KERYX BIOPHARMACEUTICALS INC (Form: 10-Q, Received: 05/12/2008 16:53:04)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 000-30929

___________________

KERYX BIOPHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	13-4087132 (I.R.S. Employer Identification No.)

750 Lexington Avenue

New York, New York 10022

(Address including zip code of principal executive offices)

(212) 531-5965

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No £

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

Large accelerated filer £	Accelerated filer x
Non-accelerated filer £ (Do not check if smaller reporting company)	Smaller reporting company £

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £ No x

There were 43,696,153 shares of the registrant’s common stock, $0.001 par value, outstanding as of May 5, 2008.

KERYX BIOPHARMACEUTICALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2008

TABLE OF CONTENTS

		Page

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS		1

PART I	FINANCIAL INFORMATION	2

Item 1	Financial Statements	2

	Consolidated Balance Sheets as of March 31, 2008 (unaudited) and December 31, 2007	2

	Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007 (unaudited)	3

	Consolidated Statement of Changes in Stockholders’ Equity for the three months ended March 31, 2008 (unaudited)	4

	Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007 (unaudited)	5

	Notes to Consolidated Financial Statements (unaudited)	7

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4	Controls and Procedures	27

PART II	OTHER INFORMATION	27

Item 1	Legal Proceedings	27

Item 1A	Risk Factors	28

Item 5	Other Information	38

Item 6	Exhibits	38

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words "anticipate," "believe," "estimate," "may," "expect" and similar expressions are generally intended to identify forward-looking statements. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, those discussed under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, as well as other factors which may be identified from time to time in our other filings with the Securities and Exchange Commission, or the SEC, or in the documents where such forward-looking statements appear. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements. Such forward-looking statements include, but are not limited to, statements about our:

·	expectations for increases or decreases in expenses;

·	expectations for the development, manufacturing, regulatory approval, and commercialization of Zerenex ^TM (ferric citrate), KRX-0401 (perifosine), and our additional product candidates or any other products we may acquire or in-license;

·	expectations for incurring capital expenditures to expand our research and development and manufacturing capabilities;

·	expectations for generating revenue or becoming profitable on a sustained basis;

·	expectations or ability to enter into marketing and other partnership agreements;

·	expectations or ability to enter into product acquisition and in-licensing transactions;

·	expectations or ability to build our own commercial infrastructure to manufacture, market and sell our drug candidates;

·	estimates of the sufficiency of our existing cash and cash equivalents and investments to finance our business strategy;

·	expected losses;

·	our ability to continue to satisfy the listing requirements of the NASDAQ Stock Market; and

·	expectations for future capital requirements.

The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is signed. Except as required by law, we assume no responsibility for updating any forward-looking statements.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Keryx Biopharmaceuticals, Inc. (A Development Stage Company)

Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007

(in thousands, except share and per share amounts)

	March 31, 2008			December 31, 2007
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	5,774		$	19,065
Short-term investment securities		20,838			43,038
Interest receivable		463			283
License receivable		8,000			—
Assets held for sale		300			—
Other current assets		1,316			1,330
Total current assets		36,691			63,716
Long-term investment securities		12,485			2,296
Property, plant and equipment, net		288			11,497
Goodwill		3,208			3,208
Other assets, net		103			344
Total assets	$	52,775		$	81,061

Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued expenses	$	16,787		$	19,134
Accrued compensation and related liabilities		1,114			1,254
Current portion of deferred revenue		1,557			1,023
Total current liabilities		19,458			21,411
Deferred revenue, net of current portion		18,289			11,022
Contingent equity rights		4,004			4,004
Other liabilities		179			202
Total liabilities		41,930			36,639
Commitments and contingencies (Note 6)
Stockholders’ equity
Preferred stock, $0.001 par value per share (5,000,000 shares authorized, no shares issued and outstanding)		—			—
Common stock, $0.001 par value per share (95,000,000 shares authorized, 43,776,101 and 43,751,101 shares issued, 43,696,153 and 43,671,153 shares outstanding at March 31, 2008 and December 31, 2007, respectively)		44			44
Additional paid-in capital		323,968			323,009
Treasury stock, at cost, 79,948 shares at March 31, 2008 and December 31, 2007, respectively		(357	)		(357	)
Deficit accumulated during the development stage		(312,810	)		(278,274	)
Total stockholders’ equity		10,845			44,422
Total liabilities and stockholders’ equity	$	52,775		$	81,061

The accompanying notes are an integral part of the consolidated financial statements.

Keryx Biopharmaceuticals, Inc. (A Development Stage Company)

Consolidated Statements of Operations

for the Three Months Ended March 31, 2008 and 2007 (Unaudited)

(in thousands, except share and per share amounts)

	Three months ended March 31,						Amounts accumulated during the development
	2008			2007			stage


Revenue:
License revenue	$	199		$	—		$	403
Diagnostic revenue		—			30			169
Service revenue		—			12			1,866
Other revenue		—			—			1,027
Total revenue		199			42			3,465

Operating expenses:
Cost of diagnostics sold		—			22			178
Cost of services		—			32			2,168

Research and development:
Non-cash compensation		(980	)		995			16,832
Non-cash acquired in-process research and development		—			—			18,800
Other research and development		30,828			17,446			225,750
Total research and development		29,848			18,441			261,382

Selling, general and administrative:
Non-cash compensation		1,717			2,006			22,652
Other selling, general and administrative		1,967			2,795			46,082
Total selling, general and administrative		3,684			4,801			68,734

Total operating expenses		33,532			23,296			332,462

Operating loss		(33,333	)		(23,254	)		(328,997	)

Interest and other (expense) income, net		(1,203	)		1,441			16,714
Net loss before income taxes		(34,536	)		(21,813	)		(312,283	)

Income taxes		—			—			527
Net loss	$	(34,536	)	$	(21,813	)	$	(312,810	)

Basic and diluted loss per common share	$	(0.79	)	$	(0.50	)	$	(13.59	)

Weighted average shares used in computing basic and diluted net loss per common share		43,718,077			43,506,236			23,012,552

The accompanying notes are an integral part of the consolidated financial statements.

Keryx Biopharmaceuticals, Inc. (A Development Stage Company)

Consolidated Statement of Changes in Stockholders’ Equity

for the Three Months Ended March 31, 2008 (Unaudited)

(in thousands, except share amounts)

	Common stock						Additional paid-in
	Shares			Amount			capital

Balance at December 31, 2007		43,751,101		$	44		$	323,009
Changes during the period:
Forfeiture of restricted stock		(50,000	)		(—	)*		—
Exercise of options		75,000			—	*		222
Compensation in respect of options and restricted stock granted to employees, directors and third-parties		—			—			737
Net loss		—			—			—
Balance at March 31, 2008		43,776,101		$	44		$	323,968

	Treasury stock					Deficit accumulated during the development
	Shares		Amount			Stage			Total

Balance at December 31, 2007		79,948	$	(357	)	$	(278,274	)	$	44,422
Changes during the period:
Forfeiture of restricted stock		—		—			—			(—	)*
Exercise of options		—		—			—			222
Compensation in respect of options and restricted stock granted to employees, directors and third-parties		—		—			—			737
Net loss		—		—			(34,536	)		(34,536	)
Balance at March 31, 2008		79,948	$	(357	)	$	(312,810	)	$	10,845

* Amount less than one thousand dollars.

The accompanying notes are an integral part of the consolidated financial statements.

Keryx Biopharmaceuticals, Inc. (A Development Stage Company)

Consolidated Statements of Cash Flows

for the Three Months Ended March 31, 2008 and 2007 (Unaudited)

(in thousands)

	Three months ended March 31,						Amounts accumulated during the development stage
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss	$	(34,536	)	$	(21,813	)	$	(312,810	)
Adjustments to reconcile net loss to cash flows used in operating activities:
Acquired in-process research and development		—			—			18,800
Stock compensation expense		737			3,001			39,484
Issuance of common stock to technology licensor		—			—			359
Interest on convertible notes settled through issuance of preferred shares		—			—			253
Depreciation and amortization		35			49			3,021
Loss on disposal of property, plant and equipment		—			—			171
Impairment of investment securities		1,811			—			1,811
Other impairment charges		11,037			600			14,119
Exchange rate differences		—			—			94
Changes in assets and liabilities, net of effects of acquisitions:
Decrease (increase) in other current assets		14			1,219			(844	)
Increase in accrued interest receivable		(180	)		(134	)		(463	)
Increase in license receivable		(8,000	)		—			(8,000	)
Decrease (increase) in security deposits		241			—			(22	)
(Decrease) increase in accounts payable and accrued expenses		(2,347	)		2,991			15,042
(Decrease) increase in accrued compensation and related liabilities		(140	)		(1,214	)		519
(Decrease) increase in other liabilities		(23	)		(23	)		24
Increase (decrease) in deferred revenue		7,801			(3	)		19,390
Net cash used in operating activities		(23,550	)		(15,327	)		(209,052	)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property, plant and equipment		(163	)		(2,511	)		(16,310	)
Proceeds from disposals of property, plant and equipment		—			—			440
Increase in note and accrued interest receivable from related party		—			—			(356	)
Payments of transaction costs		—			—			(231	)
Increase in other assets		—			—			(1,192	)
Investment in held-to-maturity short-term securities		(21	)		(22	)		(55,070	)
Proceeds from maturity of held-to-maturity short-term securities		22			4,500			76,063
Investment in available-for-sale short-term securities		(12,000	)		(500	)		(126,800	)
Proceeds from sale of available-for-sale short-term securities		22,200			2,500			114,800
Investment in held-to-maturity long-term securities		(1	)		(2,019	)		(44,320	)
Proceeds from maturity of held-to-maturity long-term securities		—			1			193
Net cash provided by (used in) investing activities		10,037			1,949			(52,783	)

The accompanying notes are an integral part of the consolidated financial statements.

Keryx Biopharmaceuticals, Inc. (A Development Stage Company)

Consolidated Statements of Cash Flows

for the Three Months Ended March 31, 2008 and 2007 (Unaudited)

(continued)

(in thousands)

	Three months ended March 31,						Amounts accumulated during the development stage
	2008			2007
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans	$	—		$	—		$	500
Proceeds from long-term loans		—			—			3,251
Payment of assumed notes payable and accrued interest in connection with the ACCESS Oncology acquisition		—			—			(6,322	)
Issuance of convertible note, net		—			—			2,150
Issuance of preferred shares, net		—			—			8,453
Receipts on account of shares previously issued		—			—			7
Proceeds from initial public offering, net		—			—			46,298
Proceeds from subsequent public offerings, net		—			—			158,487
Proceeds from private placements, net		—			—			45,795
Proceeds from exercise of options and warrants		222			183			9,342
Purchase of treasury stock		—			(70	)		(357	)

Net cash provided by financing activities		222			113			267,604

Cash acquired in acquisition		—			—			99
Effect of exchange rate on cash		—			—			(94	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(13,291	)		(13,265	)		5,774

Cash and cash equivalents at beginning of period		19,065			48,736			—

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	5,774		$	35,471		$	5,774

NON - CASH TRANSACTIONS
Issuance of common stock in connection with acquisition	$	—		$	—		$	9,635
Contingent equity rights in connection with acquisition		—			—			4,004
Assumption of liabilities in connection with acquisition		—			—			9,068
Conversion of short-term loans into contributed capital		—			—			500
Conversion of long-term loans into contributed capital		—			—			2,681
Conversion of long-term loans into convertible notes of Partec		—			—			570
Conversion of convertible notes of Partec and accrued interest into stock in Keryx		—			—			2,973
Issuance of warrants to related party as finder’s fee in private placement		—			—			114
Declaration of stock dividend		—			—			3

SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	—		$	—		$	1,166
Cash paid for income taxes	$	—		$	—		$	468

The accompanying notes are an integral part of the consolidated financial statements.

Keryx Biopharmaceuticals, Inc. (A Development Stage Company)

Notes to Consolidated Financial Statements (unaudited)

NOTE 1 - GENERAL

Basis of Presentation

Keryx Biopharmaceuticals, Inc. and subsidiaries (“Keryx” or the “Company”) is a biopharmaceutical company focused on the acquisition, development and commercialization of medically important, novel pharmaceutical products for the treatment of life-threatening diseases, including renal disease and cancer. The Company was incorporated in Delaware in October 1998 (under the name Paramount Pharmaceuticals, Inc., which was later changed to Lakaro Biopharmaceuticals, Inc. in November 1999, and finally to Keryx Biopharmaceuticals, Inc. in January 2000). The Company commenced activities in November 1999, focusing on the development and commercialization of clinical compounds and core technologies for the life sciences.

Until November 1999, most of the Company’s activities were carried out by Partec Limited, an Israeli corporation formed in December 1996, and its subsidiaries - SignalSite Inc. (85% owned), SignalSite Israel Ltd. (wholly-owned), Vectagen Inc. (87.25% owned) and Vectagen Israel Ltd. (wholly-owned) (hereinafter collectively referred to as “Partec”). In November 1999, the Company acquired substantially all of the assets and liabilities of Partec and, as of that date, the activities formerly carried out by Partec were performed by the Company. On the date of the acquisition, Keryx and Partec were entities under common control (the controlling interest owned approximately 79.7% of Keryx and approximately 76% of Partec) and accordingly, the assets and liabilities were recorded at their historical cost basis by means of “as if” pooling, with Partec being presented as a predecessor company. Consequently, these financial statements include the activities performed in previous periods by Partec by aggregating the relevant historical financial information with the financial statements of the Company as if they had formed a discrete operation under common management for the entire development stage.

The Company owns a 100% interest in each of ACCESS Oncology, Inc., Neryx Biopharmaceuticals, Inc., and Accumin Diagnostics, Inc., all U.S. corporations incorporated in the State of Delaware, and Keryx (Israel) Ltd. and Keryx Biomedical Technologies Ltd., each organized in Israel. In 2003, the Company’s subsidiaries in Israel ceased operations and are currently in the process of being closed down. Most of the Company's biopharmaceutical development and substantially all of its administrative operations during the three months ended March 31, 2008 and 2007, were conducted in the United States of America.

On February 5, 2004, the Company completed the acquisition of ACCESS Oncology, Inc. and its subsidiaries (“ACCESS Oncology”). The transaction was structured as a merger of AXO Acquisition Corp., a Delaware corporation and the Company’s wholly-owned subsidiary, with and into ACCESS Oncology, with ACCESS Oncology remaining as the surviving corporation and a wholly-owned subsidiary of the Company. The transaction was accounted for under the purchase method of accounting. The assets and liabilities of ACCESS Oncology that the Company acquired and assumed pursuant to the acquisition have been included in the Company’s consolidated financial statements as of February 5, 2004.

On April 6, 2006, Accumin Diagnostics, Inc., a wholly-owned subsidiary of the Company, completed the acquisition of Accumin ^TM , a novel, patent protected, diagnostic for the direct measurement of total, intact urinary albumin, from AusAm Biotechnologies, Inc. The transaction was accounted for under the purchase method of accounting. The assets and liabilities of Accumin that the Company acquired and assumed pursuant to the acquisition have been included in the Company’s consolidated financial statements as of April 6, 2006.

The accompanying unaudited consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments that are, in the opinion of management, of a normal recurring nature and are necessary for a fair presentation of the consolidated financial statements have been included. Nevertheless, these financial statements should be read in conjunction with the Company's audited consolidated financial statements contained in its Annual Report on Form 10-K for the year ended December 31, 2007. The results of operations for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

The Company has incurred operating losses since its inception and expects to continue to incur operating losses for the foreseeable future and may never become profitable. The Company has not generated any revenues from its planned principal operations and is dependent upon significant financing to provide the working capital necessary to execute its business plan. The Company has not yet commercialized any of its drug candidates and cannot be sure if it will ever be able to do so. Even if the Company commercializes one or more of its drug candidates, the Company may not become profitable. The Company’s ability to achieve profitability depends on a number of factors, including its ability to complete its development efforts, obtain regulatory approval for its drug candidates, successfully complete any post-approval regulatory obligations and successfully commercialize its drug candidates. The Company may continue to incur substantial operating losses even if it begins to generate revenues from its drug candidates, if approved. If the Company determines that it is necessary to seek additional funding, there can be no assurance that the Company will be able to obtain any such funding on terms that are acceptable to it, if at all.

Cash and Cash Equivalents

The Company treats liquid investments with original maturities of less than three months when purchased as cash and cash equivalents.

Investment Securities

The Company records its investments as either held-to-maturity or available-for-sale. Held-to-maturity investments are recorded at amortized cost. Available-for-sale investments securities (auction rate securities) are recorded at fair value. See Note 2 - Fair Value Measurements. Other-than-temporary impairment charges are included in interest and other income (expense), net.

The following tables summarize the Company’s investment securities at March 31, 2008 and December 31, 2007:

(in thousands)	March 31, 2008		December 31, 2007

Short-term investment securities:
Obligations of domestic governmental agencies (mature between April and October 2008) (held-to-maturity)	$	20,838	$	20,838
Auction rate securities (mature between 2031 and 2047) (available-for-sale)		—		22,200
Total short-term investment securities	$	20,838	$	43,038

Long-term investment securities:
Obligations of domestic governmental agencies (mature May 2009) (Held-to-maturity)	$	2,296	$	2,296
Auction rate securities (mature between 2031 and 2047) (available-for-sale)		10,189		—
Total long-term investment securities	$	12,485	$	2,296

Revenue Recognition

The Company recognizes license revenue consistent with the provisions of Staff Accounting Bulletin (“SAB”) No. 104 and Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” The Company analyzes each element of its licensing agreement to determine the appropriate revenue recognition. The Company recognizes revenue on upfront payments over the period of significant involvement under the related agreements unless the fee is in exchange for products delivered or services rendered that represent the culmination of a separate earnings process and no further performance obligation exists under the contract. The Company recognizes milestone payments upon the achievement of specified milestones if (1) the milestone is substantive in nature, and the achievement of the milestone was not reasonably assured at the inception of the agreement and (2) the fees are nonrefundable. Any milestone payments received prior to satisfying these revenue recognition criteria are recognized as deferred revenue. Sales milestones and royalties that are deferred will be recognized when earned under the agreements.

The Company recognizes diagnostic revenue when persuasive evidence of an arrangement exists, the product has been shipped, title and risk of loss have passed to the customer and collection from the customer is reasonably assured.

The Company recognizes service revenues as the services are provided. Deferred revenue is recorded when the Company receives a deposit or prepayment for services to be performed at a later date.

Stock-Based Compensation

The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment” (“SFAS No. 123R”) on January 1, 2006 using the modified prospective transition method. SFAS No. 123R requires all share-based payments to employees, and to non-employee directors as compensation for service on the Board of Directors, to be recognized as compensation expense in the consolidated financial statements based on the fair values of such payments. Stock-based compensation expense recognized each period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company accounts for equity instruments issued to third party service providers (non-employees) in accordance with the fair value method prescribed by the provisions of EITF Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services” (“EITF 96-18”).

Net Loss per Share

Basic net loss per share is computed by dividing the losses allocable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share does not reflect the effect of shares of common stock to be issued upon the exercise of stock options and warrants, as their inclusion would be anti-dilutive. The options and warrants outstanding as of March 31, 2008 and 2007, which are not included in the computation of net loss per share amounts, were 10,687,140 and 11,098,843, respectively.

Accounting for Manufacturing Suite

As of March 31, 2008, the Company has spent approximately $11.3 million in capital expenditures building its manufacturing suite for Sulonex. With the cessation of the Company’s development of Sulonex, the Company took an impairment charge of $11.0 million, which is included in other research and development expenses in the three months ended March 31, 2008, to write the assets down to their estimated fair value of $300,000, which are being classified as assets held for sale. In addition, the Company recognized a $2.1 million provision, which is included in other research and development expenses in the three months ended March 31, 2008, for estimated costs relating to the required restoration of the facility to its original condition.

Impairment of Goodwill

The Company accounts for impairment of goodwill using the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). This statement addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. SFAS No. 142 requires goodwill be tested using a two-step process. The first step compares the fair value of the reporting unit with the unit's carrying value, including goodwill. When the carrying value of the reporting unit is greater than fair value, the unit’s goodwill may be impaired, and the second step must be completed to measure the amount of the goodwill impairment charge, if any. In the second step, the implied fair value of the reporting unit’s goodwill is compared with the carrying amount of the unit’s goodwill. If the carrying amount is greater than the implied fair value, the carrying value of the goodwill must be written down to its implied fair value. The negative outcome of the Company’s pivotal SUN-MICRO Phase 3 clinical trial of Sulonex™ (sulodexide) for the treatment of diabetic nephropathy, announced on March 7, 2008, and the Company’s subsequent decision to terminate the ongoing SUN-MACRO Phase 4 clinical trial triggered an impairment test. As of March 31, 2008, management concluded that there is no impairment of the Company’s goodwill.

NOTE 2 – FAIR VALUE MEASUREMENTS

As of January 1, 2008, the Company adopted the Financial Accounting Standards Board’s Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”) for its financial assets only. SFAS No. 157 defines fair value, establishes a fair value hierarchy for assets and liabilities measured at fair value and requires expanded disclosures about fair value measurements. The SFAS No. 157 hierarchy ranks the quality and reliability of inputs, or assumptions, used in the determination of fair value and requires financial assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

·	Level 1 – quoted prices in active markets for identical assets and liabilities;

·	Level 2 – inputs other than Level 1 quoted prices that are directly or indirectly observable; and

·	Level 3 – unobservable inputs that are not corroborated by market data.

As of March 31, 2008, $10.2 million of the Company’s long-term investment securities were invested in auction rate securities, which represent interests in student loan-backed securities. Auction rate securities are structured to provide liquidity through a Dutch auction process that resets the applicable interest rate at pre-determined calendar intervals, generally every 28 days. This mechanism has historically allowed existing investors either to rollover their holdings, whereby they would continue to own their respective securities, or liquidate their holdings by selling such securities at par. This auction process has historically provided a liquid market for these securities; however, the uncertainties in the credit markets have affected all of the Company’s holdings in auction rate securities. Since February 2008, the auctions for the auction rate securities held by the Company have not had sufficient buyers to cover investors’ sell orders, resulting in unsuccessful auctions. When an auction is unsuccessful, the interest rate is re-set to a level pre-determined by the loan documents and remains in effect until the next auction date, at which time the process repeats. While these investments are currently rated AA or higher, the Company is uncertain as to when the liquidity issues relating to these investments will improve. Given the complexity of auction rate securities and the lack of readily observable market quotes related to these investments, the Company obtained the assistance of an independent valuation firm, Pluris Valuation Advisors LLC, to assist management in assessing the fair value of its auction rate securities portfolio. As a result of this valuation process, the Company recorded an impairment charge of $1.8 million for an other-than-temporary decline in the value of its auction rate securities to estimated fair value of $10.2 million at March 31, 2008. This other-than-temporary impairment charge was included in interest and other income (expense), net. In addition, the Company reclassified the entire auction rate securities portfolio from short-term to long-term investments due to the uncertainty of when the Company can sell these securities.

The valuation methods used to estimate the auction rate securities’ fair value were (1) a discounted cash flow model, where the expected cash flows of the auction rate securities are discounted to the present using a yield that incorporates compensation for illiquidity, and (2) a market comparables method, where the auction rate securities are valued based on indications, from the secondary market, of what discounts buyers demand when purchasing similar auction rate securities. The valuation included numerous assumptions such as assessments of the underlying structure of each security, expected cash flows, discount rates, credit ratings, workout periods, and overall capital market liquidity. These assumptions, assessments and the interpretations of relevant market data are subject to uncertainties, are difficult to predict and require significant judgment. The use of different assumptions, applying different judgment to inherently subjective matters and changes in future market conditions could result in significantly different estimates of fair value.

The fair value of the Company’s auction rate securities could change significantly based on market conditions and continued uncertainties in the credit markets. If these uncertainties continue or if these securities experience credit rating downgrades, the Company may incur additional impairment charges with respect to its auction rate securities portfolio. The Company will continue to monitor the fair value of its auction rate securities and relevant market conditions and will recognize additional impairment charges if future circumstances warrant such charges.

The Company reviews impairments in accordance with the guidance in EITF Issue 03-1 and FSP SFAS 115-1 and 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” to determine the classification of the impairment as temporary or other-than-temporary. Losses are recognized in the Company’s statement of operations when a decline in fair value is determined to be other-than-temporary. The Company reviews its investments on an ongoing basis for indications of possible impairment. Once identified, the determination of whether the impairment is temporary or other-than-temporary requires significant judgment. The Company believes that the impairment charge related to its auction rate securities investments are other-than-temporary. The primary factors the Company considers in classifying an impairment include the extent and time the fair value of each investment has been below cost and the Company’s ability to hold such investment to maturity.

The following table provides the fair value measurements of applicable Company financial assets according to the fair value levels defined by SFAS No. 157 as of March 31, 2008:

	Financial assets at fair value as of March 31, 2008
(in thousands)	Level 1		Level 2		Level 3

Money market funds (1)	$	2,542	$	—	$	—
Auction rate securities (2)		—		—		10,189
Total	$	2,542	$	—	$	10,189

(1)	Included in cash and cash equivalents on the Company’s consolidated balance sheet. The carrying amount of money market funds is a reasonable estimate of fair value.

(2)	Included in long-term investment securities on the Company’s consolidated balance sheet.

The following table summarizes the change in carrying value associated with Level 3 financial assets for the three months ended March 31, 2008:

(in thousands)	Available-for-sale long-term investments

Balance at January 1, 2008	$	—
Transfer into Level 3 (1)		12,000
Total unrealized losses included in net loss		(1,811	)
Balance at March 31, 2008	$	10,189

(1)

Based on deteriorated market conditions in the first quarter of 2008, the Company changed the fair value measurement methodology of its auction rate securities portfolio that the Company classifies as available-for-sale from quoted prices in active markets to a discounted cash flow model. Accordingly, these securities were re-classified from Level 1 to Level 3.

NOTE 3 – STOCKHOLDERS' EQUITY

Common Stock

The Company filed a shelf registration statement on Form S-3 (File No. 333-130809) with the Securities and Exchange Commission, or SEC, on December 30, 2005, that was declared effective by the SEC on January 13, 2006, covering shares of the Company’s Common Stock having a value not to exceed $150 million. At March 31, 2008, $67 million remain available for future sale under this shelf registration statement. The Company may offer the remaining securities under its shelf registration from time to time in response to market conditions or other circumstances if it believes such a plan of financing is in the best interest of the Company and its stockholders. The Company believes that the shelf registration provides it with the flexibility to raise additional capital to finance its operations as needed.

Equity Incentive Plans

The following table summarizes stock option activity for the three months ended March 31, 2008:

	Number of shares			Weighted- average exercise price		Weighted- average Contractual Term		Aggregate Intrinsic Value
						(in years)
Outstanding at December 31, 2007		10,869,173		$	7.69
Granted		183,800			5.52
Exercised		(75,000	)		2.96			$	259,900
Forfeited		(611,013	)		9.80
Expired		(1,796	)		13.56
Outstanding at March 31, 2008		10,365,164		$	7.56		6.5	$	152,800
Vested and expected to vest at March 31, 2008		10,277,328		$	7.52		6.5	$	152,800
Exercisable at March 31, 2008		7,581,095		$	6.07		5.7	$	152,800

Upon the exercise of stock options, the Company issues new shares. As of March 31, 2008, 3,453,833 options issued to employees and directors, and 93,000 options issued to consultants, are milestone-based, of which 3,218,833 options issued to employees and directors, and 43,000 options issued to consultants, are vested and exercisable.

Certain employees and consultants have been awarded restricted stock under the 2004 Long-Term Incentive Plan and 2007 Incentive Plan. The restricted stock vests primarily over a period of two to four years. The following table summarizes restricted share activity for the three months ended March 31, 2008:

	Number of Shares			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value

Outstanding at December 31, 2007		138,334		$	10.09
Granted		—			—
Vested		(50,000	)		10.17	$	24,500
Forfeited		(50,000	)		10.17
Outstanding at March 31, 2008		38,334		$	9.88	$	23,000

Shares available for the issuance of stock options or other stock-based awards under our stock option and incentive plans were 5,486,629 at March 31, 2008.

Warrants

	Warrants		Weighted- average exercise price		Aggregate Intrinsic Value

Outstanding at December 31, 2007		321,976	$	4.65
Issued		—		—
Exercised		—		—
Canceled		—		—
Outstanding at March 31, 2008		321,976	$	4.65	$	43,052

Stock-Based Compensation

The fair value of stock options granted is estimated at the date of grant using the Black-Scholes model. The expected term of options granted is derived from historical data and the expected vesting period. Expected volatility is based on the historical volatility of the Company’s common stock and the Company’s assessment of its future volatility. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has assumed no expected dividend yield, as dividends have never been paid to stock or option holders and will not be for the foreseeable future.

Black-Scholes Option Valuation Assumptions	Three months ended March 31,
	2008			2007
Risk-free interest rates		2.5	%		4.5	%
Dividend yield		—			—
Volatility		65.0	%		72.2	%
Weighted-average expected term		5.0 years			5.0 years

The weighted average grant date fair value of options granted was $3.10 and $6.92 per option for the three months ended March 31, 2008, and 2007, respectively. The Company used historical information and the Company’s assessment of future forfeitures to estimate forfeitures within the valuation model. As of March 31, 2008, there was $13.2 million and $0.3 million of total unrecognized compensation cost related to non-vested stock options and restricted stock, respectively, which is expected to be recognized over a weighted-average period of 2.3 years and 2.7 years, respectively. The amounts do not include, as of March 31, 2008, 285,000 options outstanding, which are milestone-based and vest upon certain corporate milestones, such as FDA approval of our drug candidates and market capitalization targets. Stock-based compensation will be measured and recorded if and when a milestone occurs.

NOTE 4 – RESTRUCTURING

On March 26, 2008, the Company implemented a strategic restructuring plan to reduce its cash burn rate and re-focus its development efforts (the “2008 Restructuring”). The 2008 Restructuring, which was prompted by the negative outcome of the Company’s pivotal SUN-MICRO Phase 3 clinical trial of Sulonex™ (sulodexide) for the treatment of diabetic nephropathy, announced on March 7, 2008, and subsequent decision by the Company to terminate the ongoing SUN-MACRO Phase 4 clinical trial, is intended to conserve the financial resources of the Company and enable it to focus its efforts on programs and opportunities that management believes are most likely to provide long-term shareholder value. The 2008 Restructuring includes a workforce reduction of approximately 50%. Following the workforce reduction, the Company will have approximately 25 full and part-time employees.

As part of the 2008 Restructuring, on March 26, 2008, the Company notified its President, I. Craig Henderson, M.D., that the Company was terminating his employment, effective April 15, 2008. Dr. Henderson will remain in his position as a member of the Company’s Board of Directors until the next annual meeting. The Company recognized a $1,569,000 credit to expense, in the three months ended March 31, 2008, related to the forfeiture of stock options and restricted stock issued to Dr. Henderson. In addition, the Company reached a mutual agreement with its Chief Accounting Officer, Mark Stier, that Mr. Stier will resign effective June 30, 2008. His responsibilities have been assumed by James F. Oliviero, Vice President, Finance, who was appointed Principal Financial and Accounting Officer on May 6, 2008.

The following table summarizes restructuring costs that were provided for and/or incurred by the Company during the three months ended March 31, 2008:

	Three months ended
(in thousands)	March 31, 2008

Research and development Impairment of manufacturing facility	$	11,037
Manufacturing facility restoration provision		2,063
Severance		624
Non-cash compensation		(1,569	)
Total research and development		12,155

Selling, general and administrative Severance		99
Total selling, general and administrative		99

Total restructuring costs	$	12,254

(in thousands)

Restructuring liabilities at December 31, 2007	$	—
Provision for manufacturing facility restoration costs		2,063
Accrued severance costs		723
Restructuring liabilities at March 31, 2008	$	2,786

The Company expects to pay out the restructuring liabilities accrued for at March 31, 2008 over the next six months.

NOTE 5 - LICENSE AGREEMENT

In September 2007, the Company entered into a Sublicense Agreement with Japan Tobacco Inc. (“JT”) and Torii Pharmaceutical Co., Ltd. (“Torii”), JT's pharmaceutical business subsidiary, under which JT and Torii obtained the exclusive sublicense rights for the development and commercialization of ferric citrate in Japan, which is being developed in the United States under the trade name Zerenex. JT and Torii are responsible for the future development and commercialization costs in Japan.

An upfront payment of $12.0 million, which was received in October 2007, is being recognized as license revenue on a straight-line basis over the life of the agreement, which is through the expiration of the last-to-expire patent covered by the agreement in 2023, and represents the estimated period over which the Company will have certain ongoing responsibilities under the sublicense agreement. The Company recorded license revenue of approximately $193,500 in the three months ended March 31, 2008, and, at March 31, 2008, has deferred revenue of approximately $11.6 million (approximately $774,000 of which has been classified as a current liability), associated with this $12.0 million payment.

An additional milestone payment of $8.0 million, for the achievement of certain milestones reached in March 2008, was received in April 2008, and is being recognized as license revenue on a straight-line basis over the life of the agreement (as discussed above). The Company recorded license revenue of approximately $5,800 for the three months ended March 31, 2008, and, at March 31, 2008, has license receivable of $8.0 million and deferred revenue of approximately $8.0 million (approximately $533,000 of which has been classified as a current liability) associated with this $8.0 million payment. The Company may receive up to an additional $80.0 million in payments upon the achievement of pre-specified milestones. In addition, upon commercialization, JT and Torii will make royalty payments to the Company on net sales of ferric citrate in Japan.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Obligations and Commitments

As of March 31, 2008, the Company has known contractual obligations, commitments and contingencies of $3,662,000. Of this amount, $2,079,000 relates to research and development agreements (primarily relating to the Company’s Phase 2 KRX-0401 clinical program), all of which is due within the next year. The additional $1,583,000 relates to the Company’s operating lease obligations, of which $676,000 is due within the next year, with the remaining balance due as per the schedule below.

	Payment due by period
Contractual obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Research and development agreements	$	2,079,000	$	2,079,000	$	—	$	—	$	—
Operating leases		1,583,000		676,000		907,000		—		—
Total	$	3,662,000	$	2,755,000	$	907,000	$	—	$	—

The table above includes certain commitments that are contingent upon the Company’s continuing development of its drug candidates.

The Company has undertaken to make contingent milestone payments to certain of its licensors of up to approximately $72.8 million over the life of the licenses, of which approximately $60.4 million will be due upon or following regulatory approval of the licensed drugs. In certain cases, such payments will reduce any royalties due on sales of related products. In the event that the milestones are not achieved, the Company remains obligated to pay one licensor $75,000 annually until the license expires. The Company has also committed to pay to the former stockholders of ACCESS Oncology certain contingent equity rights (up to 3,372,422 shares of the Company’s common stock) if its drug candidates meet certain development milestones. A substantial portion of the contingent shares would be payable to related parties of the Company. The Company has also entered into a royalty arrangement under which its wholly-owned subsidiary may be required to pay up to a maximum of $16.1 million to AusAm on revenue from a next generation product following FDA marketing approval, as part of the Company’s acquisition of Accumin. The uncertainty relating to the timing of the commitments described in this paragraph prevents the Company from including them in the table above.

Litigation

In July 2003, Keryx (Israel) Ltd., one of the Company’s Israeli subsidiaries, vacated its Jerusalem facility, after giving advance notice to RMPA Properties Ltd., the landlord. On May 1, 2005, the landlord filed suit in the Circuit Court of Jerusalem in Jerusalem, Israel, claiming that Keryx (Israel) Ltd., among other parties, was liable as a result of the alleged breach of the lease agreement. In addition to Keryx (Israel) Ltd., the landlord brought suit against Keryx Biomedical Technologies Ltd., another of the Company’s Israeli subsidiaries, Keryx Biopharmaceuticals, Inc., Michael S. Weiss, the Company’s Chairman and Chief Executive Officer, and Robert Trachtenberg, a former employee of Keryx. The amount demanded by the landlord totals 4,345,313 New Israeli Shekels, or approximately $1,257,000, and includes rent for the entire remaining term of the lease, as well as property taxes and other costs allegedly incurred by the landlord. In August 2003, the landlord claimed a bank deposit, in the amount of $222,000, which was previously provided as security in connection with the lease agreement. The Company intends to vigorously defend the suit. In July 2005, Keryx (Israel) Ltd. and Keryx Biomedical Technologies Ltd. filed an answer to the landlord's complaint. In October 2005, Keryx Biopharmaceuticals, Inc. filed an answer to the landlord's complaint. Generally, each answer challenges the merits of the landlord's cause of action as to each defendant. All defendants, except Keryx (Israel) Ltd., have filed a motion to dismiss the complaint. The plaintiff has filed a response to each answer. At this time, the Circuit Court of Jerusalem has not issued a decision with respect to the motion to dismiss. A hearing on a motion by Keryx Biopharmaceuticals, Inc. and Michael S. Weiss to vacate service of process outside of Israel was held in June 2006. On October 15, 2006, the Court held that the service of the claim against Mr. Weiss is vacated. Consequently, the Circuit Court of Jerusalem dismissed the suit against Mr. Weiss. However, the service against the Company was sustained. The Company appealed this holding. The appeal was denied on June 18, 2007, and the Company filed a petition for certiorari to the Supreme Court of Israel. The Company’s motion for certiorari was denied as well. The next preliminary hearing is scheduled for June 26, 2008. The Company filed its testimonial affidavit along with an expert opinion contesting the interest and the accumulated debt claimed by plaintiff. The Company has not yet recorded a charge to reflect any potential liability associated with this lawsuit, as it is too early to accurately estimate the amount of the charge, if any.

The Company prevailed in an arbitration proceeding with Alfa Wasserman concerning certain terms of the License Agreement related to the provision of data to Alfa Wasserman and consultation regarding management of the licensed patents. An arbitration proceeding was held in October 2007 and the arbitrator issued his decision on March 25, 2008, rejecting Alfa Wasserman’s claims that the Company was in breach of the License Agreement. Under the terms of the License Agreement, the Company may be entitled to recoup a portion of its legal fees and expenses associated with the arbitration.

The Company has notified Alfa Wasserman of its intention to terminate the License Agreement as of June 1, 2008, and that the Company will transfer to Alfa Wasserman all regulatory applications as provided in the License Agreement and demanding payment by Alfa Wasserman of 25% of the Company’s development costs associated with sulodexide, as provided in the License Agreement. Alfa Wasserman has itself served a notice of termination of the License Agreement on the grounds that the Company is in material breach of the agreement for failing to diligently develop sulodexide by terminating the Phase 4 clinical trial and seeking to terminate the License Agreement, thereby seeking to avoid reimbursement to Keryx of development costs. The Company intends to submit its claim for reimbursement of legal fees and development costs and Alfa Wasserman’s claim of material breach to the sole arbitrator for resolution.

In November 2007, the Company initiated an action in the US District Court for the Southern District of New York against Panion to enjoin Panion from improperly terminating the November 2005 License Agreement for an alleged breach of contract by Keryx related to certain manufacturing provisions of the agreement, to enjoin Panion from interfering with the Company’s contractual relationships with certain third-parties, as well as to enforce the Company’s right with respect to the prosecution of certain patents. On November 27, 2007, the Court granted the Company a motion for a preliminary injunction. Panion asserted counterclaims for breach of contract relating to certain manufacturing provisions of the license agreement. On March 17, 2008, the parties agreed to settle their dispute and as a result have entered into an Amended and Restated License Agreement, which resulted in an expansion of the scope of the original license grant and granted to the Company greater control over patent prosecution and maintenance. In consideration of these amendments and the settlement of the litigation, the Company paid Panion $2.5 million in March 2008. Following execution of the Amended and Restated License Agreement, the parties entered a voluntary dismissal of the action, including Panion’s asserted counterclaims.

NOTE 7 – SEGMENT INFORMATION

The Company has three reportable segments: Diagnostics, Services and Products. The Diagnostics business sells diagnostic products for the direct measurement of total, intact urinary albumin. The Services business provides clinical trial management and site recruitment services to other biotechnology and pharmaceutical companies. The Products business focuses on the acquisition, development and commercialization of medically important, novel pharmaceutical products for the treatment of life-threatening diseases, including renal disease and cancer, and also includes license revenue, other revenue and associated costs.

Segment information for the three month periods were as follows:

	Revenue
	Three months ended March 31,				Amounts accumulated during the development
(in thousands)	2008		2007		Stage

Diagnostics	$	—	$	30	$	169
Services		—		12		1,866
Products		199		—		1,430
Total	$	199	$	42	$	3,465

	Operating loss
	Three months ended March 31,						Amounts accumulated during the development
(in thousands)	2008			2007			Stage

Diagnostics	$	(81	)	$	(674	)	$	(1,853	)
Services		—			(20	)		(302	)
Products		(33,252	)		(22,560	)		(326,842	)
Total	$	(33,333	)	$	(23,254	)	$	(328,997	)

A reconciliation of the totals reported for the operating segments to the consolidated total net loss is as follows:

	Net loss
	Three months ended March 31,						Amounts accumulated during the development
(in thousands)	2008			2007			Stage

Operating losses of reportable segments	$	(33,333	)	$	(23,254	)	$	(328,997	)
Interest and other income (expense), net		(1,203	)		1,441			16,714
Income taxes		—			—			(527	)
Consolidated net loss	$	(34,536	)	$	(21,813	)	$	(312,810	)

	Assets (1)
	As of		As of
(in thousands)	March 31,2008		December 31, 2007

Diagnostics	$	85	$	87
Services		—		—
Products		5,130		16,293
Total assets of reportable segments		5,215		16,380
Cash, cash equivalents, interest receivable, license receivable and investment securities		47,560		64,681
Consolidated total assets	$	52,775	$	81,061

(1)	Assets for our reportable segments include fixed assets, goodwill, as well as accounts receivable and inventory.

The carrying amount of goodwill by reportable segment as of March 31, 2008 and December 31, 2007, was as follows:

	Goodwill
(in thousands)	March 31, 2008		December 31, 2007

Diagnostics	$	—	$	—
Services		—		—
Products		3,208		3,208
Total	$	3,208	$	3,208

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context requires otherwise, references in this report to “Keryx,” the “Company,” “we,” “us” and “our” refer to Keryx Biopharmaceuticals, Inc., its predecessor company and our subsidiaries.

The following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed in “Risk Factors.” See also the “Special Cautionary Notice Regarding Forward-Looking Statements” set forth at the beginning of this report.

You should read the following discussion and analysis in conjunction with the unaudited consolidated financial statements, and the related footnotes thereto, appearing elsewhere in this report, and in conjunction with management’s discussion and analysis and the audited consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2007.

OVERVIEW

We are a biopharmaceutical company focused on the acquisition, development and commercialization of medically important, novel pharmaceutical products for the treatment of life-threatening diseases, including renal disease and cancer. We are developing Zerenex™ (ferric citrate), an oral, iron-based compound that has the capacity to bind to phosphate and form non-absorbable complexes. Zerenex is currently in Phase 2 clinical development for the treatment of hyperphosphatemia (elevated phosphate levels) in patients with end-stage renal disease, or ESRD. We are also developing clinical-stage oncology compounds, including KRX-0401 (perifosine), a novel, potentially first-in-class, oral anti-cancer agent that modulates Akt, a protein in the body associated with tumor survival and growth. KRX-0401 also modulates a number of other key signal transduction pathways, including the JNK and MAPK pathways, which are pathways associated with programmed cell death, cell growth, cell differentiation and cell survival. KRX-0401 is currently in Phase 2 clinical development for multiple tumor types. We also have an in-licensing and acquisition program designed to identify and acquire additional drug candidates. To date, we have not received approval for the sale of any of our drug candidates in any market and, therefore, have not generated any product sales from our drug candidates.

The table below summarizes the status of our product pipeline.

Product candidate	Target indication	Development status
*Endocrine/Renal*
Zerenex™ (ferric citrate)	Hyperphosphatemia in patients with end-stage renal disease	Phase 2
*Oncology*
KRX-0401 (perifosine)	Multiple forms of cancer	Phase 2
KRX-0404 (ErPC)	Multiple forms of cancer	Pre-clinical
*Neurology*
KRX-0701 (dexlipotam)	Diabetic neuropathy	Phase 2
KRX-0501	Neurological disorders	Phase 1

Recent Developments

2008 Restructuring

On March 26, 2008, we implemented a strategic restructuring plan to reduce our cash burn rate and re-focus our development efforts (the “2008 Restructuring”). The 2008 Restructuring, which was prompted by the negative outcome of our pivotal SUN-MICRO Phase 3 clinical trial of Sulonex™ (sulodexide) for the treatment of diabetic nephropathy, announced on March 7, 2008, and our subsequent decision to terminate the ongoing SUN-MACRO Phase 4 clinical trial, is intended to conserve our financial resources and enable us to focus our efforts on programs and opportunities that we believe are most likely to provide long-term shareholder value. The 2008 Restructuring includes a workforce reduction of approximately 50%. Following the workforce reduction, we will have approximately 25 full and part-time employees.

As part of the 2008 Restructuring, on March 26, 2008, we notified our President, I. Craig Henderson, M.D., that we were terminating his employment, effective April 15, 2008. Dr. Henderson will remain in his position as a member of our Board of Directors until our next annual meeting. In addition, we reached a mutual agreement with our Chief Accounting Officer, Mark Stier, that Mr. Stier will resign effective June 30, 2008. His responsibilities have been assumed by James F. Oliviero, Vice President, Finance, who was appointed Principal Financial and Accounting Officer on May 6, 2008.

General Corporate

We are a development stage company and have no drug product sales to date. Our major sources of working capital have been proceeds from various private placements of equity securities, option and warrant exercises, public offerings of our common stock, and, beginning in 2007, from the upfront and milestone payments from our Sublicense Agreement with Japan Tobacco Inc. (“JT”) and Torii Pharmaceutical Co., Ltd. (“Torii”) and miscellaneous payments from our other prior licensing activities. We have devoted substantially all of our efforts to the identification, in-licensing and development of drug candidates. We have incurred negative cash flow from operations each year since our inception. We anticipate incurring negative cash flows from operating activities for the foreseeable future. We have spent, and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including our product development efforts, our clinical trials and in-licensing and acquisition activities.

Our license revenues currently consist of license fees arising from our agreement with JT and Torii. We recognize these revenues ratably over the estimated period which we will have certain ongoing responsibilities under the sublicense agreement, with un-amortized amounts recorded as deferred revenue.

Our diagnostic revenue is based on the sale of a diagnostic product for the direct measurement of total, intact urinary albumin. Diagnostic revenue is recognized when persuasive evidence of an arrangement exists, the product has been shipped, title and risk of loss have passed to the customer and collection from the customer is reasonably assured.

Our service revenues consist entirely of clinical trial management and site recruitment services. Revenues from providing these services are recognized as the services are provided. Deferred revenue is recorded when we receive a deposit or prepayment for services to be performed at a later date.

We have not earned any revenues from the commercial sale of any of our drug candidates.

Our cost of diagnostics sold consist specifically of costs associated with the manufacture of the diagnostic products such as payments to third-party vendors, material costs and other support facilities associated with delivering of the diagnostics to our customers. Cost of diagnostics sold are recognized as diagnostic revenue is recognized.

Our cost of services consist of all costs specifically associated with our clinical trial management and site recruitment client programs such as salaries, benefits paid to personnel, payments to third-party vendors and other support facilities associated with delivering services to our clients. Cost of services are recognized as services are performed.

Our research and development expenses consist primarily of salaries and related personnel costs, fees paid to consultants and outside service providers for clinical and laboratory development, facilities-related and other expenses relating to the design, development, testing, and enhancement of our drug candidates and technologies, as well as expenses related to in-licensing of new product candidates. We expense our research and development costs as they are incurred.

Our general and administrative expenses consist primarily of salaries and related expenses for executive, finance and other administrative personnel, recruitment expenses, professional fees and other corporate expenses, including investor relations, general legal activities and facilities-related expenses.

Our results of operations include non-cash compensation expense as a result of the grants of stock options, restricted stock and warrants. Compensation expense for awards of options and restricted stock granted to employees and directors represents the fair value of the award recorded over the respective vesting periods of the individual stock options. The expense is included in the respective categories of expense in the statements of operations. We expect to continue to incur significant non-cash compensation as a result of Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment” (“SFAS No. 123R”), which we adopted on January 1, 2006. For awards of options and warrants to consultants and other third-parties, compensation expense is determined at the “measurement date,” in accordance with the fair value method prescribed by the provisions of Emerging Issues Task Force (“EITF”) Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services” (“EITF 96-18”). The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. We record compensation expense based on the fair value of the award at the reporting date. The awards to consultants and other third-parties are then revalued, or the total compensation is recalculated based on the then current fair value, at each subsequent reporting date. In addition, because some of the options, restricted stock and warrants issued to employees, consultants and other third-parties vest upon the achievement of certain milestones, the total expense is uncertain.

Our ongoing clinical trials will be lengthy and expensive. Even if these trials show that our drug candidates are effective in treating certain indications, there is no guarantee that we will be able to record commercial sales of any of our drug candidates in the near future. In addition, we expect losses to continue as we continue to fund in-licensing and development of new drug candidates. As we continue our development efforts, we may enter into additional third-party collaborative agreements and may incur additional expenses, such as licensing fees and milestone payments. In addition, we may need to establish the commercial infrastructure required to manufacture, market and sell our drug candidates following approval, if any, by the FDA, which would result in us incurring additional expenses. As a result, our quarterly results may fluctuate and a quarter-by-quarter comparison of our operating results may not be a meaningful indication of our future performance.

RESULTS OF OPERATIONS

Three months ended March 31, 2008 and March 31, 2007

License Revenue. License revenue was $199,000 for the three months ended March 31, 2008 as compared to no revenue for the three months ended March 31, 2007. License revenue for the three months ended March 31, 2008 was related to the amortization of a portion of the license fees of $12.0 million and $8.0 million associated with our sublicense agreement with JT and Torii. Such amount is recognized as license revenue on a straight-line basis over the life of the agreement, which is through the expiration of the last-to-expire patent covered by the agreement in 2023, and represents the estimated period over which we will have certain ongoing responsibilities under the sublicense agreement.

Diagnostic Revenue. We recognized no diagnostic revenue for the three months ended March 31, 2008, as compared to diagnostic revenue of $30,000 for the three months ended March 31, 2007. We do not expect our diagnostic revenue to have a material impact on our financial results during 2008.

Service Revenue. We recognized no service revenue for the three months ended March 31, 2008, as compared to service revenue of $12,000 for the three months ended March 31, 2007. We do not expect our service revenue to have a material impact on our financial results during the remainder of 2008.

Cost of Diagnostics Sold . We recognized no cost of diagnostics sold for the three months ended March 31, 2008, as compared to an expense of $22,000 for the three months ended March 31, 2007. We do not expect our cost of diagnostics sold to have a material impact on our financial results during the remainder of 2008.

Cost of Services . We recognized no cost of services for the three months ended March 31, 2008, as compared to an expense of $32,000 for the three months ended March 31, 2007. We do not expect our cost of services to have a material impact on our financial results during the remainder of 2008.

Non-Cash Compensation Expense (Research and Development). Non-cash compensation expense related to stock option and restricted stock grants decreased by $1,975,000 to a credit of $980,000 for the three months ended March 31, 2008, as compared to an expense of $995,000 for the three months ended March 31, 2007. The decrease was primarily attributable to a $1,968,000 decrease in expense related to stock options and restricted stock issued to our President, who was terminated as part of the 2008 Restructuring.

Other Research and Development Expenses . Other research and development expenses increased by $13,382,000 to $30,828,000 for the three months ended March 31, 2008, as compared to $17,446,000 for the three months ended March 31, 2007. The increase in other research and development expenses was due primarily to an $11,037,000 impairment charge related to the write-down of the assets of the Sulonex manufacturing suite to their estimated fair value following the cessation of our development of Sulonex, and a $2,063,000 provision for estimated costs relating to the required restoration of the manufacturing facility to its original condition. For more information regarding these expenses please see “Overview – Recent Developments — 2008 Restructuring” above. Including the impairment charge and provision discussed above, other research and development expenses related to Sulonex were $25,826,000 and $12,533,000 during the three months ended March 31, 2008 and 2007, respectively.

We expect our other research and development costs to decrease substantially during the remainder of 2008 as a result of the termination of the Sulonex clinical development program, as well as the 2008 Restructuring, which is intended to conserve our financial resources.

Non-Cash Compensation Expense (Selling, General and Administrative). Non-cash compensation expense related to stock option and restricted stock grants decreased by $289,000 to $1,717,000 for the three months ended March 31, 2008, as compared to an expense of $2,006,000 for the three months ended March 31, 2007. The decrease was primarily related to expense incurred during the three months ended March 31, 2007 related to stock options and restricted stock outstanding to our former chief financial officer, who resigned in the second quarter of 2007.

Other Selling General and Administrative Expenses . Other selling, general and administrative expenses decreased by $828,000 to $1,967,000 for the three months ended March 31, 2008, as compared to an expense of $2,795,000 for the three months ended March 31, 2007. The decrease was primarily related to an impairment charge, in the three months ended March 31, 2007, of approximately $600,000 related to certain intangibles associated with Accumin’s diagnostic product.

We expect our other selling, general and administrative costs to decrease over the remainder of 2008 as a result of the 2008 Restructuring, which is intended to conserve our financial resources.

Interest and Other Income (Expense), Net . Interest and other income (expense), net, decreased by $2,644,000 to an expense of $1,203,000 for the three months ended March 31, 2008, as compared to income of $1,441,000 for the three months ended March 31, 2007. The decrease was primarily due to the $1,811,000 impairment charge we recorded in the three months ended March 31, 2008, related to our investments in auction rate securities. The decrease also resulted from a lower level of invested funds and market interest rates as compared to the comparable period last year.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations from inception primarily through public offerings of our common stock, various private placement transactions, option and warrant exercises, and, beginning in 2007, from the upfront and milestone payments from our sublicense agreement with JT and Torii and miscellaneous payments from our other prior licensing activities.

As of March 31, 2008, we had $47.6 million in cash, cash equivalents, interest receivable, short-term and long-term securities and license receivable (including $10.2 million in auction rate securities as discussed below), a decrease of $17.1 million from December 31, 2007. Cash used in operating activities for the three months ended March 31, 2008 was $23.6 million, as compared to $15.3 million for the three months ended March 31, 2007. This increase was due primarily to a $2.3 million decrease in accounts payable and accrued expenses in the three months ended March 31, 2008, as compared to a $3.0 million increase in accounts payable and accrued expenses in the comparable period last year, a result of the timing of payments. The $2.3 million decrease in accounts payable and accrued expenses in the three months ended March 31, 2008 was primarily the result of a $2.5 million litigation settlement payment for Zerenex. For the three months ended March 31, 2008, net cash provided by investing activities of $10.0 million was primarily the result of the maturity and sale of short-term securities in our investment portfolio, net of purchases, of approximately $10.2 million, offset by purchases of property, plant and equipment of approximately $0.2 million. For the three months ended March 31, 2008, net cash provided by financing activities of $0.2 million was the result of proceeds from the exercise of stock options.

As of March 31, 2008, $10.2 million of our long-term investment securities were invested in auction rate securities, which represent interests in student loan-backed securities. Auction rate securities are structured to provide liquidity through a Dutch auction process that resets the applicable interest rate at pre-determined calendar intervals, generally every 28 days. This mechanism has historically allowed existing investors either to rollover their holdings, whereby they would continue to own their respective securities, or liquidate their holdings by selling such securities at par. This auction process has historically provided a liquid market for these securities; however, the uncertainties in the credit markets have affected all of our holdings in auction rate securities. Since February 2008, the auctions for our auction rate securities have not had sufficient buyers to cover investors’ sell orders, resulting in unsuccessful auctions. When an auction is unsuccessful, the interest rate is re-set to a level pre-determined by the loan documents and remains in effect until the next auction date, at which time the process repeats. While these investments are currently rated AA or higher, we are uncertain as to when the liquidity issues relating to these investments will improve. Given the complexity of auction rate securities and the lack of readily observable market quotes related to these investments, we obtained the assistance of an independent valuation firm, Pluris Valuation Advisors LLC, to assist us in assessing the fair value of our auction rate securities portfolio. As a result of this valuation process, we recorded an impairment charge of $1.8 million for an other-than-temporary decline in the value of our auction rate securities to estimated fair value of $10.2 million at March 31, 2008. This other-than-temporary impairment charge was included in interest and other income (expense), net. In addition, we reclassified the entire auction rate securities portfolio from short-term to long-term investments due to the uncertainty of when we can sell these securities.

We currently anticipate that our cash, cash equivalents, interest receivable, investment securities and license receivable as of March 31, 2008, exclusive of our holdings in auction rate securities, are sufficient to meet our anticipated working capital needs and fund our business plan for approximately the next 12 to 18 months. We will continue to attempt to sell our auction rate securities until the auctions are successful; however, there is no assurance as to when the market for auction rate securities will stabilize. The fair value of our auction rate securities could change significantly based on market conditions and continued uncertainties in the credit markets. If these uncertainties continue or if these securities experience credit rating downgrades, we may incur additional impairment charges with respect to our auction rate securities portfolio, which could negatively affect our financial condition, cash flow and reported earnings, and the lack of liquidity of our auction rate securities could have a material impact on our ability to fund our operations.

On December 30, 2005, we filed a shelf registration statement on Form S-3 with the SEC that was declared effective by the SEC on January 13, 2006. The registration statement provides for the offering of up to $150 million of our common stock. Subsequent to the registered direct offering that was completed in March 2006, there remains approximately $67 million of our common stock available for sale on this shelf registration statement. We may offer these securities from time to time in response to market conditions or other circumstances if we believe such a plan of financing is in the best interest of Keryx and our stockholders. We believe that the availability to conduct such offerings enhances our ability to raise additional capital to finance our operations.

OFF-BALANCE SHEET ARRANGEMENTS

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

OBLIGATIONS AND COMMITMENTS

As of March 31, 2008, we have known contractual obligations, commitments and contingencies of $3,662,000. Of this amount, $2,079,000 relates to research and development agreements (primarily relating to our Phase 2 KRX-0401 clinical program), all of which is due within the next year. The additional $1,583,000 relates to our operating lease obligations, of which $676,000 is due within the next year, with the remaining balance due as per the schedule below.

	Payment due by period
Contractual obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Research and development agreements	$	2,079,000	$	2,079,000	$	—	$	—	$	—
Operating leases		1,583,000		676,000		907,000		—		—
Total	$	3,662,000	$	2,755,000	$	907,000	$	—	$	—

The table above includes certain commitments that are contingent upon our continuing development of our drug candidates.

We have undertaken to make contingent milestone payments to certain of our licensors of up to approximately $72.8 million over the life of the licenses, of which approximately $60.4 million will be due upon or following regulatory approval of the licensed drugs. In certain cases, such payments will reduce any royalties due on sales of related products. In the event that the milestones are not achieved, we remain obligated to pay one licensor $75,000 annually until the license expires. We have also committed to pay to the former stockholders of ACCESS Oncology certain contingent equity rights (up to 3,372,422 shares of our common stock) if its drug candidates meet certain development milestones. A substantial portion of the contingent shares would be payable to related parties. We have also entered into a royalty arrangement under which our wholly-owned subsidiary may be required to pay up to a maximum of $16.1 million to AusAm on revenue from a next generation product following FDA marketing approval, as part of our acquisition of Accumin. The uncertainty relating to the timing of the commitments described in this paragraph prevents us from including them in the table above.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities and related disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the applicable period. Actual results may differ from these estimates under different assumptions or conditions.

We define critical accounting policies as those that are reflective of significant judgments and uncertainties and which may potentially result in materially different results under different assumptions and conditions. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. These estimates are subject to an inherent degree of uncertainty. Our critical accounting policies include the following:

Stock Compensation . We have granted stock options and restricted stock to employees, directors and consultants, as well as warrants to other third parties. In applying SFAS No. 123R to employee and director grants, the value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes model takes into account volatility in the price of our stock, the risk-free interest rate, the estimated life of the option, the closing market price of our stock and the exercise price. We base our estimates of our stock price volatility on the historical volatility of our common stock and our assessment of future volatility; however, these estimates are neither predictive nor indicative of the future performance of our stock. For purposes of the calculation, we assumed that no dividends would be paid during the life of the options and warrants. The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management judgment. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those equity awards expected to vest. As a result, if other assumptions had been used, our recorded stock-based compensation expense could have been materially different from that reported. In addition, because some of the options and warrants issued to employees, consultants and other third-parties vest upon the achievement of certain milestones, the total expense is uncertain.

In accordance with EITF 96-18 “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” total compensation expense for options and restricted stock issued to consultants is determined at the “measurement date.” The expense is recognized over the vesting period for the options and restricted stock. Until the measurement date is reached, the total amount of compensation expense remains uncertain. We record stock-based compensation expense based on the fair value of the equity awards at the reporting date. These equity awards are then revalued, or the total compensation is recalculated based on the then current fair value, at each subsequent reporting date. This results in a change to the amount previously recorded in respect of the equity award grant, and additional expense or a reversal of expense may be recorded in subsequent periods based on changes in the assumptions used to calculate fair value, such as changes in market price, until the measurement date is reached and the compensation expense is finalized.

Accruals for Clinical Research Organization and Clinical Site Costs. We make estimates of costs incurred to date in relation to external clinical research organizations, or CROs, and clinical site costs. We analyze the progress of clinical trials, including levels of patient enrollment, invoices received and contracted costs when evaluating the adequacy of the amount expensed and the related prepaid asset and accrued liability. Significant judgments and estimates must be made and used in determining the accrued balance and expense in any accounting period. In addition, administrative costs related to external CROs are recognized on a straight-line basis over the estimated contractual period. With respect to clinical site costs, the financial terms of these agreements are subject to negotiation and vary from contract to contract. Payments under these contracts may be uneven, and depend on factors such as the achievement of certain events, the successful recruitment of patients, the completion of portions of the clinical trial or similar conditions. The objective of our policy is to match the recording of expenses in our financial statements to the actual services received and efforts expended. As such, expense accruals related to clinical site costs are recognized based on our estimate of the degree of completion of the event or events specified in the specific clinical study or trial contract.

Revenue Recognition. We recognize license revenue consistent with the provisions of Staff Accounting Bulletin (“SAB”) No. 104 and EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” We analyze each element of our licensing agreement to determine the appropriate revenue recognition. We recognize revenue on upfront payments over the period of significant involvement under the related agreements unless the fee is in exchange for products delivered or services rendered that represent the culmination of a separate earnings process and no further performance obligation exists under the contract. We recognize milestone payments upon the achievement of specified milestones if (1) the milestone is substantive in nature, and the achievement of the milestone was not reasonably assured at the inception of the agreement and (2) the fees are nonrefundable. Any milestone payments received prior to satisfying these revenue recognition criteria are recognized as deferred revenue. Sales milestones and royalties that are deferred will be recognized when earned under the agreements.

We recognize diagnostic revenue when persuasive evidence of an arrangement exists, the product has been shipped, title and risk of loss have passed to the customer and collection from the customer is reasonably assured.

We recognize service revenues as the services are provided. Deferred revenue is recorded when we receive a deposit or prepayment for services to be performed at a later date.

Accounting Related to the Valuation of Intangible Assets. In accounting for acquisitions, we allocate the purchase price to the fair value of the acquired tangible and intangible assets. This allocation requires us to make several significant judgments and estimates. For example, we estimated the value of the acquired intangible assets of Accumin utilizing the income approach, which requires us to make assumptions and estimates about, among other things:

·	revenue that is likely to result from the asset, including estimated selling price, estimated market share and year-over-year growth rates;

·	operating margin; and

·	sales and marketing and general and administrative expenses using historical and industry or other sources of market data;

The valuations are based on information that is available as of the acquisition date and the expectations and assumptions that have been deemed reasonable by our management. No assurance can be given, however, that the underlying assumptions or events associated with such assets will occur as projected. For these reasons, among others, the actual results may vary from the projected results.

As of March 31, 2008, there was approximately $3.2 million of goodwill on our consolidated balance sheet. SFAS No. 142, “Goodwill and Other Intangible Assets,” or SFAS No. 142, addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. SFAS No. 142 requires goodwill be tested using a two-step process. The first step compares the fair value of the reporting unit with the unit's carrying value, including goodwill. When the carrying value of the reporting unit is greater than fair value, the unit’s goodwill may be impaired, and the second step must be completed to measure the amount of the goodwill impairment charge, if any. In the second step, the implied fair value of the reporting unit’s goodwill is compared with the carrying amount of the unit’s goodwill. If the carrying amount is greater than the implied fair value, the carrying value of the goodwill must be written down to its implied fair value.

We are required to perform impairment tests under SFAS No. 142 annually and whenever events or changes in circumstances suggest that the carrying value of an asset may not be recoverable. For all of our acquisitions, various analyses, assumptions and estimates were made at the time of each acquisition specifically regarding cash flows that were used to determine the valuation of goodwill and intangibles. When we perform impairment tests in future years, the possibility exists that changes in forecasts and estimates from those used at the acquisition date could result in impairment charges.

Impairment of Long-Lived Assets. In accordance with the guidance in SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” or SFAS No. 144, we recognize an impairment loss when circumstances indicate that the carrying value of long-lived tangible and intangible assets with finite lives may not be recoverable. Management’s policy in determining whether an impairment indicator exists, a triggering event, comprises measurable operating performance criteria as well as qualitative measures. If an analysis is necessitated by the occurrence of a triggering event, we make certain assumptions in determining the impairment amount. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by the asset or used in its disposal. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized. During the first quarter of 2007, management reviewed both its original and projected revenue estimates associated with the Accumin diagnostic tool. As a result of this analysis, we concluded that the asset was impaired and recorded an impairment charge of approximately $600,000 to write-down identifiable intangible long-lived assets associated with Accumin. The charge was recorded in other selling, general and administrative expenses within the Diagnostics segment. Prior to the impairment charge taken in the first quarter of 2007, we amortized our identifiable intangible assets associated with Accumin over their estimated economic lives, which was 12 years, the life of the patents, using the straight-line method.

We had entered into a relationship with SPL, a U.S.-based contract manufacturer, for Sulonex to build a larger scale manufacturing suite within their current facility, which they would operate on our behalf. We believed this suite would be suitable to manufacture and produce initial commercialization quantities of Sulonex (for approximately one to three years from launch). As of March 31, 2008, we have spent approximately $11.3 million in capital expenditures building the suite. In accordance with the guidance in SFAS No. 144, with the cessation of our development of Sulonex, we recognized an impairment charge of $11.0 million, which is included in other research and development expenses in the three months ended March 31, 2008, to write the assets down to their estimated fair value of $300,000, which are being classified as assets held for sale.

Impairment of Investment Securities. As of March 31, 2008, $10.2 million of our long-term investment securities were invested in auction rate securities, which represent interests in student loan-backed securities. The uncertainties in the credit markets have affected all of our holdings in auction rate securities. Since February 2008, the auctions for our auction rate securities have not had sufficient buyers to cover investors’ sell orders, resulting in unsuccessful auctions. When an auction is unsuccessful, the interest rate is re-set to a level pre-determined by the loan documents and remains in effect until the next auction date, at which time the process repeats. While these investments are currently rated AA or higher, we are uncertain as to when the liquidity issues relating to these investments will improve. Given the complexity of auction rate securities and the lack of readily observable market quotes related to these investments, we obtained the assistance of an independent valuation firm, Pluris Valuation Advisors LLC, to assist us in assessing the fair value of our auction rate securities portfolio. As a result of this valuation process, we recorded an impairment charge of $1.8 million for an other-than-temporary decline in the value of our auction rate securities to estimated fair value of $10.2 million at March 31, 2008. This other-than-temporary impairment charge was included in interest and other income (expense), net. In addition, we reclassified the entire auction rate securities portfolio from short-term to long-term investments due to the uncertainty of when we can sell these securities.

The fair value of our auction rate securities could change significantly based on market conditions and continued uncertainties in the credit markets. If these uncertainties continue or if these securities experience credit rating downgrades, we may incur additional impairment charges with respect to our auction rate securities portfolio. We will continue to monitor the fair value of its auction rate securities and relevant market conditions and will recognize additional impairment charges if future circumstances warrant such charges.

We review impairments in accordance with the guidance in EITF Issue No. 03-1 and FSP SFAS 115-1 and 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” to determine the classification of the impairment as temporary or other-than-temporary. Losses are recognized in our statement of operations when a decline in fair value is determined to be other-than-temporary. We review our investments on an ongoing basis for indications of possible impairment. Once identified, the determination of whether the impairment is temporary or other-than-temporary requires significant judgment. We believe that the impairment charge related to our auction rate securities investments are other-than-temporary. The primary factors we consider in classifying an impairment include the extent and time the fair value of each investment has been below cost and our ability to hold such investment to maturity.

Accounting For Income Taxes . In preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves management estimation of our actual current tax exposure and assessment of temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the statement of operations. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We have fully offset our U.S. deferred tax assets with a valuation allowance. Our lack of earnings history and the uncertainty surrounding our ability to generate taxable income prior to the reversal or expiration of such deferred tax assets were the primary factors considered by management in establishing the valuation allowance. In prior periods, our wholly-owned Israeli subsidiaries had generated taxable income in respect of services provided within the group, and therefore we believed in the past that our deferred tax assets relating to the Israeli subsidiaries would be realized. With the cessation of operating activities in Israel during 2003 and the resulting absence of taxable income from the Israeli subsidiaries, the deferred tax asset was written off in 2003.

ITEM 3. QUANTI TATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activities is to preserve principal while maximizing our income from investments and minimizing our market risk. We invest in government and investment-grade corporate debt and auction rate securities in accordance with our investment policy. Some of the securities in which we invest have market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate later rises, the principal amount of our investment will probably decline. As of March 31, 2008, our portfolio of financial instruments consists of cash equivalents and short-term and long-term interest bearing securities, including money market funds, government debt and auction rate securities. The average duration of all of our held-to-maturity investments held as of March 31, 2008, was less than 12 months. Due to the short-term nature of our money market funds and held-to-maturity investments, we believe we have no material exposure to interest rate risk arising from our money market funds and held-to-maturity investments.

As of March 31, 2008, $10.2 million of our long-term investment securities were invested in auction rate securities, which represent interests in student loan-backed securities. The uncertainties in the credit markets have affected all of our holdings in auction rate securities. Since February 2008, the auctions for our auction rate securities have not had sufficient buyers to cover investors’ sell orders, resulting in unsuccessful auctions. When an auction is unsuccessful, the interest rate is re-set to a level pre-determined by the loan documents and remains in effect until the next auction date, at which time the process repeats. While these investments are currently rated AA or higher, we are uncertain as to when the liquidity issues relating to these investments will improve. We will continue to attempt to sell our auction rate securities until the auctions are successful. If uncertainties in the credit and capital markets continue, these markets deteriorate further or we experience any ratings downgrades on the auction rate securities in our portfolio, we may incur additional impairment charges with respect to our auction rate securities portfolio, which could negatively affect our financial condition, cash flow and reported earnings. We will continue to monitor the fair value of our auction rate securities and relevant market conditions and will recognize additional impairment charges if future circumstances warrant such charges. Assuming a 10% adverse change in fair value of these securities overall, the fair value would decline approximately $1.0 million. However, each of our auction rate security investments have different features and are subject to different risks and therefore, any market decline would impact these securities to a different degree. In addition, the lack of liquidity of our auction rate securities could have a material impact on our ability to fund our operations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of March 31, 2008, management carried out, under the supervision and with the participation of our Chief Executive Officer and Principal Financial and Accounting Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms. Based upon that evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer concluded that, as of March 31, 2008, our disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We, and our subsidiaries, are not a party to, and our property is not the subject of, any material pending legal proceedings, other than as noted below.

In July 2003, Keryx (Israel) Ltd., one of our Israeli subsidiaries, vacated its Jerusalem facility, after giving advance notice to RMPA Properties Ltd., the landlord. On May 1, 2005, the landlord filed suit in the Circuit Court of Jerusalem in Jerusalem, Israel, claiming that Keryx (Israel) Ltd., among other parties, was liable as a result of the alleged breach of the lease agreement. In addition to Keryx (Israel) Ltd., the landlord brought suit against Keryx Biomedical Technologies Ltd., another of our Israeli subsidiaries, Keryx Biopharmaceuticals, Inc., Michael S. Weiss, our Chairman and Chief Executive Officer, and Robert Trachtenberg, a former employee of Keryx. The amount demanded by the landlord totals 4,345,313 New Israeli Shekels, or approximately $1,257,000, and includes rent for the entire remaining term of the lease, as well as property taxes and other costs allegedly incurred by the landlord. In August 2003, the landlord claimed a bank deposit, in the amount of $222,000, which was previously provided as security in connection with the lease agreement. We intend to vigorously defend the suit. In July 2005, Keryx (Israel) Ltd. and Keryx Biomedical Technologies Ltd. filed an answer to the landlord's complaint. In October 2005, Keryx Biopharmaceuticals, Inc. filed an answer to the landlord's complaint. Generally, each answer challenges the merits of the landlord's cause of action as to each defendant. All defendants, except Keryx (Israel) Ltd., have filed a motion to dismiss the complaint. The plaintiff has filed a response to each answer. At this time, the Circuit Court of Jerusalem has not issued a decision with respect to the motion to dismiss. A hearing on a motion by Keryx Biopharmaceuticals, Inc. and Michael S. Weiss to vacate service of process outside of Israel was held in June 2006. On October 15, 2006, the Court held that the service of the claim against Mr. Weiss is vacated. Consequently, the Circuit Court of Jerusalem dismissed the suit against Mr. Weiss. However, the service against us was sustained. We appealed this holding. The appeal was denied on June 18, 2007, and the Company filed a petition for certiorari to the Supreme Court of Israel. The Company’s motion for certiorari was denied as well. The next preliminary hearing is scheduled for June 26, 2008. We filed our testimonial affidavit along with an expert opinion contesting the interest and the accumulated debt claimed by plaintiff. We have not yet recorded a charge to reflect any potential liability associated with this lawsuit, as it is too early to accurately estimate the amount of the charge, if any.

We prevailed in an arbitration proceeding with Alfa Wasserman concerning certain terms of the License Agreement related to the provision of data to Alfa Wasserman and consultation regarding management of the licensed patents. An arbitration proceeding was held in October 2007 and the arbitrator issued his decision on March 25, 2008, rejecting Alfa Wasserman’s claims that we were in breach of the License Agreement. Under the terms of the License Agreement, we may be entitled to recoup a portion of our legal fees and expenses associated with the arbitration.

We have notified Alfa Wasserman of our intention to terminate the License Agreement as of June 1, 2008 and that we will transfer to Alfa Wasserman all regulatory applications as provided in the License Agreement and demanding payment by Alfa Wasserman of 25% of our development costs associated with sulodexide, as provided in the License Agreement. Alfa Wasserman has itself served a notice of termination of the License Agreement on the grounds that we are in material breach of the agreement for failing to diligently develop sulodexide by terminating the Phase 4 clinical trial and seeking to terminate the License Agreement, thereby seeking to avoid reimbursing us our development costs. We intend to submit our claim for reimbursement of legal fees and development costs and Alfa Wasserman’s claim of material breach to the sole arbitrator for resolution.

In November 2007, we initiated an action in the US District Court for the Southern District of New York against Panion to enjoin Panion from improperly terminating the November 2005 License Agreement for an alleged breach of contract by us related to certain manufacturing provisions of the agreement, to enjoin Panion from interfering with our contractual relationships with certain third-parties, as well as to enforce our right with respect to the prosecution of certain patents. On November 27, 2007, the Court granted us a motion for a preliminary injunction. Panion asserted counterclaims for breach of contract relating to certain manufacturing provisions of the license agreement. On March 17, 2008, the parties agreed to settle their dispute and as a result have entered into an Amended and Restated License Agreement, which resulted in an expansion of the scope of the original license grant and granted us greater control over patent prosecution and maintenance. In consideration of these amendments and the settlement of the litigation, we paid Panion $2.5 million in March 2008. Following execution of the Amended and Restated License Agreement, the parties entered a voluntary dismissal of the action, including Panion’s asserted counterclaims.

ITEM 1A. RISK FACTORS

You should carefully consider the following risks and uncertainties. If any of the following occurs, our business, financial condition or operating results could be materially harmed. These factors could cause the trading price of our common stock to decline, and you could lose all or part of your investment.

Risks Related to Our Business

We have a limited operating history and have incurred substantial operating losses since our inception. We expect to continue to incur losses in the future and may never become profitable.

We have a limited operating history. You should consider our prospects in light of the risks and difficulties frequently encountered by early stage companies. In addition, we have incurred operating losses since our inception and expect to continue to incur operating losses for the foreseeable future and may never become profitable. As of March 31, 2008, we had an accumulated deficit of approximately $312.8 million. As we continue our research and development efforts, we will incur increasing losses. We may continue to incur substantial operating losses even if we begin to generate revenues from our drug candidates.

We have not yet commercialized any of our drug candidates and cannot be sure we will ever be able to do so. Even if we commercialize one or more of our drug candidates, we may not become profitable. Our ability to achieve profitability depends on a number of factors, including our ability to complete our development efforts, obtain regulatory approval for our drug candidates, successfully complete any post-approval regulatory obligations and successfully commercialize our drug candidates.

Risks Associated with Our Product Development Efforts

If we are unable to successfully complete our clinical trial programs, or if such clinical trials take longer to complete than we project, our ability to execute our current business strategy will be adversely affected.

Whether or not and how quickly we complete clinical trials is dependent in part upon the rate at which we are able to engage clinical trial sites and, thereafter, the rate of enrollment of patients, and the rate we collect, clean, lock and analyze the clinical trial database. Patient enrollment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the study, the existence of competitive clinical trials, and whether existing or new drugs are approved for the indication we are studying. We are aware that other companies are planning clinical trials that will seek to enroll patients with the same diseases as we are studying. Certain clinical trials are designed to continue until a pre-determined number of events have occurred to the patients enrolled. Trials such as this are subject to delays stemming from patient withdrawal and from lower than expected event rates and may also incur increased costs if enrollment is increased in order to achieve the desired number of events. If we experience delays in identifying and contracting with sites and/or in patient enrollment in our clinical trial programs, we may incur additional costs and delays in our development programs, and may not be able to complete our clinical trials on a cost-effective or timely basis. In addition, conducting multi-national studies adds another level of complexity and risk as we are subject to events affecting countries outside the United States. Moreover, negative or inconclusive results from the clinical trials we conduct or adverse medical events could cause us to have to repeat or terminate the clinical trials. Accordingly, we may not be able to complete the clinical trials within an acceptable time frame, if at all.

Additionally, we have never filed a new drug application, or NDA, or similar application for approval in the United States or in any country, which may result in a delay in, or the rejection of, our filing of an NDA or similar application. During the drug development process, regulatory agencies will typically ask questions of drug sponsors. While we endeavor to answer all such questions in a timely fashion, or in the NDA filing, some questions may not be answered by the time we file our NDA. Unless the FDA waives the requirement to answer any such unanswered questions, submission of an NDA may be delayed or rejected.

Pre-clinical testing and clinical development are long, expensive and uncertain processes. If our drug candidates do not receive the necessary regulatory approvals, we will be unable to commercialize our drug candidates.

We have not received, and may never receive, regulatory approval for the commercial sale of any of our drug candidates. We will need to conduct significant additional research and human testing before we can apply for product approval with the FDA or with regulatory authorities of other countries. Pre-clinical testing and clinical development are long, expensive and uncertain processes. Satisfaction of regulatory requirements typically depends on the nature, complexity and novelty of the product and requires the expenditure of substantial resources. Data obtained from pre-clinical and clinical tests can be interpreted in different ways, which could delay, limit or prevent regulatory approval. It may take us many years to complete the testing of our drug candidates and failure can occur at any stage of this process. Negative or inconclusive results or medical events during a clinical trial could cause us to delay or terminate our development efforts.

Furthermore, interim results of preclinical or clinical studies do not necessarily predict their final results, and acceptable results in early studies might not be obtained in later studies. Safety signals detected during clinical studies and pre-clinical animal studies, such as the gastrointestinal bleeding that has been seen in some high-dose, ferric citrate canine studies, may require us to do additional studies, which could delay the development of the drug or lead to a decision to discontinue development of the drug. Drug candidates in the later stages of clinical development may fail to show the desired safety and efficacy traits despite positive results in initial clinical testing. Results from earlier studies may not be indicative of results from future clinical trials and the risk remains that a pivotal program may generate efficacy data that will be insufficient for the approval of the drug, or may raise safety concerns that may prevent approval of the drug. Interpretation of the prior safety and efficacy data of our drug candidates may be flawed and there can be no assurance that safety and/or efficacy concerns from the prior data were overlooked or misinterpreted, which in subsequent, larger studies appear and prevents approval of such drug candidates.

Clinical trials have a high risk of failure. A number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in advanced clinical trials, even after achieving what appeared to be promising results in earlier trials. If we experience delays in the testing or approval process or if we need to perform more or larger clinical trials than originally planned, our financial results and the commercial prospects for our drug candidates may be materially impaired. In addition, we have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approval in the United States and abroad and, accordingly, may encounter unforeseen problems and delays in the approval process. Though we may engage a clinical research organization with experience in conducting regulatory trials, errors in the conduct, monitoring and/or auditing could invalidate the results from a regulatory perspective.

Because all of our proprietary technologies are licensed to us by third parties, termination of these license agreements would prevent us from developing our drug candidates.

We do not own any of our drug candidates. We have licensed the rights, patent or otherwise, to our drugs candidates from third parties. These license agreements require us to meet development milestones and impose development and commercialization due diligence requirements on us. In addition, under these agreements, we must pay royalties on sales of products resulting from licensed technologies and pay the patent filing, prosecution and maintenance costs related to the licenses. If we do not meet our obligations in a timely manner or if we otherwise breach the terms of our license agreements, our licensors could terminate the agreements, and we would lose the rights to our drug candidates. From time to time, in the ordinary course of business, we may have disagreements with our licensors or collaborators regarding the terms of our agreements or ownership of proprietary rights, which could lead to delays in the research, development and commercialization of our drug candidates or could require or result in litigation or arbitration, which would be time-consuming and expensive.

We rely on third parties to manufacture and analytically test our products. If these third parties do not successfully manufacture and test our products, our business will be harmed.

We have limited experience in manufacturing products for clinical or commercial purposes. We intend to continue, in whole or in part, to use third parties to manufacture and analytically test our products for use in clinical trials and for future sales. We may not be able to enter into future contract agreements with these third-parties on terms acceptable to us, if at all.

Contract manufacturers often encounter difficulties in scaling up production, including problems involving raw material supplies, production yields, quality control and assurance, shortage of qualified personnel, compliance with FDA and foreign regulations, production costs and development of advanced manufacturing techniques and process controls. These risks become more acute as we scale up for commerical quantities, where a reliable source of raw material supplies becomes critical to commerical success. For example, given the large quantity of materials required for ferric citrate production, as we approach commercialization for Zerenex we will need to ensure an adequate supple of starting materials that meet quality, quantity and cost standards. Failure to achieve this level of supple can jeopardize the successful commercialization of the product.

Our third-party manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required by us to successfully produce and market our drug candidates. In addition, our contract manufacturers will be subject to ongoing periodic and unannounced inspections by the FDA and corresponding foreign governmental agencies to ensure strict compliance with current Good Manufacturing Practices, as well as other governmental regulations and corresponding foreign standards. The same issues apply to contract analytical services which we use for testing of our products. We will not have control over, other than by contract and periodic oversight, third-party manufacturers' compliance with these regulations and standards. We are currently developing analytical tools for ferric citrate active pharmaceutical ingredient testing. Failure to develop effective analytical tools could result in regulatory or technical delay or could jeopardize our ability to obtain FDA approval. Switching or engaging multiple third-party contractors to produce our products may be difficult because the number of potential manufacturers may be limited and the process by which multiple manufacturers make the drug substance must be identical at each manufacturing facility. It may be difficult for us to find and engage replacement or multiple manufacturers quickly and on terms acceptable to us, if at all. Moreover, if we need to change manufacturers, the FDA and corresponding foreign regulatory agencies must approve these manufacturers in advance, which will involve testing and additional inspections to ensure compliance with FDA and foreign regulations and standards.

If we do not establish or maintain manufacturing, drug development and marketing arrangements with third parties, we may be unable to commercialize our products.

We do not possess all of the capabilities to fully commercialize our products on our own. From time to time, we may need to contract with third parties to:

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manufacture our product candidates;

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assist us in developing, testing and obtaining regulatory approval for and commercializing some of our compounds and technologies; and

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market and distribute our drug products.

We can provide no assurance that we will be able to successfully enter into agreements with such third parties on terms that are acceptable to us, if at all. If we are unable to successfully contract with third parties for these services when needed, or if existing arrangements for these services are terminated, whether or not through our actions, or if such third parties do not fully perform under these arrangements, we may have to delay, scale back or end one or more of our drug development programs or seek to develop or commercialize our products independently, which could result in delays. Furthermore, such failure could result in the termination of license rights to one or more of our products. If these manufacturing, development or marketing agreements take the form of a partnership or strategic alliance, such arrangements may provide our collaborators with significant discretion in determining the efforts and resources that they will apply to the development and commercialization of our products. Accordingly, to the extent that we rely on third parties to research, develop or commercialize our products, we are unable to control whether such products will be scientifically or commercially successful. Additionally, if these third parties fail to perform their obligations under our agreements with them or fail to perform their work in a satisfactory manner, in spite of our efforts to monitor and ensure the quality of such work, we may face delays in achieving the regulatory milestones required for commercialization of one or more drug candidates.

Our reliance on third parties, such as clinical research organizations, or CROs, may result in delays in completing, or a failure to complete, clinical trials if they fail to perform under our agreements with them.

In the course of product development, we engage CROs to conduct and manage clinical studies and to assist us in guiding our products through the FDA review and approval process. If the CROs fail to perform their obligations under our agreements with them or fail to perform clinical trials in a satisfactory manner, we may face delays in completing our clinical trials, as well as commercialization of one or more drug candidates. Furthermore, any loss or delay in obtaining contracts with such entities may also delay the completion of our clinical trials and the market approval of drug candidates.

Other Risks Related to Our Business

If we are unable to develop adequate sales, marketing or distribution capabilities or enter into agreements with third parties to perform some of these functions, we will not be able to commercialize our products effectively.

In the event that one or more of our drug candidates are approved by the FDA, we currently plan to conduct our own sales and marketing effort to support the drugs. We currently have limited experience in sales, marketing or distribution. To directly market and distribute any products, we must build a sales and marketing organization with appropriate technical expertise and distribution capabilities. We may attempt to build such a sales and marketing organization on our own or with the assistance of a contract sales organization. For some market opportunities, we may want or need to enter into co-promotion or other licensing arrangements with larger pharmaceutical or biotechnology firms in order to increase the commercial success of our products. We may not be able to establish sales, marketing and distribution capabilities of our own or enter into such arrangements with third parties in a timely manner or on acceptable terms. To the extent that we enter into co-promotion or other licensing arrangements, our product revenues are likely to be lower than if we directly marketed and sold our products, and some or all of the revenues we receive will depend upon the efforts of third parties, and these efforts may not be successful. Additionally, building marketing and distribution capabilities may be more expensive than we anticipate, requiring us to divert capital from other intended purposes or preventing us from building our marketing and distribution capabilities to the desired levels.

Notwithstanding our current plans to commercialize our drug candidates, from time to time we may consider offers or hold discussions with companies for partnerships or the acquisition of our company or any of our products. Any accepted offer may preclude us from the execution of our current business plan.

Even if we obtain FDA approval to market our drug products, if they fail to achieve market acceptance, we will never record meaningful revenues.

Even if our products are approved for sale, they may not be commercially successful in the marketplace. Market acceptance of our drug products will depend on a number of factors, including:

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perceptions by members of the health care community, including physicians, of the safety and efficacy of our product candidates;

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the rates of adoption of our products by medical practitioners and the target populations for our products;

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the potential advantages that our products offer over existing treatment methods;

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the cost-effectiveness of our products relative to competing products;

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the availability of government or third-party payor reimbursement for our products;

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the side effects or unfavorable publicity concerning our products or similar products; and

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the effectiveness of our sales, marketing and distribution efforts.

Because we expect sales of our products, if approved, to generate substantially all of our revenues in the long-term, the failure of our drugs to find market acceptance would harm our business and could require us to seek additional financing or other sources of revenue.

If our competitors develop and market products that are less expensive, more effective or safer than our drug products, our commercial opportunities may be reduced or eliminated.

The pharmaceutical industry is highly competitive. Our competitors include pharmaceutical companies and biotechnology companies, as well as universities and public and private research institutions. In addition, companies that are active in different but related fields represent substantial competition for us. Many of our competitors have significantly greater capital resources, larger research and development staffs and facilities and greater experience in drug development, regulation, manufacturing and marketing than we do. These organizations also compete with us to recruit qualified personnel, attract partners for joint ventures or other collaborations, and license technologies that are competitive with ours. As a result, our competitors may be able to more easily develop technologies and products that could render our drug products obsolete or noncompetitive. To compete successfully in this industry we must identify novel and unique drugs or methods of treatment and then complete the development of those drugs as treatments in advance of our competitors.

The drugs that we are attempting to develop will have to compete with existing therapies. For example, Zerenex, if approved in the United States, would compete with other FDA approved phosphate binders such as Renagal ® (sevelamer hydrochloride) and Renvela ® (sevelamer carbonate), both marketed by Genzyme Corporation. PhosLo® (calcium acetate), marketed by Fresenius Medical Care, and Fosrenol® (lanthanum carbonate), marketed by Shire Pharmaceuticals Group plc, as well as over-the-counter calcium carbonate products such as TUMS® and metal-based options such as aluminum, amd magnesium. KRS-0401 (perifosine), if approved in the United States would compete with other anti-cancer agents, such as mTOR inhibitors. Wyeth's mTOR inhibitor, temsirolimus, has been approved to treat patients with advanced kidney disease. Biotechnology companies such as Amgen Inc., Biogen-Idec, Inc., ImClone Systems, Inc., Millennium Pharmaceuticals, Inc., Onyx Pharmaceuticals Inc., OSI Pharmaceuticals, Inc. and Vertex Pharmaceuticals, Inc. are developing and, in some cases, marketing drugs to treat various diseases, including cancer, by inhibiting cell-signaling pathways. In addition, we are aware of a number of small and large companies developing competitive products that target the Akt pathway.

Our commercial opportunities may be reduced or eliminated if our competitors develop and market products that are less expensive, more effective or safer than our drug products. Other companies have drug candidates in various stages of pre-clinical or clinical development to treat diseases for which we are also seeking to discover and develop drug products. Some of these potential competing drugs are further advanced in development than our drug candidates and may be commercialized earlier. Even if we are successful in developing effective drugs, our products may not compete successfully with products produced by our competitors.

If we lose our key personnel or are unable to attract and retain additional personnel, our operations could be disrupted and our business could be harmed.

As of May 5, 2008, we had 28 full and part-time employees. To successfully develop our drug candidates, we must be able to attract and retain highly skilled personnel. In addition, if we lose the services of our current personnel, in particular, Michael S. Weiss, our Chairman and Chief Executive Officer, our ability to continue to execute on our business plan could be materially impaired. Although we have an employment agreement with Mr. Weiss, this agreement does not prevent him from terminating his employment with us.

Any acquisitions we make may require a significant amount of our available cash and may not be scientifically or commercially successful.

As part of our business strategy, we may effect acquisitions to obtain additional businesses, products, technologies, capabilities and personnel. If we make one or more significant acquisitions in which the consideration includes cash, we may be required to use a substantial portion of our available cash.

Acquisitions involve a number of operational risks, including:

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difficulty and expense of assimilating the operations, technology and personnel of the acquired business;

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our inability to retain the management, key personnel and other employees of the acquired business;

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our inability to maintain the acquired company's relationship with key third parties, such as alliance partners;

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exposure to legal claims for activities of the acquired business prior to the acquisition;

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the diversion of our management's attention from our core business; and

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the potential impairment of goodwill and write-off of in-process research and development costs, adversely affecting our reported results of operations.

The status of reimbursement from third-party payors for newly approved health care drugs is uncertain and failure to obtain adequate reimbursement could limit our ability to generate revenue.

Our ability to commercialize pharmaceutical products may depend, in part, on the extent to which reimbursement for the products will be available from:

● government and health administration authorities;

● private health insurers;

● managed care programs; and

● other third-party payors.

Significant uncertainty exists as to the reimbursement status of newly approved health care products. Third-party payors, including Medicare, are challenging the prices charged for medical products and services. Government and other third-party payors increasingly are attempting to contain health care costs by limiting both coverage and the level of reimbursement for new drugs and by refusing, in some cases, to provide coverage for uses of approved products for disease indications for which the FDA has not granted labeling approval. Third-party insurance coverage may not be available to patients for our products. If government and other third-party payors do not provide adequate coverage and reimbursement levels for our products, their market acceptance may be reduced.

Health care reform measures could adversely affect our business.

The business and financial condition of pharmaceutical and biotechnology companies are affected by the efforts of governmental and third-party payors to contain or reduce the costs of health care. In the United States and in foreign jurisdictions there have been, and we expect that there will continue to be, a number of legislative and regulatory proposals aimed at changing the health care system, such as proposals relating to the reimportation of drugs into the U.S. from other countries (where they are then sold at a lower price) and government control of prescription drug pricing. The pendency or approval of such proposals could result in a decrease in our stock price or limit our ability to raise capital or to obtain strategic partnerships or licenses.

We face product liability risks and may not be able to obtain adequate insurance.

The use of our drug candidates in clinical trials, the future sale of any approved drug candidates and new technologies, and the sale of Accumin, exposes us to liability claims. Although we are not aware of any historical or anticipated product liability claims against us, if we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to cease clinical trials of our drug candidates or limit commercialization of any approved products.

We believe that we have obtained sufficient product liability insurance coverage for our clinical trials and the sale of Accumin. We intend to expand our insurance coverage to include the commercial sale of any approved products if marketing approval is obtained; however, insurance coverage is becoming increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost. We also may not be able to obtain additional insurance coverage that will be adequate to cover product liability risks that may arise. Regardless of merit or eventual outcome, product liability claims may result in:

● decreased demand for a product;

● injury to our reputation;

● our inability to continue to develop a drug candidate;

● withdrawal of clinical trial volunteers; and

● loss of revenues.

Consequently, a product liability claim or product recall may result in losses that could be material.

In connection with providing our clinical trial management and site recruitment services, we may be exposed to liability that could have a material adverse effect on our financial condition and results of operations.

The Online Collaborative Oncology Group, Inc., or OCOG, a subsidiary we acquired through our acquisition of ACCESS Oncology, provides clinical trial management and site recruitment services to us as well as other biotechnology and pharmaceutical companies. In conducting the activities of OCOG, any failure on our part to comply with applicable governmental regulations or contractual obligations could expose us to liability to our clients and could have a material adverse effect on us. We also could be held liable for errors or omissions in connection with the services we perform. In addition, the wrongful or erroneous delivery of health care information or services may expose us to liability. If we were required to pay damages or bear the costs of defending any such claims, the losses could be material.

Our corporate compliance efforts cannot guarantee that we are in compliance with all potentially applicable regulations.

The development, manufacturing, pricing, sales, and reimbursement of our products, together with our general operations, are subject to extensive regulation by federal, state and other authorities within the United States and numerous entities outside of the United States. We are a relatively small company with 28 full and part-time employees as of May 5, 2008. We also have significantly fewer employees than many other companies that have a product candidate in clinical development, and we rely heavily on third parties to conduct many important functions. While we believe that our corporate compliance program is sufficient to ensure compliance with applicable regulations, we cannot assure you that we are or will be in compliance with all potentially applicable regulations. If we fail to comply with any of these regulations we could be subject to a range of regulatory actions, including suspension or termination of clinical trials, the failure to approve a product candidate, restrictions on our products or manufacturing processes, withdrawal of products from the market, significant fines, or other sanctions or litigation.

Risks Related to Our Financial Condition

Our current cash, cash equivalents, interest receivable, license receivable and investment securities may not be adequate to support our operations for the length of time that we have estimated.

We currently anticipate that our cash, cash equivalents, interest receivable, license receivable and investment securities as of March 31, 2008, exclusive of our holdings of auction rate securities, are sufficient to meet our anticipated working capital needs and fund our business plan for approximately the next 12 to 18 months. Our forecast of the period of time through which our cash, cash equivalents, interest receivable, license receivable and investment securities will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties. The actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. These factors include the following:

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the timing of completion and results from clinical trials for our drug candidates;

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the timing of expenses associated with manufacturing and product development of the proprietary drug candidates within our portfolio and those that may be in-licensed, partnered or acquired;

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the timing of the in-licensing, partnering and acquisition of new product opportunities;

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the progress of the development efforts of parties with whom we have entered, or may enter, into research and development agreements;

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our ability to achieve our milestones under our licensing arrangements; and

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the costs involved in prosecuting and enforcing patent claims and other intellectual property rights.

If our capital resources are insufficient to meet future capital requirements, we will have to raise additional funds. If we are unable to obtain additional funds on terms favorable to us or at all, we may be required to cease or reduce our operating activities or sell or license to third parties some or all of our intellectual property. If we raise additional funds by selling additional shares of our capital stock, the ownership interests of our stockholders will be diluted. If we need to raise additional funds through the sale or license of our intellectual property, we may be unable to do so on terms favorable to us, if at all.

We will continue to attempt to sell our auction rate securities until the auctions are successful. If uncertainties in the credit and capital markets continue, these markets deteriorate further or we experience any ratings downgrades on the auction rate securities in our portfolio, we may incur additional impairment charges with respect to our auction rate securities portfolio, which could negatively affect our financial condition, cash flow and reported earnings. We will continue to monitor the fair value of our auction rate securities and relevant market conditions and will recognize additional impairment charges if future circumstances warrant such charges. In addition, the lack of liquidity of our auction rate securities could have a material impact on our ability to fund our operations.

Our prior restructurings may result in additional Israeli-related liabilities.

In July 2003, Keryx (Israel) Ltd., one of our Israeli subsidiaries, vacated its Jerusalem facility, after giving advance notice to RMPA Properties Ltd., the landlord. On May 1, 2005, the landlord filed suit in the Circuit Court of Jerusalem in Jerusalem, Israel, claiming that Keryx (Israel) Ltd., among other parties, was liable as a result of the alleged breach of the lease agreement. In addition to Keryx (Israel) Ltd., the landlord brought suit against Keryx Biomedical Technologies Ltd., another of our Israeli subsidiaries, Keryx Biopharmaceuticals, Inc., Michael S. Weiss, our Chairman and Chief Executive Officer, and Robert Trachtenberg, a former employee of Keryx. The amount demanded by the landlord totals 4,345,313 New Israeli Shekels, or approximately $1,257,000, and includes rent for the entire remaining term of the lease, as well as property taxes and other costs allegedly incurred by the landlord. In August 2003, the landlord claimed a bank deposit, in the amount of $222,000, which was previously provided as security in connection with the lease agreement. We intend to vigorously defend the suit. In July 2005, Keryx (Israel) Ltd. and Keryx Biomedical Technologies Ltd. filed an answer to the landlord's complaint. In October 2005, Keryx Biopharmaceuticals, Inc. filed an answer to the landlord's complaint. Generally, each answer challenges the merits of the landlord's cause of action as to each defendant. All defendants, except Keryx (Israel) Ltd., have filed a motion to dismiss the complaint. The plaintiff has filed a response to each answer. At this time, the Circuit Court of Jerusalem has not issued a decision with respect to the motion to dismiss. A hearing on a motion by Keryx Biopharmaceuticals, Inc. to vacate service of process outside of Israel was held in September 2006. On October 15, 2006, the Circuit Court of Jerusalem held that the service of process on Keryx was sustained. We appealed this holding. The appeal was denied on September 18, 2007, and we filed a petition for certiorari to the Supreme Court of Israel. Our motion for certiorari was denied as well. The next preliminary hearing is scheduled for June 26, 2008. We filed our testimonial affidavit along with an expert opinion contesting the interest and the accumulated debt claimed by plaintiff. We have not yet recorded a charge to reflect any potential liability associated with this lawsuit, as it is too early to accurately estimate the amount of the charge, if any.

Risks Related to Our Intellectual Property and Third-Party Contracts

If we are unable to adequately protect our intellectual property, third parties may be able to use our intellectual property, which could adversely affect our ability to compete in the market.

Our commercial success will depend in part on our ability and the ability of our licensors to obtain and maintain patent protection on our drug products and technologies and successfully defend these patents against third-party challenges. The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date. Accordingly, the patents we use may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products. Furthermore, others may independently develop similar or alternative drug products or technologies or design around our patented drug products and technologies. The patents we use may be challenged or invalidated or may fail to provide us with any competitive advantage.

We rely on trade secrets to protect our intellectual property where we believe patent protection is not appropriate or obtainable. Trade secrets are difficult to protect. While we require our employees, collaborators and consultants to enter into confidentiality agreements, this may not be sufficient to adequately protect our trade secrets or other proprietary information. In addition, we share ownership and publication rights to data relating to some of our drug products and technologies with our research collaborators and scientific advisors. If we cannot maintain the confidentiality of this information, our ability to receive patent protection or protect our trade secrets or other proprietary information will be at risk.

Litigation or third-party claims could require us to spend substantial time and money defending such claims and adversely affect our ability to develop and commercialize our products.

We may be forced to initiate litigation to enforce our contractual and intellectual property rights, or we may be sued by third parties asserting claims based on contract, tort or intellectual property infringement. In addition, third parties may have or obtain patents in the future and claim that our drug products or technologies infringe their patents. If we are required to defend against suits brought by third parties, or if we sue third parties to protect our rights, we may be required to pay substantial litigation costs, and our management's attention may be diverted from operating our business. In addition, any legal action against our licensors or us that seeks damages or an injunction of our commercial activities relating to our drug products or technologies could subject us to monetary liability and require our licensors or us to obtain a license to continue to use our drug products or technologies. We cannot predict whether our licensors or we would prevail in any of these types of actions or that any required license would be made available on commercially acceptable terms, if at all.

Risks Related to Our Common Stock

Future sales or other issuances of our common stock could depress the market for our common stock.

Sales of a substantial number of shares of our common stock, or the perception by the market that those sales could occur, could cause the market price of our common stock to decline or could make it more difficult for us to raise funds through the sale of equity in the future. On December 30, 2005, we filed with the SEC a shelf registration statement on Form S-3, that was declared effective by the SEC on January 13, 2006, providing for the offering of up to $150 million of our common stock. Following our registered direct offering of common stock to two institutional investors that was completed in March 2006, there remains approximately $67 million available for sale on this shelf registration statement. Future sales pursuant to this registration statement could depress the market for our common stock.

If we make one or more significant acquisitions in which the consideration includes stock or other securities, our stockholders may be significantly diluted. In addition, we may enter into arrangements with third parties permitting us to issue shares of common stock in lieu of certain cash payments upon the achievement of milestones.

In addition, we may be required to issue up to 3,372,422 shares of our common stock to former stockholders of ACCESS Oncology upon the achievement of certain milestones, of which 500,000 shares may be payable in 2008 if we reach the first milestone, or we may conclude, under certain circumstances, that it is in our best interests to settle this contingent share obligation for all or substantially all of such shares in advance of reaching any of the milestones. A substantial portion of the contingent shares would be payable to related parties.

Our stock price can be volatile, which increases the risk of litigation, and may result in a significant decline in the value of your investment.

The trading price of our common stock is likely to be highly volatile and subject to wide fluctuations in price in response to various factors, many of which are beyond our control. These factors include:

● developments concerning our drug candidates;

● announcements of technological innovations by us or our competitors;

● introductions or announcements of new products by us or our competitors;

● announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

● changes in financial estimates by securities analysts;

● actual or anticipated variations in quarterly operating results;

● expiration or termination of licenses, research contracts or other collaboration agreements;

● conditions or trends in the regulatory climate and the biotechnology and pharmaceutical industries;

● changes in the market valuations of similar companies; and

● additions or departures of key personnel.

In addition, equity markets in general, and the market for biotechnology and life sciences companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies traded in those markets. These broad market and industry factors may materially affect the market price of our common stock, regardless of our development and operating performance. In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted against that company. Such litigation, if instituted against us, could cause us to incur substantial costs to defend such claims and divert management's attention and resources, which could seriously harm our business.

Certain anti-takeover provisions in our charter documents and Delaware law could make a third-party acquisition of us difficult. This could limit the price investors might be willing to pay in the future for our common stock.

Provisions in our amended and restated certificate of incorporation and bylaws could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, or control us. These factors could limit the price that certain investors might be willing to pay in the future for shares of our common stock. Our amended and restated certificate of incorporation allows us to issue preferred stock. The issuance of preferred stock could decrease the amount of earnings and assets available for distribution to the holders of our common stock or could adversely affect the rights and powers, including voting rights, of such holders. In certain circumstances, such issuance could have the effect of decreasing the market price of our common stock. Our amended and restated bylaws eliminate the right of stockholders to call a special meeting of stockholders, which could make it more difficult for stockholders to effect certain corporate actions. Any of these provisions could also have the effect of delaying or preventing a change in control.

We may not be able to continue to meet the minimum listing requirements of the NASDAQ Stock Market, and as a result may be de-listed which would significantly and adversely affect the liquidity of the market for our common stock.

We recently received notice from the NASDAQ Stock Market that we were not in compliance with the $1.00 minimum bid price requirement for continued inclusion on the NASDAQ Global Market pursuant to Marketplace Rule 4450 (a)(5). This notification, which was received in a letter dated April 22, 2008, is a standard communication when the bid price of a NASDAQ-listed company closes below the minimum $1.00 per share requirement for 30 consecutive business days. In accordance with Marketplace Rule 4450(e)(2), we will be provided 180 calendar days to regain compliance by having the bid price of our common stock close at $1.00 per share or more for a minimum of 10 consecutive business days.

Shortly after receiving the notice, we applied for a transfer of our listing to the NASDAQ Capital Market. Our listing was accepted to the NASDAQ Capital Market as of May 6, 2008. As such, we are now subject to the continued listing requirements of the NASDAQ Capital Market, and are no longer subject to the continued listing requirements of the NASDAQ Global Market.

We cannot provide assurance that in the future we will continue to meet the listing requirements of the NASDAQ Capital Market, including, without limitation, bid price, stockholders' equity and/or market value of listed securities minimum requirements. Under the rules of the NASDAQ Capital Market, the Company may have an additional 180-calendar day compliance period through April 17, 2009 to comply with the $1.00 minimum closing bid price requirement on the NASDAQ Capital Market, provided the Company otherwise meets the initial listing requirements for the NASDAQ Capital Market on the 180 ^th day of the first 180-calendar day compliance period.

ITEM 5. OTHER INFORMATION

On March 17, 2008, we entered into an Amended and Restated License Agreement with Panion & BF Biotech, Inc., a drug development company based in Taiwan that holds the rights to Zerenex ™, an oral, iron-based compound. Pursuant to the agreement, Panion has granted us a worldwide (excluding certain Asia-Pacific countries) exclusive license to sublicense, develop, use, sell, import and export Zerenex ™ .

ITEM 6. EXHIBITS

The exhibits listed on the Exhibit Index are included with this report.

	3.1	Amended and Restated Certificate of Incorporation of Keryx Biopharmaceuticals, Inc., filed as Exhibit 3.1 to the Registrant's Annual Report on Form 10-Q for the quarter ended September 30, 2004, filed on August 12, 2004, and incorporated herein by reference.

	3.2	Amended and Restated Bylaws of Keryx Biopharmaceuticals, Inc., filed as Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001, filed on March 26, 2002, and incorporated herein by reference.

	3.3	Amendment to Amended and Restated Certificate of Incorporation of Keryx Biopharmaceuticals, Inc., dated July 24, 2007, filed as Exhibit 3.3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 9, 2007 and incorporated herein by reference.

	10.1*	Amended and Restated License Agreement by and between Panion & BF Biotech, Inc. and Keryx Biopharmaceuticals, Inc. dated March 17, 2008.

	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 12, 2008.

	31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 12, 2008.

	32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 12, 2008 .

	32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 12, 2008 .

* Confidential treatment has been requested with respect to the omitted portions of this exhibit.

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.

	KERYX BIOPHARMACEUTICALS, INC.

Date: May 12, 2008	By:	/s/ James F. Oliviero
		Vice President, Finance
		Principal Financial and Accounting Officer

EXHIBIT INDEX

The following exhibits are included as part of this Quarterly Report on Form 10-Q:

	10.1*	Amended and Restated License Agreement by and between Panion & BF Biotech, Inc. and Keryx Biopharmaceuticals, Inc. dated March 17, 2008.

	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 12, 2008.

	31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated May 12, 2008.

	32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 12, 2008 .

	32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated May 12, 2008 .

____________

* Confidential treatment has been requested with respect to the omitted portions of this exhibit.

EXHIBIT 10.1

CONFIDENTIAL TREATMENT REQUESTED . Confidential portions of this
document have been redacted and have been separately filed with the Commission.

AMENDED & RESTATED

LICENSE AGREEMENT

THIS AMENDED & RESTATED LICENSE AGREEMENT (the “Agreement”), effective as of this 17th day of March, 2008 (the “Effective Date”), by and between Panion & BF Biotech, Inc., with offices at 16F No. 3, Yuanqu Street, Nangang District, Taipei, Taiwan, ROC (hereinafter "Licensor"), and Keryx Biopharmaceuticals, Inc, with offices at 750 Lexington, 20 ^th Floor, New York, NY 10022 (hereinafter "Licensee").

WHEREAS , Dr. Chen Hsing Hsu (the "Inventor"), an employee of the University of Michigan (the "Institution"), is the named inventor on U.S. Patent No. 5,753,706, issued May 19, 1998 and entitled "Methods for Treating Renal Failure" (the "Licensed Patent Property"),

WHEREAS , the Institution has transferred to the Inventor all of the Institution's right, title, and interest in and to the Licensed Patent Property (subject to certain non-commercial applications, specified below), by an Agreement for the Reassignment of Intellectual Property, with a last-signed date of August 16, 2000,

WHEREAS , the Inventor has granted the Licensor the exclusive license, throughout the world (except the People's Republic of China) to make, use, and sell products embodying the inventions described in the Licensed Patent Properties, as well as rights to the Patent Rights (as hereinafter defined) (as specified below) (the "Exclusive License"),

WHEREAS , Licensor has developed certain Licensor Know-How (as hereinafter defined),

WHEREAS , by operation of this exclusive license, Licensor is the sole and exclusive licensee of the entire right, title and interest in and to the Patent Rights (with the exception of the People's Republic of China) and Licensor Know-How,

WHEREAS, effective November 7, 2005 Licensor and Licensee entered into a License Agreement (“License Agreement”) under which Licensee obtained an exclusive license under such Patent Rights and Licensor Know-How to develop, have developed, make, have made, use, have used, offer to sell, sell, have sold, import and export the Compound and Product in the Territory (as hereinafter defined),

*****Confidential material redacted and filed separately with the Commission.

WHEREAS , under the terms of the License Agreement Licensee has paid to Licensor the following sums: (i) a non-refundable, non-creditable license fee of *****; (ii) a milestone payment for completion of a Phase II clinical trial in the amount of ***** and (iii) the amount of ***** in reimbursement of ***** of Licensor’s development costs associated with its Phase II clinical trial,

WHEREAS , on or about September 26, 2007 Licensee entered into a Sublicense Agreement with Japan Tobacco Inc. and Torii Pharmaceutical Co., Ltd (“Japan Sublicense”),

WHEREAS , Licensor has the authority and is willing to grant such license to Licensee, and Licensee is willing to accept such license from Licensor, under the terms and conditions set forth in this Agreement, and

WHEREAS , the parties now wish to amend and restate the License Agreement in its entirety on the terms and conditions set forth herein.

NOW THEREFORE , in consideration of the mutual promises and covenants set forth herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1. DEFINITIONS

As used in this Agreement, the following terms, whether used in the singular or the plural, shall have the following meanings:

1.1 " Affiliate " means any corporation or non-corporate business entity, which controls, is controlled by, or is under common control with a party to this Agreement. A corporation or non-corporate business entity shall be regarded as in control of another corporation if it owns or directly or indirectly controls at least fifty-one percent (51%) of the voting stock of the other corporation, or (i) in the absence of the ownership of at least fifty-one percent (51%) of the voting stock of a corporation, or (ii) in the case of a non-corporate business entity, if it possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the corporation or non-corporate business entity, as applicable.

1.2 “ Combination Product ” means a Product containing one or more therapeutically active ingredients in addition to the Compound.

1.3 " Compound " means ferric citrate or any other iron-based compound.

1.4 " FDA " means the United States Food and Drug Administration.

1.5 Intentionally omitted.

1.6 “ First Commercial Sale ” means with respect to a Product, the first sale for end use or consumption of such Product in a country after all Registrations in such country have been obtained.

1.7 " IND " means an Investigational New Drug Application in the United States.

1.8 " Indication " means any therapeutic application for a Product that is covered by the Patent Rights.

1.9 “ Improvements ” means any and all improvements, materials, technical data and information whether patented or unpatented, including but not limited to any changes to the Compound, to the Product or in the Licensor Know-How or Licensee Know-How including, but not limited to any analogues, or derivatives of the Compound, and changes in the manufacturing process for the Compound or the Product which are conceived or reduced to practice during the term of this Agreement.

1.10 “ Licensee Development Data ” means and includes all data relating to the Compound or the Product and all chemistry, manufacturing and control data relating to the development and manufacture of the Compound or the Product, results of pre-clinical and clinical studies and all other documentation containing or embodying any pre-clinical, clinical, chemistry, manufacturing and control data relating to any application for Registrations for a Product, which is generated by Licensee, its agents, or any Sublicensees during the term of this Agreement.

1.11 “ Licensee Know-How ” means all information and materials, including but not limited to, discoveries, processes, instructions, formulas, data, inventions, know-how and trade secrets, patentable or otherwise, which arise out of the development, manufacture and commercialization by Licensee of the Compound or the Product, including, without limitation, all biological, chemical, pharmacological, toxicological, pharmaceutical, physical, analytical, clinical, safety, manufacturing and quality control data and information related thereto, and all applications, registrations, licenses authorizations, documents, approvals and correspondence relating to the Compound or the Product, including without limitation, correspondence submitted to Regulatory Authorities, and all information and data contained in Registrations. Licensee Know-How shall also include Licensee’s interest in Improvements .

1.12 “ Licensor Development Data ” means and includes all data to which Licensor has rights relating to the Compound or the Product and all chemistry, manufacturing and control data relating to the development and manufacture of the Compound or the Product, results of pre-clinical and clinical studies and all other documentation containing or embodying any pre-clinical, clinical, chemistry, manufacturing and control data relating to any application for Registrations for the Product, whether such Licensor Development Data is in existence as of the Effective Date or generated by Licensor during the term of this Agreement.

1.13 " Licensor Know-How ” means all information and materials to which Licensor has rights, including but not limited to, discoveries, processes, formulas, instructions, data, inventions, know-how and trade secrets, patentable or otherwise, in each case, which as of the Effective Date and during the term of this Agreement are necessary or useful to Licensee in connection with the development, registration, manufacture, marketing, use or sale of a Product. Licensor Know-How shall also include without limitation, all biological, chemical, pharmacological, toxicological, pharmaceutical, physical, analytical, clinical, safety, manufacturing and quality control data and information related thereto, and all applications, registrations, licenses, authorizations, documents, approvals and correspondence relating to a Licensed Compound or a Product. Licensor Know-How shall also include Licensor’s interest in Improvements.

1. 14 " NDA " means a New Drug Application in the United States.

1.15 " Net Sales " with respect to any Product other than a Combination Product means the gross sales (i.e. gross invoice prices) of such Product billed by Licensee and its Sublicenses to Third Party customers on all sales of a Product, and exclusive of inter-company transfer or sales, less the reasonable and customary deductions from such gross sales, including:

(i) actual credited allowances to such Third Party customers for spoiled, damaged, outdated and returned Product and for retroactive price reductions,

(ii) the amounts of trade, cash discounts and rebates, to the extent such discounts and rebates were not deducted by Licensee or its Sublicensees at the time of invoice in order to arrive at the gross invoice prices,

(iii) all transportation, handling charges and freight insurance, sales taxes, excise taxes, use taxes or import/export duties paid, and

(iv) all other reasonable and customary allowances and adjustments actually credited to customers whether during the specific royalty period or not.

The sale of a Product between Licensee and any of its Sublicensees solely for the research or clinical testing of such Product shall be excluded from the computation of Net Sales of such Product, provided that Licensee's sale of the Product was at cost, and such Product was used for research or clinical testing.

1.16 " Net Sales " with respect to any Combination Product means the gross sales of such Product billed by Licensee and its Sublicensees to Third Party customers, on all sales of a Combination Product, and exclusive of inter-company transfer or sales, less all the allowances, adjustment, reductions, discounts, taxes, duties and other charges referred to in Section 1.15 multiplied by a fraction to be determined by Licensor and Licensee at such time when the Combination Product becomes available.

The sale of a Combination Product between Licensee and any of its Sublicensees solely for the research or clinical testing of such Product shall be excluded from the computation of Net Sales for such Combination Product, provided that Licensee's sale of the Combination Product was at cost, and such Combination Product was used for research or clinical testing.

1.17 " Patent Rights " means the Licensed Patent Property , and the patents and patent applications set forth in Exhibit 1 (which shall be updated from time to time by Licensor), all other patents and patent applications that are directed to the Compound or its manufacture or use and in which Licensor holds rights, including, without limititation, those patents and patent applications that are directed to Licensor’s interest in Improvements, and any and all patents in which Licensor holds rights and that may issue from any of the foregoing patent applications, including any and all divisions, continuations, continuations-in-part, extensions, substitutions, renewals, registrations, supplementary protection certificates, revalidations, reissues or additions of or to any of the aforesaid patents and patent applications, and any additional patents or patent applications to which Licensor acquires rights during the term of this Agreement which pertain in any way to the Compound or the Product or their manufacture or use.

1.18 “Payment Default” means Licensee’s failure to pay Licensor the license fee and milestone payments under Article 4, and the royalties under Article 5 for more than 90 days past the date on which these amounts are due.

1.19 " Product " means the Compound or any pharmaceutical product containing the Compound as an active ingredient, either alone or in combination with other active ingredients.

1.20 “ Proprietary Information ” means all information, including without limitation all Licensee Know-How, Licensor Know-How, and all other scientific, clinical, regulatory, marketing, financial and commercial information or data, whether communicated in writing, orally or electronically which is provided by one party to the other party in connection with this Agreement.

1.21 " Registration " in relation to any Product means such approvals by a Regulatory Authority in a country or community or association of countries as may be legally required before such Product may be commercialized in such country or community or association of countries.

1.22 “ Regulatory Authority ” means the applicable government regulatory authority in each country in the Territory involved in granting regulatory approval for the Product. Such term includes, without limitation, the FDA and any successor agency thereto and Committee on Proprietary Medicinal Products of the European Community and any successor agency thereto.

1.23 “ Sublicensee ” means a Third Party to which Licensee has granted sublicense rights under the license granted Licensee hereunder, which rights include at least the right to sell the Product. Third Parties that are permitted to manufacture the Compound or the Product for supply only to Licensee or only to Sublicensees are not “Sublicensees” and such transaction shall be deemed a transfer and not a sale of the Product.

1.24 " Territory " means the entire world, provided that (a) excluded from the Territory are China, Korea, and all other countries in the Asian Pacific Region, except that (b) included within the Territory is Japan.

1.25 " Third Party " means any party other than Licensor or Licensee or their respective Affiliates, or Sublicensees of Licensee or its Sublicensees.

1.26 " Valid Claim " means a claim of an issued and unexpired patent included within the Patent Rights which has not been held unenforceable or invalid in the applicable jurisdiction by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through dedication, disclaimer or otherwise.

ARTICLE 2. REPRESENTATIONS AND WARRANTIES

2.1 Each party represents and warrants to the other party that it has the full right and authority to enter into this Agreement, and that, to the best of its knowledge, there are no prior agreements, commitments or other obstacles which could prevent it from carrying out all of its obligations hereunder.

2.2 Licensor represents to Licensee that:

(a) it is the exclusive licensee of the entire right, title and interest in and to the Patent Rights, and to the best of its knowledge, there are no charges, encumbrances, licenses, options, restrictions, liens, rights of others, disputes, proceedings or claims relating to, affecting, or limiting its rights or the rights of Licensee under this Agreement, with the exception of non-commercial uses of the Licensed Patent Properties reserved to the Institution;

(b) there is no claim, pending or threatened, of infringement, interference or invalidity regarding any part or all of the Patent Rights and their use as contemplated in this Agreement, and it has no present knowledge from which it can be inferred that the Patent Rights are invalid or that their exercise would infringe the patent rights of any Third Party;

(c) it has the right to enter into this Agreement and to grant the licenses granted herein, and there is nothing in any Third Party agreement Licensor has entered into as of the Effective Date, which in any way, will limit the ability of Licensor to perform any and all of the obligations undertaken by Licensor hereunder;

(d) it will not enter into any agreement after the Effective Date which will limit its ability to perform any and all of the obligations undertaken by Licensor hereunder;

(e) it has delivered to Licensee all Licensor Development Data and Licensor Know-how; and

(f) to the best of its knowledge neither this Agreement, nor any document or piece of Licensor Development Data, Licensor Know-How or Patent Rights contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein misleading.

2.3 Licensee represents to Licensor that:

(a) it has the right to enter into this Agreement and to the best of its knowledge, there is nothing in any Third Party agreement Licensee has entered into as of the Effective Date, which in any way, will limit the ability of Licensee to perform any and all of the obligations undertaken by Licensee hereunder, and

(b) it will not enter into any agreement after the Effective Date which will limit its ability to perform any and all of the obligations undertaken by Licensee hereunder.

*****Confidential material redacted and filed separately with the Commission.

ARTICLE 3. LICENSE GRANT

3.1 Grant . Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee an exclusive license, in the Territory, with the right to sublicense, to develop, have developed, make, have made, use, have used, offer to sell, sell, have sold, and import and export the Product in the Territory under the Licensor Know-How, and the Patent Rights for all Indications.

3.2 Sublicensing. Sublicensees of Licensee shall be entitled to sublicense to third parties the right to manufacture the Product, provided such third party manufacturers are permitted to sell only to Licensee or its immediate Sublicensees. Sublicensees of Licensee may not grant sublicenses under this Agreement without the written consent of Licensor, which consent shall not be unreasonably withheld or delayed. Should Licensee or any Sublicensee of Licensee grant any sublicenses, the terms and conditions of such sublicenses and the identity of sublicensees shall be at the sole discretion of Licensee and no consent shall be required from Licensor in connection with the terms and conditions of such sublicenses or the identity of sublicensees, provided however, that such sublicenses shall be co-terminated with this Agreement.

3.3 Consent of Inventor . The Inventor has provided his written consent to the terms and conditions of the License Grant and the terms and conditions of the License Agreement. The Written Consent of the Inventor is set forth in Exhibit 2 hereto.

ARTICLE 4. LICENSE FEE; MILESTONE PAYMENTS

4.1 Intentionally omitted.

4.2 Milestone Payments . Licensee will pay to Licensor the milestone payments as follows:

(a) Intentionally omitted.

(b) Within one hundred twenty (120) days following submission to the FDA of the first New Drug Application for a Product: *****;

*****Confidential material redacted and filed separately with the Commission.

(d) Within one hundred and twenty (120) days following a first marketing approval for a Product in any country in Europe: *****; and

(e) Within one hundred and twenty (120) days following a first marketing approval for a Product in Japan: *****.

4.3 Limitations . It is understood and agreed that Licensee shall pay the milestone payments set forth in Section 4.2 only with respect to the first Indication for which a Product achieves a particular milestone event, and regardless of the number of Products which achieve a particular milestone event.

4.4 Payment in Equity . At Licensee’s option, up to ***** or such greater amount as may be mutually agreed by Licensor and Licensee of any milestone payment due pursuant to Sections 4.2(b) and (c) can be made in shares of unrestricted, unlegended and freely tradable common stock of Licensee, based on a per share price equal to the average closing price as listed in the Wall Street Journal over the last thirty (30) business days immediately preceding the date of a particular milestone payment is due; provided that (i) the Licensee’s common stock is traded on the NASDAQ National Market or other national stock exchange in the U.S. at the time the payment is made; (ii) the average trading price of such shares of common stock on the NASDAQ National Market or other national stock exchange in the U.S. in the three (3) months period immediately preceding the last day of a particular milestone payment pursuant to Sections 4.2(b) or (c) is due exceeds *****, and (iii) the ***** immediately preceding the payment due date exceeds *****. It is understood and agreed that the Licensee has the right to refuse any or all payment in the form of stock by the Licensor pursuant to this Section 4.4 if the Licensor has reasons to believe that the stock delivered is not unrestricted, unlegended or freely tradable.

*****Confidential material redacted and filed separately with the Commission.

4.5 Sublicense Payments . In the event that Licensee enters into a sublicense agreement other than the Japan Sublicense, Licensee shall pay to Licensor a sublicense payment in an amount equal to ***** of any Sublicense Income within thirty (30) days of receipt thereof by Licensee. For purposes of this Section 4.5, Sublicense Income shall mean consideration in any form received by Licensee or an Affiliate of Licensee in connection with a grant to any third party or parties of a sublicense or other right, license, privilege or immunity to make, have made, use, sell, have sold, distribute, import or export Products or to practice licensed methods. Sublicense Income shall include, without limitation, any license signing fee, license maintenance fee, unearned portion of any minimum royalty payment received by Licensee, equity, distribution or joint marketing fee, research and development funding in excess of Licensee’s cost of performing such research and development, and any consideration received for an equity interest in, extension of credit to or other investment in Licensee to the extent such consideration exceeds the fair market value of the equity or other interest received as determined by agreement of the parties or by an independent appraiser mutually agreeable to the parties. Notwithstanding the foregoing, Sublicense Income shall not include (i) sales-based milestones; (ii) royalty payments; or (iii) sublicense income received by Licensee under the Japan Sublicense. Nothing in this Section 4.5 shall affect the milestone payments otherwise owed to Licensor under Section 4.2 of this Agreement, except that to the extent that a payment is owed to Licensor under Section 4.2, then any sublicense payment that is triggered by the same event (i.e., submission to the FDA of the first New Drug Application, first FDA marketing approval, first marketing approval for a Product in Europe and first marketing approval for a Product in Japan) shall be waived and shall not be owed to Licensor under this Section 4.5.

ARTICLE 5. ROYALTIES

5.1 Royalties. In consideration of the license rights granted to Licensee hereunder, Licensee shall pay or cause any Sublicensee to pay to Licensor a royalty on their respective Net Sales , as follows: for each Product where the manufacture, use or sale of such Product would but for the license granted hereunder, infringe a Valid Claim a royalty of ***** on Net Sales.

5.2 Limitation . If the laws of any country where royalties are payable under Section 5.1 limit the amount of royalty or the duration of such royalty payments to less than the amount specified herein, then the royalty payment to Licensor shall be limited to that permitted by law.

5.3 Accrual of Royalties. No royalty shall be payable on a Product made, sold, or used for testing or development purposes or distributed as samples, provided such samples are sold by Licensee (or its Sublicensee) at cost. No royalties shall be payable on sales among Licensee and its Sublicensees, but royalties shall be payable on subsequent sales by Licensee or its Sublicensees to a Third Party. No multiple royalty shall be payable because the manufacture, use, or sale of a Product is covered by more than one Valid Claim.

5.4 Royalty Withheld due to Invalid Claims. In the event that all applicable claims of a patent included within the Patent Rights under which Licensee is paying a royalty according to Section 5.1 shall be held invalid or unenforceable by a court of competent jurisdiction in a given country of the Territory, Licensee may withhold payments of royalties which would otherwise have been due on Net Sales in that country by reason of Section 5.1 until such judgment shall be finally reviewed by an unappealed or unappealable decree of a higher court of competent jurisdiction in such country. The Licensee shall promptly repay Licensor any withheld royalty payments upon a final adjudication that the applicable claims of a patent included within the Patent Rights under which Licensee is paying a royalty under Section 5.1 are valid and enforceable.

5.5 Compulsory Licenses . If Licensee is caused to grant a compulsory license to any Third Party with respect to a Product in any country in the Territory, then the royalty rate to be paid by Licensee on Net Sales due on such Product in that country under Section 5.1 shall be reduced to the rate paid by such Third Party compulsory licensee on such Product.

ARTICLE 6. ROYALTY REPORTS AND ACCOUNTING

6.1 Royalty Reports and Records. Beginning with the First Commercial Sale by Licensee or any Sublicensee as the case may be of a Product in any country of the Territory, and continuing thereafter during the term of this Agreement, Licensee shall furnish , and shall cause any Sublicensee to furnish, to Licensor a written report covering each calendar quarter (the "Reporting Period") showing (a) the Net Sales of each Product in each country of the Territory where royalties are payable under Section 5.1 during the Reporting Period; (b) the royalties, payable in United States Dollars, which shall have accrued hereunder in respect of such sales with a summary computation of such royalties; (c) withholding taxes, if any required by law to be deducted in respect of such sales; and (d) the exchange rates used in determining the amount of United States Dollars payable in respect of sales outside the United States. With respect to sales of a Product invoiced in a currency other than United States Dollars, the Net Sales and royalty payable shall be expressed in the domestic currency of the party making the sale together with the United States Dollars equivalent of the royalty payable, calculated using the simple average of the exchange rate published in the Wall Street Journal on the last day of each month of the Reporting Period. If any Sublicensee makes any sale invoiced in a currency other than its domestic currency, the Net Sales shall be converted to its domestic currency in accordance with its normal accounting principles. Licensee's Sublicensees shall have the option of making any royalty payment directly to Licensor. However, notwithstanding anything to the contrary, the Licensee shall continue to be liable for all royalties due under Section 5.1 until they are paid. Licensee or its Sublicensee shall furnish to Licensor appropriate evidence of payment of, and itemize any tax, credits or specific amount deducted from any royalty payment.

6.2 Royalty Reports and Payments. Royalty reports and payments shall be due sixty (60) days after the close of each Reporting Period. Payment of royalties in whole or in part may be made in advance of such due date. In case no royalty is due for any given Reporting Period, Licensee shall so report to Licensor. Licensee and its Sublicensees shall keep accurate records in sufficient detail to enable the royalty payable hereunder to be determined and confirmed. Licensee shall be responsible for all royalties, late payments, and interest that are due but have not been paid by Licensee's Sublicensees.

6.3 Right to Audit. Upon written request of Licensor, but not more than once in each calendar year nor more than once in respect to any given calendar year, Licensee shall permit an independent public accountant, selected by Licensor and acceptable to Licensee, which acceptance shall not be unreasonable withheld, to have access during normal business hours to those records of Licensee as may be reasonably necessary to verify the accuracy of the royalty reports hereunder in respect of any calendar year ending not more than thirty-six (36) months prior to the date of such request. Licensee shall include in each Sublicense granted by it pursuant to this Agreement a provision requiring the Sublicensee to keep and maintain records of sales made pursuant to such sublicense and to grant the same right of access to such records to Licensor's independent accountant. Upon the expiration of thirty-six (36) months following the end of any calendar year, the calculation of royalties payable with respect to such calendar year shall be binding and conclusive upon the parties, and Licensee and its Sublicensees shall be released from any liability or accountability with respect to royalties (and Licensor for an overpayment of royalties) for such calendar year, unless (a) an audit requested by Licensor prior to expiration of such thirty-six (36) months period has not yet been completed, or (b) Licensor has notified Licensee prior to the expiration of such thirty-six (36) months period that such audit has revealed a discrepancy regarding such calculation. The report prepared by such independent public accountant, a copy of which promptly shall be provided to Licensee, shall disclose only the amount of any underpayment or overpayment of royalties, if any, without disclosure of or reference to supporting documentation. If such independent accountant's report shows any underpayment of royalties, Licensee shall remit or shall cause its Sublicensees to remit to Licensor the amount of such underpayment within thirty (30) days after Licensee's receipt of such report, and if such underpayment exceeds five percent (5%) of the royalty due, Licensee shall reimburse Licensor for its reasonable out-of-pocket expenses for the audit, upon submission of supporting documentation. Any overpayment of royalties shall be creditable against future royalties payable in subsequent royalty periods, allocated evenly over the next-following two (2) royalty periods. In the event this Agreement is terminated or expires before such overpayment is fully credited, Licensor shall pay Licensee the portion of such overpayment not credited within one hundred twenty (120) days after the date of such termination or expiration.

*****Confidential material redacted and filed separately with the Commission.

6.4 Confidentiality of Records . Licensor agrees that all information subject to review under Section 6.3 or under any sublicense agreement shall be deemed the Proprietary Information of Licensee.

6.5 Late Payment Interest . Royalties and other payments required to be paid by Licensee pursuant to this Agreement shall, if overdue, bear interest at the rate equal to two percent (2%) over the prime rate as quoted by Citibank NA and not to exceed ten percent (10%) per annum until paid. The payment of such interest shall not preclude Licensor from exercising any other rights it may have because any payment is overdue.

ARTICLE 7. DEVELOPMENT AND MARKETING PROGRAM

7.1 Clinical Development Program. Licensee shall use commercially reasonable best efforts (a) to conduct a clinical development program directed to obtaining FDA approval of at least one Product for at least one Indication to be selected by Licensee (the "Development Program"), and (b) if, in the opinion of Licensee, the results of the Development Program so justify, to diligently seek FDA approval for such Product for such Indication. For purposes of this Section, "commercially reasonable best efforts" shall mean efforts consistent with those used by Licensee in its own priority development projects with its own products deemed to have high commercial potential.

7.2 Fulfillment . Licensee's reasonable efforts set forth in Section 7.1 with respect to the US shall be deemed to have been fulfilled if Licensee

(a) *****

(b) *****

For purposes of this Section 7.2, *****. All clinical studies are to be conducted under an IND in the United States, or if conducted by Licensee outside the United States, are to be acceptable to the FDA for Registration of a Product in the United States. While fulfilling or in Licensee’s discretion, upon fulfillment of the above obligations, Licensee shall use commercially reasonable best efforts to commercialize the Product outside the US, within the Territory.

7.3 Suspension of Development Program . Licensee’s obligation to conduct the Development Program is expressly conditioned on the continuing absence of any event or condition (such as, but not limited to, a regulatory action affecting the Product or the existence of an issue relating to the safety or efficacy of the Product, the introduction of a therapy which has superior safety and/or efficacy, or the existence of any circumstances, economic or otherwise, which make the development or marketing of the Product, in Licensee’s judgment, commercially unrewarding) that would suggest to Licensee, in exercising prudent and justifiable business judgment, that development or marketing of the Product should be suspended or stopped altogether, and Licensee’s obligation to develop or market the Product may be suspended for up to six (6) months, after which time the Development Program shall be resumed or this Agreement may be terminated by Licensor, at the sole discretion of Licensor.

7.4 Mutual Assistance .

(a) Licensor Development Data . As soon as practical after the Effective Date, Licensor will make available to Licensee all Licensor Development Data in the possession of Licensor, and will cooperate with and provide reasonable assistance to Licensee in its evaluation of such Licensor Development Data. On a continuing basis during the term of this Agreement, Licensor shall make available to Licensee all additional Licensor Development Data generated by Licensor or any Third Party on behalf of Licensor. Licensor shall provide Licensee with a right of reference to all such Licensor Development data and Licensee shall have the right to include such Licensor Development Data in any of its applications for Registrations. All such Licensor Development Data shall be deemed the Proprietary Information of Licensor, and all right, title and interest in and to such Licensor Development Data shall remain vested in Licensor.

(b) In the event that either party receives any inquiries from any Regulatory Authority which may affect the development and marketing of a Product, such party shall immediately notify the other party. Licensee shall be responsible for responding to Regulatory Authorities within the Territory and Licensor shall be responsible for responding to Regulatory Authorities outside the Territory. The parties agree to exchange regulatory information and reports for compliance with local Regulatory Authorities and to provide reasonable assistance to the other in formulating a response to the aforementioned inquiries, including being available to meet with the Regulatory Authority if necessary. Licensee shall reimburse Licensor for its reasonable expenses incurred in rendering such assistance in the Territory, upon presentation by Licensor of an invoice documenting such expenses and Licensor shall reimburse Licensee for its reasonable expenses incurred in rendering such assistance outside the Territory, upon presentation by Licensee of an invoice documenting such expenses.

*****Confidential material redacted and filed separately with the Commission.

7.5 Registrations . Subject to the terms and conditions of this Agreement, each application for Registration shall be filed in the name of Licensee or a designated Affiliate or sublicensee. Licensee shall own all right, title and interest in and to all applications for Registrations and granted Registrations. Licensee shall be responsible for all disclosures and correspondence to and with the Regulatory Authorities, and all disclosures and correspondence with any Regulatory Authority in the Territory involving Licensor shall be made through Licensee. Licensee shall keep Licensor advised of the status of all Registrations and any applications for Registration.

7.6 Licensee Development Data . All Licensee Development Data shall be deemed the Proprietary Information of Licensee, and all right, title and interest in and to such Licensee Development Data shall vest in Licensee, subject to Section 12.4.2.

7.7 Production of Clinical Supplies of the Compound .

(a) Both parties agree to work in good faith to fully collaborate to review and administer the manufacturing program for the Compound and to resolve any technical issues both immediately after the Effective Date and at least annually thereafter during *****.

(b) For the period commencing on the Effective Date and continuing for ***** following Registration in the United States ***** Licensee (and its Sublicensees) *****. In consideration for such supply, Licensee shall provide compensation to Licensor at ***** over Licensor's manufacturing and procurement cost. Notwithstanding the preceding two sentences, decisions and actions related to pharmaceutical development and manufacturing of the Clinical Supplies are subject to joint review and approval . *****.

*****Confidential material redacted and filed separately with the Commission.

( c ) As requested by Licensee, *****, Licensor shall make its best efforts to assist Licensee *****. Licensor shall provide assistance to Licensee to transfer any know-how and technology from ***** of Licensor to ***** by Licensee *****.

( d ) In the event that either party elects to procure Clinical Supplies from the other ***** , in consideration for such clinical supplies, the supplies shall be transferred at ***** over manufacturing and procurement cost.

7.8 Intentionally omitted.

7.9 Progress Reports . Within thirty (30) days of the close of each calendar quarter, Licensee shall provide to Licensor a written report of Licensee's progress and activities in meeting Licensee's obligations under Sections 7.1 and 7.2 ("Progress Report"). Progress Reports shall be in writing, and shall set forth, in reasonable detail, relevant information including (i) the status of clinical development programs for any Product; (ii) the status of regulatory approvals in the US and in other jurisdictions within the Territory concerning Products; and (iii) the status of other development activities regarding Products. Licensee shall promptly supplement or clarify such Progress Reports, upon Licensor's reasonable request.

ARTICLE 8. PATENTS AND IMPROVEMENTS

8.1 Patents

8.1.1 Patent Prosecution and Maintenance. Licensee shall use reasonable efforts to prosecute the patent applications that are enumerated in Exhibit 1 of this Amended License Agreement at the time of its execution, to obtain patents thereon, to conduct any interference, re-examination, reissue and opposition proceedings, and to maintain patents included in the Patent Rights in effect during the term of this Agreement. Licensee shall be solely responsible for all costs and expenses relating to such patent applications and patents.

8.1.2 Patent Counsel . The parties shall use patent counsel to be mutually agreed upon. Initially, such counsel shall be Albert Wai-Kit Chan, Esq. In the event that Licensee believes that Mr. Chan is not providing the appropriate level of service or expertise, then Licensor and Licensee will meet to propose new counsel that is mutually acceptable to both parties.

8.1.3 Consultation and Decision . Licensee shall regularly consult with Licensor and shall keep Licensor advised of the status of all patent applications and patents relating to the Patent Rights by providing Licensor with copies of such patent applications and patents and copies of all patent office correspondence relating thereto including any office actions received by Licensee and responses or other papers filed by Licensee. Licensee specifically agrees to provide Licensor with copies of patent office correspondence in sufficient time for Licensor to review and comment on such correspondence and submit to Licensee any proposed response thereto. Licensee further agrees to provide Licensor with sufficient time and opportunity, but in no event less than ten (10) days, to review, comment and consult on all proposed responses to patent office correspondence relating to such patent applications and patents. Licensor agrees that all final decisions regarding the preparation and prosecution of such patent applications and patents, reissues, reexaminations, interferences and oppositions relating thereto shall be made by Licensee after consultation with Licensor. Notwithstanding the foregoing, in the event of a decision regarding a Significant Event, Licensee will provide Licensor with notice of such Significant Event and Licensor shall have thirty (30) working days in which to assent or refuse to assent to such action, with such assent not to be unreasonably withheld. For purposes of this Section 8.1.3, “Significant Event” shall mean abandonment of an application, the filing of divisional or continuation applications, or a significant narrowing of the scope of patent application claims. Licensee shall have the right in its sole discretion after consultation with Licensor, to discontinue the prosecution of any such patent applications or the maintenance of any such patents, and Licensor shall have the right to assume responsibility for the prosecution of such patent applications or the maintenance of such patents at its own expense. If Licensee elects not to prosecute , and Licensor elects not to assume, any such patent applications or not to maintain any such patents in any country within the Territory , Licensee’s license rights and its obligations under this Agreement, with respect to such patent applications and patents in such country shall terminate , without affecting its license rights and other obligations to pay with respect to any other patent applications or patents included in the Patent Rights.

8.1.4 Additional Patents . After the Effective Date of this Agreement, the parties may, by mutual agreement, amend Exhibit 1 to add additional patents related to the Compound (“Additional Patents”). Upon the written amendment of Exhibit 1, such Additional Patents shall be prosecuted and maintained in accordance with the provisions of this Section 8.1.

8.2 Improvements .

(a) Each party shall notify the other party promptly of any sole or joint inventions directed to Improvements under such party's control.

(b) As between the parties, Licensee shall own all right, title and interest in and to Improvements invented solely by Licensee’s employees or contractors and Licensor shall own all right, title and interest in and to Improvements invented solely by Licensor’s employees or contractors. Patent applications and patents directed to jointly invented Improvements shall be jointly assigned to and owned by Licensee and Licensor, and the rights of the parties with respect thereto shall be determined according to the laws of the countries in which such patent applications and patents are held. During the term of this Agreement, either party shall have the liberty to freely practice Improvements in its respective territories.

(c) During the term of this Agreement, for patent applications and patents relating to Improvements invented solely by Licensor, the provisions of Section 8.1.4 shall apply.

(d) Following expiration or termination of this Agreement, Licensor shall be solely responsible, at its sole discretion and expense, for preparing, filing, prosecuting and maintaining in such countries where it deems appropriate, patent applications and patents relating to Improvements invented solely by Licensor and for conducting interference, re-examination, reissue and opposition proceedings relating to such patent applications and patents.

(e) During the term of this Agreement, Licensee shall be responsible, in its sole discretion and expense, for preparing, filing, prosecuting and maintaining in such countries where it deems appropriate, patent applications and patents relating to Improvements invented solely by Licensee or jointly by Licensee and Licensor. Notwithstanding the foregoing, if Licensee elects (after consultation with Licensor) not to prosecute, or to discontinue the prosecution of any patent applications concerning joint inventions, or to discontinue the maintenance of any patents concerning joint inventions, then (i) Licensor shall have the right to assume the full responsibility for the prosecution of such patent applications or the maintenance of such patents at its own costs expense, (ii) Licensee shall assign its interest in such patents and patent applications to Licensor, and (iii) such patents and patent applications shall no longer be subject to this Agreement.

(f) Following expiration or termination of this Agreement, Licensee shall be solely responsible, in its sole discretion and expense, for preparing, filing, prosecuting and maintaining in such countries where it deems appropriate, patent applications and patents relating to Improvements invented solely by Licensee and for conducting interference, re-examination, reissue and opposition proceedings relating to such patent applications and patents.

(g) Following expiration or termination of this Agreement, the parties shall be jointly responsible for preparing, filing, prosecuting and maintaining in such countries where the parties jointly agree, patent applications and patents relating to improvements jointly invented by the parties and for conducting interference, re-examination, reissue and opposition proceedings relating to such patent applications and patents. The parties shall jointly bear all costs relating thereto. If one party elects to discontinue the prosecution of any patent applications and patents filed pursuant to this Section 8.2(g), or not to conduct any further activities with respect to such patent applications or patents, the party electing to discontinue any such activities shall assign to the other party all right, title and interest in and to such patents or patent applications. The party electing to continue such activities shall be solely responsible for all costs relating to such activities.

ARTICLE 9. INFRINGEMENT

9.1 Infringement by a Third Party . In the event that either party becomes aware that a Compound or a Product being made, used or sold by a Third Party infringes the Patent Rights licensed hereunder, such party shall promptly advise the other party of all known facts and circumstances relating thereto . Licensor shall have the first right to enforce at Licensor’s sole expense the Patent Rights licensed under this Agreement against infringement by third parties. Licensee shall reasonably cooperate in any such enforcement and, if necessary, join as a party therein, at the expense of Licensor. Licensor shall have the right to retain 100% of the proceeds of any such enforcement action. In the event that Licensor does not file suit against or commence settlement negotiations with a substantial infringer of the Patent Rights within six (6) months after receipt of and a written demand from Licensee that Licensor bring suit, then Licensee shall have the right to enforce at its own expense any patent licensed hereunder on behalf of itself and Licensor, Licensor shall reasonably cooperate with Licensee, at the expense of Licensee. In this case, Licensee shall have the right to retain 100% of the proceeds of any such enforcement action.

9.2 Infringement by Licensee . In the event that it is determined by any court of competent jurisdiction that the manufacture, use or sale of any Product by Licensee or its Sublicensees in accordance with the terms and conditions of this Agreement infringes, or Licensee and Licensor reasonably determine and agree that the manufacture, use or sale of such Product is likely to infringe, an additional Third Party patent or related intellectual property right in any country in the Territory, Licensee shall in consultation with Licensor use its reasonable best efforts to: (i) procure at Licensee’s expense a license from such Third Party authorizing Licensee to continue to manufacture, use or sell such Product; or (ii) modify such Product or its manufacture so as to render it non-infringing. In the event that neither of the foregoing alternatives is reasonably available or commercially feasible, Licensee may at its option (i) either cease the manufacture, use and sale of such Product for so long as and to the extent that such activities are infringing the relevant Third Party patents, in which case the obligation of Licensee hereunder to pay royalties shall also cease, or (ii) terminate the rights and licenses granted solely with respect to a country or countries within the Territory in which the infringement of Third Party patents has occurred or is likely to occur, in which case the obligation of Licensee hereunder to pay royalties shall also terminate with respect to that country or countries within the Territory.

ARTICLE 10. INDEMNIFICATION

10.1 Indemnification by Licensee. Licensee agrees to indemnify and hold Licensor, its directors, officers, employees and agents harmless from and against any liabilities or damages or expenses in connection therewith (including reasonable attorneys' fees and costs and other expenses of litigation) resulting from (i) any willful misrepresentation of a material fact or breach of warranty under this Agreement, (ii) claims by Third Parties arising out of Licensee's or its Sublicensees' manufacture, use, sale or testing of Product; and (iii) the enforcement by Licensor of its indemnification rights against Licensee under clause (ii) of this Section 10.1.

10.2 Indemnification by Licensor . Licensor hereby agrees to indemnify and hold Licensee and its officers, directors, employees and agents harmless from and against any liabilities or damages or expenses in connection therewith (including reasonable attorneys' fees and costs and other expenses of litigation) resulting from any willful misrepresentation of a material fact or breach of warranty under this Agreement and the enforcement by Licensee of its indemnification rights under this Section 10.2.

10.3 Indemnification Procedures. Each indemnified party shall promptly notify the indemnifying party in writing of any action, claim or liability in respect of which the indemnified party intends to claim indemnification from the indemnifying party. The indemnified party shall permit the indemnifying party, at its discretion, to settle any such action, claim or liability, and agrees to the complete control of such defense or settlement by the indemnifying party, provided however, that such settlement does not adversely affect the rights of the indemnified party hereunder or impose any obligations on the indemnified party in addition to those set forth herein in order for it to exercise such rights. No such action, claim or liability shall be settled by the indemnified party without the prior written consent of the indemnifying party, which consent shall not be unreasonably withheld or delayed, and the indemnifying party shall not be responsible for any legal fees or other costs incurred by the indemnified party other than as provided herein. The indemnified party and its directors, officers, employees and agents shall cooperate fully with the indemnifying party and its legal representatives in the investigation and defense of any action, claim or liability covered by this indemnification, and shall have the right, but not the obligation, to be represented by counsel of their own selection and at their own expense.

10.4 Limitation of Liability . Notwithstanding anything to the contrary herein, neither party shall be liable to the other party for any indirect, incidental or consequential damages arising out of any terms or conditions in this Agreement or with respect to the performance hereof.

10.5 Survival of Representations and Warranties . The representations and warranties contained in this Agreement shall survive the expiration or termination of this Agreement and shall remain in full force and effect.

ARTICLE 11. CONFIDENTIALITY

11.1 Treatment of Proprietary Information . Except as otherwise provided in this Article 11, during the term of this Agreement and for a period of five (5) years following expiration or termination thereof, a party (the "Receiving Party") will retain in confidence and use only for purposes of this Agreement Proprietary Information supplied by or on behalf of the other party (the "Disclosing Party"). For purposes of this Article 11, all such Proprietary Information which a Receiving Party is obligated to retain in confidence shall be disclosed in written form and marked "Confidential" or with similar designation, or if originally disclosed visually or orally, reduced to such written form within thirty (30) days of such original disclosure.

11.2 Right to Disclose. To the extent it is reasonably necessary or appropriate to fulfill its obligations or exercise its rights under this Agreement or any rights which survive termination or expiration hereof, a Receiving Party may disclose Proprietary Information to its Affiliates, Sublicensees, consultants, agents, outside contractors and clinical investigators (collectively the “Representatives”) on condition that such Representatives agree (i) to keep the Proprietary Information confidential for a least the same time periods and to the same extent as such party is required to keep the Proprietary Information confidential and (ii) to use the Proprietary Information only for such purposes as the Receiving Party is entitled to use the Proprietary Information. Each party warrants that each of its Representatives to whom any Proprietary Information is disclosed shall previously have been informed of the confidential nature of the Proprietary Information and shall have agreed to be bound by the terms and conditions of confidentiality as set forth in this Agreement. The Receiving Party shall ensure that the Proprietary Information provided by the Disclosing Party shall not be used or disclosed by such Representatives except as permitted by this Agreement. The Receiving Party shall stand responsible for any breach by its Representatives of the confidentiality provisions set forth in this Agreement.

11.3 Release From Restrictions. The obligation not to disclose Proprietary Information shall not apply to any part of such Proprietary Information which:

(i) is or becomes patented, published or otherwise part of the public domain other than by the unauthorized acts of the Receiving Party or its Affiliates or Sublicensees in contravention of this Agreement; or

(ii) is disclosed to the Receiving Party by a Third Party which did not obtain such Proprietary Information directly or indirectly from the Disclosing Party; or

(iii) prior to disclosure under this Agreement, was already in the possession of the Receiving Party as evidenced by its written records, provided such Proprietary Information was not obtained, directly or indirectly, from the Disclosing Party; or

(iv) is developed by the Receiving Party independent of Proprietary Information received from the Disclosing Party as evidenced by its written records.

11.4. Public Domain . For the purpose of this Agreement, specific information disclosed as part of the Proprietary Information shall not be deemed to be in the public domain or in the prior possession of the Receiving Party merely because it is embraced by more general information in the public domain or by more general information in the prior possession of the Receiving Party.

11.5 Ownership of Proprietary Information . Except as otherwise agreed to hereunder, all Proprietary Information disclosed by the Disclosing Party shall remain the property of the Disclosing Party. Upon the written request of the Disclosing Party (i) all tangible Proprietary Information provided by the Disclosing Party (including, but not limited to all copies thereof and all unused samples of materials provided by the Disclosing Party) except for Proprietary Information consisting of analyses, studies and other documents prepared by or for the benefit of the Receiving Party shall be promptly returned to the Disclosing Party, and (ii) all portions of such analyses, studies and other documents not prepared by or for the benefit of the Receiving Party (including all copies thereof) which are within the definition of Proprietary Information shall be destroyed, and the Receiving Party shall certify such destruction in writing to the Disclosing Party. Notwithstanding the foregoing, the Receiving Party may retain one copy of the Proprietary Information of the Disclosing Party in its legal department for the sole purpose of determining its obligations hereunder.

11.6 Legal Disclosure . The Receiving Party may disclose the Proprietary Information of the Disclosing Party to the extent reasonably necessary in prosecuting or defending litigation, complying with applicable laws, governmental regulations or court order, or otherwise submitting required information to tax or other governmental authorities. If the Receiving Party intends to so disclose any such Proprietary Information, the Receiving Party shall provide the Disclosing Party prompt prior notice of such fact so that the Disclosing Party may seek to obtain a protective order or other appropriate remedy concerning any disclosure of such Proprietary Information. The Receiving Party will reasonably cooperate with the Disclosing Party in connection with the Disclosing Party’s efforts to obtain any such order or other remedy. If any such order or other remedy does not fully preclude the disclosure of such Proprietary Information, the Receiving Party will make such disclosure only to the extent that such disclosure is legally required and will use its reasonable efforts to have confidential treatment accorded to the disclosed Proprietary Information.

11.7 No Title . Except as otherwise expressly set forth in this Agreement, nothing herein shall be construed as giving the Receiving Party any right, title and interest in and to the Proprietary Information of the Disclosing Party.

11.8 Permitted Disclosures .

11.8.1 Disclosure by Licensee . Notwithstanding the foregoing, subject to review and comment by Licensor, Licensee may disclose Licensor Proprietary Information to the extent such disclosure is reasonably necessary for (a) the development of the Compound or the Product, (b) the filing of applications for Registration, (c) the commercialization of the Compound or the Product, or (d) the filing or prosecution of a patent applications and patents relating to Improvements invented solely by Licensee or jointly by Licensee and Licensor.

11.8.2 Disclosure by Licensor . Notwithstanding the foregoing, subject to review and comment by Licensee, Licensor may disclose Licensee Proprietary Information to the extent such disclosure is reasonably necessary for the filing or prosecution of patent applications and patents relating to Improvements invented solely by Licensor.

11.9 Publications . Neither Party shall submit or present any written or oral publication, any manuscript, abstract or the like which includes data or other information related to the Compound or the Products or the Proprietary Information of the other Party without first obtaining the prior written consent of the other Party.

ARTICLE 12. TERM AND TERMINATION

12.1 Term. Unless terminated sooner as provided herein, this Agreement shall continue in full force and effect from the Effective Date until the expiration of Licensee's obligation to pay royalties hereunder. Upon expiration or termination of this Agreement with respect to one or more countries of the Territory, the rights and obligation of the parties with respect to each such country or countries shall cease, except as follows:

(i) upon expiration or termination by either party for any reason, the rights and obligations under Articles 2, 6, 10, 11, 12 and 22 and the applicable provisions of Section 8.2;

(ii) expiration or termination of this Agreement shall not relieve either party of any obligations which accrued to that party prior to such expiration or termination for any reason; and

(iii) any cause of action or remedy for breach shall survive the expiration or termination of this Agreement.

12.2 Termination by Licensee.

12.2.1 Licensee may terminate this Agreement (i) in its entirety or (ii) with respect to one or more countries of the Territory without affecting the Agreement or the licenses granted hereunder in any other country of the Territory, without cause at any time upon at least ninety (90) days prior written notice to Licensor.

12.2.2 Licensee may terminate this Agreement upon or after the breach of any material provision of this Agreement by Licensor if such breach is not cured within ninety (90) days after Licensee gives Licensor written notice thereof.

12.2.3 Licensee may terminate this Agreement in its entirety for cause upon at least ninety (90) days prior written notice to Licensor upon or after the bankruptcy, insolvency, dissolution or winding up of Licensor other than for the purpose of reconstruction or amalgamation.

12.3 Termination by Licensor .

12.3.1 Licensor may terminate this Agreement in its entirety for cause at any time upon at least ninety (90) days prior written notice to Licensee upon the occurrence of any of the following:

(a) upon or after the breach of any material provision of this Agreement by Licensee if such breach is not cured within ninety (90) days after Licensor gives Licensee written notice thereof;

(b) upon a Payment Default; or

*****Confidential material redacted and filed separately with the Commission.

(c) upon or after the bankruptcy, insolvency, dissolution or winding up of Licensee other than for the purpose of reconstruction or amalgamation; or

12.4 Rights Following Termination .

12.4.1 Subject to the provisions of Section 8.2 with respect to Improvements, in the event of termination of this Agreement with respect to all countries in the Territory, Licensee will promptly transfer and hand over to Licensor all Licensor Development Data and Licensor Know-How p rovided to Licensee hereunder. Each party will return to the other party all copies of the Proprietary Information supplied by one party to the other party hereunder, except that one copy of such Proprietary Information may be retained by each party for archival purposes only.

12.4.2 Upon termination of this Agreement or the license rights granted hereunder by either party for any reason with respect to one or all countries of the Territory (other than a termination by Licensee for an uncured breach or default by Licensor), Licensee will grant Licensor access to (and allow Licensor to obtain copies of) all Licensee Development Data and Licensee Know-How and shall promptly take all steps necessary to transfer all right, title and interest in any Registration, marketing authorizations or other regulatory approvals to Licensor. Licensor shall have the right to disclose to a Third Party all such Licensee Development Data and Licensee Know-How in connection with Licensor’s effort to license to such Third Party the right to manufacture and sell a Product in those countries where termination of Licensee’s rights has occurred. Such use or disclosure shall be subject to the Licensee’s rights in countries where termination has not occurred and to the right, title and interest in such Licensee Development Data and Licensee Know-How which shall remain vested in Licensee. The Third Party shall not be entitled to sublicense, assign or transfer any of the rights granted to it by Licensor except to an Affiliate of such Third Party. Licensee agrees to cooperate with and provide reasonable assistance to Licensor in its effort to license to a Third Party the use of such Licensee Development Data and Licensee Know-How. In consideration thereof, Licensor shall pay to Licensee a royalty of ***** on Net Sales of Product sold by Licensor or such Third Party for a period of ***** from the commencement of the sale of the Product . Any license granted by Licensor to such Third Party that bears a Licensee Royalty (a "Covered License") shall be consistent with the terms and conditions of this Agreement and shall include without limitation, provisions necessary to ensure that Licensor or such Third Party comply with royalty reporting and audit requirements, and confidentiality. Any act or omission by such Third Party under a Covered License which would have constituted a breach of this Agreement had it been the act or omission of Licensor, shall be deemed to constitute a breach of this Agreement by Licensor. Licensor shall advise Licensee without delay of any breach by such Third Party and Licensor shall exercise without delay its rights with respect to such breach against such Third Party.

12.5 Disposition of Product. Upon termination of this Agreement with respect to any country, Licensee shall provide Licensor a written inventory of all Product (in the form of raw material, work-in-progress and finished goods) in its and its Sublicensees' possession in such country, and shall have the right to dispose of such Product within six (6) months thereafter, subject to fulfillment of the royalty obligations relating thereto.

ARTICLE 13. ASSIGNMENT

This Agreement may not be assigned or otherwise transferred by either party without the written consent of the other party except that either party without such consent may assign or sell the license (i) in connection with the transfer or sale of all or substantially all of its business assets to a Third Party, or (ii) in the event of its merger or consolidation with another company, or (iii) to an Affiliate. Any purported assignment in violation of this clause shall be void. Any permitted assignee shall assume all the obligations of its assignor under this Agreement. No assignment shall relieve either party of its responsibility for the performance of any obligation that such party has accrued hereunder as of the date of assignment.

ARTICLE 14 PATENT MARKINGS

Licensee agrees to mark all Products made, used or sold under the terms of this Agreement, or their containers, in accordance with applicable patent marking laws.

ARTICLE 15. REGISTRATION OF LICENSES

Licensee agrees to register or give required notice concerning this Agreement, through itself or through a Sublicensee, in each country where there exists an obligation under law to so register or give notice, to pay all costs and legal fees connected therewith, and to otherwise comply with all national laws applicable to this Agreement. Upon request by Licensee, Licensor agrees to promptly execute any "short form" licenses in a form submitted to it by Licensee in order to effectuate the foregoing registration in each such country.

ARTICLE 16. PATENT TERM EXTENSION

Licensee agrees, as exclusive Licensee, to apply for and to exercise due diligence in obtaining an extension of the term of any patent included within the Patent Rights under the applicable laws of any country where such extensions are available, including, but not limited to, the Drug Price Competition and Patent Term Restoration Act of 1984 in the United States. Licensor agrees to execute such documents and take such additional actions as Licensee may reasonably request in connection therewith. Each party shall bear its own expenses in connection with the application for patent term extensions.

ARTICLE 17. FORCE MAJEURE

Neither party shall be held liable or responsible to the other party nor be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement, other than an obligation to make a payment, when such failure or delay is caused by or results from fires, floods, embargoes, government regulations, prohibitions or interventions, wars, acts of war, terrorism, insurrections, riots, civil disobedience, strikes, lockouts, acts of God, or any other cause beyond the reasonable control of the affected party.

ARTICLE 18. NEGATION OF AGENCY.

Nothing herein contained shall be deemed to create an agency, joint venture, amalgamation, partnership, or similar relationship between Licensee and Licensor. The relationship between the parties established by this Agreement is that of independent contractors. Neither party shall have the power to bind, obligate, incur any debts or make any commitments for the other party except to the extent, if at all, specifically provided herein.

ARTICLE 19. PUBLICITY

Each party shall give notice to the other party prior to issuing any press release relating to this Agreement within due time to allow for reasonable consideration. The party issuing the press release shall give due consideration and weight to any comments or concerns raised by the other party. Notwithstanding the foregoing, neither party shall issue a press release announcing the execution of this Agreement outside of a joint press release which will be prepared jointly by the parties.

ARTICLE 20. FILING OF THE AGREEMENT

To the extent, if any, that a party concludes in good faith that it is required to file this Agreement or a notification thereof with any governmental authority, including without limitation the U.S. Securities and Exchange Commission in accordance with applicable laws and regulations, such party may do so, subject to the confidentiality obligations set forth herein, and the other party shall cooperate in such filing or notification and shall execute all documents reasonably required in connection therewith at the, expense of the requesting party. The parties shall promptly inform each other as to the activities or inquiries of any such governmental authority relating to this Agreement, and shall cooperate, in responding to any request for further information therefrom at the expense of the requesting party.

ARTICLE 21. SEVERABILITY

Each party hereby expressly agrees and contracts that it is not the intention of either party to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries. If any word, sentence, paragraph, clause or combination thereof in this Agreement is found by a court or executive body with judicial powers having jurisdiction over this Agreement or any of the parties hereto in a final unappealable order to be in violation of any such provisions in any country or community or association of countries, such word, sentence, paragraph, clause or combination thereof shall be inoperative in such country or community or association of countries, and the parties will seek in good faith to amend this Agreement in order to cure such violation; the remainder of this Agreement shall in any event remain binding upon the parties hereto.

ARTICLE 22. NOTICES

Any notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been properly given if delivered in person, or if mailed by registered or certified mail (return receipt requested), postage prepaid, or by telex or facsimile or e-mail promptly confirmed by first class mail, to the addresses given below or such other addresses as may be designated in writing by the parties from time to time during the term of this Agreement. Any notice sent or by telex or facsimile or e-mail shall be effective when sent, and any notice sent by registered or certified mail shall be effective when mailed.

In the case of Licensee:

Keryx Biopharmaceuticals, Inc

750 Lexington Ave, 20 ^th Floor

New York, NY 10022

Attn: Michael S. Weiss

Chairman & CEO

Email: msw@keryx.com

In the case of Licensor:

Panion & BF Biotech, Inc.

16F No. 3, Yuanqu Street,

Nangang District,

Taipei, Taiwan, ROC

Attn: Michael Chiang

ARTICLE 23. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, exclusive of choice-of-law rules. Any dispute between Licensor and Licensee arising from or relating to this Agreement will be determined exclusively by the United States District Court for the Southern District of New York (and the appellate courts thereof), to whose jurisdiction the parties irrevocably consent; provided, however, if for any reason that Court should lack jurisdiction over any such suit, the same shall be brought exclusively in the New York State Supreme Court, New York County, to whose jurisdiction the parties irrevocably consent. Licensor irrevocably consents that service of process may be effected in connection with any such action by certified mail addressed to its offices at 16F No. 3, Yuanqu Street, Nangang District, Taipei, Taiwan and agrees that such service shall constitute good and sufficient service for all purposes; provided, further, that the prevailing party in any such action shall be awarded its reasonable attorneys’ and expert fees and expenses incurred in connection with the action.

ARTICLE 24. AFFILIATES

Each party may perform its obligations hereunder personally or through one or more Affiliate and shall be responsible for the performance of such obligations, and any liabilities resulting from such performance. Neither party shall permit any of its Affiliates to commit any act (including any act of omission) which such party is prohibited hereunder from committing directly.

ARTICLE 25. ENTIRE AGREEMENT

This Agreement and the Exhibits hereto which are a part hereof, contain the entire understanding of the parties with respect to the subject matter hereof. All express or implied agreements and understanding, either oral or written, heretofore made are expressly merged in and made a part of this Agreement. The parties hereto may alter any of the provisions of this Agreement, but only by a written instrument duly executed by both parties hereto. This Agreement may be executed in counterparts.

ARTICLE 26. WAIVER

The failure of a party to enforce at any time for any period any of the provisions hereof shall not be construed as a waiver of such provisions or of the right of such party thereafter to enforce each such provision.

ARTICLE 27. CAPTIONS

The captions to the several Articles and Sections hereof are not a part of this Agreement, but are merely guides or labels to assist in location and reading the several Articles and Sections hereof.

IN WITNESS HEREOF , the parties have executed this Agreement as of the Effective Date.

KERYX BIOPHARMACEUTICALS, INC.		PANION & BF BIOTECH INC.

By:	/s/ Michael S. Weiss	By:	/s/ Michael Chiang
	Michael S. Weiss		Michael Chiang
	Chairman & CEO		Executive President

EXHIBIT 1

PATENT RIGHTS

Attorney Dkt. No.	Country
855-B-PRO	United States
859-PRO	United States
859-PCT	N/A
859-PCT-CAN	Canada
859-PCT-EPO	Europe
	EPO - Austria
	EPO - Belgium
	EPO - Bulgaria
	EPO - Cyprus
	EPO - Czech Republic
	EPO - Denmark
	EPO - Estonia
	EPO - Finland
	EPO - France
	EPO - Germany
	EPO- Great Britain
	EPO - Greece
	EPO - Hungary
	EPO - Ireland
	EPO - Italy
	EPO - Luxembourg
	EPO - Monaco
	EPO - Netherlands
	EPO - Portugal
	EPO - Romania
	EPO - Sweden
	EPO - Slovakia
	EPO - Slovenia
	EPO - Spain
	EPO - Liechtenstein/Switzerland
	EPO - Turkey
859-PCT-ERA	Eurasia
	ERA - Armenia
	ERA - Azerbaijan
	ERA - Belarus
	ERA - Kazakhstan
	ERA - Kyrgyzstan
	ERA - Moldova
	ERA - Russia
	ERA - Tajikistan

	ERA - Turkmenistan
859-PCT-JP	Japan
859-PCT-IL	Israel
859-PCT-MX	Mexico
859-A-PCT-US	United States
859-B-PRO	United States
859-C-PCT	N/A
859-C-PCT-CAN	Canada
859-C-PCT-IL	Israel
859-C-PCT-JP	Japan
859-C-PCT-MX	Mexico
859-C-PCT-EPO	Europe
859-C-PCT-ERA	Eurasia
859-C-PCT-US	United States
1092-US	United States
1092-PRO	United States
1092-PCT	N/A
1092-PCT-CAN	Canada
1092-PCT-EPO	Europe
	EPO - Austria
	EPO - Belgium
	EPO - Denmark
	EPO - Finland
	EPO - France
	EPO - Germany
	EPO - Greece
	EPO - Ireland
	EPO - Italy
	EPO - Liechtenstein/Switzerland
	EPO - Luxembourg
	EPO - Monaco
	EPO - Netherlands
	EPO - Portugal
	EPO - Spain
	EPO - Sweden
	EPO - United Kingdom
1092-PCT-IL	Israel
1092-PCT-JP	Japan
1092-Z-PCT-JP	Japan
1092-PCT-MX	Mexico
1092-PCT-NO	Norway
1098-US	United States
1148-PRO	United States
1148-A-PCT	N/A
1231-PCT	N/A

EXHIBIT 2

WRITTEN CONSENT OF INVENTOR

CONSENT BY INVENTOR

The undersigned, Dr. Chen Hsing Hsu, is the inventor and owner of the U.S. Patent No. 5,753,706, issued May 19, 1998 and entitled “Methods for Treating Renal Failure,” filed in the U.S. and other countries (the Hsu Patent).

Dr. Chen Hsing Hsu (The Inventor) granted Panion & BF Biotech Inc. (Panion) of Taipei, Taiwan the right to commercialize the inventions disclosed in the Hsu Patent and the two parties entered into a Patent License Agreement dated July 20, 2001 and its subsequent Amendment 1 dated August 29, 2005.

Panion is desirous to grant Keryx Biopharmaceuticals, Inc. (Keryx) of New York the right to further develop and commercialize the Hsu Patent. The inventor hereby gives consent to Panion to enter licensing agreement with Keryx.

/s/ Chen Hsing Hsu

Chen Hsing Hsu

Exhibit 31.1

CERTIFICATION OF PERIODIC REPORT PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Michael S. Weiss, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Keryx Biopharmaceuticals, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

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;

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

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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

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: May 12, 2008		/s/ Michael S. Weiss
		Michael S. Weiss Chief Executive Officer Principal Executive Officer

Exhibit 31.2

CERTIFICATION OF PERIODIC REPORT PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James F. Oliviero, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Keryx Biopharmaceuticals, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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: May 12, 2008		/s/ James F. Oliviero
		James F. Oliviero Vice President, Finance Principal Financial and Accounting Officer

Exhibit 32.1

STATEMENT OF CHIEF EXECUTIVE OFFICER OF

KERYX BIOPHARMACEUTICALS, INC.

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Keryx Biopharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2008 as filed with the Securities and Exchange Commission (the “Report”), I, Michael S. Weiss, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 12, 2008		/s/ Michael S. Weiss
		Michael S. Weiss Chief Executive Officer Principal Executive Officer

Exhibit 32.2

STATEMENT OF CHIEF FINANCIAL OFFICER OF

KERYX BIOPHARMACEUTICALS, INC.

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Keryx Biopharmaceuticals, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2008 as filed with the Securities and Exchange Commission (the “Report”), I, James F. Oliviero, Vice President, Finance, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 12, 2008		/s/ James F. Oliviero
		James F. Oliviero Vice President, Finance Principal Financial and Accounting Officer