

• leverage our established collaborations and enter into new collaborations for the development of our products;

• identify new product candidates through our internal discovery effort or through acquisition;

• develop products that reach the market first;

• develop products that are superior to other products in the market;

• develop products that are cost-effective and competitively priced; and

• obtain and enforce patents covering our technology.

Manufacturing

We do not have internal manufacturing capabilities to produce supplies of PREOS^®, teduglutide or any of our other product candidates to support clinical trials or commercial launch of these products, if they are approved. We are dependent on third parties for manufacturing, supply, and storage of our product candidates. If we are unable to contract for a sufficient supply of our product candidates on acceptable terms, or if we encounter delays or difficulties in the manufacturing process or our relationships with our manufacturers, we may not have sufficient product to conduct or complete our clinical trials or support preparations for the commercial launch of our product candidates, if approved.

We have entered into agreements with contract manufacturers to manufacture clinical and commercial supplies of PREOS^® and the injection pen device, or pen, used to administer PREOS^®. These contract manufacturers are our only source for the production of PREOS^® and the pen.

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We depend on a number of contract manufacturers to supply key components of PREOS^®. For instance, we have entered into agreements with SynCo Bio Partners B.V., or SynCo, and Boehringer Ingelheim Austria GmbH, or BI, to produce bulk supplies of the active pharmaceutical ingredient of PREOS^®. Historically, SynCo has supplied the bulk drug product for our clinical requirements. BI will supply the bulk drug product for our commercial requirements, which include the commercial launch of PREOS^®, when and if approved. The technology utilized by SynCo to produce the active pharmaceutical ingredient of PREOS^® has been transferred to BI and our agreement with SynCo has expired. In connection with the technology transfer, we are required to establish for regulatory purposes comparability between the finished drug product supplied by SynCo in the conduct of our clinical trials and the commercial supplies of the finished drug product supplied by BI. We believe that we established the required comparability in our NDA filing. BI has successfully completed initial manufacturing runs of the commercial bulk drug product and we expect BI to be able to produce sufficient bulk supplies of PREOS^® on a timely basis. Nevertheless, manufacturing biological products is complex and no assurances can be provided that BI will be able to produce commercial quantities of bulk drug product in a timely manner or at all.

We also depend on Vetter Pharma-Fertigung GmbH, or Vetter, for the production of finished supplies of PREOS^®. Because the “fill and finish” aspect of the manufacturing process for PREOS^® requires the use of Vetter’s proprietary technology, Vetter is our sole source for finished supplies of PREOS^®. Absent the development of an alternative method of delivery of PREOS^®, we will remain dependent on the availability of Vetter’s proprietary technology. Vetter has only produced small quantities of finished supplies of PREOS^® to date, but has commenced manufacturing commercial quantities of finished supplies of PREOS^®. We expect Vetter to be able to meet our commercial supply needs for PREOS^®. Nevertheless, the fill and finish aspect of the manufacturing process for PREOS^® is complex and no assurances can be provided that Vetter will be able to produce commercial quantities of finished supplies of PREOS^® in a timely manner or at all.

We rely on Ypsomed AG, or Ypsomed, to manufacture the pen used for the administration of PREOS^®. Ypsomed is our sole source for the pen and, absent the development of an alternative method of delivery of PREOS^®, we will remain dependent on Ypsomed’s technology to produce the pen. The pen has been specifically designed and developed for delivery of PREOS^®. This will be the first time that Ypsomed will have produced commercial quantities of the pen. To date, Ypsomed has not produced commercial quantities of the pen, but has commenced commercial production of the pen. We expect Ypsomed to be able to produce sufficient supplies of the pen on a timely basis to support the commercial launch of PREOS^®, when and if approved by the FDA. Nevertheless, manufacturing drug delivery devices such as the pen is complex and no assurances can be provided that Ypsomed will be able to produce commercial quantities of the pen in a timely manner or at all.

We are subject to various risks when relying on our contract manufacturers for the supply of PREOS^® and the pen. If, for example, Vetter is unable to produce finished supplies of PREOS^® in required quantities or in accordance with our specifications in a timely manner or at all, or if Ypsomed is unable to produce the pen in required quantities, and in accordance with our required specifications, in a timely manner or at all, the commercial launch of PREOS^® would be delayed and we could be forced to ultimately develop an alternative delivery process for PREOS^®, which would require additional clinical trials and regulatory approvals. We have experienced certain instances where our contract manufacturers have produced product that has not met our required specifications and could not be used in clinical trials or for commercial launch. Any extended disruption or termination of our relationship with any of our contract manufacturers for PREOS^® would materially harm our business and financial condition and could adversely impact our stock price.

We also have arrangements with contract manufacturers for clinical supplies of teduglutide. If clinical supplies of teduglutide are disrupted, exhausted, or fail to arrive when needed, we will have to substantially curtail or postpone initiation of planned clinical trials with those product candidates.

A more complete description of the risks associated with our business, including our contract manufacturers, can be found below in Section 1A of this Annual Report titled “Risk Factors.”

Employees

As of December 31, 2005, we employed 355 individuals full-time, of which 74 hold doctorate degrees and 73 hold other advanced degrees. A total of 238 full-time employees are engaged in research, development and support activities. A total of 117 full-time employees are employed in finance, legal, human resources, marketing and sales, corporate development and general administrative activities. None of our employees are covered by collective bargaining agreements and our management considers its relations with our employees to be good.

Trademarks

“NPS”, “NPS Pharmaceuticals”, “PREOS”, and “PREOTACT” are our registered trademarks. All other trademarks, trade names or service marks appearing in this Annual Report on Form 10-K are the property of their respective owners.

Available Information

Our Internet address is www.npsp.com. We make available free of charge on or through our Internet website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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ITEM 1A. Risk Factors.

The following information sets forth risk factors that could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Annual Report on Form 10-K and those we may make from time to time. If any of the following risks actually occur, our business, results of operation, prospects or financial condition could be harmed. These are not the only risks we face. Additional risks not presently known to us, or that we currently deem immaterial, may also affect our business operations.

Risks Related to Our Business

We have a history of operating losses. We expect to incur net losses and we may never achieve or maintain profitability.

With the exception of 1996, we have not been profitable since our inception in 1986. We reported net losses of $169.7 million, $168.3 million and $170.4 million for the years ended 2005, 2004 and 2003, respectively. As of December 31, 2005, we had an accumulated deficit of approximately $756.2 million. To date, our sole revenue from product sales has been in the form of royalty payments from Amgen on sales of cinacalcet HCl. We have assigned the right to receive future royalties from Amgen for sales of cinacalcet HCl to a wholly owned subsidiary. The subsidiary has pledged the right to such royalties as security for the repayment of certain notes. Until such notes, with a carrying value of $175.0 million at December 31, 2005, are paid in full, all royalties from Amgen will go to repay the loan and related interest and not to us. If the Amgen royalties are not sufficient to repay the notes on a timely basis, or at all, then we may never receive additional cash flows from future royalty payments from Amgen on sales of cinacalcet HCl. We have not generated any other revenue from product sales to date, and it is possible that we will never have sufficient product sales revenue to achieve profitability. We expect to continue to incur losses for at least the next several years as we and our collaborators and licensees pursue clinical trials and research and development efforts. To become profitable, we, either alone or with our collaborators and licensees, must successfully develop, manufacture and market our current product candidates, particularly PREOS^® and cinacalcet HCl, as well as continue to identify, develop, manufacture and market new product candidates. It is possible that we will never have significant product sales revenue or receive significant royalties on our licensed product candidates.

We may require additional funds.

Currently, we are not a self-sustaining business and certain economic, operational and strategic factors may require us to secure additional funds. If we lack sufficient funding at any time in the future, we may not be able to develop or commercialize our products, take advantage of business opportunities or respond to competitive pressures.

Our current and anticipated operations, particularly our product development and commercialization programs for PREOS^® and teduglutide, require substantial capital. We expect that our existing cash and cash equivalents will sufficiently fund our current and planned operations through the next 12 months. However, our future capital needs will depend on many factors, including the extent to which we enter into collaboration agreements with respect to any of our proprietary product candidates, receive royalty and milestone payments from our collaborators and make progress in our internally funded research, development and commercialization activities. Our capital requirements will also depend on the magnitude and scope of these activities, our ability to maintain existing and establish new collaborations, the terms of those collaborations, the success of our collaborators in developing and marketing products under their respective collaborations with us, the success of our contract manufacturers in producing clinical and commercial supplies of our product candidates on a timely basis and in sufficient quantities to meet our requirements, competing technological and market developments, the time and cost of obtaining regulatory approvals, the extent to which we choose to commercialize our future products through our own sales and marketing capabilities, the cost of preparing, filing, prosecuting, maintaining and enforcing patent and other rights and our success in acquiring and integrating complimentary products, technologies or companies. We do not have committed external sources of funding, and we cannot assure you that we will be able to obtain additional funds on acceptable terms, if at all. If adequate funds are not available, we may be required to:

• engage in equity financings that would be dilutive to current stockholders;

• delay, reduce the scope of or eliminate one or more of our development programs;

• obtain funds through arrangements with collaborators or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves; or

• license rights to technologies, product candidates or products on terms that are less favorable to us than might otherwise be available.

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We are substantially dependent on our ability to obtain regulatory approval to market PREOS^® in the United States and the ability of Nycomed to obtain regulatory approval to market PREOS^® in Europe. Our business will be materially harmed and our stock price may be adversely affected if these regulatory approvals are not obtained with respect to this product candidate.

In May 2005, we filed an NDA for PREOS^® with the FDA seeking approval to market PREOS^® in the U.S. The PDUFA date for the PREOS^® NDA is March 10, 2006. “PDUFA date” refers to the date that the FDA is expected to notify a drug sponsor about the approval status of an NDA. In March 2005, our corporate licensee, Nycomed, filed a Marketing Authorization Application, or MAA, with the European Medicines Agency, or EMEA, seeking approval to market PREOS^® in Europe. The Committee for Medicinal Products for Human Use of the EMEA, or the CHMP, has adopted a positive opinion recommending authorization for Nycomed to market PREOS^® in Europe. The CHMP recommendation is generally the last step prior to receipt of marketing authorization by the EMEA. The process of obtaining FDA and other regulatory approvals is costly, time consuming, uncertain and subject to unanticipated delays. In order to obtain the necessary regulatory approvals, we must demonstrate with substantial evidence from well-controlled clinical trials and to the satisfaction of the applicable regulatory reviewing agency that this product is both safe and efficacious. We believe the results from the pivotal Phase III clinical trial demonstrated safety and efficacy with respect to PREOS^®. The most frequently observed adverse events across the trials were hypercalcemia, hypercalciuria and nausea. However, there is no assurance that the FDA or the EMEA will accept the results of those studies and determine that the applicable regulatory requirements for approval have been met. The FDA may require additional testing for safety and efficacy, which would result in a substantial delay in the regulatory approval process for us. Additionally, if PREOS^® is approved, the FDA approved indication, side effect and adverse events profile, and product distribution requirements may not be competitive with other products and may impede our ability to effectively promote and commercialize PREOS^®. Our corporate licensee, Nycomed, has assumed responsibility for obtaining regulatory approval to market PREOS^® in Europe. We are dependent on their efforts in this area. If we or Nycomed fail to successfully obtain regulatory approvals for PREOS^®, or face delays, our business will be materially harmed and our stock price may be adversely affected.

We are entirely dependent on the efforts of Nycomed to develop and market PREOS^® in Europe. If Nycomed does not devote adequate resources to the development and marketing of PREOS^® in Europe or if Nycomed is not successful in its efforts, our sales of PREOS^® in Europe will be reduced, our profitability will be delayed and our stock price adversely affected.

We have licensed to Nycomed the exclusive right to develop and market PREOS^® in Europe. Nycomed has also assumed responsibility to obtain regulatory approval to market PREOS^® in Europe. If Nycomed is not able to obtain regulatory approval to market PREOS^® in Europe in a timely manner or at all, or if it does not devote adequate resources to the development and marketing of PREOS^® in Europe then European sales of PREOS^® will be negatively impacted which will adversely affect our profitability and stock price.

We may never develop any more commercial drugs or other products that generate revenues.

Cinacalcet HCl is our only drug, to date, that is generating revenues. Our remaining product candidates will require significant additional development, clinical trials, regulatory clearances and additional investment before they can be commercialized. Our product development efforts may not lead to commercial drugs for a number of reasons, including the failure of our product candidates to be safe and effective in clinical trials or because we have inadequate financial or other resources to pursue the programs through the clinical trial process. Even if we are able to commercialize one or more of our product candidates, we cannot assure you that such product candidates will find acceptance in the medical community.

We have no internal manufacturing capabilities. We depend on third parties, including a number of sole suppliers, for manufacturing, supply, and storage of our product candidates to be used for commercial launch and in our clinical trials. Product introductions may be delayed or suspended if the manufacture or supply of our products is interrupted or discontinued.

We do not have internal manufacturing capabilities to produce supplies of PREOS^®, teduglutide or any of our other product candidates to support clinical trials or commercial launch of these products, if they are approved. We are dependent on third parties for manufacturing, supply, and storage of our product candidates. If we are unable to contract for a sufficient supply of our product candidates on acceptable terms, or if we encounter delays or difficulties in the manufacturing or supply process or our relationships with our manufacturers, we may not have sufficient product to conduct or complete our clinical trials or support preparations for the commercial launch of our product candidates, if approved.

We have entered into agreements with contract manufacturers to manufacture clinical and commercial supplies of PREOS^® and the injection pen device used to administer PREOS^®. These contract manufacturers are our only source for the production of PREOS^® and the pen.

We depend on a number of contract manufacturers to supply key components of PREOS^®. For instance, we have entered into agreements with SynCo Bio Partners B.V., or SynCo, and Boehringer Ingelheim Austria GmbH, or BI, to

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produce bulk supplies of the active pharmaceutical ingredient of PREOS^®. Historically, SynCo has supplied the bulk drug product for our clinical requirements. Some of the bulk drug product manufactured by SynCo will be used in the commercial launch of PREOS^® if approved. BI will supply the bulk drug product for our commercial requirements, which include the commercial launch of PREOS^®, when and if approved. The technology utilized by SynCo to produce the active pharmaceutical ingredient of PREOS^® has been transferred to BI and our agreement with SynCo has expired. In connection with the technology transfer, we are required to establish for regulatory purposes comparability between the finished drug product supplied by SynCo in the conduct of our clinical trials and the commercial supplies of the finished drug product supplied by BI. We believe that we established the required comparability in our NDA filing. BI has successfully completed initial manufacturing runs of the commercial bulk drug product and we expect BI to be able to produce sufficient bulk supplies of PREOS^® on a timely basis. Nevertheless, manufacturing biological products is complex and no assurances can be provided that BI will be able to produce commercial quantities of bulk drug product in a timely manner or at all.

We also depend on Vetter Pharma-Fertigung GmbH, or Vetter, for the production of finished supplies of PREOS^®. Because the “fill and finish” aspect of the manufacturing process for PREOS^® requires the use of Vetter’s proprietary technology, Vetter is our sole source for finished supplies of PREOS^®. Absent the development of an alternative method of delivery of PREOS^®, we will remain dependent on the availability of Vetter’s proprietary technology. Vetter has only produced small quantities of finished supplies of PREOS^® to date, but has commenced manufacturing commercial quantities of finished supplies of PREOS^®. We expect Vetter to be able to meet our commercial supply needs for PREOS^®. Nevertheless, the fill and finish aspect of the manufacturing process for PREOS^® is complex and no assurances can be provided that Vetter will be able to produce commercial quantities of finished supplies of PREOS^® in a timely manner or at all.

We rely on Ypsomed AG, or Ypsomed, to manufacture the pen used for the administration of PREOS^®. Ypsomed is our sole source for the pen and, absent the development of an alternative method of delivery of PREOS^®, we will remain dependent on Ypsomed’s technology to produce the pen. The pen has been specifically designed and developed for delivery of PREOS^®. This will be the first time that Ypsomed will have produced commercial quantities of the pen. To date, Ypsomed has not produced commercial quantities of the pen, but has commenced commercial production of the pen. We expect Ypsomed to be able to produce sufficient supplies of the pen on a timely basis to support the commercial launch of PREOS^®, when and if approved by the FDA. Nevertheless, manufacturing drug delivery devices such as the pen is complex and no assurances can be provided that Ypsomed will be able to produce commercial quantities of the pen in a timely manner or at all.

We are subject to various risks when relying on our contract manufacturers for the supply of PREOS^® and the pen. If, for example, Vetter is unable to produce finished supplies of PREOS^® in required quantities or in accordance with our required specifications, in a timely manner or at all, or if Ypsomed is unable to produce the pen in required quantities and in accordance with our required specifications, in a timely manner or at all, the commercial launch of PREOS^® would be delayed and we could be forced to ultimately develop an alternative delivery process for PREOS^®, which would require additional clinical trials and regulatory approvals. We have experienced certain instances where our contract manufacturers have produced product that has not met our required specifications and could not be used in clinical trials or for commercial launch. Any extended disruption or termination of our relationship with any of our contract manufacturers for PREOS^® would materially harm our business and financial condition and could adversely impact our stock price.

We also have arrangements with contract manufacturers for clinical supplies of teduglutide. If clinical supplies of teduglutide are disrupted, exhausted, or fail to arrive when needed, we will have to substantially curtail or postpone initiation of planned clinical trials with those product candidates.

Dependence on contract manufacturers for commercial production involves a number of additional risks, many of which are outside our control. These additional risks include:

• there may be delays in scale-up to quantities needed for clinical trials and commercial launch or failure to manufacture such quantities to our specifications, or to deliver such quantities on the dates we require;

• our current and future manufacturers are subject to ongoing, periodic, unannounced inspection by the FDA and corresponding state and international regulatory authorities for compliance with strictly enforced cGMP regulations and similar foreign standards, and we do not have control over our contract manufacturers’ compliance with these regulations and standards;

• our current and future manufacturers may not be able to comply with applicable regulatory requirements, which would prohibit them from manufacturing products for us;

• if we need to change to other commercial manufacturing contractors, the FDA and comparable foreign regulators must approve these contractors prior to our use, which would require new testing and compliance inspections, and the new manufacturers would have to be educated in, or themselves develop substantially equivalent processes necessary for, the production of our products;

• our manufacturers might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements and may result in substantial delays in meeting market demand; and

• we may not have intellectual property rights, or may have to share intellectual property rights, to any improvements in the manufacturing processes or new manufacturing processes for our products.

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Any of these factors could cause us to delay or suspend clinical trials, regulatory submission, required approvals or commercialization of our products under development, entail higher costs and result in our being unable to effectively commercialize our products.

We do not currently intend to manufacture any of our product candidates, although we may choose to do so in the future. If we decide to manufacture our products, we would be subject to the regulatory risks and requirements described above. We would also be subject to similar risks regarding delays or difficulties encountered in manufacturing our pharmaceutical products and we would require additional facilities and substantial additional capital. We cannot assure you that we would be able to manufacture any of our products successfully in accordance with regulatory requirements and in a cost-effective manner.

Clinical trials are long, expensive and uncertain processes and the FDA may ultimately not approve any of our product candidates. We cannot assure you that data collected from preclinical and clinical trials of our product candidates will be sufficient to support approval by the FDA, the failure of which could delay our profitability and adversely affect our stock price.

Before we receive regulatory approval for the commercial sale of our product candidates, our product candidates are subject to extensive pre-clinical testing and clinical trials to demonstrate their safety and efficacy. Clinical trials are long, expensive and uncertain processes. Clinical trials may not be commenced or completed on schedule, and the FDA may not ultimately approve our product candidates for commercial sale. Further, even if the results of our preclinical studies or clinical trials are initially positive, it is possible that we will obtain different results in the later stages of drug development or that results seen in clinical trials will not continue with longer-term treatment. Drugs in late stages of clinical development may fail to show the desired safety and efficacy traits despite having progressed through initial clinical testing. For example, positive results in early Phase I or Phase II clinical trials may not be repeated in larger Phase II or Phase III clinical trials. All of our potential drug candidates are prone to the risks of failure inherent in drug development. The clinical trials of any of our drug candidates, including teduglutide, could be unsuccessful, which would prevent us from commercializing the drug. Our failure to develop safe, commercially viable drugs would substantially impair our ability to generate revenues and sustain our operations and would materially harm our business and adversely affect our stock price.

If we fail to maintain our existing or establish new collaborative relationships, or if our collaborators do not devote adequate resources to the development and commercialization of our licensed drug candidates, we may have to reduce our rate of product development and may not see products brought to market or be able to achieve profitability.

Our strategy for developing, manufacturing and commercializing our products includes entering into various relationships with other pharmaceutical companies to advance many of our programs. We have granted exclusive development, commercialization and marketing rights to a number of our collaborators for some of our key product development programs, including cinacalcet HCl, PREOS^®, calcilytics, mGluRs and glycine reuptake inhibitors. Except in the case of our collaboration with AstraZeneca for research involving mGluRs, our collaborators have full control over those efforts in their territories and the resources they commit to the programs. Accordingly, the success of the development and commercialization of product candidates in those programs depends on their efforts and is beyond our control. For us to receive any significant milestone or royalty payments from our collaborators, they must advance drugs through clinical trials, establish the safety and efficacy of our drug candidates, obtain regulatory approvals and achieve market acceptance of those products. As a result, if a collaborator elects to terminate its agreement with us with respect to a research program, our ability to advance the program may be significantly impaired or we may elect to discontinue funding the program altogether.

Under our agreement with AstraZeneca, we are required to co-direct the research and to pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel through March 2009. This commitment of personnel and capital may limit or restrict our ability to initiate or pursue other research efforts.

As part of our product development and commercialization strategy, we evaluate whether to seek collaborators for our product candidates. If we elect to collaborate, we may not be able to negotiate collaborative arrangements for our product candidates on acceptable terms, if at all. If we are unable to establish collaborative arrangements, we will either need to increase our expenditures and undertake the development and commercialization activities at our own expense or delay further development of the affected product candidate.

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Collaborative agreements, including our existing collaborative agreements, pose the following risks:

• our contracts with collaborators may be terminated and we may not be able to replace our collaborators;

• the terms of our contracts with our collaborators may not be favorable to us in the future;

• our collaborators may not pursue further development and commercialization of compounds resulting from their collaborations with us;

• a collaborator with marketing and distribution rights to one or more of our product candidates may not commit enough resources to the marketing and distribution of such candidates;

• disputes with our collaborators may arise, leading to delays in or termination of the research, development or commercialization of our product candidates, or resulting in significant litigation or arbitration;

• contracts with our collaborators may fail to provide significant protection if one or more of them fail to perform;

• in some circumstances, if a collaborator terminates an agreement, or if we are found to be in breach of our obligations, we may be unable to secure all of the necessary intellectual property rights and regulatory approval to continue developing the same compound or product;

• our collaborators could independently develop, or develop with third parties, drugs that compete with our products; and

• we may be unable to meet our financial or other obligations under our collaborative agreements.

We cannot assure you of the success of our current collaborative efforts nor can we assure you of the success of any of our future collaborative efforts. If our collaborative efforts fail, our business and financial condition would be materially harmed.

If our agreement with Allergan to promote Restasis^® is unsuccessful or terminated prior to the expiration of its initial term, our profitability under the agreement may be adversely impacted and our efforts to further develop and maintain our sales force prior to the commercial launch of PREOS^® may be delayed.

We have entered into an agreement with Allergan to promote Allergan’s FDA approved drug Restasis^®. Allergan may terminate the agreement on our breach or on the occurrence of other events. If we are unsuccessful in promoting Restasis^® or if the agreement is terminated prior to the expiration of its initial term our expected revenues from our promotional efforts will be reduced and we may have to bear the cost of our sales force with no corresponding revenue. Additionally, we expect that our efforts to promote Restasis^® will assist in the further development of a sales force to launch PREOS^®, if approved. Should any of these events occur prior to the approval of PREOS^®, our sales force would not have any product to promote which would make it difficult to maintain the current size of our sales force, the development of our sales force may be adversely impacted and as a result our profitability may be delayed and our stock price adversely affected.

Because we have never marketed, sold or distributed a product, we may be unable to successfully market and sell our products and generate revenues.

We have recruited and continue to recruit sales, marketing, market research and product planning personnel. However, we still require additional sales, marketing and distribution capabilities. In order to commercialize any product candidates for which we receive FDA approval, we must rely on our sales and marketing force or rely on third parties to perform these functions. To market products directly, our marketing and sales force must have technical expertise and supporting distribution capability. Our inability to continue to develop expertise and attract skilled marketing and sales personnel to our sales and distribution capabilities may limit our ability to gain market acceptance for our products and generate revenues. We have entered into an agreement with Ventiv Pharma Services, or Ventiv, to assist in the development of a sales force to promote Restasis^® and Kineret^® under our respective agreements with Allergan and Amgen. We believe that our promotional efforts with Restasis^® and Kineret^® and our relationship with Ventiv have accelerated our creation of a sales force to promote PREOS^®. We cannot assure you that our sales force will be successful in generating PREOS sales revenue in a highly competitive market. Further, if we establish relationships with one or more companies with existing distribution systems and direct sales forces to market any or all of our product candidates, we cannot assure you that we will be able to enter into or maintain agreements with these companies on acceptable terms, if at all.

In addition, we have incurred significant expenses in developing sales, marketing and distribution capabilities in connection with determining potential commercialization strategies with respect to PREOS^®. Our commercialization strategy with respect to PREOS^® and other product candidates will depend on a number of factors, including:

• the extent to which we are successful in securing collaborative partners to offset some or all of the funding obligations with respect to other product candidates;

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• whether we are able to establish agreements with third party collaborators with respect to any of our product candidates on terms that are acceptable to us;

• the extent to which our agreement with our collaborators permits us to exercise marketing or promotion rights with respect to the product candidate; and

• how our product candidates compare to competitive products with respect to labeling, pricing, therapeutic effect and method of delivery.

A number of these factors are outside of our control and will be difficult to determine. Therefore, we may change commercialization strategies by entering into agreements with our collaborators or third parties after we have incurred significant expenses in developing internal sales, marketing and distribution capabilities. A change of this nature could result in increased expenses or delays in commercialization and therefore could delay revenues and adversely affect our future operating results.

Because of the uncertainty of pharmaceutical pricing, reimbursement and healthcare reform measures, we may be unable to sell our products profitably.

The availability of reimbursement by governmental and other third-party payors affects the market for any pharmaceutical product. These third-party payors continually attempt to contain or reduce the costs of healthcare. There have been a number of legislative and regulatory proposals to change the healthcare system and further proposals are likely. Medicare’s policies may decrease the market for our products that are designed to treat patients with age-related disorders, such as osteoporosis and hyperparathyroidism. Significant uncertainty exists with respect to the reimbursement status of newly approved healthcare products.

In addition, third-party payors are increasingly challenging the price and cost-effectiveness of medical products and services. We might not be able to sell our products profitably or recoup the value of our investment in product development if reimbursement is unavailable or limited in scope, particularly for product candidates addressing small patient populations, such as teduglutide for the treatment of short bowel syndrome.

The passage of the Medicare Prescription Drug and Modernization Act of 2003, or the MMA, imposes new requirements for the distribution and pricing of prescription drugs for Medicare beneficiaries which may affect the marketing of our products. The MMA also introduced a new reimbursement methodology, part of which went into effect in 2004. At this point, it is not clear what effect the MMA will have on prices paid for currently approved drugs and the pricing options for new drugs approved after January 1, 2006. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-governmental payors.

In addition, in some foreign countries, the proposed pricing for a drug must be approves before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. We expect that there will continue to be a number of federal and state proposals to implement governmental pricing controls. While we cannot predict whether such legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability.

As a result of intense competition and technological change in the pharmaceutical industry, the marketplace may not accept our products, and we may not be able to compete successfully against other companies in our industry and achieve profitability.

The pharmaceutical and biotechnology industries are intensely competitive. We have competitors both in the U.S. and internationally including major multi-national pharmaceutical companies, chemical companies, biotech companies, universities and other research organizations. Many of our competitors have drug products that have already been approved or are in development, and operate large, well-funded research and development programs in these fields. For example, Forteo^®, a fragment of the full-length parathyroid hormone for the treatment of osteoporosis, is currently being marketed in the United States and Europe by Eli Lilly, Inc., or Lilly, as a treatment for patients with osteoporosis who are at high risk of bone fracture. If PREOS^® is approved by the FDA, it will compete directly with Forteo^® and other approved therapies, including supplementing dietary calcium and vitamin D, estrogen replacement therapies, calcitonin, bisphosphonate and selective estrogen modulators therapies. Many of our competitors have substantially greater financial and management resources, superior intellectual property positions and greater manufacturing, marketing and sales capabilities, areas in which we have limited or no experience. In addition, many of our competitors have significantly greater experience than we do in undertaking preclinical testing and clinical trials of new or improved pharmaceutical products and obtaining required regulatory approvals. Consequently, our competitors may obtain FDA and other regulatory approvals for product candidates sooner and may be more successful in manufacturing and marketing their products than we or our collaborators, which could render our product candidates obsolete and non-competitive.

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Existing and future products, therapies and technological approaches will compete directly with the products we seek to develop. Current and prospective competing products may provide greater therapeutic benefits for a specific problem, may offer easier delivery or may offer comparable performance at a lower cost. Any product candidate that we develop and that obtains regulatory approval must then compete for market acceptance and market share. Our product candidates may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Further, any products we develop may become obsolete before we recover any expenses we incurred in connection with the development of these products. As a result, we may never achieve profitability.

We may be unable to obtain patents to protect our technologies from other companies with competitive products, and patents of other companies could prevent us from manufacturing, developing or marketing our products.

The patent positions of pharmaceutical and biotechnology firms are uncertain and involve complex legal and factual questions. The U.S. Patent and Trademark Office has not established a consistent policy regarding the breadth of claims that it will allow in biotechnology patents. If it allows broad claims, the number and cost of patent interference proceedings in the U.S. and the risk of infringement litigation may increase. If it allows narrow claims, the risk of infringement may decrease, but the value of our rights under our patents, licenses and patent applications may also decrease. In addition, the scope of the claims in a patent application can be significantly modified during prosecution before the patent is issued. Consequently, we cannot know whether our pending applications will result in the issuance of patents or, if any patents are issued, whether they will provide us with significant proprietary protection or will be circumvented, invalidated, or found to be unenforceable. Until recently, patent applications in the United States were maintained in secrecy until the patents issued, and publication of discoveries in scientific or patent literature often lags behind actual discoveries. Patent applications filed in the United States after November 2000 generally will be published 18 months after the filing date unless the applicant certifies that the invention will not be the subject of a foreign patent application. We cannot assure you that, even if published, we will be aware of all such literature. Accordingly, we cannot be certain that the named inventors of our products and processes were the first to invent that product or process or that we were the first to pursue patent coverage for our inventions.

Our commercial success depends in part on our ability to maintain and enforce our proprietary rights. If third parties engage in activities that infringe our proprietary rights, our management’s focus will be diverted and we may incur significant costs in asserting our rights. We may not be successful in asserting our proprietary rights, which could result in our patents being held invalid or a court holding that the third party is not infringing, either of which would harm our competitive position. In addition, we cannot assure you that others will not design around our patented technology.

Moreover, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office or other analogous proceedings in other parts of the world to determine priority of invention and the validity of patent rights granted or applied for, which could result in substantial cost and delay, even if the eventual outcome is favorable to us. We cannot assure you that our pending patent applications, if issued, would be held valid or enforceable. Additionally, many of our foreign patent applications have been published as part of the patent prosecution process in such countries. Protection of the rights revealed in published patent applications can be complex, costly and uncertain.

In order to protect goodwill associated with our company and product names, we rely on trademark protection for our marks. We registered the “PREOS” trademark with the United States Patent and Trademark Office. A third party may assert a claim that the PREOS^® mark is confusingly similar to its mark, and such claims or the failure to timely register the PREOS mark or objections by the FDA could force us to select a new name for PREOS^®, which could cause us to incur additional expense or delay its introduction to market.

We also rely on trade secrets, know-how and confidentiality provisions in our agreements with our collaborators, employees and consultants to protect our intellectual property. However, these and other parties may not comply with the terms of their agreements with us, and we might be unable to adequately enforce our rights against these people or obtain adequate compensation for the damages caused by their unauthorized disclosure or use. Our trade secrets or those of our collaborators may become known or may be independently discovered by others.

Our products and product candidates may infringe the intellectual property rights of others, which could increase our costs and negatively affect our profitability.

Our success also depends on avoiding infringement of the proprietary technologies of others. In particular, there may be certain issued patents and patent applications claiming subject matter which we or our collaborators may be required to license in order to research, develop or commercialize at least some of our product candidates, including PREOS^® and teduglutide. In addition, third parties may assert infringement or other intellectual property claims against us based on our patents or other intellectual property rights. An adverse outcome in these proceedings could subject us to significant liabilities

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to third parties, require disputed rights to be licensed from third parties or require us to cease or modify our use of the technology. If we are required to license such technology, we cannot assure you that a license under such patents and patent applications will be available on acceptable terms or at all. Further, we may incur substantial costs defending ourselves in lawsuits against charges of patent infringement or other unlawful use of another’s proprietary technology.

We are subject to extensive government regulations that may cause us to cancel or delay the introduction of our products to market.

Our research and development activities and the clinical investigation, manufacture, distribution and marketing of drug products are subject to extensive regulation by governmental authorities in the United States and other countries. Prior to marketing in the United States, a drug must undergo rigorous testing and an extensive regulatory approval process implemented by the FDA under federal law, including the Federal Food, Drug and Cosmetic Act. To receive approval, we or our collaborators must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that the product is both safe and effective for each indication where approval is sought. Depending upon the type, complexity and novelty of the product and the nature of the disease or disorder to be treated, that approval process can take several years and require substantial expenditures. Data obtained from testing are susceptible to varying interpretations that could delay, limit or prevent regulatory approvals of our products. Drug testing is subject to complex FDA rules and regulations, including the requirement to conduct human testing on a large number of test subjects. We, our collaborators or the FDA may suspend human trials at any time if a party believes that the test subjects are exposed to unacceptable health risks. We cannot assure you that any of our product candidates will be safe for human use. Other countries also have extensive requirements regarding clinical trials, market authorization and pricing. These regulatory requirements vary widely from country to country, but, in general, are subject to all of the risks associated with United States approvals.

If any of our products receive regulatory approval, the approval will be limited to those disease states and conditions for which the product is safe and effective, as demonstrated through clinical trials. In addition, results of pre-clinical studies and clinical trials with respect to our products could subject us to adverse product labeling requirements which could harm the sale of such products. Even if regulatory approval is obtained, later discovery of previously unknown problems may result in restrictions of the product, including withdrawal of the product from the market. Further, governmental approval may subject us to ongoing requirements for post-marketing studies. Even if we obtain governmental approval, a marketed product, its respective manufacturer and its manufacturing facilities are subject to unannounced inspections by the FDA and must comply with the FDA’s cGMP and other regulations. These regulations govern all areas of production, record keeping, personnel and quality control. If a manufacturer fails to comply with any of the manufacturing regulations, it may be subject to, among other things, product seizures, recalls, fines, injunctions, suspensions or revocations of marketing licenses, operating restrictions and criminal prosecution. Other countries also impose similar manufacturing requirements. Our promotional materials and sales activities are governed by FDA regulation. The FDA may require us to withdraw promotional material, to issue corrected material, or to cease promotion resulting in loss of credibility with our customers, reduced sales revenue or increased costs.

If we fail to attract and retain key employees, the development and commercialization of our products may be adversely affected.

We depend heavily on the principal members of our scientific and management staff. To the extent that we lose key personnel, our ability to develop products and become profitable may suffer. The risk of being unable to retain key personnel may be increased by the fact that we have not executed long-term employment contracts with our employees. Our future success will also depend in large part on our ability to attract and retain other highly qualified scientific and management personnel. We face competition for personnel from other companies, academic institutions, government entities and other organizations. We have operations in Salt Lake City, Utah, Parsippany, New Jersey, Mississauga, Ontario and Toronto, Ontario. We also have executive officers at each of these locations. Our future success will depend in part on how well we are able to integrate each of their efforts with the operations of the Company and how successful we are in managing personnel who are working on the same program but are spread out at various geographic locations.

If we are not successful in our management transition or in attracting and retaining management team members and other highly qualified individuals in our industry, we may not be able to successfully implement our business strategy.

Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends in large part upon our ability to attract and retain highly qualified managerial personnel. We have historically been highly dependent on Dr. Hunter Jackson, the founder of our company and our only Chairman, Chief Executive Officer and President. Dr. Jackson has held these offices since the founding of NPS to November 2005. In November 2005, Dr. N. Anthony Coles joined NPS as President and Chief Operating Officer and continues to hold these offices. Dr. Jackson continues to serve as our Chairman and Chief Executive Officer and will hold these offices until May 11, 2006, at which time he will retire. On May 11, 2006, Dr. Coles will become our Chief Executive Officer. Drs. Jackson and Coles are working together closely to ensure an effective transition. Dr. Coles will continue after May 11, 2006 to work with our management team to accomplish, among other things, a successful transition of leadership. In addition to Dr. Coles, we have hired other key members of our management team over the past few years. Our future success depends on a successful management transition and will also depend on our continuing to attract, retain and motivate highly skilled management team members.

If product liability claims are brought against us or we are unable to obtain or maintain product liability insurance, we may incur substantial liabilities that could reduce our financial resources.

The clinical testing and commercial use of pharmaceutical products involves significant exposure to product liability claims. We have obtained limited product liability insurance coverage for our clinical trial on humans, however, our insurance coverage may be insufficient to protect us against all product liability damages. Further, liability insurance coverage is becoming increasingly expensive and we might not be able to obtain or maintain product liability insurance in the future on acceptable terms or in sufficient amounts to protect us against product liability damages. Regardless of merit or eventual outcome, liability claims may result in decreased demand for a future product, injury to reputation, withdrawal of clinical trial volunteers, loss of revenue, costs of litigation, distraction of management and substantial monetary awards to

26

plaintiffs. Additionally, 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 adversely affected.

Our operations involve hazardous materials and we must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

Our research and development activities involve the controlled use of hazardous materials, radioactive compounds and other potentially dangerous chemicals and biological agents. Although we believe our safety procedures for these materials comply with governmental standards, we cannot entirely eliminate the risk of accidental contamination or injury from these materials. We currently have insurance, in amounts and on terms typical for companies in businesses that are similarly situated, that could cover all or a portion of a damage claim arising from our use of hazardous and other materials. However, if an accident or environmental discharge occurs, and we are held liable for any resulting damages, the associated liability could exceed our insurance coverage and our financial resources.

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, new SEC regulations and Nasdaq National Market rules are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and management time related to compliance activities. In particular, our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment has required the commitment of significant financial and managerial resources. We expect these efforts to require the continued commitment of significant resources. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed and we might be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission. Any such action could adversely affect our financial results and the market price of our common stock.

Risks Related to Our Common Stock and Notes Payable

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

You should consider an investment in our common stock as risky and invest only if you can withstand a significant loss and wide fluctuations in the market value of your investment. We receive only limited attention by securities analysts and frequently experience an imbalance between supply and demand for our common stock. The market price of our common stock has been highly volatile and is likely to continue to be volatile. Factors affecting our common stock price include:

• fluctuations in our operating results;

• announcements of technological innovations or new commercial products by us, our collaborators or our competitors;

• published reports by securities analysts;

• the progress of our and our collaborators’ clinical trials, including our and our collaborators’ ability to produce clinical supplies of our product candidates on a timely basis and in sufficient quantities to meet our clinical trial requirements;

• governmental regulation and changes in medical and pharmaceutical product reimbursement policies;

• developments in patent or other intellectual property rights;

• publicity concerning the discovery and development activities by our licensees;

• public concern as to the safety and efficacy of drugs that we and our competitors develop; and

• general market conditions.

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Antitakeover provisions in our Certificate of Incorporation, Bylaws, stockholder rights plan and under Delaware law may discourage or prevent a change of control.

Provisions of our Certificate of Incorporation and Bylaws and Section 203 of the Delaware General Corporation Law could delay or prevent a change of control of us. For example, our Board of Directors, without further stockholder approval, may issue preferred stock that could delay or prevent a change of control as well as reduce the voting power of the holders of common stock, even to the extent of losing control to others. In addition, our Board of Directors has adopted a stockholder rights plan, commonly known as a “poison pill,” that may delay or prevent a change of control.

Substantial future sales of our common stock by us or by our existing stockholders could cause our stock price to fall.

Additional equity financings or other share issuances by us could adversely affect the market price of our common stock. Sales by existing stockholders of a large number of shares of our common stock in the public market and the sale of shares issued in connection with strategic alliances, or the perception that such additional sales could occur, could cause the market price of our common stock to drop.

Our cash flow may not be sufficient to cover interest payments on the 3% Convertible Notes due 2008 or to repay the notes at maturity.

Our ability to make interest payments on and to repay at maturity or refinance our 3% Convertible Notes due 2008 will depend on our ability to generate sufficient cash. We have never generated positive annual cash flow from our operating activities, and we may not generate or sustain positive cash flows from operations in the future. Our ability to generate sufficient cash flow will depend on our ability, or the ability of our strategic partners, to successfully develop and obtain regulatory approval for new products and to successfully market these products, as well as the results of our research and development efforts and other factors, including general economic, financial, competitive, legislative and regulatory conditions, many of which are outside of our control.

Conversion of the notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their notes.

The conversion of some or all of the notes will dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the notes may encourage short selling by market participants.

Royalty and milestone revenues received from Amgen on sales of cinacalcet HCl may not be sufficient to cover the interest and principal payments on the Secured 8.0% Notes due March 30, 2017. As a result, we would have to either make such payments out of available cash resources or risk forfeiture of certain royalty rights under the Amgen agreement.

In December 2004, we completed a private placement of $175.0 million in secured 8.0% Notes due March 30, 2017, or Secured Notes. The Secured Notes are non-recourse to us and are secured by certain royalty and related rights of the company under our agreement with Amgen. Additionally, the principal sources for interest payments and principal repayment of the Secured Notes is limited to royalty and milestone payments received from Amgen. If the revenues received from Amgen are insufficient to cover the interest and other payments due under the secured Notes we would have to either make the payments out of available cash resources or forfeit our rights to royalties and other rights under the Amgen agreement. If we elect to make the payments our cash resources would be significantly reduced and we may not have sufficient cash resources to fund our programs and operations. If we do not make the payments due under the Secured Notes then we risk losing the future revenue stream from Amgen for sales of cinacalcet HCl which could adversely effect future cash resources and we would lose rights to the technology licensed to Amgen under the Amgen agreement.

ITEM 1B. Unresolved Staff Comments.

None.

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ITEM 2. Properties.

We have ongoing operations in Salt Lake City, Utah; Parsippany, New Jersey; Mississauga, Ontario; and Toronto, Ontario. In December 2005, we closed a transaction for the sale and leaseback of our 93,000 square foot laboratory and office building in Salt Lake City. As part of the transaction, we entered into a lease agreement for all of the laboratory and office space in the building. The lease will expire in December 2020. The building is located on land in the Research Park of the University of Utah and is subject to 40-year ground lease. In Parsippany, we lease approximately 76,500 square feet of administrative space. The Parsippany lease will expire in October 2007.

In Mississauga, we own a building consisting of approximately 90,000 square feet of laboratory, support and administrative space. In March 2005, we entered into a lease agreement with the MaRS Discovery District in Toronto for an approximately 60,000 square foot laboratory and office building. In September 2005, we completed construction of leasehold improvements on this facility and relocated certain personnel from our Mississauga facility to the MaRS facility. The lease will expire in March 2015. The MaRS Discovery District is located in downtown Toronto and includes the University of Toronto and over thirty internationally renowned, affiliated hospitals and research institutes.

ITEM 3. Legal Proceedings.

From time to time we are involved in litigation arising out of our operations. We maintain liability insurance, including product liability coverage, in amounts our management believes is adequate. We are not currently engaged in any legal proceedings that we expect would materially harm our business or financial condition.

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

No matter was submitted to the stockholders during the fourth quarter of 2005.

Executive Officers of the Registrant.

The following table sets forth certain information concerning our executive officers:

Name	Age	Position
Hunter Jackson	55	Chief Executive Officer and Chairman of the Board
N. Anthony Coles	45	President and Chief Operating Officer
Val R. Antczak	53	Senior Vice President Legal Affairs, General Counsel and Secretary
Morgan R. Brown	37	Vice President, Finance and Treasurer
G. Thomas Heath	56	Senior Vice President, Marketing and Sales
Glenn R. Melrose	50	Vice President, Human Resources
Gerard J. Michel	42	Chief Financial Officer and Vice President, Corporate Development
Alan L. Mueller	51	Vice President, Drug Discovery
Edward F. Nemeth	53	Vice President and Chief Scientific Officer
Stephen R. Parrish	49	Vice President, Technical Operations
Alan M. Rauch	56	Senior Vice President, Clinical Research and Medical Affairs and Chief Medical Officer
Gregory Torre	53	Senior Vice President, Regulatory Affairs

Hunter Jackson, Ph.D. has been Chief Executive Officer and Chairman of our board since founding NPS in 1986. He also served as President from 1994 to October 2005. Before founding NPS, he was an Associate Professor in the Department of Anatomy at the University of Utah School of Medicine. Dr. Jackson received a Ph.D. in Psychobiology from Yale University. He received postdoctoral training in the Department of Neurosurgery, University of Virginia Medical School.

N. Anthony Coles, M.D. has been President and Chief Operating Officer since November 2005. Prior to joining NPS, Dr. Coles served as the Senior Vice President of Commercial Operations of Vertex Pharmaceuticals from 2002 to October 2005. From 1996 to 2002, Dr. Coles held a variety of positions with Bristol-Myers Squibb, including Senior Vice President of Strategy and Policy and Senior Vice President of Marketing and Medical Affairs, Neuroscience/Infectious Diseases/Dermatology. Dr. Coles was a Research Fellow at Harvard Medical School. He received a B.S. from Johns Hopkins University, a Master of Public Health from Harvard University, and a Doctor of Medicine from Duke University.

Val R. Antczak, J.D., has been Senior Vice President Legal Affairs, General Counsel and Secretary since April 2005. From 1978 to April 2005, Mr. Antczak was a partner at the law firm of Parsons Behle & Latimer in Salt Lake City, where his practice concentrated on business, business litigation and regulatory matters for capital-intensive industries. Mr. Antczak received a J.D. from the University of Utah and a B.S. in finance from the University of Utah.

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Morgan R. Brown, C.P.A, M.B.A., has been Vice President, Finance and Treasurer since October 2003. Before being appointed to that position, he served as Corporate Controller and Senior Director of Financial Reporting since June 2000. From 1993 to June 2000, he held various positions with the accounting firm of KPMG LLP, most recently as a Senior Manager. Mr. Brown received an M.B.A. from the University of Utah and a B.S. in accounting from Utah State University.

G. Thomas Heath, M.B.A., has been Senior Vice President, Marketing and Sales since November 2001. In 1997, Mr. Heath co-founded Echelon Biosciences Inc., where he served as President until November 2001 and as a director through 2004. From 1976 to 1996, Mr. Heath served in various marketing and sales positions at Pfizer Inc., where he managed the pre-launch planning and successful introductions of a number of new pharmaceutical products. Mr. Heath also served as Vice President, Sales and Marketing at Pfizer Canada, where he managed a sales force of over 250 salespeople. Mr. Heath received B.A. and M.B.A. degrees from the University of Utah.

Glenn R. Melrose, M.S., has been Vice President of Human Resources since July 2005. From 1999 to June 2005, Mr. Melrose served as Vice President of Human Resources at Amersham Biosciences Corp., North America, where he led Biosciences worldwide Human Resources function in 2003 and 2004. He began his career as an R&D scientist at Becton Dickinson and has held various sales and marketing management positions with Kodak Clinical Diagnostics and Amersham. Mr. Melrose received a M.S. in Experimental Biology from the University of Maryland and a B.S. in Biology from Washington and Lee University.

Gerard J. Michel, M.S., M.B.A. has been Chief Financial Officer since October 2003 and Vice President, Corporate Development since July 2002. From 1995 to July 2002, Mr. Michel served as a Principal of the consulting firm of Booz-Allen & Hamilton. In this consulting capacity, he worked with large pharmaceutical companies, biotech firms, and service firms. From 1988 to 1995 Mr. Michel was with Lederle Labs, serving in Marketing, Sales and Corporate Development roles, both domestically and international. Mr. Michel received an M.S. in Microbiology and an M.B.A., both from the University of Rochester.

Alan L. Mueller, Ph.D. has been Vice President, Drug Discovery since January 2001. Before being appointed to that position, he served us as Director, Discovery Research from September 1999 to January 2001. He joined NPS in February 1989 as a Senior Scientist. Prior to that time, he was a Pharmacologist at Abbott Laboratories. Dr. Mueller received a Ph.D. in Pharmacology from the University of Colorado Health Sciences Center, Denver.

Edward F. Nemeth, Ph.D. has been a Vice President of NPS since January 1994 and was appointed Chief Scientific Officer in July 1997. He joined NPS as Director of Pharmacology in March 1990. From 1986 until joining NPS, Dr. Nemeth was an Assistant Professor in the Department of Physiology and Biophysics at Case Western Reserve University School of Medicine. He received a Ph.D. in Pharmacology from Yale University.

Stephen R. Parrish, M.S. has been Vice President, Technical Operations since September 2002. Prior to joining NPS as an employee, Mr. Parrish worked with NPS for six months as a consultant through ManuPharm Consulting, Mr. Parrish’s own consulting company since October 1998. In that capacity, he provided manufacturing consulting services to the biotechnology and pharmaceutical industries. From March 1995 to September 1998, he served as Head of Operations for Medeva Pharma. Mr. Parrish received a B.S. in Pharmacy and an M.S. in Pharmaceutical Analysis, both from the University of Manchester.

Alan M. Rauch, M.D. has been Senior Vice President, Clinical Research and Medical Affairs and Chief Medical Officer since November 2003. From March 2002 to July 2003, he was the Chief Executive Officer of Galaxy Biomedical Services. From January 1998 to March 2002 he served as Senior Vice President, Clinical Affairs for Miravant Pharmaceuticals, Inc. where he managed their clinical programs. From January 1991 to January 1998 he served as Director, Medical Affairs for GlaxoWellcome, Inc. and various subsidiaries of Glaxo, Inc. Dr. Rauch currently serves as a Director for Medicab, Inc. and on the Advisory Board, Houston Technology Center. Dr. Rauch received an AB in Chemistry and an M.D. from the University of North Carolina, Chapel Hill.

Greg Torre, Ph.D., J.D., has been Senior Vice President Regulatory Affairs since February 2006. From June 2005 to January 2006, Dr. Torre served as Vice President Regulatory and Chief Regulatory Officer at Accentia Biopharmaceuticals. From June 2004 to June 2005 he served as Vice President Regulatory at MannKind Pharmaceuticals. From 2000 to June 2004, he was Senior Vice President Regulatory at Watson Pharma, Inc. While at Accentia, MannKind and Watson, Dr. Torre was responsible for developing worldwide registration strategies for new pharmaceutical products, regulatory compliance programs and drug safety programs. Dr. Torre received a Ph.D. in Pharmacology and Toxicology from St. John’s University and a J.D. from Brooklyn Law School.

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PART II

ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters.

Since May 26, 1994, our common stock has been quoted on the Nasdaq National Market under the symbol “NPSP.” The following table sets forth, for the periods indicated, the high and low closing sales prices for our common stock, as reported on the Nasdaq National Market.

	High		Low
2004
First Quarter	$	35.84	$	25.03
Second Quarter		28.40		20.00
Third Quarter		23.12		16.50
Fourth Quarter		22.62		16.52
2005
First Quarter		18.31		10.97
Second Quarter		13.35		10.45
Third Quarter		12.76		9.24
Fourth Quarter		12.51		9.33

As of December 31, 2005, there were approximately 215 holders of record of our common stock.

We have never declared or paid cash dividends on capital stock. We intend to retain any future earnings to finance growth and development and therefore do not anticipate paying cash dividends in the foreseeable future.

We have adopted a policy and implemented procedures allowing directors and officers to effect sales of the Company’s securities under SEC Rule 10b5-1. Under this rule, directors and officers may adopt a prearranged contract, instructions, or written plan arranging for the sale of Company securities on specified conditions. To this effect, prearranged plans have already been implemented and additional such plans may be adopted from time to time.

ITEM 6. Selected Financial Data.

The selected consolidated financial data presented below are for each fiscal year in the five-year period ended December 31, 2005. This is derived from, and qualified by reference to, NPS’s audited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-K. The selected quarterly data presented below are derived from our unaudited consolidated financial statements.

	Years Ended December 31
Consolidated Statements of Operations Data:	2005			2004			2003			2002			2001
	(in thousands, except per share amounts)
Revenues from research and license agreements	$	12,825		$	14,237		$	9,919		$	2,154		$	10,410
Operating expenses:
Cost of royalties received		1,144			237			—			—			—
Research and development		117,445			143,099			118,173			80,872			60,090
Selling, general and administrative		48,635			34,351			20,337			14,777			12,099
Amortization of goodwill and acquired intangibles (1)		—			1,598			1,485			1,322			3,411
Merger costs and termination fees		—			—			46,114			—			—
Total operating expenses		167,224			179,285			186,109			96,971			75,600
Operating loss		(154,399	)		(165,048	)		(176,190	)		(94,817	)		(65,190	)
Other income (expense), net		(15,379	)		(1,570	)		3,265			7,883			15,522
Loss before income tax expense		(169,778	)		(166,618	)		(172,925	)		(86,934	)		(49,668	)
Income tax expense (benefit)		(55	)		1,633			(2,530	)		(102	)		300
Net loss	$	(169,723	)	$	(168,251	)	$	(170,395	)	$	(86,832	)	$	(49,968	)
Basic and diluted loss per share (2)	$	(4.14	)	$	(4.43	)	$	(4.71	)	$	(2.79	)	$	(1.67	)
Basic and diluted weighted average shares outstanding (3)		41,036			37,948			36,148			31,165			29,912

31

(1) The Company adopted the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, or SFAS No. 142 as of January 1, 2002. The Company recognized $2.1 million for the year ended December 2001 of amortization of goodwill and the assembled workforce component of purchased intangibles, which was not recorded in 2005, 2004, 2003 and 2002 under SFAS No. 142.

(2) See note 1 to the consolidated financial statements for information concerning the computation of net loss per share.

Consolidated Balance Sheets Data:

	Years Ended December 31,
	2005			2004			2003			2002			2001
	(in thousands)
Cash, cash equivalents, and marketable investment securities	$	258,967		$	329,685		$	303,874		$	234,454		$	207,518
Working capital		233,907			306,349			283,906			228,497			206,314
Total assets		331,052			397,485			327,508			253,468			234,976
Long-term portion of lease financing, notes payable and other long-term liabilities		390,117			367,000			192,000			—			—
Accumulated deficit		(756,204	)		(586,481	)		(418,230	)		(247,835	)		(161,003	)
Stockholders’ equity (deficit)		(97,524	)		(12,789	)		112,785			242,362			221,935

Quarterly Financial Data:

	Quarter Ended
	December 31			September 30			June 30			March 31
	(in thousands, except per share amounts)
2005
Revenue from research and license agreements	$	4,308		$	4,700		$	2,183		$	1,634
Operating loss		(40,970	)		(34,304	)		(38,277	)		(40,848	)
Net loss		(44,278	)		(38,333	)		(42,162	)		(44,950	)
Basic and diluted loss per common and common share equivalent (1)	$	(0.96	)	$	(0.95	)	$	(1.09	)	$	(1.16	)
	December 31			September 30			June 30			March 31
2004
Revenue from research and license agreements	$	1,073		$	710		$	443		$	12,011
Operating loss		(49,249	)		(39,069	)		(41,218	)		(35,512	)
Net loss		(52,048	)		(39,170	)		(41,382	)		(35,651	)
Basic and diluted loss per common and common share equivalent (1)	$	(1.34	)	$	(1.02	)	$	(1.11	)	$	(0.96	)

(1) Loss per share is computed independently for each of the quarters presented and therefore may not sum to the total for the year.

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PART II

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and the documents incorporated by reference into this report contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our management’s judgment regarding future events. In many cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “plan,” “expect,” “anticipate,” “estimate,” “predict,” “intend,” “potential” or “continue” or the negative of these terms or other words of similar import, although some forward-looking statements are expressed differently. All statements other than statements of historical fact included in this Annual Report on Form 10-K and the documents incorporated by reference into this report regarding our financial position, business strategy and plans or objectives for future operations are forward-looking statements. Without limiting the broader description of forward-looking statements above, we specifically note that statements regarding potential drug candidates, their potential therapeutic effect, the possibility of obtaining regulatory approval, our ability or the ability of our collaborators to manufacture and sell any products, market acceptance, our ability to earn a profit from sales or licenses of any drug candidate or our ability to discover new drugs in the future are all forward-looking in nature. We cannot guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors, including:

• the risks inherent in our research and development activities, including the successful continuation of our strategic collaborations, our and our collaborators’ ability to successfully complete clinical trials, commercialize products and receive required regulatory approvals and the length, time and cost of obtaining such regulatory approvals;

• competitive factors;

• our ability to maintain the level of our expenses consistent with our internal budgets and forecasts;

• the ability of our contract manufacturers to successfully produce adequate supplies of our product candidates to meet our clinical trial and commercial launch requirements;

• changes in our relationships with our collaborators;

• variability of our royalty, license and other revenues;

• our ability to enter into and maintain agreements with current and future collaborators on commercially reasonable terms;

• the demand for securities of pharmaceutical and biotechnology companies in general and our common stock in particular;

• uncertainty regarding our patents and patent rights;

• compliance with current or prospective governmental regulation;

• technological change; and

• general economic and market conditions.

You should also consider carefully the statements set forth in Section 1A of this Annual Report entitled “Risk Factors” which addresses these and additional factors that could cause results or events to differ from those set forth in the forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. We have no plans to update these forward-looking statements.

Overview

Our objective is to build a profitable biopharmaceutical company by discovering, developing and commercializing small molecule drugs and recombinant proteins. Our current product candidates are primarily for the treatment of bone and mineral disorders, gastrointestinal disorders and central nervous system disorders. We have one U.S. Food and Drug Administration, or FDA, approved product, one product candidate presently undergoing regulatory review for approval to market in the U.S. and Europe, as well as other product candidates in various stages of clinical development and preclinical development. We are also promoting two FDA approved products on behalf of two other pharmaceutical companies.

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Our FDA approved product, cinacalcet HCl, has received marketing approval in the U.S., the European Union and Canada, for the treatment of secondary hyperparathyroidism in chronic kidney disease patients on dialysis and for the treatment of elevated calcium levels in patients with parathyroid carcinoma. We have licensed to Amgen worldwide rights to cinacalcet HCl, with the exception of Japan, China, North and South Korea, Hong Kong and Taiwan, where we have licensed such rights to Kirin Brewery, Ltd., or Kirin. Amgen developed and is marketing cinacalcet HCl in the U.S. under the brand name Sensipar^® and in Europe under the brand name Mimpara^®. Kirin is presently in Phase III clinical trials with cinacalcet HCl. Both Amgen and Kirin have contractually committed to pay us royalties on their sales of cinacalcet HCl.

PREOS^® is our most advanced product candidate. PREOS^® is our brand name for recombinant, full-length human parathyroid hormone which we are developing as a potential treatment for post-menopausal osteoporosis. In May 2005, we filed a New Drug Application, or NDA, with the FDA seeking approval to market PREOS^® in the U.S. The PDUFA date for the PREOS^® NDA is March 10, 2006. “PDUFA date” refers to the date that the FDA is expected to notify a drug sponsor about the approval status of an NDA. We have granted to Nycomed Danmark ApS, or Nycomed, the exclusive right to market and sell PREOS^® in Europe. Nycomed also assumed responsibility to file all necessary regulatory filings to obtain marketing approval for PREOS^® in Europe. Nycomed filed its European marketing authorization application, or MAA, with the European Medicines Evaluation Authority, or EMEA, in March 2005. The Committee for Medicinal Products for Human Use of the EMEA, or the CHMP, has adopted a positive opinion recommending authorization for Nycomed to market PREOS^® in Europe. The CHMP recommendation is generally the last step prior to receipt of marketing authorization of the EMEA. If marketing approval from the EMEA is granted, Nycomed intends to market PREOS^® in Europe under the brand name PREOTACT^® and expects to be ready to launch PREOTACT^® in Europe during the second half of 2006.

We are conducting a pivotal Phase III clinical trial with teduglutide, our analog of glucagon-like peptide 2, in patients with short bowel syndrome and have completed a proof-of-concept Phase II clinical trial in patients with Crohn’s disease. Our corporate licensee, GlaxoSmithKline, is engaged in Phase I clinical development activities with a calcilytic compound licensed from us for the potential use in osteoporosis. AstraZeneca is engaged in Phase I clinical development activities with a compound active at mGluRs licensed from us. Janssen is also engaged in Phase I clinical development activities with a compound licensed from us for potential use in central nervous system disorders. We are also evaluating the potential use of a proprietary compound, isovaleramide, in a variety of central nervous system disorders.

In October 2005, we entered into an agreement with Allergan, Inc. to co-promote Allergan’s proprietary drug, Restasis^®, an ophthalmic product approved for the treatment of Keratoconjuctivitis sicca, or dry eye. In August 2004, we entered into an agreement with Amgen to promote Amgen’s proprietary drug, Kineret^®, a biologic therapy approved for the treatment of moderate to severe rheumatoid arthritis. We have agreed with Amgen that we will end our promotion of Kineret^® effective March 31, 2006. We believe our activities under these agreements have allowed us to develop and train our sales organization in preparation for the commercial launch of PREOS^® if and when approved by the FDA.

We have incurred cumulative losses from inception through December 31, 2005 of approximately $756.2 million, net of cumulative revenues from research and license agreements of approximately $112.6 million. We expect to continue to incur significant operating losses over at least the next several years as we continue our current and anticipated development projects. Commercial manufacturing activities for PREOS^®, the build-up of the infrastructure necessary for the commercial launch of PREOS^® and the conduct of pre-and post-FDA approval clinical trials with PREOS^® will substantially contribute to our operating losses. Other activities that will increase our operating losses include: the conduct of clinical trials with teduglutide; clinical manufacturing for teduglutide; and, contractual commitments to fund research activities in our metabotropic glutamate receptor program.

Major Research and Development Projects

Our major research and development projects involve PREOS^® and teduglutide. We also have other significant research and development efforts, including isovaleramide and our work with AstraZeneca on metabotropic glutamate receptors.

PREOS^®. PREOS^® is our brand name for recombinant, full length, human parathyroid hormone that we are developing as a potential treatment for post-menopausal osteoporosis. During the years ended December 31, 2005, 2004 and 2003 we incurred $54.4 million, $80.6 million, and $80.6 million, respectively, in the research and development of this product candidate, including costs associated with the manufacture of clinical and commercial supplies of PREOS^®. We have incurred costs of approximately $ 327.5 million since we assumed development obligations for this product candidate under our acquisition of Allelix Biopharmaceuticals Inc., or Allelix, in December 1999.

34

Our development administration overhead costs are included in total research and development expense for each period, but are not allocated among our various projects.

The goal of our PREOS^® development program is to obtain marketing approval from the FDA and analogous international agencies. We will consider the project substantially complete if we obtain those approvals even though subsequent to that time we might incur additional expenses in conducting additional clinical trials and follow-up studies. To obtain the first of such approvals, we submitted an NDA to the FDA in May 2005. The FDA has accepted the NDA for review. The PDUFA date for the PREOS^® NDA is March 10, 2006. We have granted to Nycomed the exclusive right to market and sell PREOS^® in Europe. Nycomed also assumed responsibility to file all necessary regulatory filings to obtain marketing approval for PREOS^® in Europe. Nycomed filed its MAA with the EMEA in March 2005. The CHMP has adopted a positive opinion recommending authorization for Nycomed to market PREOS^® in Europe. THE CHMP recommendation is generally the last step prior to receipt of marketing authorization of the EMEA. Because of the ongoing work with respect to the PREOS^® program, the FDA review process, the initiation of commercial manufacturing activities, the creation of a sales and marketing organization, and the risks associated with the drug approval process, including the risk that we may have to repeat, revise or expand the scope of clinical trials or conduct additional clinical trials not presently planned to secure marketing approvals and the additional risks identified herein, we are unable to estimate the costs to completion or the completion date for the PREOS^® program. Material cash inflows relating to our PREOS^® development program will not commence until after marketing approvals are obtained, and then only if PREOS^® finds acceptance in the marketplace. Because of the many risks and uncertainties relating to the receipt of marketing approval from the applicable regulatory agencies and acceptance in the marketplace, and the availability of sufficient funds to complete development of the product, we cannot predict when material cash inflows from our PREOS^® program will commence, if ever. To date, we have not received any revenue from commercial sales of PREOS^®. The risks and uncertainties associated with completing the development of PREOS^® on a timely basis, or at all, include the following:

• We may be unable to obtain regulatory approval of the drug or be unable to obtain such approval on a timely basis;

• We may be unable to secure adequate commercial supplies of PREOS^® in order to initiate commercial launch upon approval; and

• We may not have adequate funds to complete the development and prepare for the commercial launch of PREOS^®.

A failure to obtain marketing approval for PREOS^®, secure adequate commercial supplies of PREOS^®, or secure adequate funds to complete development and prepare for commercial launch would likely have the following results on our operations, financial position and liquidity:

• We would not earn any sales revenue from PREOS^®, which would increase the likelihood that we would need to obtain additional financing for our other development efforts;

• Our reputation among investors might be harmed, which might make it more difficult for us to obtain equity capital on attractive terms or at all; and

• Our profitability would be delayed.

Teduglutide. Teduglutide is an analog of glucagon-like peptide 2, a naturally occurring hormone that regulates proliferation of the cells lining the small intestine. We are independently investigating teduglutide as a potential treatment for short bowel syndrome and Crohn’s disease. We initiated a pivotal Phase III study in adults with short bowel syndrome in the first quarter of 2004. A Phase IIa proof-of-concept clinical study to evaluate the possible utility of teduglutide in the treatment of patients with Crohn’s disease has been completed and based upon the results of the study, we plan to advance the clinical development of teduglutide for Crohn’s disease.

During the years ended December 31, 2005, 2004 and 2003, we incurred $28.8 million, $30.5 million and $18.1 million, respectively, in the research and development of this product candidate, including costs associated with the manufacture of clinical and commercial supplies of teduglutide. We have incurred costs of approximately $95.4 million since we assumed development obligations of this product candidate under our acquisition of Allelix in December 1999.

Our development administration overhead costs are included in total research and development expense for each period, but are not allocated among our various projects.

The goal of our teduglutide development program is to obtain marketing approval from the FDA, and analogous international agencies. We will consider the project substantially complete if we obtain those approvals even though subsequent to that time we might incur additional expenses in conducting additional clinical trials and follow-up studies. Before we can obtain such marketing approvals we will need to complete pivotal clinical trials with satisfactory results and submit an NDA to the FDA. We are unable to estimate the costs to completion or the completion date for the teduglutide

35

program because of the ongoing work with respect to the pivotal Phase III trial in adults with short bowel syndrome, the early stage of the clinical trials in Crohn’s disease, the risks associated with the clinical trial process, including the risk that patient enrollment in the clinical trials may be slow; that we may repeat, revise or expand the scope of future trials or conduct additional clinical trials not presently planned to secure marketing approvals, and the additional risks identified herein. We cannot predict when material cash inflows from our teduglutide program will commence, if ever, because of the many risks and uncertainties relating to the completion of clinicals trials, receipt of marketing approval from the applicable regulatory agency, acceptance in the marketplace, and the availability of sufficient funds to complete development of the product. To date, we have not received any revenues from product sales of teduglutide. The risks and uncertainties associated with completing the development of teduglutide on schedule, or at all, include the following:

• We may be unable to enroll on a timely basis or at all, a sufficient number of patients to complete our clinical trials as planned;

• Teduglutide may not be shown to be safe and efficacious in the pivotal and on-going clinical trials;

• We may be unable to obtain regulatory approval of the drug on a timely basis, or at all;

• Our ability to continue to be able to secure adequate clinical and commercial supplies of teduglutide in order to complete preclinical studies, clinical trials and initiate commercial launch upon approval; and

• We may not have adequate funds to complete the development of teduglutide.

A failure to obtain marketing approval for teduglutide or to timely complete development and obtain regulatory approval would likely have the following results on our operations, financial position and liquidity:

• We would not earn any sales revenue from teduglutide, which would increase the likelihood that we would need to obtain additional financing for our other development efforts;

• Our reputation among investors might be harmed, which might make it more difficult for us to obtain equity capital on attractive terms or at all; and

• Our profitability would be delayed.

Other Research and Development Programs

Most of the remaining research and development expenses for the three years ended December 31, 2005, were generated by various early clinical stage programs, pre-clinical studies and drug discovery programs, including those described below.

Metabotropic Glutamate Receptor Program. Since 1996, we have been working to find compounds that act on targets in the central nervous system called metabotropic glutamate receptors, or mGluRs. We have discovered a number of compounds that activate or inhibit mGluRs and that are highly selective for specific subtypes of mGluRs. Our animal studies with a number of these compounds have demonstrated their potential as drug candidates for the treatment of central nervous system disorders such as chronic pain. Additionally, animal studies with a number of these compounds have demonstrated their potential as drug candidates for the treatment of gastrointestinal disorders such as gastroesophageal reflux disease, or GERD.

In March 2001, we entered into an agreement with AstraZeneca under which we collaborate exclusively in an extensive program around a number of mGluR subtypes. We granted AstraZeneca exclusive rights to commercialize mGluR subtype-selective compounds. Under our agreement, we are required to co-direct the research and pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel, through March 2009 unless earlier terminated by AstraZeneca or us upon six months advance written notice. If certain milestones are met, AstraZeneca is required to pay us up to $30.0 million. AstraZeneca is also required to pay us royalties on sales of products that include those compounds. We have the right to co-promote any resulting product in the United States and Canada and to receive co-promotion revenue, if any. Should we elect to co-promote products, in some circumstances we will be required to share in the development and regulatory costs associated with those products, and we may not receive some late-stage milestone payments. AstraZeneca is engaged in Phase I clinical development activities with a compound active at mGluR’s licensed from us.

During the three years ended December 31, 2005, 2004 and 2003, we incurred $4.7 million, $4.6 million and $3.9 million, respectively, in research and development expenses under our collaboration with AstraZeneca.

Our development, administration and overhead costs are included in total research and development expenses for each period, but are not allocated among our various projects.

Isovaleramide for CNS Disorders. Isovaleramide is a small organic molecule which we are evaluating as a potential treatment for various central nervous system disorders. Preclinical studies have shown that isovaleramide is effective in a number of animal models of epilepsy and spasticity. We have completed several Phase I clinical trials with isovaleramide to evaluate its safety and tolerability. Our analysis of the data indicates that the drug was safe and well tolerated.

36

During the years ended December 31, 2005, 2004 and 2003, we incurred $9.3 million, $10.2 million and $3.3 million, respectively in research and development of this product candidate, including costs associated with the manufacture of clinical supplies of isovaleramide.

Our development, administration and overhead costs are included in total research and development expenses for each period, but are not allocated among our various projects.

Calcilytic Compounds. We are pursuing a treatment for osteoporosis that focuses on the discovery and development of orally administered drugs called calcilytic compounds. Calcilytic compounds are small molecule antagonists of the calcium receptors that temporarily increase the secretion of the body’s own parathyroid hormone, which may result in the formulation of new bone. In animal studies, we determined that intermittent increases in circulating levels of parathyroid hormone can be obtained through use of calcilytics.

In 1993, we collaborated with GlaxoSmithKline for the research, development and commercialization of calcium receptor active compounds from the treatment of osteoporosis and other bone metabolism disorders. We are not expending significant resources in the program. In December 2000, GlaxoSmithKline initiated a proof-of-principle Phase I clinical trial with a calcilytic compound for which we received a $1.0 million milestone payment. In November 2003, GlaxoSmithKline initiated new Phase I clinical studies with more advance compounds for which we received an additional $2.0 million milestone payment. We will receive additional payments of up to an aggregate of $11.0 million if certain clinical milestones are achieved, and royalties on sales of any commercialized products based on compounds identified in the collaboration.

Glycine Reuptake Inhibitors. We collaborated with Janssen on glycine reuptake inhibitors to identify prospective drug candidates for schizophrenia and dementia. Janssen has now assumed full responsibility for the development of product candidates identified under the collaboration. We are not expending any significant resources in the program. In November 2001, we received a milestone payment from Janssen as a result of the selection of a preclinical compound for further development as a potential treatment for schizophrenia. Janssen has informed us that they have moved a compound from this collaboration into a Phase I clinical trial. We will receive additional milestone payments of up to $20.5 million from Janssen, if certain milestones are met, and royalties on sales of any drugs developed or sold by Janssen under this collaboration agreement.

Summary of Other Programs. The goal of our other programs is to discover, synthesize, develop and obtain marketing approval for product candidates. Material cash inflows will not commence until after marketing approvals are obtained, and then only if the product finds acceptance in the marketplace. Currently all of these compounds are in pre-clinical stages or early clinical stages. In order to obtain marketing approval, we will need to initiate and complete all current and planned clinical trials with satisfactory results and submit a NDA to the FDA. Because of this, and the many risks and uncertainties relating to the completion of clinical trials, receipt of marketing approvals and acceptance in the marketplace, we cannot predict when material cash inflows from these programs will commence, if ever.

Results of Operations

The following table summarizes selected operating statement data for the years ended December 31, 2005, 2004 and 2003 (amounts in thousands):

	2005			2004			2003
Revenues from research and license agreements Operating expenses:	$	12,825		$	14,237		$	9,919
Cost of royalties	$	1,144		$	237		$	—
% of revenues		9	%		2	%		—
Research and development	$	117,445		$	143,099		$	118,173
% of revenues		916	%		1,005	%		1,191	%
Selling, general and administrative	$	48,635		$	34,351		$	20,337
% of revenues		379	%		241	%		205	%
Amortization of purchased intangibles	$	—		$	1,598		$	1,485
Merger costs and termination fees	$	—		$	—		$	46,114

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Years ended December 31, 2005 and 2004

Revenues. Substantially all our revenues have come from license fees, research and development support payments, milestone payments and royalty payments from our licensees and collaborators. These revenues fluctuate from year to year. Our revenues were $12.8 million in 2005 compared to $14.2 million in 2004. The decrease in revenues during 2005 as compared to 2004 is due primarily to milestone payments from licensees earned during 2004. During 2004, we received a $10.0 million milestone payment from Amgen Inc. for the approval of their NDA by the FDA for Sensipar^® and we received a $2.0 million milestone payment from Kirin for the commencement of Phase III clinical trials with cinacalcet HCl in Japan. Similar milestones were not earned during 2005. Additionally, during 2005 and 2004, we recognized $12.5 million and $2.2 million, respectively, in royalty revenue from Amgen on the sales of cinacalcet HCl. The increase in royalty revenue is due to an increase in sales of cinacalcet HCl since its launch by Amgen in March 2004 and due to an increase in the royalty rates earned on sales of cinacalcet HCl due to Amgen’s achievement of certain cumulative annual sales thresholds. We recognized revenue from our agreements as follows:

• Under our agreement with Amgen, we recognized revenue of $12.5 million in 2005 and $12.2 million in 2004;

• Under our agreement with Kirin, we recognized no revenue in 2005 and revenue of $2.0 million in 2004; and

• Under our agreement with Nycomed, we recognized revenue of $234,000 in 2005 and no revenue in 2004.

See “Liquidity and Capital Resources” below for further discussion of payments that we may earn in the future under these agreements.

Cost of Royalties. Our cost of royalties consists of royalties owed under our agreement with the Brigham and Women’s Hospital on sales of cinacalcet HCl. We recorded cost of royalties of $1.1 million and $237,000, respectively, during 2005 and 2004.

Research and Development. Our research and development expenses arise primarily from compensation and other related costs of our personnel who are dedicated to research and development activities and from the fees paid and costs reimbursed to outside professionals to conduct research, pre-clinical and clinical trials, and to manufacture drug compounds and related supplies prior to FDA approval. Our research and development expenses decreased to $117.4 million in 2005 from $143.1 million in 2004. Research and development expenses decreased from 2004 to 2005 principally due to a $18.4 million decrease in the costs of advancing our PREOS^® clinical program, a $10.4 million decrease in the development costs of advancing our teduglutide clinical program, and a $2.0 million decrease in the development costs of our central nervous system programs offset by a $2.5 million increase in costs associated with the manufacture of clinical and commercial supplies of PREOS^® and teduglutide, including amounts paid and due to a contract manufacturer for reservation fees in accordance with an agreement we signed for “fill and finish” production of clinical and commercial supplies of PREOS^®.

Selling, General and Administrative. Our selling, general and administrative expenses consist primarily of the costs of our management and administrative staff, business insurance, property taxes, professional fees and market research and promotion activities, including the cost of our sales force, for our marketed products and product candidates. Our selling, general and administrative expenses increased to $48.6 million in 2005 from $34.4 million in 2004. The increase in selling, general and administrative expenses from 2004 to 2005 is due primarily to a $10.7 million increase in costs related to market research, educational and commercial activities, including personnel costs, associated with PREOS^® and our promotional activities around Kineret^® and Restasis^®, and a $3.5 million increase in other selling, general and administrative costs associated with the overall growth of the Company and the establishment of commercial headquarters in Parsippany, New Jersey, including increased facilities costs of $1.6 million, corporate administration expenses of $2.6 million, information technology costs of $1.3 million, offset by decrease in legal expenses of $2.5 million.

Amortization of Purchased Intangibles. Purchased intangibles originated with our December 1999 acquisition of Allelix. As of December 31, 2004, purchased intangible assets associated with the acquisition of Allelix were fully amortized. Our amortization of purchased intangibles was $1.6 million in 2004.

Total Other Income (Expense), Net. Our total other expense, net, increased from $1.6 million in 2004 to $15.4 million in 2005. The increase in total other expense, net, from 2004 to 2005 is primarily the result of recording interest expense of $18.1 million in 2005 compared with $401,000 in 2004 on our $175.0 million Secured Notes which were issued in December 2004. Additionally, interest income increased by $3.4 million from 2004 to 2005, primarily the result of higher average cash, cash equivalents, and marketable investment securities balances throughout 2005. Average balances of cash, cash equivalent and marketable investment securities during the year ended December 31, 2005 increased as a result of issuing our $175.0 million Secured 8.0 percent Notes in December 2004 and completing a $78.7 million, net, secondary equity offering in September 2005.

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Income Taxes. Our income tax benefit was $55,000 in 2005 compared to income tax expense of $1.6 million in 2004. The income tax benefit recorded in 2005 relates to our estimates of refundable tax credits from the Canadian province of Quebec for research and development activities performed. The income tax expense recorded in 2004 is primarily the result of a tax audit performed by the Canadian province of Quebec in which it was determined that certain research and development activities performed by us were not eligible to receive previously refunded Quebec Research and Development Wage tax credits from which we recorded income tax expense of $1.4 million. Additionally, we made a $200,000 income tax payment to a foreign jurisdiction in 2004 upon receipt of a milestone payment from a licensee.

As of December 31, 2005, we had a United States federal and state income tax net operating loss carryforward of approximately $235.0 million and $239.2 million, respectively, and a United States federal income tax research credit carryforward of approximately $6.7 million. We also had a Canadian federal and provincial income tax net operating loss carryforward of approximately $485.1 million and $505.5 million, respectively, a Canadian research pool carryforward of approximately $189.1 million and a Canadian investment tax credit carryforward of approximately $25.3 million. Our ability to utilize the United States operating loss and credit carryforwards against future taxable income will be subject to annual limitations in future periods pursuant to the “change in ownership rules” under Section 382 of the Internal Revenue Code of 1986.

Years ended December 31, 2004 and 2003

Revenues. Our revenues were $14.2 million in 2004 compared to $9.9 million in 2003. The increase in revenues from 2003 to 2004 is primarily the result of a $10.0 million milestone payment we received from Amgen Inc. for the approval of their NDA by the FDA for cinacalcet HCl in March 2004 and a $2.0 million milestone payment we received from Kirin Brewery Company, Ltd. for the commencement of a Phase III clinical trial with cinacalcet HCl in Japan. Additionally, during 2004 we received $2.2 million in royalty revenue from Amgen on the sales of cinacalcet HCl. During 2003 we received a $6.0 million milestone payment from Amgen for the submission of their NDA to the FDA for cinacalcet HCl and a $2.0 million milestone payment from GlaxoSmithKline for the initiation of a clinical study with a new calcilytic compound. Additionally, we recognized $1.5 million in revenue during 2003 as a result of our settled arbitration with Forest Laboratories, Inc. relating to a milestone owed to us. We recognized revenue from our agreements as follows:

• Under our agreement with Amgen, we recognized $12.2 million in 2004 and $6.0 million in 2003;

• Under our terminated agreement with Forest, we recognized no revenue in 2004 and $1.5 million in 2003

• Under our agreement with GlaxoSmithKline, we recognized no revenue in 2004 and $2.2 million in 2003; and

• Under our agreement with Kirin, we recognized $2.0 million in 2004 and no revenue in 2003.

See “Liquidity and Capital Resources” below for further discussion of payments that we may earn in the future under these agreements.

Cost of Royalties. Our cost of royalties consists of royalties owed under our agreement with the Brigham and Women’s Hospital on sales of cinacalcet HCl. We recorded cost of royalties of $237,000 in 2004 and zero in 2003 as cinacalcet HCl was not approved by the FDA until March 2004.

Research and Development. Our research and development expenses increased to $143.1 million in 2004 from $118.2 million in 2003. Research and development expenses increased from 2003 to 2004 principally due to a $5.2 million increase in the development costs of advancing our teduglutide clinical program, a $21.8 million increase in costs associated with the manufacture of clinical and commercial supplies of PREOS^® and teduglutide, including amounts paid and due to a contract manufacturer for reservation fees in accordance with an agreement we signed for “fill and finish” production of clinical and commercial supplies of PREOS^® and a $7.0 million increase in the development costs of our central nervous system programs offset by a $11.9 million decrease in the development costs of our PREOS^® clinical program, including personnel related costs.

Selling, General and Administrative. Our selling, general and administrative expenses increased to $34.4 million in 2004 from $20.3 million in 2003. The increase in selling, general and administrative expenses from 2003 to 2004 is due primarily to a $5.1 million increase in costs related to market research, educational, and various other pre-launch marketing activities associated with PREOS^® and teduglutide, $2.0 million in costs related to the internal investigation of the events leading to the execution of the PharmData and DCI contracts and other legal expenses regarding that matter, $850,000 in severance and retirement benefits, and a $6.1 million increase in other selling, general and administrative costs associated with the overall growth of the Company and the establishment of commercial headquarters in Parsippany, New Jersey, including increased finance and accounting costs of $1.5 million, human resource expenses of $1.1 million, information technology costs of $1.3 million, legal expenses of $816,000 and facility expenses of $621,000.

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Amortization of Purchased Intangibles. Our amortization of purchased intangibles of $1.6 million in 2004 was comparable to $1.5 million in 2003.

Merger Costs and Termination Fees. Merger costs and termination fees were zero in 2004. We recorded an expense of $46.1 million for the year ended December 31, 2003 as a result of the termination of our merger with Enzon Pharmaceuticals, Inc., or Enzon, and the termination of our agreement with the Government of Canada pursuant to the Technology Partnerships Canada program, or TPC.

On February 19, 2003 we entered into an Agreement and Plan of Reorganization, or Merger Agreement, with Enzon, which set forth the terms and conditions of the proposed merger of NPS and Enzon. On June 4, 2003, we announced that NPS and Enzon had mutually agreed to terminate the Merger Agreement and other ancillary documents entered into in connection with the Merger Agreement. As part of the agreements to terminate the merger, we paid Enzon a termination fee in the form of a private placement of 1.5 million shares of our common stock valued at $35.6 million based upon the $23.747 per share closing price of our common stock on the Nasdaq National Market on June 4, 2003. A Shelf Registration Statement on Form S-3, providing for the resale of these shares by Enzon was filed with the Securities and Exchange Commission on July 2, 2003. The resale of the shares by Enzon has been registered with the SEC on a Form S-3 Registration Statement. We also incurred direct costs relating to the proposed merger of approximately $4.3 million.

In December 2003, we reached an agreement to mutually terminate our contract with the Government of Canada under its TPC program. As a result, we concluded that it was probable that we would have to repay amounts previously paid by TPC under this agreement and to write off receivables due from TPC. In exchange for mutual releases, we paid $4.3 million to the Government of Canada. Additionally, we released TPC from all outstanding reimbursement obligations, resulting in the write-off of $1.9 million in accounts receivable. We are relieved of any further or continuing obligations related to the development or commercialization of teduglutide. We are continuing our clinical work with this compound for the treatment of various gastrointestinal disorders.

Total Other Income (Expense), Net. Our total other income, net, decreased from $3.3 million in 2003 to total other expense, net, of $1.6 million in 2004. The decrease in total other income, net, from 2003 to 2004 is primarily the result of a recording interest expense of $7.1 million in 2004 compared with $3.7 million in 2003 on our $192.0 million 3.0 percent convertible notes issued June 2003. In addition we recorded $401,000 of interest expense on our $175.0 million Secured 8.0 percent Notes in 2004. Additionally, interest income decreased $751,000, primarily the result of lower average cash, cash equivalents, and marketable investment securities throughout 2004. Average balances of cash, cash equivalent and marketable investment securities during the year ended December 31, 2004 decreased as a result of the need to fund current operations; however, we were able to increase our cash, cash equivalent and marketable investment securities in December 2004 due to the issuance of our $175.0 million Secured 8.0 percent Notes.

Income Taxes. Our income tax benefit decreased from $2.5 million in 2003 to income tax expense of $1.6 million in 2004. The income tax expense recorded in 2004 is primarily the result of a tax audit performed by the Canadian province of Quebec in which it was determined that certain research and development activities performed by us were not eligible to receive previously refunded Quebec Research and Development Wage tax credits from which we recorded income tax expense of $1.4 million. Additionally, we made a $200,000 income tax payment to a foreign jurisdiction in 2004 upon receipt of a milestone payment from a licensee. We recorded an income tax benefit of $2.4 million during 2003 for refundable income tax credits relating to research and development activities in Quebec. The amount recorded in 2003 represented our estimate of amounts we believed were probable of being received and retained by us. Prior to 2003 we were not able to estimate or conclude that it was probable that we would receive and retain amounts related to this credit.

Liquidity and Capital Resources

The following table summarizes selected financial data (amounts in the thousands):

	December 31, 2005			December 31, 2004
Cash, cash equivalents, and marketable securities	$	258,967		$	329,685
Total assets		331,052			397,485
Current debt		1,349			—
Non-current debt		384,599			367,000
Stockholders’ deficit		(97,524	)		(12,789	)

We require cash to fund our operating expenses, to make capital expenditures, acquisitions and investments and to service our debt. We have financed operations since inception primarily through payments received under collaborative research and license agreements, the private and public issuance and sale of equity securities, and the issuance and sale of

40

secured debt and convertible debt. As of December 31, 2005, we had recognized $112.6 million of cumulative revenues from payments for research support, license fees, milestone and royalty payments, $561.5 million from the sale of equity securities for cash, $355.2 million from the sale of secured debt and convertible debt for cash and $19.0 million from the sale of our administration and laboratory building located in Salt Lake City, Utah, in a sale-leaseback transaction. Our principal sources of liquidity are cash, cash equivalents, and marketable investment securities, which totaled $259.0 million at December 31, 2005. The primary objectives for our marketable investment security portfolio are liquidity and safety of principal. Investments are intended to achieve the highest rate of return to us, consistent with these two objectives. Our investment policy limits investments to certain types of instruments issued by institutions with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer.

In December 2005, we completed a sale-leaseback transaction with BioMed Realty, L.P., a Maryland limited partnership, in which we agreed to sell our 93,000 square foot laboratory and office building located in Salt Lake City, Utah for $19.0 million and lease back the property under a 15-year lease with BMR – 383 Colorow Drive LLC, a subsidiary of BioMed Realty. Net proceeds from the sale were $19.0 million after deducting miscellaneous closing expenses. Under the terms of the lease we will pay a base rent of $158,000 per month for the first three years of the lease. After year three, our rent increases at the rate of 2.75% per year for the remainder of the lease. The lease is a triple-net lease and, as a result, we will continue to pay all costs associated with the building, including costs for maintenance and repairs, property taxes, insurance, and lease payments under the ground lease with the University of Utah. Under the terms of the sale, we assigned the 40-year ground lease with the University of Utah to BioMed Realty. Upon the expiration of the lease term, we have the right to (i) extend the lease for two separate five year periods, each at the current fair-market-rental value of the building, or (ii) purchase the building for 115% of its then fair-market-value.

In October 2005, we entered into an agreement with Allergan to co-promote Restasis^®, an ophthalmic product approved for the treatment of Keratoconjuctivitis sicca, or dry eye. Under the terms of the agreement, Allergan will supply product, promotional materials, sales training and other support. We are required to promote Restasis^® to rheumatologists in the United States with a minimum number of sales representatives, make a minimum number of sales calls during the term of the agreement and spend a minimum annual amount on promotional expenses. If we achieve certain annual sales objectives, we will receive a percentage of the incremental sales of Restasis^® generated through our promotional activities. Under the terms of the agreement, we recognized $23,000 in revenue during 2005. We may also receive a percentage of Allergan’s sales of Restasis^® to rheumatologists in the United States after the expiration of the term for a period of three years, provided that we agree to renew the term of the agreement and that the agreement is not terminated due to our material breach or by us prior to the end of the term as described below. The agreement has a four-year term, which may be extended for an additional one-year period upon the mutual consent of the parties. Either party may terminate the agreement should the other party commit a material breach that is not cured within 60 days of written notice of the breach. The agreement may also be terminated immediately on the occurrence of certain other customary events. We may also terminate the agreement at the end of 2007 if we fail to achieve a certain annual sales objectives during both the 2006 and 2007 calendar years under the agreement. Upon termination of the agreement all rights granted to NPS under the agreement will revert back to Allergan.

In September 2005, we completed a public offering of 7.0 million shares of our common stock at $11.35 per share, with net proceeds of approximately $78.7 million, after deducting offering costs of $797,000.

In December 2004, we completed a private placement of $175.0 million in Secured 8.0% Notes due March 30, 2017, or Secured Notes. The Company received net proceeds from the issuance of the Secured Notes of approximately $169.3 million, after deducting costs associated with the offering. The Secured Notes accrue interest at an annual rate of 8.0% payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year. The Secured Notes are secured by certain royalty and related rights under our agreement with Amgen. Additionally, the only source for interest payments and principal repayment of the Secured Notes is limited to royalty and milestone payments received from Amgen plus any amounts available in the restricted cash reserve account and earnings thereon as described later. All payments received by us from Amgen will be applied to the payment of interest and principal on the Secured Notes until such notes are paid in full. The Secured Notes are non-recourse to NPS Pharmaceuticals, Inc. Payments of principal will be made on March 30 of each year, commencing March 30, 2006, to the extent there is sufficient revenue available for such principal payment. In connection with the issuance of the Secured Notes, we were required to place $14.2 million of the Secured Notes proceeds into a restricted cash reserve account to pay any shortfall of interest payments through December 30, 2006. As of December 30, 2005, we had $8.4 million remaining in the restricted cash reserve account. Any remaining amount in the restricted cash reserve account after December 30, 2006 will be available to repay principal. In the event we receive royalty and milestone payments under our agreement with Amgen above certain specified amounts, a redemption premium on principal repayment will be owed. The redemption premium ranges from 0% to 41.5% of principal payments, depending on the annual net sales of cinacalcet HCl by Amgen. The Company may repurchase, in whole but not in part, the Secured Notes on any Payment Date at a premium ranging from 0% to 41.5% of outstanding principal, depending on the preceding four quarters’ sales of Sensipar^® by Amgen. We are accruing the estimated redemption premiums over the estimated life of the debt of six years

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using the “effective interest-rate” method. Accrued interest in the notes was approximately $3.0 million as of December 31, 2005 which represents our estimate of the redemption premium. We incurred debt issuance costs of $5.7 million, which are also being amortized using the “effective interest-rate” method. The effective interest rate on the Secured Notes, including debt issuance costs and estimated redemption premiums, is approximately 10.3%.

In August 2004, we entered into an agreement with Amgen to promote Kineret^®, a biologic therapy for the treatment of moderate to severe rheumatoid arthritis, in the United States. Under the terms of the agreement, Amgen is required to supply product, promotional materials, training and support to us in our promotional efforts. We are required to promote Kineret with a minimum number of sales representatives during the term of the agreement. We began promoting Kineret in March 2005. We will receive a percentage of incremental Kineret revenues above specified baseline amounts. During 2005, we did not recognize any revenue under the terms of this agreement. We have agreed with Amgen to end our promotion of Kineret^® effective March 31, 2006.

In April 2004, we signed a distribution and license agreement with Nycomed Danmark ApS, or Nycomed, in which we granted Nycomed the exclusive right to develop and market PREOS^® in Europe. Nycomed also agreed to make an equity investment in NPS of $40.0 million through the purchase of 1.33 million shares of NPS common stock in the form of a private placement. We closed on the equity investment on July 7, 2004. The agreement also requires Nycomed to pay us up to $25.0 million in milestone payments upon regulatory approvals and achievement of certain sales targets and to pay us royalties on product sales. To date, we have received $2.1 million in milestone payments from Nycomed. Nycomed has also committed to participate in fifty percent of the costs incurred in the conduct of certain Phase IIIb clinical trials up to a maximum contribution of $12.5 million and to expend at least $12.5 million in the conduct of certain Phase IV clinical studies. Under the terms of the agreement, we recognized revenue in 2005 and 2004 of $234,000 and zero, respectively.

In July 2003, we completed a private placement of $192.0 million of our 3.0 % Convertible Notes due June 15, 2008, or Convertible Notes. Interest is payable semi annually in arrears on June 15 and December 15 of each year beginning December 15, 2003. Accrued interest on the Convertible Notes was approximately $256,000 as of December 31, 2005. The holders may convert all or a portion of the Convertible Notes into common stock at any time on or before June 15, 2008. The Convertible Notes are convertible into our common stock at a conversion rate equal to approximately $36.59 per share, subject to adjustment in certain events. The Convertible Notes are unsecured senior debt obligations and rank equally in right of payment with all existing and future unsecured senior indebtedness. On or after June 20, 2006, we may redeem any or all of the Convertible Notes at a redemption price of 100 percent of their principal amount, plus accrued and unpaid interest to the day preceding the redemption date. The Convertible Notes will mature on June 15, 2008 unless earlier converted, redeemed at our option or redeemed at the option of the noteholder upon a fundamental change, as described in the Convertible Note indenture. Neither we nor any of our subsidiaries are subject to any financial covenants under the indenture. In addition, neither we nor any of our subsidiaries are restricted under the indenture from paying dividends, incurring debt, or issuing or repurchasing our securities.

The following table summarizes our cash flow activity for the years ended December 31, 2005, 2004 and 2003 (amounts in thousands):

	2005			2004			2003
Net cash used in operating activities	$	(161,414	)	$	(148,117	)	$	(117,502	)
Net cash provided by (used in) investing activities		(22,468	)		92,128			(92,586	)
Net cash provided by financing activities		104,761			192,974			189,246

Net cash used in operating activities was $161.4 million in 2005 compared to $148.1 million in 2004 and $117.5 million in 2003. The increase in cash used in operating activities during 2005 compared to 2004 is primarily a result of increased accounts receivable balances and decreased accounts payable, accrued liabilities and accrued taxes payable balances, compared with the same period in the prior year. The net loss increased $1.5 million during 2005 compared to 2004 due primarily to less revenues recognized under license agreements, increased marketing expenses associated with PREOS^®, increased sales and marketing expenses associated with the promotion of Kineret^® and Restasis^®, and increased interest expense associated with our Secured Notes that were issued in December 2004 offset by decreases in research and development expenses for our clinical programs during 2005. Additionally, our accounts receivable balances increased during 2005 relating primarily to amounts owed by Amgen for cinacalcet HCl sales. The increase in cash used in operating activities during 2004 as compared with 2003 is primarily the result of increased research and development expenses associated with our teduglutide and isovaleramide clinical development programs and increased marketing expenses associated with PREOS^® as well as commercial activities associated with Kineret^®.

Net cash used in investing activities was $22.5 million in 2005 compared to net cash provided by investing activities of $92.1 million in 2004 compared to cash used in investing activities of $92.6 million in 2003. Net cash used in investing activities in 2005 was primarily the result of investing the net proceeds from our Secured Notes as well as investing the

42

proceeds from our equity offering that was completed in September 2005. Net cash provided by investing activities in 2004, was primarily the result of selling marketable investment securities to fund current operations. Net cash used in investing activities in 2003 was primarily the result of investing the net proceeds from our Convertible Notes. Additionally, capital expenditures were $10.3 million, $17.5 million and $1.8 million, respectively, in 2005, 2004 and in 2003. Capital expenditures during 2005 relate primarily to the construction of leasehold improvements on laboratory and administrative space in the MaRS Discovery District in Toronto, Canada, while capital expenditures during 2004 related primarily to the construction of a new administrative office and scientific laboratory building located in Research Park of the University of Utah in Salt Lake City, Utah.

Net cash provided by financing activities was $104.8 million, $193.0 million and $189.2 million, respectively, during 2005, 2004 and 2003. Cash provided by financing activities in 2005, primarily relates to net proceeds of $78.7 million from the sale of 7.0 million shares of NPS common stock, net proceeds of $19.0 million from the sale of our administrative office and laboratory building located in Salt Lake City, Utah and the use of restricted cash and cash equivalents to fund the interest expense shortfall on our Secured Notes. Cash provided by financing activities in 2004 was primarily the result of net proceeds of $39.9 million received from the sale of 1.33 million shares of NPS common stock to Nycomed and net proceeds of $169.3 million from the issuance of the Secured Notes less restricted cash of $14.2 million relating to the interest reserve on the Secured Notes and $5.2 million relating to a manufacturing contract. Cash provided by financing activities in 2003 is primarily the result of net proceeds of $185.9 million from the issuance of the Convertible Notes. We also received cash from the exercise of employee stock options and proceeds from the sale of stock by us pursuant to the employee stock purchase plan. Employee stock option exercises and proceeds from the sale of stock by us pursuant to the employee stock purchase plan provided $2.3 million, $3.1 million and $3.4 million, respectively, of cash during 2005, 2004 and 2003. Proceeds from the exercise of employee stock options vary from period to period based upon, among other factors, fluctuations in the market value of NPS’s stock relative to the exercise price of such options.

We could receive future milestone payments of up to $95.1 million in the aggregate if each of our current licensees accomplishes the specified research and/or development milestones provided in the respective agreements. In addition, all of the agreements require the licensees to make royalty payments to us if they sell products covered by the terms of our license agreements. However, we do not control the subject matter, timing or resources applied by our licensees to their development programs. Thus, potential receipt of milestone and royalty payments from these licensees is largely beyond our control. Some of the late-stage development milestone payments from AstraZeneca will not be due if we elect a co-promotion option under which we may commercialize products. Further, each of these agreements may be terminated before its scheduled expiration date by the respective licensee either for any reason or under certain conditions.

We have entered into certain research and license agreements that require us to make research support payments to academic or research institutions when the research is performed. Additional payments may be required upon the accomplishment of research milestones by the institutions or as license fees or royalties to maintain the licenses. As of December 31, 2005, we have a total commitment of up to $1.4 million for future research support and milestone payments. Further, depending on the commercial success of certain of our products, we may be required to pay license fees or royalties. For example, we are required to make royalty payments to certain licensors on teduglutide net sales and cinacalcet HCl royalty revenues. We expect to enter into additional sponsored research and license agreements in the future.

Under our agreement with AstraZeneca, we are required to co-direct the research and pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel through March 2009 unless earlier terminated by AstraZeneca or us upon six months advance written notice. Additionally, we have entered into long-term agreements with certain manufacturers, contract research organizations, and suppliers that require us to make contractual payment to these organizations. We expect to enter into additional collaborative research, contract research, manufacturing, and supplier agreements in the future, which may require up-front payments and long-term commitments of cash.

The following represents the contractual obligations of the Company as of December 31, 2005 (in millions):

Contractual Obligations	Total		Less than 1 year		2-3 years		4-5 years		More than 5 years
Operating Leases	$	11.8	$	1.2	$	3.0	$	2.1	$	5.5
Purchase Commitments (1)		54.6		34.0		18.1		0.4		2.1
Convertible Notes Payable		192.0		—		192.0		—		—
Interest on Convertible Notes Payable		14.4		5.8		8.6		—		—
Secured Notes Payable (2)		175.0		1.2		36.0		87.6		50.2
Interest on Secured Notes Payable (2)		71.5		14.5		36.1		16.3		4.6
Lease Financing Obligation		5.7		0.1		—		—		5.6
Interest on Lease Financing Obligation		27.3		1.8		3.8		3.9		17.8
Royalty payment obligation		13.5		1.0		2.0		2.0		8.5

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(1) Purchase obligations primarily represent commitments for services ($22.0 million), manufacturing agreements ($19.0 million) and other research and purchase commitments ($10.5 million).

(2) Amounts shown as contractual commitments under our Secured Notes payable represent our estimate of expected principal repayment based on anticipated cinacalcet HCl royalty income. Additionally amounts shown in interest on Secured Notes include our expected premium redemption payment based on cinacalcet HCl royalty income levels.

In September 2005, we completed construction of leasehold improvements on approximately 58,000 square feet of laboratory, support and administrative space in the MaRS Discovery District in downtown Toronto, Ontario. Leasehold improvement costs were approximately $8.5 million. In January 2005, we completed the construction of a 90,000 square foot building consisting of administrative offices and scientific laboratories in Research Park of the University of Utah in Salt Lake City, Utah. Construction costs were approximately $15.0 million. In December 2005, we completed a sale-leaseback on this facility which resulted in net proceeds of $19.0 million.

We expect that our existing capital resources including interest earned thereon, will be sufficient to allow us to maintain our current and planned operations through the next 12 months. However, our actual needs will depend on numerous factors, including the progress and scope of our internally funded research, development and commercialization activities; our ability to comply with the terms of our research funding agreements; our ability to maintain existing collaborations; our decision to seek additional collaborators; the success of our collaborators in developing and marketing products under their respective collaborations with us; our success in producing clinical and commercial supplies of our product candidates on a timely basis sufficient to meet the needs of our clinical trials and commercial launch; the costs we incur in obtaining and enforcing patent and other proprietary rights or gaining the freedom to operate under the patents of others; and our success in acquiring and integrating complementary products, technologies or businesses. Our clinical trials may be modified or terminated for several reasons including the risk that our product candidates will demonstrate safety concerns; the risk that regulatory authorities may not approve our product candidates for further development or may require additional or expanded clinical trials to be performed; and the risk that our manufacturers may not be able to supply sufficient quantities of our drug candidates to support our clinical trials or commercial launch, which could lead to a disruption or cessation of the clinical trials or commercial activities. If any of the events that pose these risks comes to fruition, we may have to substantially modify or terminate current and planned clinical trials, our business may be materially harmed, our stock price may be adversely affected, and our ability to raise additional capital may be impaired.

We may need to raise substantial additional funds to support our long-term research, product development, and commercialization programs. We regularly consider various fund raising alternatives, including, for example, partnering of existing programs, monetizing of potential revenue streams, debt or equity financing and merger and acquisition alternatives. We may also seek additional funding through strategic alliances, collaborations, or license agreements and other financing mechanisms. There can be no assurance that additional financing will be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research and development programs, or to obtain funds through arrangements with licensees or others that may require us to relinquish rights to certain of our technologies or product candidates that we may otherwise seek to develop or commercialize on our own.

Critical Accounting Policies and Estimates

Our discussion and analysis of our consolidated financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue and research and development costs. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect the significant judgments and estimates used in the preparation of our consolidated financial statements:

• revenue recognition;

• accrual of research an development expenses; and

• valuation of long-lived and intangible assets and goodwill.

Revenue Recognition. We earn our revenue from research and development support payments, license fees, milestone payments and royalty payments. As described below, significant management judgment and estimates must be made and used in connection with the revenue recognized in any accounting period. Material differences may result in the amount and timing of our revenue for any period if our management made different judgments or utilized different estimates.

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We apply the provisions of Staff Accounting Bulletin No. 104, Revenue Recognition, or SAB No. 104, to all of our revenue transactions and Emerging Issues Task Force, or EITF, Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, to all revenue transactions entered into in fiscal periods beginning after June 15, 2003. We recognize revenue from our research and development support agreements as related research and development costs are incurred and the services are performed. The terms and conditions of our research and development support agreements are such that revenues are earned as the related costs are incurred. The principal costs under these agreements are for personnel employed to conduct research and development under these agreements. We recognize revenue from milestone payments as agreed upon events representing the achievement of substantive steps in the development process are achieved and where the amount of the milestone payment approximates the value of achieving the milestone. We recognize revenue from up-front nonrefundable license fees on a straight-line basis over the period we have continuing involvement in the research and development project. Royalties from licensees are based on third-party sales of licensed products and are recorded in accordance with the contract terms when third-party results are reliably measurable and collectability is reasonably assured. Cash received in advance of the performance of the related research and development support and for nonrefundable license fees when we have continuing involvement is recorded as deferred income. Where questions arise about contract interpretation, contract performance, or possible breach, we continue to recognize revenue unless we determine that such circumstances are material and/or that payment is not probable.

We analyze our arrangements entered into after June 15, 2003 to determine whether the elements can be separated and accounted for individually or as a single unit of accounting in accordance with EITF No. 00-21. Allocation of revenue to individual elements which qualify for separate accounting is based on the estimated fair value of the respective elements.

Accrual of Research and Development Expenses. Research and development costs are expensed as incurred and include salaries and benefits; costs paid to third-party contractors to perform research, conduct clinical trials, develop and manufacture drug materials and delivery devices; and associated overhead expenses and facilities costs. Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors. Invoicing from third-party contractors for services performed can lag several months. We accrue the costs of services rendered in connection with third-party contractor activities based on our estimate of management fees, site management and monitoring costs and data management costs. Differences between actual clinical trial costs from estimated clinical trial costs have not been material and are adjusted for in the period in which they become known.

Valuation of Long-lived and Intangible Assets and Goodwill. We assess the impairment of long-lived assets and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

• significant underperformance relative to expected historical or projected future operating results;

• significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

• significant negative industry or economic trends;

• significant decline in our stock price for a sustained period; and

• our market capitalization relative to net book value.

Our balance sheet reflects net long-lived assets of $50.2 million, including net goodwill of $9.3 million as of December 31, 2005.

When we determine that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. As of December 31, 2005, we have not determined the existence of any indication of impairment sufficient to require us to adjust our historical measure of value of such assets.

In 2002, we ceased amortizing goodwill. In lieu of amortization, we perform an annual impairment review of goodwill. We have not determined the existence of any indication of impairment sufficient to require us to adjust our historical measure of the value of such assets.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standard, or SFAS No. 123R, Share Based Payment, or SFAS No. 123R which is a revision to SFAS No. 123 Accounting for Stock-Based Compensation. SFAS No. 123R supersedes Accounting Principals Board Opinion No. 25, or APB No. 25, and

45

its related implementation guidance. SFAS No. 123R requires that compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. In April 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107, or SAB No. 107, delaying the required implementation of SFAS No. 123R. Under SAB No. 107, SFAS No. 123R will be effective for us beginning with our first quarter of 2006.

As permitted by SFAS No. 123, we currently account for share-based payments to employees using the APB No. 25 intrinsic value method and, therefore we generally recognize no compensation cost for employee stock options. The adoption of SFAS No. 123R will have a significant impact on our consolidated results of operations, although it is not expected to have any impact on our overall consolidated financial position. The precise impact of the adoption of SFAS No. 123R cannot be predicted at this time as it will depend in part on levels of share-based payments granted in the future. However, had SFAS No. 123R been adopted in prior periods, the impact would have approximated the impact of SFAS No. 123, which is presented in the pro forma financial results described in Note 1(g) to the consolidated financial statements. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under the current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the adoption. We cannot estimate what those amounts will be in the future because they depend on, among other things, when employees exercise stock options.

SFAS No. 123R allows companies to choose one of three transition methods: the modified prospective transition method without restatement, modified prospective transition method with restatement, or modified retroactive transition method. We have chosen to use the modified prospective transition methodology without restatement.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (SFAS No. 154). SFAS No. 154, which replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, which requires that a voluntary change in accounting principle be applied retrospectively to all prior period financial statements presented, unless it is impracticable to do so. SFAS No. 154 also provides that a change in method of depreciating or amortizing a long-lived non financial asset be accounted for as a change in estimate effected by a change in accounting principle, and also provides that correction of errors in previously issued financial statements should be termed a “restatement”. SFAS No. 154 is effective for fiscal years beginning December 15, 2005. We do not believe the adoption of SFAS No. 154 will have a material impact on the condensed consolidated financial position, results of operations or cash flows.

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

Interest Rate Risk. Our interest rate risk exposure results from our investment portfolio, our convertible notes, our secured notes and our lease obligation. Our primary objectives in managing our investment portfolio are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. The securities we hold in our investment portfolio are subject to interest rate risk. At any time, sharp changes in interest rates can affect the fair value of the investment portfolio and its interest earnings. After a review of our marketable investment securities, we believe that in the event of a hypothetical ten percent increase in interest rates, the resulting decrease in fair market value of our marketable investment securities would be insignificant to the financial statements. Currently, we do not hedge these interest rate exposures. We have established policies and procedures to manage exposure to fluctuations in interest rates. We place our investments with high quality issuers and limit the amount of credit exposure to any one issuer and do not use derivative financial instruments in our investment portfolio. We invest in highly liquid, investment-grade securities and money market funds of various issues, types and maturities. These securities are classified as available for sale and, consequently, are recorded on the balance sheet at fair value with unrealized gains or losses reported as accumulated other comprehensive income as a separate component in stockholders’ equity (deficit). Our 3.0 percent Convertible Notes in the principal amount of $192.0 million due June 15, 2008, our 8.0 percent Secured Notes in the principal amount of $175.0 million and our $19.0 million lease obligation each have a fixed interest rate. The fair value of the Convertible Notes is affected by changes in the interest rates and by changes in the price of our common stock. The fair value of the Secured Notes is affected by changes in the interest rates and by historical rates of royalty revenues from cinacalcet HCl sales. The fair value of the lease obligation is affected by changes in the interest rates and by changes in the value of real estate and lease rates in Salt Lake City, Utah.

Foreign Currency Risk. We have research and development operations in Canada. Additionally, we have significant clinical and commercial manufacturing agreements which are denominated in Euro dollars. As a result, our financial results could be affected by factors such as a change in the foreign currency exchange rate between the U.S. dollar and the Canadian dollar or Euro dollar, or by weak economic conditions in Canada or Europe. When the U.S. dollar strengthens against the Canadian dollar or Euro dollar, the cost of expenses in Canada or Europe decreases. When the U.S. dollar weakens against the Canadian dollar or Euro dollar, the cost of expenses in Canada or Europe increases. The monetary assets and liabilities in

46

our foreign subsidiary which are impacted by the foreign currency fluctuations are cash, accounts receivable, accounts payable, and certain accrued liabilities. A hypothetical ten percent increase or decrease in the exchange rate between the U.S. dollar and the Canadian dollar or Euro dollar from the December 31, 2005 rate would cause the fair value of such monetary assets and liabilities in our foreign subsidiary to change by an insignificant amount. We are not currently engaged in any foreign currency hedging activities.

ITEM 8. Financial Statements and Supplementary Data.

Financial statements and notes thereto appear on pages F-1 to F-29 of this Form 10-K Annual Report.

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

None.

ITEM 9A. Controls and Procedures.

We maintain “disclosure controls and procedures” within the meaning of Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures, or Disclosure Controls, are designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our Disclosure Controls, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures.

Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this Annual Report on Form 10-K, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, which was done under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Immediately following the Signatures section of this Annual Report of Form 10-K are certifications of our Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Exchange Act. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented. Based on the controls evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the date of their evaluation, our Disclosure Controls and Procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act is made known to management, including our Chief Executive Officer and Chief Financial Officer and that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms

Change in Internal Control over Financial Reporting. No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to material affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. 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 internal control over financial reporting as of December 31, 2005. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment we believe that, as of December 31, 2005, our internal control over financial reporting is effective based on those criteria.

KPMG LLP, our independent registered public accounting firm, has issued an audit report on management’s assessment of the Company’s internal control over financial reporting. This report appears on page F-3 of this report.

47

Attestation Report of the Registered Public Accounting Firm. KPMG LLP’s report on management’s assessment of the effectiveness of our internal control over financial reporting is included on page F-3 of our consolidated financial statements beginning on page F-1 of this report, and is incorporated into this section by reference.

ITEM 9B. Other Information.

None.

PART III

ITEM 10. Directors and Executive Officers of the Registrant.

Certain of the information required by this item will be contained in our definitive Proxy Statement with respect to our Annual Meeting of Stockholders, to be held on May 11, 2006, under the captions “Election of Directors,” and “Compliance with Section 16(a) of the Exchange Act” and “Code of Ethics” and is incorporated into this section by reference. For information regarding executive officers see Part I of this Form 10-K under the caption “Executive Officers of the Registrant.”

ITEM 11. Executive Compensation.

Certain of the information required by this item will be contained in our definitive Proxy Statement with respect to our Annual Meeting of Stockholders, to be held on May 11, 2006, under the captions “Executive Compensation” and except for the information appearing under the captions “Report of the Compensation Committee of the Board of Directors” is incorporated into this section by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management.

Certain of the information required by this item will be contained in our definitive Proxy Statement with respect to our Annual Meeting of Stockholders, to be held on May 11, 2006, under the captions “Security Ownership of Certain Beneficial Owners and Management” and is incorporated into this section by reference.

ITEM 13. Certain Relationships and Related Transactions.

Certain of the information required by this item will be contained in our definitive Proxy Statement with respect to our Annual Meeting of Stockholders, to be held on May 11, 2006, under the captions “Certain Relationships and Related Transactions” and is incorporated into this section by reference.

ITEM 14. Principal Accountant Fees and Services.

Certain of the information required by this item will be contained in our definitive Proxy Statement with respect to our Annual Meeting of Stockholders, to be held on May 11, 2006, under the captions “Principal Accountant Fees and Services” and is incorporated into this section by reference.

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PART IV

ITEM 15. Exhibits and Financial Statement Schedules.

(a) The following documents are filed as part of this Annual Report on Form 10-K.

1. Financial Statements. The consolidated financial statements required by this item are submitted in a separate section beginning on page F-1 of this report.

	Page Number
Table of Contents to Consolidated Financial Statements	F-1
Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-5
Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Income (Loss)	F-6
Consolidated Statements of Cash Flows	F-8
Notes to Consolidated Financial Statements	F-9

2. Financial statement schedules. There are no financial statements schedules included because they are either not applicable or the required information is shown in the consolidated financial statements or the notes thereto.

3. Exhibits.

Exhibit Number	Description of Document
3.1A	Amended and Restated Certificate of Incorporation of the Registrant (21)
3.1B	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant, dated December 16, 1999 (2)
3.1C	Certificate of Designation of Series A Junior Participating Preferred Stock of the Registrant, dated December 18, 1996 (3)
3.1D	Amendment to Certificate of Designation of Series A Junior Participating Preferred Stock of the Registrant, dated September 5, 2000 (2)
3.1E	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant, dated September 30, 2003 (14)
3.2A	Amended and Restated Bylaws of the Registrant (21)
3.2B	Certificate of Adoption of Amendments to the Amended and Restated Bylaws of the Registrant, dated February 19, 2003 (11)
4.1	Specimen Common Stock Certificate (1)
4.2A	Rights Agreement, dated as of December 4, 1996, between the Registrant and American Stock Transfer & Trust, Inc., with Exhibit A, Form of Certificate of Designation of Series A Junior Participating Preferred Stock of the Registrant; Exhibit B, Form of Right Certificate; and Exhibit C, Summary of Rights to Purchase Shares of Preferred Stock of the Registrant (5)
4.2B	First Amendment to the Rights Agreement and Certificate of Compliance with Section 27 thereof, dated December 31, 2001 (5)
4.2C	Second Amendment to the Rights Agreement and Certificate of Compliance with Section 27 thereof, dated February 19, 2003 (5)
4.3	Indenture, dated as of June 17, 2003, between Registrant and U.S. Bank National Association, as Trustee, including the form of 3% Convertible Subordinated Notes due 2008 attached as Exhibit A thereto. (13)
4.4	Composite Indenture, dated as of December 22, 2004, by and between Cinacalcet Royalty Sub LLC, a wholly-owned subsidiary of Registrant, and U.S. National Bank Association, incorporating the amendments provided for in the Supplemental Indenture dated as of February 2, 2005, between the same parties (16)
10.1A	1987 Stock Option Plan and Form of Stock Option Agreement (1)

49

10.1B	1987 Stock Option Plan, as amended December 2002 (11)
10.2A	1994 Equity Incentive Plan and Form of Stock Option Grant Agreement (1)
10.2B	1994 Equity Incentive Plan, as amended December 1996 (6)
10.2C	1994 Equity Incentive Plan, as amended December 2002 (11)
10.3A	1994 Non-Employee Directors’ Stock Option Plan (1)
10.3B	1994 Non-Employee Directors’ Stock Option Plan, as amended December 1996 (6)
10.3C	1994 Non-Employee Directors’ Stock Option Plan, as amended December 2002 (11)
10.4A	1994 Employee Stock Purchase Plan and Form of Offering Document (1)
10.4B	1994 Employee Stock Purchase Plan as amended December 1996, and Form of Offering Document (6)
10.4C	1994 Employee Stock Purchase Plan, as amended December 2002 (11)
10.4D	1994 Employee Stock Purchase Plan, as amended June 2003 (14)
10.4E	1994 Employee Stock Purchase Plan, as amended May 2005 (18)
10.5A	1998 Stock Option Plan (9)
10.5B	1998 Stock Option Plan, as amended December 2002 (11)
10.5C	1998 Stock Option Plan, as amended June 2003 (14)
10.6	Form of Indemnity Agreement entered into between the Registrant and each of its officers and directors (1)
10.7A	Severance Pay Plan (11)
10.7B	Form of Agreement Providing Specified Benefits Following Termination of Employment Incident to a Merger, Acquisition or Other Change of Control or to Some Other Strategic Corporate Event, between the Registrant and each of its executive officers (14)
10.8A	Collaborative Research and License Agreement between the Registrant and SmithKline Beecham Corporation (now GlaxoSmithKline), dated November 1, 1993 (1)
10.8B	Amendment Agreement to Collaborative Research and License Agreement between GlaxoSmithKline, effective June 29, 1995 (8)
10.8C	Amendment Agreement between the Registrant and GlaxoSmithKline, dated October 28, 1996 (3)
10.8D	Amendment Agreement between the Registrant and GlaxoSmithKline, dated October 24, 1997 (9)
10.8E	Amendment Agreement between the Registrant and GlaxoSmithKline, dated October 27, 1997 (9)
10.8F	Amendment to Collaborative Research and License Agreement between the Registrant and GlaxoSmithKline, dated November 26, 1997 (9)
10.8G	Letter, dated January 24, 2000, from SmithKline Beecham to NPS Re: Amendment Agreement to Amend the November 26, 1997 Amendment Agreement to Amend the November 26, 1997 Amendment Agreement (11)
10.8H	Letter, dated May 15, 2000, from SmithKline Beecham to NPS Re: Amendment Agreement (11)
10.8I	Letter, dated August 1, 2001, from GlaxoSmithKline to NPS Re: Amendment Agreement to Amend the January 24, 2000 Amendment Agreement (11)
10.9A	Patent Agreement between the Registrant and The Brigham and Women’s Hospital, Inc., dated February 19, 1993 (1)
10.9B	Letter dated March 15, 1993 from the Registrant to The Brigham and Women’s Hospital, Inc. regarding Patent Agreement between the Registrant and The Brigham and Women’s Hospital, Inc. (11)
10.9C	Amendment to Patent Agreement between the Registrant and The Brigham and Women’s Hospital, Inc., effective February 7, 1996 (10)
10.9D	1999 Patent Agreement Amendment between the Registrant and The Brigham and Women’s Hospital, Inc., effective February 18, 1999 (11)

50

10.10	Collaborative Research and License Agreement between the Registrant and Kirin Brewery Company, Ltd. dated June 29, 1995 (10)
10.11	Development and License Agreement between the Registrant and Amgen Inc. effective as of December 27, 1995 (8)
10.13	Manufacturing Agreement between NPS Allelix Corp. and SynCo Bio Partners B.V., effective as of May 17, 2001 (12)
10.14	Addendum to Manufacturing Agreement between NPS Allelix Corp. and SynCo Bio Partners B.V., effective as of October 26, 2001 (12)
10.15	Lease Agreement between Registrant and University of Utah, effective December 10, 2003 (14)
10.16A	Agreement of Sublease between Registrant and Harrison & Star, Inc. d/b/a Hyphen Solutions, effective November 2003 (14)
10.16B	Extension and Additional Space Agreement between Registrant and Harrison & Star, Inc. d/b/a Hypen Solutions, effective May 2004 (15)
10.17	Lease Agreement between MaRS Discovery District and Registrant, dated April 12, 2004 (15)
10.18A	Distribution and License Agreement between Registrant and Nycomed Danmark ApS, dated April 26, 2004 (15)*
10.18B	First Amendment to Distribution and License Agreement between the Registrant and Nycomed Danmark ApS, dated July 1, 2004 (15)*
10.19	Compensation Agreement (17)
10.20A	2005 Omnibus Incentive Plan (18)
10.20B	Form of Stock Option Grant Agreement under the 2005 Omnibus Incentive Plan (20)
10.21A	Non-Employee Director Deferred Compensation Program (19)
10.21B	Form of Deferred Stock Unit Award Agreement (19)
10.22	Employment Agreement with N. Anthony Coles, M.D
10.23A	Agreement of Purchase and sale between Registrant and Biomed Realty, L.P. dated December 20, 2005
10.23B	Lease Agreement between Registrant and BMR-383 Colorow Drive, LLC dated December 22, 2005
12.1	Computation Ratio of Earnings Available to Cover Fixed Charges
21.1	List of Subsidiaries (21)
23.1	Consent of Independent Registered Public Accounting Firm
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Annual Financial Report by the Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

⁽¹⁾ Incorporated herein by reference to the Registrant’s Registration Statement on Form S-1 filed on January 21, 1994 (SEC File No. 333-74318).

⁽²⁾ Incorporated herein by reference to the Registrant’s Registration Statement on Form S-3 filed on September 6, 2000 (SEC File No. 333-45274, Film No. 717603).

⁽³⁾ Incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated December 19, 1996 (SEC File No. 000-23272, Film No. 96683282).

⁽⁴⁾ Incorporated herein by reference to the Registrant’s Registration Statement on Form 8-A12G/A (SEC File No. 000-23272, Film No. 1826478, filing date December 31, 2001).

⁽⁵⁾ Incorporated herein by reference to the Registrant’s Registration Statement on Form 8-A/A (SEC File No. 000-23272, Film No. 03575669, filing date February 21, 2003).

⁽⁶⁾ Incorporated herein by reference to the Registrant’s Registration Statement on Form S-8 (SEC File No. 333-17521, Film No. 96677983, filing date December 9, 1996).

51

⁽⁷⁾ Incorporated herein by reference to the Registrant’s Definitive Proxy Statement (SEC File No. 000-23272, Film No. 98590984, filing date April 9, 1998).

⁽⁸⁾ Incorporated herein by reference to Amendment No. 1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 29, 1996.

⁽⁹⁾ Incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated January 27, 1998 (SEC File No. 000-23272, Film No. 98513828).

⁽¹⁰⁾ Incorporated herein by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended on December 31, 1995.

⁽¹¹⁾ Incorporated herein by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended on December 31, 2002 (SEC File No. 000-23272, Film No. 03612691, filing date March 21, 2003).

⁽¹²⁾ Incorporated herein by reference to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended on December 31, 2002 (SEC File No. 000-23272, Film No. 03739737, filing date June 11, 2003).

⁽¹³⁾ Incorporated herein by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2003 (SEC File No. 000-23272. Film No. 03838243, filing date August 12, 2003).

⁽¹⁴⁾ Incorporated herein by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (SEC File No. 23272, Film No. 04582125, filing date February 10, 2004).

⁽¹⁵⁾ Incorporated herein by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 (SEC File No. 23272, Film No. 04962020, filing date August 9, 2004).

⁽¹⁶⁾ Incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated February 2, 2005 (SEC File No. 23272, Film No. 05578512, filing date February 7, 2005).

⁽¹⁷⁾ Incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated February 9, 2005 (SEC File No. 23272, Film No. 05587185, filing date February 9, 2005).

⁽¹⁸⁾ Incorporated herein by reference to the Registrant’s Definitive Proxy Statement (SEC File No. 23272, Film No. 05744588, filing date April 11, 2005).

⁽¹⁹⁾ Incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated July 1, 2005 (SEC File No. 23272, Film No. 05933233, filing date July 1, 2005).

⁽²⁰⁾ Incorporated herein by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 (SEC File No. 23272, Film No. 05974685, filing date July 26, 2005).

⁽²¹⁾ Incorporated herein by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (SEC File No. 23272, Film No. 05667287, filing date March 8, 2005).

* Confidential treatment has been granted.

(b) See Exhibits listed under Item 14(a)(3).

(c) The financial statement schedules required by this Item are listed under Item 14(a)(2).

52

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NPS PHARMACEUTICALS, INC.
Date: March 2, 2006	By:	/s/ HUNTER JACKSON
		Hunter Jackson, President and Chief Executive Officer (Principal Executive Officer)
Date: March 2, 2006	By:	/s/ GERARD J. MICHEL
		Gerard J. Michel, Chief Financial Officer (Principal Financial and Accounting Officer)

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

Name	Title	Date
/s/ MICHAEL W. BONNEY Michael W. Bonney	Director	March 2, 2006
/s/ N. ANTHONY COLES N. Anthony Coles	Director	March 2, 2006
/s/ SANTO J. COSTA Santo J. Costa	Director	March 2, 2006
/s/ JOHN R. EVANS John R. Evans	Director	March 2, 2006
/s/ JAMES G. GRONINGER James G. Groninger	Director	March 2, 2006
/s/ HUNTER JACKSON Hunter Jackson	Director	March 2, 2006
/s/ JOSEPH KLEIN, III Joseph Klein, III	Director	March 2, 2006
/s/ DONALD E. KUHLA Donald E. Kuhla	Director	March 2, 2006
/s/ THOMAS N. PARKS Thomas N. Parks	Director	March 2, 2006
/s/ RACHEL R. SELISKER Rachel R. Selisker	Director	March 2, 2006
/s/ CALVIN R. STILLER Calvin R. Stiller	Director	March 2, 2006
/s/ PETER G. TOMBROS Peter G. Tombros	Director	March 2, 2006

53

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Table of Contents

	Page
Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-5
Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Income (Loss)	F-6
Consolidated Statements of Cash Flows	F-8
Notes to Consolidated Financial Statements	F-9

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

NPS Pharmaceuticals, Inc.:

We have audited the accompanying consolidated balance sheets of NPS Pharmaceuticals, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity (deficit) and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NPS Pharmaceuticals, Inc. and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of NPS Pharmaceuticals, Inc. and subsidiaries internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 28, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

Salt Lake City, Utah

February 28, 2006

F-2

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

NPS Pharmaceuticals, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, that NPS Pharmaceuticals, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). NPS Pharmaceuticals, Inc. and subsidiaries’ 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 NPS Pharmaceuticals, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, NPS Pharmaceuticals, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of NPS Pharmaceuticals, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity (deficit) and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2005, and our report dated February 28, 2006 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Salt Lake City, Utah

February 28, 2006

F-3

Item 1. Consolidated Financial Statements.

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2005 and 2004

(In thousands, except share data)

	2005			2004
Assets
Current assets:
Cash and cash equivalents	$	98,712		177,216
Marketable investment securities (note 3)		160,255		152,469
Restricted cash and cash equivalents		6,095		15,052
Accounts receivable		4,281		1,424
Other current assets		3,023		3,330
Total current assets		272,366		349,491
Restricted cash and cash equivalents		8,437		4,385
Plant and equipment:
Land		558		540
Building		16,624		1,562
Equipment		19,926		17,361
Leasehold improvements		11,847		4,769
		48,955		24,232
Less accumulated depreciation and amortization		15,995		13,371
		32,960		10,861
Construction-in-progress		—		13,679
Net plant and equipment		32,960		24,540
Goodwill, net of accumulated amortization of $4,666 and $4,516, respectively (note 4)		9,333		9,031
Debt issuance costs, net of accumulated amortization of $4,270 and $1,908, respectively, (notes 6 and 7)		7,525		9,887
Other assets		431		151
	$	331,052		397,485
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	26,945		29,278
Accrued expenses and other liabilities		5,028		4,970
Accrued research and development expenses		5,137		5,613
Accrued income taxes		—		3,281
Current installments of notes payable and lease financing obligation (notes 7 and 8)		1,349		—
Total current liabilities		38,459		43,142
Notes payable (notes 6 and 7)		365,756		367,000
Lease financing obligation (note 8)		18,843		—
Deferred revenue		2,006		—
Other liabilities		3,512		132
Total liabilities		428,576		410,274
Stockholders’ equity (deficit) (notes 9 and 10):
Preferred stock, $0.001 par value. Authorized 5,000,000 shares; issued and outstanding no shares		—		—
Common stock, $0.001 par value. Authorized 105,000,000 shares; issued and outstanding 46,007,597 shares and 38,771,824 shares, respectively		46		39
Additional paid-in capital		664,042		578,268
Deferred compensation		(3,120	)	(2,527	)
Accumulated other comprehensive income		(2,288	)	(2,088	)
Accumulated deficit		(756,204	)	(586,481	)
Total stockholders’ deficit		(97,524	)	(12,789	)
Commitments and contingencies (notes 2, 5, 6, 7, 8, 10 and 16)
	$	331,052		397,485

See accompanying notes to consolidated financial statements.

F-4

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 2005, 2004, and 2003

(In thousands, except per share data)

	Years ended December 31,
	2005			2004		2003
Revenues from research and license agreements	$	12,825		14,237		9,919
Operating expenses:
Cost of royalties		1,144		237		—
Research and development		117,445		143,099		118,173
Selling, general and administrative		48,635		34,351		20,337
Amortization of purchased intangibles (note 4)		—		1,598		1,485
Merger costs and termination fees (note 14)		—		—		46,114
Total operating expenses		167,224		179,285		186,109
Operating loss		(154,399	)	(165,048	)	(176,190	)
Other income (expense):
Interest income		8,639		5,191		5,942
Interest expense (notes 6, 7 and 8)		(25,119	)	(7,527	)	(3,718	)
Gain (loss) on sale of marketable investment securities		(13	)	78		259
Foreign currency transaction gain		904		486		541
Other		210		202		241
Total other income (expense)		(15,379	)	(1,570	)	3,265
Loss before income tax expense (benefit)		(169,778	)	(166,618	)	(172,925	)
Income tax expense (benefit) (note 11)		(55	)	1,633		(2,530	)
Net loss	$	(169,723	)	(168,251	)	(170,395	)
Basic and diluted net loss per common and potential common share	$	(4.14	)	(4.43	)	(4.71	)
Weighted average common and potential common shares outstanding - basic and diluted		41,036		37,948		36,148

See accompanying notes to consolidated financial statements.

F-5

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Income (Loss)

Years ended December 31, 2005, 2004 and 2003

(In thousands, except share data)

	Preferred stock		Common stock	Additional paid-in capital	Deferred compensation		Accumulated deficit		Comprehensive income (loss)			Accumulated other comprehensive income (loss)		Total stockholders’ equity (deficit)
Balances, December 31, 2002	$	—	35	489,352	(370	)	(247,835	)				1,180		242,362
Issuance of 1,500,000 shares of common stock termination fees (Notes 9 and 14)		—	2	35,619	—		—					—		35,621
Issuance of 419,216 shares of common stock for cash under option plans		—	—	2,795	—		—					—		2,795
Issuance of 19,000 shares of common stock for services		—	—	495	—		—					—		495
Issuance of 32,533 shares of common stock for cash under employee purchase plan		—	—	573	—		—					—		573
Compensation expense on stock option issuances		—	—	1,749	—		—					—		1,749
Deferred compensation, net of current year expense		—	—	3,346	(3,346	)	—					—		—
Gross unrealized losses on marketable securities										(1,015	)
Reclassification for realized gains on marketable securities										(259	)
Net unrealized losses on marketable securities		—	—	—	—		—			(1,274	)	(1,274	)	(1,274	)
Foreign currency translation gain		—	—	—	—		—			859		859		859
Net loss		—	—	—	—		(170,395	)		(170,395	)	—		(170,395	)
Comprehensive loss		—	—	—	—		—		$	(170,810	)	—		—
Balances, December 31, 2003	$	—	37	533,929	(3,716	)	(418,230	)				765		112,785
Issuance of 1,333,333 shares of common stock for cash (note 9)		—	2	39,890	—		—					—		39,892
Issuance of 298,398 shares of common stock for cash under option plans		—	—	2,267	—		—					—		2,267
Issuance of 28,900 shares of common stock for services		—	—	898	(84	)	—					—		814
Issuance of 50,560 shares of common stock for cash under employee purchase plan		—	—	859	—		—					—		859
Compensation expense on stock option issuances		—	—	425	—		—					—		425
Deferred compensation, net of current year expense		—	—	—	1,273		—					—		1,273
Gross unrealized losses on marketable securities										(1,517	)
Reclassification for realized gains on marketable securities										(78	)
Net unrealized losses on marketable securities		—	—	—	—		—			(1,595	)	(1,595	)	(1,595	)
Foreign currency translation loss		—	—	—	—		—			(1,258	)	(1,258	)	(1,258	)
Net loss		—	—	—	—		(168,251	)		(168,251	)	—		(168,251	)
Comprehensive loss		—	—	—	—		—		$	(171,104	)	—		—
Balances, December 31, 2004	$	—	39	578,268	(2,527	)	(586,481	)				(2,088	)	(12,789	)

See accompanying notes to consolidated financial statements.

F-6

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Income (Loss)

Years ended December 31, 2005, 2004 and 2003

(In thousands, except share data)

	Preferred stock		Common stock	Additional paid-in capital	Deferred compensation		Accumulated deficit		Comprehensive income (loss)			Accumulated other comprehensive income (loss)		Total stockholders’ equity (deficit)
Balances, December 31, 2004	$	—	39	578,268	(2,527	)	(586,481	)				(2,088	)	(12,789	)
Issuance of 7,000,000 shares of common stock for cash (note 9)		—	7	78,646	—		—					—		78,653
Issuance of 132,173 shares of common stock for cash under option plans		—	—	1,136	—		—					—		1,136
Issuance of 151,962 shares of deferred stock for services		—	—	1,707	—		—					—		1,707
Issuance of 103,575 shares of common stock for cash under employee purchase plan		—	—	1,151	—		—					—		1,151
Compensation expense on stock option issuances		—	—	1,334	—		—					—		1,334
Deferred compensation, net of current year expense		—	—	1,800	(593	)	—					—		1,207
Gross unrealized losses on marketable securities										(572	)
Reclassification for realized losses on marketable securities										13
Net unrealized losses on marketable investment securities		—	—	—	—		—			(559	)	(559	)	(559	)
Foreign currency translation gain		—	—	—	—		—			359		359		359
Net loss		—	—	—	—		(169,723	)		(169,723	)	—		(169,723	)
Comprehensive loss		—	—	—	—		—		$	(169,923	)	—		—
Balances, December 31, 2005	$	—	46	664,042	(3,120	)	(756,204	)				(2,288	)	(97,524	)

See accompanying notes to consolidated financial statements.

F-7

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2005, 2004 and 2003

(In thousands)

	Years ended December 31,
	2005			2004		2003
Cash flows from operating activities:
Net loss	$	(169,723	)	(168,251	)	(170,395	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		5,921		4,337		3,488
Gain on disposition of equipment, leasehold improvements, and leases		—		—		(24	)
Realized gain (loss) on sale of marketable investment securities		13		(78	)	(259	)
Issuance of common stock, deferred stock units and restricted stock in lieu of cash for services		1,564		1,059		495
Compensation expense on stock options		2,439		1,698		1,749
Issuance of common stock for merger costs and termination fees		—		—		35,621
Write-off of accounts receivable in TPC termination		—		—		1,920
Decrease (increase) in operating assets:
Accounts receivable		(2,849	)	(1,380	)	54
Other current assets and other assets		58		(517	)	791
Increase (decrease) in operating liabilities:
Accounts payable, accrued expenses and other current liabilities and other liabilities		1,377		13,531		7,486
Accrued income taxes		(3,265	)	1,352		1,572
Deferred revenue		2,115		—		—
Other long-term liabilities		936		132		—
Net cash used in operating activities		(161,414	)	(148,117	)	(117,502	)
Cash flows from investing activities:
Sales and maturities of marketable investment securities		223,297		301,644		353,692
Purchase of marketable investment securities		(232,406	)	(192,041	)	(444,490	)
Acquisitions of equipment and leasehold improvements		(13,359	)	(17,475	)	(1,812	)
Proceeds from sale of equipment		—		—		24
Net cash provided by (used in) investing activities		(22,468	)	92,128		(92,586	)
Cash flows from financing activities:
Proceeds from convertible notes		—		—		192,000
Proceeds from issuance of secured notes		—		175,000		—
Proceeds from lease financing obligations		19,000		—		—
Principal payments under lease financing obligations		(52	)	—		—
Payment of debt issuance costs		(32	)	(5,607	)	(6,122	)
Proceeds from issuance of common stock		80,940		43,018		3,368
Increase (decrease) in restricted cash and cash equivalents		4,905		(19,437	)
Net cash provided by financing activities		104,761		192,974		189,246
Effect of exchange rate changes on cash		617		(54	)	479
Net increase (decrease) in cash and cash equivalents		(78,504	)	136,931		(20,363	)
Cash and cash equivalents at beginning of period		177,216		40,285		60,648
Cash and cash equivalents at end of period	$	98,712		177,216		40,285
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	20,591		5,760		2,848
Cash paid (received) for income taxes		3,607		203		(4,213	)
Supplemental Schedule of Noncash Investing and Financing Activities:
Unrealized losses on marketable investment securities	$	(559	)	(1,595	)	(1,274	)
Accrued debt issuance costs		—		65		—
Accrued acquisition of equipment, leasehold improvements and construction-in-progress		477		3,044		—

See accompanying notes to consolidated financial statements.

F-8

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2005, 2004, and 2003

(1) Organization and Summary of Significant Accounting Policies

The consolidated financial statements are comprised of the financial statements of NPS Pharmaceuticals, Inc. and its subsidiaries (NPS), collectively referred to as the Company. The Company is engaged in the discovery, development, and commercialization of pharmaceutical products. Since inception, the Company’s principal activities have been performing research and development, raising capital, establishing research and license agreements, and establishing a marketing and sales organization. All monetary amounts are reported in U.S. dollars unless specified otherwise. During the first quarter of 2004, the Company commenced its principal operations when Sensipar^®, the Company’s first commercial product, received marketing approval by the U.S. Food and Drug Administration (FDA) for the treatment of secondary hyperparathyroidism in chronic kidney disease patients on dialysis and for the treatment of elevated calcium levels in patients with parathyroid carcinoma and is no longer considered a development stage enterprise. The following significant accounting policies are followed by the Company in preparing its consolidated financial statements:

(a) Cash Equivalents

The Company considers all highly liquid investments with maturities at the date of purchase of three months or less to be cash equivalents. Cash equivalents consist of commercial paper, money market funds, and debt securities of approximately $91.1 million and $166.0 million at December 31, 2005 and 2004, respectively. At December 31, 2005 and 2004, the book value of cash equivalents approximates fair value.

Total restricted cash and cash equivalent balances were $14.5 million at December 31, 2005. The restricted amount consists of: 1) $9.6 million restricted for the purpose of paying any shortfall of interest payments on our Secured Notes (see note 7) and is classified as either current ($1.2 million) or long-term ($8.4 million) based on the Company’s estimate of such interest shortfalls and 2) $4.9 million restricted in escrow as security for payments on certain accrued research and development expenses which are classified as current.

(b) Revenue Recognition

The Company earns revenue from research and development support payments, license fees, milestone payments, royalty payments and product sales. The Company recognizes revenue from its research and development support agreements as related research and development costs are incurred and from milestone payments, as agreed-upon events representing the achievement of substantive steps in the development process are achieved and where the amount of the milestone payment approximates the value of achieving the milestone. The Company recognizes revenue from up-front nonrefundable license fees on a straight-line basis over the period wherein the Company has continuing involvement in the research and development project. Royalties from licensees are based on third-party sales of licensed products and are recorded in accordance with contract terms when third-party results are reliably measurable and collectibility is reasonably assured. Cash received in advance of the performance of the related research and development support and for nonrefundable licensee fees the Company has continuing involvement in is recorded as deferred income.

The Company analyzes its arrangements entered into after June 15, 2003 to determine whether the elements should be separated and accounted for individually or as a single unit of accounting in accordance with Emerging Issues Task Force (EITF) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. Allocation of revenue to individual elements which qualify for separate accounting is based on the estimated fair value of the respective elements.

(c) Trade Accounts Receivable

Trade accounts receivable are recorded for research and development support performed; for license fees, milestone payments and royalty income earned; and product sales and do not bear interest. The Company determines the allowance for doubtful accounts based on assessed customers’ ability to pay, historical write-off experience, and economic trends and such allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company reviews its allowance for doubtful accounts monthly. The Company did not record a provision for bad debts in 2005, 2004, or 2003.

F-9

(d) Plant and Equipment

Plant and equipment are stated at cost. Depreciation of plant is calculated on the straight-line method over its estimated useful life of 25 years in Mississauga, Ontario, Canada and 39 years in Salt Lake City, Utah. Depreciation and amortization of equipment are calculated on the straight-line method over their estimated useful lives of 3 to 5 years. Leasehold improvements are amortized using the straight-line method over the shorter of the life of the asset or remainder of the lease term.

(e) Income Taxes

The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating loss, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(f) Loss per Common Share

Basic loss per common share is the amount of loss for the period applicable to each share of common stock outstanding during the reporting period. Diluted loss per common share is the amount of loss for the period applicable to each share of common stock outstanding during the reporting period and to each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the period.

Potential common shares of approximately 11.4 million, 10.3 million and 9.2 million during the years ended December 31, 2005, 2004, and 2003, respectively, that could dilute basic earnings per share in the future were not included in the computation of diluted loss per share because to do so would have been anti-dilutive for the periods presented. Potential dilutive common shares for the years ended December 31, 2005, 2004 and 2003 include approximately 5.2 million common shares related to convertible debentures and 6.2 million, 5.1 million, and 4.0 million shares, respectively, related to stock options, deferred stock units, and restricted stock units.

(g) Stock-Based Compensation

The Company employs the footnote disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, and SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of SFAS No. 123. SFAS No. 123 encourages entities to adopt a fair-value-based method of accounting for stock options or similar equity instruments. However, it also allows an entity to continue measuring compensation cost for stock-based compensation using the intrinsic-value method of accounting prescribed by the Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. The Company has elected to continue to apply the provisions APB Opinion No. 25, under which no compensation cost has been recognized when the exercise price of the option equals the market price of the stock on the date of grant for options granted to employees. The Company generally uses the straight-line method of amortization for stock-based compensation. Had compensation cost for these plans been determined consistent with SFAS No. 123, the Company’s consolidated net loss and net loss per share would have been increased to the following pro forma amounts (in thousands, except per share amounts):

F-10

	2005			2004		2003
Net loss:
As reported	$	(169,723	)	(168,251	)	(170,395	)
Add: Stock-based employee compensation expense included in reported net loss		3,960		1,675		1,716
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards		(16,745	)	(18,074	)	(11,649	)
Pro forma	$	(182,508	)	(184,650	)	(180,328	)
Net loss per share as reported:
Basic and diluted	$	(4.14	)	(4.43	)	(4.71	)
Pro forma:
Basic and diluted	$	(4.45	)	(4.89	)	(4.99	)

Net loss, as reported, also included compensation cost of $2,000, $23,000 and $33,000, respectively, for stock-based compensation awards for nonemployees in 2005, 2004 and 2003.

(h) Use of Estimates

Management of the Company has made estimates and assumptions relating to reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

(i) Marketable Investment Securities

The Company classifies its marketable investment securities as available for sale. Available for sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of stockholders’ equity (deficit) until realized. A decline in the market value below cost that is deemed other than temporary is charged to results of operations resulting in the establishment of a new cost basis for the security. Premiums and discounts are amortized or accreted into the cost basis over the life of the related security as adjustments to yield using the effective-interest method. Interest income is recognized when earned. Realized gains and losses from the sale of marketable investment securities are based on the specific identification method and are included in results of operations and are determined on the specific-identification basis.

(j) Principles of Consolidation

The consolidated financial statements include the accounts of the Company, all subsidiaries in which it owns a majority voting interest including a variable interest entity in which the Company is the primary beneficiary. The Company eliminates all intercompany accounts and transactions in consolidation. The Company reports all monetary amounts in U.S. dollars unless specified otherwise.

(k) Goodwill and Other Purchased Intangibles

Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually. Purchased intangible assets are amortized on a straight-line basis over five years.

(l) Accounting for Impairment of Long-Lived Assets

The Company reviews its long-lived assets, excluding goodwill, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying amount, or fair value, less costs to sell.

F-11

The Company reviews its goodwill for impairment at least annually or more often if an event or circumstance indicates that it is more likely than not that an impairment loss has been incurred. The goodwill impairment test is a two-step test. Goodwill is considered impaired and a loss is recognized when the carrying value of the reporting unit exceeds its fair value and the carrying value of the goodwill exceeds its implied fair value. The Company completed its impairment review of goodwill during 2005, 2004 and 2003 and determined that no impairment charge was required.

(m) Foreign Currency Translation

The local foreign currency is the functional currency for the Company’s foreign subsidiaries. Assets and liabilities of foreign operations are translated to U.S. dollars at the current exchange rates as of the applicable balance sheet date. Revenues and expenses are translated at the average exchange rates prevailing during the period. Adjustments resulting from translation are reported as a separate component of stockholders’ equity (deficit). Certain transactions of the foreign subsidiaries are denominated in currencies other than the functional currency, including transactions with the parent company. Transaction gains and losses are included in other income (expense) for the period in which the transaction occurs. The Company’s subsidiaries operating in Canada had net liabilities of approximately $6.0 million and $10.5 million as of December 31, 2005 and 2004, respectively.

(n) Operating Segments

The Company is engaged in the discovery, development, and commercialization of pharmaceutical products and, in its current state of development, considers its operations to be a single reportable segment. Financial results of this reportable segment are presented in the accompanying consolidated financial statements. The Company’s subsidiaries operating outside of the United States had long-lived assets, including goodwill of approximately $21.3 million and $13.6 million as of December 31, 2005 and 2004, respectively. The Company recognized non-United States revenue of $269,000, $2.0 million and $172,000, respectively, during the years ended December 31, 2005, 2004 and 2003. Substantially all of the Company’s revenues for the years ended December 31, 2005 and 2004 were from two licensees of the Company. The majority of the Company’s revenue for the year ended December 31, 2003 was from one licensee in addition to revenue recorded upon arbitration settlement. The majority of the Company’s accounts receivable as of December 31, 2005 and 2004 was from one licensee.

(o) Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and other gains and losses affecting stockholders’ equity (deficit) that, under accounting principles generally accepted in the United States of America, are excluded from net income (loss). For the Company, these consist of net unrealized gains or losses on marketable investment securities and foreign currency translation gains and losses. Accumulated other comprehensive income as of December 31, 2005 and 2004 consists of accumulated net unrealized losses on marketable investment securities of $888,000 and $329,000, respectively, and foreign currency translation losses of $1.4 million and $1.8 million, respectively.

(p) Concentration of Suppliers

The Company has entered into agreements with contract manufacturers to manufacture clinical and commercial supplies of its product candidates. In some instances, the Company is dependent upon a single supplier. The loss of one of these suppliers could have a material adverse effect upon the Company’s operations.

(q) Leases

The Company leases its facilities under terms of lease agreements which sometimes provide for rent holidays and escalating payments. Rent under operating leases is recognized on a straight-line basis beginning with lease commencement through the end of the lease term. The Company records deferred lease payments in other long-term liabilities.

(r) Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

F-12

(2) Collaborative and License Agreements

The Company is pursuing product development both on an independent basis and in collaboration with others. Because the Company has granted exclusive development, commercialization, and marketing rights to each party (Licensee) under certain of the below-described collaborative research, development, and license agreements, the success of each program is dependent upon the efforts of the Licensee. Each of the respective agreements may be terminated early. If any of the Licensees terminates an agreement, such termination may have a material adverse effect on the Company’s operations. Following is a description of significant current collaborations and license agreements:

(a) Allergan, Inc.

In October 2005, the Company entered into an agreement with Allergan, Inc. (Allergan) to promote Restasis^®, an ophthalmic product approved for the treatment of keratoconjunctivitis sicca, or dry eye, exclusively to rheumatologists in the United States. Under the terms of the agreement, Allergan is required to supply product, promotional materials, training and other support to the Company in its promotional efforts. The Company is required to promote Restasis^® to rheumatologists with a minimum number of sales representatives, make a minimum number of calls during the term of the agreement and spend a minimum annual amount on promotional expenses during the term of the agreement. The Company will receive a percentage of the incremental sales of Restasis^® generated through our promotional activities. The agreement has an initial term of four years, with a one-year extension provision upon the mutual consent of the parties. The Company recognized $23,000 in revenue under the terms of the agreement in 2005.

(b) Amgen Inc.

In August 2004, the Company entered into an agreement with Amgen Inc. (Amgen) to promote Kineret^®, a biologic therapy for the treatment of moderate to severe rheumatoid arthritis, in the United States. Under the terms of the agreement, Amgen is required to supply product, promotional materials, training and support to the Company in its promotional efforts. The Company is required to promote Kineret with a minimum number of sales representatives to commence no later than March 31, 2005. The Company will receive a percentage of incremental Kineret revenues. The Company and Amgen have agreed that the Company will end its promotion of Kineret^® effective March 31, 2006. The Company recognized no revenue under the terms of the agreement in 2005 and 2004.

Effective December 1995, the Company entered into a development and license agreement with Amgen to develop and commercialize compounds for the treatment of hyperparathyroidism and indications other than osteoporosis. Amgen also acquired an equity investment in the Company in 1995. Amgen paid the Company a $10.0 million nonrefundable license fee and agreed to pay up to $400,000 per year through 2000 in development support, potential additional development milestone payments totaling $26.0 million, and royalties on any future product sales. To date, Amgen has paid the Company $19.0 million in milestone payments. Amgen is incurring all costs of developing and commercializing products. Amgen received exclusive worldwide rights excluding Japan, China, Korea, and Taiwan. The Company recognized research and licensing revenue and royalties from product sales of $12.5 million, $12.2 million and $6.0 million in 2005, 2004 and 2003 respectively, under the contract.

(c) AstraZeneca AB

In March 2001, the Company entered into a collaborative effort with AstraZeneca AB (AstraZeneca) to discover, develop, and market new small molecule therapies for the treatment of various disorders of the central nervous system. Under the terms of the agreement, the Company licensed to AstraZeneca its proprietary technology related to protein structures known as metabotropic glutamate receptors (mGluRs). Additionally, the Company granted AstraZeneca exclusive rights to commercialize mGluRs subtype-selective compounds. If certain milestones are met, the Company may receive milestone payments of up to $30.0 million and royalties on sales of products that include those compounds. The Company and AstraZeneca agreed to extend the research term and will continue to work together on the identification of mGluR-active compounds. The Company is required to co-direct the research and pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel, through March 2009 unless terminated earlier by AstraZeneca or the Company upon six months advance written notice. Once compounds have been selected for development, AstraZeneca will conduct and fund product development. The Company has the right to co-promote any resulting product in the United States and Canada and receive co-promotion revenue, if any. Should the Company elect to co-promote products, in some circumstances it will be required to share in the development and regulatory costs associated with those products.

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(d) Eli Lilly and Company and Lilly Canada

In December 1989, Allelix Biopharmaceuticals Inc. (Allelix) entered into a collaborative research and license agreement with Eli Lilly and Company and Lilly Canada (Lilly). Lilly is solely responsible for development, preclinical and clinical testing, and commercialization of any products related to excitatory amino acid receptors under the collaboration, and has an exclusive worldwide license to manufacture and market products developed under the agreement. The Company acquired Allelix in 1999. The Company is entitled to royalties on any sales of products developed under the agreement. The Company recognized no research and licensing revenue under the terms of the agreement in 2005, 2004, and 2003. Lilly is incurring all costs of developing and commercializing products.

(e) GlaxoSmithKline

Effective November 1, 1993, the Company entered into an agreement with GlaxoSmithKline (GSK) to collaborate on the research, development and commercialization of calcium receptor active compounds to treat osteoporosis and other bone metabolism disorders, excluding hyperparathyroidism. GSK also acquired an equity investment in the Company in 1993. Under the terms of the agreement, the Company may receive milestone payments of up to $23.0 million and royalties from any product sales under the license. To date, GSK has paid the Company $12.0 million in milestone payments. The GSK agreement established a three-year research collaboration between the parties, which was extended through October 2002. The Company and GSK agreed to continue the funded research on a month-to-month basis through May 2003. Under the GSK agreement, the Company granted GSK the exclusive license to develop and market worldwide compounds described under the GSK agreement, subject to the Company’s right to co-promote in the United States. Once compounds have been selected for development, GSK has agreed to conduct and fund all development of such products, including all human clinical trials and regulatory submissions. In December 2003, the Company entered into an amendment to the agreement with GSK that permits the Company to conduct its own research and development efforts with compounds not in the same class of compounds being pursued by GSK. Under the amendment, the Company is not permitted to commercialize any compounds deriving from the Company’s research if GSK is commercializing a compound. The Company also granted to GSK a right of first negotiation to acquire a license to such compounds.

Under the GSK agreement, the Company recognized no research and licensing revenue in 2005 and 2004. The Company recognized research and licensing revenue of $2.2 million in 2003. The Company is entitled to receive additional payments upon the achievement of specific development and regulatory milestones. The Company is entitled to receive royalties on sales of such compounds by GSK and a share of the profits from co-promoted products.

(f) Janssen Pharmaceutica N.V.

On October 30, 1998, Allelix entered into a collaborative agreement with Janssen Pharmaceutica N.V. (Janssen), a wholly owned subsidiary of Johnson & Johnson, for the research, development, and marketing of new drugs for neuropsychiatric disorders. Johnson & Johnson Development Corporation also acquired an equity investment in Allelix in 1998. Under the terms of the agreement, the Company may receive total milestone payments of up to $21.5 million, development support through November 2003, and royalties from any product sales under this license. Janssen has the right to market products worldwide, subject to a company option for co-promotion in Canada. Under the Janssen agreement, the Company recognized no research and licensing revenue in 2005, 2004 and 2003. Janssen is incurring all costs of developing and commercializing products.

(g) Kirin Brewery Company, Ltd.

Effective June 30, 1995, the Company entered into a five-year agreement with the pharmaceutical division of Kirin Brewery Company, Ltd. (Kirin), a Japanese company, to develop and commercialize compounds for the treatment of hyperparathyroidism in Japan, China, Korea, and Taiwan. Kirin paid the Company a $5.0 million license fee and agreed to pay up to $7.0 million in research support, potential additional milestone payments totaling $13.0 million and royalties on product sales. Kirin research support payments were $500,000 per quarter through June 1997 and were $250,000 per quarter through June 2000. Kirin is incurring all costs of developing and commercializing products. Any payments subsequent to June 2000 represent milestone and royalty payments. To date, Kirin has paid the Company $9.0 million in milestone payments. Kirin received exclusive rights to develop and sell products within its territory. The parties participate in a collaborative research program

F-14

utilizing the Company’s parathyroid calcium receptor technology. The Company recognized no research and licensing revenue in 2005 and 2003 under the agreement. The Company recognized research and licensing revenue of $2.0 million in 2004.

(h) Nycomed Danmark ApS

In April 2004, the Company signed a distribution and license agreement with Nycomed Danmark ApS (Nycomed) in which the Company granted rights to develop and market PREOS^® in Europe. Nycomed also acquired an equity investment in the Company of $40.0 million through the purchase of 1.33 million shares of the Company’s common stock. The agreement requires Nycomed to pay the Company up to $25.0 million in milestone payments upon regulatory approvals and achievement of certain sales targets and pay the Company royalties on product sales. To date, Nycomed has paid the Company $2.1 million in milestone payments. Nycomed has also committed to participate in fifty percent of the costs incurred in the conduct of certain Phase IIIb clinical trials up to a maximum contribution of $12.5 million and to expend at least $12.5 million in the conduct of certain Phase IV clinical studies. The Company recognized research and licensing revenue of $234,000 in 2005. The Company recognized no research and licensing revenue under the terms of the agreement in 2004.

(i) In-License and Purchase Agreements

The Company has entered into certain sponsored research, license, and purchase agreements that require the Company to make research support and milestone payments to academic or commercial research institutions. During 2005, 2004, and 2003, the Company paid to these institutions $2.6 million, $1.7 million, and $3.9 million, respectively, in sponsored research payments and license fees. As of December 31, 2005, the Company had a total commitment of up to $1.4 million for future research support and milestone payments. Depending on the commercial success of certain products, the Company may be required to pay license fees or royalties. Additionally, the Company is required to pay royalties on sales of cinacalcet HCl up to a cumulative maximum of $15.0 million.

(3) Marketable Investment Securities

Investment securities available for sale as of December 31, 2005 are summarized as follows (in thousands):

	Amortized cost		Gross unrealized holding gains	Gross unrealized holding losses		Fair value
Equity securities:
Common stock	$	1	—	—		1
Debt securities:
Corporate		61,527	7	(158	)	61,376
Municipal		43,450	—	—		43,450
Government agency		56,165	—	(737	)	55,428
	$	161,143	7	(895	)	160,255

Investment securities available for sale as of December 31, 2004 are summarized as follows (in thousands):

	Amortized cost		Gross unrealized holding gains	Gross unrealized holding losses		Fair value
Equity securities:
Common stock	$	1	—	—		1
Debt securities:
Corporate		53,258	201	(103	)	53,356
Municipal		37,279	—	(38	)	37,241
Government agency		62,260	3	(392	)	61,871
	$	152,798	204	(533	)	152,469

F-15

Investment securities available for sale in an unrealized loss position as of December 31, 2005 are summarized as follows (in thousands):

	Less than 12 months			More than 12 months		Total
	Fair value		Unrealized losses	Fair value	Unrealized losses	Fair value	Unrealized losses
Debt securities:
Corporate	$	5,773	73	5,804	85	11,577	158
Government agency		40,991	614	14,437	123	55,428	737
	$	46,764	687	20,241	208	67,005	895

All securities in an unrealized loss position as of December 31, 2005 are debt securities and the decline in fair value is due to interest rate fluctuations.

Maturities of investment securities available for sale are as follows at December 31, 2005 (in thousands):

	Amortized cost		Fair value
Due within one year	$	32,731	32,512
Due after one year through five years		40,761	40,092
Due after five years through ten years		10,100	10,100
Due after ten years		77,550	77,550
Total debt securities		161,142	160,254
Equity securities		1	1
	$	161,143	160,255

(4) Goodwill and Identifiable Intangible Assets

Goodwill. The cost of acquired companies in excess of the fair value of the net assets and purchased intangible assets at acquisition date was recorded as goodwill. As of December 31, 2005, the Company had goodwill of $9.3 million, which is net of $4.7 million in accumulated amortization, from the acquisition of Allelix in December 1999.

Purchased Intangible Assets. Purchased intangible assets consist of patents acquired in our December 1999 acquisition of Allelix and are amortized over a period of five years on a straight-line basis. As of December 31, 2004, purchased intangible assets were fully amortized. Amortization expense associated with purchased intangible assets was zero, $1.6 million, and $1.5 million, respectively, for 2005, 2004, and 2003.

(5) Leases

The Company has noncancelable operating leases for office and laboratory space that expire in 2007 and 2015 and noncancelable operating leases for certain equipment that expire between 2006 and 2009. Rental payments for operating leases was approximately $1.6 million, $2.5 million, and $1.4 million for 2005, 2004, and 2003, respectively. The future lease payments under noncancelable operating leases as of December 31, 2005 are as follows (in thousands):

F-16

	Operating leases
Year ending December 31:
2006	$	1,190
2007		1,964
2008		1,054
2009		1,050
2010		1,053
Thereafter		5,474
Total minimum lease payments	$	11,785

(6) Convertible Notes Payable

In July 2003, the Company completed a private placement of $192.0 million in 3.0% Convertible Notes due June 15, 2008 (Convertible Notes). The Company received net proceeds from these Convertible Notes of approximately $185.9 million, after deducting costs associated with the offering. The Convertible Notes accrue interest at an annual rate of 3.0% payable semiannually in arrears on June 15 and December 15 of each year, beginning December 15, 2003. Accrued interest on the Convertible Notes was approximately $256,000 as of December 31, 2005. The holders may convert all or a portion of the Convertible Notes into common stock at any time on or before June 15, 2008. The Convertible Notes are convertible into common stock at a conversion price of $36.59 per share, subject to adjustment in certain events. The Convertible Notes are unsecured senior debt obligations and rank equally in right of payment with all existing and future unsecured senior indebtedness. On or after June 20, 2006, the Company may redeem any or all of the Convertible Notes at redemption prices of 100% of their principal amount, plus accrued and unpaid interest through the day preceding the redemption date. Upon the occurrence of a “fundamental change,” as defined in the indenture governing the Convertible Notes, holders of the Convertible Notes may require the Company to redeem all or a part of the Convertible Notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest and liquidated damages, if any. The Company has filed a registration statement with the United States Securities and Exchange Commission covering the resale of the Convertible Notes and common stock issuable upon conversion of the Convertible Notes. The Company incurred debt issuance costs of $6.1 million, which are being amortized over a five-year period. The effective interest rate on the Convertible Notes, including debt issuance costs, is 3.6%.

(7) Secured Notes Payable

In December 2004, the Company completed a private placement of $175.0 million in Secured 8.0% Notes due March 30, 2017 (Secured Notes). The Company received net proceeds from the issuance of the Secured Notes of approximately $169.3 million, after deducting costs associated with the offering. The Secured Notes accrue interest at an annual rate of 8.0% payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year (Payment Date), commencing March 30, 2005. The Secured Notes are secured by certain royalty and related rights of the Company under its agreement with Amgen. Additionally, the only source for interest payments and principal repayment of the Secured Notes is limited to royalty and milestone payments received from Amgen plus any amounts available in the restricted cash reserve account and earnings thereon as described later. The Secured Notes are non-recourse to NPS Pharmaceuticals, Inc. Payments of principal will be made on March 30 of each year commencing March 30, 2006, to the extent there is sufficient revenue available for such principal payment. In connection with the issuance of the Secured Notes, the Company was required to place $14.2 million of the Secured Notes proceeds into a restricted cash reserve account to pay any shortfall of interest payments through December 30, 2006. As of December 30, 2005, the Company had $8.4 million remaining in the restricted cash reserve account. Any remaining amount in the restricted cash reserve account after December 30, 2006 will be available to repay principal. In the event the Company receives royalty and milestone payments under its agreement with Amgen above certain specified amounts, a redemption premium on principal repayment will be owed. The redemption premium ranges from 0% to 41.5% of principal payments, depending on the annual net sales of Sensipar by Amgen. The Company may repurchase, in whole but not in part, the Secured Notes on any Payment Date at a premium ranging from 0% to 41.5% of outstanding principal, depending on the preceding four quarters’ sales of Sensipar by Amgen. The Company is accruing the estimated redemption premiums over the estimated life of the debt of six years using the “effective interest-rate” method. Accrued interest on the notes was approximately $3.0 million as of December 31, 2005 which represents the Company’s estimate of the redemption premium. The Company incurred debt issuance costs of $5.7 million, which are also being amortized using the “effective interest-rate” method. The effective interest rate on the Secured Notes, including debt issuance costs and estimated redemption premiums, is approximately 10.3%.

F-17

(8) Lease Financing Obligation

In December 2005, the Company completed a sale-leaseback transaction with BioMed Realty, L.P., a Maryland limited partnership, in which the Company agreed to sell its 93,000 square foot laboratory and office building located in Salt Lake City, Utah for $19.0 million and lease back the property under a 15-year lease. Net proceeds from the sale were $19.0 million. Under the terms of the lease the Company agreed to pay a base rent of $158,000 per month for the first three years of the lease. After year three, the Company’s rent increases at the rate of 2.75% per year for the remainder of the lease term. The lease is a triple-net lease and, as a result, the Company will continue to pay all costs associated with the building, including costs for maintenance and repairs, property taxes, insurance, and lease payments of $204,000 per year under the ground lease with the University of Utah. Under the terms of the sale, the Company assigned its 40-year ground lease with the University of Utah to BioMed Realty. Upon the expiration of the lease term, the Company has the right to (i) extend the lease for two separate five year periods, each at the current fair-market-rental value of the building, or (ii) purchase the building for 115% of its then fair-market-value. As the lease agreement in the sale-leaseback transaction contains a purchase option by the Company, SFAS No. 98, Accounting for Leases, requires the Company to account for the transaction as a financing, deferring the gain on the sale of $4.3 million. The effective interest rate on the lease financing obligation is 10.3%. Principal payments will commence in 2011.

(9) Capital Stock

(a) Stockholder Rights Plan

In December 1996, the board of directors approved the adoption of a Stockholder Rights Plan (the Rights Plan). The Rights Plan was subsequently amended on December 31, 2001 to increase the purchase price of a share of Series A Junior Participating Preferred Stock and to extend the expiration date of the Rights Plan. The Rights Plan provides for the distribution of a preferred stock purchase right (Right) as a dividend for each outstanding share of the Company’s common stock. This Right entitles stockholders to acquire stock in the Company or in an acquirer of the Company at a discounted price in the event that a person or group acquires 20% or more of the Company’s outstanding voting stock or announces a tender or exchange offer that would result in ownership of 20% or more of the Company’s stock. Each right entitles the registered holder to purchase from the Company 1/100th of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share at a price of $300 per 1/100th of a preferred share, subject to adjustment. The Rights may only be exercised on the occurrence of certain events related to a hostile takeover of the Company as described above. In any event, the Rights will expire on December 31, 2011. The Rights may be redeemed by the Company at $0.01 per right at any time prior to expiration or the occurrence of an event triggering exercise. At December 31, 2005, the Rights were not exercisable.

(b) Capital Stock Transactions

In September 2005, the Company completed a public offering of 7.0 million shares of our common stock at $11.35 per share, with net proceeds of approximately $78.7 million, after deducting offering costs of $797,000.

In July 2004, the Company completed a private placement with Nycomed in which Nycomed purchased 1.33 million shares of the Company’s common stock at $30.00 per share, with net proceeds of $39.9 million, as part of the distribution and license agreement signed with Nycomed in April 2004.

In June 2003, the Company and Enzon Pharmaceuticals, Inc. (Enzon) mutually agreed to terminate the Agreement and Plan of Reorganization (Merger Agreement). As part of the agreement to terminate the merger, the Company issued Enzon 1.5 million shares of its common stock valued at $35.6 million (see note 14).

(10) Stock-Based Compensation Plans

As of December 31, 2005, the Company has five equity incentive plans: the 1987 Stock Option Plan (the 1987 Plan), the 1994 Equity Incentive Plan (the 1994 Plan), the 1994 Nonemployee Directors’ Stock Option Plan (the Directors’ Plan), the 1998 Stock Option Plan (the 1998 Plan), and the 2005 Omnibus Incentive Plan (the 2005 Plan). An aggregate of 8,794,564 shares are authorized for future issuance under the five plans.

As of December 31, 2005, there are no shares reserved for future grant under the 1987 Plan, the 1994 Plan and the Directors’ Plan. As of December 31, 2005, and there are 2,068,038 and 551,748, respectively, shares reserved for future grant under the 2005 Plan and 1998 Plan. The Company’s 2005 Plan, provides for the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, cash-based awards and other stock-based awards. Under the Company’s 2005 Plan, the exercise price of stock

F-18

options, the grant price of stock appreciation rights and the initial value of performance awards, must be equal to at least 100% of the fair market value of the Company’s common stock on the date of grant. Stock options generally vest 28% after year one and 2% per month thereafter. During 2005, Directors of the Company were granted 151,962 deferred stock units for services that were recorded at fair value. Also during 2005, the Company granted 180,000 restricted stock units to an executive officer of the Company which vest subject to continued employment over a five year period. Under the Company’s 1998 Plan, the exercise price of options is generally not less than the fair market value of the Company’s common stock on the date of grant. The number of shares, terms, and exercise period are determined by the board of directors on an grant-by-grant basis, and the exercise period does not extend beyond ten years from the date of the grant. Stock options generally vest 28% after one year and 2% to 3% per month thereafter.

On December 13, 2002, the Company modified the option grants of certain employees. The result of the option modification was that upon the occurrence of a strategic corporate event in which the employee is severed, the employee would receive some period of vesting acceleration and have an increased period of time to exercise vested options. In 2005 and 2004, the Company recorded compensation expense of zero and $23,000, respectively, upon the termination of one employee in each year which represented the December 13, 2002 intrinsic value of affected options. The December 13, 2002 intrinsic value of the affected options for the remaining employees is $10.6 million at December 31, 2005. The Company has not recorded additional compensation expense for the intrinsic value of impacted options for any other employee as the strategic corporate event and ultimate severance is not considered probable as of December 31, 2005. At such time that severance is deemed probable for any one of these employees, the Company may incur a charge to compensation expense.

On December 13, 2002, the Company adopted an arrangement for the exercise of employee stock options following retirement. Pursuant to this arrangement, the Company modified option grants for each employee who later retires and meets certain criteria. Under the plan, retiring employees receive two years of vesting acceleration and have the remaining life of the options to exercise vested options. Employees are eligible for this benefit when the combination of years of service and age, with a minimum age of 55, equal at least 70 years. During 2005, 2004 and 2003, the Company recorded compensation expense of $1.3 million, $291,000 and $960,000, respectively, upon the retirement of one employee in 2005, and two employees in 2004 and three employees and one Board Member in 2003 which represented the December 13, 2002 intrinsic value of the affected options. The Company has not recorded additional compensation expense for the intrinsic value of impacted options for any other employee as the Company is not able to estimate which employees will retire, the timing of that retirement, or the number of affected options. As of December 31, 2005, no employee had notified the Company of his/her intention to retire from full-service to the Company. At such time as it is possible to estimate the number of employees who will benefit from the modification, the Company may incur a charge to compensation expense.

The Company also has an Employee Stock Purchase Plan (the Purchase Plan) whereby qualified employees are allowed to purchase limited amounts of the Company’s common stock at the lesser of 85% of the market price at the beginning or end of the offering period or purchase period. The Company has authorized 685,000 shares for purchase by employees. Employees purchased 103,575, 50,560 and 32,533 shares under the Purchase Plan in the years ended December 31, 2005, 2004, and 2003, respectively, and 292,826 shares remain available for future purchase.

F-19

A summary of activity related to aggregate stock options and stock appreciation rights under all five plans is indicated in the following table (shares in thousands):

	Years ended December 31,
	2005			2004			2003
	Number of shares	Weighted average exercise price		Number of shares	Weighted average exercise price		Number of shares	Weighted average exercise price
Options outstanding at beginning of year	5,114	$	21.21	3,998	$	19.95	3,111	$	16.64
Options granted	1,492		12.02	1,725		22.19	1,385		23.64
	6,606			5,723			4.496
Options exercised	143		8.85	332		9.87	445		8.12
Options canceled	620		21.28	277		22.71	53		21.83
	763			609			498
Options outstanding at end of year	5,843		19.17	5,114		21.21	3,998		19.95
Options exercisable at end of year	3,303		21.07	2,530		19.69	1,941		16.03
Weighted average fair value of options granted during the year			6.85			15.15			16.04

The following table summarizes information about stock options and stock appreciation rights outstanding at December 31, 2005 (shares in thousands):

	Options outstanding				Options exercisable
Range of exercise price	Outstanding as of December 31, 2005	Weighted average remaining contractual life	Weighted average exercise price		Exercisable as of December 31, 2005	Weighted average exercise price
$ 0.00 – 5.63	94	3.9	$	4.61	94	$	4.61
5.64 – 11.26	1,210	6.3		9.70	623		9.39
11.27 – 16.89	874	9.1		13.34	70		14.00
16.90 – 22.52	2,436	7.6		21.57	1,504		21.70
22.53 – 28.16	461	7.6		26.63	307		26.58
28.17 – 33.79	699	5.9		29.70	638		29.70
33.80 – 39.42	56	5.7		35.88	54		35.91
39.43 – 45.05	5	4.8		41.42	5		41.42
45.06 – 50.68	2	2.7		48.23	2		48.23
50.69 – 56.31	6	4.8		54.02	6		54.02
	5,843				3,303

Pursuant to SFAS No. 123, the Company has estimated the fair value of each stock option grant and stock appreciation rights on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2005, 2004, and 2003, respectively: risk free interest rates of 4.11%, 3.7%, and 3.2%; expected dividend yields of 0%; expected lives of 4.6 years, 5.0 years and 5.0 years; and expected volatility of 66%, 83% and 85%. The weighted average fair value of employee stock purchase rights granted under the Purchase Plan in 2005, 2004, and 2003 was $4.35, $11.86, and $10.82, respectively. The fair value for the employee stock purchase rights was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions in 2005, 2004, and 2003, respectively: risk free interest rates of 3.34%, 1.4%, and 1.2%; expected dividend yields of 0%; expected lives of 0.5 years; and expected volatility of 46%, 45% and 79%. The Company granted options in 2005, 2004, and 2003 to nonemployees for the performance of services. Options granted to nonemployees are remeasured based on their fair value until such options vest. Stock compensation cost for nonemployees is recognized over the period services are provided. The fair value of the options granted to nonemployees was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions in 2005, 2004 and 2003, respectively: risk free interest rates of 4.01%, 4.3%, and 3.1%; expected dividend yields of 0%; contract lives of 1.0 years, 9.0 years, 4.8 years; and expected volatility of 47%, 75% and 103%.

F-20

The Company granted 811,540 stock options during 2003 to employees with a weighted average exercise price of $21.46 and a weighted average fair value of $14.60 that were contingent upon the shareholders approving an increase in the authorized shares. The shareholders of the Company approved the increase in authorized shares on August 21, 2003 when the market value of the common stock was $26.51. As a result, the Company recorded deferred compensation of $4.1 million. The deferred compensation is being amortized over the four-year vesting period of the stock options.

(11) Income Taxes

The Company has income tax expense (benefit) for the years ended December 31, 2005, 2004, and 2003 of $(55,000), $1,633,000 and $(2,530,000), respectively.

Income tax differed from the amounts computed by applying the U.S. federal income tax rate of 34% to loss before income tax expense as a result of the following (in thousands):

	Years ended December 31,
	2005			2004		2003
Computed “expected” tax benefit	$	(57,724	)	(56,650	)	(58,795	)
Expiration of tax attributes		2,249		—		—
Foreign tax rate differential		(1,176	)	(2,851	)	(3,188	)
Change in the valuation allowance for deferred tax assets attributable to operations and other adjustments		53,483		53,151		87,073
Adjustment to deferred tax assets for changes in foreign taxes, laws and rates		6,014		9,122		(16,468	)
U.S. and foreign credits		(2,686	)	(2,449	)	(6,446	)
State income taxes, net of federal tax effect		(1,634	)	(1,263	)	(2,200	)
Foreign R&D wage tax credits (recoverable) payable		(55	)	1,430		(2,530	)
Foreign withholding taxes		—		203		—
Equity based compensation expense		335		—		—
Other		1,139		940		24
	$	(55	)	1,633		(2,530	)

The Company recorded income tax benefit of $55,000 during the year ended December 31, 2005 for refundable income tax credits relating to research and development activities in the province of Quebec. The Company recorded income tax expense of $1.6 million during the year ended December 31, 2004 relating primarily to $1.4 million in Quebec Research and Development Wage tax credits previously refunded to the Company that have since been determined to have arisen from activities which do not qualify as allowable research and development expenditures. The remaining $203,000 in 2004 was due to foreign withholding taxes. The Company recorded an income tax benefit of $2.4 million during the year ended December 31, 2003 for refundable income tax credits relating to the research and development activities in the province of Quebec. The amount recorded in 2003 represented the Company’s estimate of the amounts the Company determined was probable of being received and retained. This estimate was revised in 2004 to account for amounts subsequently determined to have arisen from activities not qualifying as allowable research and development expenditures.

Domestic and foreign components of income (loss) before taxes are as follows (in thousands):

	Years ended December 31,
	2005			2004		2003
Domestic	$	(50,617	)	(32,153	)	(61,747	)
Foreign		(119,161	)	(134,465	)	(111,178	)
Total loss before taxes	$	(169,778	)	(166,618	)	(172,925	)

F-21

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at December 31, 2005 and 2004 are presented below (in thousands):

	2005					2004
	Domestic			Foreign		Domestic		Foreign
Deferred tax assets:
Stock compensation expense	$	942		—		2,659		—
Accrued compensation		317		—		280		—
Equipment and leasehold improvements, principally due to differences in depreciation		2,118		25		628		6
Intangible assets		—		6,139		—		6,211
Research and development pool carryforward		—		66,176		—		61,266
Net operating loss carryforward		87,483		172,626		71,457		134,598
Research credit carryforward		7,589		—		6,968		—
Investment tax credit carryforward		—		18,811		—		17,513
State credits		168		—		124		—
Other		56		—		49		868
Total gross deferred tax assets		98,673		263,777		82,165		220,462
Less valuation allowance		(98,673	)	(263,777	)	(82,165	)	(220,462	)
Deferred tax assets		—		—		—		—
Deferred tax liabilities		—		—		—		—
Net deferred tax asset (liability)	$	—		—		—		—

Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2005 will be allocated as follows: 1) To the extent that the Allelix acquired net deferred tax assets are recognized, the tax benefit will be applied to reduce any remaining unamortized goodwill. At December 31, 2005, the remaining unamortized goodwill equaled $9.3 million. 2) Tax benefits in excess of the acquired goodwill related to the acquisition will be reported as a reduction of income tax expense. The valuation allowance includes the benefit for stock option exercises which increased the size of the domestic net operating loss carryovers. Future reductions to the domestic valuation allowance will be allocated $88.9 million to operations and $9.8 million to paid-in capital.

The valuation allowance for deferred tax assets as of January 1, 2005 and 2004 was $302.6 million and $231.6 million, respectively. The net change in the Company’s total valuation allowance for the years ended December 31, 2005, 2004, and 2003 was an increase of $59.9 million, $71.0 million and $105.3 million, respectively.

F-22

At December 31, 2005, the Company had domestic and foreign net operating loss and credit carryforwards available to offset future income for tax purposes approximately as follows (in thousands):

	Domestic net operating loss carry- forward for regular income tax purposes		Domestic research credit carry- forward	Canadian net operating loss carryforward for regular income tax purposes		Canadian research pool carry- forward	Canadian investment tax credit carry- forward
				Federal	Provincial
Expiring:
2006	$	585	49	8	134		3,336
2007		—	49	14,125	21,893		2,681
2008		2,452	334	52,843	56,806		248
2009		6,342	317	82,300	85,687		—
2010		2,928	166	92,759	95,582		1,644
2011		58	360	—	—		2,808
2012		10,890	846	—	—		2,899
2013		18,328	—	—	—		6,239
2014		—	—	133,763	136,111		2,703
2015		—	—	109,253	109,253		2,753
2018		18,695	1,035	—	—		—
2019		16,136	989	—	—		—
2020		3,107	724	—	—		—
2021		843	255	—	—		—
2022		16,083	363	—	—		—
2023		63,878	296	—	—		—
2024		32,300	412	—	—		—
2025		42,133	472	—	—		—
Total	$	234,758	6,667	485,051	505,466	189,075	25,311

The Company also has domestic state net operating loss carryovers and tax credit carryforwards in varying amounts depending on the different state laws. The Company’s domestic tax loss carryover for alternative minimum tax purposes is approximately the same as the Company’s regular tax loss carryover. For the year ended December 31, 2004, certain Canadian research pool carryforward amounts were reclassified to Canadian net operating loss carryforwards as a result of audit by Canadian and Quebec tax authorities. The remaining Canadian research pool carryforward of $189.1 million carries forward indefinitely.

As measured under the rules of the Tax Reform Act of 1986, the Company has undergone one or more greater than 50% changes of ownership since 1986. Consequently, use of the Company’s domestic net operating loss carryforward and research credit carryforward against future taxable income in any one year may be limited. The maximum amount of carryforwards available in a given year is limited to the product of the Company’s fair market value on the date of ownership change and the federal long-term tax-exempt rate, plus any limited carryforward not utilized in prior years. Management does not believe that these rules will adversely impact the Company’s ability to utilize the above losses and credits in the aggregate.

(12) Employee Benefit Plan

The Company maintains a tax-qualified employee savings and retirement plan (401(k) Plan) covering all of the Company’s employees in the United States. Pursuant to the 401(k) Plan, employees may elect to reduce their current compensation by the lesser of 15% of eligible compensation or the prescribed IRS annual limit and have the amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan permits, but does not require, additional matching contributions to the 401(k) Plan by the Company on behalf of all participants. The Company matched one-half of employee contributions in 2005 up to a maximum contribution from the Company of the lesser of 3% of employee compensation or $6,300. Total matching contributions for the years ended December 31, 2005, 2004, and 2003 were $607,000, $437,000 and $263,000, respectively.

F-23

Additionally, the Company maintains a tax-qualified defined contribution pension plan for its Canadian employees. Employees may elect to reduce their current compensation by 2% or 4% of eligible compensation up to a maximum of Cnd. $8,250 per year and have the amount of such reduction contributed to the pension plan. The Company matches 100% of such contributions. Total matching contributions for the years ended December 31, 2005, 2004, and 2003 were Cnd. $342,000, Cnd. $298,000, and Cnd. $226,000, respectively.

(13) Disclosure about the Fair Value of Financial Instruments

The carrying value for certain short-term financial instruments that mature or reprice frequently at market rates approximates fair value. Such financial instruments include: cash and cash equivalents, accounts receivable, accounts payable, and accrued and other liabilities. The fair values of marketable investment securities are based on quoted market prices at the reporting date. The fair value of the Company’s Convertible Notes, based on quoted market prices at the reporting date, was $167.5 million and $177.4 million as of December 31, 2005 and 2004 respectively. The fair value of the Company’s Secured Notes was estimated to be $192.5 million and $175.0 million as of December 31, 2005 and 2004, respectively. The fair value of the Company’s lease financing obligations was estimated to be $18.9 million as of December 31, 2005. The Company does not invest in derivatives.

(14) Merger Costs and Termination Fees

On February 19, 2003, the Company entered into an Merger Agreement with Enzon, which set forth the terms and conditions of the proposed merger of NPS and Enzon. On June 4, 2003, NPS and Enzon announced they had mutually agreed to terminate the Merger Agreement and other ancillary documents entered into in connection with the Merger Agreement. As part of the agreements to terminate the merger, the Company paid Enzon a termination fee in the form of a private placement of 1.5 million shares of the Company’s common stock valued at $35.6 million based upon the $23.747 per share closing price of our common stock on the Nasdaq National Market on June 4, 2003. A Shelf Registration Statement on Form S-3, providing for the resale of these shares by Enzon, was filed with the Securities and Exchange Commission on July 2, 2003. The resale of these shares by Enzon has been registered with the SEC on a Form S-3 Registration Statement. The Company also incurred direct costs relating to the proposed merger of approximately $4.3 million.

In December 2003, the Company reached an agreement to terminate its contract with the Government of Canada under its Technology Partnerships Canada, or TPC, program. As a result, the Company concluded that it was probable that it would have to repay amounts previously paid by TPC under this research and development agreement and to write off receivables due from TPC. In exchange for mutual releases, the Company paid $4.3 million to the Government of Canada and agreed to release TPC from all outstanding reimbursement obligations, resulting in the write off of $1.9 million in accounts receivable.

(15) Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123R, Share Based Payment (SFAS No. 123R) which is a revision to SFAS No. 123 Accounting for Stock-Based Compensation. SFAS No. 123R supersedes Accounting Principals Board Opinion No. 25 (APB No. 25) and its related implementation guidance. SFAS No. 123R requires that compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. In April 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (SAB No. 107) delaying the required implementation of SFAS No. 123R. Under SAB No. 107, SFAS No. 123R will be effective for the Company beginning with its first quarter of 2006.

As permitted by SFAS No. 123, the Company currently accounts for share-based payments to employees using the APB No. 25 intrinsic value method and, therefore the Company generally recognizes no compensation cost for employee stock options. The adoption of SFAS No. 123R will have a significant impact on our consolidated results of operations, although it is not expected to have any impact on our overall consolidated financial position. The precise impact of the adoption of SFAS No. 123R cannot be predicted at this time as it will depend in part on levels of share-based payments granted in the future. However, had SFAS No. 123R been adopted in prior periods, the impact would have approximated the impact of SFAS No. 123, which is presented in the pro forma financial results described in Note 1(g). SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under the current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the adoption. The Company cannot estimate what those amounts will be in the future because they depend on, among other things, when employees exercise stock options.

F-24

SFAS No. 123R allows companies to choose one of three transition methods: the modified prospective transition method without restatement, modified prospective transition method with restatement, or modified retroactive transition method. The Company has chosen to use the modified prospective transition methodology without restatement.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections (SFAS No. 154). SFAS No. 154, which replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, which requires that a voluntary change in accounting principle be applied retrospectively to all prior period financial statements presented, unless it is impracticable to do so. SFAS No. 154 also provides that a change in method of depreciating or amortizing a long-lived non financial asset be accounted for as a change in estimate effected by a change in accounting principle, and also provides that correction of errors in previously issued financial statements should be termed a “restatement”. SFAS No. 154 is effective for the Company on January 1, 2006. The Company does not believe the adoption of SFAS No. 154 will have a material impact on the condensed consolidated financial position, results of operations or cash flows.

(16) Commitments and Contingencies

The Company has agreed to indemnify, under certain circumstances, certain manufacturers and service providers from and against any and all losses, claims, damages or liabilities arising from services provided by such manufacturers and service providers or from any use, including clinical trials, or sale by the Company or any Company agent of any product supplied by the manufacturers.

The Company has entered into purchase commitments and long-term agreements with certain manufacturers, contract research organizations and suppliers that require the Company to make contractual payments to these organizations. As of December 31, 2005, the Company has outstanding commitments under these agreements of approximately $54.6 million. The Company estimates that the outstanding commitments will be paid as follows: $34.0 million in 2006, $17.9 million in 2007, $200,000 in 2008, $200,000 in 2009, $200,000 in 2010 and $2.1 million thereafter.

F-25

EXHIBIT INDEX

Exhibit Number	Description of Document
3.1A	Amended and Restated Certificate of Incorporation of the Registrant (21)
3.1B	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant, dated December 16, 1999 (2)
3.1C	Certificate of Designation of Series A Junior Participating Preferred Stock of the Registrant, dated December 18, 1996 (3)
3.1D	Amendment to Certificate of Designation of Series A Junior Participating Preferred Stock of the Registrant, dated September 5, 2000 (2)
3.1E	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Registrant, dated September 30, 2003 (14)
3.2A	Amended and Restated Bylaws of the Registrant (21)
3.2B	Certificate of Adoption of Amendments to the Amended and Restated Bylaws of the Registrant, dated February 19, 2003 (11)
4.1	Specimen Common Stock Certificate (1)
4.2A	Rights Agreement, dated as of December 4, 1996, between the Registrant and American Stock Transfer & Trust, Inc., with Exhibit A, Form of Certificate of Designation of Series A Junior Participating Preferred Stock of the Registrant; Exhibit B, Form of Right Certificate; and Exhibit C, Summary of Rights to Purchase Shares of Preferred Stock of the Registrant (5)
4.2B	First Amendment to the Rights Agreement and Certificate of Compliance with Section 27 thereof, dated December 31, 2001 (5)
4.2C	Second Amendment to the Rights Agreement and Certificate of Compliance with Section 27 thereof, dated February 19, 2003 (5)
4.3	Indenture, dated as of June 17, 2003, between Registrant and U.S. Bank National Association, as Trustee, including the form of 3% Convertible Subordinated Notes due 2008 attached as Exhibit A thereto. (13)
4.4	Composite Indenture, dated as of December 22, 2004, by and between Cinacalcet Royalty Sub LLC, a wholly-owned subsidiary of Registrant, and U.S. National Bank Association, incorporating the amendments provided for in the Supplemental Indenture dated as of February 2, 2005, between the same parties (16)
10.1A	1987 Stock Option Plan and Form of Stock Option Agreement (1)
10.1B	1987 Stock Option Plan, as amended December 2002 (11)
10.2A	1994 Equity Incentive Plan and Form of Stock Option Grant Agreement (1)
10.2B	1994 Equity Incentive Plan, as amended December 1996 (6)
10.2C	1994 Equity Incentive Plan, as amended December 2002 (11)
10.3A	1994 Non-Employee Directors’ Stock Option Plan (1)
10.3B	1994 Non-Employee Directors’ Stock Option Plan, as amended December 1996 (6)
10.3C	1994 Non-Employee Directors’ Stock Option Plan, as amended December 2002 (11)
10.4A	1994 Employee Stock Purchase Plan and Form of Offering Document (1)
10.4B	1994 Employee Stock Purchase Plan as amended December 1996, and Form of Offering Document (6)
10.4C	1994 Employee Stock Purchase Plan, as amended December 2002 (11)
10.4D	1994 Employee Stock Purchase Plan, as amended June 2003 (14)
10.4E	1994 Employee Stock Purchase Plan, as amended May 2005 (18)
10.5A	1998 Stock Option Plan (9)

F-26

10.5B	1998 Stock Option Plan, as amended December 2002 (11)
10.5C	1998 Stock Option Plan, as amended June 2003 (14)
10.6	Form of Indemnity Agreement entered into between the Registrant and each of its officers and directors (1)
10.7A	Severance Pay Plan (11)
10.7B	Form of Agreement Providing Specified Benefits Following Termination of Employment Incident to a Merger, Acquisition or Other Change of Control or to Some Other Strategic Corporate Event, between the Registrant and each of its executive officers (14)
10.8A	Collaborative Research and License Agreement between the Registrant and SmithKline Beecham Corporation (now GlaxoSmithKline), dated November 1, 1993 (1)
10.8B	Amendment Agreement to Collaborative Research and License Agreement between GlaxoSmithKline, effective June 29, 1995 (8)
10.8C	Amendment Agreement between the Registrant and GlaxoSmithKline, dated October 28, 1996 (3)
10.8D	Amendment Agreement between the Registrant and GlaxoSmithKline, dated October 24, 1997 (9)
10.8E	Amendment Agreement between the Registrant and GlaxoSmithKline, dated October 27, 1997 (9)
10.8F	Amendment to Collaborative Research and License Agreement between the Registrant and GlaxoSmithKline, dated November 26, 1997 (9)
10.8G	Letter, dated January 24, 2000, from SmithKline Beecham to NPS Re: Amendment Agreement to Amend the November 26, 1997 Amendment Agreement to Amend the November 26, 1997 Amendment Agreement (11)
10.8H	Letter, dated May 15, 2000, from SmithKline Beecham to NPS Re: Amendment Agreement (11)
10.8I	Letter, dated August 1, 2001, from GlaxoSmithKline to NPS Re: Amendment Agreement to Amend the January 24, 2000 Amendment Agreement (11)
10.9A	Patent Agreement between the Registrant and The Brigham and Women’s Hospital, Inc., dated February 19, 1993 (1)
10.9B	Letter dated March 15, 1993 from the Registrant to The Brigham and Women’s Hospital, Inc. regarding Patent Agreement between the Registrant and The Brigham and Women’s Hospital, Inc. (11)
10.9C	Amendment to Patent Agreement between the Registrant and The Brigham and Women’s Hospital, Inc., effective February 7, 1996 (10)
10.9D	1999 Patent Agreement Amendment between the Registrant and The Brigham and Women’s Hospital, Inc., effective February 18, 1999 (11)
10.10	Collaborative Research and License Agreement between the Registrant and Kirin Brewery Company, Ltd. dated June 29, 1995 (10)
10.11	Development and License Agreement between the Registrant and Amgen Inc. effective as of December 27, 1995 (8)
10.13	Manufacturing Agreement between NPS Allelix Corp. and SynCo Bio Partners B.V., effective as of May 17, 2001 (12)
10.14	Addendum to Manufacturing Agreement between NPS Allelix Corp. and SynCo Bio Partners B.V., effective as of October 26, 2001 (12)
10.15	Lease Agreement between Registrant and University of Utah, effective December 10, 2003 (14)
10.16A	Agreement of Sublease between Registrant and Harrison & Star, Inc. d/b/a Hyphen Solutions, effective November 2003 (14)
10.16B	Extension and Additional Space Agreement between Registrant and Harrison & Star, Inc. d/b/a Hypen Solutions, effective May 2004 (15)
10.17	Lease Agreement between MaRS Discovery District and Registrant, dated April 12, 2004 (15)
10.18A	Distribution and License Agreement between Registrant and Nycomed Danmark ApS, dated April 26, 2004 (15)*

F-27

10.18B	First Amendment to Distribution and License Agreement between the Registrant and Nycomed Danmark ApS, dated July 1, 2004 (15)*
10.19	Compensation Agreement (17)
10.20A	2005 Omnibus Incentive Plan (18)
10.20B	Form of Stock Option Grant Agreement under the 2005 Omnibus Incentive Plan (20)
10.21A	Non-Employee Director Deferred Compensation Program (19)
10.21B	Form of Deferred Stock Unit Award Agreement (19)
10.22	Employment Agreement with N. Anthony Coles, M.D
10.23A	Agreement of Purchase and sale between the Registrant and Biomed Realty, L.P. dated December 20, 2005
10.23B	Lease Agreement between the Registrant and BMR-383 Colorow Drive, LLC dated December 22, 2005
12.1	Computation Ratio of Earnings Available to Cover Fixed Charges
21.1	List of Subsidiaries (21)
23.1	Consent of Independent Registered Public Accounting Firm
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Annual Financial Report by the Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

⁽¹⁾ Incorporated herein by reference to the Registrant’s Registration Statement on Form S-1 filed on January 21, 1994 (SEC File No. 333-74318).

⁽²⁾ Incorporated herein by reference to the Registrant’s Registration Statement on Form S-3 filed on September 6, 2000 (SEC File No. 333-45274, Film No. 717603).

⁽³⁾ Incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated December 19, 1996 (SEC File No. 000-23272, Film No. 96683282).

⁽⁴⁾ Incorporated herein by reference to the Registrant’s Registration Statement on Form 8-A12G/A (SEC File No. 000-23272, Film No. 1826478, filing date December 31, 2001).

⁽⁵⁾ Incorporated herein by reference to the Registrant’s Registration Statement on Form 8-A/A (SEC File No. 000-23272, Film No. 03575669, filing date February 21, 2003).

⁽⁶⁾ Incorporated herein by reference to the Registrant’s Registration Statement on Form S-8 (SEC File No. 333-17521, Film No. 96677983, filing date December 9, 1996).

⁽⁷⁾ Incorporated herein by reference to the Registrant’s Definitive Proxy Statement (SEC File No. 000-23272, Film No. 98590984, filing date April 9, 1998).

⁽⁸⁾ Incorporated herein by reference to Amendment No. 1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1995, filed on March 29, 1996.

⁽⁹⁾ Incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated January 27, 1998 (SEC File No. 000-23272, Film No. 98513828).

⁽¹⁰⁾ Incorporated herein by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended on December 31, 1995.

⁽¹¹⁾ Incorporated herein by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended on December 31, 2002 (SEC File No. 000-23272, Film No. 03612691, filing date March 21, 2003).

⁽¹²⁾ Incorporated herein by reference to the Registrant’s Annual Report on Form 10-K/A for the fiscal year ended on December 31, 2002 (SEC File No. 000-23272, Film No. 03739737, filing date June 11, 2003).

⁽¹³⁾ Incorporated herein by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2003 (SEC File No. 000-23272. Film No. 03838243, filing date August 12, 2003).

⁽¹⁴⁾ Incorporated herein by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (SEC File No. 23272, Film No. 04582125, filing date February 10, 2004).

⁽¹⁵⁾ Incorporated herein by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 (SEC File No. 23272, Film No. 04962020, filing date August 9, 2004).

⁽¹⁶⁾ Incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated February 2, 2005 (SEC File No. 23272, Film No. 05578512, filing date February 7, 2005).

F-28

⁽¹⁷⁾ Incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated February 9, 2005 (SEC File No. 23272, Film No. 05587185, filing date February 9, 2005).

⁽¹⁸⁾ Incorporated herein by reference to the Registrant’s Definitive Proxy Statement (SEC File No. 23272, Film No. 05744588, filing date April 11, 2005).

⁽¹⁹⁾ Incorporated herein by reference to the Registrant’s Current Report on Form 8-K dated July 1, 2005 (SEC File No. 23272, Film No. 05933233, filing date July 1, 2005).

⁽²⁰⁾ Incorporated herein by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 (SEC File No. 23272, Film No. 05974685, filing date July 26, 2005).

⁽²¹⁾ Incorporated herein by reference to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (SEC File No. 23272, Film No. 05667287, filing date March 8, 2005).

* Confidential treatment has been granted.

F-29

EX-10.22

EXHIBIT 10.22

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into on the 31^st day of October 2005, by and between NPS Pharmaceuticals, Inc., a Delaware corporation, with a business address at 383 Colorow Drive, Salt Lake City, Utah 84108, and its affiliates (collectively, “NPS” or the “Company”), and N. Anthony Coles, M.D. (“Dr. Coles”).

RECITALS

1. The Company desires to hire Dr. Coles as President and Chief Operating Officer (President and COO), with the expectation that he will become Chief Executive Officer (CEO).

2. Dr. Coles is leaving a current position in order to accept the position of President and COO, in accordance with these terms, with the expectation that he will become the Chief Executive Officer.

3. The Company and Dr. Coles have arrived at these terms as compensating Dr. Coles for leaving his current position and join the Company as President and COO.

Based on the foregoing Recitals, and in consideration of the mutual promises contained herein, the Company and Dr. Coles agree as follows:

I. Employment Duties

a. Position / Duties. Dr. Coles will be appointed President and COO of NPS, with duties and responsibilities commensurate with such position. Specifically, all functional Vice Presidents, with the exception of the Senior Vice President, Legal Affairs and General Counsel and Vice President, Development will report to the President and COO. Dr. Coles will also be appointed as President and COO of all affiliates of the Company.

b. Date of Appointment. Dr. Coles will be appointed as President and COO on November 2, 2005.

c. Reporting Relationship. Dr. Coles will report directly to the Chief Executive Officer of NPS.

d. Board Membership. Dr. Coles will be elected to the Board of Directors of the Company (Board) at its scheduled Board meeting on November 2 and 3, 2005 in Parsipanny, New Jersey. Dr. Coles will stand for election at the 2006 Annual Meeting of Stockholders.

e. Location. Dr. Coles will have his primary office at the Company office in Parsippany, New Jersey. Dr. Coles agrees to travel as required on company business, including but not limited to, the Company offices in Salt Lake City, Utah; Toronto, Ontario, and Mississauga, Ontario.

f. Term of Agreement. This Agreement has a three (3) year term beginning on the date of this Agreement. This Agreement will be automatically extended by one (1) year at the end of the term unless a notice of non-renewal is provided by the Company or by Dr. Coles at least ninety (90) days prior to renewal.

II. Joining Compensation

In order to compensate Dr. Coles for leaving his current employer, the Company will make the following one-time cash payments or equity awards.

a. Sign-On Incentive. Within fifteen (15) days of appointment as President and COO, Dr. Coles will receive a total of $200,000 to cover his expected annual bonus and an outstanding loan from his current employer. The total of those two payments will satisfy the Company’s bonus commitment to Dr. Coles for his employment in 2005.

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b. Make-Whole Grant. The Company awards the “make-whole” equity grants on the Date of Appointment, or as otherwise expressly provided herein, in order to lessen the forgone equity grants which Dr. Coles will forfeit by leaving his current employment. These equity awards are subject to accelerated vesting upon a change in control, termination without cause or termination for good reason, as more specifically described in Sections VIII and IX below. All equity awards described below are made under the Company’s 2005 Omnibus Equity Plan, attached as Exhibit A.

i. Restricted Stock Units (RSUs). Dr. Coles will receive 180,000 employment-vested Restricted Stock Units, which will vest as follows:

• 45,000 RSUs on the second year anniversary of hire;

• 90,000 RSUs on the fourth year anniversary of hire; and

• 45,000 RSUs on the fifth year anniversary of hire.

The Board has determined that these RSUs are not performance-based compensation. Attached, as Exhibit B, is a Restricted Stock Unit Agreement.

ii. Stock Appreciation Rights (SARs). Dr. Coles will receive 150,000 stock settled SARs with an exercise price equal to fair market value on the date of grant. The SARs will vest at the Company’s standard four-year vesting schedule (28% after one year and 2% each month thereafter). Attached, as Exhibit C, is a Stock Appreciation Rights Agreement.

iii. Stock Options. Dr. Coles will receive 150,000 Non-Qualified Stock Options (NQSOs) with an exercise price equal to the fair market value on the date of grant. The NQSOs will vest at the Company’s standard four-year vesting schedule (28% after one year and 2% each month thereafter). Attached, as Exhibit D, is a Stock Option Grant Agreement.

iv. Succession to CEO. The advancement of Dr. Coles to CEO will be considered in six (6) months. No later than May 11, 2006, Dr. Coles will receive an additional grant of 200,000 NQSOs, or other equity vehicle, as permitted under the Company’s 2005 Omnibus Incentive Plan, with an exercise price equal to the fair market value on the date of the grant. The Board has determined that any NQSOs granted in this circumstance, would not be performance-based compensation. The NQSOs will vest at the Company’s standard four-year vesting schedule (28% after one year and 2% each month thereafter).

III. Ongoing Annual Compensation

a. Base Salary. Beginning on the date of appointment as President and COO, Dr. Coles will receive an annual base salary of $450,000 paid over the standard payroll cycle of NPS. The Compensation Committee of the Board will adjust Dr. Coles’s salary when he is appointed CEO, and thereafter on such a schedule to be determined by the Company.

b. Short-Term Incentives – Annual Bonus. Dr. Coles will participate in the Company’s current Executive Short-Term Incentive Plan which compensates Company executives based on certain performance measures, which historically have been operational and financial measures.

i. 2006. The target bonus opportunity as President and COO under the Executive Short-Term Incentive Plan will be 45% of base salary. The Compensation Committee will adjust the target bonus opportunity for Dr. Coles when he is appointed CEO. The annual target bonus opportunity for CEO is presently a minimum of 50% and a maximum of 100% of base salary. Dr. Coles will receive a bonus for the twelve (12) months of 2006 in addition to the sign-on incentive provided under Section II.a.

ii. 2007. The Company will review the target bonus opportunity annually, in connection with reviewing compensation within the Company generally, to ensure it remains competitive among a peer group of similarly situated pharmaceutical and biotechnology companies.

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c. Long-Term Incentives – Equity. The Company also compensates employees with equity-based long-term incentives. Dr. Coles, as President and COO, will receive annual long-term incentive target awards with an annual value, based on the fair value of the equity award (e.g. Black-Scholes value of options) of $600,000, to be granted as stock options, restricted stock units, or other vehicles as permitted under the Company’s 2005 Omnibus Plan. The initial long-term incentive award will be determined for Dr. Coles in January 2006, and will be granted in quarterly installments beginning in January 2006. The Compensation Committee will adjust the amount of long-term incentive target award value for Dr. Coles when he is appointed CEO. Upon termination without Cause, or termination for Good Reason, the options that would otherwise have vested during the next twenty-four (24) months will vest; and vested options will remain exercisable in accordance with the Company’s standard practice. Eligibility for future stock option grants and other long-term incentive awards are determined by recommendation of the Compensation Committee of the Board, and adoption by the Board.

IV. Relocation

The Company will pay relocation costs in accordance with its policy or as otherwise approved by the Company, which includes standard relocation cost reimbursement. Relocation costs will be grossed-up in accordance with normal practices.

V. Benefits

Dr. Coles will receive the following benefit package, which the Company may revise from time to time, is currently provided to all non-temporary employees that work a minimum of 30 hours per week.

• Medical insurance coverage for you and your legal dependents as defined by the Company’s standard insurance plan.

• Dental insurance coverage for you and your legal dependents as defined by the Company’s standard insurance plan.

• Long-term care insurance.

• Short-term disability coverage.

• Regular life insurance in the amount of one times your base salary.

• Accidental death and dismemberment insurance in the amount of one times your base salary.

• Long-term disability coverage.

• A 401(k) plan – subject to that plan’s rules- currently the Company will match fifty percent (50%) of your contributions up to three percent (3%) of your annual salary. Fifty percent (50 %) of the Company contribution becomes vested after one (1) year and one hundred percent (100%) is vested after two (2) years of service.

• Option to participate in the 125 Cafeteria Plan which includes dependent care and health care flexible spending accounts.

• Annual paid time off (PTO) of twenty-five days per year, with 7.7 hours earned per full pay period worked.

• NPS also grants nine (9) Company holiday days every calendar year.

VI. Restrictive Covenants

As a condition to employment, Dr. Coles agrees to the Company’s Employee Agreement Concerning Invention Assignment, Non-Disclosure and Non-Competition (Employee Noncompete Agreement), attached as Exhibit E. The non-competition covenant required by the Employee Noncompete Agreement shall be waived in the event of a Change in Control, as defined in the Company’s Change in Control Severance Pay Plan (Severance Plan), or in the event Dr. Coles’s employment is terminated without Cause or Dr. Coles resigns for Good Reason.

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VII. Indemnification

Dr. Coles will be indemnified to the same extent the Company indemnifies other officers and/or directors during and following employment and services as a Director. Attached, as Exhibit F, is the Indemnity Agreement.

VIII. Change In Control Protection

a. Severance Plan. The Company’s Severance Plan will cover Dr. Coles and allows him to exercise rights under the Severance Plan if his job prospects are materially altered or he is involuntarily terminated (other than for cause) after a Change in Control. The severance benefit for the Chief Operating Officer is twenty-four (24) months of his total cash compensation target payable in a lump sum. Attached, as Exhibit G, is the Company’s Change In Control Severance Pay Plan.

b. Gross Up Payment.

i. In the event it shall be determined that any compensation, payment or distribution by the Company to or for the benefit of Dr. Coles, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Severance Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties are incurred by Dr. Coles with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Dr. Coles shall be entitled to receive an additional payment (a “Gross-Up Payment”) such that the net amount retained by Dr. Coles, after deduction of any Excise Tax on the Severance Payments, any Federal, state, and local income tax, employment tax and Excise Tax upon the Gross-Up Payment, and any interest and/or penalties assessed with respect to such Excise Tax, shall be equal to the amount Dr. Coles would have received had there been no Excise Tax imposed on the Severance Payments.

ii. All determinations required to be made under this subparagraph (b), including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”). For purposes of determining the amount of the Gross-Up Payment, Dr. Coles shall be deemed to pay Federal income taxes at the highest marginal rate of Federal income taxation applicable to individuals for the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rates of individual taxation in the state and locality of Dr. Coles’s residence on the date of the Terminating Event, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. Any determination by the Accounting Firm shall be binding upon the Company and Dr. Coles.

IX. Termination Provisions (other than Change in Control)

Dr. Coles is an employee at will, whose employment may be terminated at any time, though he will be entitled to benefits under this Agreement in accordance with its terms. For purposes of this Section IX, the following definitions apply:

a. Definitions. For purpose of this section, the following definitions apply.

i. Cause. Cause is (a) an act of material dishonesty by Dr. Coles in connection with Dr. Coles’s responsibilities as an employee, (b) Dr. Coles’s conviction of, or plea of nolo contendere to, a felony, (c) Dr. Coles’s gross misconduct in connection with the performance or failure of performance of a material component of Dr. Coles’s responsibilities as an employee that is materially injurious to the Company, or (d) Dr. Coles’s continued substantial violations of his employment duties after Dr. Coles has received a written demand for performance from the Company which specifically sets forth the factual basis for the Company’s belief that the Covered Employee has not substantially performed such duties and after Dr. Coles has been provided with a sixty (60) day cure period. In each case, termination shall not be deemed for

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Cause unless Dr. Coles receives a copy of a resolution duly adopted by a seventy-five percent (75%) vote of the Board of Directors, excluding Dr. Coles at a meeting of the Board of Directors. Dr. Coles will be given reasonable notice of such meeting and will be given a reasonable opportunity to be heard by the Board of Directors.

ii. Good Reason. Good Reason, under this Agreement, is limited to the failure of the Company to name Dr. Coles as CEO.

b. Termination by the Company Without Cause. If Dr. Coles is terminated by the Company without Cause, he is entitled to the following:

i. Base salary provided under this agreement for the longer of the remainder of the agreement term or twenty-four (24) months.

ii. Immediate vesting of the “make-whole” equity awards in Section II (including specifically in Section II.b.iv) above.

iii. Other long-term incentive or equity awards that would otherwise have vested during the next twenty-four (24) months will immediately vest.

iv. Vested options will remain exercisable for the longer of (a) twenty-four (24) months, or (b) such other period as Dr. Coles may be entitled under any Company stock option plan, grant agreement, or retirement plan.

c. Termination by the Company For Cause. If Dr. Coles is terminated by the Company For Cause, he is entitled to the following:

i. The “make-whole” equity awards in Section II above, will not be immediately vested.

ii. Other long-term incentive or equity awards would not be subject to accelerated vesting.

iii. Vested stock options are exercisable for ninety (90) days.

d. Termination by Dr. Coles for Good Reason. If Dr. Coles is not named CEO of the Company within six (6) months of his appointment as President and COO, and he elects to terminate his employment, he is entitled to the following:

i. Base salary and target annual incentive provided under this agreement for the longer of the remainder of the agreement term or twenty four (24) months.

ii. The “make-whole” equity awards in Section II (including specifically in Section II.b.iv) above, will be immediately vested.

iii. Other long-term incentive or equity awards that would otherwise have vested during the next twenty-four (24) months will immediately vest.

iv. Vested options will remain exercisable for the longer of (a) twenty-four (24) months, or (b) such other period as Dr. Coles may be entitled under any Company stock option plan, grant agreement, or retirement plan.

e. Section 409A. To the extent required by Section 409A of the Internal Revenue Code and the regulations thereunder to avoid imposition of the 20% additional tax, the severance payments set forth in paragraphs b, c and d of this Section IX shall be delayed until at least six (6) months after Dr. Coles’s termination of employment. The severance amounts that would otherwise be payable during the six (6) month period following Dr. Coles’s termination of employment shall be paid in a lump sum in the seventh (7^th) month following Dr. Coles’s termination of employment.

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f. Death or Disability. Upon death or total disability, Dr. Coles (or his estate) will be entitled to:

i. A prorated annual incentive and pro-rated long-term incentive (if applicable) based upon the number of weeks of service performed in the performance cycle and based on performance to date as determined by the Board.

ii. The “make-whole” equity awards in Section II (including specifically in Section II.b.iv) above, will be immediately vested.

iii. Vested options will remain exercisable in accordance with the terms of the 2005 Omnibus Incentive Plan.

g. Termination by Dr. Coles for any other reason. If Dr. Coles voluntarily terminates his employment without Good Reason, he is entitled to no further benefits under this Agreement.

X. Misc. Provisions

a. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, personal representatives, successors and assigns, provided that neither Party shall assign any of its rights or privileges hereunder without the prior written consent of the other Party except that the Company may assign its rights hereunder to a successor in ownership of all or substantially all the assets of the Company.

b. Severability. Should any part or provision of this Agreement be held unenforceable by a court of competent jurisdiction, the validity of the remaining parts or provisions shall not be affected by such holding, unless such enforceability substantially impairs the benefit of the remaining portions of the Agreement.

c. Captions. The captions used in this Agreement are for convenience only and are not to be used in interpreting the obligations of the Parties under this Agreement.

d. Choice of Law. The validity, construction and performance of this Agreement and the transactions to which it relates shall be governed by the laws of the State of New York, without regard to choice of laws provisions, and the Company and Dr. Coles irrevocably consent to the exclusive jurisdiction and venue of the federal and state courts located within New York, and courts with appellate jurisdiction therefrom, in connection with any matter based upon or arising out of this Agreement.

e. Entire Agreement. This Agreement embodies the entire understanding of the Parties as it relates to the subject matter contained herein and as such, supersedes any prior agreement or understanding between the Parties relating to the terms of employment of Dr. Coles. No amendment or modification of this Agreement shall be valid or binding upon the Parties unless in writing executed by the Parties.

	NPS PHARMACEUTICALS, INC.
/S/ N. ANTHONY COLES	By:	/S/ HUNTER JACKSON
N. Anthony Coles, M.D.		Hunter Jackson, CEO, Chairman of the Board and President
Date: October 31, 2005	Date:	October 31, 2005

Exhibit A

to the

Employment Agreement

between

NPS Pharmaceuticals, Inc.

and

N. Anthony Coles, M.D.

2005 OMNIBUS INCENTIVE PLAN

NPS Pharmaceuticals, Inc.

2005 Omnibus Incentive Plan

Article 1. Establishment, Purpose and Duration

1.1 Establishment. NPS Pharmaceuticals, Inc., a Delaware corporation (hereinafter referred to as the “Company”), establishes an incentive compensation plan to be known as the NPS Pharmaceuticals, Inc. 2005 Omnibus Incentive Plan (hereinafter referred to as the “Plan”), as set forth in this document.

This Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, and Other Stock-Based Awards.

This Plan shall become effective upon stockholder approval (the “Effective Date”) and shall remain in effect as provided in Section 1.3 hereof.

1.2 Purpose of this Plan. This Plan has been established by the Company to provide a means by which Employees, Directors, and Third Party Service Providers of the Company and its Subsidiaries and Affiliates may be given the opportunity to benefit from increases in the value of Shares through the granting of Awards under this Plan. The Company seeks to (a) retain the services of present Employees, Directors, and Third Party Service Providers; (b) secure and retain the services of new Employees, Directors, and Third Party Service Providers; and (c) provide incentives for such persons to exert maximum efforts for the success of the Company and thereby promote the long-term interests of the Company, including the growth in value of the Company’s equity and enhancement of long-term stockholder return.

1.3 Duration of this Plan. Unless sooner terminated as provided herein, this Plan shall terminate ten (10) years from the Effective Date. After this Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and this Plan’s terms and conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten (10) years after the earlier of the adoption of this Plan by the Board or the Effective Date.

Article 2. Definitions

Whenever used in this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.

2.1 “Affiliate” shall mean any corporation or other entity (including, but not limited to, a partnership or a limited liability company), that is affiliated with the Company through stock or equity ownership or otherwise, and is designated as an Affiliate for purposes of this Plan by the Committee.

2.2 “Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 4.3.

2.3 “Award” means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, or Other Stock-Based Awards, in each case subject to the terms of this Plan.

2.4 “Award Agreement” means either (a) a written agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under this Plan, or (b) a written or electronic statement issued by the Company to a Participant describing the terms and provisions of such Award, including any amendment or modification thereof. The Committee may provide for the use of electronic, internet or other non-paper Award Agreements, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant.

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2.5 “Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

2.6 “Board” or “Board of Directors” means the Board of Directors of the Company.

2.7 “Cash-Based Award” means an Award, denominated in cash, granted to a Participant as described in Article 10.

2.8 “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.

2.9 “Committee” means the Compensation Committee of the Board or a subcommittee thereof, or any other committee designated by the Board to administer this Plan. If the Committee does not exist or cannot function for any reason, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.

2.10 “Company” means NPS Pharmaceuticals, Inc., a Delaware corporation, and any successor thereto as provided in Article 19 herein.

2.11 “Covered Employee” means any salaried Employee who is or may become a “Covered Employee,” as defined in Code Section 162(m), and who is designated, either as an individual Employee or class of Employees, by the Committee within the shorter of (a) ninety (90) days after the beginning of the Performance Period, or (b) twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered Employee” under this Plan for such applicable Performance Period.

2.12 “Director” means any individual who is a member of the Board of Directors of the Company.

2.13 “Effective Date” has the meaning set forth in Section 1.1.

2.14 “Employee” means any person designated as an employee of the Company, its Affiliates, and/or its Subsidiaries on the payroll records thereof. An Employee shall not include any individual during any period he or she is classified or treated by the Company, Affiliate, and/or Subsidiary as an independent contractor, a consultant, or any employee of an employment, consulting, or temporary agency or any other entity other than the Company, Affiliate, and/or Subsidiary, without regard to whether such individual is subsequently determined to have been, or is subsequently retroactively reclassified as a common-law employee of the Company, Affiliate, and/or Subsidiary during such period.

2.15 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.

2.16 “Fair Market Value” or “FMV” means a price that is based on the opening, closing, actual, high, low, or average selling prices of a Share reported on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation System (“Nasdaq”) or other established stock exchange (or exchanges) on the applicable date, the preceding trading day, the next succeeding trading day, or an average of trading days, as determined by the Committee in its discretion. Unless the Committee determines otherwise, Fair Market Value shall be deemed to be equal to the closing price of a Share on the most recent date on which Shares were publicly traded. In the event Shares are not publicly traded at the time a determination of their value is required to be made hereunder, the determination of their Fair Market Value shall be made by the Committee in such manner as it deems appropriate. Such definition(s) of FMV shall be specified in each Award Agreement and may differ depending on whether FMV is in reference to the grant, exercise, vesting, settlement, or payout of an Award.

2.17 “Freestanding SAR” means an SAR that is granted independently of any Options, as described in Article 7.

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2.18 “Full Value Award” means an Award other than in the form of an ISO, NQSO, or SAR, and which is settled by the issuance of Shares.

2.19 “Grant Price” means the price established at the time of grant of a SAR pursuant to Article 7, used to determine whether there is any payment due upon exercise of the SAR.

2.20 “Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6 to an Employee and that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422, or any successor provision.

2.21 “Insider” shall mean an individual who is, on the relevant date, an officer, or Director of the Company, or a more than ten percent (10%) Beneficial Owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act.

2.22 “Nonemployee Director” means a Director who is not an Employee.

2.23 “Nonemployee Director Award” means any NQSO, SAR, or Full Value Award granted, whether singly, in combination, or in tandem, to a Participant who is a Nonemployee Director pursuant to such applicable terms, conditions, and limitations as the Board or Committee may establish in accordance with this Plan.

2.24 “Nonqualified Stock Option” or “NQSO” means an Option that is not intended to meet the requirements of Code Section 422, or that otherwise does not meet such requirements.

2.25 “Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6.

2.26 “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.

2.27 “Other Stock-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 10.

2.28 “Participant” means any eligible individual as set forth in Article 5 to whom an Award is granted.

2.29 “Performance-Based Compensation” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for certain performance-based compensation paid to Covered Employees. Notwithstanding the foregoing, nothing in this Plan shall be construed to mean that an Award which does not satisfy the requirements for performance-based compensation under Code Section 162(m) does not constitute performance-based compensation for other purposes, including Code Section 409A.

2.30 “Performance Measures” means measures as described in Article 11 on which the performance goals are based and which are approved by the Company’s stockholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation.

2.31 “Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.

2.32 “Performance Share” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.

2.33 “Performance Unit” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in units, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.

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2.34 “Period of Restriction” means the period when Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Article 8.

2.35 “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.

2.36 “Plan” means the NPS Pharmaceuticals, Inc. 2005 Omnibus Incentive Plan.

2.37 “Plan Year” means the Company’s fiscal year.

2.38 “Restricted Stock” means an Award granted to a Participant pursuant to Article 8.

2.39 “Restricted Stock Unit” means an Award granted to a Participant pursuant to Article 8, except no Shares are actually awarded to the Participant on the date of grant.

2.40 “Share” means a share of common stock of the Company, par value of $.001 per share.

2.41 “Stock Appreciation Right” or “SAR” means an Award, designated as a SAR, pursuant to the terms of Article 7 herein.

2.42 “Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise.

2.43 “Tandem SAR” means an SAR that is granted in connection with a related Option pursuant to Article 7 herein, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled).

2.44 “Third Party Service Provider” means any consultant, agent, advisor, or independent contractor who renders services to the Company, a Subsidiary, or an Affiliate that (a) are not in connection with the offer and sale of the Company’s securities in a capital raising transaction, and (b) do not directly or indirectly promote or maintain a market for the Company’s securities.

Article 3. Administration

3.1 General. The Plan shall be administered by or under the direction of the Board unless and until the Board delegates administration to a committee of the Board. The Board may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Board, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Board shall be final and binding upon the Participants, the Company, and all other interested individuals.

3.2 Authority of the Board. The Board shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan and any Award Agreement or other agreement or document ancillary to or in connection with this Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering this Plan as the Board may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including the terms and conditions set forth in Award Agreements, granting Awards as an alternative to or as the form of payment for grants or rights earned or due under compensation plans or arrangements of the Company, construing any ambiguous provision of the Plan or any Award Agreement, and, subject to Article 16, adopting modifications and amendments to this Plan or any Award Agreement, including without limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company, its Affiliates, and/or its Subsidiaries operate.

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3.3 Delegation.

(a) The Board may delegate administration of the Plan to a Board committee composed of not fewer than two members. All members of such committee shall be Nonemployee Directors, to the extent necessary to comply with the applicable provisions of Rule 16b-3, Section 162(m) and the listing requirements of the Nasdaq Stock Market. If administration is delegated to a committee, the committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board (and references in this Plan to the Board shall in such event, be to the committee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the committee at any time and revest in the Board the administration of the Plan.

(b) The Board may delegate to one or more of its members or to one or more officers of the Company, and/or its Subsidiaries and Affiliates or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Board or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Board or such individuals may have under this Plan. The Board may, by resolution, authorize one or more officers of the Company to do one or both of the following on the same basis as can the Board: (1) designate Employees to be recipients of Awards; and (2) determine the size of any such Awards; provided, however, (i) the Board shall not delegate such responsibilities to any such officer for Awards granted to an Employee who is considered an Insider; (ii) the resolution providing such authorization sets forth the total number of Awards such officer(s) may grant; and (iii) the officer(s) shall report periodically to the Board regarding the nature and scope of the Awards granted pursuant to the authority delegated.

Article 4. Shares Subject to this Plan and Maximum Awards

4.1 Number of Shares Available for Awards.

(a) Subject to adjustment as provided in Section 4.4 herein, the maximum number of Shares available for grant to Participants under this Plan shall be two million seven hundred thousand (2,700,000) Shares (the “Share Authorization”).

(b) The maximum number of Shares of the Share Authorization that may be issued pursuant to ISOs under this Plan shall be two million seven hundred thousand (2,700,000) Shares.

4.2 Share Usage. Shares covered by an Award shall only be counted as used to the extent they are actually issued. Any Shares related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged with the Board’s permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available again for grant under this Plan. Moreover, if the Option Price of any Option granted under this Plan or the tax withholding requirements with respect to any Award granted under this Plan are satisfied by tendering Shares to the Company (by either actual delivery or by attestation), or if an SAR is exercised, only the number of Shares issued, net of the Shares tendered, if any, will be deemed delivered for purposes of determining the maximum number of Shares available for delivery under this Plan. The Shares available for issuance under this Plan may be authorized and unissued Shares or treasury Shares.

4.3 Annual Award Limits. Unless and until the Board determines that an Award to a Covered Employee shall not be designed to qualify as Performance-Based Compensation, the following limits (each an “Annual Award Limit” and, collectively, “Annual Award Limits”) shall apply to grants of such Awards under this Plan:

(a) Options. The maximum aggregate number of Shares subject to Options granted in any one Plan Year to any one Participant shall be one hundred fifty thousand (150,000) plus the amount of the Participant’s unused applicable Annual Award Limit for Options as of the close of the previous Plan Year.

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(b) SARs. The maximum number of Shares subject to Stock Appreciation Rights granted in any one Plan Year to any one Participant shall one hundred fifty thousand (150,000) plus the amount of the Participant’s unused applicable Annual Award Limit for SARs as of the close of the previous Plan Year.

(c) Restricted Stock or Restricted Stock Units. The maximum aggregate grant with respect to Awards of Restricted Stock or Restricted Stock Units in any one Plan Year to any one Participant shall be eighty thousand (80,000) plus the amount of the Participant’s unused applicable Annual Award Limit for Restricted Stock or Restricted Stock Units as of the close of the previous Plan Year.

(d) Performance Units or Performance Shares. The maximum aggregate Award of Performance Units or Performance Shares that a Participant may receive in any one Plan Year shall be eighty thousand (80,000) Shares, or equal to the value of eighty thousand (80,000) Shares determined as of the date of vesting or payout, as applicable plus the amount of the Participant’s unused applicable Annual Award Limit for Performance Units or Performance Shares as of the close of the previous Plan Year.

(e) Cash-Based Awards. The maximum aggregate amount awarded or credited with respect to Cash-Based Awards to any one Participant in any one Plan Year may not exceed the value of one million dollars ($1,000,000), plus the amount of the Participant’s unused applicable Annual Award Limit as of the close of the previous Plan Year.

(f) Other Stock-Based Awards. The maximum aggregate grant with respect to Other Stock-Based Awards pursuant to Section 10.2 in any one Plan Year to any one Participant shall be eighty thousand (80,000) plus the amount of the Participant’s unused applicable Annual Award Limit for Other Stock-Based Awards as of the close of the previous Plan Year.

4.4 Adjustments in Authorized Shares. In the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure, number of outstanding Shares or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Board, in its sole discretion, in order to prevent dilution or enlargement of Participants’ rights under this Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under this Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards. The Board, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under this Plan to reflect or related to such changes or distributions and to modify any other terms of outstanding Awards. The determination of the Board as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.

Subject to the provisions of Article 16 and notwithstanding anything else herein to the contrary, without affecting the number of Shares reserved or available hereunder, the Board may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate (including, but not limited to, a conversion of equity awards into Awards under this Plan in a manner consistent with paragraph 53 of FASB Interpretation No. 44), subject to compliance with the rules under Code Sections 422 and 424, as and where applicable.

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Article 5. Eligibility and Participation

5.1 Eligibility. Individuals eligible to participate in this Plan include all Employees, Directors, and Third Party Service Providers.

5.2 Actual Participation. Subject to the provisions of this Plan, the Board may, from time to time, select from all eligible individuals, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each Award.

Article 6. Stock Options

6.1 Grant of Options. Subject to the terms and provisions of this Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Board, in its sole discretion; provided that ISOs may be granted only to eligible Employees of the Company or of any parent or subsidiary corporation (as permitted under Code Sections 422 and 424). However, an Employee who is employed by an Affiliate and/or Subsidiary and is subject to Code Section 409A, may only be granted Options to the extent the Affiliate and/or Subsidiary is part of the Company’s consolidated group for United States federal tax purposes.

6.2 Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Board shall determine which are not inconsistent with the terms of this Plan. The Award Agreement also shall specify whether the Option is intended to be an ISO or a NQSO.

6.3 Option Price. The Option Price for each grant of an Option under this Plan shall be determined by the Board in its sole discretion and shall be specified in the Award Agreement; provided, however, the Option Price on the date of grant must be at least equal to one hundred percent (100%) of the FMV of the Shares as determined on the date of grant.

6.4 Term of Options. Each Option granted to a Participant shall expire at such time as the Board shall determine at the time of grant; provided, however, no Option shall be exercisable later than the tenth (10^th) anniversary date of its grant. Notwithstanding the foregoing, for Nonqualified Stock Options granted to Participants outside the United States, the Board has the authority to grant Nonqualified Stock Options that have a term greater than ten (10) years.

6.5 Exercise of Options. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Board shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant.

6.6 Payment. Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Board, or by complying with any alternative procedures which may be authorized by the Board, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.

A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option Price (provided that except as otherwise determined by the Board, the Shares that are tendered must have been held by the Participant for at least six (6) months (or such other period, if any, as the Board may permit) prior to their tender to satisfy the Option Price if acquired under this Plan or any other compensation plan maintained by the Company or have been purchased on the open market); (c) pursuant to a broker-assisted exercise same-day sales program; (d) by a combination of (a) (b), and (c); or (e) any other method approved or accepted by the Board in its sole discretion.

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Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon the Participant’s request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).

Unless otherwise determined by the Board, all payments under all of the methods indicated above shall be paid in United States dollars.

6.7 Restrictions on Share Transferability. The Board may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.

6.8 Termination of Employment. Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Board, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination.

6.9 Notification of Disqualifying Disposition. If any Participant shall make any disposition of Shares issued pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition prior to the end of the calendar year in which such disposition occurred.

6.10 Retirement of Participant. Notwithstanding any contrary provision in this Plan, in the event a Participant’s employment as an Employee, or service as a Director or Third Party Service Provider terminates due to a Participant’s Retirement, the Participant shall vest in that number of Shares subject to the Option that would have vested had the Participant remained an Employee, Director, or Third Party Service Provider for an additional two (2) years from the date of Retirement. In addition, the Option shall remain exercisable until the expiration of its term. For purposes of this paragraph, “Retirement” shall mean the termination of service of a Participant with the Company, a Subsidiary, or an Affiliate on or after the date on which the Participant’s number of completed years of service with the Company, a Subsidiary, or Affiliate and age equal or exceed seventy (70) (including termination due to death or Disability after such time).

Article 7. Stock Appreciation Rights

7.1 Grant of SARs. Subject to the terms and conditions of this Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Board. The Board may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SARs. However, an Employee who is employed by an Affiliate and/or Subsidiary and is subject to Code Section 409A, may only be granted SARs to the extent the Affiliate and/or Subsidiary is part of the Company’s consolidated group for United States federal tax purposes.

Subject to the terms and conditions of this Plan, the Board shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of this Plan, in determining the terms and conditions pertaining to such SARs.

The Grant Price for each grant of a Freestanding SAR shall be determined by the Board and shall be specified in the Award Agreement; provided, however, the Grant Price on the date of grant must be at least equal to one hundred percent (100%) of the FMV of the Shares as determined on the date of grant. The Grant Price of Tandem SARs shall be equal to the Option Price of the related Option.

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7.2 SAR Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and such other provisions as the Board shall determine.

7.3 Term of SAR. The term of an SAR granted under this Plan shall be determined by the Board, in its sole discretion, and except as determined otherwise by the Board and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10^th) anniversary date of its grant. Notwithstanding the foregoing, for SARs granted to Participants outside the United States, the Board has the authority to grant SARs that have a term greater than ten (10) years.

7.4 Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Board, in its sole discretion, imposes.

7.5. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.

Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the excess of the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised over the Option Price of the underlying ISO; and (c) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO.

7.6 Settlement of SAR Amount. Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying the excess of the Fair Market Value of a Share on the date of exercise over the Grant Price by the number of Shares with respect to which the SAR is exercised.

At the discretion of the Board, the payment upon SAR exercise may be in cash, Shares, or any combination thereof, or in any other manner approved by the Board in its sole discretion. The Board’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR.

7.7 Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Board, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.

7.8 Other Restrictions. The Board shall impose such other conditions and/or restrictions on any Shares received upon exercise of a SAR granted pursuant to this Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of a SAR for a specified period of time.

Article 8. Restricted Stock and Restricted Stock Units

8.1 Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of this Plan, the Board, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Board shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually awarded to the Participant on the date of grant.

8.2 Restricted Stock or Restricted Stock Unit Agreement. Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, if any, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as the Board shall determine.

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8.3 Other Restrictions. The Board shall impose such other conditions and/or restrictions, if any, on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to this Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock Units.

To the extent deemed appropriate by the Board, the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.

Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Board, in its sole discretion shall determine.

8.4 Certificate Legend. In addition to any legends placed on certificates pursuant to Section 8.3, each certificate representing Shares of Restricted Stock granted pursuant to this Plan may bear a legend such as the following or as otherwise determined by the Board in its sole discretion:

THE SALE OR TRANSFER OF SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION OF LAW, IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE NPS PHARMACEUTICALS, INC. 2005 OMNIBUS INCENTIVE PLAN, AND IN THE ASSOCIATED AWARD AGREEMENT. A COPY OF THIS PLAN AND SUCH AWARD AGREEMENT MAY BE OBTAINED FROM NPS PHARMACEUTICALS, INC.

8.5 Voting Rights. Unless otherwise determined by the Board and set forth in a Participant’s Award Agreement, to the extent permitted or required by law, as determined by the Board, Participants holding Shares of Restricted Stock granted hereunder may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.

8.6 Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Restricted Stock and/or Restricted Stock Units following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Board, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.

8.7 Section 83(b) Election. The Board may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Code Section 83(b). If a Participant makes an election pursuant to Code Section 83(b) concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company.

Article 9. Performance Units/Performance Shares

9.1 Grant of Performance Units/Performance Shares. Subject to the terms and provisions of this Plan, the Board, at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Board shall determine.

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9.2 Value of Performance Units/Performance Shares. Each Performance Unit shall have an initial value that is established by the Board at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Board shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that will be paid out to the Participant.

9.3 Earning of Performance Units/Performance Shares. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout on the value and number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.

9.4 Form and Timing of Payment of Performance Units/Performance Shares. Payment of earned Performance Units/Performance Shares shall be as determined by the Board and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Board, in its sole discretion, may pay earned Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Board. The determination of the Board with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.

9.5 Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Board, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Units or Performance Shares issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.

Article 10. Cash-Based Awards and Other Stock-Based Awards

10.1 Grant of Cash-Based Awards. Subject to the terms and provisions of the Plan, the Board, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Board may determine.

10.2 Other Stock-Based Awards. The Board may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Board shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

10.3 Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a payment amount or payment range as determined by the Board. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Board. The Board may establish performance goals in its discretion. If the Board exercises its discretion to establish performance goals, the number and/or value of Cash-Based Awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.

10.4 Payment of Cash-Based Awards and Other Stock-Based Awards. Payment, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Board determines.

10.5 Termination of Employment. The Board shall determine the extent to which the Participant shall have the right to receive Cash-Based Awards or Other Stock-Based Awards following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the

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case may be. Such provisions shall be determined in the sole discretion of the Board, such provisions may be included in an agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based Awards or Other Stock-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.

Article 11. Transferability of Awards

11.1 Transferability. Except as provided in Section 11.2 below, during a Participant’s lifetime, his or her Awards shall be exercisable only by the Participant. Awards shall not be transferable other than by will or the laws of descent and distribution; no Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind; and any purported transfer in violation hereof shall be null and void. The Board may establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable or Shares deliverable in the event of, or following, the Participant’s death, may be provided.

11.2 Board Action. The Board may, in its discretion, determine that notwithstanding Section 11.1, any or all Awards (other than ISOs) shall be transferable to and exercisable by such transferees, and subject to such terms and conditions, as the Board may deem appropriate; provided, however, no Award may be transferred for value (as defined in the General Instructions to Form S-8 under the Securities Act of 1933, as amended).

11.3 Domestic Relations Orders. Without limiting the generality of Section 11.1, and notwithstanding Section 11.2, no domestic relations order purporting to authorize a transfer of an Award shall be recognized as valid.

Article 12. Performance Measures

12.1 Performance Measures. The performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:

(a) net earnings or net income (before or after taxes);

(b) earnings per share;

(c) net sales or revenue growth;

(d) net operating profit;

(e) return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue);

(f) cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment);

(g) earnings before or after taxes, interest, depreciation, and/or amortization;

(h) gross or operating margins;

(i) productivity ratios;

(j) Share price (including, but not limited to, growth measures and total shareholder return);

(k) expense targets;

(l) margins;

(m) operating efficiency;

(n) market share;

(o) customer satisfaction;

(p) working capital targets;

(q) economic value added or EVA^® (net operating profit after tax minus the sum of capital multiplied by the cost of capital); and

(r) product development.

Any Performance Measures may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company, Subsidiary, and/or Affiliate or any combination thereof, as the Board may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Board, in its sole discretion, deems appropriate, or the Company may select Performance Measure (j) above as compared to various stock market indices. The Board also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 12.

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12.2 Evaluation of Performance. The Board may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.

12.3 Adjustment of Performance-Based Compensation. Awards that are intended to qualify as Performance-Based Compensation may not be adjusted upward. The Board shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis or any combination, as the Board determines.

12.4 Board Discretion. In the event that applicable tax and/or securities laws change to permit Board discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Board shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Board determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Board may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 12.1.

Article 13. Dividend Equivalents

Any Participant selected by the Board may be granted dividend equivalents based on the dividends declared on Shares that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Board. Such dividend equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Board.

Article 14. Beneficiary Designation

Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Board, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such beneficiary designation, benefits remaining unpaid or rights remaining unexercised at the Participant’s death shall be paid or exercised by the Participant’s executor, administrator, or legal representative.

Article 15. Rights of Participants

15.1 Employment. Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries, to terminate any Participant’s employment or service on the Board or to the Company at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his employment or service as a Director or Third Party Service Provider for any specified period of time.

Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company, its Affiliates, and/or its Subsidiaries and, accordingly, subject to Articles 3 and 16, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Board without giving rise to any liability on the part of the Company, its Affiliates, and/or its Subsidiaries.

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15.2 Participation. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.

15.3 Rights as a Stockholder. Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.

Article 16. Amendment, Modification, Suspension, and Termination

16.1 Amendment, Modification, Suspension, and Termination. Subject to Section 16.3, the Board may, at any time and from time to time, alter, amend, modify, suspend, or terminate this Plan and any Award Agreement in whole or in part; provided, however, that, without the prior approval of the Company’s stockholders and except as provided in Section 4.4, Options or SARs issued under this Plan will not be repriced, replaced, or regranted through cancellation, or by lowering the Option Price of a previously granted Option or the Grant Price of a previously granted SAR, and no material amendment of this Plan shall be made without stockholder approval if shareholder approval is required by law, regulation, or stock exchange rule.

16.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Board may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Board determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Board as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.

16.3 Awards Previously Granted. Notwithstanding any other provision of this Plan to the contrary (other than Section 16.4), no termination, amendment, suspension, or modification of this Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under this Plan, without the written consent of the Participant holding such Award.

16.4 Amendment to Conform to Law. Notwithstanding any other provision of this Plan to the contrary, the Board of Directors may amend the Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or an Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Code Section 409A), and to the administrative regulations and rulings promulgated thereunder.

Article 17. Withholding

The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.

Article 18. Corporate Transactions

In the event of (a) a merger or consolidation in which the Company is not the surviving corporation; (b) a reverse merger in which the Company is the surviving corporation but the shares of the Company’s common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise; (c) a strategic corporate event, such as a merger or acquisition, where the Company is technically the surviving entity, but where other elements of a change of control are present, i.e., change in management team or Board composition; (d) a transaction which the Board determines in its sole discretion to constitute a change in control of the Company; or (e) any capital reorganization in which fifty percent (50%) of the Shares of the Company entitled to vote are exchanged, then, the time during which Awards outstanding under the Plan become vested shall be accelerated and all outstanding Awards shall become immediately exercisable upon such event and such Awards shall continue to be exercisable until the later of (i) twenty-four (24) months from the

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effective date of such event, or (ii) the time specified in the Award Agreement during which the Award is exercisable following a Participant’s termination of service; provided, however, that in no event shall the Award be exercisable after the expiration of its term.

Article 19. Successors

All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

Article 20. General Provisions

20.1 Forfeiture Events.

(a) The Board may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of employment for cause, termination of the Participant’s provision of services to the Company, Affiliate, and/or Subsidiary, violation of material Company, Affiliate, and/or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company, its Affiliates, and/or its Subsidiaries.

(b) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, if the Participant knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the misconduct, or if the Participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve (12) month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever just occurred) of the financial document embodying such financial reporting requirement.

20.2 Legend. The certificates for Shares may include any legend which the Board deems appropriate to reflect any restrictions on transfer of such Shares.

20.3 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

20.4 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

20.5 Requirements of Law. The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

20.6 Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this Plan prior to:

(a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and

15

(b) completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.

20.7 Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

20.8 Investment Representations. The Board may require any individual receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.

20.9 Employees Based Outside of the United States. Notwithstanding any provision of this Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Employees, Directors, or Third Party Service Providers, the Board, in its sole discretion, shall have the power and authority to:

(a) determine which Affiliates and Subsidiaries shall be covered by this Plan;

(b) determine which Employees and/or Directors or Third Party Service Providers outside the United States are eligible to participate in this Plan;

(c) modify the terms and conditions of any Award granted to Employees, Directors or Third Party Service Providers outside the United States to comply with applicable foreign laws;

(d) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 20.9 by the Board shall be attached to this Plan document as appendices; and

(e) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.

Notwithstanding the above, the Board may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law.

20.10 Uncertificated Shares. To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.

20.11 Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, and/or its Subsidiaries, and/or its Affiliates may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any person acquires a right to receive payments from the Company, its Subsidiaries, and/or its Affiliates under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company, a Subsidiary, or an Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan.

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20.12 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. The Board shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.

20.13 Retirement and Welfare Plans. Neither Awards made under this Plan nor Shares or cash paid pursuant to such Awards, except pursuant to Covered Employee Annual Incentive Awards, may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s or Affiliate’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit.

20.14 Deferred Compensation. No deferral of compensation (as defined under Code Section 409A or guidance thereto) is intended under this Plan. Notwithstanding this intent, if any Award would be considered deferred compensation as defined under Code Section 409A and if the Plan fails to meet the requirements of Code Section 409A with respect to such Award, then such Award shall be null and void. However, the Board may permit deferrals of compensation pursuant to the terms of a Participant’s Award Agreement, a separate plan or a subplan which meets the requirements of Code Section 409A and any related guidance. Additionally, to the extent any Award is subject to Code Section 409A, notwithstanding any provision herein to the contrary, the Plan does not permit the acceleration of the time or schedule of any distribution related to such Award, except as permitted by Code Section 409A, the regulations thereunder, and/or the Secretary of the United States Treasury.

20.15 Nonexclusivity of this Plan. The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Board to adopt such other compensation arrangements as it may deem desirable for any Participant.

20.16 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems to be necessary or appropriate.

20.17 Governing Law. The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Delaware, to resolve any and all issues that may arise out of or relate to this Plan or any related Award Agreement.

17

Exhibit B

to the

Employment Agreement

between

NPS Pharmaceuticals, Inc.

and

N. Anthony Coles, M.D.

RESTRICTED STOCK UNIT AWARD AGREEMENT

RESTRICTED STOCK UNIT AGREEMENT

under the

2005 OMNIBUS INCENTIVE PLAN

Participant:	N. Anthony Coles
Number of RSUs Awarded:	180,000
Date of Grant:	November 2, 2005
Purpose for Award:	One-time make-up grant to compensate for lost annual retainer and repayment of a loan to former employer

THIS RESTRICTED STOCK UNIT AGREEMENT, is made and is effective as of the above Date of Grant between NPS Pharmaceuticals, Inc., a Delaware corporation (the “Company”), to the Participant named above, who is an employee of the Company. The Company hereby irrevocably grants to Participant the number of Restricted Stock Units (“RSUs”) set forth above subject to the conditions provided herein and in the 2005 Omnibus Incentive Plan (the “Plan”). Unless otherwise specified, capitalized terms shall have the meanings specified in attached Terms and Conditions and the Plan.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto have agreed, and do hereby agree to the terms and conditions of this Agreement.

IN WITNESS WHEREFORE, the Company has signed this Agreement to be effective as of the Date of Grant shown above.

NPS PHARMACEUTICALS, INC.
By:	/S/ VAL R. ANTCZAK	/S/ N. ANTHONY COLES
	Val R. Antczak, Senior Vice President, General Counsel and Secretary	N. Anthony Coles

1

TERMS AND CONDITIONS

1. Conversion of Restricted Stock Units; Issuance of Common Stock. Upon vesting of the RSUs, the Company shall promptly cause to be issued in book-entry form, registered in Participant’s name or in the name of Participant’s legal representatives, beneficiaries or heirs, as the case may be, Common Stock in payment of such vested whole restricted stock.

2. Vesting. Subject to the terms and conditions of this Agreement, the RSUs will vest as follows:

(a) 45,000 on the second (2^nd) anniversary of the Date of Grant;

(b) 90,000 on the fourth (4^th) year anniversary of the Date of Grant; and

(c) 45,000 on the fifth (5^th) year anniversary of the Date of Grant.

provided that, except as provided in the Employment Agreement between Participant and the Company dated October __, 2005 (“Employment Agreement”), vesting will cease upon the termination of your continuous status as an employee, director or consultant (“Continuous Service”). Vesting of the RSUs granted hereunder may be accelerated on the occurrence of certain events set forth in the Employment Agreement.

3. Termination of Continuous Service.

(a) If, prior to vesting of the RSUs, Participant terminates his/her Continuous Service, then all of the unvested RSUs shall be immediately and irrevocably forfeited.

(b) After the termination of Continuous Service due to death or permanent or total disability, then all unvested RSUs shall become immediately vested.

4. Transferability. The RSUs and any rights under this Agreement are not transferable, except by will or by the laws of descent and distribution. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your RSUs.

5. No Employment Relationship. The RSU is not an employment or service contract, and nothing in this Agreement shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an affiliate, or of the Company or an affiliate to continue your employment.

6. No Shareholder Rights. The RSU granted pursuant to this Agreement do not entitle the Participant to any rights of a stockholder of Common Stock. The rights of Participant with respect to the RSUs shall remain forfeitable at all times prior to the date on which such RSUs become vested.

7. Notices. Any notices provided for in this Agreement or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, address to you at the least address you provided to the Company.

8. The Plan. This Agreement is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your grant of RSUs, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted and those of the Plan, the provisions of the Plan shall control.

2

Exhibit C

to the

Employment Agreement

between

NPS Pharmaceuticals, Inc.

and

N. Anthony Coles, M.D.

SAR AWARD AGREEMENT

STOCK APPRECIATION RIGHT AGREEMENT

under the

2005 OMNIBUS INCENTIVE PLAN

Participant:	N. Anthony Coles
Social Security Number:	________________________
Total Number of Shares in this Grant:	150,000
Date of Grant:	November 2, 2005
Exercise Price Per Share:	$10.00
First Exercise Date:	November 2, 2006
Expiration Date:	November 2, 2015

This Stock Appreciation Right Agreement (“Agreement”) is made and is effective as of the above Date of Grant between NPS Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the above-named Participant, an employee of the Company, or of one or more of its subsidiaries or other eligible person under the 2005 Omnibus Incentive Plan (the “Plan”). Pursuant to this Agreement, the Company has granted you the right to the appreciation on the number of shares of Common Stock, at the exercise price indicated above. Defined terms not explicitly defined in this Agreement but defined in the Plan shall have the same definitions as in the Plan.

The details of your Stock Appreciation Rights are set out in the attached Terms and Conditions.

IN WITNESS WHEREOF, the Company has signed this Stock Appreciation Right Agreement to be effective as of the Date of Grant set forth above.

NPS PHARMACEUTICALS, INC.
By:	/S/ VAL R. ANTCZAK	/S/ N. ANTHONY COLES
	Val R. Antczak, Senior Vice President, General Counsel and Secretary	N. Anthony Coles

1

TERMS AND CONDITIONS

1. Settlement of Stock Appreciation Rights. Upon exercise of all or a specified portion of your Stock Appreciation Right, you (or such other person entitled to exercise the Stock Appreciation Right pursuant to this Agreement and the Plan) shall be entitled to receive from the Company shares of Common Stock with an aggregate Fair Market Value on the date of exercise of the Stock Appreciation Right equal to the amount determined by multiplying (a) the amount (if any) by which the Fair Market Value of a share of Common Stock on the date of exercise of the Stock Appreciation Right exceeds the exercise price per share of the Stock Appreciation Right, by (b) the number of shares of Common Stock with respect to which the Stock Appreciation Right shall have been exercised.

2. Vesting. Subject to the limitations contained herein, your Stock Appreciation Right will vest over four (4) years, with 28% becoming vested on the first year anniversary of the Date of Grant, and 2% each month thereafter, provided that vesting will cease upon the termination of your continuous status as an employee, director or consultant (“Continuous Service”).

Except as provided in the Employment Agreement between Participant and the Company dated October __, 2005 (“Employment Agreement”), vesting will cease upon the termination of your continuous status as an employee, director or consultant (“Continuous Service”). Vesting of the Stoack Appreciation Right granted hereunder may be accelerated on the occurrence of certain events set forth in the Employment Agreement.

3. Whole Shares. Your Stock Appreciation Right may only be exercised with respect to whole shares of Common Stock.

4. Securities Law Compliance. Notwithstanding anything to the contrary contained herein, your Stock Appreciation Right may not be exercised unless the shares issuable upon exercise of your Stock Appreciation Right are then registered under the Securities Act or, if such are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your Stock Appreciation Right must also comply with other applicable laws and regulations governing the Stock Appreciation Right and the Stock Appreciation Right may not be exercised if the Company determines that the exercise would not be in material compliance with such laws and regulations.

5. Term. The term of your Stock Appreciation Right commences on the Date of Grant and expires upon the earliest of the following:

(a) the Expiration Date indicated above;

(b) the tenth (10^th ) anniversary of the Date of Grant;

(c) twelve (12) months after the termination of your Continuous Service due to permanent or total disability;

(d) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates for any reason; or

(e) ninety (90) days after the termination of your Continuous Service for any other reason, provided that if during any part of such ninety (90) day period the Stock Appreciation Right is not exercisable solely because of the condition set forth in paragraph 4 above, the Stock Appreciation Right shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of ninety (90) days after the termination of your Continuous Service.

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6. Exercise.

(a) You may exercise the vested portion of your Stock Appreciation Right during its term by delivering a Notice of Exercise (in the form designated by the Company) to the Secretary of the Company, or to such other person as the Company may designate, during regular hours, together with such additional documents as the Company may then require.

(b) By exercising your Stock Appreciation Right you agree that, as a condition to any exercise of your Stock Appreciation Right, the Company may require you to enter into one or more arrangements providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your Stock Appreciation Right; (ii) the lapse of any substantial risk of forfeiture to which the shares are subject at the time of exercise; or (iii) the disposition of shares acquired upon such exercise.

7. Transferability. Your Stock Appreciation Right is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your Stock Appreciation Right.

8. No Employment Relationship. Your Stock Appreciation Right is not an employment or service contract, and nothing in your Stock Appreciation Right shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an affiliate, or of the Company or an affiliate to continue your employment.

9. Notices. Any notices provided for in your Stock Appreciation Right or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, address to you at the least address you provided to the Company.

10. The Plan. Your Stock Appreciation Right is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Stock Appreciation Right, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted and those of the Plan, the provisions of the Plan shall control.

3

Exhibit D

to the

Employment Agreement

between

NPS Pharmaceuticals, Inc.

and

N. Anthony Coles, M.D.

STOCK OPTION GRANT AGREEMENT

STOCK OPTION GRANT AGREEMENT

UNDER THE

2005 OMNIBUS INCENTIVE PLAN

Optionee:	N. Anthony Coles
Social Security Number:	______________________
Form of Option:	NQSO
Total Number of Optioned Shares in this Grant:	150,000
Date of Grant:	November 2, 2005
Exercise Price Per Share:	$10.00
First Exercise Date:	November 2, 2006
Expiration Date:	November 2, 2015

THIS OPTION AGREEMENT is made and is effective as of the above Date of Grant between NPS Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and the above-named Optionee, an employee of the Company, or of one or more of its subsidiaries or other eligible person under the 2005 Omnibus Incentive Plan (the “Plan”). The Company desires, by affording the Optionee an opportunity to purchase the number of shares of its common stock par value $.001 per share (the “Common Stock”) shown above and as hereinafter provided (the “Optioned Shares”), to carry out the purposes of the Plan.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto have agreed, and do hereby agree to the terms and conditions of this Option as set out in paragraphs 1 through 12 hereof.

IN WITNESS WHEREFORE, the Company has signed this Stock Option Grant to be effective as of the Date of Grant shown above.

NPS PHARMACEUTICALS, INC.		OPTIONEE:
By:	/S/ VAL R. ANTCZAK	/S/ N. ANTHONY COLES
	Val R. Antczak, Senior Vice President, General Counsel, and Secretary	N. Anthony Coles

1

TERMS AND CONDITIONS

1. Grant of Option. The Company hereby irrevocably grants to the Optionee the right and option (the “Option”) to purchase the above number of Optioned Shares of the Company’s Common Stock in the manner and subject to the conditions provided herein and in the Plan.

2. Purchase Price and Payment.

2.1 The purchase price (the “Exercise Price”) shall be the amount per share of the Optioned Shares shown above, which is the fair market value of the Common Stock on the Date of Grant as determined under the Plan. To the extent that the Optionee being granted this Option owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or its subsidiary corporations, then the Exercise Price has been established by the Company to be equal to at least one hundred ten percent of said fair market value.

2.2. Payment of the Exercise Price per Optioned Share shall be paid, to the extent permitted by applicable statutes and regulations, either (a) in cash, or (b) by delivery of already-owned shares of Common Stock (which has been held by Optionee for at least six months), or a combination of cash and already-owned Common Stock, or (c) according to a deferred payment or other arrangement as agreed to between the Optionee and the Company, or (d) pursuant to a broker assisted exercise same-day sales program, or (e) a combination of (a), (b), (c), and/or (d) above. With regard to delivery of shares of Common Stock under (b) above, such shares of Common Stock (i) shall be valued for determination of the payment of the Exercise Price of such delivered shares of Common Stock at the shares’ fair market value on the Date of Exercise, and (ii) must be owned free and clear of any liens, claims, encumbrances, or security interests on such date.

2.3 In the case of any deferred payment arrangement, interest shall be payable at least annually, and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest under any applicable provisions of the Code of any amounts other than amounts stated to be interest under the deferred payment arrangement.

2.4 Notwithstanding the foregoing, this Option may be exercised pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board, which results in the receipt of cash (or check) by the Company prior to the issuance of any of the Optioned Shares.

3. Vesting and Term of Option. The Optioned Shares shall be exercisable during the term of this Option Agreement but only on the terms hereof and pursuant to the following exercise schedule:

Twenty-eight percent of the Optioned Shares shall vest at 5:00 p.m., Mountain Standard Time (“MST”), on the first anniversary of the Date of Grant and two percent of the remaining Optioned Shares shall vest at 5:00 p.m. MST, on each monthly anniversary date thereafter, provided that the Optionee was, during the entire period prior to such vesting date, continuously employed as an employee of the Company or otherwise affiliated in a position qualifying for continued vesting under the Plan. With respect to Canadian employees, Optionee’s status as an employee shall terminate upon delivery of a notice of termination by the Company.

Except as provided in the Employment Agreement between Participant and the Company dated October     , 2005 (“Employment Agreement”), vesting will cease upon the termination of your continuous status as an employee, director or consultant (“Continuous Service”). Vesting of the Stoack Appreciation Right granted hereunder may be accelerated on the occurrence of certain events set forth in the Employment Agreement.

The term of the Option is from the Date of Grant through the Expiration Date shown above. Except to the extent that a different Expiration Date is shown above, any portion of the Optioned Shares, which become exercisable shall remain in effect and be exercisable thereafter during the term of the Option. The Option shall not be exercisable after the Expiration Date. Not less than one hundred shares of the Optioned Shares may be purchased at any time unless the number purchased is the total number at the time purchasable under the Option. Notwithstanding the above, as to any Option granted to a person owning more than ten percent of the Company’s voting stock on the Date of Grant, such Option shall expire five years from the Date of Grant and said date shall be the Expiration Date.

4. Termination of Employment or Relationship as a Director or Consultant. In the event an Optionee’s continual status as an employee, director, or consultant (other than upon the Optionee’s death or disability) shall terminate prior to the Expiration Date, then this Option shall expire ninety days after the termination of the later of employment with the Company or such affiliation with the Company for any reason, or for no reason, unless:

4.1 such termination of employment or affiliation is due to Optionee’s permanent or total disability (within the meaning of Section 422(c)(6) of the Code), in which event the Option shall expire on the earlier of the Expiration Date set forth above, or twelve months following such termination of employment or affiliation;

4.2 such termination of employment or affiliation is due to Optionee’s death, in which event the Option shall expire on the earlier of the Expiration Date set forth above or eighteen months after Optionee’s death;

4.3 exercise of the Option within ninety days after termination of employment or affiliation with the Company would result in liability of the Optionee under Section 16(b) of the Securities Exchange Act of 1934 (arising, for example, from a non-exempt purchase), in which case the Option will expire on the earlier of (a) the Expiration Date set forth above, (b) the tenth day after the last day upon which exercise would result in such liability, or (c) six months and ten days after the termination of Optionee’s employment or affiliation; or

4.4 such termination of employment or affiliation is due to a termination without Cause by the Company or a resignation for Good Reason by Optionee, in which event the Option shall expire on the earlier of the Expiration Date set forth above, or twenty-four months following such termination of employment or affiliation.

This Option may be exercised following termination of employment or affiliation only as to that number of Optioned Shares as to which it was exercisable on the date of termination of employment or affiliation under the provisions of this Option Agreement.

5. Transferability.

5.1 Incentive Stock Option (“ISO”). In the case of an ISO, this Option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during Optionee’s life, only by the Optionee. In the event an Optionee transfers such Option, such transfer shall constitute a disqualifying event and the Option shall no longer qualify as an ISO but shall be considered a Non-Qualified Stock Option under the terms of this Plan.

5.2 Non-Qualified Stock Option (“NQSO”). In the case of a NQSO, this Option is not transferable, except as follows:

5.2.1 By will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder (a “QDRO”), and shall be exercisable during the lifetime Optionee only by such Optionee or any transferee pursuant to a QDRO; and

5.2.2 Transfers to the spouse, children, or grandchildren of the Optionee (“Immediate Family Members”), a trust or trusts for the exclusive benefit of such Immediate Family Members, or a partnership in which such Immediate Family Members are the only partners, provided that (a) there may be no consideration for any such transfer, (b) subsequent transfers of transferred options shall be prohibited except those occurring by will or the laws of descent and distribution, and (c) the Option shall continue to be subject to all the terms and conditions that applied prior to transfer. The Options shall be exercisable by the transferee only to the extent and for the periods specified in this Option Agreement or the Plan. The Company expressly disclaims any obligation to provide notice to a transferee of the expiration of the Option.

5.3 Non-Qualifying Transfer. In the event of the transfer of the Optioned Shares obtained by exercise of an ISO in such manner as to disqualify the Optioned Shares for ISO treatment, the provisions of this Grant and the Plan applicable to NQSOs shall be deemed to apply to the Optioned Shares as if the Grant had been an NQSO.

6. No Employment Relationship. This Option is not an employment contract and nothing in this Option Agreement shall be deemed to create in any way whatsoever any obligation on Optionee’s part to continue in the employ of the Company or as an affiliate of the Company, or of the Company to continue Optionee’s employment or affiliation with the Company. In the event that this Option is granted in connection with the performance of services as a consultant or director, references to employment, employee, and similar terms shall be deemed to include the performance of services as a consultant or a director, as the case may be, provided however, that no rights as an employee shall arise by reason of the use of such terms.

7. Rights of Stockholder. No rights as a stockholder are created or conferred hereby until the date of issue of a stock certificate for the shares of the Optioned Shares covered by a valid exercise of this Option.

8. Restriction on Transfer. A purchaser of shares of Common Stock who purchases such Optioned Shares by exercise of this Option may not dispose of such Optioned Shares within two years from the Date of Grant or within one year after the date of exercise without losing the purchaser’s right to treat such Optioned Shares as an ISO. Other contractual or legal restrictions may also apply to ISOs.

9. Method of Exercising Option.

9.1 Subject to the terms and conditions of this Option Agreement, the Option may be exercised by written notice (in a form designated by the Company) to the Company at its principal office. Such notice shall state the election to exercise the Option and the number of Optioned Shares in respect of which it is being exercised, and shall be signed by the person or persons so exercising the Option. If the option being exercised was granted partially as ISOs as to certain shares and as NQSOs as to the balance of the shares, the Company will assume that the shares being exercised are pro-rata ISO and NQSO unless specifically otherwise directed or elected by the Optionee. Such notice shall either:

9.1.1 be accompanied by payment of the full Exercise Price of such Optioned Shares, in which event the Company shall deliver a certificate promptly after the notice shall be received; or

9.1.2 fix a date (not less than five nor more than ten business days from the date such notice is received by the Company unless a longer date or different arrangement has been established under paragraph 2 hereof) for the payment of the full Exercise Price of such Optioned Shares, against delivery of a certificate or certificates representing such Optioned Shares.

9.1.3 By exercising this Option, Optionee agrees that the Company may require Optionee to enter into an arrangement providing for the cash payment by Optionee to the Company of any tax withholding obligations of the Company arising by reason of: (a) the exercise of this Option; (b) the lapse of any substantial risk of forfeiture to which the Optioned Shares are subject at the time of exercise; or (c) the disposition of Optioned Shares acquired upon such exercise.

10. The Plan. The terms of the Plan are incorporated herein and made a part hereof. In the event of inconsistency between the terms of the Plan (as in effect on the Date of Grant) and the terms hereof, the terms of the Plan shall control. The Plan contains many terms, which may affect this Option Agreement, which are not repeated herein.

11. Severability. It is the intent of all parties to this Option Agreement that ISOs granted under the terms of this Option Agreement shall qualify for treatment as ISOs under Section 422 of the Internal Revenue Code of 1954, as amended. To that end, should any provisions of this Option Agreement be determined to invalidate such ISO treatment or characterization, such provisions shall be severable from, and shall not affect the remaining provisions of this Option Agreement.

12. Plan Acknowledgment. Optionee acknowledges receipt of a copy of the Plan, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all the terms and provisions thereof. Optionee hereby agrees to accept as binding and final all decisions of interpretation of the Board of Directors upon any questions arising under the Plan.

Exhibit E

to the

Employment Agreement

between

NPS Pharmaceuticals, Inc.

and

N. Anthony Coles, M.D.

EMPLOYEE AGREEMENT CONCERNING

INVENTION ASSIGNMENT, NON-DISCLOSURE

AND NON-COMPETITION

EMPLOYEE AGREEMENT CONCERNING

INVENTION ASSIGNMENT, NON-DISCLOSURE

AND NON-COMPETITION

Employee: N. Anthony Coles, M.D.

In consideration of employment or continued employment by NPS Pharmaceuticals, Inc. (which together with its affiliates and subsidiaries, if any, are hereinafter referred to as the “Company”), the compensation paid by the Company from time to time and other good and valuable consideration, Employee hereby represents to and agrees with the Company as follows:

1. Scope of Company’s Business Interests.

Employee understands that the Company is engaged in a continuous program of research, development, production, and marketing with respect to the discovery and development of novel pharmaceutical therapies for a variety of diseases.

2. Definitions.

2.1 “Confidential Information” shall mean:

2.1.1 any and all Intellectual Property or information whether business, financial, technical or otherwise, of any type whatsoever, in any form whatsoever, which is (a) proprietary to the Company; or (b) submitted or disclosed to the Company by a third party.

2.1.2 Confidential Information (whether or not reduced to writing and in any and all stages of development) includes but is not limited to: discoveries, ideas, inventions, designs, formulas, test results, test procedures, protocols, concepts, drawings, specifications, techniques, models, data, software, research, processes, procedures, works of authorship, formulas, improvements, trade secrets, know-how, marketing plans and supplies, product plans, customer names (and other information relating to customers), supplier names (and other information relating to suppliers), and financial information.

2.1.3 Confidential Information shall not include anything that is publicly known or generally employed by the trade at or after the effective date of this Agreement.

2.2 “Intellectual Property” shall mean, without limitation, all copyrights, patents, trademarks, service marks, trade secrets, know-how and other rights commonly referred to as “moral rights” and all intellectual property rights of any type whatsoever.

3. Assignment of Rights in Intellectual Property.

3.1 Employee hereby assigns to the Company all of Employee’s rights in all discoveries, inventions and other technology, all works of authorship, all data and information, and all Intellectual Property rights therein and thereto, which are made, discovered, developed, assembled, created, or conceived, in whole or in part, previously or hereafter by Employee: (a) during the course of and within the scope of employment with the Company; or (b) with the aid of Confidential Information or the facilities, resources or property of the Company.

3.2 All of said Intellectual Property assigned to the Company shall be Confidential Information except for anything that is publicly known or generally employed by the trade, without the fault of Employee, at or after the effective date of this Agreement.

3.3 Employee agrees to disclose promptly and fully to the Company anything which qualifies as Confidential Information hereunder.

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4. Confidential Information.

4.1 Employee understands that Confidential Information is confidential and secret and agrees to respect the confidentiality and secrecy of the same. Employee also understands that all Confidential Information is the property of the Company or of a third party submitting the same to the Company. Employee agrees to treat Confidential Information submitted to the Company by third parties as if confidential and proprietary to the Company.

4.2 Except as lawfully authorized or as may be required in the performance of Employee’s responsibilities for the Company, Employee:

4.2.1 agrees not to directly or indirectly disclose, reveal, report, publish, or transfer possession of, or access to, any Confidential Information to any person or entity;

4.2.2 agrees, at the expense of the Company, promptly at all times hereafter to execute and deliver any and all acts and instruments as may be necessary or desirable to perfect and protect the Company’s interest in the Confidential Information; and

4.2.3 agrees not to directly or indirectly use the Confidential Information except for the benefit of the Company in the performance of Employee’s responsibilities for the Company.

5. Trust Relationship.

Employee understands that employment with the Company creates a relationship of confidence and trust between the Employee and the Company with respect to the Employee’s care, use, and treatment of Intellectual Property and Confidential Information of the Company.

6. Delivery to the Company.

Employee agrees to turn over any and all Confidential Information in Employee’s possession or control upon request of the Company and upon termination of employment with the Company. Employee understands and agrees that Employee’s obligations under this Agreement survive the termination of Employee’s employment with the Company.

7. No Contract of Employment.

7.1 Nothing herein is intended to constitute a contract of employment or alter or change the terms of Employee’s understanding with the Company concerning terms and duration of employment.

7.2 This Agreement is not an employment agreement and does not give the Employee the right to be employed by the Company in any capacity. The Company reserves the right to terminate Employee’s employment at any time for any reason.

8. Non-Competition.

8.1 The Employee and the Company agree that the Company’s activities, including its interests in Confidential Information and Intellectual Property, are of a proprietary, unique and special nature and that if Employee’s services were used in competition with the Company, such use could cause serious and possibly irreparable harm to the Company. Accordingly, Employee agrees to the commitments of non-competitive activities as described herein.

8.1.1 Employee agrees that during the period of employment with the Company, Employee shall not directly or indirectly engage in any employment or activity (other than for the Company) which competes with the business of the Company as now or hereinafter conducted.

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8.1.2 Employee agrees that during the period of employment with the Company, and for a period of twenty four (24) months thereafter, Employee shall not directly or indirectly (a) compete with the business of the company by calling on, soliciting, taking away, or attempting to take away for the benefit of Employee or of any other person or entity, any customer, supplier, or client of the Company with whom Employee became acquainted during employment with the Company, or (b) solicit, take away, or attempt to take away, for the benefit of the Employee or of any other person or entity, any employee or officer of the Company.

8.1.3 Employee agrees that upon termination of employment with the Company, Employee shall not use or disclose material Confidential Information of the Company.

9. No Use of Other’s Intellectual Property.

Employee represents to the Company that Employee has not brought and has not used, and agrees that it will not bring to the Company and will not use in the performance of any responsibilities for the Company, any information, materials or the like which are confidential and are proprietary to a former employer or to some other person or entity without written authorization from said former employer, person or entity.

10. Injunctive Relief.

Employee agrees that, because of the unique nature of this Agreement and the obligations of Employee regarding non-disclosure, non-use and assignment of inventions and Intellectual Property, monetary damages alone will be an inadequate remedy for Employee’s breach of such obligations. As a result, Employee agrees that the Company shall be entitled to obtain injunctive and other equitable relief to protect the confidential nature of its Confidential Information and its interest in such inventions and Intellectual Property, in addition to all other remedies which may be available at law or otherwise.

11. Miscellaneous.

11.1 If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, the same shall be deemed severed from the remainder of this Agreement and shall not cause the invalidity or unenforceability of the remainder of this Agreement.

11.2 This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, beneficiaries or legatees.

11.3 This Agreement shall be governed by the laws of the State of Utah without reference to the conflicts of law principles thereof.

11.4 This Agreement constitutes the final, complete, and exclusive agreement between the Company and Employee concerning the subject matter of this Agreement and supersedes all prior representations, agreements, understandings, negotiations and discussions, written or oral, between the Company and Employee with respect thereto. In the event Employee and the Company have previously entered into an agreement concerning the subject matter hereof, this Agreement is considered a novation of that agreement. Employee agrees that all Confidential Information received by Employee prior to the “Date of Hire” shown below is governed hereby and is deemed received pursuant to the terms hereof. Any inventions excluded by Employee thereunder are also deemed excluded hereunder unless stated otherwise in Exhibit A hereof. Any modification, recision or amendment of this Agreement shall not be effective unless made in writing and executed by both parties.

11.5 Employee has identified in the space below all inventions, ideas, biological compounds, cell lines, and other items of Intellectual Property of interest to the Company as described herein, and other items of Intellectual Property which have been made or conceived or first reduced to practice by Employee, alone or jointly with others, PRIOR to employment with the Company AND which Employee desires to exclude from the operation of this Agreement. Employee claims an interest in the following PRIOR items of Intellectual Property:

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If no inventions, ideas, discoveries or other items of Intellectual Property are identified in the space above, then Employee represents that there are no such inventions, ideas, discoveries or other items of Intellectual Property.

11.6 Employee agrees that adequate consideration to the Employee from the Company can be found in each of the following:

11.6.1 continued employment with the Company;

11.6.2 compensation paid to the Employee by the Company from time to time; and

11.6.3 capital stock of the Company sold or granted to the Employee from time to time.

11.7 Employee acknowledges that his or her employment with the Company was expressly conditioned upon an understanding that an agreement covering the subject hereof was a condition of employment and that this Agreement is the intended agreement and that if signed after the Date of Hire the Agreement is intended to relate back to the Employee’s Date of Hire and to be part of the terms of initial employment.

READ, UNDERSTOOD AND ACCEPTED:	COMPANY:
	NPS PHARMACEUTICALS, INC.
/S/ N. ANTHONY COLES	By:	/S/ VAL R. ANTCZAK
N. Anthony Coles, M.D.		Val R. Antczak, Senior Vice President, General Counsel, and Secretary
Dated: October 31, 2005	Dated: October 21, 2005
Date of Hire    November 2, 2005

4

Exhibit F

to the

Employment Agreement

between

NPS Pharmaceuticals, Inc.

and

N. Anthony Coles, M.D.

INDEMNITY AGREEMENT

INDEMNITY AGREEMENT

THIS AGREEMENT, effective the 2^nd day of November 2005 by and between NPS Pharmaceuticals, Inc., a Delaware corporation (the “Corporation”), and N. Anthony Coles, M.D., the undersigned agent of the Corporation (“Agent”).

RECITALS

WHEREAS, Agent performs a valuable service to the Corporation in the capacity as an officer of the Corporation;

WHEREAS, the stockholders of the Corporation have adopted bylaws (the “Bylaws”) providing for the indemnification of the directors, officers, employees, and other agents of the Corporation, including persons serving at the request of the Corporation in such capacities with other corporations or enterprises, as authorized by the Delaware General Corporation Law, as amended (the “Code”);

WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit contracts between the Corporation and its agents, officers, employees, and other agents with respect to indemnification of such persons; and

WHEREAS, in order to induce Agent to continue to serve as an officer of the Corporation, the Corporation has determined and agreed to enter into this Agreement with Agent;

NOW, THEREFORE, in consideration of Agent’s continued service as an officer after the date hereof, the parties hereto agree as follows:

1. Services to the Corporation. With duties beginning as of the above date, Agent will serve, at the will of the Corporation or under separate contract, if any such contract exists, as an officer of the Corporation or as a director, officer or other fiduciary of an affiliate of the Corporation (including any employee benefit plan of the Corporation) faithfully and to the best of Agent’s ability so long as Agent is duly elected and qualified or appointed in accordance with the provisions of the Bylaws or other applicable charter documents of the Corporation or such affiliate; provided, however, that Agent may at any time and for any reason resign from such position (subject to any contractual obligation that Agent may have assumed apart from this Agreement) and that the Corporation or any affiliate shall have no obligation under this Agreement to continue Agent in any such position.

2. Indemnity of Agent. The Corporation hereby agrees to hold harmless and indemnify Agent to the fullest extent authorized or permitted by the provisions of the Bylaws, the Code, and applicable law as the same may be amended from time to time (but, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than the Bylaws, the Code, or applicable law permitted prior to adoption of such amendment).

3. Additional Indemnity. In addition to and not in limitation of the indemnification otherwise provided for herein, and subject only to the exclusions set forth in Section 4 hereof, the Corporation hereby further agrees to hold harmless and indemnify Agent:

3.1 against any and all expenses (including attorneys’ fees), witness fees, damages, judgments, fines, amounts paid in settlement, and any other amounts that Agent becomes legally obligated to pay because of any claim or claims made against or by Agent in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative, or investigative (including an action by or in the right of the Corporation) to which Agent is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Agent is, was or at any time becomes a director, officer, employee or other agent of Corporation, or is or was serving or at any time serves at the request of the Corporation as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise; and

3.2 otherwise to the fullest extent as may be provided to Agent by the Corporation under the non-exclusivity provisions of the Code and Section 11.5 of the Bylaws.

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4. Limitations on Additional Indemnity. No indemnity shall be paid by the Corporation under this agreement:

4.1 on account of any claim against Agent for an accounting of profits made from the purchase or sale by Agent of securities of the Corporation pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law;

4.2 on account of Agent’s conduct that was knowingly fraudulent or deliberately dishonest or that constituted willful misconduct;

4.3 on account of Agent’s conduct that constituted a breach of Agent’s duty of loyalty to the Corporation or resulted in any personal profit or advantage to which Agent was not legally entitled;

4.4 for which payment is actually made to Agent under a valid and collectible insurance policy or under a valid and enforceable indemnity clause, bylaw or agreement, except in respect of any excess beyond payment under such insurance, clause, bylaw or agreement;

4.5 if indemnification is not lawful (and, in this respect, both the Corporation and Agent have been advised that the Securities and Exchange Commission believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication); or

4.6 in connection with any proceeding (or part thereof) initiated by Agent, or any proceeding by Agent against the Corporation or its directors, officers, employees or other agents, unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the Corporation, (iii) such indemnification is provided by the Corporation, in its sole discretion, pursuant to the powers vested in the Corporation under the Code, or (iv) the proceeding is initiated pursuant to Section 9 hereof.

5. Continuation of Indemnity. All agreements and obligations of the Corporation contained herein shall continue during the period Agent is a director, officer, employee or other agent of the Corporation (or is or was serving at the request of the Corporation as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise) and shall continue thereafter so long as Agent shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative, by reason of the fact that Agent was serving in the capacity referred to herein.

6. Partial Indemnification. Agent shall be entitled under this Agreement to indemnification by the Corporation for a portion of the expenses (including attorneys’ fees), witness fees, damages, judgments, fines and amounts paid in settlement, and any other amounts that Agent becomes legally obligated to pay in connection with any action, suit or proceeding referred to in Section 3 hereof even if not entitled hereunder to indemnification for the total amount thereof, and the Corporation shall indemnify Agent for the portion thereof to which Agent is entitled.

7. Notification and Defense of Claim. Not later than thirty (30) days after receipt by Agent of notice of the commencement of any action, suit or proceeding, Agent will, if a claim in respect thereof is to be made against the Corporation under this Agreement, notify the Corporation or confirm that the Corporation has notice of the commencement thereof; but the omission so to notify or so to confirm notice to the Corporation will not relieve it from any liability which it may have to Agent otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Agent notifies the Corporation of the commencement thereof or confirms that the Corporation has such notice:

7.1 the Corporation will be entitled to participate therein at its own expense;

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7.2 except as otherwise provided below, the Corporation may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense thereof, with counsel reasonably satisfactory to Agent. After notice from the Corporation to Agent of its election to assume the defense thereof, the Corporation will not be liable to Agent under this Agreement for any legal or other expenses subsequently incurred by Agent in connection with the defense thereof except for reasonable costs of investigation or otherwise as provided below. Agent shall have the right to employ separate counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Agent unless (i) the employment of counsel by Agent has been authorized by the Corporation, (ii) Agent shall have reasonably concluded that there may be a conflict of interest between the Corporation (or any other agent or agents for whom the Corporation has assumed or may assume the defense) and Agent in the conduct of the defense of such action; or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of Agent’s separate counsel shall be at the expense of the Corporation. The Corporation shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the Corporation or as to which Agent shall have made the conclusion provided for in clause (ii) above; and

7.3 the Corporation shall not be liable to indemnify Agent under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent, which shall not be unreasonably withheld. The Corporation shall be permitted to settle any action except that it shall not settle any action or claim in any manner that would impose any penalty or limitation on Agent without Agent’s written consent, which may be given or withheld in Agent’s sole discretion.

8. Expenses. Promptly following request for advancement of expenses and upon receipt of an undertaking by or on behalf of Agent to repay said amounts on the terms hereof, the Corporation shall advance, prior to the final disposition of any proceeding, all expenses actually and reasonably incurred by Agent in connection with such proceeding, prior to the date (if at all) when the Corporation has determined that Agent has acted in bad faith or in a manner that Agent did not believe to be in or not opposed to the best interests of the Corporation, that Agent is not entitled to indemnification due to exclusion under Section 4 hereof or, with respect to any criminal action or proceeding that Agent acted without reasonable cause to believe that Agent’s conduct was lawful. Such determination may be made by the Corporation upon a finding that the facts known to the decision-making party at the time such determination is made, clearly and convincingly support such a determination. Such determination may be made by the Corporation (i) as to an officer by a vote of all disinterested directors provided such directors constitute a quorum of the Board of Directors; or (ii) if such a quorum is not obtainable, or even if obtainable, upon direction of a majority of the disinterested directors as to an officer or director by independent legal counsel (selected by said majority, or other representation of the Corporation, from a panel of five alternates approved for this purpose by the National Association of Corporate Directors) in a written opinion. This provision is adopted under and is to be interpreted consistent with Delaware Code 145(f) and Bylaw 11.5.

9. Enforcement.

9.1 Any right to indemnification or advances granted by this Agreement to Agent shall be enforceable by or on behalf of Agent in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. Agent, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting Agent’s claim. It shall be a defense to any action for which a claim for indemnification is made under Section 3 hereof (other than an action brought to enforce a claim for expenses pursuant to Section 8 hereof, provided that the required undertaking has been tendered to the Corporation) that Agent is not entitled to indemnification because of the limitations set forth in Section 4 hereof. Neither the failure of the Corporation (including its Board of Directors or its stockholders) to have made a determination prior to the commencement of such enforcement action that indemnification of Agent is proper in

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the circumstances, nor an actual determination by the Corporation (including its Board of Directors or its stockholders) that such indemnification is improper shall be a defense to the action or create a presumption that Agent is not entitled to indemnification under this Agreement or otherwise.

9.2 Any determination, election, or authorization (a “Determination”) permitted or required herein to be made by the Corporation when made by the Board of Directors, shall be made in the manner set out in the following sentence when the Determination is (i) to authorize Agent to initiate a proceeding against the Corporation under paragraph 4(f) hereof; (ii) to participate in a proceeding under paragraph 7(a) hereof; or (iii) to assume the defense under paragraph 7(b) hereof. A Determination made by the Board of Directors under the proceeding sentence shall require only a quorum of one-third of the exact number of directors of the Corporation fixed from time to time in accordance with the Certificate of Incorporation if such Determination is to authorize Agent to bring an action under (i) above, to cause the Corporation to participate in a proceeding under (ii) above, and/or to assume a defense of an action against Agent under (iii) above.

10. Subrogation. In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Agent, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Corporation effectively to bring suit to enforce such rights.

11. Non-Exclusivity of Rights. The rights conferred on Agent by this Agreement shall not be exclusive of any other right which Agent may have or hereafter acquire under any statute, provision of the Corporation’s Certificate of Incorporation or Bylaws, agreement, vote of stockholders or directors, applicable law or otherwise, both as to action in Agent’s official capacity and as to action in another capacity while holding office.

12. Survival of Rights.

12.1 The rights conferred on Agent by this Agreement shall continue after Agent has ceased to be a director, officer, employee or other agent of the Corporation or to serve at the request of the Corporation as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise and shall inure to the benefit of Agent’s heirs, executors and administrators.

12.2 The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

13. Separability. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. Furthermore, if this Agreement shall be invalidated in its entirety on any ground, then the Corporation shall nevertheless indemnify Agent to the fullest extent provided by the Bylaws, the Code or any other applicable law.

14. Governing Law. This Agreement shall be interpreted and enforced in accordance with the laws of the State of Delaware.

15. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto.

16. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.

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17. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

18. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) upon delivery if delivered by hand to the party to whom such communication was directed, or (ii) upon the third (3^rd) business day after the date on which such communication was mailed if mailed by certified or registered mail with postage prepaid:

18.1 If to Agent, to:

______________________________

______________________________

______________________________

18.2 If to the Corporation, to:

NPS Pharmaceuticals, Inc.
383 Colorow Drive
Salt Lake City, Utah 84108
Attention:	General Counsel

or to such other address as may have been furnished to Agent by the Corporation.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

AGENT	NPS PHARMACEUTICALS, INC.
/S/ N. ANTHONY COLES	By:	/S/ VAL R. ANTCZAK
N. Anthony Coles, M.D.		Val R. Antczak, Senior Vice President, General Counsel and Secretary

5

Exhibit G

to the

Employment Agreement

between

NPS Pharmaceuticals, Inc.

and

N. Anthony Coles, M.D.

CHANGE IN CONTROL SEVERANCE PAY PLAN

NPS PHARMACEUTICALS, INC.

CHANGE IN CONTROL SEVERANCE PAY PLAN

ADOPTED BY THE BOARD OF DIRECTORS

FEBRUARY 10, 2005

1. Introduction. The purpose of the NPS Pharmaceuticals, Inc. Change in Control Severance Pay Plan (the “Plan”) is to provide severance benefits to eligible employees of NPS Pharmaceuticals, Inc. and its subsidiaries (collectively “Company”) when there has been a “change in control” of the Company resulting in the eligible employee’s job prospects being “materially altered.” This Plan replaces any prior severance policy or other policy or practice under which severance benefits have been provided to employees of the Company, except as provided in Section 13 herein. This document constitutes both the written instrument under which the Plan is maintained and the summary plan description for the Plan.

2. Effective Date. The effective date of the Plan is January 1, 2005.

3. Term. The Plan shall be in effect until terminated by the Company.

4. ERISA. For Covered Employees in the United States, the Plan is intended to be, and shall be, administered and maintained as, a welfare benefit plan under the Employee Retirement Income Security Act of 1974, as amended.

5. Employment Standards Act. For Covered Employees in Canada, the Plan is intended to provide the severance benefits required under the Canadian Employment Standards Act, as amended from time to time (“Employment Standards Act”). To the extent that any provisions of the Plan conflict with the Employment Standards Act, the Employment Standards Act shall govern Covered Employees in Canada.

6. Important Terms. The following words and phases shall have the following respective meanings unless the context clearly indicates otherwise:

6.1 “Administrator” means the Company, acting through its Vice President, Human Resources, or such other person appointed by the Board.

6.2 “Base Pay” means the Covered Employee’s annual regular straight-time salary as in effect on the date of termination of employment.

6.3 “Board” means the Board of Directors of the Company.

6.4 “Cause” means (i) an act of material dishonesty by the Covered Employee in connection with the Covered Employee’s responsibilities as an employee, (ii) the Covered Employee’s conviction of, or plea of nolo contendere to, a felony, (iii) the Covered Employee’s gross misconduct in connection with the Covered Employee’s responsibilities as an employee, (iv) the Covered Employee’s violation of the Company’s written policies and procedures; or (v) the Covered Employee’s continued failure to perform his or her responsibilities as an employee after the Covered Employee has received a written demand for such performance.

6.5 “Change in Control” means (i) a dissolution or liquidation or sale of all or substantially all of the assets of the Company; (ii) a merger or consolidation in which the Company is not the surviving corporation; (iii) a reverse merger in which the Company is the surviving corporation but the shares of the Company’s common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise; (iv) a strategic corporate event, such as a merger or acquisition, where the Company is technically the surviving entity, but which the Board determines in its sole discretion that other elements of a Change in Control are present, i.e., a substantial change in the management team or composition of the Board; (v) a transaction which the Board determines in its sole discretion to constitute a Change in Control of the Company: or (vi) any other capital reorganization in which more than 50% of the shares of the Company entitled to vote are exchanged. A Change in Control does not include the occurrence of an event described in (i), (ii), (iii) or (iv) where the sole parties to the event are NPS Pharmaceuticals, Inc. and one of its subsidiaries.

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6.6 “Company” means NPS Pharmaceuticals, Inc., a Delaware corporation, and any of its wholly owned subsidiaries and any successor by merger, acquisition, consolidation or otherwise that assumes the obligations of the Company under the Plan.

6.7 “Covered Employee” means a regular full-time employee of the Company who is paid at Grade 9 or above of the Company’s Compensation Structure for Executives and Non-Executives.

6.8 “Full-Time Employee” means those employees whose employment status is expected to last four consecutive months or longer working 80 percent or more of the normal possible annual working hours for that position.

6.9 “Determination Period” means the time period, not to exceed twenty-four (24) months, beginning on the date of the Change in Control.

6.10 “Involuntary Termination” means the Company’s termination of employment of the Covered Employee after a Change in Control other than for Cause.

6.11 “Materially Altered” means (i) a material reduction in the Covered Employee’s title, authority, status or responsibilities relative to the Covered Employee’s title, authority, status or responsibilities in effect immediately prior to such reduction where such reduction was imposed without Cause, (ii) a reduction in the Covered Employee’s annualized Total Cash Compensation Target, without Covered Employee’s written consent, where such reduction was imposed without Cause; (iii) relocation of the Covered Employee’s principal place of performing his or her duties as an employee of the Company by more than thirty (30) miles, without Covered Employee’s written consent.

6.12 “Plan” means the NPS Pharmaceuticals, Inc. Change in Control Severance Pay Plan, as set forth in this document, and as hereafter amended from time to time.

6.13 “Severance Benefit” means the compensation and other benefits the Covered Employee will be provided pursuant to Section 8.

6.14 “Severance Period” means the time period, not to exceed twenty-four months, beginning on the date of a Covered Employee’s termination of employment as a result of an Involuntary Termination or the Covered Employee’s job prospects being Materially Altered as a result of a Change in Control. The Severance Period for each job classification is set forth on Exhibit A.

6.15 “Short Term Incentive” means the target percentage of the Covered Employee’s Base Salary in the Short Term Incentive Plan as determined by the Company in effect on the date of termination of employment. It does not include the short term incentive earned but not paid prior to the Covered Employee’s date of termination.

6.16 “Total Cash Compensation Target” means the Covered Employee’s Annual Base Pay and target Short Term Incentive divided by twelve (12) months and multiplied by the number of months of the Covered Employee’s Severance Period.

7. Eligibility for Severance Benefit. An individual is eligible for the Severance Benefit under the Plan, in the amount set forth in Section 8 and for the duration set forth in Exhibit A, only if he or she is a Covered Employee on the effective date of a Change in Control.

8. Severance Benefit.

8.1 Termination Following a Change in Control. Except as provided in Section 13, at any time within the Determination Period for a Covered Employee following a Change in Control (i) the Covered Employee’s job prospects are Materially Altered, or (ii) the Covered Employee’s employment is Involuntarily Terminated, other than for Cause or death or permanent disability, then the Covered Employee may exercise his or her rights under the Plan. To do so, the Covered Employee must provide the Company with written notice that he or she is exercising his or her right to such Severance Benefit within ninety (90) days of the date that his or her job prospects are Materially Altered or the Covered Employee’s employment is Involuntarily Terminated.

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Upon timely exercise of his or her rights under the Plan, the Covered Employee will receive the following Severance Benefit from the Company:

8.1.1 Total Cash Compensation Target. Within 30 days of the execution of the Release as required by Section 8.2 herein and the return of the Company’s property as required by Section 25 herein, the Covered Employee will be paid a lump sum single payment equal to his or her Total Cash Compensation Target.

8.1.2 Covered Employees in Canada. For Covered Employees in Canada, the amount of severance pay for a Covered Employee whose severance pay is governed by the Employment Standards Act will be the greater of that determined under Section 8.1.1 or the amount required under the Employment Standards Act.

8.1.3 Continued Medical Benefits. If Covered Employee, and any spouse and/or dependents of Covered Employee (“Family Members”), has medical and dental coverage on the date of Covered Employee’s termination of employment under a group health plan sponsored by the Company, the Company will reimburse Covered Employee for the total applicable premium cost for medical and dental coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986, 29 U.S.C. Sections 11611168; 26 U.S.C. Section 4980B(f), as amended, and all applicable regulations (referred to collectively as “COBRA”) for Covered Employee and his Family Members during the full term of the Severance Period (to the extent COBRA coverage lasts for the full term); provided, that the Company shall have no obligation to reimburse Covered Employee for the premium cost of COBRA coverage beginning on or after the date Covered Employee and his Family Members first become eligible to obtain comparable benefits from a subsequent employer.

8.1.4 Stock Option Accelerated Vesting and Extended Exercise Period. Provisions for acceleration of vesting upon a Change in Control as defined above are found in the Company’s Employee Stock Option Plans in effect on February 19, 2003 and options previously granted thereunder and then outstanding. Those Stock Option Plans and Options also provide for an extended time for exercise of such Options upon an Involuntary Termination initiated by the Covered Employee or a termination initiated by the Company in either case upon a Change in Control for Company employees generally and for Covered Employees in particular. The terms of such stock option plans and grants made thereunder remain in full force and effect.

8.1.5 Short Term Incentive Earned Prior to Date of Termination. In the event that the Covered Employee’s date of termination is prior to the date that the amount of short term incentive earned by employees of the Company for that year is determined, if any, the Covered Employee will be entitled to receive, in addition to the Total Cash Compensation Target, a pro rata share of his or her actual short term incentive earned for such year, if any, e.g., if the Covered Employee’s date of termination is July 1, he or she will be entitled to receive 50% of his or her actual short term incentive. Such pro rata short term incentive payment will be paid according to the terms of the Company’s compensation program in effect for the calendar year in which the Involuntary Termination of the Covered Employee occurs. The Covered Employee’s pro rata share of actual short term incentive for such year will be paid to the Covered Employee at the same time that it is paid to employees of the Company generally, regardless of the Covered Employee’s date of termination of employment.

8.2 Release. As a condition to receiving Severance Benefits under this Plan, each Covered Employee will be required to sign a waiver and release of all claims arising out of the termination of the Covered Employee’s employment with the Company and its subsidiaries and affiliates, in the form set forth on Exhibit B.

8.3 Vacation and PTO Days. Any unused vacation or personal time off (“PTO”) pay accrued as of a Covered Employee’s date of Involuntary Termination will be paid at the time the Covered Employee receives his or her Total Cash Compensation Target payment. No Covered Employee may use any accrued but unused vacation or PTO pay to extend his or her Involuntary Termination date or to postpone or delay the start of his or her Severance Period.

9. Withholding. The Company will withhold from any Severance Benefit all federal, state, local and other taxes required to be withheld therefrom and any other required payroll deductions.

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10. Administration. The Company is the Administrator of the Plan (within the meaning of section 3(16)(A) of ERISA). The Plan will be administered and interpreted by the Administrator (in his or her sole discretion). The Administrator is the “named fiduciary” of the Plan for purposes of ERISA and will be subject to the fiduciary standards of ERISA when acting in such capacity. Any decision made or other action taken by the Administrator with respect to the Plan, and any interpretation by the Administrator of any term or condition of the Plan, or any related document, will be conclusive and binding on all persons and be given the maximum possible deference allowed by law. The Administrator has the authority to act for the Company (in a non-fiduciary capacity) as to any matter pertaining to the Plan; provided, however, that this authority does not apply with respect to (a) the Company’s power to amend or terminate the Plan or (b) any action that could reasonably be expected to increase significantly the cost of the Plan, the authority to take such actions is subject to the prior approval of the Board.

11. Eligibility to Participate. The Administrator will not be excluded from participating in the Plan if otherwise eligible, but he or she is not entitled to act or pass upon any matters pertaining specifically to his or her own benefit or eligibility under the Plan. The chief executive officer of the Company will act upon any matters pertaining specifically to the benefit or eligibility of the Administrator under the Plan.

12. Amendment or Termination. The Company reserves the right to amend or modify the Plan at any time, without advance notice to any Covered Employee, including but not limited to the Severance Periods set forth on Exhibit A. Notwithstanding the preceding, no amendment or modification of the Plan shall impair the rights of any Covered Employee, unless mutually agreed otherwise between the Covered Employee and the Company, which agreement must be in writing and signed by the Covered Employee and the Company. The Plan will automatically terminate on March 31, 2008 unless the Company determines otherwise; provided, however, if there are any outstanding Determination Periods or Severance Periods on March 31, 2008, then the Plan will remain in effect until all Severance Benefits have been paid with respect to any such Determination Periods and Severance Periods. The Company shall not have the power to terminate the Plan prior to March 31, 2008 without the consent of the affected Covered Employees.

13. Severance Agreements for Certain Covered Employees. Certain Covered Employees have previously entered into written severance agreements with the Company prior to December 1, 2004. Such Covered Employees will not be entitled to severance benefits under both the Plan and their written agreements. Within five (5) days of the Covered Employee’s Involuntary Terminaion, the Covered Employee shall elect whether he or she will receive benefits under the written severance agreement or the Plan.

14. Claims Procedure. Any employee or other person who believes he or she is entitled to any payment under the Plan may submit a claim in writing to the Administrator or his or her designee. If the claim is denied (in full or in part), the claimant will be provided a written notice explaining the specific reasons for the denial and referring to the provisions of the Plan on which the denial is based. The notice will also describe any additional information needed to support the claim. The denial notice will be provided within 90 days after the claim is received. If special circumstances require an extension of time (up to 90 days), written notice of the extension will be given within the initial 90-day period.

15. Appeal Procedure. If the claimant’s claim is denied, the claimant (or his or her authorized representative) may apply in writing to the Administrator for a review of the decision denying the claim. Review must be requested within 60 days following the date the claimant received the written notice of their claim denial or else the claimant loses the right to review. The claimant (or representative) then has the right to review pertinent documents and to submit issues and comments in writing. The Administrator will provide written notice of his or her decision on review within 60 days after it receives a review request. If additional time (up to 60 days) is needed to review the request, the claimant (or representative) will be given written notice of the reason for the delay.

16. Source of Payments. All Severance Benefits will be paid in cash from the general funds of the Company; no separate fund will be established under the Plan; and the Plan will have no assets. No right of any person to receive any payment under the Plan will be any greater than the right of any other general unsecured creditor of the Company.

17. Inalienability. In no event may any current or former employee of the Company or any of its subsidiaries or affiliates sell, transfer, anticipate, assign or otherwise dispose of any right or interest under the Plan. At no time will any such right or interest be subject to the claims of creditors nor liable to attachment, execution or other legal process.

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18. No Enlargement of Employment Rights. Neither the establishment or maintenance of the Plan, any amendment of the Plan, nor the making of any benefit payment hereunder, will be construed to confer upon any individual any right to be continued as an employee of the Company. The Company expressly reserves the right to discharge any of its employees, including Covered Employees, at any time, with or without cause.

19. Applicable Law and Choice of Forum. The provisions of the Plan will be construed, administered and enforced in accordance with ERISA and, to the extent applicable, the laws of Canada or the State of Utah. The Covered Employee agrees that any action brought under the Plan will be brought in the State of Utah.

20. Severability. If any provision of the Plan is held invalid or unenforceable, its invalidity or unenforceability will not affect any other provision of the Plan, and the Plan will be construed and enforced as if such provision had not been included.

21. Headings. Headings in this Plan document are for purposes of reference only and will not limit or otherwise affect the meaning hereof.

22. Indemnification. The Company hereby agrees to indemnify and hold harmless the officers and employees of the Company, and the members of its boards of directors, from all losses, claims, costs or other liabilities arising from their acts or omissions in connection with the administration, amendment or termination of the Plan, to the maximum extent permitted by applicable law. This indemnity will cover all such liabilities, including judgments, settlements and costs of defense. The Company will provide this indemnity from its own funds to the extent that insurance does not cover such liabilities. This indemnity is in addition to and not in lieu of any other indemnity provided to such person by the Company by written agreement, by-laws, incorporation documents or state law.

23. Breach and Attorneys’ Fees. In the event that a Covered Employee breaches the waiver and release attached as Exhibit B, to the fullest extent permitted by law (including the Employment Standards Act), the Company shall be entitled to pursue all legal remedies against the Covered Employee and the Covered Employee shall be liable to the Company for its reasonable attorneys’ fees and costs incurred in pursuing such legal remedies.

24. Representations by the Company. Except as provided in Section 12 above, no employee, officer, director, or agent of the Company has the authority to alter, vary, modify, or waive the terms and conditions of the Plan. Except as provided in Section 13 above, no verbal or written representations that are in addition to or contrary to the terms of the Plan and its written amendments shall be binding on the Plan, the Administrator or the Company.

25. Return of Company Property. All property of the Company, including but not limited to keys, credit cards, documents, records, office equipment, computers, cell phones, etc., must be returned by the Covered Employee to the Company within five (5) business days of the Covered Employee’s Involuntary Termination in order for the Covered Employee to receive the Severance Benefit.

26. Additional Information.

Plan Name:	NPS Pharmaceuticals, Inc. Change in Control Severance Pay Plan
Plan Sponsor:	NPS Pharmaceuticals, Inc. 383 Colorow Drive Salt Lake City, Utah 84108 (801) 883-4939
Identification Numbers:	EIN: 87-0439579 PLAN: 501
Plan Year:	Calendar year

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Plan Administrator:	NPS Pharmaceuticals, Inc. Attention: Vice President, Human Resources 300 Interspace Parkway, 4th Floor, Building B Parsippany, New Jersey 07054 (973) 394-8600
Agent for Service of Legal Process:	NPS Pharmaceuticals, Inc. Attention: General Counsel NPS Pharmaceuticals, Inc. 383 Colorow Drive Salt Lake City, Utah 84108 (801) 883-4939

27. Statement of ERISA Rights for U.S. Employees. Under ERISA, Covered Employees have certain rights and protections:

27.1 You may examine (without charge) all Plan documents, including any amendments and copies of all documents filed with the U.S. Department of Labor, such as the Plan’s annual report (IRS Form 5500). These documents are available for your review in the Company’s Human Resources Department.

27.2 You may obtain copies of all Plan documents and other Plan information upon written request to the Plan Administrator. A reasonable charge may be made for such copies.

27.3 In addition to creating rights for Covered Employees, ERISA imposes duties upon the people who are responsible for the operation of the Plan. The people who operate the Plan (called “fiduciaries”) have a duty to do so prudently and in the interests of you and the other Covered Employees. No one, including the Company or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit under the Plan or exercising your rights under ERISA. If your claim for a severance benefit is denied, in whole or in part, you must receive a written explanation of the reason for the denial. You have the right to have the denial of your claim reviewed. (The claim review procedure is explained in Sections 10 and 11 above.)

27.4 Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and to pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim that is denied or ignored, in whole or in part, you may file suit in a state or federal court. If it should happen that you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court.

27.5 In any case, the court will decide who will pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds that your claim is frivolous.

27.6 If you have any questions regarding the Plan, please consult the Company’s Human Resources Department. If you have any questions about this statement or about your rights under ERISA, you may contact the nearest area office of the Employee Benefits Security Administration (formerly the Pension and Welfare Benefits Administration), U.S. Department of Labor, listed in your telephone directory, or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, N.W. Washington, D.C. 20210.

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EXHIBIT A

SEVERANCE PERIOD FOR EACH JOB CLASSIFICATION

1. Employees in Grades 9-11: 9 Months Total Cash Compensation Target.

2. Non-Officer Vice Presidents (Tier 5): 12 Months Total Cash Compensation Target.

3. Officer Level Vice Presidents (Tiers 2-4): 18 Months Total Cash Compensation Target

4. Chief Executive Officer and Chief Operating Officer: 24 Months Total Cash Compensation Target

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EXHIBIT B

WAIVER AND RELEASE AGREEMENT

1. For good and valuable consideration (as provided in paragraph 2 below),                  (hereinafter the “Employee”), with the intention of binding himself or herself and his or her heirs, executors, administrators and assigns, does hereby release NPS Pharmaceuticals, Inc. and its affiliates and subsidiaries and their affiliated companies, divisions, subsidiaries, successors, predecessors and assigns, and their respective present and former officers, directors, executives, agents, attorneys and employees (collectively the “Released Parties”), of and from any and all claims, actions, causes of action, demands, attorneys’ fees and liabilities of whatever kind or nature in law, equity or otherwise, whether now known or unknown, federal or state, which the Employee, individually or as a member of a class, now has, owns or holds, or has at any time heretofore had, owned or held, against any Released Party arising out of or in any way connected with the Employee’s employment relationship with the Released Parties, or the termination thereof, up to the date of this Waiver and Release Agreement (“Agreement”). Such claims include without limitation, any claims for severance or vacation or other benefits, unpaid wages, salary or incentive payment, breach of contract, wrongful discharge, or employment discrimination under any applicable federal, state or local statute, provision, order or regulation including, but not limited to, any claim under the Age Discrimination in Employment Act (“ADEA”). The Employee specifically waives any and all claims for back pay, front pay, or any other form of compensation, except as set forth herein.

Notwithstanding the foregoing, the Employee does not waive rights, if any, the Employee may have to unemployment insurance benefits or workers’ compensation benefits. The Employee does not waive any claims or rights under the ADEA which may arise from events occurring after the date of this Agreement.

2. In reliance on the releases and agreements set forth herein and pursuant to the NPS Pharmaceuticals, Inc. Change in Control Severance Pay Plan (“Plan”), the Employee shall receive the gross amount of                                                                                             ($            ), less applicable federal and state withholding taxes, in accordance with Section 8.1.1 of the Plan. The Employee acknowledges that he or she would not be entitled to the total amount provided herein without signing this Agreement.

3. The Employee acknowledges and agrees that neither the Plan nor this Agreement is to be construed in any way as an admission of any liability whatsoever by any Released Party under any federal or state statute or the principles of common law, any such liability having been expressly denied.

4. The Employee acknowledges and agrees that he or she has not, with respect to any transaction or state of facts existing prior to the date of execution of this Agreement, filed any complaints, charges or lawsuits against any of the Released Parties with any governmental agency or any court or tribunal, and that he or she will not do so at any time hereafter. The parties to this Agreement understand that the Employee does not waive any rights or claims that may arise after the date that this Agreement is executed.

5. The Employee acknowledges and agrees that it continues to be bound by the confidentiality provisions of the Employee Agreement Concerning Invention Assignment, Non-Disclosure and Non-Competition.

6. In the event that the Employee breaches this Agreement, to the fullest extent permitted by law (including the Employment Standards Act), the Company shall be entitled to pursue all legal remedies against the Employee and the Employee shall be liable to the Company for its reasonable attorneys’ fees and costs incurred in pursuing such legal remedies.

7. The Employee further declares and represents that he or she has carefully read and fully understands the terms of this Agreement and the Plan, that he or she has been given not less than forty-five (45) days to consider this Agreement and, if applicable, the statistical data provided to him or her, that he or she has been advised to seek, and has had the opportunity to seek, the advice and assistance of counsel with regard to this Agreement and the terms of the Plan, and that he or she knowingly and voluntarily, of his or her own free will, without any duress, being fully informed and after due deliberate thought and action, accepts the terms of and signs this Agreement as his or her own free act.

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8. The Employee acknowledges and understands that he or she may revoke this Agreement within seven (7) days of signing it by sending a written notice of revocation to Vice President, Human Resources, NPS Pharmaceuticals, Inc., 300 Interspace Parkway, 4^th Floor, Building B, Parsippany, New Jersey 07054. The Employee further understands that if he or she revokes this Agreement, it shall not be effective or enforceable and he or she will not receive any payments or other benefits provided for in the Plan. This Agreement shall not become effective or enforceable until the revocation period has expired, but shall be final and binding on the eighth (8^th) day after it has been executed.

DATED this             day of             , 200    .

[Employee]

The foregoing instrument was acknowledged before me this      day of                     , 200    , by [Employee].

NOTARY PUBLIC

Residing at:                                                                 

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EX-10.23(A)

Exhibit 10.23A

EXECUTION VERSION

AGREEMENT OF PURCHASE AND SALE

(383 Colorow Drive, Salt Lake City, Utah)

This Agreement of Purchase and Sale (“Agreement”) is made as of the 20^th day of December 2005 (“Effective Date”) between NPS Pharmaceuticals, Inc., a Delaware corporation (“Seller”), and BioMed Realty, L.P., a Maryland limited partnership (“Purchaser”).

Subject to the terms and conditions of this Agreement, Seller will sell to Purchaser, and Purchaser will purchase from Seller the Property (as defined below), including an approximately 93,650 rentable square foot, three-story, laboratory and office building located at 383 Colorow Drive, Salt Lake City, Utah 84108 (the “Building”). The land underlying the Building is not owned by Seller and is subject to that certain Ground Lease dated the 10^th day of December, 2003 (the “Ground Lease”), between the Seller, as lessee, and the University of Utah, as ground lessor (“Ground Lessor”).

ARTICLE 1. PROPERTY/PURCHASE PRICE

1.1. Property. Subject to the terms and conditions of this Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, the following property (collectively, the “Property”):

(a) The Building;

(b) Seller’s leasehold interest in the land described in Exhibit A attached hereto (the “Land”), subject to the terms and conditions of the Ground Lease, and all other right, title and interest of Seller in and to (i) all and singular the rights, benefits, privileges, easements, tenements, hereditaments, and appurtenances thereon or in anyway appertaining to such Land; and (ii) all strips and gores and any land lying in the bed of any street, road or alley, open or proposed, adjoining such Land;

(c) All right, title and interest of Seller in and to all improvements and fixtures located on the Land (the “Improvements”), except for tangible personal property and other trade fixtures and equipment owned by Seller, which shall not be part of the Improvements or this Agreement and shall remain the property of Seller; provided, however, all electrical, plumbing, HVAC, life safety systems, attached laboratory benches, autoclaves, climatized rooms, and gas and liquid distribution systems, shall be included as part of the Improvements and assigned to Purchaser at Closing. The Building, Land and Improvements are collectively referred to herein as the “Real Property; and

(d) The “Intangible Property,” being all, right, title and interest of Seller, if any, in and to: (i) all intangible personal property now or hereafter used exclusively in connection with the operation, ownership, maintenance, management, or occupancy of the Real Property (to the extent assignable); (ii) the plans and specifications for the Improvements (to the extent assignable); (iii) warranties, indemnities, applications, permits, approvals and licenses (to the extent applicable in any way to the above referenced Real Property or the Tangible Personal Property and assignable); and (iv) insurance proceeds and condemnation awards or claims thereto to the extent provided be assigned to Purchaser hereunder.

1.2. Purchase Price. The total purchase price to be paid to Seller by Purchaser for the Property shall be NINETEEN MILLION DOLLARS ($19,000,000) (the “Purchase Price”). The Purchase Price, as adjusted for prorations, deposits and other adjustments as provided herein, shall be paid to Escrow Agent by wire transfer of immediately available funds or in cash.

1.3. Deposit of Earnest Money. Within two (2) business days (in this Agreement, a business day shall mean any day of the year other than any Saturday or Sunday or any other day on which banks

located in San Diego, California generally are closed for business) after the Effective Date, Purchaser shall deposit $250,000 in cash (such amount, including any interest earned thereon, the “Earnest Money”) with the Escrow Agent (as defined below). The Escrow Agent shall hold and disburse the Earnest Money in accordance with the escrow provisions in Exhibit B. Prior to the expiration of the Due Diligence Period (as defined below), the Earnest Money shall be promptly returned to Purchaser upon termination of this Agreement pursuant to Section 2.2. Following the expiration of the Due Diligence Period, the Earnest Money shall be non-refundable, except as otherwise provided herein. Seller shall not deliver any instruction to the Escrow Agent calling for disbursement of the Earnest Money to Seller except following the occurrence of Purchaser’s default hereunder and the expiration of any applicable cure period or as otherwise expressly provided in this Agreement, and Seller further agrees to provide Purchaser with a copy of such instruction concurrently with the delivery thereof to the Escrow Agent. Provided such supplemental escrow instructions are not in conflict with this Agreement as it may be amended in writing from time to time, Seller and Purchaser agree to execute such supplemental escrow instructions as may be appropriate to enable Escrow Agent to comply with the terms of this Agreement.

1.4. Title Company and Escrow Agent. The “Escrow Agent” and “Title Company” are: LandAmerica Commercial Services, 750 B Street #3000, San Diego, CA 92101, Attn: Paula Mraz (Tel #: (619) 230-6352: Fax#: (619) 233-4684).

1.5. Closing Date. The “Closing Date” shall mean December 22, 2005.

ARTICLE 2. INSPECTION

2.1. Seller’s Delivery of Specified Documents. To the extent such items exist and are in Seller’s possession or control, Seller shall provide or make available to Purchaser at the Property the information and documents set forth on Exhibit C attached hereto (the “Property Information”) on the Effective Date. Seller agrees to cooperate with Purchaser and make copies, at Purchaser’s expense, of such documentation as Purchaser may request during the course of Purchaser’s review of the Property Information. The terms “Operating Statements,” and “Service Contracts” are defined in Exhibit C. Seller shall have the continuing obligation during the pendency of this Agreement to provide Purchaser with any document described in Exhibit C and coming into Seller’s or its property manager’s possession or produced by or for Seller after the initial delivery of the Property Information.

2.2. Due Diligence. Purchaser shall have until December 21, 2005 (the “Due Diligence Period”) in which to examine, inspect, and investigate the Property, and, in Purchaser’s sole and absolute judgment and discretion, to determine whether the Property is satisfactory to Purchaser to proceed with this transaction. Purchaser may terminate this Agreement pursuant to this Section 2.2 by giving written notice of termination to Seller on or before the last day of the Due Diligence Period, and in the event Purchaser terminates this Agreement, Purchaser shall promptly thereafter return to Seller all documents that Seller shall have provided to Purchaser in connection with the Property, the Earnest Money shall be refunded to Purchaser immediately upon request, and all further rights and obligations of the parties under this Agreement shall terminate except for those that expressly survive such termination.

2.3. Access. Upon reasonable prior notice to Seller, Purchaser and its agents, employees, consultants, lenders and representatives shall have reasonable access to the Property and all books and records for the Property that are in Seller’s possession or control for the purpose of conducting surveys, appraisals, architectural, engineering, structural, mechanical, geotechnical and environmental inspections and tests, and any other inspections, studies, or tests reasonably required by Purchaser; provided, however, Purchaser may not conduct any invasive testing without Seller’s prior written consent (which consent shall not be unreasonably withheld) and Seller shall have the right to accompany Purchaser during all activities conducted at the Property. Invasive testing shall include but not be limited to any testing, studies or inspections that may disturb the Property in a material respect or interfere with the use of the Building or Seller’s business. If any inspection or test disturbs the Property in a material respect,

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Purchaser will restore the Property to its condition before any such inspection or test. Purchaser shall provide to Seller, at Seller’s expense, copies of the results of all such inspections, studies or tests required by Purchaser. During the pendency of this Agreement, Purchaser and its agents, employees, consultants, lenders and representatives shall have a continuing right of reasonable access to the Property and any office where the records of the Property are kept, with at least two (2) days prior notice, for the purpose of examining and making copies, at Purchaser’s sole expense, of all books and records and other materials relating to the Property in Seller’s possession or control. Purchaser shall have the right to conduct a “walk-through” of the Property before the Closing upon at least two (2) days prior notice to Seller. In the course of its investigations, Purchaser may make inquiries concerning the Real Property to third parties, including, without limitation, representatives, contractors, parties to Service Contracts and municipal, local and other government officials and representatives in accordance with the terms of this Agreement, and Seller consents to such inquiries. Purchaser hereby indemnifies, protects, defends (with counsel reasonably acceptable to Seller) and holds Seller and the Property free and harmless from and against any and all costs, losses, liabilities, damages, lawsuits, judgments, actions, proceedings, penalties, demands, attorneys’ fees, mechanic’s liens, or expenses of any kind or nature whatsoever (“Claims”), to the extent caused by any entry and/or activities upon the Property by Purchaser, Purchaser’s agents, contractors and/or subcontractors, provided, however, Purchaser shall not indemnify Seller against any Claims caused by Seller’s negligence or willful misconduct, or Claims arising out of conditions that were present before Purchaser entered the Property, except to the extent that Purchaser’s activities (a) are unreasonable in the context of the information provided to Purchaser, or reasonably evident to Purchaser, with respect to such existing condition, and (b) exacerbate such existing conditions. The foregoing indemnity obligations shall survive the termination of this Agreement and the Closing.

2.4. Ground Lessor Estoppel. Seller shall endeavor to secure and deliver to Purchaser an estoppel certificate from Ground Lessor under the Ground Lease substantially in the form of Exhibit D attached hereto (the “Ground Lessor Estoppel”). The Ground Lessor Estoppel shall be delivered to Ground Lessor no later than one (1) day after the Effective Date, and Seller shall apply commercially reasonable efforts to obtain the same, duly executed by Ground Lessor, and deliver the same to Purchaser no later than one (1) day after the Effective Date. Seller shall provide Purchaser with copies of the Ground Lessor Estoppel in the form attached hereto as Exhibit D for Purchaser’s review and comment before delivering the Ground Lessor Estoppel to Ground Lessor. If Ground Lessor fails to deliver the Ground Lessor Estoppel, then Seller may elect to satisfy the requirement to obtain such estoppel by delivering an estoppel certificate in the form attached hereto as Exhibit E.

2.5. Service Contracts; Property Management and Leasing Agreements; Property Employees. During the Due Diligence Period, Purchaser shall notify Seller as to which Service Contracts Purchaser will assume and which Service Contracts shall be terminated by Seller in Purchaser’s sole discretion. Purchaser will assume the obligations arising from and after the Closing Date under those Service Contracts which Purchaser has elected to assume. Seller shall terminate at Closing all Service Contracts that are not so assumed, provided that such termination does not expose Seller to liability. Seller shall terminate at Closing, and Purchaser shall not assume, any property management or leasing agreement affecting the Property.

ARTICLE 3. TITLE AND SURVEY REVIEW

3.1. Delivery of Preliminary Title Report and Survey. Seller shall cause to be delivered to Purchaser on the Effective Date, any existing survey of the Land and the Building in Seller’s possession or control. Purchaser may, in its sole discretion, and at its sole expense, obtain a new ALTA-ACSM Urban survey of the Property (the “Survey”) prior to the expiration of the Due Diligence Period, including a certification addressed to Purchaser, substantially in the form attached hereto as Exhibit F. The Survey shall plot all plotable easements benefiting the Property. Purchaser may, in its sole discretion, obtain a preliminary title report (the “Preliminary Title Report”) issued by the Title Company. The Preliminary Title Report, the documents referred to therein, and the Survey are referred to herein collectively as the “Title Documents.”

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3.2. Title Review and Cure. During the Due Diligence Period, Purchaser shall review title to the Property as disclosed by the Title Documents. Purchaser shall be entitled to object to any title matters shown in the Title Documents, in its sole discretion, by a written notice of objections delivered to Seller on or before the expiration of the Due Diligence Period. Purchaser shall notify the Seller before the expiration of the Due Diligence Period which title exceptions (excluding survey matters), if any, will not be accepted by Purchaser (the “Title Notice”). If Purchaser fails to notify Seller in writing of its disapproval of any exceptions before the expiration of the Due Diligence Period, Purchaser shall be deemed to have approved the condition of title to the Real Property. If Purchaser notifies Seller in writing that Purchaser objects to any exceptions to title, Seller shall have one (1) business day after receipt of the Title Notice to notify Purchaser of either of the following: (a) that Seller will remove all such objectionable exceptions from title on or before the Closing; (b) that Seller will remove certain objectionable exceptions from title on or before the Closing; or (c) that Seller elects not to cause such exceptions to be removed. If Seller fails to notify Purchaser within such one (1) business day period, then Seller shall be deemed to have made an election under the foregoing clause (c). Notwithstanding the foregoing or any other provision of this Agreement, all monetary obligations (including, without limitation, mechanics’ and materialmens’ liens or claims thereof, any liens or encumbrances that secure obligations for borrowed money and any exceptions or encumbrances to title which are created by or through Seller after the Effective Date) disclosed in the Preliminary Title Report constituting a lien against the Real Property are to be satisfied by Seller before Closing. With respect to any other objections, Seller will reasonably cooperate with Purchaser in curing such objections. The procurement by Seller of a commitment for the issuance of the Title Policy (as defined in Section 5.2(f) hereof) or an endorsement thereto insuring Purchaser, in a manner acceptable to Purchaser, against any title exception which was disapproved pursuant to this Section 3.2 shall be deemed a cure by Seller of such disapproval. If Seller gives Purchaser notice under clause (b) or (c) above, Purchaser shall have one (1) business day after the date of such notice in which to notify Seller that Purchaser will nevertheless proceed with the purchase in accordance with the provisions of this Agreement and take title to the Property subject to such exceptions, or that Purchaser will terminate this Agreement and receive a refund of the Earnest Money. If Purchaser does not terminate this Agreement or deliver a Title Notice to Seller before the expiration of the Due Diligence Period pursuant to Section 2.2, then Purchaser shall have been deemed to have approved any title exception set forth in the Title Documents that Seller is not obligated to remove and Seller did not agree in writing to remove or cure. If after the expiration of the Due Diligence Period the Title Company revises the Preliminary Title Report or the surveyor revises the Survey, to add or modify exceptions, then Purchaser may terminate this Agreement and receive a refund of the Earnest Money if the provision for their removal or modification satisfactory to Purchaser is not made. In such case, the Closing Date shall be extended for up to ten (10) days in order for Purchaser and Seller to determine if such exception can be resolved and to give Purchaser the opportunity to terminate this Agreement and receive a refund of the Earnest Money if the exception is not removed.

3.3. Permitted Exceptions and Endorsements. “Permitted Exceptions” means the following exceptions approved or deemed approved by Purchaser pursuant to this Agreement: real estate taxes not yet due and payable; the Ground Lease; tenants in possession as tenants only under the lease agreement to be entered into between Seller, as tenant, and Purchaser, as landlord, at Closing (the “NPS Lease”); the form of which is attached hereto as Exhibit J, and the exceptions approved (or deemed approved) by Purchaser pursuant to the terms of Section 3.2 above. For the avoidance of doubt, the general exceptions in the Preliminary Title Report will be removed upon issuance of the ALTA extended coverage title policy to be issued in this transaction and are not Permitted Exceptions. “Purchaser’s Endorsements” shall mean, to the extent such endorsements are available under the laws of the state in which the Property is located: (1) owner’s comprehensive; (2) access; (3) survey (accuracy of survey); (4) location (survey legal matches title legal); (5) separate tax lot; (6) subdivision map act; (7) zoning 3.1, with parking and loading docks; (8) mechanic’s lien; (9) deletion of creditors’ rights exception; (10) endorsement over

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environmental protection liens; (11) utilities endorsement; (12) leasehold endorsement; and (13) such other endorsements as Purchaser may require during the Due Diligence Period based on its review of the Preliminary Title Report and Survey.

3.4. ALTA Statement. Seller shall execute at Closing an ALTA Statement (Owner’s Affidavit) and any other documents, undertakings or agreements, including a mechanic’s lien indemnity, customarily required by the Title Company to enable it to issue the Title Policy (as defined in Section 5.2(f) hereof) in accordance with the provisions of this Agreement.

ARTICLE 4. GROUND LEASE, OPERATIONS AND RISK OF LOSS

4.1. Ground Lease.

(a) Waiver. On or before the Effective Date, Ground Lessor shall have waived its option to purchase right under Article VI of the Ground Lease;

(b) Consent. No later than one (1) business day after the Effective Date, Seller shall use commercially reasonable efforts to obtain a consent from Ground Lessor, consenting to the NPS Lease and the transfer of Seller’s leasehold interest in the Land and Improvements to Purchaser, in form and substance reasonably satisfactory to Purchaser;

(c) Transfer Costs. Seller shall pay, if any, all: (i) transfer fees and other fees, costs and expenses charged by Ground Lessor in connection with the assignment of the Ground Lease, and (ii) recording costs and expenses relating to the recordation of the amendment to the Ground Lease. Each party shall pay the fees charged by its attorneys in connection with the assignment of the Ground Lease;

(d) Cooperation. The parties shall cooperate in good faith and with reasonable diligence to secure the approval of Ground Lessor to the assignment of the Ground Lease to Purchaser and the NPS Lease prior to the expiration of the Due Diligence Period.

4.2. Ongoing Operations. During the pendency of this Agreement:

(a) Preservation of Business. Seller shall cause the Property to be operated only in the ordinary and usual course of business and consistent with past practice, shall, subject to reasonable wear and tear, preserve intact the Property, preserve the good will and advantageous relationships of Seller with customers, suppliers, independent contractors, employees and other persons or entities material to the operation of its business, shall perform its obligations under any agreements affecting the Property and shall not take any action or omission which would cause any of the representations or warranties of Seller contained herein to become inaccurate or any of the covenants of Seller to be breached.

(b) Maintenance of Insurance. Seller shall continue to carry its existing insurance through the Closing Date, and shall not allow any breach, default, termination or cancellation of such insurance policies or agreements to occur or exist.

(c) New Contracts. Without Purchaser’s prior written consent in each instance, Seller will not enter into or amend, terminate, waive any default under, or grant concessions regarding any contract or agreement that will be an obligation affecting the Property or binding on Purchaser after the Closing.

(d) Leasing Arrangements. Seller will not enter into any lease, sublease of space or other occupancy agreements affecting the Real Property, and any and all amendments and supplements thereto, and any and all guaranties and security received by landlord in connection therewith (except the NPS Lease) without Purchaser’s prior written consent.

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(e) Maintenance of Permits. Seller shall maintain in existence all licenses, permits and approvals, if any, in its name necessary or reasonably appropriate to the ownership, operation or improvement of the Property.

(f) Ground Lease. Seller covenants and agrees to comply with the terms of the Ground Lease.

(g) Exclusive Negotiations. Seller shall: (i) remove the Property from the market, and (ii) not actively solicit or negotiate with any other prospective purchasers of the Property.

4.3. Damage. All risk of loss with respect to the Property shall remain with Seller until the Closing and delivery of the Deed (as defined below) vesting title in Purchaser, when full risk of loss with respect to the Property shall pass to Purchaser. Seller shall promptly give Purchaser written notice of any damage to the Property, describing such damage, whether such damage is covered by insurance and the estimated cost of repairing such damage, provided that such damage is known to Seller. If such damage is not material, then the parties shall proceed to close this transaction, and Seller shall, to the extent possible, begin repairs prior to the Closing out of any insurance proceeds received by Seller for the damage, and shall transfer and assign any remaining insurance proceeds or rights thereto to Purchaser at the Closing. If such damage is material, Purchaser may elect (in its sole discretion) by notice to Seller given within ten (10) days after Purchaser is notified of such damage (and the Closing shall be extended, if necessary, to give Purchaser such ten (10) day period to respond to such notice) to proceed in the same manner as in the case of damage that is not material or to terminate this Agreement, in which event the Earnest Money shall be returned to Purchaser. Damage as to any one or multiple occurrences is material if the cost to repair the damage, as reasonably estimated by Seller’s contractor (if Seller has engaged a contractor to perform the work), and otherwise by a contractor approved by both Purchaser and Seller, acting reasonably, exceeds $100,000. An affiliate of Seller may be engaged as Seller’s contractor, provided Seller discloses the relationship of such affiliate to Purchaser.

4.4. Condemnation. Seller shall promptly give Purchaser notice of any eminent domain proceedings that are contemplated, threatened or instituted with respect to the Property. By notice to Seller given within ten (10) days after Purchaser receives notice of proceedings in eminent domain that are contemplated, threatened or instituted by any body having the power of eminent domain with respect to the Property, and if necessary the Closing Date shall be extended to give Purchaser the full ten (10) day period to make such election, Purchaser may terminate this Agreement, in which event the Earnest Money shall be returned to Purchaser, or proceed under this Agreement, in which event Seller shall, at the Closing, assign to Purchaser its entire right, title and interest in and to any condemnation award, and Purchaser shall have the right during the pendency of this Agreement to negotiate and otherwise deal with the condemning authority in respect of such matter.

ARTICLE 5. CONDITIONS PRECEDENT

5.1. Conditions to Seller’s Obligation to Close. In addition to all other conditions set forth herein, the obligation of Seller to consummate the transactions contemplated hereunder shall be contingent upon the following:

(a) Representations. Purchaser’s representations and warranties contained herein shall be true and correct as of the date of this Agreement and the Closing Date;

(b) Performance. As of the Closing Date, Purchaser shall have performed its obligations hereunder and all deliveries to be made by Purchaser at Closing have been tendered;

(c) Ground Lease. Ground Lessor’s consent to the assignment of the Ground Lease shall have been obtained; and

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(d) Other Condition. Any other condition set forth in this Agreement to Seller’s obligation to close shall have been satisfied by the applicable date.

5.2. Conditions to Purchaser’s Obligation to Close. In addition to all other conditions set forth herein, the obligation of Purchaser to consummate the transactions contemplated hereunder shall be contingent upon the following:

(a) Representations. Seller’s representations and warranties contained herein shall be true and correct as of the date of this Agreement and the Closing Date;

(b) Performance. As of the Closing Date, Seller shall have performed its obligations hereunder and all deliveries to be made by Seller at Closing have been tendered;

(c) Default. As of the Closing Date, Seller shall not be in default under any agreement to be assigned to, or obligation to be assumed by, Purchaser under this Agreement;

(d) Physical Condition. The physical condition of the Property shall be substantially the same on the Closing Date as on the Effective Date, reasonable wear and tear excepted, unless the alteration of said physical condition is caused by Purchaser during the due diligence inspections or the result of a casualty loss or proceeding in eminent domain, in which case the provisions of Sections 4.2 and 4.3 shall govern;

(e) Ground Lease Condition. (1) Seller shall have obtained and delivered to Purchaser at least one (1) business days prior to the expiration of the Closing Date, (i) the Ground Lessor Estoppel substantially in the form required pursuant to Section 2.4, and (ii) Ground Lessor’s consent to the assignment of the Ground Lease shall have been obtained, and (2) as of the Closing Date, the Ground Lease shall be in full force and effect and no default, dispute or controversy shall exist under the Ground Lease;

(f) Title. Upon the sole condition of payment of the premium, at Closing, the Title Company shall irrevocably commit to issue to Purchaser an ALTA Owner’s Policy of title insurance, with extended coverage (i.e., with ALTA General Exceptions deleted), dated as of the date and time of the recording of the Deed (as defined below) vesting title in Purchaser, in the amount of the Purchase Price, insuring Purchaser as owner of good, marketable and indefeasible fee simple title to the Building and the Improvements, and Purchaser as holder of the leasehold interest in the Land pursuant to the Ground Lease, subject only to the Permitted Exceptions, and containing the Purchaser’s Endorsements (the “Title Policy”);

(g) Title Exceptions. Seller shall have cured all exceptions that it agreed to cure, or was deemed to have agreed to cure, in accordance with Section 3.2. In the event Seller has not cured such exceptions, in Purchaser’s sole discretion, Purchaser shall have the option to: (a) extend the Closing for up to thirty (30) days to allow Seller the opportunity to cure such exceptions which Seller has agreed to cure but has not yet cured, or (b) proceed with the Closing and receive a credit from Seller for the total cost to cure such exceptions;

(h) Bankruptcy. No proceeding has been commenced against Seller under the federal Bankruptcy Code or any state law for relief of debtors;

(i) Moratorium. No moratorium, statute or regulation of any governmental agency or order or ruling of any court has been enacted, adopted, or issued which would adversely affect Purchaser’s use or development of the Property;

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(j) Financial Condition. No event shall have occurred that would be reasonably likely to result in a material adverse change in the financial condition of the Seller on the Closing Date as compared to the financial condition of the Seller on the Effective Date;

(k) Board Approval. Purchaser shall have obtained approval from the board of directors of BioMed Realty Trust, as a general partner of Purchaser, to enter into this Agreement and to execute the documents contemplated hereby. Upon the expiration of the Due Diligence Period, this condition shall be deemed to have been satisfied; and

(l) Other Condition. Any other condition set forth in this Agreement to Purchaser’s obligation to close shall have been satisfied by the applicable date.

5.3. Failure of Condition Precedent. So long as a party is not in default beyond applicable notice and cure periods hereunder, if any condition to such party’s obligation to proceed with the Closing hereunder has not been satisfied as of the Closing Date or other applicable date and such condition is not cured within five (5) days after receipt of notice of default from the non-defaulting party, such non-defaulting party may, in its sole discretion, either (i) terminate this Agreement by delivering written notice to the other party on or before the Closing Date or other applicable date whereupon the Earnest Money shall be returned to Purchaser if Seller is the defaulting party or paid to Seller if Purchaser is the defaulting party, or (ii) elect to close, notwithstanding the non-satisfaction of such condition, in which event such party shall be deemed to have waived any such condition.

ARTICLE 6. DEFAULT AND REMEDIES

6.1. Purchaser’s Defaults; Seller’s Remedies.

(a) In the event of a breach by Purchaser of its obligations under this Agreement to effect the Closing, which breach is not cured within five (5) days after Purchaser’s receipt of notice of default from Seller (provided that no such cure period shall extend the Closing Date or apply for a breach of the obligation to close by the Closing Date) and Seller is willing, ready and able to perform its obligations hereunder, Seller’s sole remedy shall be to terminate this Agreement and receive and retain all Earnest Money and any earnings thereon as liquidated damages, not as a penalty. PURCHASER AND SELLER AGREE THAT IT WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO QUANTIFY THE ACTUAL DAMAGES TO SELLER IN THE EVENT OF A BREACH BY PURCHASER, THAT THE AMOUNT OF ALL EARNEST MONEY IS A REASONABLE ESTIMATE OF SUCH ACTUAL DAMAGES, AND THAT SELLER’S EXCLUSIVE REMEDY IN THE EVENT OF A BREACH BY PURCHASER SHALL BE TO RETAIN ALL EARNEST MONEY AND ANY EARNINGS THEREON AS LIQUIDATED DAMAGES.

___________________	_________________________
Initials of Seller	Initials of Purchaser

(b) After Closing, in the event of a breach by Purchaser of its obligations under this Agreement that survive Closing, Seller may exercise any rights and remedies available at law or in equity.

6.2. Seller’s Defaults; Purchaser’s Remedies.

(a) In the event of a material breach by Seller of its obligations under this Agreement, which breach is not cured within five (5) days after Seller’s receipt of notice of default from Purchaser (provided that no such cure period shall extend the Closing Date or apply for a breach of the obligation to close by the Closing Date), Purchaser may elect one of the following two remedies: (a) terminate this Agreement and receive: (i) a refund of the Earnest Money and any earnings thereon, plus (ii) reimbursement from Seller for Purchaser’s reasonable out of pocket costs incurred in connection with the negotiation of this Agreement, Purchaser’s diligence with respect to the Property, and

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Purchaser’s actions in furtherance of the transactions contemplated by this Agreement (provided that said sum recoverable as reimbursement shall not exceed fifty thousand dollars ($50,000)); or (b) enforce specific performance of this Agreement against Seller, including the right to recover reasonable attorneys’ fees. PURCHASER AND SELLER AGREE THAT IT WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO QUANTIFY THE ACTUAL DAMAGES TO PURCHASER IN THE EVENT OF A BREACH BY SELLER, THAT THE AMOUNT OF ALL EARNEST MONEY IS A REASONABLE ESTIMATE OF SUCH ACTUAL DAMAGES, AND THAT IN THE EVENT PURCHASER SELECTS TO ENFORCE ITS REMEDIES UNDER (A) ABOVE, PURCHASER SHALL RECEIVE A REFUND OF ALL EARNEST MONEY AND ANY EARNINGS THEREON, AND PURCHASER’S OUT OF POCKET COSTS.

(b) After Closing, in the event of a breach by Seller of its obligations under this Agreement that survive Closing, Purchaser may exercise any rights and remedies available at law or in equity.

ARTICLE 7. CLOSING

7.1. Closing and Escrow. The consummation of the transaction contemplated herein (“Closing”) shall occur on the Closing Date at the offices of the Escrow Agent. Closing shall occur through an escrow with the Escrow Agent. Funds shall be deposited into and held by Escrow Agent in a closing escrow account with a bank satisfactory to Purchaser and Seller. Upon satisfaction or completion of all closing conditions and deliveries, Escrow Agent shall immediately record and deliver the Deed and deliver the closing documents to the appropriate parties and make disbursements according to the closing statements executed by Seller and Purchaser. Provided such supplemental escrow instructions are not in conflict with this Agreement as it may be amended in writing from time to time, Seller and Purchaser agree to execute such supplemental escrow instructions as may be appropriate to enable Escrow Agent to comply with the terms of this Agreement. The parties understand that the Closing shall occur in San Diego, California requiring that all necessary deliveries to escrow must be completed by 11:00 A.M. on the Closing Date.

7.2. Seller’s Deliveries in Escrow. On or before 11:00 A.M. on the Closing Date, Seller shall deliver in escrow to the Escrow Agent the following:

(a) Deed. That certain Special Warranty Deed substantially in the form of Exhibit G attached hereto (“Deed”), sufficient to vest title in Purchaser subject only to the Permitted Exceptions;

(b) Bill of Sale and Assignment of Ground Lease and Contracts. A counterpart of the Bill of Sale and Assignment of Ground Lease and Contracts substantially in the form of Exhibit H attached hereto (“Bill of Sale”), executed and acknowledged by Seller;

(c) Closing Certificate. A certificate from Seller in the form of Exhibit I attached hereto that contains an updated list of the Service Contracts to be assumed, each of which Seller shall certify to be true and correct as of Closing.

(d) NPS Lease. A counterpart of the NPS Lease substantially in the form of Exhibit J attached hereto;

(e) State Law Disclosures. Such disclosures and reports as are required by applicable state and local law in connection with the conveyance of real property;

(f) FIRPTA. A Foreign Investment in Real Property Tax Act affidavit executed by Seller;

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(g) Terminations. Subject to Section 2.5, terminations effective no later than Closing of those Service Contracts which Purchaser has elected not to assume, including any management and leasing agreements affecting the Property;

(h) Authority. Evidence of the existence, organization and authority of Seller and of the authority of the persons executing documents on behalf of Seller required by and reasonably satisfactory to Purchaser’s counsel and Escrow Agent;

(i) Indemnity. A mechanic’s lien indemnity, if required, in form reasonably satisfactory to the Escrow Agent and the Title Company;

(j) Ground Lease. A copy of each of the documents that Seller is required to deliver in connection with the assignment of the Ground Lease; and

(k) Other Deliveries. Any other Closing deliveries required to be made by or on behalf of Seller hereunder or reasonably required to effect the Closing of this transaction consistent with this Agreement.

7.3. Purchaser’s Deliveries in Escrow. On or before 9:00 AM on the Closing Date, Purchaser shall deliver in escrow to the Escrow Agent the following:

(a) Purchase Price. The Purchase Price, less the Earnest Money that is applied to the Purchase Price plus or minus applicable prorations, deposited by Purchaser with the Escrow Agent in immediate, same-day federal funds wired for credit into the Escrow Agent’s escrow account;

(b) Bill of Sale and Assignment of Ground Lease and Contracts. A counterpart of the Bill of Sale, executed by Purchaser;

(c) NPS Lease. A counterpart of the NPS Lease, executed by Purchaser;

(d) State Law Disclosures. Such disclosures and reports as are required by applicable state and local law in connection with the conveyance of real property; and

(e) Other Deliveries. Any other Closing deliveries required to be made by or on behalf of Purchaser hereunder or reasonably required to effect the Closing of this transaction consistent with this Agreement.

7.4. NPS Lease. Upon receipt of the fully executed NPS Lease, Title Company shall date the NPS Lease the date of the Closing and deliver a completely executed copy of the NPS Lease to Purchaser and Seller.

7.5. Closing Statements/Closing Costs.

(a) Seller and Purchaser shall deposit with the Escrow Agent executed closing statements consistent with this Agreement in the form required by the Escrow Agent.

(b) Seller and Purchaser shall execute such returns, questionnaires and other documents as shall be required with regard to all applicable real property transaction taxes imposed by applicable federal, state or local law or ordinance.

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(c) Seller shall pay the fees of any counsel representing Seller in connection with this transaction. Seller shall also pay the following costs and expenses:

(i) one-half of the escrow fee, if any, which may be charged by the Escrow Agent or the Title Company;

(ii) the transfer fees, if any, associated with the assignment of the Ground Lease pursuant to Section 4.1;

(iii) the owner’s title insurance premium for a standard title insurance policy;

(iv) the excise, recording, deed, imposed transfer tax, documentary stamp tax or similar tax which becomes payable by reason of the transfer of the Property under applicable state or local law, including, without limitation, any real estate excise tax;

(v) all of its recording fees.

(d) Purchaser shall pay the fees of any counsel representing Purchaser in connection with this transaction. Purchaser shall also pay the following costs and expenses:

(i) one-half of the escrow fee, if any, which may be charged by the Escrow Agent or the Title Company;

(ii) the costs associated with the issuance of an extended title insurance policy and the Purchaser’s Endorsements;

(iii) the cost of the Survey; and

(iv) all of its recording fees.

7.6. Possession. At the time of Closing, Seller shall continue to possess the Property without interruption.

7.7. Delivery of Books and Records. Immediately after the Closing, Seller shall deliver to the offices of Purchaser or Purchaser’s property manager: originals of the Service Contracts (or copies thereof if originals are not available) and the following to the extent the same exist and are in Seller’s possession or control and pertain to the Property: copies or originals of all books and records of account, contracts, copies of correspondence with suppliers, receipts for deposits, unpaid bills and other papers or documents which pertain to the Property; all permits and warranties; all advertising materials and booklets; and the original “as-built” plans and specifications for the Building and all other available plans and specifications and all operation manuals. Seller shall reasonably cooperate with Purchaser before and after Closing to transfer to Purchaser any such information stored electronically.

ARTICLE 8. PRORATIONS AND ADJUSTMENTS

8.1. Prorations. On or before Closing, Seller shall provide to Purchaser such information and verification reasonably necessary to support the prorations and adjustments under this Article 8. The items in Subsections (a) through (d) of this Section 8.1 shall be prorated between Seller and Purchaser, based on the actual number of days in the applicable period, as of the close of the day immediately preceding the Closing Date, the Closing Date being a day of income and expense to Purchaser:

(a) Taxes and Assessments. Purchaser shall receive a credit for any accrued but unpaid real estate taxes and assessments (including, without limitation, any assessments imposed by private covenant) applicable to any period before the Closing Date, even if such taxes and assessments are not yet due and payable. Purchaser shall receive a credit for any special assessments which are levied or charged against the Property applicable to any period before the Closing Date, whether or not then due and payable.

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(b) Income. Purchaser shall receive a credit for any rent, operating expenses or other income accruing on or before the Closing Date pursuant to the terms of the NPS Lease.

(c) Ground Lease. Seller, as lessee under the Ground Lease, shall pay all rent and other operating costs and expenses in connection with the Land and the Improvements, if any, pursuant to the terms and conditions of the Ground Lease (the “Ground Lease Costs”) applicable to any period before the Closing Date. Purchaser shall pay the Ground Lease Costs applicable to any period on or after the Closing Date. Purchaser shall receive a credit for any unpaid Ground Lease Costs that are applicable to any period before the Closing Date, even if such Ground Lease Costs are not yet due and payable. Seller shall receive a credit for Ground Lease Costs that are paid before the Closing Date to the extent such costs are applicable to the period on or after the Closing Date.

(d) Service Contracts. Seller or Purchaser, as the case may be, shall receive a credit for regular charges under Service Contracts assumed by Purchaser pursuant to this Agreement paid and applicable to Purchaser’s period of ownership or payable and applicable to Seller’s period of ownership, respectively.

(e) Utilities. Seller shall cause the meters, if any, for utilities to be read the day on which the Closing Date occurs and to pay the bills rendered on the basis of such readings for the period prior to the Closing Date. If any such meter reading for any utility is not available, then adjustment therefor shall be made on the basis of the most recently issued bills therefor which are based on meter readings no earlier than thirty (30) days before the Closing Date and such adjustment shall be reprorated when the next utility bills are received.

8.2. Utility Deposits. Seller shall receive a credit for the amount of deposits, if any, with utility companies that are transferable and that are assigned to Purchaser at the Closing.

8.3. Sales Commissions. Seller and Purchaser represent and warrant each to the other that they have not dealt with any real estate broker, sales person or finder in connection with this transaction. In the event of any claim for broker’s or finder’s fees or commissions in connection with the negotiation, execution or consummation of this Agreement or the transactions contemplated hereby, each party shall indemnify and hold harmless the other party from and against any such claim based upon any statement, representation or agreement of such party.

8.4. Pre-Closing Expenses. Except as otherwise specifically provided in this Agreement or in any other written agreement that may be entered into between Seller and Purchaser, Seller has paid or will pay in full, prior to Closing (or promptly following receipt of a bill therefor if not received by the Closing), all bills and invoices for labor, goods, material and services of any kind relating to the Property and utility charges, relating to the period prior to Closing. Any alterations, installations, decorations and other work required to be performed by Seller under any and all agreements affecting the Property have been or will, by the Closing, be completed (except as otherwise provided in Section 4.3) and paid for in full by Seller.

ARTICLE 9. REPRESENTATIONS AND WARRANTIES

9.1. Seller’s Representations and Warranties. As a material inducement to Purchaser to execute this Agreement and consummate this transaction, Seller represents and warrants to Purchaser that:

(a) Organization and Authority. Seller has been duly organized, is validly existing, and is in good standing as a Delaware corporation. Seller is in good standing and is qualified to do business in the state in which the Real Property is located. Seller has the full right and authority and has obtained any and all consents required to enter into this Agreement and the NPS Lease and to consummate or cause to be consummated the transactions contemplated hereby. This Agreement has been, and all of the documents to be delivered by Seller at the Closing, including the NPS Lease, will be, authorized and properly executed and constitute, or will constitute, as appropriate, the valid and binding obligations of Seller, enforceable in accordance with their terms.

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(b) Conflicts and Pending Actions or Proceedings. There is no agreement to which Seller is a party or, to Seller’s knowledge, binding on Seller or the Property which is in conflict with this Agreement or the NPS Lease, or which challenges or impairs Seller’s ability to execute or perform its obligations under this Agreement or the NPS Lease. There is not now pending or, to the best of Seller’s knowledge, threatened, any action, suit or proceeding before any court or governmental agency or body against Seller that would prevent Seller from performing its obligations hereunder or against or with respect to the Property. No condemnation, eminent domain or similar proceedings are pending or, to Seller’s knowledge, threatened with regard to the Property. Seller has not received any notice and has no knowledge of any pending or threatened liens, special assessments, impositions or increases in assessed valuations to be made against the Property.

(c) Leases. Seller is the sole occupant of the Property. As of the date hereof, there are no tenants under any leases affecting the Real Property and there are no lease or occupancy agreements affecting any portion of the Real Property other than the Ground Lease.

(d) Service Contracts; Operating Statements. The list of Service Contracts, if any, to be delivered to Purchaser pursuant to this Agreement is or will be true, correct, and complete as of the date of its delivery. The documents constituting the Service Contracts that are to be delivered to Purchaser are true, correct and complete copies of all of the Service Contracts affecting the Property. Neither Seller nor, to the best of Seller’s knowledge, any other party is in default under any Service Contract. The Operating Statements to be delivered to Purchaser pursuant to this Agreement, if any, will show all items of income and expense (operating and capital) incurred in connection with Seller’s ownership, operation, and management of the Property for the periods indicated and will be true, correct, and complete in all material respects.

(e) Legal Compliance. Seller has all material licenses, permits and certificates necessary for the use and operation of the Property, including, without limitation, all certificates of occupancy necessary for the lawful occupancy of the Property. Seller has received no written notice that the Property or the use thereof violates any governmental law or regulation or any covenants or restrictions encumbering the Property. Seller has not received any written notices of violations or alleged violations of any laws, rules, regulations or codes, including building codes, with respect to the Property which have not been corrected to the satisfaction of the issuer of the notice.

(f) Environmental. Seller has no knowledge of, and has received no notice of, any violation of Environmental Laws related to the Property or the presence or release of Hazardous Materials on or from the Property in violation of Environmental Laws. Seller has not used the Property or any part thereof for the release, generation, treatment, storage, handling or disposal of any Hazardous Materials, in violation of any Environmental Laws. There are no underground storage tanks located on the Property. The term “Environmental Laws” includes without limitation the Resource Conservation and Recovery Act and the Comprehensive Environmental Response Compensation and Liability Act and other federal laws governing the environment as in effect on the date of this Agreement, together with their implementing regulations, guidelines, rules or orders as of the date of this Agreement, and all state, regional, county, municipal and other local laws, regulations, ordinances, rules or orders that are equivalent or similar to the federal laws recited above or that purport to regulate Hazardous Materials. The term “Hazardous Materials” includes petroleum, including crude oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas or such synthetic gas), and any substance, material, waste, pollutant or contaminant listed or defined as hazardous or toxic under any Environmental Law.

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(g) Withholding Obligation. Seller’s sale of the Property is not subject to any federal, state or local withholding obligation of Purchaser under the tax laws applicable to Seller or the Property.

(h) Disclosure. Other than this Agreement, the documents delivered at Closing pursuant hereto, and the Permitted Exceptions, and the Service Contracts, there are no contracts or agreements of any kind relating to the Property to which Seller or its agents is a party and which would be binding on Purchaser after Closing. Copies of Property Information delivered to Purchaser pursuant to Section 2.1 hereof are or will be true, correct and complete. Seller has delivered to Purchaser all books, notices, documents and agreements pertaining to the Property that are in Seller’s possession. To Seller’s knowledge, the Property Information does not contain a material misstatement of fact or omit to state a fact necessary in order to make the statements therein not misleading in any material respect. Seller is not aware of any current fact or circumstance pertaining to the condition of the Property that (1) have not been disclosed to Purchaser, or will not be disclosed to Purchaser pursuant to the Property Information, and (2) in Seller’s reasonable opinion have a material adverse impact on the value of the Property. Notwithstanding the foregoing, Purchaser agrees that, so long as Seller discloses the foregoing information in a manner which is not misleading in any material respect, Purchaser shall be fully responsible for all information that is: (a) readily apparent from a review of the Property Information delivered to Purchaser pursuant to Section 2.1, the Survey, the Preliminary Title Report and/or any reports or studies obtained by Purchaser; (b) apparent from an inspection of the Building, and/or (c) otherwise disclosed to Purchaser.

(i) ERISA. Seller is not and is not acting on behalf of an “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, a “plan” within the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended or an entity deemed to hold “plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of any such employee benefit plan or plans.

(j) Zoning. The Property’s zoning classification is Research Park, and permits the use of the Property in the manner in which it is currently being used. There is no proceeding pending or, to Seller’s knowledge, threatened, to modify the zoning for the Property.

(k) Ground Lease. The Ground Lease is in full force and effect and no default, dispute or controversy exists under the Ground Lease. Seller has not received any notice of any default or breach on the part of lessee under the Ground Lease, nor, to Seller’s knowledge, does there exist any such default or breach on the part of lessee.

9.2. Purchaser’s Representations and Warranties. As a material inducement to Seller to execute this Agreement and consummate this transaction, Purchaser represents and warrants to Seller that:

(a) Organization and Authority. Purchaser has been duly organized and is validly existing as a Maryland limited partnership, in good standing and will be qualified to do business in the state in which the Real Property is located on the Closing Date. Subject only to obtaining certain internal approvals on or before the expiration of the Due Diligence Period, Purchaser has the full right and authority and has obtained any and all consents required to enter into this Agreement and to consummate or cause to be consummated the transactions contemplated hereby. This Agreement has been, and all of the documents to be delivered by Purchaser at the Closing will be, authorized and properly executed and constitutes, or will constitute, as appropriate, the valid and binding obligation of Purchaser, enforceable in accordance with their terms.

(b) Conflicts and Pending Action. There is no agreement to which Purchaser is a party or to Purchaser’s knowledge binding on Purchaser which is in conflict with this Agreement. There is no action or proceeding pending or, to Purchaser’s knowledge, threatened against Purchaser which challenges or impairs Purchaser’s ability to execute or perform its obligations under this Agreement.

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(c) “As-Is” Purchase. Purchaser is an experienced commercial real estate owner and, except as set forth in this Agreement or in any document executed at Closing pursuant to or in connection with this Agreement, shall rely solely upon its own evaluation and investigation of the condition and all aspects of the Property. Purchaser acknowledges that this Agreement grants to Purchaser the opportunity to fully evaluate the condition and all aspects of the Property. Purchaser has asked for, and has obtained in this Agreement, disclosure of information and documents regarding the Property which is in Seller’s possession or control. Accordingly, except to the extent that Seller fraudulently or intentionally conceals or makes misrepresentations as to the condition or suitability of the Property and except for Seller’s representations and warranties set forth in this Agreement and the warranties set forth in any closing documents delivered to Purchaser from Seller, Purchaser acknowledges that it is not relying upon any representations of Seller as to the condition of the Property or its suitability for Purchaser’s intended use. Subject to the foregoing, in the event Purchaser does not terminate this Agreement pursuant to Section 2.2 above, Purchaser shall be deemed to accept the Property “as is” in all respects and without representation and warranty except as specifically set forth in this Agreement.

9.3. Survival of Representations and Warranties. The representations and warranties set forth in this Article 9 are made as of the Effective Date and are remade as of the Closing Date, and such representations and warranties (and any representations and warranties in any other documents delivered to Purchaser pursuant to the provisions of this Agreement) shall not be deemed to be merged into or waived by the instruments of Closing, but shall survive the Closing.

ARTICLE 10. MISCELLANEOUS

10.1. Parties Bound. Neither party may assign this Agreement without the prior written consent of the other, and any such prohibited assignment shall be void; provided, however, that Purchaser may assign this Agreement without Seller’s consent to an Affiliate (including without limitation BioMed Realty Trust, Inc. or BMR-383 Colorow Drive LLC). Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the respective legal representatives, successors, assigns, heirs, and devisees of the parties. For the purposes of this paragraph, the term “Affiliate” means (i) an entity that directly or indirectly controls, is controlled by or is under common control with Purchaser, or (ii) a partnership or other entity in which Purchaser or an entity described in (i) is a partner or other owner; and the term “control” means the power to direct the management of such entity through voting rights, ownership or contractual obligations.

10.2. Headings. The article and paragraph headings of this Agreement are for convenience only and in no way limit or enlarge the scope or meaning of the language hereof.

10.3. Expenses. Except as otherwise expressly provided herein, each party hereto shall pay its own expenses incident to this Agreement and the transactions contemplated hereunder, including all legal and accounting fees and disbursements.

10.4. Invalidity and Waiver. If any portion of this Agreement is held invalid or inoperative, then so far as is reasonable and possible the remainder of this Agreement shall be deemed valid and operative, and, to the greatest extent legally possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The failure by either party to enforce against the other any term or provision of this Agreement shall not be deemed to be a waiver of such party’s right to enforce against the other party the same or any other such term or provision in the future.

10.5. Governing Law and Venue. This Agreement shall, in all respects, be governed, construed, applied, and enforced in accordance with the laws of the state of Utah and venue and jurisdiction in any action involving, relating to or arising from this Agreement shall lie solely and exclusively with the courts in the County of Salt Lake, State of Utah.

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10.6. Survival. The provisions of this Agreement and the obligations of the parties not fully performed at the Closing shall survive the Closing for one year and shall not be deemed to be merged into or waived by the instruments of Closing. Any claim for performance of an obligation after Closing shall be barred and shall lapse unless a claim is made in writing, with a description of the claim made, on or before the first anniversary of Closing.

10.7. No Third Party Beneficiary. This Agreement is not intended to give or confer any benefits, rights, privileges, claims, actions, or remedies to any person or entity as a third party beneficiary, decree, or otherwise.

10.8. Entirety and Amendments. This Agreement embodies the entire agreement between the parties and supersedes all prior agreements and understandings relating to the Property. This Agreement may be amended or supplemented only in writing by a non-electronic instrument executed by the party against whom enforcement is sought. For the avoidance of doubt, copies of signed instruments that are electronically transmitted constitute a writing for this purpose.

10.9. Time of the Essence. Time is of the essence in the performance of this Agreement.

10.10. Time. All times, whenever specified herein, shall be local time in San Diego, California.

10.11. Confidentiality. Subject to Section 10.12, (i) the parties agree to keep all negotiations and the terms of this Agreement confidential, and shall not disclose such terms to any person, without the prior written approval of the other party, and (ii) Purchaser agrees that the books, records and other information relating to the Property reviewed by or delivered to Purchaser as well as the results from all studies, tests and inspections conducted on the Real Property by Purchaser or its representatives are confidential information under this Agreement and shall not be disclosed nor used by Purchaser except in furtherance of completing the transactions contemplated by this Agreement. The confidentiality obligations set out in this Section 10.11 shall survive the termination of this Agreement and the Closing.

10.12. Press Release. Until the Closing, neither Seller nor Purchaser will release or cause or permit to be released any press notices, or publicity (oral or written) or advertising promotion relating to, or otherwise announce or disclose or cause or permit to be announced or disclosed, in any manner whatsoever, the terms, conditions or substance of this Agreement without first obtaining the written consent of the other party except those disclosures that are required by law, including the federal securities laws, applicable stock exchange requirements or contractual obligation (in which case notice shall be timely provided to the other party of such requirement and disclosure). The foregoing shall not preclude either party from discussing the substance or any relevant details of such transactions with any of its attorneys, accountants, professional consultants, lenders, partners, investors, or any prospective lender, partner or investor, as the case may be, or prevent either party hereto, from complying with laws, rules, regulations and court orders, including without limitation, governmental regulatory, disclosure, tax and reporting requirements, or from making disclosures in the ordinary course of its due diligence inspections and contacts with third parties related thereto. Notwithstanding the foregoing, any party to this transaction (and each employee, agent or representative of the foregoing) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to them relating to such tax treatment and tax structure except to the extent maintaining such confidentiality is necessary to comply with any applicable federal or state securities laws. The authorization in the preceding sentence is not intended to permit disclosure of any other information unrelated to the tax treatment and tax structure of the transaction including (without limitation) (i) any portion of the transaction documents or related materials to the extent not related to the tax treatment or tax structure of the transaction, (ii) the existence or status of any negotiations unrelated to the tax issues, or (iii) any other term or detail not relevant to the tax treatment or the tax structure of the transaction.

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10.13. Attorneys’ Fees. Should either party employ attorneys to enforce any of the provisions hereof, the non-prevailing party agrees to pay the prevailing party all reasonable costs, charges, and expenses, including reasonable attorneys’ fees, expended or incurred by the prevailing party in connection therewith, whether incurred prior to, during or subsequent to any bankruptcy, receivership, reorganization, appellate, or other legal proceeding.

10.14. Notices. All notices required or permitted hereunder shall be in writing and shall be served on the parties at the addresses set forth in Exhibit K. Any such notices shall be either (i) sent by overnight delivery using a nationally recognized overnight courier, in which case notice shall be deemed delivered one business day after deposit with such courier, (ii) sent by facsimile on a business day, in which case notice shall be deemed delivered upon transmission of such notice with confirmed receipt by the sender’s machine, or (iii) sent by personal delivery, in which case notice shall be deemed delivered upon receipt or refusal of delivery. A party’s address may be changed by written notice to the other party; provided, however, that no notice of a change of address shall be effective until actual receipt of such notice. Copies of notices are for informational purposes only, and a failure to give or receive copies of any notice shall not be deemed a failure to give notice. The attorney for a party has the authority to send notices on behalf of such party.

10.15. Construction. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.

10.16. Remedies Cumulative. Except as expressly provided to the contrary in this Agreement, the remedies provided in this Agreement shall be cumulative and shall not preclude the assertion or exercise of any other rights or remedies available by law, in equity or otherwise.

10.17. Calculation of Time Periods. Unless otherwise specified, in computing any period of time described herein, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is a Saturday, Sunday or legal holiday for national banks in the location where the Property is located, in which event the period shall run until the end of the next day which is neither a Saturday, Sunday, or legal holiday. The last day of any period of time described herein and the time during any day by which an event must occur shall be deemed to end at 5 p.m.

10.18. Public Company Requirements. Upon Purchaser’s request, for a period of two (2) years after Closing, Seller shall make any books and records of the Property remaining in possession of Seller available to Purchaser for inspection, copying and audit by Purchaser’s designated accountants, and at Purchaser’s expense. Seller shall provide Purchaser, but without third-party expense to Seller, with copies of, or access to, such factual information in connection with this Agreement and/or the Property as may be reasonably requested by Purchaser, and in the possession or control of Seller, to enable Purchaser to comply with applicable filing requirements of the Securities and Exchange Commission. Purchaser or its designated independent or other accountants may audit the operating statements of the Property, and Seller shall supply such documentation in its possession or control as Purchaser or its accountants may reasonably request in order to complete such audit and shall provide to Purchaser’s auditors a representation letter from Seller or its representative reasonably satisfactory to Purchaser’s auditors in connection with such audit.

10.19. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one agreement. To facilitate execution of this Agreement, the parties may execute and exchange by telephone facsimile counterparts of the signature pages.

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10.20. Further Assurances. In addition to the acts and deeds recited herein and contemplated to be performed, executed or delivered by either party at Closing, each party agrees to perform, execute and deliver, on or after the Closing any further actions, documents, and will obtain such consents, as may be reasonably necessary or as may be reasonably requested to fully effectuate the purposes, terms and conditions of this Agreement or to further perfect the conveyance, transfer and assignment of the Property to Purchaser.

10.21. Approval. To the extent any approval or consent shall be required in this Agreement such approval or consent shall not be unreasonably withheld, unless the terms of and conditions of such approval or consent are to the sole discretion of such party.

10.22. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[Signature Page Follows]

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EXECUTION VERSION

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the Effective Date.

SELLER:		PURCHASER:
NPS PHARMACEUTICALS, INC., a Delaware corporation		BIOMED REALTY, L.P., a Maryland limited partnership
By	/s/ MORGAN R. BROWN	By	/s/ GARY A. KREITZER
Name:	Morgan R. Brown	Name:	Gary A. Kreitzer
Title:	VP Financie	Title:	Executive Vice President

[SIGNATURE PAGE: 383 COLOROW DRIVE PURCHASE AND SALE AGREEMENT]

Escrow Agent has executed this Agreement in order to confirm that Escrow Agent shall act as escrowee with respect to and hold in escrow the Earnest Money and the interest earned thereon, and shall disburse the Earnest Money and the interest earned thereon, pursuant to the provisions of Exhibit B hereof.

ESCROW AGENT:
LANDAMERICA COMMERCIAL SERVICES
By	/s/ PAULA MRUZ
Name:	Paula Mruz
Title:	Escrow Officer
Dated: December 21, 2005

[SIGNATURE PAGE: 383 COLOROW DRIVE PURCHASE AND SALE AGREEMENT]

AGREEMENT OF PURCHASE AND SALE

[383 Colorow Drive, Salt Lake City, Utah]

EXHIBITS

Exhibit A	Legal Description of Land
Exhibit B	Earnest Money Escrow Provisions
Exhibit C	Property Information
Exhibit D	Ground Lessor Estoppel Certificate
Exhibit E	Seller Estoppel Certificate
Exhibit F	Survey Certification
Exhibit G	Deed
Exhibit H	Bill of Sale and Assignment of Ground Lease and Contracts
Exhibit I	Closing Certificate
Exhibit J	NPS Lease
Exhibit K	Notice Addresses

EXHIBIT A

LEGAL DESCRIPTION OF LAND

Property located on the University Of Utah at Research Park.

Three parcels of land located within the Southeast Quarter Of Section 3, Township 1 South, Range 1 East, Salt Lake Base And Meridian, described as follows:

Leasehold estate:

Beginning at a point South 65°11’09” East 66.35 feet and North 54°38’21” East 190.000 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet, and North 54°38’21” East 190.000 feet From the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 54°42’57” West 573.288 feet; thence North 35°21’39” West 61.714 feet; thence North 54°38’21” East 589.38 feet; thence South 35°21’40” East 602.601 feet; thence South 54°38’21” West 399.379 feet to the point of beginning.

Non-exclusive easements for purposes of access and landscaping to run concurrently with the Lease:

Beginning at a point South 65°11’09” East 66.35 feet from the existing street monument a Tabby Lane and Colorow Drive, said Point Of Beginning also being a record West 1970.16 feet and North 1931.31 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35°21’39” West 540.887 feet; thence South 54°42’57” East 573.288 feet; thence South 54°38’21” West 190.000 feet to the point of beginning, and

Beginning at a point South 65°11’09” East 66.35 feet and North 54°38’21” East 589.379 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet and North 54°38’21” East 589.379 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35°21’40” West 602.601 feet; thence South 46°58’28” East 615.196 feet; thence South 54°38’21” West 123.845 feet to the point of beginning

The following is shown for informational purposes only: Tax Parcel No. 16-03-400-002-2007 and 16-03-400-002-6007

The basis of bearing for this parcel is the record bearing of North 35°21’39” West along the center line of Colorow Drive between the existing street monuments at Tabby Lane and Wakara Drive.

[EXHIBIT A]

EXHIBIT B

EARNEST MONEY ESCROW PROVISIONS

1. Investment and Use of Funds. The Escrow Agent shall invest the Earnest Money in government insured interest-bearing accounts satisfactory to Purchaser, shall not commingle the Earnest Money with any funds of the Escrow Agent or others, and shall promptly provide Purchaser and Seller with confirmation of the investments made. If the Closing under this Agreement occurs, the Escrow Agent shall deliver the Earnest Money to, or upon the instructions of, Seller on the Closing Date.

2. Termination Before Expiration of Due Diligence Period. Purchaser shall notify the Escrow Agent of the date that the Due Diligence Period ends promptly after such date is established under this Agreement, and Escrow Agent may rely upon such notice. If Purchaser elects to terminate this Agreement prior to the expiration of the Due Diligence Period pursuant to Section 2.2, Purchaser shall deliver written notice of such termination to Seller and Escrow Agent. Within three (3) business days of its receipt of such termination notice, Escrow Agent shall pay the entire Earnest Money to Purchaser; provided, however, that if Seller shall, within said three (3) business day period, deliver to Purchaser and the Escrow Agent a written notice that it disputes Purchaser’s claim to the Earnest Money under Section 2.2, Escrow Agent shall retain the Earnest Money until it receives written instructions executed by both Seller and Purchaser as to the disposition and disbursement of the Earnest Money, or until ordered by final court order, decree or judgment, which is not subject to appeal, to deliver the Earnest Money to a particular party, in which event the Earnest Money shall be delivered in accordance with such notice, instruction, order, decree or judgment.

3. Termination After Expiration of Due Diligence Period. Except as otherwise expressly provided herein, at any time after the expiration of the Due Diligence Period, upon not less than three (3) business days’ prior written notice to the Escrow Agent and the other party, Escrow Agent shall deliver the Earnest Money to the party requesting the same; provided, however, that if the other party shall, within said three (3) business day period, deliver to the requesting party and the Escrow Agent a written notice that it disputes the claim to the Earnest Money, Escrow Agent shall retain the Earnest Money until it receives written instructions executed by both Seller and Purchaser as to the disposition and disbursement of the Earnest Money, or until ordered by final court order, decree or judgment, which is not subject to appeal, to deliver the Earnest Money to a particular party, in which event the Earnest Money shall be delivered in accordance with such notice, instruction, order, decree or judgment.

4. Interpleader. Seller and Purchaser mutually agree that in the event of any controversy regarding the Earnest Money, unless mutual written instructions are received by the Escrow Agent directing the Earnest Money’s disposition, the Escrow Agent shall not take any action, but instead shall await the disposition of any proceeding relating to the Earnest Money or, at the Escrow Agent’s option, the Escrow Agent may interplead all parties and deposit the Earnest Money with a court of competent jurisdiction in which event the Escrow Agent may recover all of its court costs and reasonable attorneys’ fees. Seller or Purchaser, whichever loses in any such interpleader action, shall be solely obligated to pay such costs and fees of the Escrow Agent, as well as the reasonable attorneys’ fees of the prevailing party in accordance with the other provisions of this Agreement.

5. Liability of Escrow Agent. The parties acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and for their convenience, that the Escrow Agent shall not be deemed to be the agent of either of the parties, and that the Escrow Agent shall not be liable to either of the parties for any action or omission on its part taken or made in good faith, and not in disregard of this Agreement, but shall be liable for its negligent acts and for any loss, cost or expense incurred by Seller or Purchaser resulting from the Escrow Agent’s mistake of law respecting the Escrow Agent’s scope or nature of its duties. Seller and Purchaser shall jointly and severally indemnify and hold the Escrow Agent harmless from and against all costs, claims and expenses, including reasonable attorneys’ fees, incurred in

[EXHIBIT B]

connection with the performance of the Escrow Agent’s duties hereunder, except with respect to actions or omissions taken or made by the Escrow Agent in bad faith, in disregard of this Agreement or involving negligence on the part of the Escrow Agent.

[EXHIBIT B]

EXHIBIT C

LIST OF PROPERTY INFORMATION

(a) Operating Statements. Operating statements of the Property for the current year (“Operating Statements”);

(b) Tax Statements. Copies or a summary of ad valorem tax statements relating to the Property for the current year or other current tax period (if available);

(c) Leases. Copies of all leases and license agreements, and any and all subleases currently in effect pertaining to the Property

(d) Service Contracts. A list of and copies of any and all service contracts affecting the Property (“Service Contracts”);

(e) Maintenance Records. All available maintenance work orders for the current year;

(f) List of Capital Improvements. A list of all capital improvements known to Seller and performed on the Property prior to the date hereof;

(g) Reports. Any environmental, soil, structural engineering, drainage and other physical inspection reports, assessments, audits and surveys related to the Property;

(h) Plans and Specifications. All construction plans and specifications relating to the original development of the Property;

(i) Insurance. Copies of Seller’s certificates of insurance for the Property and any notices received from insurance carriers;

(j) Proceedings. Copies of any documents or materials (except for privileged documents) relating to any litigation, investigation, condemnation, or proceeding of any kind pending or threatened affecting any of the Property or the ability of Seller to consummate the transaction contemplated by this Agreement;

(k) Existing Title and Survey Documents. Copy of Seller’s existing title insurance policy, any existing surveys of the Property, any right of way agreements or easement agreements and a copy of the existing mortgage affecting the Property;

(l) Architectural and Engineering Records. Copies of: any and all elevator inspection certificates and reports; physical condition reports; mechanical and electrical inspection reports; geotechnical reports; warranties (roof, mechanical equipment, etc.); building permits and certificates of occupancy; any structural and engineering studies prepared since original construction; ADA surveys and reports; notices of any violations of building or fire codes; maintenance logs for major equipment; and plans for any rooftop antenna installations;

(m) Accounting. Copies of the following items to the extent applicable to the Property: fixed asset and accumulated depreciation schedules; budgets for the current and prior years with supporting assumptions; operating statements for the current year; general ledger for the current and prior years;

(n) Land/Development Records. Copies of: any easements, CCRs or other recorded documents affecting the Property, and any unrecorded agreements to which Purchaser would be subject post-closing; all agreements with or applications to any governmental authority relating to zoning, use, development, subdivision or planning of the Property; and information relating to the availability and location of utilities;

[EXHIBIT C]

(o) Environmental Records. All Phase One / Phase Two Environmental Assessments for the Property, asbestos audits of the Property, environmental reports related to the Property; and any notices from or to any governmental authority regarding Hazardous Materials on or relating to the Property;

(p) Loan Documents. Copies of all documents evidencing, securing or otherwise effecting the Property, including, without limitation, collateral assignments, control agreements, and a list of all impound, holdback and reserve accounts used in connection with such loan; and

(q) Other. Copies of any written notices from any governmental agencies regarding the Property; any and all appraisals performed with respect to the Property, and such other documents or materials concerning the Property as may be reasonably requested by Purchaser.

[EXHIBIT C]

EXHIBIT D

GROUND LESSOR ESTOPPEL CERTIFICATE

To: BioMed Realty, L.P.

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128

Attention: Mr. Gary A. Kreitzer

NPS Pharmaceuticals, Inc.

383 Colorow Drive

Salt Lake City, Utah 84108

Attn: Office of General Counsel

LandAmerica Commercial Services

750 B. Street, #3000

San Diego, California 92101

Attn: Kathy Leicht

Re: Property Address: 383 Colorow Drive, Salt Lake City, Utah (the “Property”)

NPS Pharmaceuticals, Inc., a Delaware corporation (“Lessee”) has entered into that certain Agreement for Purchase and Sale, dated December 20, 2005, by and between Lessee and BioMed Realty, L.P., a Maryland limited partnership (the “Purchaser”) whereby Purchaser shall acquire a fee interest in the Property.

With the knowledge and understanding that Purchaser will be relying on the statements contained herein in acquiring the Property, as of the date hereof, The University of Utah (“Ground Lessor”) hereby certifies to Purchaser as follows:

1. Ground Lessor is the lessor at the Property under that certain Ground Lease (the “Lease”) dated December 10, 2003; the Lease has not been cancelled, modified, assigned, extended or amended and there are no other agreements, written or oral, affecting or relating to Ground Lessor’s lease of the Land as described on Exhibit A attached hereto (the “Land”), together with all improvements and fixtures located on the Land (the “Improvements”).

2. Lessee has full possession of the approximately 93,650 rentable square foot, three-story laboratory and office building located on the Land.

3. Ground Lessor has not assigned the Lease, except:                                                     . The Lease, subject to any rights of extension, terminates on                             .

4. All base rent, rent escalations and additional rent under the Lease has been paid through                     , 20            . There is no prepaid rent, except $                    , and the amount of security deposit is $            . Lessee currently has no right to any future rent abatement under the Lease, except:                                 .

5. Base rent is currently payable in the amount of $                    per month.

6. Lessee is currently paying estimated payments of additional rent of $                    per month on account of real estate taxes, insurance, and common area maintenance expenses.

[EXHIBIT D]

7. To the best of Ground Lessor’s knowledge, Lessee has not assigned the Lease or sublet any part of the Land or the Improvements and does not hold the Land or the Improvements under an assignment or sublease, except                    .

8. The Lease is in full force and effect, free from default and free from any event which could become a default under the Lease and Ground Lessor has no claims against the Lessee, and there are no disputes with the Lessee.

9. Ground Lessor has received no notice of prior sale, transfer or assignment, hypothecation or pledge of the Lease or of the rents payable thereunder, except                     .

10. Ground Lessor has waived its right to purchase the Property pursuant to that certain Waiver dated [                        ], between Ground Lessor and Lessee.

11. To the best of Ground Lessor’s knowledge, no hazardous wastes have been generated, treated, stored, or disposed of by or on behalf of Ground Lessor or Lessee on the Land or the Improvements in violation of any environmental laws.

12. Ground Lessor hereby consents to the assignment of Lessee’s rights under the Lease to BMR-383 Colorow Drive LLC, a Delaware limited liability company.

The undersigned has executed this Estoppel Certificate with the knowledge and understanding that BioMed Realty, L.P., or its assignee, is acquiring the Property in reliance on this Estoppel Certificate and that the undersigned will be bound by this Estoppel Certificate. The statements contained herein may be relied upon by BioMed Realty, L.P., BMR-383 Colorow Drive LLC, BioMed Realty Trust, Inc., NPS Pharmaceuticals, Inc., and LandAmerica Commercial Services, and any mortgagee of the Property and their respective successors and assigns.

Dated this                     day of                     , 2005.

______________________________________________________________

By

Name:

Title:

[EXHIBIT D]

EXHIBIT E

SELLER ESTOPPEL CERTIFICATE

To: BioMed Realty, L.P.

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128

Attention: Mr. Gary A. Kreitzer

LandAmerica Commercial Services

750 B. Street, #3000

San Diego, California 92101

Attn: Kathy Leicht

Re: Property Address: 383 Colorow Drive, Salt Lake City, Utah (the “Property”)

NPS Pharmaceuticals, Inc. (“Seller”) has entered into that certain Agreement for Purchase and Sale, dated December 20, 2005, by and between Seller and BioMed Realty, L.P. (the “Purchaser”) whereby Purchaser shall acquire a fee interest in the Property.

With the knowledge and understanding that Purchaser will be relying on the statements contained herein in acquiring the Property, as of the date hereof, Seller hereby certifies to Purchaser as follows:

1. Seller is the lessee at the Property under that certain Ground Lease (the “Lease”), by and between Seller, as lessee, and The University of Utah (“Ground Lessor”), as lessor, dated December 10, 2003; the Lease has not been cancelled, modified, assigned, extended or amended and there are no other agreements, written or oral, affecting or relating to Seller’s lease of the Land as described on Exhibit A attached hereto (the “Land”), together with all improvements and fixtures located on the Land (the “Improvements”).

2. Seller has full possession of the approximately 93,650 rentable square foot, three-story laboratory and office building located on the Land.

3. To the best of Seller’s knowledge, Ground Lessor has not assigned the Lease, except:                                . The Lease, subject to any rights of extension, terminates on                                              .

4. All base rent, rent escalations and additional rent under the Lease has been paid through                         , 20    . There is no prepaid rent, except $                    , and the amount of security deposit is $                    . Lessee currently has no right to any future rent abatement under the Lease, except:                                                                         .

5. Base rent is currently payable in the amount of $                    per month.

6. Lessee is currently paying estimated payments of additional rent of $                    per month on account of real estate taxes, insurance, and common area maintenance expenses.

7. Seller has not assigned the Lease or sublet any part of the Land or the Improvements and does not hold the Land or the Improvements under an assignment or sublease, except                                    .

8. The Lease is in full force and effect, free from default and free from any event which could become a default under the Lease and Seller has no claims against the Ground Lessor, and there are no disputes with the Ground Lessor.

[EXHIBIT E]

9. To the best of Seller’s knowledge, Ground Lessor has received no notice of prior sale, transfer or assignment, hypothecation or pledge of the Lease or of the rents payable thereunder, except                     .

10. Ground Lessor has waived its right to purchase the Property pursuant to that certain Waiver dated [                                    ], between Ground Lessor and Lessee.

11. To the best of Seller’s knowledge, no hazardous wastes have been generated, treated, stored, or disposed of by or on behalf of Ground Lessor or Seller on the Land or the Improvements in violation of any environmental laws.

The undersigned has executed this Estoppel Certificate with the knowledge and understanding that BioMed Realty, L.P., or its assignee, is acquiring the Property in reliance on this Estoppel Certificate and that the undersigned will be bound by this Estoppel Certificate. The statements contained herein may be relied upon by BioMed Realty, L.P., BMR-383 Colorow Drive LLC, BioMed Realty Trust, Inc. and LandAmerica Commercial Services, and any mortgagee of the Property and their respective successors and assigns.

Dated this                         day of             , 2005.

NPS PHARMACEUTICALS, INC.,

a Delaware corporation

By

Name:

Title:

[EXHIBIT E]

EXHIBIT F

SURVEY CERTIFICATION

I, [                        ], a registered land surveyor, do hereby certify to BioMed Realty, L.P., BioMed Realty Trust, Inc., BMR-383 Colorow Drive LLC and LandAmerica Commercial Services, and their respective successors and assigns, that the accompanying plat of survey represents a true and accurate survey made by me of the following described property (the “Property”) on the             day of                                     , 2005:

I further certify that:

(i) This map or plat and the survey on which it is based were made in accordance with laws regulating surveying in the State of Utah, and with the “Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys,” jointly established and adopted by American Land Title Association (“ALTA”) and American Congress on Surveying and Mapping (“ACSM”) in 1999 and includes 1, 2, 3, 4, 6, 7a, 7b1, 7c, 8, 9, 10, 11(a), 13, 14 and 16 in Table A contained therein. Pursuant to the Accuracy Standards as adopted by ALTA, National Society of Professional Surveyors, and ACSM and in effect on the date of this certification, undersigned further certifies that proper field procedures, instrumentation, and adequate survey personnel were employed in order to achieve results comparable to those outlined in the “Minimum Angle, Distance, and Closure Requirements for Survey Measurements Which Control Land Boundaries for ALTA/ACSM Land Title Surveys”;

(ii) That said survey accurately shows the location of all buildings, structures and other improvements situated on the                     acre tract known as 383 Colorow Drive, Salt Lake City, Utah;

(iii) There are no party walls included in any buildings, structures, or other improvements on the Property;

(iv) Except as shown, there are no encroachments on adjoining premises, streets, or alleys by any of the buildings, structures, or other improvements on the Property;

(v) Except as shown, there are no encroachments on the Property by any buildings, structures, or other improvements located on adjoining premises;

(vi) Except as shown, there are no encroachments on the Property by any buildings, structures or other improvements across set back, side yard and rear yard lines shown on the recorded plat or set forth in the applicable zoning ordinance which were provided by the County of Salt Lake;

(vii) Said described property is located within an area having a Zone Designation of                     [(describe zone designation)] by the Federal Emergency Management Agency (FEMA) on Flood Insurance Rate Map No.                     , with a date of identification of                                                  , for Community No.                             , in County of Salt Lake, State of Utah, which is the current Flood Insurance Rate Map for the community in which said premises is situated;

(viii) That the record description of the Property forms a mathematically closed figure;

(ix) That the Property has access to a dedicated public street or streets known as                                                              ;

[EXHIBIT F]

(x) The total number of striped parking spaces on the subject property is                         , including                 designated handicap spaces; and

(xi) That the undersigned has received and examined a copy of title commitment number             issued by                                 with an effective date of                         and that all easements, covenants and restrictions referenced in said title commitment or apparent from a physical inspection of the site or otherwise known to me have been plotted hereon or otherwise noted as to their effect on the subject property.

[LICENSE NUMBER AND SEAL]

[NAME OF SURVEYOR]

[Insert Proper Acknowledgment]

[EXHIBIT F]

EXHIBIT G

FORM OF DEED

When recorded, return to

(and send tax notices to):

BMR-383 COLOROW DRIVE LLC

17140 Bernardo Center Drive, Suite 222

San Diego, California 92128

Attn: Gary A. Kreitzer

Tax Parcel ID No.:                         

SPECIAL WARRANTY DEED

For Ten Dollars ($10.00) and other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, NPS PHARMACEUTICALS, INC., a Delaware corporation (“Grantor”), whose address is 383 Colorow Drive, Salt Lake City, Utah, 84108, hereby sells, conveys, and warrants against all claiming by, through, or under, Grantor to BMR-383 COLOROW DRIVE LLC, a Delaware limited liability company (“Grantee”), whose address is 17140 Bernardo Center Drive, Suite 222, San Diego, California 92128, the following described real property located in Salt Lake County, Utah, to wit:

Beginning at a point S65º11’09”E 66.35 feet and N54º38’21”E 190.000 feet from the existing street monument at Tabby Lane and Colorow Drive and running thence N54º42’57”W 573.288 feet; thence N35º21’39”W 61.714 feet; thence N54º38’21”E 589.38 feet; thence S35º21’40”E 602.601 feet; thence S54º38’21”W 399.379 feet to the Point Of Beginning. Contains 6.974 Acres

Also includes the following non-exclusive easements for purposes of access and landscaping to run concurrently with the Lease:

Beginning at a point S65º11’09”E 66.35 feet from the existing street monument at Tabby Lane and Colorow Drive and running thence N35º21’39”W 540.887 feet; thence S54º42’57”E 573.288 feet; thence S54º38’21”W 190.000 feet to the Point of Beginning.

Contains 1.180 Acres

Beginning at a point S65º11’09”E 66.35 feet and N54º38’21”E 589.379 feet from the existing street monument at Tabby Lane and Colorow Drive and running thence N35º21’40”W 602.601 feet; thence S46º58’28”E 615.196 feet; thence S54º38’21”W 123.845 feet to the Point of Beginning.

Contains 0.857 Acres

The Basis of Bearing for these parcels is the record bearing of N35º21’39”W along the center line of Colorow Drive between the existing street monuments at Tabby Lane and Wakara Drive.

[EXHIBIT G]

Grantor has executed this Special Warranty Deed in favor of Grantee effective this             day of                                         , 2005.

GRANTOR:	NPS PHARMACEUTICALS, INC.,
	a Delaware corporation
	By
	Name:
	Title:

[EXHIBIT G]

State of                                  )

                                     : ss.

County of                                  )

On the         day of                     , 20    , before me, the undersigned notary, personally appeared                             , the                                              of NPS Pharmaceuticals, Inc., a Delaware corporation who duly acknowledged before me that he signed the foregoing instrument for and on behalf of said corporation having all requisite authority to so act.

My commission expires:	Notary Public
___________________	Residing at:
[Seal]

[EXHIBIT G]

EXHIBIT H

BILL OF SALE AND ASSIGNMENT OF GROUND LEASE AND CONTRACTS

This instrument is executed and delivered as of the 22^nd day of December, 2005 (“Assignment”) pursuant to that certain Agreement of Purchase and Sale (“Agreement”) dated December 20, 2005, by and between NPS Pharmaceuticals, Inc., a Delaware corporation (“Seller”), and BMR-383 Colorow Drive LLC, a Delaware limited liability company (as successor in interest to BioMed Realty, L.P., a Maryland limited partnership, “Purchaser”), covering an approximately 93,650 rentable square foot, three-story, laboratory and office building located at 383 Colorow Drive, Salt Lake City, Utah 84108 (the “Building”) and Seller’s leasehold interest in the land as described on Exhibit A attached hereto (the “Land”) pursuant to that certain Ground Lease (as defined below), together with all improvements and fixtures located on the Land (the “Improvements” and, collectively with the Building and the Land, the “Real Property”), except for those items listed in Section 1.1(c) of the Agreement and Section 1(b) below, the ownership of which will be retained by Seller.

1. Sale of Personalty. For good and valuable consideration, Seller hereby sells, transfers, sets over and conveys to Purchaser the following:

(a) Intangible Property. The following property to the extent assignable: All, right, title and interest of Seller, if any, in and to: (1) all intangible personal property now or hereafter used exclusively in connection with the operation, ownership, maintenance, management, or occupancy of the Real Property; (2) the plans and specifications for the Improvements; (3) warranties, indemnities, applications, permits, approvals and licenses pertaining to the Real Property; and (4) insurance proceeds and condemnation awards or claims thereto to the extent provided in the Agreement.

(b) Improvements. The following property to the extent assignable: All, right, title and interest of Seller, if any, in and to all Improvements and fixtures located on the Land, except for tangible personal property and other trade fixtures and equipment owned by Seller, which shall not be part of the Improvements or this Assignment and shall remain the property of Seller; provided, however, all electrical, plumbing, HVAC, life safety systems, attached laboratory benches, autoclaves, climatized rooms, and gas and liquid distribution systems, shall be included as part of the Improvements and assigned to Purchaser hereunder.

2. Assignment of Leases, Service Contracts and Commission Agreements. For good and valuable consideration, Seller hereby assigns, transfers, sets over and conveys to Purchaser, and Purchaser hereby accepts the following as of the Closing Date (as defined in the Agreement):

(a) Ground Lease. All of Seller’s right, title and interest in and to that certain Ground Lease dated December 10, 2003 between Seller, as lessee, and the University of Utah, as ground lessor (the “Ground Lease”) covering the Land and the Improvements, as set forth on Exhibit B attached hereto, and, subject to the terms and conditions of the Agreement, Purchaser hereby assumes all of the lessee’s obligations under the Ground Lease arising from and after the Closing Date; and

(b) Service Contracts. The service contracts described in Exhibit C attached hereto (the “Service Contracts”), and, subject to the terms and conditions of the Agreement, Purchaser hereby assumes the obligations of Seller under such Service Contracts arising from and after the Closing Date.

3. Indemnification. Seller shall defend, indemnify and hold harmless Purchaser from and against any liability, damages, causes of action, expenses, and attorneys’ fees incurred by Purchaser by reason of the failure of Seller to fulfill, perform, discharge, and observe its obligations with respect to the Ground Lease or the Service Contracts arising prior to the Closing Date. Purchaser shall defend, indemnify and hold harmless Seller from and against any liability, damages, causes of action, expenses,

[EXHIBIT H]

and attorneys’ fees incurred by Seller by reason of the failure of Purchaser to fulfill, perform, discharge, and observe its obligations with respect to the Ground Lease and the Service Contracts arising on or after the Closing Date.

4. Successors and Assigns. This Assignment is binding upon, and shall inure to the benefit of Seller and Purchaser and their respective heirs, legal representatives, successors and assigns.

5. Counterparts. This Assignment may be executed in counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. To facilitate execution of this Assignment, the parties may execute and exchange by telephone facsimile counterparts of the signature pages.

6. Governing Law. This Assignment shall be governed by, interpreted under, and construed and enforceable in accordance with, the laws of the State of Utah.

7. Attorneys’ Fees. Should either party employ attorneys to enforce any of the provisions hereof, the non-prevailing party agrees to pay the prevailing party all reasonable costs, charges, and expenses, including reasonable attorneys’ fees, expended or incurred by the prevailing party in connection therewith.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[EXHIBIT H]

IN WITNESS WHEREOF, the undersigned have caused this Bill of Sale and Assignment of Leases and Contracts to be executed as of the date written above.

SELLER:	PURCHASER:
NPS PHARMACEUTICALS, INC., a Delaware corporation	BMR-383 COLOROW DRIVE LLC, a Delaware limited liability company
	By:	BioMed Realty, L.P., a Maryland limited partnership
By	By
Name:	Name:	Gary A. Kreitzer
Title:	Title:	Executive Vice President

[EXHIBIT H]

EXHIBIT I

CLOSING CERTIFICATE

THIS CERTIFICATE is made, executed and delivered as of this 22^nd day of December, 2005, pursuant to that certain Agreement of Purchase and Sale (“Agreement”) dated December 20, 2005, by and between NPS Pharmaceuticals, Inc., a Delaware corporation (“Seller”), and BioMed Realty, L.P., a Maryland limited partnership (“Purchaser”), pursuant to which the Seller is selling to Purchaser certain property located at 383 Colorow Drive, Salt Lake City, Utah. All capitalized words used herein and not otherwise defined herein shall have the meaning ascribed thereto in the Agreement.

CERTIFICATE

Seller, in accordance with Section 7.2(c) of the Agreement, hereby certifies to Purchaser as of Closing that:

(a) All representations and warranties of Seller contained in the Agreement are true and correct on the date set forth above with the same effect as if such were made on and as of such date;

(b) Schedule 1 attached hereto is a true and correct list of the Service Contracts to be assumed by Purchaser;

(c) To Seller’s knowledge, there are no uncured defaults existing under the Service Contracts or any agreement to be assigned to, or obligation to be assumed by, Purchaser under the Agreement;

(d) The Ground Lease is in full force and effect and no default, dispute or controversy exists under the Ground Lease. Seller has not received any notice of any default or breach on the part of lessee under the Ground Lease, nor, to Seller’s knowledge, does there exist any such default or breach on the part of lessee; and

(e) To Seller’s knowledge, the information provided in the Property Information continues to be true and accurate in all material respects.

[Signature Page Follows]

[EXHIBIT I]

IN WITNESS WHEREOF, Seller has executed this Certificate, effective as of the date and year first above written.

NPS PHARMACEUTICALS, INC.,

a Delaware corporation

By

Name:

Title:

[EXHIBIT I]

EXHIBIT J

NPS LEASE

[EXHIBIT J]

EXHIBIT K

NOTICE ADDRESSES

To Seller at:		To Purchaser at:
NPS Pharmaceuticals, Inc. Attn: Morgan Brown 383 Colorow Drive Salt Lake City, Utah 84108		BioMed Realty, L.P. Attn: Gary A. Kreitzer 17140 Bernardo Center Drive, Suite 222 San Diego, CA 92128
Telephone: Facsimile: Email:	(801) 583-4939 (801) 583-4961 mbrown@npsp.com	Telephone: Facsimile: E-mail:	858.485.9840 858.485.9843 gkreitzer@BioMedRealty.com
with a copy to:		with a copy to:
Office of General Counsel NPS Pharmaceuticals, Inc. 383 Colorow Drive Salt Lake City, Utah 84108		Latham & Watkins Attn: Finance Department Notice (BioMed–383 Colorow Drive – SJL) 600 West Broadway, Suite 1800 San Diego, CA 92101
Telephone: Facsimile:	(801) 583-4939 (801) 583-4961]	Telephone: Facsimile:	619-236-1234 619-696-7419

[EXHIBIT K]

EX-10.23(B)

Exhibit 10.23B

EXECUTION VERSION

LEASE AGREEMENT

(383 Colorow Drive, Salt Lake City, Utah)

This Lease Agreement (the “Lease”) is made as of the 22^nd day of December, 2005, by and between BMR-383 Colorow Drive LLC, a Delaware limited liability company (the “Landlord”) and NPS Pharmaceuticals, Inc., a Delaware corporation (the “Tenant”).

ARTICLE 1. DESCRIPTION OF PREMISES

1.1 Premises. Landlord hereby leases to Tenant and Tenant leases from Landlord, pursuant to the terms, conditions and uses herein set forth, that certain real property commonly known as 383 Colorow Drive, Salt Lake City, Utah and more particularly described in Exhibit A attached hereto (the “Land”), including a building located on the Premises containing approximately 93,650 square feet of rentable space (the “Building” and, together with the Land, the “Premises”).

ARTICLE 2. TERM

2.1 Lease Term. The term of this Lease will be for 15 years commencing on December 22, 2005 (the “Commencement Date”) and ending on December 21, 2020 (“Lease Term”). Tenant has two consecutive five-year options to extend the Lease Term, as further described in Article 34.

ARTICLE 3. RENT

3.1 Base Monthly Rental. Tenant shall pay to Landlord at the address set forth in Section 36.10, or such other address as Landlord may advise Tenant in writing, without deduction, offset or prior notice or demand, and Landlord shall accept, as rent for the Premises the sum of $158,333.00 per month ($1,900,000.00 per year), subject to adjustments pursuant to Section 3.3 below, in lawful money of the United States payable in advance on the first day of each month of the term of this Lease. Said monthly installments shall hereinafter be referred to as the “Base Monthly Rental.” Tenant has delivered to Landlord the Base Monthly Rental for the first month of the term hereof upon execution and delivery of this Lease. For purposes of this Lease, “Rent” will mean the Base Monthly Rent plus the Additional Rent plus any other charges due Landlord by Tenant under this Lease.

3.2 Proration of Rent. Prior to the first day of the first full calendar month of occupancy, in lieu of the Base Monthly Rental, Tenant will pay Landlord an amount equal to the Base Monthly Rental multiplied by a factor having as its numerator the number of days remaining in the month from, after and including the Commencement Date and as its denominator the number thirty. On the first day of the last month of this Lease, in lieu of the Base Monthly Rental, Tenant will pay Landlord an amount equal to the Base Monthly Rental multiplied by a factor having as its numerator the number of days remaining in the lease term and as its denominator the number thirty. Except as provided in Section 3.2, Rent shall be payable in accordance with the terms of Section 3.1.

3.3 Annual Adjustments. The Base Monthly Rental will be increased annually commencing on the first day of the calendar month immediately following the third anniversary of the Commencement Date, and on each anniversary thereafter, by an amount equal to 2.75% of the Base Monthly Rental for the preceding year.

3.4 Additional Rent, Expenses and Costs. Commencing upon the Commencement Date, Tenant shall pay to Landlord (unless otherwise expressly required hereunder to pay directly to a third party), as additional rent (“Additional Rent”), all sums of money of any and every sort required to be paid by Tenant under this Lease, whether or not the same are designated as Additional Rent; provided,

however, with respect to capital replacements in the last five years of the Lease Term, Landlord shall initially be responsible for the cost of such capital replacements and Tenant shall only make such capital replacements after obtaining Landlord’s prior written consent, which consent shall not be unreasonably withheld. The cost of such capital replacements shall be amortized over the useful life of the capital replacement, as such useful life is determined under Internal Revenue Service Treasury regulations, and the pro rata portion of the cost thereof attributable to the period: (a) prior to the expiration of the Lease Term shall be payable by the Tenant, at Tenant’s option, (i) monthly as Additional Rent with interest on the unamortized balance at the rate of ten percent (10%) per annum (the “Default Rate”), or (ii) to Landlord in cash within 10 days of receipt of Landlord’s consent, or (b) following the expiration of the Lease Term shall not be included as Additional Rent and shall be the sole responsibility of Landlord; provided, however, if Tenant exercises an option to extend the Lease Term pursuant to Section 34, Landlord may recover and Tenant shall (y), in the event it exercised its option pursuant to subsection (a)(i) above, continue to pay monthly as Additional Rent the portion of such cost previously excluded to the extent it falls within the extension term, or (z) in the event Tenant exercised its option pursuant to subsection (a)(ii) above, pay to Landlord within 10 days following Tenant’s exercise of such option pursuant to Section 34, the portion of such cost previously excluded to the extent it falls within the extension term. If such amounts or charges are not paid at the time provided in this Lease, they shall nevertheless be collectible as Additional Rent with the next installment of the Base Monthly Rental thereafter falling due, but nothing herein contained shall be deemed to suspend or delay the payment of any amount of money or charge at the time the same becomes due and payable hereunder, or limit any other remedy of Landlord. Except as provided in this Section, Tenant acknowledges that this is an absolute net lease to Landlord. As such, Tenant shall pay, as Additional Rent, all costs and expenses relating to the Premises.

3.5 Late Fees. Tenant acknowledges that late payment by Tenant to Landlord of the Base Monthly Rental or other charges incurred under this Lease will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to fix. Such costs include, without limitation, processing, administrative and accounting charges. If any payment of Base Monthly Rental, Additional Rent, or other charges due from Tenant is not received by Landlord within 5 business days of when due, such unpaid amounts shall bear interest at the Default Rate from the date due to the date of payment. In addition to interest, Tenant shall pay a sum of the greater of (i) 3% of the overdue rent or (ii) $15.00 as a late charge (“Late Charge”). Late Charges shall constitute Additional Rent. The parties agree that the Late Charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment by Tenant. Acceptance of any Late Charge shall not constitute a waiver of Tenant’s default with respect to the overdue amount, or prevent Landlord from exercising any of the other rights and remedies available to Landlord hereunder.

3.6 Security Deposit. Tenant will pay a security deposit of $300,000 (payable in cash or in the form of a letter of credit reasonably acceptable to Landlord) (the “Security Deposit”).

3.6.1 In lieu of depositing cash as the Security Deposit, Tenant shall have the right to deliver to Landlord an unconditional, irrevocable, standby letter of credit in the amount of the cash Security Deposit otherwise required hereunder, which letter of credit shall (i) be in a form reasonably acceptable to Landlord, (ii) be issued by a financial institution selected by Tenant and reasonably acceptable to Landlord, (iii) be for the benefit of Landlord, but shall be transferable at Tenant’s sole cost and expense by Landlord to any subsequent purchaser or encumbrancer of the Building, (iv) be automatically renewable from year to year throughout the Lease Term, (v) be payable by draft sight in a location reasonably acceptable to Landlord upon presentation of a certification signed by an officer of Landlord which states that Tenant has failed to perform any of its monetary or non-monetary obligations, and all notice and cure provisions of the Lease have been provided for and lapsed, and (vi) be payable in the event such letter of credit is not renewed on or before the date which is thirty (30) days prior to its expiration. Any amounts of cash drawn on a letter of credit Security Deposit will thereafter be treated as a cash Security Deposit hereunder.

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3.6.2 Tenant shall have the right at any time during the Lease Term upon thirty (30) days prior written notice to Landlord (i) to replace a cash Security Deposit with a letter of credit which complies with all the terms of Section 3.6.1, or (ii) to replace a letter of credit Security Deposit with a corresponding amount of cash.

3.6.3 Springing Security Deposit. Within 40 days after the end of each calendar quarter, Tenant shall provide to Landlord an Officer’s Certificate in the form of Exhibit B attached hereto to the effect that (i) either (a) the value of the Tenant’s cash, cash equivalents and marketable investment securities (as set forth in Tenant’s financial statements) at the end of such calendar quarter are equal to or greater than $80,000,000, or (b) the value of the Tenant’s cash, cash equivalents and marketable investment securities at the end of such calendar quarter are less than $80,000,000. If the value of the Tenant’s cash, cash equivalents and marketable investment securities drops below $80,000,000, Tenant shall, within five business (5) days after delivery of such Officer’s Certificate, deposit with Landlord an additional security deposit in an amount equal to $1,200,000 (payable in cash or in the form of a letter of credit reasonably acceptable to Landlord in accordance with the provisions of Section 3.6.1) (the “Springing Security Deposit” and, together with the Security Deposit, the “Security Deposits”); provided, however, in the event Tenant’s cash, cash equivalents and marketable investment securities once again exceeds $80,000,000 for two consecutive calendar quarters, Landlord shall promptly return the Springing Security Deposit to Tenant; provided, further, in the event Tenant reports financial profitability for four consecutive quarters, the requirements of this Section 3.6.3 shall be permanently eliminated and Landlord shall promptly return the Springing Security Deposit to Tenant. Failure to timely provide such Officer’s Certificate or such Springing Security Deposit, if required, shall be a default under this Lease.

3.6.4 If Tenant fails to pay Rent when required or fails to perform any other covenant contained herein, Landlord may use or retain all or any part of the Security Deposits for the payment of any sum not so paid, or for the payment of any amount which Landlord may spend or become obligated to spend by reason of Tenant’s default, provided that Landlord provides written notice to Tenant and the applicable cure period for such default has expired without Tenant effecting a cure. If any portion of the Security Deposits are so applied or used, then Tenant shall, within 5 business days after written notice thereof, deposit an additional amount with Landlord sufficient to restore each said Security Deposit to the amount set forth above and Tenant’s failure to do so shall constitute a breach of this Lease.

3.6.5 If Tenant has performed all of its monetary and other obligations hereunder at the termination of this Lease, Landlord shall return each said Security Deposit to Tenant within 30 days after termination of this Lease, less any amounts required to restore the Premises to good condition and repair, reasonable wear and tear excepted, including repairing any damage resulting from the removal by Tenant of its trade fixtures or equipment.

3.6.6 Landlord’s obligation with respect to the Security Deposits are that of a debtor and not as a trustee, consequently, such sums may be commingled with rental receipts or dissipated and no interest shall accrue thereon.

3.6.7 In the event of the sale of the real property of which the Premises constitute a part, Landlord’s successor in interest shall assume Landlord’s obligations with respect to the sums held as security or advance rent and notify Tenant in writing setting forth the particularity of such transfer, including the successor’s name and address. Upon such assumption and written notification, Tenant shall have no further claim against Landlord with respect to any such Security Deposits and hereby waives all rights against Landlord in such regard. Notwithstanding the foregoing, Landlord will remain personally liable to the extent Landlord’s successor in interest fails to assume the Landlord’s obligations with respect to the deposit as specified above.

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ARTICLE 4. POSSESSION

4.1 Possession. Tenant hereby acknowledges that as of the Commencement Date it is in possession of the Premises, and is familiar with the condition thereof and accepts the Premises in its “as is” condition with all faults, and Landlord makes no representation or warranty of any kind with respect the Premises, and Landlord will have no obligation to improve, alter or repair the Premises, except as specifically set forth herein. It is understood and agreed that Landlord is not obligated to install any equipment, or make any repairs, improvements or alterations to the Premises.

4.2 NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT LANDLORD IS LEASING THE PREMISES “AS IS” AND “WHERE IS,” AND WITH ALL FAULTS AND THAT, LANDLORD IS MAKING NO REPRESENTATIONS AND WARRANTIES WHETHER EXPRESS OR IMPLIED, BY OPERATION OF LAW OR OTHERWISE, WITH RESPECT TO THE QUALITY OR PHYSICAL CONDITION OF THE PROPERTY, THE INCOME OR EXPENSES FROM OR OF THE PROPERTY, OR THE COMPLIANCE WITH THE PROPERTY WITH APPLICABLE BUILDING OR FIRE CODES, ENVIRONMENTAL LAWS OR OTHER LAWS, RULES, ORDERS OR REGULATIONS. WITHOUT LIMITING THE FOREGOING, IT IS UNDERSTOOD AND AGREED THAT LANDLORD MAKES NO WARRANTY OF THE HABITABILITY, SUITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. TENANT AGREES THAT IT ASSUMES FULL RESPONSIBILITY FOR, AND THAT IT HAS PERFORMED EXAMINATIONS AND INVESTIGATIONS OF THE PREMISES, INCLUDING SPECIFICALLY, WITHOUT LIMITATION, EXAMINATIONS AND INVESTIGATIONS FOR THE PRESENCE OF ASBESTOS, PCBS AND OTHER HAZARDOUS SUBSTANCES, MATERIALS AND WASTES (AS THOSE TERMS MAY BE DEFINED HEREIN OR BY APPLICABLE FEDERAL OR STATE LAWS, RULES OR REGULATIONS) ON OR IN THE PREMISES. WITHOUT LIMITING THE FOREGOING, TENANT IRREVOCABLY WAIVES ALL CLAIMS AGAINST LANDLORD WITH RESPECT TO ANY ENVIRONMENTAL CONDITION, INCLUDING CONTRIBUTION AND INDEMNITY CLAIMS, WHETHER STATUTORY OR OTHERWISE. EXCEPT AS PROVIDED IN SECTION 3.4, TENANT ASSUMES FULL RESPONSIBILITY FOR ALL COSTS AND EXPENSES REQUIRED TO CAUSE THE PROPERTY TO COMPLY WITH ALL APPLICABLE BUILDING AND FIRE CODES, MUNICIPAL ORDINANCES, ENVIRONMENTAL LAWS AND OTHER LAWS, RULES, ORDERS, AND REGULATIONS.

ARTICLE 5. USE

5.1 Permitted Use of Premises. The Premises shall be used and occupied by Tenant solely for laboratory, research, administration, pharmaceutical and related health care uses. The Premises are to be used for no other purposes without first obtaining the consent of Landlord, which consent shall not be unreasonably withheld.

5.2 Compliance with Laws. Tenant, at Tenant’s sole expense, shall promptly comply, or cause compliance, with all laws, ordinances, zoning restrictions, rules, regulations, orders and requirements of any duly constituted public authorities now or hereafter affecting the Premises, including the use, safety, cleanliness and occupation of the Premises.

5.3 Prohibited Uses. Tenant shall not do, bring or keep anything in or about the Premises that will cause a cancellation of any insurance covering the Premises or the Building. Tenant shall not use the Premises in any manner that will constitute waste, nuisance or unreasonable annoyance to owners

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or occupants of nearby properties. Tenant shall not do anything on the Premises that will cause material damage to the Building. Tenant shall place no loads upon the floors, walls or ceiling of the Building in excess of the maximum designed load or which may materially damage the Building. No machinery, apparatus, or other appliance shall be used or operated in or on the Premises that will vibrate or shake the Premises.

ARTICLE 6. ALTERATIONS AND ADDITIONS

6.1 Alterations. Tenant shall not make any alterations, improvements or additions to any part of the structural or exterior portion of the Building or any of the Building’s base building systems (including without limitation the base building HVAC, mechanical, electrical, plumbing or life safety systems) without obtaining Landlord’s prior written consent, which consent shall not be unreasonably withheld. So long as alterations, improvements and additions do not affect the structural or exterior portion of the Building or any of the Building’s base building systems, Tenant shall be permitted to make all reasonable alterations, improvements and additions to, on or at the Premises. Any such improvements, excepting movable furniture, trade fixtures and equipment, shall become part of the realty and belong to Landlord. All alterations and improvements shall be properly permitted and installed at Tenant’s sole cost, by a licensed contractor, in a good and workmanlike manner, and in conformity with the laws of all applicable duly constituted public authorities. Any alterations that Tenant shall desire to make which require the consent of Landlord shall be presented to Landlord in written form with detailed plans. Tenant shall: (i) acquire all applicable governmental permits; (ii) furnish Landlord with copies of both the permits and the plans and specifications before the commencement of the work, and (iii) comply with all conditions of said permits in a prompt and expeditious manner. Any alterations shall be performed in a workmanlike manner with good and sufficient materials. Tenant shall promptly upon completion of any alterations that require the consent of Landlord pursuant to this section furnish Landlord with as-built plans and specifications. In the event Tenant installs improvements or makes any alterations, Tenant shall only be required to remove such improvements or alterations if Landlord’s approval was conditioned upon Tenant’s removal of such improvements or alterations. Tenant shall, in any event, repair any damage resulting from the removal of machinery or trade fixtures of Tenant.

6.2 Notice of Commencement. At least 10 days prior to commencing any work relating to any alterations, improvements or additions which require Landlord’s prior consent or which have been approved by Landlord, Tenant shall notify Landlord in writing of the expected date of commencement. Landlord shall have the right at any time thereafter to post and maintain in the work area on the Premises such notices as Landlord reasonably deems necessary to protect Landlord and the Premises from mechanics’ liens, materialmen’s liens or any other liens, provided that such postings shall not interfere with such work. Tenant shall pay, when due, all claims for labor or materials furnished to or for Tenant for use in improving the Premises. Tenant shall not permit any mechanics’ or materialmen’s liens to be levied against the Premises arising out of work performed, materials furnished, or obligations to have been performed on the Premises by or at the request of Tenant. Tenant hereby indemnifies and holds Landlord harmless against loss, damage, attorneys’ fees and all other expenses on account of claims of lien of laborers or materialmen or others for work performed or materials or supplies furnished for Tenant or its contractors, agents or employees. If Tenant fails to remove or bond any lien(s) filed against the Premises in connection with any work performed or any work claimed to have been performed by or at the direction of Tenant within 10 days from the date of the lien(s) filing, Landlord may remove such lien(s) at Tenant’s expense and Tenant shall reimburse Landlord for all costs incurred by Landlord in connection with the removal of the lien(s), which amount shall be deemed Additional Rent, and shall include, without limitation, all sums disbursed, incurred or deposited by Landlord, including Landlord’s costs, expenses and actual attorneys’ fees, with interest thereon, at the Default Rate from the date of expenditure. If Tenant shall contest the validity of any such lien, claim or demand, then Tenant shall, at its sole expense defend and protect itself, Landlord and the Premises against the same and shall pay and

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satisfy any such judgment that may be rendered thereon before the enforcement thereof. If Landlord shall require, Tenant shall furnish a surety bond in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Landlord against liability for the same.

6.3 Trade Fixtures. Tenant may install trade fixtures, machinery or other trade equipment in conformance with the ordinances of all applicable duly constituted public authorities. Tenant may remove any of such trade fixtures or machinery upon the termination of this Lease. In the event that Tenant installs machinery or trade fixtures, Tenant shall, at Landlord’s option, return the Premises on termination of this Lease to the same condition as existed at the date of entry, reasonable wear and tear excepted.

ARTICLE 7. SURRENDER OF PREMISES

7.1 Conditions upon Surrender. Upon the expiration, or earlier termination, of this Lease, Tenant shall surrender the Premises to Landlord in its condition existing as of the Commencement Date, normal wear and tear, casualty, condemnation and acts of God excepted, with all interior walls in good repair, the HVAC equipment, plumbing, electrical and other mechanical installations in good operating order to the reasonable satisfaction of Landlord, and the clean-up, removal and detoxification of any Hazardous Materials as required in Section 33.2.5. Tenant shall remove from Premises all of Tenant’s alterations which Landlord requires Tenant to remove pursuant to Section 6.1 and all Tenant’s personal property, and shall repair any damage and perform any restoration work caused by such removal. If Tenant fails to remove such alterations and Tenant’s personal property which Tenant is authorized and obligated to remove pursuant to the above, and such failure continues after the termination of the Lease, Landlord may retain such property and all rights of Tenant with respect to it shall cease, or Landlord may place all or any portion of such property in public storage for Tenant’s account. Tenant shall pay to Landlord upon demand costs of removal of such alterations and Tenant’s personal property and storage and transportation costs of same, and the cost of repairing and restoring the Premises, together with attorneys’ fees and interest at the Default Rate on said amounts, from the date of expenditure by Landlord. If the Premises are not so surrendered at the termination of this Lease, Landlord may, in its sole discretion, either (a) upon written notice to Tenant, treat Tenant as a month-to-month tenant at will, subject to all the terms, covenants and conditions of this Lease, or (b) proceed with an unlawful detainer action and pursue all other rights and remedies available to Landlord. Notwithstanding the foregoing, Tenant shall not remove from the Premises any base building electrical, plumbing, HVAC, life safety systems; and attached laboratory benches, autoclaves, climatized rooms, and gas and liquid distribution systems.

ARTICLE 8. UTILITIES AND SERVICES

8.1 Utilities. Tenant shall make all arrangements for and pay for all water, sewer, gas, heat, light, power, telephone service and any other service or utility Tenant requires at the Premises. Landlord shall not be liable for any failure or interruption of any utility service being furnished to the Premises, and no such failure or interruption shall entitle Tenant to terminate this Lease; provided, however, that Tenant will be entitled to Rent abatement in connection with any such failure or interruption to the extent Landlord receives lost rental income insurance proceeds.

ARTICLE 9. INDEMNIFICATION

9.1 Indemnity of Landlord. Tenant hereby agrees to indemnify, defend (with attorneys approved by Landlord), protect, and hold Landlord and Landlord’s agents, employees, directors, officers, managers, members, partners, affiliates, independent contracts and property managers (“Landlord’s Agents”), harmless from any and all liabilities, costs, expenses and losses by reason of injury to person or property (“Losses”), caused by, arising out of, or related to, the condition of the Premises or the use or

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occupancy of the Premises by Tenant, its agents, directors, officers, managers, members, partners, affiliates, independent contracts and property managers, or invitees (“Tenant’s Agents”), including without limitation, any liability for injury to the person or property of Tenant or Tenant’s Agents, but excepting any Loss resulting from the material breach of the Lease by Landlord or the gross negligence or willful misconduct of Landlord or Landlord’s Agents. Tenant’s obligation hereunder shall survive the termination of this Lease with respect to any claims or liability arising in connection with any event occurring prior to such termination.

9.2 Waiver of Claims. Tenant, as a material part of the consideration rendered to Landlord in entering into this Lease, hereby waives all claims against Landlord for damages to goods, wares, machinery, trade fixtures, or other property of Tenant, Tenant’s Agents or any other person in or about the Premises, whether such damage or injury is caused by or results from Landlord’s negligence, fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the building of which the Premises are a part, or from other sources or places, but excepting any claims resulting from the gross negligence or willful misconduct of Landlord or Landlord’s Agents. Notwithstanding Landlord’s negligence or breach of this Lease, Landlord shall under no circumstances be liable for loss of profits or special, incidental or consequential damages arising therefrom.

9.3 Landlord Indemnification. Landlord agrees to indemnify, defend, protect and hold harmless Tenant and Tenant’s agents, employees, directors, and officers from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys’ fees) incurred in connection with or arising from any Losses, caused by Landlord’s material breach of this Lease or the gross negligence or willful misconduct of Landlord and/or any of Landlord’s Agents. The obligations of Landlord under this Section 9.3 shall survive the termination of this Lease with respect to any claims or liability arising in connection with any event occurring prior to such termination.

9.4 Claims for Indemnification. If any indemnitee under Sections 9.2 or 9.3 above (an “Indemnitee”) shall believe that such Indemnitee is entitled to indemnification pursuant to this Article 9 in respect of any Losses, such Indemnitee shall give the appropriate indemnifying party (each, as applicable, an “Indemnifying Party”) prompt written notice thereof. Any such notice shall set forth in reasonable detail and to the extent then known the basis for such claim for indemnification. The failure of such Indemnitee to give notice of any claim for indemnification promptly shall not adversely affect such Indemnitee’s right to indemnity hereunder except to the extent that such failure adversely affects the right of the Indemnifying Party to assert any reasonable defense to such claim.

9.5 Defense of Claims. In connection with any claim which may give rise to indemnity under this Article 9 resulting from or arising out of any claim or proceeding against an Indemnitee by a person that is not a party hereto, the Indemnifying Party shall (unless such Indemnitee elects not to seek indemnity hereunder for such claim), upon written notice to the relevant Indemnitee, assume the defense of any such claim or proceeding. The Indemnifying Party shall select counsel reasonably acceptable to such Indemnitee to conduct the defense of such claim or proceeding, shall take all steps necessary in the defense or settlement thereof and shall at all times diligently and promptly perform resolution thereof. Without the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld, the Indemnifying Party will not enter into any settlement of, or any claim or proceeding which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. Without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, the Indemnitee will not enter into any settlement or any claim or proceeding which would lead to liability or create any financial or other obligation on the part of the Indemnifying Party unless the Indemnifying Party has failed or refused to acknowledge responsibility for or defend such claim or proceeding within a reasonable period of time after notice is provided pursuant to Section 9.4.

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ARTICLE 10. INSURANCE

10.1 Landlord’s Insurance. Landlord shall maintain, at Tenant’s sole expense, which Tenant shall pay to Landlord as Additional Rent in the manner set forth in Section 10.2, a policy or policies of insurance protecting Landlord against the following:

10.1.1 Fire and other perils normally included within the classification of fire and extended coverage, together with insurance against vandalism and malicious mischief, to the extent of the full replacement cost of the Premises, including earthquake and flood coverage, exclusive of trade fixtures, equipment and improvements insured by Tenant, with agreed value, full replacement and other endorsements which Landlord may elect to maintain.

10.1.2 Eighteen (18) months of rental loss insurance and to the extent of 100% of the gross rentals from the Building of which the Premises constitute a part.

10.1.3 Public liability and property damage insurance with respect to the Building in amounts (i) not less than $2,000,000 for injury or death to any one person in any one accident or occurrence, (ii) not less than $5,000,000 for injury or death to more than one person in any one accident or occurrence, and (iii) not less than $5,000,000 of excess umbrella liability insurance for damage to the Building.

10.1.4 Public liability and property damage insurance with respect to common areas in amounts (i) not less than $1,000,000 for injury or death to any one person in any one accident or occurrence, (ii) not less than $2,000,000 for injury or death to more than one person in any one accident or occurrence, (iii) not less than $3,000,000 of excess umbrella liability insurance, and, (iv) not less than $1,000,000 per occurrence for damage to the common areas.

10.1.5 At Landlord’s sole option, environmental liability or environmental clean-up/remediation insurance in such amounts and with such deductibles and other provisions as Landlord may reasonably determine; provided such insurance can be obtained at commercially reasonable rates.

10.2 Payment. Tenant shall pay to Landlord all costs of insurance provided by Landlord pursuant to Section 10.1 within 30 days after receipt of an invoice from Landlord advising Tenant of the costs paid by Landlord for such insurance. To the extent that any such insurance is maintained pursuant to a blanket or similar policy of insurance, then the cost thereof shall be equitably allocated to the Premises by Landlord.

10.3 Tenant’s Insurance. Tenant shall maintain at its sole cost and expense, in force a policy or policies of insurance protecting Landlord and Tenant against each of the following:

10.3.1 Commercial general liability insurance with respect to the Premises insuring against bodily injury or death and property damage in amounts (i) not less than $5,000,000 in the aggregate and (ii) not less than $2,000,000 per occurrence. Landlord shall be included as additional insured. All such bodily injury and property damage insurance shall specifically insure the performance by Tenant of the indemnity agreement as to personal injury or property damage contained in Section 9.

10.3.2 Insurance covering alterations, additions or improvements permitted under Section 6, trade fixtures and personal property from time to time in or upon the Premises in an amount not less than 80% of their fair market value from time to time during the term of this Lease, providing

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protection against any peril included within the classification “fire and extended coverage,” for the repair or replacement of the property damaged or destroyed unless this Lease shall terminate pursuant to Section 19 hereof.

10.3.3 All policies of insurance to be provided by Tenant shall be issued by insurance companies, with general policy holder’s rating of not less than A and a financial rating of not less than Class X as rated in the most current available “Best’s” Insurance Reports, and admitted to do business in the State of Utah. The policies will provide standard lessors loss payable and additional insured endorsements to protect the interest of Landlord for covered third-party liability and first-part property damage losses. The policies provided by Tenant shall be for the mutual and joint benefit and protection of Landlord and Tenant, and executed copies of such policies of insurance or certificates thereof shall be delivered to the Landlord within 10 days after the Commencement Date and, thereafter, within 30 days prior to the expiration of the term of each such policy. All public liability and property damage policies shall contain a provision that the Landlord, although named as an additional insured, shall nevertheless be entitled to recover under said policies for any loss occasioned to it or Landlord’s Agents by reason of the negligence of the Tenant. Upon the expiration or termination of any such policy, renewal or additional policies shall be procured and maintained by the Tenant to provide the required coverage. All policies of insurance delivered to Landlord must contain a provision that the company writing said policy will provide to Landlord with 30 days notice in writing in advance of any cancellation or lapse or the effective date of any reduction in the amounts of insurance. All public liability, property damage and other casualty policies shall be written as primary policies, not contributing with and not in excess of coverage which Landlord may carry.

10.3.4 Notwithstanding anything to the contrary, Tenant’s obligation to carry the insurance described in this Section may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by the Tenant, provided that (i) Landlord will be named as an additional insured thereunder as their interests may appear, (ii) the coverage afforded Landlord will not be reduced or diminished by reason of the use of such blanket policy of insurance, and (iii) the requirements set forth herein are otherwise satisfied. Tenant agrees to permit Landlord at all reasonable times to inspect the policies of insurance of Tenant covering the Premises for policies which are not required to be delivered to Landlord.

10.3.5 From time to time during the Lease Term, but no more often than once every five (5) years, Landlord shall have the right to require Tenant to increase the amount of any insurance required to be maintained hereunder to levels that are customarily carried by landlords owning or operating comparable properties in the State of Utah or to otherwise account for inflation since the date of this Lease.

10.4 Release of Subrogation Rights. Landlord and Tenant hereby mutually release each other from liability and waive all right to recover against each other for any loss from perils insured against under their respective insurance policies, including any extended coverage and special form endorsements to said policies; provided, however, this Section shall be inapplicable if it would have the effect, but only to the extent that it would have the effect of invalidating any insurance coverage of Landlord or Tenant. The parties shall obtain, if available, from their respective insurance companies, a waiver of any right of subrogation which said insurance company may have against the Landlord or the Tenant, as the case may be.

10.5 Failure to Provide Insurance. Failure by Tenant to obtain or maintain the insurance required herein shall be a default under this Lease, and Landlord shall have all of its rights hereunder, including, the right to use or retain all or any part of the Security Deposits for the payment of any such sum not so paid.

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ARTICLE 11. TAXES

11.1 Personal Property Taxes. Tenant shall pay prior to delinquency all taxes, assessments, license fees, and other public charges levied, assessed or imposed or which become payable during the term of this Lease upon any trade fixtures, furnishings, equipment and all other personal property of Tenant installed or located in the Premises. Whenever possible, Tenant shall cause said trade fixtures, furnishings, equipment and personal property to be separately assessed. If, however, any or all of said items shall be assessed and taxed with the real property, Tenant shall pay to Landlord such taxes as are attributable to Tenant’s trade fixtures, furnishings, equipment and personal property within 15 days after receipt of an invoice from Landlord advising Tenant of the taxes applicable to Tenant’s property.

11.2 Real Property Taxes. Tenant shall also pay at least 20 days before due any and all real estate taxes, as defined in Section 11.3, assessed or imposed, or which become a lien upon or become chargeable against or payable in connection with the Premises. Tenant shall upon written request provide Landlord evidence of such payment in a form reasonably acceptable to Landlord. Real estate taxes for the last year of the term of this Lease shall be prorated between Landlord and Tenant as of the expiration date of the term. With respect to any assessments which may be levied against or upon the Premises, or which under the laws then in force may be evidenced by improvement or other bonds and may be paid in annual installments, only the amount of such annual installment, with appropriate proration for any partial year, and interest thereon, shall be included within a computation of taxes and assessments levied against the Premises.

11.3 Definition of Real Estate Taxes. For purposes of this Lease, “real estate taxes” shall also include each of the following:

11.3.1 Any form of assessment, license fee, license tax, bond or improvement bond, business license tax, commercial rental tax, levy, charge, penalty, or tax, imposed by any authority having the direct power to tax, including any city, county, state or federal government, or any school, agricultural, lighting, drainage or other improvement or special district thereof, as against any legal or equitable interest of Landlord in the Premises or the real property of which the Premises constitute a part;

11.3.2 Any assessment, tax, fee, levy or charge in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included with the definition of real property tax. It is the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies and charges and all similar assessments, taxes, fees, levies and charges be included within the definition of real property tax for purposes of this Lease;

11.3.3 Any tax allocable to or measured by the area of the Premises or the rental payable hereunder, including without limitation, any excise tax levied by the State, any political subdivision thereof, city, or federal government, with respect to the receipt of such rental, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use of occupancy by Tenant of the Premises, or any portion thereof,

11.3.4 Any tax upon any transaction to which Tenant is a party, creating or transferring an interest or an estate in the Premises; and

11.3.5 Any tax, fee, levy, assessment or charge, or any increase therein: (i) imposed by reason of events occurring during the term of this Lease, including but not limited to, any reassessment of such property taxes caused by a change in the ownership of the Premises, and (ii) levied or assessed on machinery or equipment, if any, provided by Landlord to Tenant pursuant to this Lease.

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11.3.6 “Real estate taxes” shall not include Landlord’s federal, state or city income, franchise, inheritance or estate taxes.

ARTICLE 12. COMMON AREAS

12.1 Common Area. Common areas shall include all areas within the Premises outside the exterior boundaries of the buildings situated thereon, including, but not limited to, streets, driveways, parking areas, truckways, delivery passages, loading doors, sidewalks, ramps, open and closed courts and malls, landscaped and planted areas, exterior stairways, bus stops, retaining and decorative walls and planters, and other areas provided for the use of Tenant, its employees and invitees.

12.2 Maintenance. Tenant shall maintain said common areas in a neat, clean and orderly condition, properly lighted and landscaped as Landlord and Ground Lessor (as defined below) shall determine, including, but not limited to, general maintenance, repairs, pest control, resurfacing, painting, restriping, cleaning, sweeping and trash removal; maintenance and repair of sidewalks and curbs; sprinkler systems, planting and landscaping; lighting, water, music and other utilities; directional signs and other markers and bumpers; maintenance and repair of any fire protection systems, automatic sprinkler systems, lighting systems, storm drainage systems and any other utility systems; and personnel or contractors to implement such service and to police the common areas.

12.3 Care of Premises. Tenant shall, at its sole cost and expense keep the Premises and exterior and interior portions of windows, doors, and all other glass or plate glass fixtures in a working neat, clean, sanitary, safe and good condition and repair, and shall keep the Premises free from trash, rubbish and dirt. Tenant shall make all repairs or replacements thereon or thereto, whether ordinary or extraordinary.

12.4 Maintenance of Equipment. Except as provided in Section 3.4, Tenant shall, at its sole cost and expense, keep and maintain all utilities, fixtures and mechanical equipment used, or available for use, by Tenant (wherever located) in good working order, condition and repair. Said items shall include, but are not limited to, all plumbing or sewage facilities in the Premises, doors, locks and closing devices, windows, including glass, lights, electric systems and equipment, heating and air conditioning systems and equipment, and all other appliances and equipment of every kind.

12.5 Roof, Walls, Foundation and Structural. Except as provided in Section 3.4, at its cost and expense, Tenant will keep in good condition and repair the roof, foundation, load bearing walls and structural elements of the Premises to keep the Premises in the same condition and repair existing as of the Commencement Date, normal wear and tear, casualty, acts of God and condemnation excepted.

12.6 Compliance with Governmental Regulations. Except as provided in Section 3.4, Tenant shall, at its sole cost and expense, promptly and properly observe and comply with, including the making by Tenant of any alterations to the Premises, all present and future orders, regulations, directions, rules, laws ordinances, and requirements of all governmental authorities (including, without limitation, state, municipal, county and federal governments and their departments, bureaus, boards and officials) arising from the use or occupy of, applicable to, the Premises.

12.7 Service Contracts. Except to the extent self-performed by Tenant’s qualified and experienced personnel, Tenant shall, at Tenant’s sole cost and expense, procure and maintain contracts, with copies to Landlord, in customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements, if any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler, and pressure vessels, (iii) fire extinguishing systems, including fire alarm and/or smoke detection, (iv) landscaping and irrigation system, (v) roof covering and drains, and (vi) any other equipment, if reasonably required by Landlord; provided, however, in the event such equipment or improvement is under warranty, Tenant shall not be obligated to procure and maintain such service contract until such warranty expires.

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12.8 Action by Landlord if Tenant Fails to Maintain. If Tenant refuses or neglects to repair or maintain the Premises as required by Sections 12.3, 12.4, 12.5, or 12.6 to the reasonable satisfaction of Landlord, Landlord, at any time following 10 days from the date on which Landlord shall make written demand on Tenant to affect such repair or maintenance, may, but shall not have the obligation to, make such repair and/or maintenance (without liability to Tenant for any loss or damage which may occur to Tenant’s merchandise, fixtures or other personal property, or to Tenant’s business by reason thereof, other than due to Landlord’s gross negligence or willful misconduct) and upon completion thereof, Tenant shall pay to Landlord as Additional Rent Landlord’s costs for making such repairs, plus interest at the Default Rate upon demand herefore. If Tenant refuses or neglects to comply with Section 12.7, Landlord reserves the right, upon notice to Tenant, to procure and maintain any or all of such service contracts, and if Landlord so elects, Tenant shall reimburse Landlord, upon demand, for the cost thereof. Moreover, Tenant’s failure to pay any of the charges in connection with the performance of its maintenance and repair obligations under this Lease will constitute a material default under the Lease.

12.9 Tenant’s Costs. Within 60 days after the Commencement Date, and within 60 days after the beginning of each calendar year, Landlord shall give Tenant a written estimate, for such calendar year, expenses in connection with maintenance of the Premises by Landlord pursuant to Section 12.8. Tenant shall pay such estimated amount to Landlord in equal monthly installments, in advance. Within 90 days after the end of each calendar year, Landlord shall furnish to Tenant a statement showing in reasonable detail the costs incurred by Landlord, if any, for the operation and maintenance of the Premises during such year (the “Annual Statement”), and Tenant shall pay to Landlord Tenant’s proportionate share of the cost incurred in excess of the payments made by Tenant within 10 days of receipt of such statement. In the event that the payments made by Tenant for the operation and maintenance of the Premises exceed Tenant’s share of the cost of same, such amount shall be credited by Landlord to the Rent or other charges next due and owing, provided that, if the Lease term has expired, Landlord shall accompany said statement with the amount due Tenant.

ARTICLE 13. SIGNS AND ADVERTISING

13.1 Signs. Landlord shall designate the location on the Premises for one or more exterior Tenant identification sign(s) and Tenant shall not display or erect any other signs, displays, or other advertising materials that are visible from the exterior of the building. The size, design, and other physical aspects of the permitted sign(s) shall be subject to the Landlord’s written approval prior to installation, which approval will not unreasonably be withheld, any covenants, conditions, or restrictions encumbering the Premises, any applicable municipal or other governmental permits and approvals. The cost of the sign(s), including but not limited to the permitting, installation, maintenance and removal thereof shall be at Tenant’s sole cost and expense. By executing this Lease, Landlord hereby approves Tenant’s signage currently existing on the Premises.

ARTICLE 14. ENTRY BY LANDLORD

14.1 Entry by Landlord. Tenant shall permit Landlord and Landlord’s Agents, prospective purchasers, lenders, investors and contractors to enter the Premises at all reasonable times, upon giving Tenant 5 days prior written notice, except in the event of an emergency in which case the 5 days prior written notice is not required (but Landlord shall still immediately notify Tenant): (i) for the purpose of inspecting the same, (ii) for the purposes of performing any of Tenant’s obligations under this Lease that Tenant has failed to perform after notice and the expiration of the applicable cure period, including, without limitation, Landlord’s rights pursuant to Section 12.8, or (iii) for the purpose of posting notices of non-responsibility for alterations, additions, or repairs.

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14.2 Entry to Relet Premises. Landlord may, upon two (2) days prior notice, during reasonable business hours within 12 months prior to the expiration of this Lease, enter the Premises for the purpose of allowing prospective tenants to view the Premises.

14.3 No Liability. Landlord shall be permitted to enter the Premises for any of the purposes stated in and in accordance with Sections 14.1 and 14.2 above without any liability to Tenant for any loss of occupation of quiet enjoyment of the Premises resulting therefrom.

ARTICLE 15. ASSIGNMENT AND SUBLETTING

15.1 Assignment and Subletting. Tenant shall neither voluntarily nor by operation of law, assign, sell, encumber, pledge or otherwise transfer all or any part of Tenant’s leasehold estate hereunder, or permit the Premises to be occupied by anyone other than Tenant or Tenant’s employees, or sublet the Premises or any portion thereof, without Landlord’s prior written consent in each instance, which consent shall not be unreasonably withheld. Any purported assignment or subletting contrary to these provisions shall be void. It shall not be unreasonable for Landlord to base its determination as to whether consent will be granted in any specific instance on, without limitation, the following factors: (a) whether the assignee’s or subtenant’s use of the Premises will be compatible with the provisions of this Lease; (b) the financial capacity of the assignee or subtenant; (c) the business reputation of the assignee or subtenant; (d) the quality and type of the business operations of the assignee or subtenant; (e) the business experience of the proposed assignee or subtenant; and (f) that each and every covenant, condition or obligation imposed upon Tenant by this Lease is assumed by such assignee or subtenant and each and every right, remedy or benefit afforded Landlord by this Lease is not thereby impaired or diminished. This list of factors is not intended to be exclusive, and Landlord may rely on such other reasonable basis for judgment as may apply from time to time. Consent by Landlord to one or more assignments of this Lease or to one or more sublettings of the Premises shall not operate to exhaust Landlord’s rights under this Section.

15.2 Notice to Landlord. If Tenant desires at any time to assign this Lease or to sublet the Premises or any portion thereof, it shall first notify Landlord of its desire to do so and shall submit in writing to Landlord (the “Transfer Notice”); (i) the size and location of the space Tenant proposes to assign or sublet; (ii) the name of the proposed assignee; (iii) the date on which the Tenant proposes that the transfer be effective, which shall not be earlier than the date which is 30 days after the Transfer Notice (iv) the nature of the proposed assignee’s business to be carried on in the Premises; (v) the terms and provisions of the proposed sublease or assignment; (vi) such reasonable financial information as Landlord may request concerning the proposed assignee, and (vii) such other information as Landlord may reasonably require. Tenant agrees to reimburse Landlord for Landlord’s actual costs and attorneys’ fees (not to exceed $2,000) incurred in conjunction with the processing and documentation of any such requested assignment, subletting, transfer, change or ownership or hypothecation of this Lease.

15.3 Notwithstanding Section 15.1 and 15.2, Landlord agrees that Tenant may assign its interest in this Lease, without Landlord’s prior written consent or notice, to any (each such assignment, a “Specially Permitted Assignment”) successor by merger or sale of substantially all of Tenant’s assets to which this Lease relates in a manner such that the assignee will become liable and responsible for the performance and observance of all Tenant’s duties and obligations hereunder. In addition, Tenant may assign its interest in this Lease to any corporation or other entity which controls, is controlled by, or is under common control with Tenant, a corporation or other entity will be regarded as in control of another corporation or entity if its owns or controls in excess of 50% of the voting stock or other ownership interest of the other corporation or entity), subject to the prerequisite condition that the corporation or other entity to which Tenant’s interest in this Lease would be assigned must demonstrate to the satisfaction of Landlord that: (i) it has financial soundness and capability which is equal to or greater than that of Tenant, (ii) it’s net worth is equal to or greater than that of Tenant’s immediately preceding such

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assignment, (iii) the assignee’s use of the Premises will be compatible with the provisions of the Lease, and (iv) each and every covenant, condition or obligation imposed upon Tenant by this Lease is assumed by such assignee and each and every right, remedy or benefit afforded Landlord by this Lease is not thereby impaired or diminished.

15.4 No Release of Liability. No subletting or assignment, even with the consent of Landlord, shall relieve Tenant of its obligation to pay the Rent and perform all the other obligations to be performed by Tenant hereunder. The acceptance of Rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any assignment or subletting.

15.5 Transfer Premiums. If Tenant assigns or sublets its rights under this Lease, Tenant shall pay to Landlord as Additional Rent, after Tenant has recovered any relevant leasing commissions, costs of tenant improvements and other expenses of the assignment or sublease, 50% of such excess consideration due and payable to Tenant from said assignment or sublease to the extent said consideration exceeds the Base Monthly Rental and all other costs which constitute “Additional Rent” (including, without limitation, amounts attributable to insurance, utilities, maintenance and repairs, Ground Lease rental and real estate taxes) or a pro rata portion of the Base Monthly Rental and Additional Rent, in the event only a portion of the Premises is sublet or assigned (“Profits”); provided, however, Landlord will not be entitled to any Profits derived in connection with a Specially Permitted Assignment.

15.6 Landlord’s Option. If Tenant desires at any time to assign or sublet all or substantially all of the Premises, Landlord, within 15 days after Landlord’s receipt of all of the information required in the Transfer Notice, may by written notice to Tenant elect to terminate this Lease as to the entire Premises. In the event the Landlord elects to terminate the Lease, the Lease shall terminate on the proposed date the transfer would be effective as specified in the Transfer Notice and Tenant shall have no further obligations with respect to the Premises other than to surrender and vacate the Premises on or before the effective date of termination. After any such election by Landlord, Landlord shall be entitled to re-lease the Premises in Landlord’s sole and absolute discretion.

ARTICLE 16. DISPOSSESSION

16.1 No Dispossession. If Tenant shall surrender the Premises, or be disposed by process of law, or otherwise, Landlord may terminate this Lease, retake possession of the Premises, pursue its remedies provided herein, and any personal property or trade fixtures belonging to Tenant and left on the Premises shall, at the option of Landlord, be deemed abandoned. In such case, Landlord may dispose of said personal property in any manner and is hereby relieved of all liability for doing so.

ARTICLE 17. BREACH BY TENANT

17.1 Events of Default. The occurrence of any of the following shall constitute a breach and material default of this Lease by Tenant:

17.1.1 The failure of Tenant to pay or cause to be paid when due any Base Monthly Rental, Additional Rent, Rent, Security Deposits (including the Springing Security Deposit), taxes, monies, or charges required by this Lease to be paid by Tenant when such failure continues for a period of 5 business days after written notice thereof from Landlord to Tenant;

17.1.2 The failure of Tenant to perform any term, covenant or condition, other than payment of Rent, Security Deposits (including the Springing Security Deposit), taxes, monies or charges, required by this Lease and Tenant shall have failed to cure such failure within 30 days after written notice from Landlord; provided, however, that where such failure cannot reasonably be cured within the 30 day period, the Tenant shall not be in default if it has commenced such cure within the same 30 day period and diligently thereafter prosecutes the same to completion;

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17.1.3 Subject to the notice and cure provisions of Section 17.1.2 above, Tenant causing, permitting, or suffering, without the prior written consent of Landlord, any act when this Lease requires Landlord’s prior written consent or prohibits such act; or

17.1.4 To the extent permitted by applicable law, any act of bankruptcy cause, suffered or permitted by Tenant. For purposes of this Lease, “act of bankruptcy” shall include any of the following:

17.1.4.1. Any general assignment or general arrangement for the benefit of creditors;

17.1.4.2. The filing of any petition by or against Tenant to have Tenant adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy, unless such petition is filed against Tenant and same is dismissed within 120 days;

17.1.4.3. The appointment of a trustee or receiver to take possession of substantially all of Tenant’s assets located in the Premises or of Tenant’s interest in this Lease; or,

17.1.4.4. The attachment, execution or other judicial seizure of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease.

17.2 No Waiver. The acceptance by Landlord of Rent due hereunder after breach by Tenant will not constitute a waiver of such breach, unless a written notice to that effect has been delivered to Tenant.

17.3 Replacement of Statutory Notice Requirements. When this Lease requires service of a notice, that notice shall replace rather than supplement any equivalent or similar statutory notice, including any notices required by applicable law. When a statute requires service of a notice in a particular manner, service of that notice (or a similar notice required by this Lease) in the manner required by Section 36.10 shall replace and satisfy the statutory service-of-notice procedures.

ARTICLE 18. REMEDIES UPON BREACH

18.1 Landlord’s Remedies. If Tenant fails to perform any of its affirmative duties or obligations, within 10 days after written notice (or in the case of any facts or circumstances that create an imminent risk of damage to the Property or the Premises or injury to, or death of, persons, without written notice), Landlord may, at its option, perform such duty or obligation on Tenant’s behalf, including but not limited to the obtaining of reasonable required bonds, insurance policies, or governmental licenses, permits or approvals. Tenant shall pay to Landlord an amount equal to the costs and expenses incurred by Landlord in such performance upon receipt of an invoice, with interest thereon, at the Default Rate from the date of expenditure. In the event of any breach or material default by Tenant under Section 17.1, in addition to other rights or remedies of Landlord at law or in equity, Landlord shall have the following remedies:

18.1.1 Landlord shall have the remedy which provides that, when a tenant has the right to sublet or assign (subject only to reasonable limitations), the landlord may continue the lease in effect after the tenant’s breach and abandonment and recover Rent as it becomes due; provided, however, that Landlord shall not be entitled to collect Rent which could have been reasonably mitigated by Landlord. Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may enforce all of Landlord’s rights and remedies under this Lease, including the right to recover all Rent as it becomes due, not including any amount of Rent which Landlord could have reasonably mitigated; and

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18.1.2 Landlord, either as an alternative or subsequent to exercising the remedies set forth in Section 18.1.1, may terminate Tenant’s right to possession of the Premises by and upon delivery to Tenant of written notice of termination. Landlord may then immediately reenter the Premises and take possession thereof pursuant to legal proceedings and remove all persons and property from the Premises; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant. No notice of termination shall be necessary in the event that Tenant has abandoned the Premises. In the event that Landlord elects to terminate Tenant’s right of possession, Landlord may recover the following:

18.1.2.1. The worth at the time of the award of the unpaid Rent which had been earned at the time of termination. “Worth at the time of award” shall be computed by allowing interest at the Default Rate from the date that each portion of the unpaid Rent became past due and owing, including the applicable Late Charge;

18.1.2.2. The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Landlord could have reasonably mitigated. “Worth at the time of award” shall be determined by allowing interest at the Default Rate from the date that each portion of the such Rent became due and owing, including the applicable Late Charge;

18.1.2.3. The worth at the time of award of the amount by which the unpaid Rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Tenant proves could be reasonably avoided. “Worth at the time of award” shall be computed by discounting such amount at the discount rate at the Federal Reserve Bank of San Francisco at the time of award plus 1%; and

18.1.2.4. Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under the Lease or which in the ordinary course of things would be likely to result therefrom including, but not limited to, commissions that are applicable to the remaining term of this Lease, and expenses of reletting, attorneys’ fees, costs of repairs, recording fees, filing fees and any other expenses customarily resulting from obtaining possession of leased premises and re-leasing. For purposes of clarity, Tenant acknowledges that leasing commissions may vary during any given calendar year and Tenant is responsible for all such leasing commissions regardless of amount so long as such amounts are applicable to the remaining term of this Lease.

18.2 Tenant Remedies. If Landlord defaults in the performance of any obligation imposed on it by this Lease or breaches any warranty set forth herein and does not cure such default or breach within ten (10) days from the date on which Tenant shall make written demand on Landlord specifying the default or breach. Tenant’s sole remedy shall be to obtain a judgment for money damages that can be satisfied from Landlord’s interest in the Premises; provided, however, in the event of an emergency, so as to prevent injury to persons or damage to Premises, Tenant may cure such default or breach prior to the expiration of the cure period above with such written or oral notice to Landlord as is appropriate under the circumstances. Tenant shall have no right to terminate this Lease for any default by Landlord.

ARTICLE 19. DAMAGE OR DESTRUCTION

19.1 Landlord’s Obligation to Rebuild. If the Premises are damaged or destroyed, Landlord shall provide Tenant a good faith estimate of the time it will take to repair the Premises and Landlord shall promptly and diligently repair the Premises unless it has the right to terminate this Lease as provided in Section 19.2 below and it elects to so terminate.

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19.2 Landlord’s Right to Terminate. Landlord shall have the right to terminate this Lease following damage to or destruction of the Premises if any of the following occurs: (i) insurance proceeds together with additional amounts Tenant agrees to contribute, if any, are not confirmed to be available to Landlord, within 90 days following the date of damage, to pay 100% of the cost to fully repair the damaged Premises; (ii) the Premises cannot, with reasonable diligence, be fully repaired by Landlord within 18 months after the date of the damage or destruction; (iii) the Premises cannot be safely repaired because of the presence of hazardous factors, including, but not limited to, earthquake faults, radiation, chemical waste and other similar dangers; (iv) the Premises are destroyed or damaged during the last 12 months of the Term; or (v) Tenant is in uncured material default under the terms of this Lease at the time of such damage or destruction.

19.3 Tenant’s Right to Terminate. Tenant shall have the right to terminate this Lease following damage to or destruction of the Premises if any of the following occurs: (i) the Premises cannot, with reasonable diligence, be fully repaired by Landlord within 18 months after the date of the damage or destruction; or (ii) the Premises are destroyed or damaged during the last 12 months of the Term.

If a party elects to terminate this Lease and has the right to so terminate, such party will give the other party written notice of its election to terminate within 90 days after it has knowledge of such damage or destruction, and this Lease will terminate 15 days after receipt of such notice. If this Lease is terminated pursuant to Section 19.2, Landlord shall, subject to the rights of its lender(s), be entitled to receive and retain all the insurance proceeds resulting from such damage, except for those proceeds payable under policies obtained by Tenant which specifically insure Tenant’s personal property, trade fixtures and machinery. If neither party elects to terminate the Lease, Landlord shall, promptly following the date of such damage or destruction and receipt of amounts required by Tenant, if any, pursuant to Section 19.2(i) above, commence the process of obtaining necessary permits and approvals, and shall diligently commence repair of the Premises as soon as practicable and thereafter prosecute the same diligently to completion, in which event this Lease will continue in full force and effect.

19.4 Limited Obligation to Repair. Landlord’s obligation, should it elect or be obligated to repair or rebuild, shall be limited to the Premises, Building and common areas, and Tenant shall, at its expense, replace or fully repair all Tenant’s personal property and any alterations installed by Tenant existing at the time of such damage or destruction. If the Premises are to be repaired in accordance with the foregoing, Landlord shall make available to Tenant any portion of insurance proceeds it receives which are allocable to the alterations constructed by Tenant pursuant to this Lease provided Tenant is not then in material default.

19.5 Abatement of Rent. Rent shall be temporarily abated in proportion to the degree to which Tenant’s use of the Premises is impaired during any period when, by reason of such damage or destruction, Landlord and Tenant reasonably determine that there is substantial interference with Tenant’s use of the Building. Such abatement shall commence upon such damage or destruction and end upon completion by Landlord of the repair or reconstruction which Landlord is obligated or undertakes to do. Tenant shall not be entitled to any compensation or damages from Landlord for loss of the use of the Premises, damage to Tenant’s personal property or any inconvenience occasioned by such damage, repair or restoration, except to the extent that such damage or loss is caused by the gross negligence or willful misconduct of Landlord or Landlord’s Agents.

19.6 Replacement Cost. Landlord and Tenant shall work together in good faith to determine the estimated cost of repair of any damage, of the replacement cost, or of the time period required for repairs or replacements under this Article 19.

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ARTICLE 20. CONDEMNATION

20.1 Total Taking – Termination. If title to all of the Premises or so much thereof is taken for any public or quasi-public use under any statute or by right of eminent domain so that reconstruction of the Premises will not result in the Premises being reasonably suitable (as reasonably determined by Landlord and Tenant) for Tenant’s continued occupancy for the uses and purposes permitted by this Lease, this Lease shall terminate as of the date possession of the Premises or part thereof be taken.

20.2 Partial Taking. If any part of the Premises is taken and the remaining part after Landlord makes repairs and alterations is reasonably suitable, as reasonably determined by Landlord and Tenant, for Tenant’s continued occupancy for the purposes and uses permitted by this Lease, this Lease shall, as to the part so taken terminate as of the date that possession of such part of the Premises is taken and the Base Monthly Rental shall be reduced in the same proportion that the floor area of the portion of the Building so taken (less any addition thereto by reason of any reconstruction) bears to the original floor area of the Building. Landlord shall, at its sole cost and expense, make all necessary repairs or alterations to the Building so as to make the portion of the Building not taken a complete architectural unit. Such work shall not, however, exceed the scope of the work done by Tenant in originally constructing the Building. Base Monthly Rental due and payable hereunder shall be temporarily abated during such restoration period in proportion to the degree to which Tenant’s use of Premises is impaired. Notwithstanding the foregoing, if more than twenty-five percent (25%) of the square footage of the Building is taken or sold under such threat, Landlord or Tenant may terminate this Lease as of the date that the condemning authority takes possession by delivery of written notice of such election within twenty (20) days after Landlord has been notified of the taking or, in the absence thereof, within twenty (20) days after the condemning authority shall have taken possession.

20.3 No Apportionment of Award. No award for any partial or entire taking shall be apportioned, it being agreed and understood that Landlord shall be entitled to the entire award for any partial or entire taking. Tenant assigns to Landlord its interest in any award which may be made in such taking or condemnation, together with any and all rights of Tenant arising in or to the same or any part thereof. Nothing contained herein shall be deemed to give Landlord any interest in or require Tenant to assign to Landlord any separate award made to Tenant for the taking of Tenant’s personal property, trade fixtures or machinery for the interruption of Tenant’s business, or its moving costs, or for the loss of its goodwill. In addition, Tenant will have the right to make a separate claim in the condemnation proceeding for (a) the taking of the unamortized or undepreciated value of any leasehold improvements that Tenant has the right to remove at the end of the Lease Term and that Tenant elects not to remove, (b) loss of goodwill, and (c) any other amount in addition to the foregoing, so long as any such claim does not reduce the amount of the award payable to Landlord.

20.4 Temporary Taking. No temporary taking of the Premises shall terminate this Lease, but Tenant shall have the right to abate Rent in proportion to the degree to which Tenant’s use of the Premises is impaired during any such period. Any award made to Tenant by reason of such temporary taking shall belong entirely to Tenant and Landlord shall not be entitled to share therein. Each party agrees to execute and deliver to the other all instruments that may be required to effectuate the provisions of this Section.

20.5 Sale Under Threat of Condemnation. A sale made in good faith by Landlord to any authority having the power of eminent domain, either under threat of condemnation or while condemnation proceedings are pending, shall be deemed a taking under the power of eminent domain for all purposes of this Section.

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ARTICLE 21. SURRENDER OF LEASE

21.1 Surrender of Lease. The voluntary or other surrender of its interest in this Lease by Tenant or a mutual cancellation of this Lease shall not work a merger, and shall, at the election of Landlord, either terminate all or any existing subleases or subtenancies or operate as an assignment to Landlord of any or all of such subleases or subtenancies. Landlord shall exercise its election within 30 days of any such surrender or cancellation.

ARTICLE 22. ATTORNEYS’ FEES

22.1 Attorneys’ Fees. If either party institutes or is made a party to any action or proceeding to enforce or interpret this Lease, the prevailing party in such action or proceeding shall be entitled to recover all costs and attorneys’ fees incurred in connection with such action or proceeding, or any appeal or enforcement of such action or proceeding.

ARTICLE 23. SALE OF THE PREMISES BY LANDLORD.

23.1 Sale of Premises. Notwithstanding any provisions of this Lease to the contrary, Landlord may assign, in whole or in part, Landlord’s interest in this Lease and may sell all or part of the real estate of which the Premises are a part (the “Real Property”). Should Landlord elect to sell the Real Property, Landlord agrees to notify Tenant of its intent to do so. Landlord’s willingness to notify Tenant is to be considered a courtesy notice only and not an offer to sell, or an obligation of any form on the part of Landlord to sell the Real Property to Tenant. This courtesy notice is not to be construed as an option, an offer to negotiate, a right of first refusal, or any other form of agreement that would obligate Landlord to pursue a sale of the Real Property to Tenant or in any manner prohibit Landlord from its rights to sell all or part of the Real Property as it chooses.

ARTICLE 24. QUIET ENJOYMENT

24.1. Quiet Enjoyment. If Tenant is not in breach (after notice and the expiration of the applicable cure period) under the material covenants made in this Lease, Landlord covenants that Tenant shall have peaceful and quiet enjoyment of the Premises without hindrance on the part of Landlord. Landlord will defend Tenant in the peaceful and quiet enjoyment of the Premises against claims of all persons.

ARTICLE 25. ESTOPPEL CERTIFICATE

25.1 Tenant Estoppel Certificate. Tenant shall at any time during the term of this Lease, within 10 business days of written notice from Landlord, execute and deliver to Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect or, if modified, stating the nature of such modification. Tenant’s statement shall include other details requested by Landlord, such as the date to which Rent and other charges are paid, Tenant’s knowledge concerning any uncured defaults with respect to Landlord’s obligations under this Lease and the nature of such defaults if they are claimed, and such other matters as Landlord may reasonably request. Any such statement may be relied upon conclusively by any purchaser or lender having an interest in the Premises. Tenant’s failure to deliver such statements within such time shall be conclusive upon the Tenant that this Lease is in full force and effect, except as and to the extent any modification has been represented by Landlord, and that there are no uncured defaults in Landlord’s performance, and that not more than 1 month’s Rent has been paid in advance.

25.2 Tenant Financial Statements. In the event Tenant ceases to be required to file annual financial statements with the SEC, within 120 days after the end of each fiscal year, Tenant shall provide

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Landlord a copy of the audited financial statements that have been provided to the SEC or, in the event Tenant is no longer required to deliver such financial statements to the SEC, year-end financial statements, including balance sheets and income statements, reflecting Tenant’s current financial condition for such fiscal year that have been audited by a nationally recognized firm of certified public accountants. Tenant represents and warrants that all financial statements, records and information furnished by Tenant to Landlord in connection with this Lease are true, correct and complete in all material respects.

ARTICLE 26. SUBORDINATION AND ATTORNMENT

26.1 Subordination of Lease. This Lease and Tenant’s rights under this Lease are subject and subordinate to any Mortgage, ground lease, and to all renewals, modifications, consolidations, replacements, or extensions thereof, now or hereafter affecting the Premises. The provisions of this Section shall be self-operative, and no further instrument of subordination shall be required. In confirmation of such subordination, however, Tenant shall within 10 business days execute and deliver any instruments that Landlord, the holder of any Mortgage, or the Landlord of any ground lease may request to evidence such subordination. If Tenant fails to execute and deliver any such instruments, Tenant irrevocably constitutes and appoints Landlord as Tenant’s special attorney-in-fact to execute and deliver such instruments.

26.2 Attornment to Lender. If the holder of any Mortgage, or the Landlord of any ground lease affecting the Premises, shall hereafter succeed, by foreclosure or otherwise, to the rights of Landlord under this Lease, Tenant shall attorn to and recognize such successor as Tenant’s Landlord under this Lease, and shall promptly execute and deliver any instruments that may be necessary to evidence such attornment, and Tenant hereby irrevocably appoints Landlord as Tenant’s special attorney in fact to execute and deliver such instruments on behalf of Tenant should Tenant refuse or fail to do so. Upon such attornment, this Lease shall continue in effect as a direct lease between such successor Landlord and Tenant upon and subject to all of the provisions of this Lease. Notwithstanding the foregoing, Tenant’s agreement both to subordinate and to attorn, as set forth in this Article, is contingent upon Tenant’s receipt of a nondisturbance agreement from the holder of any encumbrance placed against the Premises, in a recordable, commercially reasonable form or in the holder’s standard form, providing that in the event of any foreclosure, sale under a power of sale, ground or master lease termination, or transfer in lieu of any of the foregoing, or the exercise of any other remedy under any such encumbrance, but subject to such holder’s form exceptions, or other reasonable exceptions: (i) Tenant’s use, possession, and enjoyment of the Premises will not be disturbed and this Lease will continue in full force and effect so long as Tenant is not in default; and (ii) this Lease will automatically become a lease directly between any successor to Landlord’s interest, as landlord, and Tenant, as if that successor were the landlord originally named in the lease.

ARTICLE 27. HOLDING OVER

27.1 Holding Over. If Tenant should remain in possession of the Premises after the expiration of the term of this Lease without executing a new lease, then such holding over shall be construed as a tenancy from month to month, subject to all the conditions, provisions and obligations of this Lease insofar as they are applicable to a month to month tenancy, including the provisions of Article 3, except that the Base Monthly Rental shall be one hundred twenty-five percent (125%) of the Base Monthly Rental last due, payable monthly in advance. Notwithstanding the foregoing, if Tenant fails to vacate the Premises or Tenant fulfills less than all of its material obligations hereunder at the end of the Lease Term, Tenant also shall be liable for all damages incurred by Landlord by reason of the latter’s inability to deliver possession of the Premises or any portion thereof to any other person.

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ARTICLE 28. MORTGAGEE PROTECTION

28.1 Mortgagee Protection. In the event of any default on the part of Landlord, Tenant agrees to give notice by registered or certified mail to any beneficiary of a deed of trust or mortgage covering the Premises whose address shall have been furnished to the Tenant and shall offer such beneficiary or mortgagee a reasonable opportunity to cure such default (such cure period not to exceed 90 days after receipt of such notice) before Tenant shall attempt to exercise any other remedy.

ARTICLE 29. LIABILITY OF SUCCESSORS

29.1 Successor’s Liability. The covenants and conditions herein contained shall, subject to the provisions as to assignment, apply to and bind the heir, successors, executors, administrators, and permitted assigns of all the parties hereto and all of the parties hereto shall be jointly and severally liable for the covenants contained herein.

ARTICLE 30. EASEMENTS

30.1. Easements. Landlord reserves the right, from time to time, to grant such easements, rights and dedications that Landlord deems necessary or desirable, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Tenant or any of the provisions of this Lease. Tenant shall sign any documents or instruments to accomplish the foregoing upon request of Landlord, and failure to do so shall constitute a material breach of this Lease. Tenant irrevocably appoints Landlord as Tenant’s special attorney in fact to execute and deliver such documents or instructions on behalf of Tenant should Tenant refuse or fail to do so.

ARTICLE 31. GROUND LEASE

31.1 Ground Lease. The land underlying the Building is not owned by Landlord and is subject to that certain Ground Lease (the “Ground Lease”) dated as of December 10, 2003, by and between Landlord, as lessee, and the University of Utah, as ground lessor (“Ground Lessor”). Tenant hereby agrees that this Lease is subject to, and subordinate to, the Ground Lease. All rent, fees, dues and other expenses (“Ground Lease Fees”) imposed by the Ground Lessor under the Ground Lease shall be the sole responsibility of Tenant. Tenant shall pay at least 20 days before due any and all Ground Lease Fees to Landlord as Additional Rent. Each payment shall be made promptly on demand throughout the term of this Lease and shall be paid without deduction or offset. Tenant shall faithfully observe and comply with the provisions of the Ground Lease. Tenant shall not have any rights or interests in the Premises or under this Lease greater than those held by the Landlord as the tenant under the Ground Lease, or impose any duty or obligation on the Landlord greater than those imposed on it under the Ground Lease. Any violation by Tenant of any of the provisions of the Ground Lease shall be a default under this Lease. Tenant has received a copy of the Ground Lease prior to the execution of this Lease, and such receipt is acknowledged hereby. Tenant acknowledges that nothing in this Lease obligates Landlord to extend the term of this Lease under the Ground Lease, and upon the termination of the Ground Lease, the term of this Lease shall automatically terminate.

ARTICLE 32. QUITCLAIM DEED

32.1 Quitclaim Deed. Tenant shall execute and deliver to Landlord on the expiration date or earlier termination of this Lease, promptly on Landlord’s request, a quitclaim deed to the Premises, in recordable form, designating Landlord as transferee.

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ARTICLE 33. HAZARDOUS MATERIALS

33.1 Definitions:

33.1.1 Hazardous Materials Laws. “Hazardous Materials Laws” means any and all federal, state or local laws, ordinances, rules, decrees, orders, regulations or court decisions relating to hazardous substances, hazardous materials, hazardous waste, toxic substances, environmental conditions on, under or about the Premises, or soil and ground water conditions, including, amendments to and any regulations promulgated pursuant to the foregoing, and any similar federal, state or local laws, ordinances, rules, decrees, orders or regulations.

33.1.2 Hazardous Materials. “Hazardous Materials” means any chemical, compound, substance or other material, including, without limitation, gasoline, diesel, aviation fuels, lubricating oils, solvents and chemicals, that: (i) is defined as a hazardous substance, hazardous material, hazardous waste or toxic substance under any Hazardous Material Law; (ii) is controlled or governed by any Hazardous Materials Law, or gives rise to any reporting, notice or publication requirements thereunder, or gives rise to any liability, responsibility or duty on the part of Tenant or County with respect to any third person thereunder; or (iii) is a flammable or explosive material, asbestos, radioactive material, nuclear medicine material, drug, vaccine, bacterial, virus, hazardous waste, toxic substance, or related injurious or potentially injurious material (by itself or in combination with other materials).

33.2 Tenant’s Obligations

33.2.1 Compliance with Laws. Tenant shall strictly comply with, and shall maintain the Premises in compliance with, all Hazardous Materials Laws. Tenant shall obtain and maintain in full force and effect all permits, licenses and other governmental approvals required for Tenant’s operations on the Premises under any Hazardous Materials Laws and shall comply with all terms and conditions thereof. At Landlord’s request, Tenant shall deliver copies of, or allow Landlord to inspect, all such permits, licenses and approvals. Tenant shall perform any monitoring, investigation, clean-up, removal, detoxification, preparation of closure or other required plans and any other remedial work (collectively, “Remedial Work”) required as a result of any release or discharge of Hazardous Materials from the Premises or any violation of Hazardous Materials Laws caused by Tenant or any subtenant of Tenant or their respective agents, contractors, employees, licensees or invitees (but not by Landlord or Landlord’s Agents). Landlord shall have the right to intervene in any governmental action or proceeding involving any Remedial Work, and to approve performance of the work, in order to protect Landlord interests. Tenant shall be solely responsible for paying all fines, damages and penalties imposed by any governmental agency resulting from Tenant’s violation of any Hazardous Materials Laws.

33.2.2 Compliance with Insurance Requirements. Tenant shall comply with the requirements of Tenant’s insurers regarding Hazardous Materials and with such insurers’ recommendations based upon prudent industry practices regarding management of Hazardous Materials.

33.2.3 Notice; Reporting. Tenant shall notify Landlord in writing immediately after any of the following: (a) Tenant has knowledge, or has reasonable cause to believe, that any Hazardous Material has been released or discharged under or about the Premises in violation of Hazardous Materials Laws and such release or discharge requires reporting to a public agency; (b) Tenant receives any order of a governmental agency requiring any Remedial Work pursuant to any Hazardous Materials Laws; (c) Tenant receives any warning, notice of violation or alleged violation, or Tenant receives notice or knowledge of any proceeding, investigation of enforcement action, pursuant to any Hazardous Materials Laws; or (d) Tenant receives written notice of any claims made by any third party against Tenant or the Premises relating to any loss or injury resulting from Hazardous Materials. Upon Landlord’s prior written request, Tenant shall deliver to Landlord copies of all test results, reports and business management plans required to be filed with any government agency pursuant to any Hazardous Materials Laws.

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33.2.4 Entry and Inspection; Cure. Landlord and its agents, employees and contractors, shall have the right to enter the Premises at all reasonable times to inspect the Premises and Tenant’s compliance with the terms and conditions of this Section 33, or to conduct investigations and tests that do not unreasonably disrupt Tenant’s business or possession of the Premises. No prior notice to Tenant shall be required in the event of any emergency, or if Landlord has reasonable cause to believe that violations by Tenant of this Section 33 have occurred, or if Tenant consents at the time of entry. In all other cases, Landlord shall give at least 5 days prior written notice to Tenant. Landlord shall have the right, but not the obligation, to remedy any violation by Tenant of the provisions of this Section 33, or to perform any Remedial Work necessitated as a result of any discharge by Tenant of Hazardous Materials on the Premises after notice to Tenant and opportunity for Tenant to perform the same. Tenant shall pay, upon demand, all costs incurred by Landlord in remedying such violations or performing all Remedial Work necessitated by the acts or omissions of Tenant and/or its agents or employees, plus interest thereon at the rate of 10 percent per annum from the date of demand until the date paid by the Tenant.

33.2.5 Termination/Expiration. Upon termination or expiration of this Lease, Tenant shall, at Tenant’s cost, remove any equipment utilized in connection with any Hazardous Materials and shall clean up, detoxify, repair and otherwise restore the Premises to a condition in compliance with applicable Hazardous Materials Laws, to the extent such condition is caused by Tenant or any subtenant of Tenant or their respective agents, contractors, employees, licensees or invitees. Upon termination or expiration of this Lease, Tenant shall, at Tenant’s cost, permit Landlord and Landlord’s Agents to enter the Premises upon giving Tenant 5 days prior written notice for the purposes of inspecting the environmental condition of the Premises, including an audit of any Hazardous Materials that are located on the Premises.

33.2.6 Indemnification. Tenant shall indemnify, protect, defend and hold Landlord (and its employees and agents) harmless from and against any and all claims, costs, expenses, suits, judgments, actions, investigations, proceedings and liabilities arising out of or in connection with any breach of any provision of this Lease to the extent arising out of the use, generation, storage, release, disposal or transportation of Hazardous Materials by Tenant or any subtenant, or their respective agents, contractors or employees upon the Premises (but not by Landlord or Landlord’s Agents), on, under or about the Premises during the Term, including, but not limited to, all foreseeable and unforeseeable consequential damages and the cost of any Remedial Work, but excepting any loss or injury resulting from the breach of the Lease by Landlord or the gross negligence or willful misconduct of Landlord or Landlord’s Agents. Neither the consent by Landlord to the use, generation, storage, release, disposal or transportation of Hazardous Materials, nor strict compliance with all Hazardous Materials Laws, shall excuse Tenant from Tenant’s indemnification obligations pursuant to this Section 33.2.6. The foregoing indemnity shall be in addition to and not a limitation of the indemnification provisions of Section 9 of this Lease. Tenant’s obligations pursuant to this Section 33.2.6 shall survive the termination or expiration of the Lease. The procedures set forth in Section 9.2 also will apply to this Section.

33.2.7 Default. The release or discharge of any Hazardous Material or violation of any Hazardous Materials Law by Tenant or any subtenant of Tenant shall be a material default by Tenant under the Lease, subject to the cure provisions set forth in 17.1.2. In addition to or in lieu of the remedies available under the Lease as a result of such default, Landlord shall have the right, without terminating the Lease, to require Tenant to suspend its operations and activities in such areas affected by the Hazardous Material release or discharge until Landlord is reasonably satisfied that appropriate Remedial Work has been or is being adequately performed. Landlord agrees that Remedial Work which complies with applicable Hazardous Materials Laws shall be deemed adequately performed and further agrees not to unreasonably delay Tenant from resuming operations in such affected areas. Landlord’s election of this remedy shall not constitute a waiver of Landlord’s right thereafter to declare a default and pursue other remedies set forth in the Lease.

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ARTICLE 34. Option to Extend

34.1 Options To Extend. Tenant shall have the option to extend the term of this Lease for two, five year periods, subject to the following provisions:

34.1.1 Tenant shall have no right to exercise an option: (i) during the period commencing with the giving of any notice of default and continuing until said default is cured, (ii) during the period of time any Rent is due and unpaid, or (iii) in the event that Landlord has given three or more notices of separate monetary or material non-monetary defaults, whether or not the defaults are cured, during the 12 months immediately preceding the exercise of the option.

34.1.2 The period of time within which an option may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise an option because of paragraph 34.1.1.

34.1.3 An option shall terminate and be of no further force or effect, notwithstanding Tenant’s due and timely exercise of the option, if, after such exercise and prior to the commencement of the extended term, (i) Tenant fails to pay Rent for a period of 30 days after such Rent becomes due, or (ii) if Tenant commits a default under this Lease and such default is continuing after the expiration of the applicable cure periods set forth in Section 17.1.

34.1.4 Tenant shall exercise the option by delivery of written notice to Landlord not less than 12 months prior to the expiration of the initial term and, if exercised, the first option period, of this Lease. If said notice is not delivered within said time period(s), this option shall terminate.

34.2 Rent –Option.

36.2.1 Rent—First Option. The Base Monthly Rental payable by Tenant during the first option period shall be 100% of the fair market rent for the Premises at the commencement date of such option period. The Base Monthly Rental payable by Tenant would continue to be increased as of the expiration of every year of the option period commencing on the anniversary of the commencement of such option period by an amount equal to 2.75% of the Base Monthly Rental for the preceding year.

36.2.2 Rent—Second Option. The Base Monthly Rental payable by Tenant during the first year of the second option period shall be 100% of the fair market rent for the Premises at the commencement date of such option period. The Base Monthly Rental payable by Tenant would continue to be increased as of the expiration of every year of the option period commencing on the anniversary of the commencement of such option period by an amount equal to 2.75% of the Base Monthly Rental for the preceding year.

34.2.3 Fair Market Rent. If Landlord and Tenant cannot agree on the fair market rent of the Premises for the extension period within 30 days after the Tenant has notified Landlord of Tenant’s exercise of the option, Landlord and Tenant shall each select, within 15 days of such notification, an appraiser who must be a qualified MAI appraiser with at least 5 years experience appraising commercial properties to determine said fair market rental value. If one party fails to so designate an appraiser within the time required, the determination of fair market rental value of the one appraiser who has been designated by the other party within the time required shall be binding on both parties. The appraisers shall submit their determinations of fair market rental value to both parties within 30 days after their selection. If the difference between the two determinations is 10% or less of the higher appraisal, then the average between the determinations shall be the fair market rental value of the Premises. If said difference

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is greater than 10%, then the two appraisers shall within 15 days of the date the second determination is submitted to the parties designate a third appraiser who must also be a qualified MAI appraiser. The sole responsibility of the third appraiser will be to determine which of the determinations made by the first two appraisers is most accurate. The third appraiser shall have no right to propose a middle ground or any modification of either of the determinations made by the first two appraisers. The third appraiser’s choice shall be submitted to the parties within 20 days after his or her selection. Such determination shall bind both of the parties and shall establish the fair market rental value of the Premises. Each party shall pay the fees and expenses of its appraiser and shall pay equal shares of the fees and expenses of the third appraiser. Fair market rent for the purposes of this Lease shall mean the then prevailing rent for premises comparable in size, quality and location to the demised Premises, leased on terms comparable to the terms contained in this Lease.

ARTICLE 35. Right to Purchase

35.1 Purchase Option. Landlord hereby grants to Tenant the exclusive option to purchase the Premises for 115% of the fair market value of the Premises (the “Purchase Option”), subject to the following provisions:

35.1.1 Tenant shall have no right to exercise the Purchase Option: (i) during the period commencing with the giving of any notice of default and continuing until said default is cured, and (ii) during the period of time any Rent is due and unpaid.

35.1.2 Such Purchase Option must be exercised, if at all, by Tenant delivering to Landlord notice thereof (the “Exercise Notice”) at least 12 months prior to the expiration or termination of the initial Lease Term. If Tenant does not timely deliver the Exercise Notice, the option herein granted shall terminate; time being of the essence with respect to the delivering thereof. If Tenant timely delivers an Exercise Notice, then Landlord shall sell to Tenant, and Tenant shall purchase from Landlord, the Premises for 115% of the fair market value of the Premises. The Premises shall be sold in its then-current, as-is, with all faults conditions and without any representation and warranty, expressed or implied, whatsoever. The closing of the sale transaction shall occur upon the expiration of the initial Lease Term. Upon the termination of the Purchase Option herein granted, (a) Tenant shall execute and deliver such documents as Landlord may request to evidence the termination thereof, and (b) Landlord may execute, file and record an instrument evidencing the termination of the Purchase Option herein granted. If Tenant fails to execute and deliver such documents, then Landlord may do so. Tenant hereby appoints Landlord its attorney in fact for such purpose, which appointment is coupled with an interest and is irrevocable.

35.1.3 Fair Market Value. If Landlord and Tenant cannot agree on the fair market value of the Premises within 30 days after the Tenant has notified Landlord of Tenant’s exercise of the Purchase Option, Landlord and Tenant shall each select, within 15 days of such notification, an appraiser who must be a qualified MAI appraiser with at least 5 years experience appraising commercial properties to determine said fair market value. If one party fails to so designate an appraiser within the time required, the determination of fair market value of the one appraiser who has been designated by the other party within the time required shall be binding on both parties. The appraisers shall submit their determinations of fair market value to both parties within 30 days after their selection. If the difference between the two determinations is 10% or less of the higher appraisal, then the average between the determinations shall be the fair market value of the Premises. If said difference is greater than 10%, then the two appraisers shall within 15 days of the date the second determination is submitted to the parties designate a third appraiser who must also be a qualified MAI appraiser. The sole responsibility of the third appraiser will be to determine which of the determinations made by the first two appraisers is most accurate. The third appraiser shall have no right to propose a middle ground or any modification of either of the determinations made by the first two appraisers. The third appraiser’s choice shall be submitted to the

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parties within 20 days after his or her selection. Such determination shall bind both of the parties and shall establish the fair market value of the Premises. Each party shall pay equal shares of the fees and expenses of the third appraiser. Fair market value for the purposes of this Lease shall mean the then prevailing fair market value for premises comparable in size, quality and location to the demised Premises, and shall be based on the assumption that Tenant has exercised both of its options to renew the Lease Term in accordance with Section 34 at the then fair market rental rate.

ARTICLE 36. Miscellaneous

36.1 Gender. Whenever the singular number is used in this Lease, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders, and the word “person” shall include corporation, firm, or association, when required by the context.

36.2 Headings. The headings or title to the paragraphs of this Lease are for convenience only and do not in any way define, limit or construe the contents of such paragraphs.

36.3 Integration. This instrument contains all of the agreements and conditions made between the parties with respect to the hiring of the Premises and may not be modified orally or in any other manner other than by a written instrument signed by all the parties to this Lease.

36.4 Choice of Laws. The laws of the State of Utah as applied to contracts entered into between citizens of the State of Utah and to be performed within the State of Utah shall govern the validity, performance and enforcement of this Lease.

36.5 Severability. If any provision of this Lease is determined to be void by any court of competent jurisdiction, such determination shall not affect any other provisions of this Lease and such other provisions shall remain in full force and effect. If any provision of this Lease is capable of two constructions, one which would render the provision void and one which would render the provision valid, the provision shall be interpreted in the manner which would render it valid.

36.6 Amendment for Financing. Upon written request of Landlord and opportunity for Tenant to review, Tenant agrees to execute any lease amendments not materially altering the terms of this Lease, if required by the first mortgagee or beneficiary of a deed of trust encumbering real property of which the Premises constitute a part (“Mortgagee”) incident to the financing of the real property of which the Premises constitute a part. Any change affecting the amount or timing of the consideration to be paid by Tenant or modifying the term of this Lease shall be deemed as materially alter the terms hereof.

36.7 Payments. Except as may otherwise be expressly stated, each payment required to be made by Tenant shall be in addition to and not in substitution for other payments to be made by Tenant.

36.8 Time of Essence. Time is of the essence in this Lease.

36.9 Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes thereof, governmental restrictions, regulations, or controls, enemy or hostile governmental action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, shall excuse the performance by such party for a period equal to that resulting from such prevention, delay or stoppage, except those obligations of Tenant to make payment for rental and other charges pursuant to the terms of this Lease.

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36.10. Notices. All notices to be given by one party to the other under this Lease shall be in writing, mailed or delivered to the other party at the following addresses:

To Landlord:	BMR-383 Colorow Drive LLC
	17140 Bernardo Center Drive, Suite 222
	San Diego, California 92128
	Phone: (858) 485-9840 Fax: (858) 485-9843
To Tenant:	Office of General Counsel
	NPS Pharmaceuticals, Inc.
	383 Colorow Drive
	Salt Lake City, Utah 84108
	Phone: (801) 583-4939 Fax: (801) 583-4961

Mailed notices shall be sent by United States Postal Service, certified or registered mail, postage prepaid and shall be deemed to have been given on the date of posting in the United States Postal Service.

Either party may, with proper notice, at any time designate a different address to which notices shall be sent.

36.11. Brokers. Landlord and Tenant each represents to the other that it has had no dealings with any real estate broker or agent in connection with the negotiation and/or execution of this Lease except as follows: Bioscience Capital Consulting, LLC and agree to indemnify and defend the other against all liability, costs, expenses and charges arising from any claims that may be made against them by any real estate broker, agent, finder, or other person, alleging to have acted on behalf of Landlord or Tenant.

36.12. Confidentiality. During the course of this Lease the parties may exchange certain financial statements, accounting records and other documents that are clearly stamped “confidential” (“Confidential Information”). Landlord and Tenant hereby acknowledge and agree that the Confidential Information of each party is to be kept strictly confidential. Accordingly, except as may be required by law or court order, neither Landlord nor Tenant will, without the prior written consent of the other party, use, release, publish or otherwise distribute (and shall not authorize or permit any other person or entity to use, release, publish or otherwise distribute) any of the other party’s Confidential Information to any person or entity other than such party’s prospective lenders and purchasers of the Real Property and legal and financial advisors, each of whom shall agree to hold such information strictly confidential as if such persons were bound by the provisions of this Section 36.12. The obligations of this Section 36.12 will not apply to information that the receiving party can establish by written records (a) was known by it prior to the receipt of the Confidential Information from the disclosing party; (b) was disclosed to the receiving party by a third party having the right to do so; (c) was, or subsequently became, in the public domain through no fault of the receiving party, its officers, directors, employees or agents; or (d) was disclosed by the receiving party pursuant to any judicial, governmental or stock exchange request, requirement or order, so long as the receiving party provides the disclosing party with sufficient prior notice in order to allow the disclosing party to contest such request, requirement or order.

36.13 Memorandum of Lease. Except as set forth in this Section 36.13, Tenant shall neither execute nor record a memorandum of this Lease. Tenant shall execute, acknowledge and deliver at any time after the date of this Lease, at the request of Landlord, a “memorandum of lease” suitable for recording. Landlord may record such a memorandum of lease.

36.14 Absolute Net Lease. Except as provided in Section 3.4, this Lease shall be deemed and construed to be a “absolute net lease” and, except as herein expressly provided, the Landlord shall receive all payments required to be made by Tenant, free from all charges, assessments, impositions, expenses, deductions of any and every kind or nature whatsoever. Landlord shall not be required to furnish any

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services or facilities or to make any repairs, replacements, or alterations of any kind in or on the Premises except as specifically provided herein. Tenant shall receive all invoices and bills relative to the Premises and, except as otherwise provided herein, shall pay for all expenses directly to the person or company submitting a bill without first having to forward payment for the expenses to Landlord. Tenant shall at Tenant’s sole cost and expense be responsible for the management of the Premises, shall maintain the landscaping, parking lot and shall make those additional repairs and alterations required of Tenant hereunder to maintain the property in first class condition.

36.15 Waiver of Jury Trial. The parties hereby waive their respective rights to trial by jury in any action or proceeding involving the Premises or arising out of this Lease.

36.16 Americans with Disabilities Act. Since compliance with the Americans with Disabilities Act (ADA) is dependent on Tenant’s specific use of the Premises, Landlord makes no warranty or representation as to whether or not the Premises comply with the ADA or any similar legislation. In the event that Tenant’s use of the Premises requires modifications or additions to the Premises in order to be in ADA compliance, Tenant agrees to make any such necessary modifications and/or additions at Tenant’s expense.

36.17 Execution in Counterparts. This Lease may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one agreement. To facilitate execution of this Lease, the parties may execute and exchange by telephone facsimile counterparts of the signature pages.

[Signature Page Follows]

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year set forth at the beginning hereof.

LANDLORD:			TENANT:
BMR-383 COLOROW DRIVE LLC, a Delaware limited liability company			NPS PHARMACEUTICALS, INC., a Delaware corporation
By:	BioMed Realty, L.P.,
	a Maryland limited partnership,		By:	/s/ MORGAN R. BROWN
	its Member		Name:	Morgan R. Brown
			Title:	VP Finance
	/s/ GARY A. KREITZER
	Name:	Gary A. Kreitzer
	Title:	Executive V.P.

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EXHIBIT A

DESCRIPTION OF PREMISES

Property located on the University of Utah at Research Park.

Three parcels of land located within the Southeast Quarter Of Section 3, Township 1 South, Range 1 East, Salt Lake Base And Meridian, described as follows:

Leasehold estate:

Beginning at a point South 65°11’09” East 66.35 feet and North 54°38’21” East 190.000 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet, and North 54°38’21” East 190.000 feet From the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 54°42’57” West 573.288 feet; thence North 35°21’39” West 61.714 feet; thence North 54°38’21” East 589.38 feet; thence South 35°21’40” East 602.601 feet; thence South 54°38’21” West 399.379 feet to the point of beginning.

Non-exclusive easements for purposes of access and landscaping to run concurrently with the Lease:

Beginning at a point South 65°11’09” East 66.35 feet from the existing street monument a Tabby Lane and Colorow Drive, said Point Of Beginning also being a record West 1970.16 feet and North 1931.31 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35°21’39” West 540.887 feet; thence South 54°42’57” East 573.288 feet; thence South 54°38’21” West 190.000 feet to the point of beginning, and

Beginning at a point South 65°11’09” East 66.35 feet and North 54°38’21” East 589.379 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet and North 54°38’21” East 589.379 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35°21’40” West 602.601 feet; thence South 46°58’28” East 615.196 feet; thence South 54°38’21” West 123.845 feet to the point of beginning

The following is shown for informational purposes only: Tax Parcel No. 16-03-400-002-2007 and 16-03-400-002-6007

The basis of bearing for this parcel is the record bearing of North 35°21’39” West along the center line of Colorow Drive between the existing street monuments at Tabby Lane and Wakara Drive.

[EXHIBIT A]

EXHIBIT B

FORM OF OFFICER’S CERTIFICATE

[Date]

BMR-383 Colorow Drive LLC

Attn: Gary A. Kreitzer

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128

Re: Lease Agreement: Officer’s Certificate

Ladies and Gentlemen:

This certificate is delivered pursuant to Section 3.6.3 of that certain Lease Agreement dated as of December 22, 2005 (the “Lease”), by and between BMR-383 Colorow Drive LLC, a Delaware limited liability company (“Landlord”) and NPS Pharmaceuticals, Inc., a Delaware corporation (“Tenant”). Tenant hereby represents, warrants and certifies that:

(a) [Choose one:][(1): The value of Tenant’s cash, cash equivalents and marketable investment securities at calendar quarter end [                                    ] is equal to or greater than $80,000,000][or][(2): The value of Tenant’s cash, cash Equivalents and marketable investment securities during the calendar quarter ending [                                                 ] is less than $80,000,000.]

(b) [If Applicable:][The value of Tenant’s cash, cash equivalents and marketable investment securities has been equal to or greater then $80,000,000 at the end of the two consecutive calendar quarters: [                            ] and [                                ].]

(c) [If Applicable:][The Tenant has reported financial profitability during the following four consecutive calendar quarters: [                                             ], [                                         ], [                                                 ] and [                                ].]

The Landlord is entitled to rely on each of these representations, warranties and certifications. Capitalized terms used in this certificate that are otherwise not defined shall have the meaning assigned in the Lease.

NPS PHARMACEUTICALS, INC.,¹

a Delaware corporation.

By:

Name:

Title:

¹ [This certificate must be signed by the chief financial officer or vice president finance of NPS Pharmaceuticals, Inc.]

[EXHIBIT B]

EX-12.1

EXHIBIT 12.1

NPS PHARMACEUTICALS, INC

STATEMENT REGARDING COMPUTATION

OF RATIO OF EARNINGS TO FIXED CHARGES

(in thousands)

	Year Ended December 31,
	2001			2002			2003			2004			2005
Earnings (Loss)
Pre-tax loss before adjustments for income equity from investees and cumulative effect on prior years of changes in accounting principle	$	(51,329	)	$	(87,127	)	$	(172,925	)	$	(166,618	)	$	(169,778	)
Total fixed charges		399			381			4,134			8,297			25,937
Distributed income of equity investees		1,661			193			—			—			—
Total losses before fixed charges	$	(49,269	)	$	(86,553	)	$	(168,791	)	$	(158,321	)	$	(143,841	)
Fixed Charges
Interest expense	$	5			—		$	3,718		$	7,527		$	25,119
Assumed interest attributable to rentals		394			381			416			770			818
Total fixed charges	$	399		$	381		$	4,134		$	8,297		$	25,937
Deficiency of earnings available to cover fixed charges	$	(49,668	)	$	(86,934	)	$	(172,925	)	$	(166,618	)	$	(169,778	)
Ratio of earnings available to cover fixed charges

For the years ended December 31, 2001, 2002, 2003, 2004 and 2005 our earnings were insufficient to cover fixed charges for those periods by $49,668, $86,934, $172,925, $166,618 and $169,778, respectively. In calculating the ratio of earnings available to cover fixed charges, “earnings” consist of pre-tax income (loss) before adjustments for income from equity investees, plus fixed charges and distributed income from equity investees. Fixed charges consists of interest expense and estimated interest included in rental expense.

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

NPS Pharmaceuticals, Inc.:

We consent to incorporation by reference in the registration statements (Nos. 33-79622, 333-17521, 333-94269, 333-124821, 333-126817 and 333-126823) on Forms S-8 and (Nos. 333-41758, 333-106770, 333-108612, 333-117219, 333-127756 and 333-131273) on Forms S-3 of NPS Pharmaceuticals, Inc. of our reports dated February 28, 2006, relating to the consolidated balance sheets of NPS Pharmaceuticals, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity (deficit) and comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2005, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 and the effectiveness of internal control over financial reporting as of December 31, 2005, which reports appear in the December 31, 2005 annual report on Form 10-K of NPS Pharmaceuticals, Inc.

Salt Lake City, Utah

February 28, 2006

EX-31.1

EXHIBIT 31.1

SARBANES-OXLEY SECTION 302(a) CERTIFICATION

I, Hunter Jackson, certify that:

1. I have reviewed this annual report on Form 10-K of NPS Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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 controls 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 annual 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 registrant’s board of directors (or persons performing the equivalent function):

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 2, 2006 /s/ HUNTER JACKSON Hunter Jackson, Chief Executive Officer and Chairman of the Board

EX-31.2

EXHIBIT 31.2

SARBANES-OXLEY SECTION 302(a) CERTIFICATION

I, Gerard J. Michel, certify that:

1. I have reviewed this annual report on Form 10-K of NPS Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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 controls 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 annual 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 registrant’s board of directors (or persons performing the equivalent function):

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 2, 2006 /s/ GERARD J. MICHEL Gerard J. Michel, Chief Financial Officer and Vice President, Corporate Development

EX-32

EXHIBIT 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we the undersigned Chief Executive Officer and Chief Financial Officer of NPS Pharmaceuticals, Inc. certify that the Annual Report of NPS Pharmaceuticals, Inc. on Form 10-K for the fiscal year ended December 31, 2005 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents in all material respects, the financial condition and results of operations of NPS Pharmaceuticals, Inc.

Date: March 2, 2006	/s/ HUNTER JACKSON Hunter Jackson,
	CEO and Chairman of the Board
Date: March 2, 2006	/s/ GERARD J. MICHEL Gerard J. Michel,
	Chief Financial Officer and Vice President, Corporate Development

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Form 10-K or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to NPS Pharmaceuticals, Inc. and will be retained by NPS Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.