ARCA biopharma, Inc. (Form: 10-Q, Received: 05/15/2009 16:08:11)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009

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

FOR THE TRANSITION PERIOD FROM TO

Commission File Number 000-22873

ARCA BIOPHARMA, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		36-3855489
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

8001 Arista Place, Suite 200 Broomfield, CO		80021
(Address of Principal Executive Offices)		(Zip Code)

(720) 940-2200

(Registrant’s Telephone Number, including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class		Number of Shares Outstanding
Common Stock $0.001 par value		On May 8, 2009: 7,570,103

ARCA BIOPHARMA, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2009


		PAGE
Part I	Financial Information	3
	Item 1. Consolidated Financial Statements (unaudited)	3
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	23
	Item 4. Controls and Procedures	23
Part II	Other Information	24
	Item 1. Legal Proceedings	24
	Item 1A. Risk Factors	24
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
	Item 3. Defaults Upon Senior Securities	38
	Item 4. Submission of Matters to a Vote of Security Holders	38
	Item 5. Other Information	38
	Item 6. Exhibits	39
Signature		41

PART I. FINANCIAL INFORMATION

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

ARCA BIOPHARMA, INC.

(a development stage enterprise)

CONSOLIDATED BALANCE SHEETS

(unaudited)


	March 31, 2009			December 31, 2008
	(in thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	25,920		$	7,740
Marketable securities		9,368			—
Deferred transaction costs		—			1,668
Other current assets		1,656			270

Total current assets		36,944			9,678

Restricted cash		6,000			—
Property and equipment, net		1,628			1,303
In-process research and development		6,000			—
Other assets		1,178			98

Total assets	$	51,750		$	11,079

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	1,296		$	804
Accrued compensation and employee benefits		3,296			1,071
Accrued expenses and other liabilities		2,589			1,549
Bank note payable, current portion		1,979			3,948
Convertible notes payable		—			8,351
Deferred rent, current portion		124			107
Accrued facility exit costs, current portion		5,482			—

Total current liabilities		14,766			15,830

Bank note payable, net of current portion		1,493			—
Deferred rent, net of current portion		402			430
Accrued facility exit costs, net of current portion		6,758			—
Deferred tax liability		2,281			—
Other long-term liabilities		727			132

Total liabilities		26,427			16,392

Commitments and contingencies
Preferred Stock:
Redeemable, convertible preferred stock, $0.001 par value
Series A, 9,222,257 shares authorized; 0 and 9,222,257 shares issued and outstanding at March 31, 2009 and December 31, 2008, respectively; liquidation preference of $15 million at December 31, 2008		—			14,958
Series B, 6,511,961 shares authorized; 0 and 6,455,579 shares issued and outstanding at March 31, 2009 and December 31, 2008, respectively; liquidation preference of $18 million at December 31, 2008		—			17,907
Stockholders’ equity (deficit):
Common stock, $0.001 par value; 100 million and 40 million shares authorized at March 31, 2009 and December 31, 2008, respectively; 7,569,903 and 954,420 shares issued and outstanding at March 31, 2009 and December 31, 2008, respectively		8			1
Additional paid-in capital		56,167			2,573
Unrealized loss on marketable securities		(33	)		—
Deficit accumulated during the development stage		(30,819	)		(40,752	)

Total stockholders’ equity (deficit)		25,323			(38,178	)

Total liabilities and stockholders’ equity (deficit)	$	51,750		$	11,079

See accompanying notes to consolidated financial statements.

ARCA BIOPHARMA, INC.

(a development stage enterprise)

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three Months Ended March 31,						Period from December 17, 2001 (date of inception) to March 31, 2009
	2009			2008
	(in thousands, except share and per share amounts)
Costs and expenses:
Research and development	$	4,592		$	2,361		$	30,746
Sales, general and administrative		5,324			1,634			20,725
Merger transaction costs		5,470			—			5,470

Total costs and expenses		15,386			3,995			56,941

Loss from operations		(15,386	)		(3,995	)		(56,941	)

Gain on bargain purchase		25,282			—			25,282
Interest and other income		101			124			1,145
Interest and other expense		(64	)		(5	)		(305	)

Net income (loss)	$	9,933		$	(3,876	)	$	(30,819	)

Less: Accretion of redeemable convertible preferred stock		(135	)		(14	)		(245	)
Less: Deemed preferred stock dividend for additional common shares issuable under anti-dilution provision		(781	)		—			(781	)

Net income (loss) attributable to common stockholders	$	9,017		$	(3,890	)	$	(31,845	)

Net income (loss) attributable to common stockholders per share:
Basic	$	1.61		$	(5.67	)
Diluted	$	1.41		$	(5.67	)
Weighted average shares outstanding:
Basic		5,611,586			686,560
Diluted		7,086,223			686,560

See accompanying notes to consolidated financial statements.

ARCA BIOPHARMA, INC.

(a development stage enterprise)

CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited)


	Preferred Stock										Stockholders’ Equity (Deficit)
	Series A Redeemable Convertible Preferred Stock					Series B Redeemable Convertible Preferred Stock					Common stock				Additional Paid In Capital			Deficit Accumulated During the Development Stage			Other Comprehensive Income (Loss)			Total
	Shares		Amount			Shares		Amount			Shares		Amount		Additional Paid In Capital			Deficit Accumulated During the Development Stage			Other Comprehensive Income (Loss)			Total
	(in thousands, except share and per share amounts)
Balance, December 17, 2001 (date of inception)	—		$	—		—		$	—		—		$	—	$	—		$	—		$	—		$	—
Issuance of common stock to founders on December 31, 2002, for cash, at $0.06 per share	—			—		—			—		15,529			—		1			—			—			1
Net loss	—			—		—			—		—			—		—			(116	)		—			(116	)

Balance, December 31, 2003	—			—		—			—		15,529			—		1			(116	)		—			(115	)
Issuance of common stock on September 30, 2004, for cash, at $0.06 per share	—			—		—			—		118,319			—		7			—			—			7
Net loss	—			—		—			—		—			—		—			(511	)		—			(511	)

Balance, December 31, 2004	—			—		—			—		133,848			—		8			(627	)		—			(619	)
Issuance of common stock on January 3, 2005, for cash, at $0.06 per share	—			—		—			—		17,533			—		1			—			—			1
Issuance of common stock on January 3, 2005, upon conversion of notes payable and related accrued interest at $0.06 per share	—			—		—			—		17,867			—		1			—			—			1
Issuance of common stock on October 14, 2005, for intellectual property license rights, at $8.14 per share	—			—		—			—		5,419			—		44			—			—			44
Issuance of common stock on October 14, 2005, upon conversion of notes payable and related accrued interest	—			—		—			—		186,571			—		1,354			—			—			1,354
Net loss	—			—		—			—		—			—		—			(1,459	)		—			(1,459	)

Balance, December 31, 2005	—			—		—			—		361,238			—		1,408			(2,086	)		—			(678	)
Issuance of common stock on February 21, 2006, for intellectual property license rights, at $0.72 per share	—			—		—			—		104,229			—		75			—			—			75
Issuance of Series A on February 22, 2006, for cash, at $1.6265 per share	5,727,354			9,316		—			—		—			—		—			—			—			—
Issuance of Series A on February 22, 2006, upon conversion of notes payable and related accrued interest, at $1.6265 per share	420,817			684		—			—		—			—		—			—			—			—
Issuance of common stock upon exercise of stock options, for cash	—			—		—			—		48,111			—		3			—			—			3
Issuance of common stock on February 22, 2006, for intellectual property and product license rights, at $0.72 per share	—			—		—			—		83,443			1		59			—			—			60
Issuance of common stock on June 23, 2006, for intellectual property license rights, at $0.90 per share	—			—		—			—		15,028			—		15			—			—			15
Issuance of common stock on November 7, 2006, for intellectual property license rights, at $0.90 per share	—			—		—			—		229			—		—			—			—			—
Issuance of Series A on December 8, 2006, for cash, at $1.6265 per share	3,074,086			5,000		—			—		—			—		—			—			—			—
Series A offering costs	—			(98	)	—			—		—			—		—			—			—			—
Share-based compensation	—			—		—			—		—			—		39			—			—			39
Accretion of offering costs of redeemable convertible preferred stock	—			17		—			—		—			—		(17	)		—			—			(17	)
Net loss	—			—		—			—		—			—		—			(5,241	)		—			(5,241	)

Balance, December 31, 2006	9,222,257			14,919		—			—		612,278			1		1,582			(7,327	)		—			(5,744	)
Issuance of Series B convertible redeemable preferred stock, on May 31, 2007 for $2.439 per share	—			—		3,688,902			9,000		—			—		—			—			—			—
Issuance of Series B convertible redeemable preferred stock, on December 28, 2007 for $3.253 per share	—			—		2,766,677			9,000		—			—		—			—			—			—
Series B offering Costs	—			—		—			(147	)	—			—		—			—			—			—
Accretion of Series A offering costs	—			19		—			—		—			—		(19	)		—			—			(19	)
Accretion of Series B offering costs	—			—		—			18		—			—		(18	)		—			—			(18	)
Issuance of common stock for intellectual property license rights, on January 18, 2007 at $1.68 per share	—			—		—			—		7,817			—		13			—			—			13
Issuance of common stock for intellectual property license rights, on June 30, 2007 at $1.80 per share	—			—		—			—		3,852			—		7			—			—			7
Issuance of common stock for commercial license rights, on July 19, 2007, vests upon achievement of specified criteria	—			—		—			—		16,698			—		—			—			—			—
Share-based compensation	—			—		—			—		—			—		50			—			—			50
Issuance of shares to executive on February 19, 2007, vesting upon achievement of specified criteria, subject to repurchase	—			—		—			—		83,490			—		—			—			—			—
Issuance of common stock upon exercise of stock options for cash	—			—		—			—		13,359			—		16			—			—			16
Net loss	—			—		—			—		—			—		—			(13,994	)		—			(13,994	)

Balance, December 31, 2007	9,222,257			14,938		6,455,579			17,871		737,494			1		1,631			(21,321	)		—			(19,689	)
Accretion of Series A offering costs	—			20		—			—		—			—		(20	)		—			—			(20	)
Accretion of Series B offering costs	—			—		—			36		—			—		(36	)		—			—			(36	)
Share-based compensation	—			—		—			—		—			—		545			—			—			545
Estimated fair value of warrants issued in connection with convertible notes payable	—			—		—			—		—			—		399			—			—			399
Issuance of common stock upon exercise of stock options, for cash	—			—		—			—		216,926			—		54			—			—			54
Net loss	—			—		—			—		—			—		—			(19,431	)		—			(19,431	)

Balance, December 31, 2008	9,222,257			14,958		6,455,579			17,907		954,420			1		2,573			(40,752	)		—			(38,178	)
Adjustment for fractional shares on common conversion	—			—		—			—		(39	)		—		—			—			—			—
Deemed preferred stock dividend for additional common shares issuable under anti-dilution provision	—			—		—			781		—			—		(781	)		—			—			(781	)
Accretion of Series A offering costs	—			42		—			—		—			—		(42	)		—			—			(42	)
Accretion of Series B offering costs	—			—		—			93		—			—		(93	)		—			—			(93	)
Conversion of preferred stock	(9,222,257	)		(15,000	)	(6,455,579	)		(18,781	)	3,042,740			3		33,778			—			—			33,781
Restricted stock release from restriction	—			—		—			—		—			—		75			—			—			75
Conversion of convertible notes and related accrued interest	—			—		—			—		872,792			1		8,500			—			—			8,501
Conversion of warrants for preferred stock	—			—		—			—		—			—		36			—			—			36
Share-based compensation	—			—		—			—		—			—		194			—			—			194
Merger / reverse stock split Nuvelo, Inc.	—			—		—			—		2,686,957			3		11,910			—			—			11,913
Adjustment for fractional shares	—			—		—			—		(609	)		—		—			—			—			—
Issuance of common stock upon exercise of stock options for cash	—			—		—			—		12,778			—		16			—			—			16
Issuance of common stock under employee stock purchase plan and upon vesting of restricted stock units	—			—		—			—		864			—		1			—			—			1
Comprehensive income (loss):
Net income	—			—		—			—		—			—		—			9,933			—			9,933
Unrealized loss on marketable securities	—			—		—			—		—			—		—			—			(33	)		(33	)

Comprehensive income																									9,900

Balance, March 31, 2009	—		$	—		—		$	—		7,569,903		$	8	$	56,167		$	(30,819	)	$	(33	)	$	25,323

See accompanying notes to consolidated financial statements.

ARCA BIOPHARMA, INC.

(a development stage enterprise)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Three Months Ended March 31,						Period from December 17, 2001 (date of inception) to March 31, 2009
	2009			2008
Cash flows used in operating activities:
Net income (loss)	$	9,933		$	(3,876	)	$	(30,819	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Gain on bargain purchase		(25,282	)		—			(25,282	)
Depreciation and amortization		115			23			455
Non-cash interest expense		28			5			137
Share-based compensation		194			21			865
Issuance of common stock for license rights		—			—			214
Interest on notes converted to Series A Preferred Stock		—			—			5
Interest on notes converted to common stock		—			—			48
Accretion of liabilities		78			—			78
Loss from disposal of property and equipment		—			—			24
Change in operating assets and liabilities (net of amounts acquired):
Other current assets		2,429			(80	)		2,165
Other assets		—			—			(75	)
Accounts payable		(1,697	)		62			(894	)
Accrued expenses and other liabilities		(3,250	)		(152	)		(1,244	)
Deferred rent		(10	)		—			527

Net cash used in operating activities		(17,462	)		(3,997	)		(53,796	)

Cash flows provided by (used in) investing activities:
Cash received from Merger		30,392			—			30,392
Payment of deferred transaction costs		—			—			(1,186	)
Purchase of property and equipment		(155	)		(132	)		(1,826	)
Proceeds from sale of marketable securities		5,700			—			5,700
Proceeds from sale of property and equipment		202			—			207

Net cash provided by (used in) investing activities		36,139			(132	)		33,287

Cash flows (used in) provided by financing activities:
Proceeds from issuance of convertible notes payable and related warrants for common stock		—			—			10,841
Proceeds from issuance of bank note payable		—			—			4,000
Proceeds from stock subject to repurchase		—			—			38
Proceeds from the issuance of preferred stock		—			—			32,316
Preferred stock offering costs		—			—			(246	)
Proceeds from the issuance of common stock		17			5			99
Repayment of principal on bank note payable		(514	)		—			(514	)
Repayment of principal on convertible notes payables		—			—			(105	)

Net cash (used in) provided by financing activities		(497	)		5			46,429

Net increase (decrease) in cash and cash equivalents		18,180			(4,124	)		25,920
Cash and cash equivalents, beginning of period		7,740			15,862			—

Cash and cash equivalents, end of period	$	25,920		$	11,738		$	25,920

Supplemental cash flow information:
Interest paid	$	41		$	—		$	51

Supplemental disclosure of noncash investing and financing transactions:
Accrued interest converted to equity on notes payable	$	151		$	—		$	163

See accompanying notes to consolidated financial statements.

ARCA BIOPHARMA, INC.

(a development stage enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)

The Company and Summary of Significant Accounting Policies

Description of Business

ARCA biopharma, Inc. (the “Company” or “ARCA”), a Delaware corporation, is headquartered in Broomfield, Colorado and is principally focused on developing and commercializing genetically-targeted therapies for heart failure and other cardiovascular diseases. The Company’s first drug candidate is Gencaro™, a next generation beta-blocker and vasodilator for advanced heart failure and other indications, which the Company believes has the potential to be the first genetically targeted cardiovascular drug. Gencaro was the subject of a Phase III heart failure mortality trial involving more than 2,700 patients and was unique in gathering DNA data on over 1,000 of its participants. The Company has licensed exclusive, worldwide rights to Gencaro. In September 2008, the U.S. Food and Drug Administration (“FDA”) accepted for filing the Company’s New Drug Application (“NDA”) for Gencaro.

Merger with Nuvelo, Inc.

On January 27, 2009, the Company completed a business combination (the “Merger”) with ARCA Colorado in accordance with the terms of that Agreement and Plan of Merger and Reorganization, dated September 24, 2008, and amended on October 28, 2008 (as amended, the “Merger Agreement”), in which a wholly-owned subsidiary of Nuvelo merged with and into ARCA Colorado, with ARCA Colorado continuing after the Merger as the surviving corporation and a wholly-owned subsidiary of Nuvelo. Immediately following the Merger, the Company changed its name from Nuvelo, Inc. to ARCA biopharma, Inc. The business combination is treated as a reverse merger for accounting purposes, and ARCA Colorado is the accounting acquirer, and the entity formerly known as Nuvelo, Inc. is the acquired company (“Nuvelo” or the “acquired company”). The results of operations and cash flows for the three months ended March 31, 2009 include the activities of the acquired company since the date of the Merger. Pursuant to the rules and regulations of the Securities and Exchange Commission, the historical financial statements of ARCA Colorado replaced the historical financial statements of the acquired company, and the disclosures in this report relating to the pre-Merger business of the Company, unless noted as being the business of Nuvelo prior to the Merger, pertain to the business of ARCA Colorado prior to the Merger. See Note 2 for further discussion of the Merger.

Merger Exchange Ratio and Reverse Stock Split

In conjunction with and immediately prior to the Merger, Nuvelo effected a 20-for-1 reverse stock split. As a result, and in accordance with the Merger Agreement, each outstanding common share and warrant or option to purchase ARCA Colorado’s common stock prior to the Merger was converted into the right to receive or purchase 0.16698070 (the “Exchange Ratio”) shares of the Company’s common stock (see Note 2), which Exchange Ratio incorporates the effect of the reverse stock split. All common shares, options and warrants to purchase common shares and per common share amounts for all periods presented in the accompanying financial statements and notes have been adjusted retroactively to reflect the effect of the Exchange Ratio, except for the par value per share and the number of shares authorized, which are not affected by the Exchange Ratio.

The accompanying financial statements and notes have not been adjusted to retroactively reflect the effect of the Exchange Ratio on preferred shares, warrants to purchase preferred shares, and per preferred share amounts. The ratios used to convert ARCA Colorado’s preferred stock and warrants to purchase ARCA Colorado’s preferred stock prior to the Merger into the right to receive or purchase shares of the Company’s common stock as a result of the Merger is discussed in Note 2.

Development Stage Risks, Liquidity and Going Concern

The Company is in the development stage and devotes substantially all of its efforts towards obtaining regulatory approval, building product commercialization capabilities, and raising capital necessary to fund its operations. As previously disclosed in the Company’s Annual Report on Form 10-K, the regulatory approval process for the Gencaro NDA is expensive and time-consuming and subject to the risk that the FDA may determine that the available clinical data for Gencaro are not sufficiently strong to demonstrate Gencaro’s safety and efficacy. Any such determination could prevent or delay regulatory approval and commercialization of Gencaro. As part of the FDA review of the NDA, the Company has had extensive interactions with, and has recently provided substantial supplemental information to the FDA. The submission of this or additional information could result in an extension of the review of the Gencaro NDA beyond the May 31, 2009 PDUFA date.

The Company has not generated revenue to date and is subject to a number of risks similar to those of other development stage companies, including dependence on key individuals, the development of and regulatory approval of commercially viable products, the need to obtain adequate additional financing necessary to fund the development and commercialization of its products, and competition from larger companies. The Company has historically funded its operations through issuances of convertible promissory notes, and shares of its common and preferred stock. As a result of the closing of the Merger, the Company acquired approximately $45 million in cash and short-term investments.

Since ARCA Colorado was founded on December 11, 2001 (“Inception”), the Company has incurred substantial losses and negative cash flows from operations. For the three months ended March 31, 2009, the Company incurred a loss from operations of $15.4 million and had negative cash flows from operations of $17.5 million.

As previously disclosed in its Annual Report on Form 10-K, the Company’s strategy to commercialize Gencaro, if approved, has been to raise sufficient capital to establish internal sales and marketing capabilities as well as its own distribution network for the product, if practicable. As a result of the continuing substantial disruption in the capital markets, the difficulty of raising a significant amount of capital on acceptable terms in light of these disruptions, and consideration of any potential extension of the review of the Gencaro NDA beyond the May 31, 2009 PDUFA date, the Company is currently exploring strategic alternatives for commercializing Gencaro, including a potential strategic combination or a license of the Gencaro commercialization rights. Alternatively, the Company may continue to seek substantial additional funding through public or private debt or equity markets to support the continued development and commercialization of Gencaro. In light of the Company’s current strategic direction and capital needs, the Company is actively evaluating restructuring alternatives. The Company believes that, after giving effect to an anticipated restructuring, its current cash, cash equivalents and marketable securities balances will be sufficient to fund operations through at least December 31, 2009 although the Company may seek to raise additional capital to augment its cash position. The Company is unable to assert to that its current cash, cash equivalents and marketable securities are sufficient to fund operations for the next twelve months, and as a result, there is substantial doubt about the Company’s ability to continue as a going concern after December 31, 2009.

The Company’s liquidity, and its ability to complete any strategic transaction or to raise additional capital, depends on a number of factors, including, but not limited to, the following:

•

timing and outcome of the FDA’s response to the Company’s NDA for Gencaro which, if approved, would trigger an $8 million milestone payment that would then be due within six months;

•

the costs of commercializing the Company’s product candidates if regulatory approvals are obtained, including the costs of establishing or contracting for marketing, sales and manufacturing capabilities, and other costs related to the size of the Company’s organization, which costs, the Company currently expects to substantially defer pending its review of strategic alternatives;

•

general economic and industry conditions affecting the availability and cost of capital;

•

the Company’s ability to reduce costs associated with its operation;

•

the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and

•

the terms and conditions of the Company’s existing collaborative and licensing agreements.

Should strategic alternatives or additional capital not be available to the Company in the near term, or not be available on acceptable terms, the Company may further delay or reduce operational activities to conserve its cash resources. The accompanying financial statements have been prepared with the assumption that the Company is a going concern and will be able to realize its assets and discharge its liabilities in the normal course of business and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of the Company to continue as a going concern.

Basis of Presentation

The Company has generated no revenue to date and its activities have consisted of seeking regulatory approval, product commercialization, and raising capital. Accordingly, the Company is considered to be in the development stage at March 31, 2009, as defined in Statement of Financial Accounting Standards (“SFAS”) No. 7, Accounting and Reporting by Development Stage Enterprises .

Accounting Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company bases estimates on various assumptions that are believed to be reasonable under the circumstances. The Company believes significant judgment was involved in estimating the fair value of assets acquired and liabilities assumed in the Merger, including in-process research and development, facility exit costs, clinical trial accruals, and in estimating other accrued liabilities, stock-based compensation, and income taxes. Management is continually evaluating and updating these estimates, and it is possible that these estimates will change in the future or that actual results may differ from these estimates.

Cash Equivalents and Marketable Securities

Cash equivalents consist of money market funds and debt securities with maturities of 90 days or less at the time of purchase. The Company considers its investments in marketable debt securities, which consist of U.S. Treasury, U.S. government agency, corporate debt and asset-backed securities, as available for use in current operations. Accordingly, the Company classifies these investments as short-term. The Company invests its excess cash in securities with strong ratings and has established guidelines relative to diversification and maturity with the objective of maintaining safety of principal and liquidity.

The Company classifies all cash equivalents and marketable securities as available-for-sale securities, as defined by Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and records investments at fair value. Unrealized holding gains and losses on available-for-sale securities, net of any tax effect, are excluded from earnings and are reported in accumulated other comprehensive income (loss), a separate component of stockholders’ equity, until realized. The specific identification method is utilized to calculate the cost to determine realized gains and losses from the sale of available-for-sale securities. Realized gains and losses are included in interest income in the statements of operations.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and other receivables. The Company has no off-balance-sheet concentrations of credit risk, such as foreign exchange contracts, option contracts, or foreign currency hedging arrangements. The Company maintains cash and cash equivalent balances in the form of bank demand deposits, money market fund accounts and debt securities with financial institutions that management believes are creditworthy. Such balances may at times exceed the insured amount.

Fair Value of Financial Instruments

On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements, or SFAS No. 157. SFAS No. 157 establishes a common definition for fair value to be applied to U.S. GAAP requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157, or FSP 157-2, which delays the effective date for SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except items that are recognized or disclosed at fair value on a recurring basis (at least annually), until fiscal years beginning after November 15, 2008. The implementation of SFAS No. 157 for financial assets and financial liabilities and FSP 157-2 for nonfinancial assets and nonfinancial liabilities did not have a material impact on the Company’s financial position and results of operations.

SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). SFAS No. 157 classifies the inputs used to measure fair value into the following hierarchy:

•

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities

•

Level 2—Unadjusted quoted prices in active markets for similar assets or liabilities; unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quotes prices that are observable for the asset or liability

•

Level 3—Unobservable inputs for the asset or liability

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and marketable securities) measured at fair value on a recurring basis as of March 31, 2009 (in thousands):


	Level 1		Level 2		Level 3		Total
Money market fund	$	25,209	$	—	$	—	$	25,209
Corporate debt securities		—		9,368		—		9,368

Total	$	25,209	$	9,368	$	—	$	34,577

The money market fund, which is expected to maintain a net asset value of $1 per share, was categorized in Level 1 of the fair value hierarchy. Corporate debt securities were categorized in Level 2 of the fair value hierarchy. The fair value of these securities was generally based on pricing models which took into consideration market prices of identical or similar securities from multiple sources and the securities’ accreted balance on the reporting day.

Statement of Financial Accounting Standards No. 159, “ The Fair Value Option for Financial Assets and Financial Liabilities, ” allows entities to voluntarily choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. To date, the Company has not elected this fair value option for any assets or liabilities.

Restricted Cash

Restricted cash represents a certificate of deposit used to collateralize a letter of credit as required by the lease agreement assumed in the Merger for the acquired company’s facility in Sunnyvale, California. See Note 6, Facility Exit Costs, for discussion of the related lease commitment, and Note 8, Commitments and Contingencies, for discussion of the letter of credit arrangement.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Cost includes expenditures for equipment, leasehold improvements, replacements, and renewals. Maintenance and repairs are charged to expense as incurred. When assets are sold, retired, or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. The cost of property and equipment is depreciated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the life of the lease or the estimated useful life of the assets. Property and equipment acquired in the Merger were recorded at the estimated fair value as of the date of the Merger, and are subsequently depreciated using the straight-line method over the estimated useful lives of the related assets.

Long-Lived Assets and Impairments

The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Management believes that there is no indication that an impairment of its long-lived assets has occurred from Inception through March 31, 2009. As a development stage company, the Company has not generated positive cash flows from operations, and such cash flows may not materialize for a significant period in the future, if ever. Additionally, the Company may make changes to its business plan that would result in changes to expected cash flows from long-lived assets. As a result, it is reasonably possible that future evaluations of long-lived assets may result in impairment.

Accrued Expenses

As part of the process of preparing its financial statements, the Company is required to estimate accrued expenses. This process involves identifying services that third parties have performed on the Company’s behalf and estimating the level of service performed and the associated cost incurred for these services as of the balance sheet date. Examples of estimated accrued expenses include contract service fees, such as fees payable to contract manufacturers in connection with the production of materials related to the Company’s drug product, and professional service fees, such as attorneys, consultants, and clinical research organizations. The Company develops estimates of liabilities using its judgment based upon the facts and circumstances known at the time.

Segments

The Company operates in one segment. Management uses one measure of profitability and does not segment its business for internal reporting.

Research and Development

Research and development costs are expensed as incurred. These consist primarily of salaries, contract services, and supplies.

Costs related to clinical trial and drug manufacturing activities are based upon estimates of the services received and related expenses incurred by contract research organizations (CROs), clinical study sites, drug manufacturers, collaboration partners, laboratories, consultants, or otherwise. Related contracts vary significantly in length, and could be for a fixed amount, a variable amount based on actual costs incurred, capped at a certain limit, or for a combination of these elements. Activity levels are monitored through communications with the CROs and other vendors, including detailed invoices and task completion review, analysis of expenses against budgeted amounts, and pre-approval of any changes in scope of the services to be performed. Certain significant vendors may also provide an estimate of costs incurred but not invoiced on a periodic basis. Expenses related to the CROs and clinical studies are primarily based on progress made against specified milestones or targets in each period.

Stock-Based Compensation

Effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment , using the prospective method of transition. Under that transition method, compensation cost recognized in each subsequent period includes: (a) compensation costs for current period vesting of all share-based payments granted prior to January 1, 2006, based on the intrinsic value method prescribed by APB Opinion No. 25, and (b) compensation cost for current period vesting of all share-based payments granted or modified subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123(R). The Company recognizes compensation costs for its share-based awards on a straight-line basis over the requisite service period for the entire award.

From Inception through December 31, 2005, the Company accounted for issuances of stock-based compensation under the intrinsic-value-based method of accounting prescribed by Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees , and related interpretations, including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation—an Interpretation of APB Opinion No. 25 . Under this method, compensation expense is generally recorded on the date of grant only if the estimated fair value of the underlying stock exceeds the exercise price.

Exit and Disposal Activities

As a result of the Merger, the Company assumed a facility lease agreement for a facility which the acquired company had previously exited. The fair value of the obligation related to such lease was estimated as of the date of the Merger using a discounted cash flow model which considered the estimated future cash flows under the lease and an estimate of sublease rental income and other lease operating expenses. The estimated fair value of the liability was recorded as ‘accrued facility exit costs’ on the consolidated balance sheet. The accretion of the liability due to the passage of time is recorded as a general and administrative expense.

Income Taxes

The current provision for income taxes represents actual or estimated amounts payable or refundable on tax returns filed or to be filed each year. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The overall change in deferred tax assets and liabilities for the period measures the deferred tax expense or benefit for the period. The measurement of deferred tax assets may be reduced by a valuation allowance based on judgmental assessment of available evidence if deemed more likely than not that some or all of the deferred tax assets will not be realized. The Company has recorded a valuation allowance against its deferred tax assets, as management has concluded that it is more likely than not that the net deferred tax asset will not be realized through future taxable income, based primarily on the Company’s history of operating losses. As a result of the Merger, a change of ownership of Nuvelo per IRC Section 382 has occurred, and accordingly, the Company’s ability to utilize Nuvelo’s historical net operating loss carryforwards has been substantially reduced.

Earnings (Loss) Per Share

The Company calculates net earnings (loss) per share in accordance with SFAS No. 128, Earnings Per Share . Basic net earnings (loss) per share was determined by dividing net earnings (loss) attributable to common stockholders by the weighted average common shares outstanding during the period, excluding common stock subject to vesting provisions. Diluted net earnings (loss) per share is computed by dividing the net earnings (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period increased to include, if dilutive, the number of additional common shares that would have been outstanding if the potential common shares had been issued. The Company’s potentially dilutive shares include redeemable convertible preferred stock, convertible notes payable, options and warrants.

A reconciliation of numerator and denominator used in the calculation of basic and diluted net earnings (loss) per share follows:


	Three Months Ended March 31,
(In thousands, except shares and per share data)	2009			2008
BASIC
Net income (loss)	$	9,933		$	(3,876	)
Less: Accretion of redeemable convertible preferred stock		(135	)		(14	)
Deemed preferred stock dividend for additional common shares issuable under anti-dilution provision		(781	)		—

Net income (loss) available to common shareholders	$	9,017		$	(3,890	)

Weighted average shares of common stock outstanding		5,653,331			786,748
Less: Weighted-average shares of unvested common stock		(41,745	)		(100,188	)

Total weighted-average shares used in computing net income (loss) per share attributed to common stockholders		5,611,586			686,560

Basic earnings (loss) per share	$	1.61		$	(5.67	)

DILUTED
Net income (loss)	$	9,933		$	(3,876	)
Add: Interest on convertible notes payable		33			—
Less: Accretion of redeemable convertible preferred stock		—			(14	)

Net income (loss) available to common shareholders	$	9,966		$	(3,890	)

Weighted average shares outstanding		5,611,586			686,560
Dilutive impact of stock plans		343,483			—
Dilutive impact of convertible securities		1,131,154			—

Dilutive shares outstanding		7,086,223			686,560

Diluted earnings (loss) per share	$	1.41		$	(5.67	)

Potentially dilutive securities representing 0.7 million and 3.1 million weighted average shares of common stock were excluded for the three months ended March 31, 2009 and 2008, respectively, because including them would have an anti-dilutive effect on net earnings (loss) attributable to common stockholders per share.

Recent Accounting Pronouncements

Effective January 1, 2008, the Company adopted SFAS No. 157. In February 2008, the FASB issued FASB Staff Position No. 157-2, which provided a one year deferral of the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The standard describes a fair value hierarchy based on three levels of inputs, the first two of which are considered observable and the last unobservable, that may be used to measure fair value. The adoption of SFAS No. 157 had no material impact on the Company’s consolidated financial statements. The Company adopted the provisions of SFAS No. 157 with respect to non-financial assets and liabilities effective January 1, 2009. Such adoption did not have a material impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and SFAS No. 160, Accounting and Reporting of Noncontrolling interest in Consolidated Financial Statements, an amendment of ARB No. 51 . These new standards have significantly changed the financial accounting and reporting of business combination transactions and noncontrolling (or minority) interests in consolidated financial statements. SFAS No. 141(R) requires the acquirer of a business to recognize and measure the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at fair value on the acquisition date. SFAS No. 141(R) also requires that transactions costs related to the business combination be expensed as incurred and that changes in accounting for business combination related deferred tax asset valuation allowances and income tax uncertainties after the measurement period be recognized as current period income tax expense. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company applied the provisions of SFAS No. 141(R) to the Merger transaction as discussed in Note 2. Costs incurred during 2008 associated with the Merger were recorded as deferred transaction costs at December 31, 2008. On January 1, 2009, as part of the Company’s adoption of SFAS No. 141(R), the balance of deferred transaction costs was expensed.

In December 2007, the FASB ratified the consensus reached by the Emerging Issues Task Force (EITF) on EITF Issue 07-1, “Accounting for Collaborative Arrangements” (EITF 07-1). EITF 07-1 requires collaborators to present the results of activities for which they act as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied accounting policy election. The effective date for the Company was January 1, 2009. The adoption of EITF 07-1 had no impact on the Company’s financial statements.

In June 2008, the FASB ratified the consensus reached on EITF Issue No. 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (EITF No. 07-05). EITF No. 07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify as a scope exception under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities . EITF No. 07-05 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption for an existing instrument is not permitted. The adoption of EITF 07-5 had no impact on the Company’s financial statements.

(2)

Merger with Nuvelo, Inc. on January 27, 2009

On January 27, 2009, the Company completed the Merger contemplated by the Merger Agreement. Pursuant to the Merger Agreement, a wholly-owned subsidiary of Nuvelo merged with and into ARCA Colorado, with ARCA Colorado continuing after the Merger as the surviving corporation and a wholly-owned subsidiary of Nuvelo. Immediately following the Merger, the Company changed its name from Nuvelo, Inc. to ARCA biopharma, Inc., and its common stock began trading on the Nasdaq Global Market under the symbol “ABIO” on January 28, 2009.

The Merger is treated as a reverse merger and accounted for as a business combination using the acquisition method of accounting in accordance with SFAS No. 141(R). For accounting purposes, ARCA Colorado is considered to have acquired Nuvelo in the Merger, as the stockholders of ARCA Colorado prior to the Merger now have a controlling interest in the combined company and the Company’s management is the former management of ARCA Colorado. Under the acquisition method of accounting, the assets acquired and liabilities assumed of Nuvelo are recorded as of the acquisition date, at their respective fair values. The results of operations and cash flows for the three months ended March 31, 2009 include the activities of the acquired company since the date of the Merger.

Immediately prior to the Merger, each share of ARCA Colorado’s Series A preferred stock automatically converted into 1 share of ARCA Colorado’s common stock; each share and warrant to purchase ARCA Colorado’s Series B-1 preferred stock automatically converted into 1.219875 shares or warrants to purchase, as applicable, of ARCA Colorado’s common stock; each share and warrant to purchase ARCA Colorado’s Series B-2 preferred stock automatically converted into 1.6265 shares or warrants to purchase, as applicable, of ARCA Colorado’s common stock. In connection with the Merger, each share of ARCA Colorado’s common stock was converted into the right to receive 0.16698070 shares of the Company’s common stock.

Each option and warrant to purchase shares of ARCA Colorado’s common stock outstanding at the effective time of the Merger was assumed by the Company at the effective time of the Merger. Each such option or warrant became an option or warrant, as applicable, to acquire that number of shares of the Company’s common stock equal to the product obtained by multiplying the number of shares of ARCA Colorado’s common stock subject to such option or warrant by 0.16698070, rounded down to the nearest whole share of the Company’s common stock. Following the Merger, each such option or warrant has an exercise price per share of the Company’s common stock equal to the quotient obtained by dividing the per share purchase price of ARCA Colorado’s common stock subject to such option or warrant by 0.16698070, rounded up to the nearest whole cent.

Immediately following the Merger, ARCA Colorado’s former stockholders, together with the former holders of ARCA Colorado’s options and warrants owned or had the right to acquire upon the exercise of outstanding options and warrants approximately 67% of the common stock of the Company and Nuvelo stockholders prior to the Merger owned approximately 33% of the common stock of the Company. The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended.

Prior to the completion of the Merger, Nuvelo was developing drugs for acute cardiovascular disease, gastro-intestinal, or GI, diseases and other debilitating medical conditions. Its development pipeline included NU172, a direct thrombin inhibitor that has completed Phase I development for use as a short-acting anticoagulant during medical or surgical procedures, and Phase I clinical candidate NU206, a recombinant, secreted protein for the potential treatment of GI, diseases, including inflammatory bowel disease, mucositis and bone disease. In the first quarter of 2008, Nuvelo discontinued the clinical development of its only clinical-stage product candidate, alfimeprase. ARCA Colorado merged with Nuvelo primarily to increase its cash resources in the short-term while enhancing its access to capital necessary to commercialize its late stage product candidate, Gencaro, and to build its product development pipeline.

The estimated total acquisition consideration to acquire Nuvelo is based on the market capitalization of Nuvelo as of January 27, 2009, and the estimated fair values of its vested stock options and warrants outstanding on that date, as this was deemed the most reliable measure of the consideration effectively transferred to acquire Nuvelo on that date, and is as follows (in thousands):


Market capitalization of Nuvelo common stock	$	11,824
Estimated fair value of options and warrants assumed		88

Total acquisition consideration	$	11,912

The Company considered alternative approaches to measure the acquisition consideration, such as basing the acquisition consideration on the fair value of Nuvelo’s net assets, or based on ARCA Colorado’s fair value rather than the fair value of Nuvelo’s common stock on the consummation date. The Company believes the most reliable measurement of consideration is based on the market capitalization of Nuvelo and the fair values of its vested stock options and warrants as of the date of the Merger, as it is the most objectively verifiable value.

Under the acquisition method of accounting, in accordance with SFAS No. 141(R), the total acquisition consideration is allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of the Merger. The Company has not finalized the acquisition consideration allocation as of the date of this report. The preliminary allocation, based on the estimated fair values of the assets acquired and liabilities assumed as of the date of the Merger, is as follows (in thousands):


Estimated purchase price allocation:
Cash and cash equivalents	$	30,392
Marketable securities		15,106
Collaboration receivable		626
Other current assets		1,247
Restricted cash		6,000
Property and equipment		489
In-process research and development		6,000
Other non-current assets		1,084
Accounts payable		(2,189	)
Accrued employee liabilities		(3,579	)
Other current liabilities		(1,406	)
Accrued facility exit costs		(13,278	)
Other liabilities		(74	)
Deferred tax liability		(2,281	)
Unfavorable lease obligation		(943	)
Gain on bargain purchase		(25,282	)

Total acquisition consideration	$	11,912

Cash and cash equivalents, marketable securities and other tangible assets and liabilities : The tangible assets and liabilities were valued at their respective carrying amounts by Nuvelo, except for adjustments to certain property and equipment, deferred revenue, deferred rent, facility exit costs and other liabilities, necessary to state such amounts at their estimated fair values at the acquisition date. See Note 6, Facility Exit Costs, for discussion of the accrued facility exit costs, and Note 8, Commitments and Contingencies, for discussion of the unfavorable lease liability.

In-process research and development: In-process research and development (“IPR&D”) represents projects under development by Nuvelo at the date of the Merger that had not yet been completed and had not achieved regulatory approval. It is estimated that approximately $6.0 million of the acquisition consideration represents purchased IPR&D primarily related to projects associated with the Nuvelo NU172 program. The fair value of IPR&D was determined using an income approach, as well as discussions with Nuvelo’s management and a review of certain program-related documents and forecasts of future cash flows. The income approach, a valuation method that establishes the business value based on a stream of future economic benefits, such as net cash flows, discounted to their present value, included probability adjustments to projected expenses and revenue in order to reflect the expected probabilities of incurring development cost prior to commercialization and the probability of achieving commercial revenue due to drug discovery and regulatory risks. An appropriately risk-adjusted discount rate was utilized to discount the probability adjusted net cash flows to their present value, to reflect the time value of money and risks of commercialization, sales, and competition, which are risk elements explicitly not addressed in the probability adjustments. The Company will continue to periodically reassess the value of purchased IPR&D, and in connection with those periodic reassessments, may determine that its valuation should change, even materially, based on, among other factors, changes in management’s views regarding anticipated future economic benefits of the IPR&D. IPR&D is considered an indefinite-lived intangible asset. Depending upon the results of the research and development projects, the value of the IPR&D will either be amortized beginning upon successful completion of the project or impaired if the project fails or is abandoned. The Company has recorded a deferred tax liability of $2.3 million related to the IPR&D asset.

Pre-acquisition contingencies: The Company retains the obligations under Nuvelo’s employment agreements and compensation plans, pursuant to which Nuvelo employees are entitled to termination benefits upon change of control and involuntary termination. Such plans were established prior to merger negotiations with ARCA Colorado, and were not entered into to benefit ARCA Colorado. These plans create a contingent liability for the Company as of the acquisition date, which is estimated for employees expected to be involuntary terminated at $1.7 million and is included in the consideration allocation above under the caption ‘Accrued employee liabilities’. The Company has not currently identified any other pre-acquisition contingencies where an acquisition-date liability is probable and the amount of the liability can be reasonably estimated. If information becomes available to the Company prior to the end of the measurement period, which would indicate that a liability is probable and the amount can be reasonably estimated, such items will be included in the acquisition consideration allocation.

Gain on bargain purchase: In accordance with SFAS No. 141(R), any excess of fair value of acquired net assets over the acquisition consideration results in a gain on bargain purchase. Prior to recording a gain, the acquiring entity must reassess whether all acquired assets and assumed liabilities have been identified and recognized and perform re-measurements to verify that the consideration paid, assets acquired, and liabilities assumed have been properly valued. The Company underwent such a reassessment, and as a result, has recorded a gain on bargain purchase of $25.3 million. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized for assets acquired and liabilities assumed, the Company will retrospectively adjust the amounts recognized as of the acquisition date. The final acquisition consideration and allocation thereof may change significantly from these estimates.

The acquisition consideration allocation indicates that the Merger resulted in a gain on bargain purchase of $25.3 million. In accordance with the acquisition method of accounting, any resulting gain on bargain purchase must be recognized in earnings on the acquisition date. This gain is largely determined by the trading price of Nuvelo’s common stock on Nasdaq prior to the Merger. The Company believes that the gain on bargain purchase resulted from various factors that may have impacted the trading price of Nuvelo’s common stock, including, without limitation, the significant declines in the securities markets during the fourth quarter of 2008; uncertainty concerning the combined entities’ ability to obtain regulatory approval of the Gencaro NDA; timing and conditions of an approval, its ability to successfully commercialize Gencaro, if approved, and to raise additional capital to support the commercialization of Gencaro and to fund other business objectives; uncertainty regarding the combined entities’ ability to successfully integrate the business operations of Nuvelo; and uncertainty regarding the combined entities’ ability to further identify, develop and achieve commercial success for products and technologies; all of which may have impacted Nuvelo’s market capitalization at the time the Merger was consummated.

Merger transaction costs: The Company has incurred merger transaction costs of $5.5 million, including financial advisory, legal, accounting and due diligence costs, which are recorded as merger transaction expenses on the consolidated statement of operations. Through December 31, 2008, the Company had incurred $1.7 million of merger transaction expenses, which were recorded as deferred transaction costs on the consolidated balance sheet at that date. On January 1, 2009, as part of the adoption of SFAS No. 141(R), the balance of deferred transaction costs was expensed to merger transaction expenses on the consolidated statement of operations.

In connection with the Merger, a substantial majority of Nuvelo’s employees were involuntarily terminated, subsequent to transition periods of up to 12 weeks from the date of the Merger. Pursuant to pre-existing employment agreements and compensation plans, termination benefits of $3.1 million had been accrued as of the date of the Merger. In addition to the termination benefits pursuant to the assumed Nuvelo compensation plans, the Company has offered retention bonuses to employees on transition plans totaling $290,000, which are being expensed as incurred over the transition period.

The following table provides supplemental pro forma financial information for the three months ended March 31, 2009 and 2008 as if the acquisition had occurred as of the beginning of each year presented. For each period presented, the unaudited pro forma results exclude the nonrecurring charges for the merger transaction costs and the gain on bargain purchase. The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings that may result from the consolidation of the operations of ARCA Colorado and Nuvelo. Accordingly, these unaudited pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of the combined company that would have been achieved had the acquisition occurred at the beginning of each period presented, nor are they intended to represent or be indicative of future results of operations.


	Three Months Ended, March 31,
(in thousands, except per share data)	2009			2008
Revenue	$	—		$	—
Net loss	$	(15,866	)	$	(22,291	)
Net loss per share, basic and diluted	$	(2.10	)	$	(3.48	)

(3)

Financial Instruments

Available-for-sale Investments

The cost and fair value of the Company’s available-for-sale investments as of March 31, 2009 and December 31, 2008 were as follows (in thousands):


	March 31, 2009
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Money market fund	$	25,209	$	—	$	—		$	25,209
Corporate debt securities		9,401		—		(33	)		9,368

	$	34,610	$	—	$	(33	)	$	34,577

Reported as:
Cash equivalents								$	25,209
Marketable securities									9,368

								$	34,577


	December 31, 2008
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Money market fund	$	7,671	$	—	$	—		$	7,671	(a)

(a)	Reported as cash equivalents

The contract maturity of all of the Company’s available-for-sale investments is less than one year.

The following is a summary of available-for-sale investments with unrealized losses and their related fair value by the period of time each investment has been in an unrealized loss position (in thousands):


	March 31, 2009					December 31, 2008
	Unrealized Losses			Estimated Fair Value		Unrealized Losses		Estimated Fair Value
Unrealized loss position for less than one year	$	(33	)	$	7,368	$	—	$	—

Due to the short maturities of investments, the type and quality of security held, the relatively small size of unrealized losses compared to fair value, and the short duration of such unrealized losses, the Company believes these unrealized losses to be temporary in nature.

Fair Value of Other Financial Instruments

The carrying amount of other financial instruments, including cash and accounts payable, approximated fair value due to their short maturities, and the carrying amount of the Company’s bank note approximates the fair value, as the applicable interest rate approximated market rate. As of March 31, 2009 and December 31, 2008, the Company did not have any other debt or foreign exchange forward contracts outstanding.

(4)

Property and Equipment

Property and equipment consist of the following:


	Estimated Life	March 31, 2009			December 31, 2008
		(in thousands)
Computer equipment	3 years	$	333		$	218
Lab equipment	5 years		286			85
Furniture and fixtures	5 years		509			415
Computer software	3 years		177			149
Leasehold improvements	Lesser of useful life or life of the lease		741			739

			2,046			1,606
Less accumulated depreciation and amortization			(418	)		(303	)

		$	1,628		$	1,303

For the three months ended March 31, 2009 and March 31, 2008, and for the period from Inception through March 31, 2009, depreciation and amortization expense was $115,000, $23,000 and $455,000, respectively.

(5)

Comprehensive Income (Loss)

The components of comprehensive income (loss) for each period presented, net of any related tax effects, are as follows (in thousands):


	Three Months Ended March 31,
	2009			2008
Net income (loss), as reported	$	9,933		$	(3,876	)
Change in unrealized loss on available-for-sale securities		(33	)		—

Comprehensive income (loss)	$	9,900		$	(3,876	)

(6)

Facility Exit Costs

As a result of the Merger, the Company assumed an operating lease for a 139,000-square-foot facility in Sunnyvale, California (the Sunnyvale facility), which had previously been exited by the acquired company. The term of the lease for the facility expires on May 31, 2011. The Company recorded a facility exit liability of $13.3 million as of the acquisition date to reflect the estimated fair value of this liability using a discounted cash flow method. As of March 31, 2009, estimated future lease-related payments totaling $15.0 million are scheduled to be made periodically until the lease expires. The Company also assumed a sublease agreement related to this facility, pursuant to which estimated sublease income of $2.5 million is expected to be received over the sublease term from March 1, 2009 through May 31, 2011.

The following table summarizes the activities related to accrued facility exit costs for the three months ended March 31, 2009 (in thousands):


Fair value of facility exit cost liability assumed:	$	13,278
Amounts paid during the period		(1,198	)
Amounts received during the period		42
Non-cash accretion, net		118

Balance as of March 31, 2009	$	12,240

The non-cash accretion expense of $118,000 for the three months ended March 31, 2009 was included in general and administrative expenses.

(7)

Convertible Promissory Notes

In October 2008, the Company entered into convertible promissory notes with certain of ARCA Colorado’s existing investors. The principal amount of the convertible notes was $8.4 million and the notes bore interest at 6% per annum. The entire principal and accrued interest on the notes was due on March 31, 2009. In January 2009, upon closing of the Merger, the principal balance of $8.4 million and the accrued interest of $151,000 were converted into common stock at a rate consistent with the Series B-2 Preferred Stock into 872,792 shares of common stock. In connection with the issuance of the notes, the Company issued warrants, with an estimated fair value of $399,000, to the noteholders which allows them to purchase 179,659 shares of common stock at an exercise price of $9.7406 per share.

(8)

Commitments and Contingencies

In addition to the legal matters discussed in Note 12, the Company has or is subject to the following commitments and contingencies:

(a)

Employment Agreements

The Company maintains employment agreements with several key executive employees. The agreements may be terminated at any time by the Company with or without cause upon written notice to the employee, and entitle the employee to wages in lieu of notice for periods not exceeding one calendar year from date of termination without cause or by the employee for good reason. Certain of these agreements also provide for payments to be made under certain conditions related to a change in control of the Company.

(b)

Operating Leases

As a result of the Merger, the Company assumed two facility operating leases, including the lease of the Sunnyvale facility. The term of the lease for the Sunnyvale facility expires on May 31, 2011. The Company recorded a facility exit liability of $13.3 million as of the acquisition date to reflect the estimated fair value of this liability using a discounted cash flow method. The Sunnyvale facility lease requires a letter of credit issued to the facility’s landlord in the amount of $6.0 million. The letter of credit is being collateralized by a certificate of deposit of the same amount, which is recorded as restricted cash in the accompanying consolidated balance sheet. The Company also assumed a sublease agreement related to this facility, which requires the subtenant to pay a monthly base rent of $57,000, except during the first four months of the term, and a substantial majority of the facility operating expenses charged by the facility’s landlord. The term of the sublease commenced on March 1, 2009 and ends on May 31, 2011.

The second facility operating lease assumed in the Merger is a seven-year agreement for approximately 69,000 square feet of space in San Carlos, California. The lease term commenced on September 1, 2005, and contains an option to cancel after five years upon payment of certain amounts specified in the lease, and two options to extend the lease for five additional years, each at 95% of the then-current fair market rental rate (but not less than the existing rental rate). Nuvelo used this facility for its headquarters prior to the Merger. The Company also assumed a sublease agreement related to this facility for approximately 6,800 square feet of the space. The term of the sublease, which started in February 2008 and expires in January 2011, can be extended by the subtenant for three additional periods of one year each, subject to certain conditions contained in the sublease agreement. The Company is seeking to sublease the entire facility. As of the acquisition date, the Company determined that the net terms of the lease and sublease were unfavorable compared with the market terms of leases for similar facilities, and as result recorded a liability representing the estimated the fair value of such unfavorable terms. The Company estimated the fair value of the unfavorable lease liability to be $943,000 as of the acquisition date using a discounted cash flow model comparing the contractual lease payments and receipts to an estimated market rate for such receipts. The unfavorable lease liability is classified on the accompanying consolidated balance sheet as ‘accrued expenses and other liabilities’ for the current portion and as ‘other long-term liabilities’ for the non-current portion. The Company will amortize this liability to operating expense on a straight-line basis over the term of the lease and sublease.

On February 8, 2008 the Company entered into a lease agreement for approximately 15,000 square feet of newly constructed office facilities in Broomfield, Colorado, which serves as the Company’s primary business offices. The Company relocated to the new facility upon its completion in July 2008. The lease has a term of 5 years with rights to extend the term for two additional three year periods. Per the lease agreement, base rent is subject to annual increases of approximately three percent per year. The rent expense for the lease is being recognized on a straight-line basis over the lease term. Tenant improvement reimbursements from the landlord totaled $593,000 which were recorded as deferred rent and are amortized as reductions to rent expense over the lease term.

Below is a summary of the future minimum lease payments committed under the two leases assumed in the Merger and the Company’s facility in Broomfield, Colorado (in thousands):


Remainder of 2009	$	6,458
2010		8,865
2011		5,223
2012		1,790
2013		128

Total future minimum rental payments		22,464
Less: aggregate future minimum rentals under subleases		(1,769	)

	$	20,695

(c)

CardioDx, Inc.

In June 2006, the Company entered into a license agreement with CardioDx, Inc. The license gives the Company a nonexclusive, royalty bearing license for diagnostic rights to key genetic markers that are relevant for prescribing Gencaro. The term of the agreement extends to the latest expiring patent underlying the diagnostic rights. The license permits the Company to sublicense its rights under certain conditions, and in February 2007, the Company sublicensed its rights and transferred its royalty and other fee obligations to Laboratory Corporation of America.

(d)

Laboratory Corporation of America

In February 2007, the Company entered into a commercialization and licensing agreement with Laboratory Corporation of America, or LabCorp, to develop, make, market and sell diagnostic tests in connection with the medical prescription of the Company’s lead compound, Gencaro. Under the agreement the Company granted to LabCorp an exclusive license to its diagnostic rights under the CardioDx agreement and the Company’s diagnostic rights associated with Gencaro. The license agreement has a term of 10 years. The sublicense transferred the royalty and all other fee obligations of the Company arising out of the sale of diagnostic tests by LabCorp. Royalty payments will be made directly to CardioDx by LabCorp. If LabCorp does not fulfill its royalty payment and other fee obligations, the Company is responsible for the payments. In addition, the Company granted to LabCorp 16,698 shares of common stock. The shares are subject to a restricted stock agreement in which shares vest upon the attainment of certain regulatory approval and drug product sales milestones.

(e)

Cardiovascular Pharmacology and Engineering Consultants, LLC, or CPEC

Under the terms of its strategic license agreement with CPEC, a licensing subsidiary of Indevus Pharmaceuticals Inc. (a wholly owned subsidiary of Endo Pharmaceuticals as of March 23, 2009), holding ownership rights to certain clinical trial data of Gencaro, the Company will incur milestone and royalty obligations upon the occurrence of certain events. In August 2008, the Company paid CPEC a milestone payment of $500,000 based on the July 31, 2008 submission of its NDA with the FDA. If the FDA grants marketing approval for Gencaro, the Company will owe CPEC another milestone payment of $8.0 million, which is due within six months after FDA approval. The Company’s royalty obligation ranges from 7.5% to 20% of revenue from the related product based on achievement of specified product sales levels.

(9)

Bank Note Payable

In July 2007 the Company obtained a credit facility of $4.0 million from Silicon Valley Bank (“SVB”), or the Credit Facility, to be used solely for working capital and to fund general business requirements. In August 2008, the Company borrowed the full $4.0 million available under the growth capital facility. In January 2009, the Credit Facility was amended to mature on March 23, 2009. Pending the execution and delivery of definitive documentation to amend the Credit Facility and extend the maturity date until December 1, 2010, SVB agreed to extend the maturity date of the Credit Facility until April 6, 2009 and subsequently to April 17, 2009.

On April 10, 2009, the Company and SVB agreed to amend the Credit Facility pursuant to which the maturity on the Credit Facility was extended until December 1, 2010. In addition, the principal amount outstanding under the Credit Facility will bear interest at a rate of 4.25% per annum, unless the Company and its subsidiaries fail to maintain the lesser of $10 million or 100% of all of their invested cash balances in designated accounts with SVB, in which event, the interest rate will be permanently increased to a rate equal to SVB’s prime rate plus 2.0%, which shall be fixed as of the date such accounts fall below the thresholds. Monthly principal and interest payments are due on the Credit Facility through the maturity date of December 1, 2010.

The agreement contains customary affirmative and negative covenants including, without limitation, (i) covenants requiring the Company to comply with applicable laws, provide to SVB copies of the Company’s financial statements, maintain appropriate levels of insurance, protect, defend and maintain the validity and enforceability of the Company’s material intellectual property, and (ii) covenants restricting the Company’s ability to dispose of all or substantially all of its assets, engage in other lines of business, change its senior management, enter into transactions constituting a change of control, assume additional indebtedness, incur liens on its assets, among other covenants. The Company’s obligations under the Credit Facility are secured by a majority of the Company’s assets.

The Company agreed to pledge to SVB restricted certificates of deposit (CD’s) issued by SVB, with the aggregate amount of the pledged CD’s varying from time to time depending on the aggregate amount of unrestricted cash maintained by the Company with SVB. So long as the Company and its subsidiaries maintain at least $20 million in cash at SVB, no pledged CD is required. So long as the Company and its subsidiaries maintain less than $20 million but at least $15 million in cash at SVB, the Company is required to pledge CD’s to SVB in an aggregate amount equal to 33 ¹ /3% of the then outstanding principal amount of the Credit Facility. So long as the Company and its subsidiaries maintain less than $15 million but at least $10 million in cash at SVB, it is required to pledge CD’s to SVB in an aggregate amount equal to 66 ² /3% of the then outstanding principal amount of the Credit Facility. Finally, for so long as the Company and its subsidiaries maintain less than $10 million in cash at SVB, the Company is required to pledge CD’s to SVB equal to 100% of the then outstanding principal amount of the Credit Facility.

As of March 31, 2009, the Company had $3.5 million outstanding under the Credit Facility, which has been recorded as bank note payable on the consolidated balance sheet. No additional borrowings may be made under the facility. Following is a summary of the payments under the Credit Facility (in thousands):


Remainder of 2009	$	1,564
2010		2,085

		3,649
Less: Interest payments		132
Unamortized debt discount		45

	$	3,472

(10)

Collaborative Agreements

The following collaborative agreements have been assumed as a result of the Merger:

Archemix

In July 2006, Nuvelo entered into a collaboration agreement with Archemix Corporation. Under the agreement, Archemix is responsible for the discovery of short-acting aptamers targeting the coagulation cascade for use in acute cardiovascular procedures, and the Company is responsible for development and worldwide commercialization of these product candidates. In August 2006, Nuvelo made an upfront license fee payment to Archemix of $4.0 million, and pursuant to the terms of the agreement committed to funding at least $5.25 million of Archemix’s research over the first three years of the agreement. Archemix may receive payments totaling up to $35.0 million per development compound on the achievement of specified development and regulatory milestones, along with potential royalty payments based on sales of licensed compounds. In February 2008, Nuvelo paid Archemix a $1.0 million milestone fee that was accrued upon dosing of the first patient in the Phase I trial for NU172. If the Company enrolls the first patient in a Phase II trial of NU172, which is not expected to occur in 2009, the Company is obligated to pay Archemix a $3.0 million milestone fee. At the initiation of the first Phase III study for any licensed compound, Archemix has the option to elect to participate in profits from sales of the compound by funding its pro rata share of prior and future product development and commercialization expenses, in lieu of receiving milestone payments and royalties with respect to that compound. In addition, the Company is obligated to purchase Archemix common stock having a value equal to the lesser of $10.0 million or 15% of the shares issued by Archemix in a qualified initial public offering of Archemix stock occurring within five years of the effective date of the 2006 collaboration agreement.

Kirin

In March 2005, Nuvelo entered into a collaboration agreement with Kyowa Hakko Kirin Company, Limited for the development and commercialization of NU206. In accordance with the terms of this agreement, Nuvelo received a $2.0 million upfront cash payment from Kirin in April 2005. Nuvelo agreed to lead worldwide development, manufacturing and commercialization of the compound. All operating expenses and any profits related to the development and commercialization of NU206 are being shared 60% by the Company and 40% by Kirin. If this agreement is terminated, or Kirin or the Company elects under certain circumstances to no longer actively participate in the collaboration, the relationship with respect to NU206 will convert from an expense and profit-sharing structure to a royalty-based structure.

(11)

Preferred Stock

(a)

Series A Redeemable Convertible Preferred Stock

In February 2006, the Company issued 6,148,171 shares of Series A Redeemable Convertible Preferred Stock, or Series A Preferred Stock, at a price of $1.6265 per share. In December 2006, the Company issued an additional 3,074,086 shares of Series A Preferred Stock at a price of $1.6265 per share. Each share was initially convertible into one share of common stock. Each holder of Series A Preferred Stock was entitled to receive, if and when declared, payment of an equivalent per-share dividend based on the number of common shares into which each share of Series A Preferred Stock was convertible, as of the date of declaration. The rate of conversion of Series A Preferred Stock into common stock was required to be adjusted in the event the Company issued dilutive shares of common stock according to a formula defined in the Company’s Restated Certificate of Incorporation. Holders of Series A Preferred Stock were entitled to vote as though the Series A Preferred Stock were converted into common stock.

(b)

Series B Redeemable Convertible Preferred Stock

In May 2007, the Company issued 3,688,902 shares of Series B Redeemable Convertible Preferred Stock, or Series B-1 Preferred Stock, at a price of $2.439 per share. In December 2007, the Company issued 2,766,677 shares of Series B-2 Redeemable Convertible Preferred Stock, or Series B-2 Preferred Stock, at a price of $3.253 per share. Each share of Series B-1 Preferred Stock and Series B-2 Preferred Stock was initially convertible into one share of ARCA Colorado common stock. Each holder of Series B-1 Preferred Stock and Series B-2 Preferred Stock was entitled to receive, if and when declared, payment of an equivalent per-share dividend based on the number of shares of ARCA Colorado common stock into which each share of Series B-1 Preferred Stock and Series B-2 Preferred Stock was convertible, as of the date of declaration. The rate of conversion of Series B-1 Preferred Stock and Series B-2 Preferred Stock into ARCA Colorado common stock was required to be adjusted in the event the Company issues dilutive shares of ARCA Colorado common stock according to a formula defined in the Company Restated Certificate of Incorporation. Holders of Series B-1 Preferred Stock and Series B-2 Preferred Stock were entitled to vote as though the Series B-1 Preferred Stock and Series B-2 Preferred Stock were converted into ARCA Colorado common stock.

(c)

Conversion of Preferred Stock

As a result of the Merger on January 27, 2009:

•

each share of Series A Preferred Stock automatically converted into one share of ARCA Colorado’s common stock;

•

each share of Series B-1 Preferred Stock automatically converted into 1.219875 shares of ARCA Colorado’s common stock;

•

each share of Series B-2 Preferred Stock automatically converted into 1.6265 shares of ARCA Colorado’s common stock; and

•

each share of ARCA Colorado’s common stock, including each share issued upon conversion of the Series A Preferred Stock, Series B-1 Preferred Stock and Series B-2 Preferred Stock, was converted into the right to receive 0.16698070 shares of common stock of the Company.

In aggregate the 15,677,836 shares of Preferred Stock outstanding at the time of the Merger were converted into 3,042,740 shares of the common stock of the Company. In January 2009, the Company recorded a $781,000 charge against net income (loss) attributable to common shareholders related to the additional common shares issuable to holders of Series B-1 Preferred Stock and Series B-2 Preferred Stock as a result of Series B-1 Preferred Stock and Series B-2 Preferred Stock anti-dilution provisions in effect at the consummation of the Merger.

(d)

Warrants for Series B Redeemable Preferred Stock

In July 2007, the Company issued warrants to purchase 31,790 shares of Series B-1 Preferred Stock to SVB in connection with the Credit Facility. The warrants had an exercise price of $2.439 per share, a 10 year life, and were fully vested and exercisable at the time of grant. As a result of the Merger, these warrants were converted into warrants to purchase 6,475 shares of common stock at an exercise price of $14.61 per share. In August 2008, the Company issued 24,592 warrants for its Series B-2 Preferred Stock to SVB in connection with a borrowing under the Credit Facility. The warrants had an exercise price of $3.253 per share, a 10-year life, and were fully vested and exercisable at the time of grant. As a result of the Merger, such warrants were converted into warrants to purchase 6,679 shares of common stock at an exercise price of $19.48 per share. The estimated fair value of the warrants at the time of issuance was accounted for as a debt discount within long-term liabilities, and will be reflected as additional interest expense over the term of the Credit Facility.

(12)

Legal Matters

On February 9, 2007, Nuvelo and certain of Nuvelo’s former and current officers and directors were named as defendants in a purported securities class action lawsuit filed in the United States District Court for the Southern District of New York. The suit alleges violations of the Securities Exchange Act of 1934 related to the clinical trial results of alfimeprase, which Nuvelo announced on December 11, 2006, and seeks damages on behalf of purchasers of Nuvelo’s common stock during the period between January 5, 2006 and December 8, 2006. Specifically, the suit alleges that Nuvelo misled investors regarding the efficacy of alfimeprase and the drug’s likelihood of success. The plaintiff seeks unspecified damages and injunctive relief. Three additional lawsuits were filed in the Southern District of New York on February 16, 2007, March 1, 2007 and March 6, 2007, respectively. On April 10, 2007, three separate motions to consolidate the cases, appoint lead plaintiff, and appoint lead plaintiff’s counsel were filed. On April 18, 2007, Nuvelo filed a motion to transfer the four cases to the Northern District of California. The Court granted Nuvelo’s motion to transfer the cases to the Northern District of California in July 2007. Plaintiffs have filed motions for consolidation, lead plaintiff and lead plaintiff’s counsel in the Northern District of California. Plaintiffs filed their consolidated complaint in the Northern District of California on November 9, 2007. Nuvelo filed a motion to dismiss plaintiffs consolidated complaint on December 21, 2007. Plaintiffs filed an opposition to Nuvelo’s motion to dismiss on February 4, 2008. On June 12, 2008, the Court held a hearing on the motion to dismiss.

On December 4, 2008, the Court issued an order dismissing plaintiff’s complaint, and granting leave to amend. On January 23, 2009, plaintiffs filed an amended complaint, alleging similar claims. On March 24, 2009, defendants filed a motion to dismiss the amended complaint. Based on the Court’s December 4, 2008 order, and plaintiff’s amended complaint, the Company believes that any attorneys’ fees, loss or settlement payment with respect to this suit will be paid by its insurance provider. However, it is possible that the Company could be forced to incur material expenses in the litigation if the case is not finally dismissed, or if the parties cannot achieve a settlement, and, in the event of an adverse outcome, the Company’s business could be harmed.

In addition, on or about December 6, 2001, Variagenics, Inc. was sued in a complaint filed in the United States District Court for the Southern District of New York naming it and certain of its officers and underwriters as defendants. The complaint purportedly is filed on behalf of persons purchasing Variagenics’ stock between July 21, 2000 and December 6, 2000, and alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended and Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The complaint alleges that, in connection with Variagenics’ July 21, 2000 initial public offering, or IPO, the defendants failed to disclose additional and excessive commissions purportedly solicited by and paid to the underwriter defendants in exchange for allocating shares of Variagenics’ stock to preferred customers and alleged agreements among the underwriter defendants and preferred customers tying the allocation of IPO shares to agreements to make additional aftermarket purchases at predetermined prices. Plaintiffs claim that the failure to disclose these alleged arrangements made Variagenics’ registration statement on Form S-1 filed with the SEC in July 2000 and the prospectus, a part of the registration statement, materially false and misleading. Plaintiffs seek unspecified damages. On or about April 19, 2002, an amended complaint was filed which makes essentially the same allegations. On or about July 15, 2002, Variagenics and the individuals filed a motion to dismiss. The Company is involved in this litigation as a result of Nuvelo’s merger with Variagenics in January 2003. On July 16, 2003, Nuvelo’s board of directors approved a settlement proposal initiated by the plaintiffs. However, because of a recent court ruling, the settlement class, as defined in the settlement papers, is no longer feasible. While a new complaint has not been filed against Nuvelo, there are several “focus” cases against other issuers in which new complaints have been filed. Defendant issuers in the “focus” cases filed motions to dismiss the new complaints. On March 26, 2008, the District Court issued an order granting in part and denying in part the “focus” issuers motions to dismiss. The “focus” issuers had been advised that plaintiffs intended to file new complaints against Nuvelo, but none have been filed yet. The Company believes that any attorneys’ fees, loss or settlement payment with respect to this suit will be paid by its insurance provider. However, it is possible that the Company could be forced to incur material expenses in the litigation if the parties cannot achieve a settlement, and, in the event of an adverse outcome, the Company’s business could be harmed.

(13)

Stock-based Compensation

In conjunction with the Merger, the Company discontinued grants under its 2004 Stock Option Plan, or the Plan, effective January 27, 2009. As of March 31, 2009, options to purchase 702,258 shares with a weighted-average exercise price of $2.51 per share were outstanding under the Plan. Options and awards outstanding under this plan will continue to vest according to the original terms of each grant. No new awards will be granted under the Plan.

As a result of the Merger, the Company assumed Nuvelo’s 2004 Equity Incentive Plan, or the Equity Plan. Under the Equity Plan grants of stock options (including indexed options), stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units and deferred stock units are authorized. Awards may be granted to employees, directors and consultants of the Company, except for incentive stock options, which may be granted only to employees. Subsequent to the Merger, the Company intends to grant stock-based compensation awards under the Equity Plan. As of January 27, 2009, options to purchase 235,807 shares with a weighted-average exercise price of $161.53 per share, and 699 restricted stock units were outstanding under the Equity Plan, of which 218,830 options and no restricted stock units were fully vested.

Pursuant to Nuvelo’s severance plans, generally upon a change in control and involuntary termination of employment, outstanding stock options and stock awards held by a non-executive employee became fully vested. The Merger qualified as a change in control as defined under the severance plan. Involuntarily terminated employees held options to purchase 112,550 shares with a weighted-average exercise price of $144.63 per share and 699 restricted stock units, the unvested portion of which awards was accelerated upon the holder’s termination date. These awards will generally remain outstanding and exercisable for 90 days subsequent to the holder’s termination date. Due to the exercise prices of such awards significantly exceeding the market value of the Company’s stock, and the relatively short period to the cancellation date, the fair value assigned to the unvested awards as of the acquisition date was minimal. Awards outstanding with Nuvelo’s chief executive officer were subject to acceleration upon change in control. Options outstanding with this former executive total 106,247 and will remain outstanding under the original terms of each award, as this executive continues to serve on the board of directors of the Company. Awards outstanding representing options to purchase 17,010 shares with a weighted-average exercise price of $117.71 per share to employees and consultants who are not being involuntarily terminated will continue to vest according to the original terms of the grant. Due to the exercise prices of such awards significantly exceeding the market value of the Company’s stock, the fair value assigned to the unvested awards as of the acquisition date was minimal.

The Company granted options to purchase 278,153 and 134,169 shares of common stock in the three months ended March 31, 2009 and March 31, 2008, respectively. Generally, stock options become exercisable at a rate of 25% per year for a period of four years from the date of grant and have a maximum term of 10 years. The fair values of employee stock options granted in the three months ended March 31, 2009 and March 31, 2008 were estimated at the date of grant using the Black-Scholes model with the following assumptions and had the following estimated weighted-average grant date fair value per share:


	Three Months Ended March 31,
	2009			2008
Expected term		6.4 years			6.1 years
Expected volatility		77	%		62	%
Risk-free interest rate		1.86	%		3.00	%
Expected dividend yield		0	%		0	%
Weighted-average grant date fair value per share	$	3.83		$	0.19

In November 2006, the Company entered into a restricted stock agreement with its President and CEO for 83,490 shares, whereby the President and CEO could purchase the shares at their estimated fair value of $0.90 per share. The Company retained certain repurchase rights (allowing the Company to repurchase the shares at the price paid by this individual) on 41,745 shares that would have lapsed on the date that the trading value of Company’s common stock, listed on a national exchange, resulted in market capitalization of the Company, as reported by such exchange over the immediately preceding ten business days, of at least $250.0 million, or a corporate transaction resulted in consideration paid by the acquirer of at least $250.0 million. Repurchase rights on the remaining 41,745 shares would have lapsed on the same terms as the first 41,745 if the two conditions above were met with values of at least $500.0 million. In February 2007, the Company amended the purchase terms of the restricted stock agreement to provide that the purchase price for 41,745 shares was deemed to be satisfied in consideration for services rendered to the Company, with an estimated fair value of $37,250. The estimated fair value of the services was expensed, and the total consideration received of $75,000 was reflected as a long-term liability. In October 2008, the restricted stock agreement was amended to provide that the Company’s repurchase rights would lapse with respect to all 83,490 shares upon close of the Merger. As a result of such amendment, the Company estimated the fair value of the modification to be $438,000 of which $88,000 was recognized as share-based compensation expense in the three months ended March 31, 2009.

For the three months ended March 31, 2009 and 2008 and for the period from Inception through March 31, 2009, the Company recognized the following non-cash, share-based compensation expense (in thousands):


	March 31,				Period from December 17, 2001 (date of inception) to March 31, 2009
	2009		2008
Research and Development	$	22	$	6	$	159
General and Administrative		172		15		706

Total	$	194	$	21	$	865

(14)

Income Taxes

SFAS No. 109 requires that a valuation allowance should be provided if it is more likely than not that some or all of the Company’s deferred tax assets will not be realized. The Company’s ability to realize the benefit of its deferred tax assets will depend on the generation of future taxable income. Due to the uncertainty of future profitable operations and taxable income, the Company has recorded a full valuation allowance against its net deferred tax assets.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, including statements about the timing and outcome of regulatory reviews and approvals, anticipated expenditures relating to seeking regulatory approval and the potential commercialization of Gencaro, expectations with respect to the commercialization of Gencaro, if approved, ARCA’s plans with respect to obtaining additional capital or consummating a strategic transaction, and ARCA’s ability to continue to operate as a going concern and its future capital requirements. Forward-looking statements may be identified by words including “will,” “anticipate,” “believe,” “intends,” “estimates,” “expect,” “should,” “may,” “potential” and similar expressions. Such statements are based on management’s current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors discussed herein and elsewhere including, in particular, those factors described under the “Risk Factors” set forth below, and in our other periodic reports filed from time to time with the Securities and Exchange Commission, or SEC, including our Annual Report on form 10-K for the year ended December 31, 2008. Actual results and performance could also differ materially from time to time from those projected in our filings with the SEC.

Overview

ARCA is a biopharmaceutical company whose principal focus is developing genetically-targeted therapies for heart failure and other cardiovascular diseases.

ARCA’s lead product candidate is Gencaro ^TM (bucindolol hydrochloride), a pharmacologically unique beta-blocker and mild vasodilator, which is under review by the U.S. Food and Drug Administration, or FDA, for chronic heart failure, or HF. Gencaro is an oral tablet formulation, dosed twice daily. ARCA has identified common genetic variations, or genetic markers, that it believes predicts patient response to Gencaro. Subject to approval by the FDA, ARCA, through its collaboration with Laboratory Corporation of America, or LabCorp, anticipates introducing a test for these genetic markers with the market launch of Gencaro, potentially making Gencaro the first genetically-personalized cardiovascular drug. When prescribed using the test for these markers, ARCA believes that Gencaro can become an important new therapy for many HF patients, with the potential for positive clinical outcomes in a defined genetic subpopulation, and good tolerability. Gencaro was the subject of a major North America based heart failure Phase III trial, known as BEST, which ARCA believes will provide the primary basis for the FDA’s determination on the approvability of Gencaro in the U.S. In September 2008, the FDA formally accepted for filing ARCA’s New Drug Application, or NDA, for Gencaro as a potential treatment for HF. In accordance with the Prescription Drug User Fee Act, or PDUFA, the FDA’s goal is to complete its review of the Gencaro NDA by May 31, 2009.

As previously noted in ARCA’S Annual Report on Form 10-K, the regulatory approval process for the Gencaro NDA is expensive and time-consuming and subject to the risk that the FDA may determine that the available clinical data for Gencaro are not sufficiently strong to demonstrate Gencaro’s safety and efficacy. Any such determination could prevent or delay regulatory approval and commercialization of Gencaro. As part of the FDA review of the NDA, ARCA has had extensive interactions with, and has recently provided substantial supplemental information to the FDA. The submission of this or additional information could result in an extension of the review of the Gencaro NDA beyond the May 31, 2009 PDUFA date.

Chronic heart failure is one of the largest health care problems in the United States and the rest of the world. Beta-blockers are part of the current standard of care for HF, and are considered to be among the most effective drug classes for the disease. However, a significant percentage of eligible patients in the United States is not being treated, or does not tolerate or respond well to those beta-blockers currently approved for the treatment of HF. ARCA believes that new therapies for which patient response can be predicted before a drug is prescribed can help improve the current standard of practice in the treatment of HF.

ARCA has collaborated with LabCorp to develop the Gencaro Test, a companion test for the genetic markers that predict clinical response to Gencaro. The proposed use of the Gencaro Test, if approved by the FDA, will be to enable a physician to determine, prior to therapy, whether a patient is likely to have a good response to Gencaro. LabCorp has developed the Gencaro Test to be administered using a blood test or a cheek swab, and to provide prompt results to the treating physician. The Gencaro Test was submitted through the Premarket Approval, or PMA, process in January 2009, and an FDA decision on approval of the blood test method, based on FDA guidance, is expected in conjunction with the FDA decision on Gencaro.

ARCA currently holds worldwide rights to Gencaro. As previously disclosed in its Annual Report on Form 10-K, ARCA’s strategy to commercialize Gencaro, if approved, has been to raise sufficient capital to establish internal sales and marketing capabilities as well as its own distribution network for the product, if practicable. As a result of the continuing substantial disruption in the capital markets, the difficulty of raising a significant amount of capital on acceptable terms in light of these disruptions, and consideration of any potential extension of the review of the Gencaro NDA beyond the May 31, 2009 PDUFA date, ARCA is currently exploring strategic alternatives for commercializing Gencaro, including a potential strategic combination or a license of the Gencaro commercialization rights. Alternatively, ARCA may continue to seek substantial additional funding through public or private debt or equity markets to support the continued development of and commercialization of Gencaro. In light of ARCA’s current strategic direction and capital needs, ARCA is actively evaluating restructuring alternatives.

If approved, ARCA believes that Gencaro will have market exclusivity under federal and international laws following commercial launch, and will also potentially have protection under patent applications, which ARCA believes would substantially extend market exclusivity. ARCA also believes there is potential to pursue several significant follow-on indications for Gencaro, including various forms of cardiac arrhythmias.

ARCA believes that its expertise in cardiovascular pathophysiology and genetics, and its clinical and commercial experience, will also enable it to identify and develop other cardiovascular therapies, with an emphasis on those that may be personalized using genetic markers.

Results of Operations

Research and Development Expenses

Research and development, or R&D, expenses were $4.6 million for the three months ended March 31, 2009 as compared to $2.4 million for the corresponding period in 2008, an increase of $2.2 million. Approximately $1.8 million of the cost increase is attributed to increased medical affairs, regulatory, and clinical activities in anticipation of the potential commercialization of Gencaro and in support of our NDA. These increases were offset by a decrease of approximately $700,000 in contract manufacturing costs for the comparable period. ARCA also incurred approximately $1.0 million of clinical development and manufacturing process development costs for projects acquired through the Merger with Nuvelo, specifically NU172 and NU206. These expenses consist primarily of personnel costs related to former Nuvelo employees on transition plans, pre-clinical studies initiated during the quarter, as well as costs for collaborative development arrangements. Employees on transition plans were employed for periods up to twelve weeks after the Merger to facilitate the transition of the business to ARCA. These increased expenditures were partially offset by decreased costs related to ARCA’s regulatory activities.

Research and development expenses for the remainder of 2009 are expected to vary depending primarily on the timing and outcome of the FDA’s review of the NDA for Gencaro and ARCA’s evaluation of strategic alternatives. For the remainder of 2009, ARCA intends to limit its development activities and expenditures to ARCA’s contractual requirements for product candidates other than Gencaro pending the FDA decision on approvability of Gencaro. Research and development expenses for the remainder of 2009 are expected to include the following:

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Consulting and advisory service costs in support of the NDA for Gencaro; and

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Continuation of the manufacturing and process control projects for tableting and packaging of Gencaro to support Gencaro’s anticipated commercial launch timeline, if approved by the FDA.

Selling, General and Administrative Expenses

Selling, general and administrative expenses, or SG&A, primarily consist of personnel costs, consulting and professional fees, insurance, facilities and depreciation expenses, and various other administrative costs. Direct costs paid to third parties related to the Merger transaction were classified as merger transaction costs on the consolidated statement of operations as discussed below, and therefore are excluded from SG&A.

ARCA’s SG&A expenses were $5.3 million for the three months ended March 31, 2009, as compared to $1.6 million for the corresponding period in 2008. The increase in these expenses of nearly $3.7 million is attributable to integration activities related to the Merger, increased costs related to public-company reporting requirements, as well as investment in commercial infrastructure. The significant components of the increase in SG&A expenses include:

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Approximately $700,000 of increased commercial and marketing costs, largely due to increased personnel, marketing program expense, consulting, and market research costs in preparation for the potential commercial launch of Gencaro.

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Approximately $1.3 million of increased G&A personnel costs, of which approximately $650,000 are costs related to former Nuvelo employees on transitional employment plans, generally for up to twelve weeks following the Merger, to facilitate the integration of the business activities into ARCA. The remainder of the increase in G&A personnel costs is due to increased headcount from the comparable prior period.

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Approximately $701,000 of increased costs primarily related to legal, auditing, and tax compliance, consulting, and insurance incurred primarily to complete post-Merger transitions, corporate governance, transitional SEC filings, and NASDAQ fees associated with being a public company.

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Approximately $541,000 of increased facilities costs related to facilities assumed in the Merger. The majority of these costs are attributable to the former Nuvelo headquarters.

In light of ARCA’s current strategic direction and capital needs, ARCA is actively evaluating restructuring alternatives. For the second half of 2009, ARCA’s SG&A expenses are expected to decrease compared to the first half as a result of the anticipated restructuring and ARCA’s decision to seek strategic alternatives for commercializing Gencaro, if approved.

ARCA anticipates that any restructuring actions are likely to result in a material charge in the second quarter of 2009.

Merger Transaction Costs

During the three months ended March 31, 2009, ARCA expensed nearly $5.5 million in transaction costs related to the Merger. These costs are comprised of financial advisory fees paid upon completion of the Merger and legal fees incurred in the first quarter of 2009 totaling approximately $3.8 million. Prior to December 31, 2008 ARCA had incurred merger transaction expenses, including legal, accounting and due diligence costs of approximately $1.7 million. These costs were recorded on ARCA’s consolidated balance sheet as deferred transaction costs on December 31, 2008. On January 1, 2009, as part of ARCA’s adoption of SFAS No. 141(R), these deferred transaction costs were expensed. There were no such comparative expenses in the first quarter of 2008.

Gain on Bargain Purchase

In accordance with SFAS No. 141(R), any excess of fair value of acquired net assets over the acquisition consideration results in a gain on bargain purchase, and as a result, ARCA recorded a gain on bargain purchase of $25.3 million in connection with the Merger. This gain is largely determined by the trading price of Nuvelo’s common stock on Nasdaq prior to the Merger, which ARCA believes is the most reliable measure of the consideration effectively transferred to effect the acquisition of Nuvelo. ARCA believes the gain on bargain purchase resulted from various factors that may have impacted the trading price of Nuvelo’s common stock, including, without limitation, the significant declines in the securities markets during the fourth quarter of 2008; uncertainty concerning the combined entities ability to obtain regulatory approval of the Gencaro NDA, ability to successfully commercialize Gencaro, if approved, and to raise additional capital to support the commercialization of Gencaro and to fund other business objectives; uncertainty regarding the combined entities’ ability to successfully integrate the business operations of Nuvelo; and uncertainty regarding the combined entities’ ability to further identify, develop and achieve commercial success for products and technologies; all of which may have impacted Nuvelo’s market capitalization at the time the Merger was consummated. There was no such comparative gain in the first quarter of 2008.

Interest and Other Income

Interest and other income was $101,000 in the first quarter of 2009, as compared to $124,000 in the first quarter of 2008. The decrease in interest and other income in the 2009 period was primarily due to a reduction in the yield on cash equivalents and marketable securities.

Interest and Other Expense

Interest and other expense was $64,000 in the first quarter of 2009, as compared to $5,000 in the first quarter of 2008. The increase in interest and other expense in the 2009 period was primarily due to interest on the bank note payable and convertible notes payable.

Liquidity and Capital Resources

Cash and Cash Equivalents and Marketable Securities


	March 31, 2009		December 31, 2008
	(in thousands)
Cash and cash equivalents	$	25,920	$	7,740
Marketable securities		9,368		—

	$	35,288	$	7,740

As of March 31, 2009, ARCA had total cash and cash equivalents and marketable securities $35.3 million, as compared to $7.7 million as of December 31, 2008. The increase of $27.5 million is comprised primarily of $45.5 million acquired in the Merger, offset by cash used for operating activities during the period, including merger transaction costs paid of $4.3 million.

As of March 31, 2009, all of ARCA’s investments in marketable securities were classified as available-for-sale securities, as defined by Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” They were recorded at their fair value and primarily consisted of corporate debt securities. ARCA has made its investments in accordance with its investment policy, the primary objectives of which are liquidity and safety of principal.

Cash Flows from Operating, Investing and Financing Activities


	Three Months Ended March 31,
	2009			2008
	(in thousands)
Net cash (used in) provided by:
Operating activities	$	(17,462	)	$	(3,997	)
Investing activities		36,139			(132	)
Financing activities		(497	)		5

Net increase (decrease) in cash and cash equivalents	$	18,180		$	(4,124	)

The increase in net cash used in operating activities for the three months ended March 31, 2009 as compared with the three months ended March 31, 2008 was primarily due to increases in R&D and SG&A expenses as discussed above, and $4.3 million of merger transaction costs paid.

The increase in net cash provided by or used in investing activities for the three months ended March 31, 2009 as compared with the three months ended March 31, 2008 was primarily due to $30.4 million of cash received from the Merger and $5.7 million of proceeds from the sale of marketable securities.

The increase in net cash used in or provided by financing activities for the three months ended March 31, 2009 as compared with the three months ended March 31, 2008 was primarily due to payments on the bank note in the 2009 period.

Sources and Uses of Capital

ARCA’s primary source of liquidity to date has been capital raised from financing activities and the Merger. ARCA’s primary uses of capital resources to date have been to fund operating activities, including research, clinical development and drug manufacturing expenses, license payments, and spending on capital items.

Under the license agreement for the worldwide rights to Gencaro, ARCA is obligated under the CPEC license to make an $8.0 million milestone payment within 180 days after receiving approval from the FDA. ARCA also has the obligation under the CPEC license to make milestone payments of up to $5.0 million in the aggregate upon regulatory marketing approval in Europe and Japan.

Under the collaboration agreement with Archemix, Archemix is responsible for the discovery of short-acting aptamers targeting the coagulation cascade for use in acute cardiovascular procedures, and ARCA is responsible for development and worldwide commercialization of these product candidates. If the first patient is enrolled in a Phase II trial of NU172, which is currently not expected to occur in 2009, a $3.0 million milestone fee is payable to Archemix. In addition, ARCA is obligated to purchase Archemix common stock having a value equal to the lesser of $10.0 million or 15% of the total gross proceeds raised by Archemix in a qualified initial public offering of Archemix stock occurring within five years of the effective date of the 2006 collaboration agreement.

As previously disclosed in its Annual Report on Form 10-K, ARCA’s strategy to commercialize Gencaro, if approved, has been to raise sufficient capital to establish internal sales and marketing capabilities as well as its own distribution network for the product, if practicable. As a result of the continuing substantial disruption in the capital markets, the difficulty of raising a significant amount of capital on acceptable terms in light of these disruptions, and consideration of any potential extension of the review of the Gencaro NDA beyond the May 31, 2009 PDUFA date, ARCA is currently exploring strategic alternatives for commercializing Gencaro, including a potential strategic combination or a license of the Gencaro commercialization rights. Alternatively ARCA may continue to seek substantial additional funding through public or private debt or equity markets to support the continued development of and commercialization of Gencaro. In light of ARCA’s current strategic direction and capital needs, ARCA is actively evaluating restructuring alternatives. ARCA believes that, after giving effect to an anticipated restructuring, its current cash, cash equivalents and marketable securities balances will be sufficient to fund operations until at least December 31, 2009 although ARCA may seek to raise additional capital to augment its cash position. ARCA is unable to assert that its current cash, cash equivalents and marketable securities are sufficient to fund operations for the next twelve months, and as a result, there is substantial doubt about ARCA’s ability to continue as a going concern beyond December 31, 2009. The financial statements contained in this report have been prepared with the assumption that ARCA is a going concern and will be able to realize its assets and discharge its liabilities in the normal course of business and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of ARCA to continue as a going concern.

ARCA’s liquidity, and its ability to complete any strategic transaction or to raise additional capital, depends on a number of factors, including, but not limited to, the following:

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timing and outcome of the FDA’s response to ARCA’s NDA for Gencaro which, if approved, would trigger an $8 million milestone payment that would then be due within six months;

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the costs of commercializing ARCA’s product candidates if regulatory approvals are obtained, including the costs of establishing or contracting for marketing, sales and manufacturing capabilities, and other costs related to the size of its organization, which costs ARCA currently expects to substantially defer pending its review of strategic alternatives;

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general economic and industry conditions affecting the availability and cost of capital;

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ARCA’s ability to reduce costs associated with its operations;

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the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and

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the terms and conditions of ARCA’s existing collaborative and licensing agreements.

The sale of additional equity or convertible debt securities would likely result in substantial additional dilution to ARCA’s stockholders. If ARCA raises additional funds through the incurrence of additional indebtedness, the obligations related to such indebtedness would be senior to rights of holders of ARCA’s capital stock and could contain covenants that would restrict ARCA’s operations.

Critical Accounting Policies and Estimates

A critical accounting policy is one that is both important to the portrayal of ARCA’s financial condition and results of operation and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. ARCA’s significant accounting policies are described in Note 1 of “Notes to the Consolidated Financial Statements” included within Item 1 in this report. In addition to the accounting policies described in Note 1, the following is also applicable:

Valuation & Impairment Review of Acquired In-process Research and Development

ARCA acquired a significant in-process research and development (IPR&D) asset through the Merger primarily related to NU172. A valuation firm was engaged to assist ARCA in determining the estimated fair values of these assets as of the acquisition date. Discounted cash flow models are typically used in these valuations, and the models require the use of significant estimates and assumptions including but not limited to:

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projecting regulatory approvals,

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estimating future cash flows from product sales resulting from completed products and in-process projects, and

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developing appropriate discount rates and probability rates by project.

The IPR&D asset is considered an indefinite-lived intangible asset and is not subject to amortization. IPR&D must be tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value of the IPR&D with its carrying amount. If the carrying amount of the IPR&D exceeds its fair value, an impairment loss must be recognized in an amount equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the IPR&D will be its new accounting basis. Subsequent reversal of a previously recognized impairment loss is prohibited. The initial determination and subsequent evaluation for impairment, of the IPR&D asset requires management to make significant judgments and estimates.

Off-Balance Sheet Arrangements

ARCA has not participated in any transactions with unconsolidated entities, such as special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

Indemnifications

In the ordinary course of business, ARCA enters into contractual arrangements under which ARCA may agree to indemnify certain parties from any losses incurred relating to the services they perform on our behalf or for losses arising from certain events as defined within the particular contract. Such indemnification obligations may not be subject to maximum loss clauses. ARCA has entered into indemnity agreements with each of its directors, officers and certain employees. Such indemnity agreements contain provisions, which are in some respects broader than the specific indemnification provisions contained in Delaware law. ARCA also maintains an insurance policy for our directors and executive officers insuring against certain liabilities arising in their capacities as such.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES

ARCA maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including ARCA’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, ARCA carried out an evaluation, under the supervision and with the participation of management, including ARCA’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of ARCA’s disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, ARCA’s Chief Executive Officer and Chief Financial Officer concluded that ARCA’s disclosure controls and procedures were effective at a reasonable level of assurance.

ARCA’s internal control over financial reporting was materially affected as a result of the Merger on January 27, 2009 as described in Note 2 of “Notes to the Consolidated Financial Statements” included within Item 1 in this report. As ARCA Colorado was a private company, it was not subject to Section 404 of the Sarbanes-Oxley Act of 2002 which requires companies to include in their annual report an assessment of internal controls over financial reporting and, if applicable, the related auditor attestation report. During 2009, ARCA plans to dedicate internal resources and engage outside consultants to implement a work plan such that it may complete an evaluation of ARCA’s internal control over financial reporting as of December 31, 2009 and include an internal control assessment and the related auditor attestation report in ARCA’s 2009 Form 10-K.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

ITEM 1A.

RISK FACTORS

An investment in ARCA’s securities involves certain risks, including those set forth below and elsewhere in this report. In addition to the risks set forth below and elsewhere in this report, other risks and uncertainties not known to ARCA, that are beyond its control or that ARCA deems to be immaterial may also materially adversely affect ARCA’s business operations. You should carefully consider the risks described below as well as other information and data included in this report.

Those risks described below that reflect substantive changes from the risks described under Part I, Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as filed with the Securities and Exchange Commission on March 27, 2009 have been marked with an (*).

Risks Related to ARCA’s Financial Condition

*In light of the continuing substantial disruption in the capital markets, the difficulty of raising a significant amount of capital on acceptable terms in light of these disruptions, and consideration of any potential extension of the review of the Gencaro NDA beyond the May 31, 2009 PDUFA date, ARCA is evaluating strategic alternatives. If ARCA can not complete a strategic transaction, or alternatively, raise additional funds through the public or private debt and equity markets, it will not be able to commercialize Gencaro, even if approved, and may not be able to continue operations.

ARCA’s liquidity, and its ability to complete any strategic transaction or to raise additional capital, depends on a number of factors, including, but not limited to, the following:

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timing and outcomes of regulatory approvals, in particular the approval of ARCA’s NDA for Gencaro by the FDA;

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the costs of commercializing products, particularly Gencaro, if and when regulatory approvals are obtained, including the costs of establishing or contracting for marketing, sales and manufacturing capabilities, and other costs related to increasing the size of ARCA’s organization;

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general economic and industry conditions affecting the availability and cost of capital;

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ARCA’s ability to reduce costs associated with its operations;

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the costs of filing, prosecuting, defending and enforcing any intellectual property rights related to Gencaro, including patents and patent applications; and

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the terms and conditions of ARCA’s existing collaborative and licensing agreements.

ARCA cannot predict what consideration might be available, if any, to ARCA or its stockholders, in connection with any strategic transaction. Given the current state of the capital markets, the substantial capital needed to commercialize Gencaro if approved, and ARCA’s current market capitalization, any sale of additional equity or convertible debt securities as an alternative to a strategic transaction would likely result in substantial additional dilution to ARCA’s stockholders. If ARCA were able to raise additional funds through the incurrence of additional indebtedness, the obligations related to such indebtedness would be senior to rights of holders of ARCA capital stock and could contain covenants that would restrict ARCA’s operations. Any required additional funds may not be available on reasonable terms, if at all.

*In light of ARCA’s capital needs and current resources, there is substantial doubt about its ability to continue as a going concern beyond December 31, 2009.

If ARCA is unable to complete a strategic transaction or, alternatively, raise sufficient additional capital, ARCA may be unable to realize value from its assets and discharge its liabilities in the normal course of business. These uncertainties raise substantial doubt about ARCA’s ability to continue as a going concern beyond December 31, 2009. The financial statements contained in this report have been prepared with the assumption that ARCA is a going concern and will be able to realize its assets and discharge its liabilities in the normal course of business and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the inability of ARCA to continue as a going concern beyond December 31, 2009. If ARCA becomes unable to continue as a going concern, it may have to liquidate its assets, and might realize significantly less than the values at which they are carried on ARCA’s financial statements, and stockholders may lose all or part of their investment in ARCA common stock.

*ARCA’s existing indebtedness could adversely affect its financial condition, prevent it from fulfilling its financial obligations and limit its ability to complete a strategic transaction or obtain additional capital.

ARCA is obligated as a party under a Loan and Security Agreement dated July 17, 2007, as amended, with Silicon Valley Bank, or SVB, under which SVB provided a growth capital facility of up to $4.0 million, to be used solely for working capital and to fund ARCA’s general business requirements. The growth capital facility matures on December 1, 2010. The principal amount outstanding under the growth capital facility bears interest at a rate of 4.25% per annum, unless ARCA and its subsidiaries fail to maintain the lesser of $10 million or 100% of all of their invested cash balances in designated accounts with SVB, in which event, the interest rate will be permanently increased to a rate equal to the SVB’s prime rate plus 2.0%, which shall be fixed as of the date such accounts fall below the thresholds. ARCA and its subsidiaries also agreed to pledge to SVB restricted certificates of deposit, or CD’s issued by SVB, with the aggregate amount of the pledged CD’s varying from time to time depending on the aggregate amount of unrestricted cash maintained by ARCA and its subsidiaries with SVB. As of April 30, 2009, approximately $3.3 million aggregate principal amount was outstanding under the SVB credit facility. No additional drawings are permitted under the credit facility. The credit facility is not subject to any prepayment penalties.

The agreement contains customary affirmative and negative covenants including, without limitation, (i) covenants requiring ARCA to comply with applicable laws, provide to SVB copies of ARCA’s financial statements, maintain appropriate levels of insurance, protect, defend and maintain the validity and enforceability of ARCA’s material intellectual property, and (ii) covenants restricting ARCA’s ability to dispose of all or substantially all of its assets, engage in other lines of business, change its senior management, enter into transactions constituting a change of control, assume additional indebtedness, incur liens on its assets, among other covenants. ARCA Colorado’s obligations under the credit facilities are secured by a majority of ARCA Colorado’s assets.

This indebtedness could have important consequences to you. For example, it could:

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make it more difficult to satisfy financial obligations to third parties other than SVB;

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increase vulnerability to adverse economic and industry conditions;

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require ARCA to dedicate a substantial portion of its cash to debt service, thereby reducing the availability of ARCA’s cash to fund working capital, capital expenditures, research and development efforts and other general corporate purposes;

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limit ARCA’s flexibility in planning for, or reacting to, changes in our business and the industry in which it operates;

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place ARCA at a competitive disadvantage compared to our competitors that have less or no debt;

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limit ARCA’s ability to borrow additional funds; and

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limit ARCA’s ability to make future acquisitions.

Continued disruption in financial markets has and may continue to affect ARCA’s ability to access sufficient funding.

The global financial crisis and the broad domestic economic downturn have disrupted credit and equity markets globally, which has reduced the availability, and increased the costs of investment capital and credit. A continuation or worsening of these conditions may make it difficult or impossible for ARCA to refinance its indebtedness and access adequate funding to raise additional capital if needed, and may otherwise have a material adverse effect on ARCA’s liquidity and capital resources.

*ARCA may be limited in its ability to access sufficient funding through a private equity or convertible debt offering.

Nasdaq rules impose restrictions on ARCA’s ability to raise funds through a private offering of ARCA’s common stock, convertible debt or similar instruments without obtaining stockholder approval. Under Nasdaq rules, an offering of more than 20% of ARCA’s total shares outstanding for less than the greater of book or market value requires stockholder approval unless the offering qualifies as a “public offering” for purposes of the Nasdaq rules. As of March 31, 2009, ARCA had 7,569,903 shares of common stock outstanding, 20% of which is approximately 1,514,000 shares. To the extent ARCA seeks to raise funds through a private offering of stock, convertible debt or similar instruments, it would be limited in how much funding it could raise privately without requiring a stockholder vote.

Risks Related to ARCA’s Business

*If ARCA is not able to obtain FDA approval and successfully develop and provide for the commercialization of Gencaro in a timely manner, it may not be able to continue its business operations.

ARCA currently has no products that have received regulatory approval for commercial sale. The process to develop, obtain regulatory approval for and commercialize potential product candidates is long, complex and costly. The Gencaro NDA is currently under FDA review. Gencaro is ARCA’s only product candidate at a late stage of clinical development. As a result, ARCA’s business, including its ability to successfully complete any potential strategic transaction to enable commercialization of Gencaro, is substantially dependent on its ability to obtain regulatory approval for Gencaro in a timely manner. As part of the FDA review of the NDA, ARCA has had extensive interactions with, and has recently provided substantial supplemental information to the FDA. The submission of this or additional information could result in an extension of the review of the Gencaro NDA beyond the May 31, 2009 PDUFA date.

Failure to demonstrate that a product candidate, particularly Gencaro, is safe and effective, or significant delays in demonstrating such safety and efficacy, would adversely affect ARCA’s business. Failure to obtain marketing approval of a product candidate, particularly Gencaro, from appropriate regulatory authorities, or significant delays in obtaining such approval, would also adversely affect ARCA’s business and could, among other things, preclude ARCA from completing a strategic transaction or obtaining additional financing necessary to continue as a going concern.

Even if approved for sale, a product candidate must be successfully commercialized to generate value. ARCA does not currently have the capital resources to commercialize Gencaro and, as a result, will need to complete a strategic transaction, or, alternatively, raise substantially additional funds to enable commercialization of Gencaro. Failure to successfully provide for the commercialization of Gencaro, if it is approved, in a timely manner, would damage ARCA’s business and may prevent ARCA from continuing as a going concern.

*Transitioning from a developmental stage company will require successful completion of a number of steps, many of which are outside of ARCA’s control and, consequently, ARCA can provide no assurance of its successful and timely transition from a developmental stage company.

ARCA is a development stage biopharmaceutical company with a limited operating history. To date ARCA has not generated any product revenue and has historically funded its operations through investment capital. ARCA’s future growth depends on its ability to emerge from the developmental stage and successfully commercialize or provide for the commercialization of Gencaro and its other product candidates, which in turn, will depend, among other things, on ARCA’s ability to:

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develop and obtain regulatory approval for Gencaro or other product candidates;

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successfully partner a companion genetic test with the commercial launch of Gencaro;

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enter into a strategic transaction enabling the commercialization of Gencaro, or alternatively, raise significant additional capital and build an internal specialty sales and marketing capability;

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pursue additional indications for Gencaro and develop other product candidates, including other cardiovascular therapies;

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obtain commercial quantities of Gencaro or other product candidates at acceptable cost levels; and

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successfully conduct and complete clinical trials for Gencaro and other product candidates.

Any one of these factors or other factors discussed in this report could affect ARCA’s ability to successfully commercialize Gencaro and other product candidates, which could impact ARCA’s ability to earn sufficient revenues to transition from a developmental stage company and continue its business.

*If ARCA is required to establish a direct sales force in the U.S. and unable to do so, its business may be harmed.

ARCA currently intends to pursue a strategic alternative for the commercialization of Gencaro, if it is approved, and has suspended its efforts to build internal sales, marketing and distribution capabilities. If ARCA elects to rely on third parties to sell Gencaro and any other products, then it may receive less revenue than if it sold such products directly. In addition, ARCA may have little or no control over the sales efforts of those third parties.

If ARCA is unable to complete a strategic transaction, it would be unable to commercialize Gencaro or any other product candidate without substantial additional capital. Even if such capital were secured, ARCA would be required to build internal sales, marketing and distribution capabilities to market Gencaro in the U.S. While certain ARCA employees have experience in establishing and managing a sales force, these employees have no such experience since being with ARCA.

In the event ARCA is unable to sell Gencaro and other selected product candidates, either directly or through third parties via a strategic transaction, the commercialization of Gencaro may be delayed indefinitely and ARCA may be unable to continue as a going concern.

ARCA is relying upon LabCorp to obtain marketing clearance or approval of the companion Gencaro Test. There is no guarantee that the FDA will grant timely clearance or approval of the Gencaro Test, if at all, and failure to obtain such timely clearance or approval would adversely affect ARCA’s ability to market Gencaro.

The drug label being sought for Gencaro would identify the patient receptor genotypes with a potential for enhanced efficacy, as well as those with a likelihood of a standard beta-blocker response and the smaller unfavorable subgroup with a low probability of benefit. Accordingly, ARCA believes it will be critical to the successful commercialization of Gencaro to develop a companion genetic test, or the Gencaro Test, that is simple to administer and widely available.

The Gencaro Test is subject to regulation by the FDA and by comparable agencies in various foreign countries. The process of complying with the requirements of the FDA and comparable agencies is costly, time consuming and burdensome.

Under ARCA’s agreement with LabCorp, LabCorp is responsible for determining the appropriate regulatory pathway for the Gencaro Test and obtaining market clearance or approval from the FDA. Based on FDA guidance, LabCorp has submitted a PMA regulatory submission, which the FDA formally accepted in January 2009. The FDA may decide that the Gencaro Test should be evaluated for clearance under the FDA’s 510(k) notification process. LabCorp and ARCA do not believe that any further clinical trials will be required for the Gencaro Test PMA, though there is no guarantee that FDA will not require additional clinical data.

Despite the time and expense expended, regulatory clearance or approval is never guaranteed. If regulatory clearance or approval is delayed, or if LabCorp is unable to obtain FDA approval of the Gencaro Test at all or in parallel with the approval of Gencaro, or is unable to commercialize the test successfully and in a manner that effectively supports the commercial efforts for Gencaro, or if the information concerning the differential response to Gencaro resulting from certain genetic variation is not included in the approval label for Gencaro, the commercial launch of Gencaro may be significantly and adversely affected. In such cases, ARCA could be forced to identify a new third-party test provider and obtain regulatory approval for that provider’s genetic test, which could substantially delay and negatively affect the commercial prospects for Gencaro and ARCA’s ability to continue as a going concern.

Future sales of Gencaro may suffer if its marketplace acceptance is negatively affected by the Gencaro Test.

The Gencaro Test is an important component of the commercial strategy for Gencaro. ARCA believes that the Gencaro Test helps predict patient response to Gencaro, and that this aspect of the drug is important to its ability to compete effectively with current therapies. The Gencaro Test adds an additional step in the prescribing process, an additional cost for the patient and payors, the risk that the test results may not be rapidly available and the possibility that it may not be available at all to hospitals and medical centers. Although ARCA anticipates that Gencaro will be the first genetically-targeted cardiovascular drug, Gencaro will be one of a number of successful drugs in the beta-blocker class currently on the market. Prescribers may be more familiar with these other beta-blockers, and may be resistant to prescribing Gencaro as an HF therapy without efforts on ARCA’s part to educate prescribers. Any one of these factors could affect prescriber behavior, which in turn may substantially impede market acceptance of the Gencaro Test, which could cause significant harm to Gencaro’s ability to compete, and in turn harm ARCA’s business.

Unless ARCA is able to generate sufficient product revenue, ARCA will continue to incur losses from operations and may not achieve or maintain profitability.

ARCA’s historical losses, among other things, have had and will continue to have an adverse effect on ARCA’s stockholders’ equity and working capital. Even if ARCA receives regulatory approval for any of its product candidates, including Gencaro, sales of such products may not generate sufficient revenue for it to achieve or maintain profitability. As a result, it expects to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing therapeutic drugs, ARCA may experience larger than expected future losses and may never reach profitability.

ARCA is dependent on key personnel, and it must attract and retain qualified employees, collaborators and consultants.

The success of ARCA’s business is highly dependent on the principal members of ARCA’s scientific and management staff, including its Chairman of the Board, Michael R. Bristow, and its President and Chief Executive Officer, Richard, B. Brewer. The loss of the services of any such individual might seriously harm ARCA’s product development efforts. Recruiting and training personnel with the requisite skills is challenging and extremely competitive.

*ARCA’s product candidates are subject to extensive regulation, which can be costly and time-consuming, and unsuccessful or delayed regulatory approvals could increase ARCA’s future development costs or impair ARCA’s future revenue.

The preclinical and clinical development, testing, manufacture, safety, efficacy, labeling, storage, recordkeeping, advertising, promotion, sale, and marketing, and distribution of ARCA’s product candidates are subject to extensive regulation by the FDA and other regulatory authorities in the United States and elsewhere. These regulations also vary in important, meaningful ways from country to country. ARCA is not permitted to market a potential drug in the United States until ARCA receives approval of an NDA from the FDA. ARCA has not received an NDA approval from the FDA for any of its product candidates. There can be no guarantees with respect to ARCA’s product candidates that clinical studies will adequately support an NDA, that the products will receive necessary regulatory approvals, or that they will prove to be commercially successful.

To receive regulatory approval for the commercial sale of any product candidates, ARCA must demonstrate safety and efficacy in humans to the satisfaction of regulatory authorities through preclinical studies and adequate and well-controlled clinical trials of the product candidates. This process is expensive and can take many years, and failure can occur at any stage of the testing. ARCA’s failure to adequately demonstrate the safety and efficacy of its product candidates will prevent regulatory approval and commercialization of such products. With respect to Gencaro, the FDA could determine that the preclinical studies and clinical trials conducted Gencaro were inadequate, and such a determination would prevent regulatory approval and commercialization of Gencaro. For instance, ARCA filed an NDA for Gencaro in July 2008, based primarily on a single Phase III trial. The FDA guidelines generally suggest that sponsors conduct two adequate and well-controlled studies to demonstrate the safety and efficacy of a product candidate such as Gencaro in support of FDA approval. FDA interpretation of the statutory requirements also states that a single study may be sufficient to support approval if the FDA determines that, based on relevant science and other confirmatory evidence, there is strong evidence to establish the safety and efficacy of the drug candidate using a single adequate and well-controlled study. If the FDA determines that the clinical data for Gencaro are not sufficiently strong to demonstrate Gencaro’s safety and efficacy for chronic heart failure, then Gencaro may not be approved by the FDA for ARCA’s proposed indications, may be approved for a more limited indication, or the FDA may require ARCA to conduct additional studies before approving Gencaro for chronic heart failure. Even if ARCA conducted additional studies and submitted the attendant data, FDA may ultimately decide that the NDA does not satisfy the criteria for approval.

In September 2008, the FDA formally accepted for filing ARCA’s NDA, for Gencaro, with the goal of completing its review of the NDA by May 31, 2009. Filing of the NDA indicates that the application is sufficiently complete to allow for FDA to review ARCA’s data supporting the safety profile and effectiveness of Gencaro, but does not guarantee approval. As part of the FDA review of the NDA, ARCA has had extensive interactions with, and has recently provided substantial supplemental information to the FDA. The submission of this or additional information could result in an extension of the review of the Gencaro NDA beyond the May 31, 2009 PDUFA date.

In the event that ARCA or its collaborators conduct preclinical studies that did not comply with Good Laboratory Practices or incorrectly design or carry out human clinical trials or those clinical trials fail to demonstrate clinical significance, ARCA will not likely be able to obtain FDA approval for product development candidates. ARCA’s inability to successfully and effectively complete clinical trials for any product candidates on schedule or at all will severely harm ARCA’s business. Significant delays in clinical development could materially increase product development costs or allow ARCA’s competitors to bring products to market before it does, impairing ARCA’s ability to effectively commercialize any future product candidates. ARCA does not know whether planned clinical trials will begin on time, will need to be redesigned or will be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including:

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delays or failures in obtaining regulatory authorization to commence a trial because of safety concerns of regulators relating to ARCA’s product candidates or similar product candidates of ARCA’s competitors or failure to follow regulatory guidelines;

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delays or failures in obtaining clinical materials and manufacturing sufficient quantities of the product candidate for use in trials;

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delays or failures in reaching agreement on acceptable terms with prospective study sites;

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delays or failures in obtaining approval of ARCA’s clinical trial protocol from an institutional review board, or IRB, to conduct a clinical trial at a prospective study site;

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delays in recruiting patients to participate in a clinical trial, which may be due to the size of the patient population, eligibility criteria, protocol design, perceived risks and benefits of the drug, availability of other approved and standard of care therapies, availability of clinical trial sites;

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other clinical trials seeking to enroll subjects with similar profile;

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failure of ARCA’s clinical trials and clinical investigators to be in compliance with the FDA’s Good Clinical Practices;

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unforeseen safety issues, including negative results from ongoing preclinical studies;

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inability to monitor patients adequately during or after treatment;

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difficulty monitoring multiple study sites; and

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failure of ARCA’s third-party contract research organizations, clinical site organizations and other clinical trial managers, to satisfy their contractual duties, comply with regulations or meet expected deadlines.

In addition, any approvals ARCA may obtain may not cover all of the clinical indications for which it seeks approval. In addition, if ARCA chooses to make claims of superiority over currently marketed competitive products, ARCA must substantiate those claims with scientific evidence from prospectively designed head-to-head clinical trials. Also, an approval might contain significant limitations in the form of narrow indications, warnings, precautions or contraindications with respect to conditions of use. If the FDA determines that a risk evaluation and mitigation strategy, or REMS, is necessary to ensure that the benefits of the drug outweigh the risks, ARCA may be required to include as part of the NDA a proposed REMS that may include a package insert directed to patients, a plan for communication with healthcare providers, restrictions on a drug’s distribution, or a Medication Guide to provide better information to consumers about the drug’s risks and benefits. Finally, an approval could be conditioned on ARCA’s commitment to conduct further clinical trials, which ARCA may not have the resources to conduct or which may negatively impact ARCA’s financial situation.

All of ARCA’s product candidates are prone to the risks of failure inherent in drug development. The results from preclinical animal testing and early human clinical trials may not be predictive of results obtained in later human clinical trials. Further, although a new product may show promising results in preclinical or early human clinical trials, it may subsequently prove unfeasible or impossible to generate sufficient safety and efficacy data to obtain necessary regulatory approvals. The data obtained from preclinical and clinical studies are susceptible to varying interpretations that may delay, limit or prevent regulatory approval, and the FDA and other regulatory authorities in the United States and elsewhere exercise substantial discretion in the drug approval process. The numbers, size and design of preclinical studies and clinical trials that will be required for FDA or other regulatory approval will vary depending on the product candidate, the disease or condition for which the product candidate is intended to be used and the regulations and guidance documents applicable to any particular product candidate. The FDA or other regulators can delay, limit or deny approval of any product candidate for many reasons, including, but not limited to:

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side effects;

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safety and efficacy;

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defects in the design of clinical trials;

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the fact that the FDA or other regulatory officials may not approve ARCA’s or ARCA’s third party manufacturer’s processes or facilities; or

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the fact that new regulations may be enacted by the FDA or other regulators may change their approval policies or adopt new regulations requiring new or different evidence of safety and efficacy for the intended use of a product candidate.

In light of widely publicized events concerning the safety of certain drug products, regulatory authorities, members of Congress, the Government Accountability Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the withdrawal of certain drug products, revisions to certain drug labeling that further limit use of the drug products and establishment of risk management programs that may, for instance, restrict distribution of drug products. The increased attention to drug safety issues may result in a more cautious approach by the FDA to clinical trials and approval. Data from clinical trials may receive greater scrutiny with respect to safety and the product’s risk/benefit profile, which may make the FDA or other regulatory authorities more likely to terminate clinical trials before completion, or require longer or additional clinical trials that may result in substantial additional expense, and a delay or failure in obtaining approval or approval for a more limited indication than originally sought. Aside from issues concerning the quality and sufficiency of submitted preclinical and clinical data, the FDA may be constrained by limited resources from reviewing and determining the approvability of the Gencaro NDA in a timely manner. Indeed, in early 2008, the FDA announced that due to a lack of resources, NDAs may not be reviewed within the performance goals under PDUFA, and from time to time, the FDA has extended the review period for NDAs.

In addition, the manufacture and tableting of Gencaro is done by third party suppliers, who must pass a pre-approval inspection of their facilities before ARCA can obtain marketing approval. The FDA could also request additional information or data, including data from an additional Phase III study, which may extend the review period.

In its NDA, ARCA has requested that the FDA approve Gencaro as a therapy that can be prescribed by physicians for patients with heart failure, and specifically for its effect on certain clinical outcomes for these heart failure patients. ARCA has also requested that certain information be included in the prescribing information distributed with Gencaro that shows the effect of genetic differences in patients on the clinical results for Gencaro. The FDA could approve Gencaro, but without including some or all of the prescribing information that ARCA has requested. For instance, FDA could approve Gencaro without some or all of the pharmacogenetic information in the labeling. This, in turn, could substantially and detrimentally impact ARCA’s ability to successfully commercialize Gencaro and effectively protect its intellectual property rights in Gencaro.

ARCA has no manufacturing capacity which puts it at risk of lengthy and costly delays of bringing its products to market.

ARCA does not currently operate manufacturing facilities for clinical or commercial production of its product candidates, including their active pharmaceutical ingredients, or API. ARCA has no experience in drug formulation or manufacturing, and it lacks the resources and the capabilities to manufacture any of its product candidates on a clinical or commercial scale. ARCA does not intend to develop facilities for the manufacture of product candidates for clinical trials or commercial purposes in the foreseeable future.

ARCA has contracted with Groupe Novasep to manufacture commercial quantities of the API for Gencaro. For drug production, ARCA has contracted with Patheon, Inc. to manufacture the Gencaro tablets. In addition, ARCA is dependent upon other third-party contract manufacturers to develop the necessary production processes and produce the volume of cGMP-grade material needed to conduct any additional study of NU172. These contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to successfully produce, store and distribute ARCA’s products. In the event of errors in forecasting production quantities required to meet demand, natural disaster, equipment malfunctions or failures, technology malfunctions, strikes, lock-outs or work stoppages, regional power outages, product tampering, war or terrorist activities, actions of regulatory authorities, business failure, strike or other difficulty, ARCA may be unable to find an alternative third-party manufacturer in a timely manner and the production of its product candidates would be interrupted, resulting in delays and additional costs, which could impact ARCA’s ability to commercialize and sell its product candidates.

ARCA or its contract manufacturers may also fail to achieve and maintain required manufacturing standards, which could result in patient injury or death, product recalls or withdrawals, an order by governmental authorities to halt production, delays or failures in product testing or delivery, cost overruns or other problems that could seriously hurt its business. Contract manufacturers also often encounter difficulties involving production yields, quality control and quality assurance, as well as shortages of qualified personnel. In addition, its contract manufacturers are subject to ongoing inspections and regulation by the FDA, the U.S. Drug Enforcement Agency and corresponding state agencies and they may fail to meet these agencies’ acceptable standards of compliance. If ARCA’s contract manufacturers fail to comply with applicable governmental regulations, such as quality control, quality assurance and the maintenance of records and documentation, ARCA may not be able to continue production of the API or finished product. If the safety of any API or product supplied is compromised due to failure to adhere to applicable law or for other reasons, this may jeopardize ARCA’s regulatory approval for Gencaro and other product candidates, and ARCA may be held liable for any injuries sustained as a result.

Upon the occurrence of one of the aforementioned events, the ability to switch manufacturers may be difficult for a number of reasons, including:

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the number of potential manufacturers is limited and ARCA may not be able to negotiate agreements with alternative manufacturers on commercially reasonable terms, if at all;

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long lead times are often needed to manufacture drugs;

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the manufacturing process is complex and may require a significant learning curve; and

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the FDA must approve any replacement prior to manufacturing, which requires new testing and compliance inspections.

If ARCA’s product candidates receive regulatory approval, ARCA would be subject to ongoing regulatory obligations and restrictions, which may result in significant expenses and limit its ability to develop and commercialize other potential products.

If a product candidate of ARCA is approved by the FDA or by another regulatory authority, ARCA would be held to extensive regulatory requirements over product manufacturing, testing, distribution, labeling, packaging, adverse event reporting and other reporting to regulatory authorities, storage, advertising, marketing, promotion, distribution, and record keeping. Regulatory approvals may also be subject to significant limitations on the indicated uses or marketing of the product candidates. Potentially costly follow-up or post-marketing clinical studies may be required as a condition of approval to further substantiate safety or efficacy, or to investigate specific issues of interest to the regulatory authority. Previously unknown problems with the product candidate, including adverse events of unanticipated severity or frequency, may result in additional regulatory controls or restrictions on the marketing or use of the product or the need for post marketing studies, and could include suspension or withdrawal of the products from the market.

Furthermore, ARCA’s third-party manufacturers and the manufacturing facilities that they use to make ARCA’s product candidates are regulated by the FDA. Quality control and manufacturing procedures must continue to conform to cGMP after approval. Drug manufacturers and their subcontractors are required to register their facilities and products manufactured annually with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA, state and/or other foreign authorities. Any subsequent discovery of problems with a product, or a manufacturing or laboratory facility used by ARCA or its collaborators, may result in restrictions on the product, or on the manufacturing or laboratory facility, including a withdrawal of the drug from the market or suspension of manufacturing. Any changes to an approved product, including the way it is manufactured or promoted, often require FDA approval before the product, as modified, can be marketed. ARCA and its third-party manufacturers will also be subject to ongoing FDA requirements for submission of safety and other post-market information.

The marketing and advertising of ARCA’s drug products by its collaborators or ARCA will be regulated by the FDA, certain state agencies or foreign regulatory authorities. Violations of these laws and regulations, including promotion of ARCA’s products for unapproved uses or failing to disclose risk information, are punishable by criminal and civil sanctions and may result in the issuance of enforcement letters or other enforcement action by the FDA, U.S. Department of Justice, state agencies, or foreign regulatory authorities that could jeopardize ARCA’s ability to market the product.

In addition to the FDA, state or foreign regulations, the marketing of ARCA’s drug products by ARCA or its collaborators will be regulated by federal, state or foreign laws pertaining to health care “fraud and abuse,” such as the federal anti-kickback law prohibiting bribes, kickbacks or other remuneration for the order or recommendation of items or services reimbursed by federal health care programs. Many states have similar laws applicable to items or services reimbursed by commercial insurers. Violations of these laws are punishable by criminal and civil sanctions, including, in some instances, imprisonment and exclusion from participation in federal and state health care programs, including the Medicare, Medicaid and Veterans Affairs healthcare programs. Because of the far-reaching nature of these laws, ARCA may be required to discontinue one or more of its practices to be in compliance with these laws. Health care fraud and abuse regulations are complex, and even minor irregularities can potentially give rise to claims that a statute or prohibition has been violated. Any violations of these laws, or any action against ARCA for violations of these laws, even if ARCA successfully defends against it, could have a material adverse effect on ARCA’s business, financial condition and results of operations.

ARCA could also become subject to false claims litigation under federal statutes, which can lead to civil money penalties, restitution, criminal fines and imprisonment, and exclusion from participation in Medicare, Medicaid and other federal and state health care programs. These false claims statutes include the False Claims Act, which allows any person to bring a suit on behalf of the federal government alleging submission of false or fraudulent claims, or causing to present such false or fraudulent claims, under federal programs or contracts claims or other violations of the statute and to share in any amounts paid by the entity to the government in fines or settlement. These suits against pharmaceutical companies have increased significantly in volume and breadth in recent years. Some of these suits have been brought on the basis of certain sales practices promoting drug products for unapproved uses. This new growth in litigation has increased the risk that a pharmaceutical company will have to defend a false claim action, pay fines or restitution, or be excluded from the Medicare, Medicaid, Veterans Affairs and other federal and state healthcare programs as a result of an investigation arising out of such action. ARCA may become subject to such litigation and, if ARCA is not successful in defending against such actions, those actions may have a material adverse effect on its business, financial condition and results of operations. ARCA could also become subject to false claims litigation and consumer protection claims under state statutes, which also could lead to civil monetary penalties, restitution, criminal fines and imprisonment, and exclusion from participation in state health care programs.

Of note, over the past few years there has been an increased focus on the sales and marketing practices of the pharmaceutical industry at both the federal and state level. Additionally, the law or regulatory policies governing pharmaceuticals may change. New statutory requirements may be enacted or additional regulations may be enacted that could prevent or delay regulatory approval of ARCA’s product candidates. ARCA cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the U.S. or elsewhere.

If ARCA, its collaborators or its third-party manufacturers fail to comply with applicable continuing regulatory requirements, ARCA’s business could be seriously harmed because a regulatory agency may:

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issue untitled or warning letters;

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suspend or withdraw ARCA’s regulatory approval for approved products;

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seize or detain products or recommend a product recall of a drug or medical device, or issue a mandatory recall of a medical device;

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refuse to approve pending applications or supplements to approved applications filed by ARCA;

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suspend any of ARCA’s ongoing clinical trials;

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impose restrictions on ARCA’s operations, including costly new manufacturing requirements, and restrictions on ARCA’s sales, marketing and/or distribution of ARCA’s products;

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seek an injunction;

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pursue criminal prosecutions;

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close the facilities of ARCA’s contract manufacturers; or

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impose civil or criminal penalties.

If LabCorp or certain of its third-party suppliers fail to comply with ongoing FDA or other foreign regulatory authority requirements, or if there are unanticipated problems with the Gencaro Test, these products could be subject to restrictions or withdrawal from the market.

Any medical device for which LabCorp obtains clearance or approval, and the manufacturing processes, reporting requirements, post-approval clinical data and promotional activities for such product, will be subject to continued regulatory review, oversight and periodic inspections by the FDA and other domestic and foreign regulatory bodies. With respect to the Gencaro Test, to the extent applicable, LabCorp and certain of its suppliers will be required to comply with the FDA’s Quality System Regulation, or QSR, and International Standards Organization, or ISO, requirements which cover the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, storage and shipping of any product for which clearance or approval is obtained. Regulatory bodies, such as the FDA, enforce the QSR and other regulations through periodic inspections. The failure by LabCorp, or certain of its third-party manufacturers or suppliers, as the case may be, to comply with applicable statutes and regulations administered by the FDA and other regulatory bodies, or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, enforcement actions. If any of these actions were to occur, it could harm ARCA’s reputation and cause product sales and profitability of Gencaro to suffer and may prevent ARCA from generating revenue.

Even if regulatory clearance or approval is granted, such clearance or approval may be subject to limitations on the intended uses for which the product may be marketed and reduce ARCA’s potential to successfully commercialize the product and generate revenue from the product.

If LabCorp or certain of its third party suppliers fail to supply the Gencaro Test, the product sales and profitability of Gencaro will suffer.

LabCorp is ARCA’s single-source supplier of the Gencaro Test. If LabCorp or its third party suppliers were to cease or interrupt production of or otherwise fail to supply the Gencaro Test, or the materials required to produce it, in a timely manner or at all, ARCA could be unable to obtain a contract manufacturer of companion genetic test for Gencaro for an indeterminate period of time. This could adversely affect ARCA’s ability to satisfy demand for Gencaro, which could cause product sales and profitability of Gencaro to suffer and may have an adverse effect on ARCA’s financial condition and results of operations.

Medical devices related to Gencaro, such as the Gencaro Test, may in the future be subject to product recalls that could harm ARCA’s reputation, business and financial results.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture. In the case of the FDA, the authority to require a mandatory recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious adverse health consequences or death. In addition, foreign governmental bodies have the authority to require the recall of ARCA’s products in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, initiate a field correction or removal, known as a recall, for a product if any material deficiency in a device is found. A government-mandated or voluntary recall by ARCA’s third-party suppliers, including LabCorp, could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Any such recalls would divert managerial and financial resources and may have an adverse effect on ARCA’s financial condition and results of operations.

If medical devices related to Gencaro, such as the Gencaro Test, cause or contribute to a death or a serious injury, or malfunction in certain ways, ARCA’s third-party suppliers will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.

Under the FDA’s medical device reporting regulations, medical device manufacturers are required to report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or one of ARCA’s similar devices were to recur. If ARCA’s third-party suppliers, including LabCorp, fail to report these events to the FDA within the required timeframes, or at all, the FDA could take enforcement action against ARCA’s third-party suppliers, including LabCorp. Any such adverse event involving the Gencaro Test also could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any corrective action, whether voluntary or involuntary, taken by ARCA’s third-party suppliers, including LabCorp, may significantly affect ARCA’s ability to market Gencaro. In such cases, ARCA could be forced to identify a new third-party test provider for the Gencaro Test.

LabCorp may need to conduct clinical trials to support current or future versions of the Gencaro Test. Delays or failures in any such clinical trials may prevent LabCorp from commercializing any modified or new versions of the Gencaro Test and will adversely affect ARCA’s business, operating results and prospects.

Based on discussions with the FDA, ARCA and LabCorp do not believe that clinical data are needed for the Gencaro Test submission. However, the FDA may require clinical data for the Gencaro Test submission and/or future products. Initiating and completing clinical trials necessary to support 510(k)s or PMAs, if required, for current or future products will be time consuming and expensive and the outcome uncertain. Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product ARCA or its third party suppliers, including LabCorp, advance into clinical trials may not have favorable results in later clinical trials.

Conducting successful clinical studies may require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Patient enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including: the size of the patient population; the number of patients to be enrolled; the nature of the trial protocol; the attractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects; the availability of appropriate clinical trial investigators, support staff, and proximity of patients to clinical sites; and the patients’ ability to meet the eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged from enrolling in clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness of ARCA’s products or if they determine that the treatments received under the trial protocols are not attractive or involve unacceptable risks or discomforts. In addition, patients participating in clinical trials may die before completion of the trial or suffer adverse medical events unrelated to investigational products.

Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required, and LabCorp, or ARCA may not adequately develop such protocols to support clearance and approval. Significant risk trials will require the submission and approval of an investigational device exemption, or IDE, from the FDA. There is no guarantee that the FDA will approve LabCorp’s or ARCA’s future IDE submissions. Further, the FDA may require LabCorp or ARCA to submit data on a greater number of patients than originally anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis applicable to ARCA’s clinical trials. Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays in the approval and attempted commercialization of future products or result in the failure of the clinical trial. In addition, despite considerable time and expense invested in such clinical trials, the FDA may not consider the data to be adequate to demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect ARCA’s third party suppliers’, or ARCA’s business, operating results and prospects.

Federal regulatory reforms may adversely affect ARCA’s or its suppliers’ ability to sell products profitably.

From time to time, legislation is drafted and introduced in the U.S. Congress that could significantly change the statutory provisions governing the clearance or approval, manufacture and marketing of a medical device. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect the way that medical devices are marketed and promoted. It is impossible to predict whether legislative changes will be enacted or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be.

Without limiting the generality of the foregoing, in September 2007, the Food and Drug Administration Amendments Act of 2007, or the Amendments, were enacted. The Amendments require, among other things, that the FDA propose, and ultimately implement, regulations that will require manufacturers to label medical devices with unique identifiers unless a waiver is received from the FDA. Once implemented, compliance with those regulations may require manufacturers to take additional steps in the manufacture and labeling of medical devices. These steps may require additional resources and could be costly. In addition, the Amendments require medical device manufacturers to, among other things, comply with clinical trial registration requirements once clinical trials are initiated.

If approved by the FDA, Gencaro will be entering into a competitive marketplace and may not succeed.

Gencaro is a new type of beta-blocker and vasodilator being developed for heart failure and other indications. While ARCA anticipates that this drug will be the first genetically-targeted cardiovascular drug, Gencaro will be one of a number of successful drugs in the beta-blocker class currently on the market. Currently, there are three branded beta-blockers indicated for chronic heart failure in New York Health Association, or NYHA class II-IV patients: TOPROL-XL (once-a-day formulation), Coreg and Coreg CR (once-a-day). TOPROL-XL and Coreg have generic equivalents commercially available in the U.S. (Metoprolol Succinate and Carvedilol, respectively). The price of the generic forms of these drugs will be less than the anticipated price of Gencaro, if approved. As a result, Gencaro may not be successful in competing against these existing drugs.

Additionally, Forest Laboratories may apply for approval to use Bystolic, a drug currently used to treat high blood pressure, for treatment of heart failure. If approved for treatment of heart failure, Gencaro may not be successful in competing against Bystolic, an already well-known name brand.

ARCA’s commercial opportunity may be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, have fewer side effects, are more convenient or are less expensive than Gencaro. If products with any of these properties are developed, or any of the existing products are better marketed, then prescriptions of Gencaro by physicians and patient use of Gencaro could be significantly reduced or rendered obsolete and noncompetitive. Further, public announcements regarding the development of any such competing drugs could adversely affect the market price of ARCA’s common stock and the value of its assets.

Future sales of ARCA’s products may suffer if they are not accepted in the marketplace by physicians, patients and the medical community.

Gencaro or ARCA’s other product candidates may not gain market acceptance among physicians, patients and the medical community. The degree of market acceptance of Gencaro or ARCA’s other product candidates will depend on a number of factors, such as its effectiveness and tolerability, as compared with competitive drugs. Also, prevalence and severity of side-effects could negatively affect market acceptance of Gencaro or ARCA’s other product candidates. For example, side-effects of Gencaro observed during clinical trials included fatigue, dizziness and slowed heart beat. Failure to achieve market acceptance of Gencaro would significantly harm ARCA’s business.

If ARCA is unable to obtain acceptable prices or adequate reimbursement from third-party payors for Gencaro, or any other product candidates that ARCA may seek to commercialize, then its revenues and prospects for profitability will suffer.

ARCA’s or any strategic partner’s ability to commercialize Gencaro, or any other product candidates that ARCA may seek to commercialize, is highly dependent on the extent to which coverage and reimbursement for these product candidates will be available from:

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governmental payors, such as Medicare and Medicaid;

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private health insurers, including managed-care organizations; and

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other third-party payors.

Many patients will not be capable of paying for ARCA’s potential products themselves and will rely on third-party payors to pay for their medical needs. A primary current trend in the U.S. health care industry is toward cost containment. Large private payors, managed-care organizations, group purchasing organizations and similar organizations are exerting increasing influence on decisions regarding the use of, and reimbursement levels for, particular treatments. Such third-party payors, including Medicare, are challenging the prices charged for medical products and services, and many third-party payors limit reimbursement for newly approved health care products. In particular, third-party payors may limit the reimbursed indications.

Cost-control initiatives could decrease the price ARCA might establish for products, which could result in product revenues lower than anticipated. If the prices for ARCA’s product candidates decrease, or if governmental and other third-party payors do not provide adequate coverage and reimbursement levels, then ARCA’s revenue and prospects for profitability will suffer.

*ARCA’s competitors may be better positioned in the marketplace and thereby may be more successful than ARCA at developing, manufacturing and marketing approved products.

Many of ARCA’s competitors currently have significantly greater financial resources and expertise in conducting clinical trials, obtaining regulatory approvals, managing manufacturing and marketing approved products than ARCA. Other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. In addition, these third parties compete with ARCA in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring therapies and therapy licenses complementary to ARCA’s programs or advantageous to its business. ARCA expects that its ability to compete effectively will depend upon its ability to:

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successfully and rapidly complete clinical trials for any future product candidates and obtain all requisite regulatory approvals in a cost-effective manner;

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build an adequate sales and marketing infrastructure, obtain additional funding, or enter into strategic transactions enabling the commercialization of its products;

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develop competitive formulations of its product candidates;

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attract and retain key personnel; and

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identify and obtain other product candidates on commercially reasonable terms.

*If ARCA fails to identify and license or acquire other products or product candidates, then it may be unable to expand its business, and the acquisition or licensing of other products or product candidates may put a strain on ARCA’s operations and will likely require ARCA to seek additional financing.

One of ARCA’s strategies is to license or acquire clinical-stage products or product candidates and further develop them for commercialization. The market for licensing and acquiring products and product candidates is intensely competitive and many of ARCA’s competitors may have greater resources than ARCA. If ARCA undertakes any additional acquisitions, whether of product candidates or other biopharmaceutical companies, the process of integrating an acquired product candidate or complementary company into ARCA’s business may put a strain on its operations, divert personnel, financial resources and management’s attention. If ARCA is not able to reinitiate its research and development efforts and identify and license or acquire other products or product candidates or complete future acquisitions, then it will likely be unable expand its pipeline of product candidates. In addition, any future acquisition would give rise to additional operating costs and will likely require ARCA to seek additional financing. Future acquisitions could result in additional issuances of equity securities that would dilute the ownership of existing stockholders. Future acquisitions could also result in the incurrence of debt, contingent liabilities or the amortization of expenses related to other intangible assets, any of which could adversely affect ARCA’s operating results.

Any future product revenues could be reduced by imports from countries where ARCA’s product candidates are available at lower prices.

Even if ARCA obtains FDA approval to market Gencaro or other products in the U.S., ARCA’s or a strategic partner’s sales in the U.S. may be reduced if ARCA’s products are imported into the U.S. from lower priced markets, whether legally or illegally. In the U.S., prices for pharmaceuticals are generally higher than in the bordering nations of Canada and Mexico. There have been proposals to legalize the import of pharmaceuticals from outside the U.S. If such legislation were enacted, then ARCA’s future revenues could be reduced.

If ARCA encounters difficulties enrolling patients in its clinical trials, its trials could be delayed or otherwise adversely affected.

Clinical trials for ARCA’s product candidates require that ARCA identify and enroll a large number of patients with the disorder or condition under investigation. ARCA may not be able to enroll a sufficient number of patients to complete its clinical trials in a timely manner.

Patient enrollment is affected by factors including:

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design of the protocol;

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the size of the patient population;

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eligibility criteria for the study in question;

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perceived risks and benefits of the drug under study;

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availability of competing therapies, including the off-label use of therapies approved for related indications;

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efforts to facilitate timely enrollment in clinical trials;

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the success of ARCA’s personnel in making the arrangements with potential clinical trial sites necessary for those sites to begin enrolling patients;

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patient referral practices of physicians;

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availability of clinical trial sites; and

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other clinical trials seeking to enroll subjects with similar profiles.

If ARCA has difficulty enrolling a sufficient number of patients to conduct its clinical trials as planned, ARCA may need to delay or terminate ongoing or planned clinical trials, either of which would have a negative effect on its business. Delays in enrolling patients in ARCA’s clinical trials would also adversely affect its ability to generate product, milestone and royalty revenues and could impose significant additional costs on ARCA or on its collaborators.

ARCA’s clinical trials for its product candidates may not yield results that will enable ARCA to further develop its products and obtain the regulatory approvals necessary to sell them.

ARCA, and its collaborators, will only receive regulatory approval for its product candidates if ARCA can demonstrate in carefully designed and conducted clinical trials that the product candidate is safe and effective. ARCA does not know whether its current or any future clinical trials will demonstrate sufficient safety and efficacy to obtain the requisite regulatory approvals or will result in marketable products. Clinical trials are lengthy, complex and expensive processes with uncertain results. ARCA has spent, and expects to continue to spend, significant amounts of time and money in the clinical development of its product candidates.

The results ARCA obtains in preclinical testing and early clinical trials may not be predictive of results that are obtained in later studies. ARCA may suffer significant setbacks in advanced clinical trials, even after promising results in earlier studies. Based on results at any stage of clinical trials, ARCA may decide to repeat or redesign a trial or discontinue development of one or more of ARCA’s product candidates. If ARCA fails to adequately demonstrate the safety and efficacy of its products under development, ARCA will not be able to obtain the required regulatory approvals to commercialize ARCA’s product candidates, and its business, results of operations and financial condition would be materially adversely affected.

Administering ARCA’s product candidates to humans may produce undesirable side effects. These side effects could interrupt, delay or halt clinical trials of ARCA’s product candidates and could result in the FDA or other regulatory authorities denying approval of its product candidates for any or all targeted indications.

If clinical trials for a product candidate are unsuccessful, ARCA will be unable to commercialize the product candidate. If one or more of ARCA’s clinical trials are delayed, it will be unable to meet its anticipated development timelines. Either circumstance could cause the market price of ARCA’s common stock to decline.

ARCA may not achieve its projected development goals in the time frames it announces and expects.

ARCA sets goals for, and makes public statements regarding, the timing of certain accomplishments, such as the commencement and completion of clinical trials, the disclosure of trial results, the obtaining of regulatory approval and drug product sales, which ARCA sometimes refers to as milestones. These milestones may not be achieved, and the actual timing of these events can vary dramatically due to a number of factors such as delays or failures in ARCA’s clinical trials, disagreements with current or future collaborative partners, the uncertainties inherent in the regulatory approval process and manufacturing scale-up and delays in achieving manufacturing or marketing arrangements sufficient to commercialize ARCA’s products. There can be no assurance that ARCA’s clinical trials will be completed, or that it will make regulatory submissions or receive regulatory approvals as planned. If ARCA fails to achieve one or more of these milestones as planned, its business will be materially adversely affected, and the price of ARCA’s shares will decline.

ARCA would be subject to applicable regulatory approval requirements of the foreign countries in which ARCA markets its products, which are costly and may prevent or delay ARCA from marketing its products in those countries.

In addition to regulatory requirements in the United States, ARCA would subject to the regulatory approval requirements in each foreign country where it markets its products. In addition, ARCA might be required to identify one or more collaborators in these foreign countries to develop, seek approval for and manufacture it products and any companion genetic test for Gencaro. If ARCA determines to pursue regulatory approvals and commercialization of its product candidates internationally, it may not be able to obtain the required foreign regulatory approvals on a timely basis, if at all, and any failure to do so may cause ARCA to incur additional costs or prevent ARCA from marketing its products in foreign countries, which may have a material adverse effect on ARCA’s business, financial condition and results of operations.

If ARCA cannot successfully integrate the Nuvelo organization, ARCA may not be able to operate efficiently after the merger or to realize any benefits from the merger.

Achieving the benefits of the Merger will depend in part on the successful integration of ARCA’s and Nuvelo’s technical and business operations and remaining personnel in a timely and efficient manner. The integration process requires coordination of the personnel of both companies, involves the integration of systems, applications, policies, procedures, business processes and operations and is a complex, costly and time-consuming process. The difficulties of combining the operations of the companies include, among others:

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consolidating research and development operations;

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retaining key employees;

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consolidating corporate and administrative infrastructures;

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preserving the research and development and other important relationships of the companies;

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integrating and managing the technology of two companies;

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using the combined company’s liquid capital and other assets efficiently to develop the business of the combined company;

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appropriately managing the liabilities of the combined company;

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diverting management’s attention from ongoing business concerns; and

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coordinating geographically separate organizations.

ARCA cannot assure you that it will receive any benefits of the Merger or any other merger or acquisitions, or that any of the difficulties described above will not adversely affect ARCA. The integration process may be difficult and unpredictable because of possible conflicts and differing opinions on business, scientific and regulatory matters. If the companies cannot successfully integrate their technical and business operations and personnel, ARCA may not realize the expected benefits of the Merger.

ARCA expects to incur significant costs integrating the companies into a single business.

ARCA expects to incur significant costs integrating the technical and business operations and personnel of Nuvelo and ARCA, which may include costs for employee redeployment, relocation or severance, conversion of information systems, reorganization of facilities, disposition of excess facilities and relocation or disposition of excess equipment. The benefits of the merger may not be sufficient to justify these integration costs.

Integrating the companies may divert the attention of ARCA’s management away from its operations.

ARCA’s successful integration of Nuvelo’s technical and business operations and personnel into its own organization may place a significant burden on ARCA’s management and internal resources. The diversion of management’s attention and any difficulties encountered in the transition and integration process could result in delays in ARCA’s clinical trial and product development programs and could otherwise harm ARCA’s business, financial condition and operating results.

ARCA has incurred and will continue to incur increased costs as a result of being a public company.

As a public company, ARCA has incurred and will continue to incur significant levels of legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and related rules of the SEC and Nasdaq regulate corporate governance practices of public companies and impose significant requirements relating to disclosure controls and procedures and internal control over financial reporting. Compliance with these public company requirements has increased ARCA’s costs, required additional resources and made some activities more time consuming. ARCA is required to expend considerable time and resources complying with public company regulations.

Failure to establish and maintain effective internal control over financial reporting could have a material adverse effect on ARCA’s business, operating results and stock price.

Maintaining effective internal control over financial reporting is necessary for ARCA to produce reliable financial reports and is important in helping to prevent financial fraud. Prior to the recently completed merger involving Nuvelo, ARCA was not subject to the Sarbanes-Oxley Act. Therefore, ARCA’s management only performed an evaluation of Nuvelo’s internal control over financial reporting as of December 31, 2008 in accordance with the provisions of the Sarbanes-Oxley Act. Material weaknesses may exist when ARCA reports on the effectiveness of its internal control over financial reporting for purposes of its reporting requirements under the Exchange Act or Section 404 of the Sarbanes-Oxley Act for ARCA’s fiscal year ending December 31, 2009. The existence of one or more material weaknesses would preclude a conclusion that ARCA maintains effective internal control over financial reporting. Such a conclusion would be required to be disclosed in ARCA’s future Annual Reports on Form 10-K and could impact the accuracy and timing of its financial reporting and the reliability of its internal control over financial reporting, which could harm ARCA’s reputation and cause the market price of its common stock to drop.

ARCA’s investments in marketable debt securities are subject to credit risk that may adversely affect their fair value.

ARCA maintains a significant portfolio of investments in marketable debt securities, which are recorded at fair value. To minimize ARCA’s exposure to credit risk, ARCA invests in securities with strong credit ratings and has established guidelines relative to diversification and maturity with the objective of maintaining safety of principal and liquidity. ARCA does not invest in derivative financial instruments, mortgage-backed securities or auction rate securities, and ARCA has not recorded any losses on ARCA’s securities due to credit or liquidity issues. Since 2007, rising delinquency and default rates on subprime mortgages and declining home prices have caused a significant decline in the value of residential mortgage-backed securities, which has negatively impacted the entire credit market in the U.S. In recent months, certain other financial instruments have also sustained downgrades in credit ratings and declines in value. Further deterioration in the credit market may have an adverse effect on the fair value of ARCA’s investment portfolio.

The continued economic downturn could adversely affect our business and operating results.

The U.S. economy was in a recession through much or all of 2008, which has continued and deepened in 2009. As the global financial crisis has broadened and intensified, a severe recession appears likely. Business activity across a wide range of industries and regions is substantially reduced, and many companies are in serious difficulty due to the lack of consumer spending, reduced access to credit, cash flow shortages, deterioration of their businesses, and lack of liquidity in the capital markets. Challenging economic and market conditions may also result in:

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reductions to our workforce;

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increased price competition, which may adversely affect the revenue and gross margins we anticipate from any of our product candidates, once commercialized;

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financial strain on the health care system, which may lead to lower than anticipated sales of our product candidates, once commercialized;

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the bankruptcy or insolvency of our collaborators and third party manufacturers; and

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difficulties in forecasting, budgeting and planning due to limited visibility into economic conditions.

A prolonged national or regional economic recession, or other events that have produced or could produce major changes economic patterns, such as the housing market crisis, the credit crisis or a terrorist attack, could have a material adverse effect on our business, results of operations and financial condition.

Risks Related to Stock Price Volatility

Ownership of ARCA’s common stock is highly concentrated, and it may prevent you and other stockholders from influencing significant corporate decisions and may result in conflicts of interest that could cause ARCA’s stock price to decline.

ARCA’s executive officers, directors and their affiliates beneficially own approximately 49% of the outstanding common stock of ARCA as of January 27, 2009. Accordingly, these executive officers, directors and their affiliates, acting individually or as a group, have substantial influence over the outcome of a corporate action of ARCA requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of ARCA’s assets or any other significant corporate transaction. These stockholders may also delay or prevent a change in control of ARCA, even if such change in control would benefit the other stockholders of ARCA. The significant concentration of stock ownership may adversely affect the value of ARCA’s common stock due to investors’ perception that conflicts of interest may exist or arise.

*ARCA’s stock price is expected to be volatile.

ARCA’s common stock could be subject to significant fluctuations. Market prices for securities of early-stage pharmaceutical, biotechnology and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of ARCA’s common stock to fluctuate include:

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the regulatory status of Gencaro and the Gencaro Test, and whether and when they are approved for sale, if at all, and the labeling or other conditions of use imposed by the FDA;

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the ability of ARCA to complete a strategic transaction or to secure substantial additional funding to commercialize Gencaro;

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the results of ARCA’s future clinical trials and any future NDAs of its current and future product candidates;

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the entry into, or termination of, key agreements, including key strategic alliance agreements;

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the results and timing of regulatory reviews relating to the approval of ARCA’s product candidates;

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failure of any of ARCA’s product candidates, if approved, to achieve commercial success;

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general and industry-specific economic conditions that may affect ARCA’s research and development expenditures;

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the results of clinical trials conducted by others on drugs that would compete with ARCA’s product candidates;

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issues in manufacturing ARCA’s product candidates or any approved products;

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the initiation of material developments in or the conclusion of litigation to enforce or defend any of ARCA’s intellectual property rights;

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the loss of key employees;

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the introduction of technological innovations or new commercial products by competitors of ARCA;

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changes in estimates or recommendations by securities analysts, if any, who cover ARCA’s common stock;

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future sales of ARCA’s common stock;

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changes in the structure of health care payment systems; and

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period-to-period fluctuations in ARCA’s financial results.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of ARCA’s common stock.

In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm ARCA’s profitability and reputation.

Future sales or the possibility of future sales of ARCA’s common stock may depress the market price of ARCA’s common stock.

Sales in the public market of substantial amounts of ARCA’s common stock could depress prevailing market prices of its common stock. As of March 31, 2009, ARCA had 7,569,903 shares of common stock outstanding. All of these shares are freely transferable without restriction or further registration under the Securities Act, except for shares held by ARCA’s directors, officers and other affiliates and unregistered shares held by non-affiliates. Although ARCA does not believe that its directors, officers and other affiliates have any present intentions to dispose of large amounts of any shares of common stock owned by them, there can be no assurance that such intentions will not change in the future. The sale of these additional shares could depress the market price of ARCA’s common stock.

As of March 31, 2009, ARCA had approximately 1.1 million shares of ARCA’s common stock which may be issued upon exercise of outstanding stock options. If and when these options are exercised, such shares are available for sale in the open market without further registration under the Securities Act. The existence of these outstanding options may negatively affect ARCA’s ability to complete future equity financings at acceptable prices and on acceptable terms. The exercise of those options, and the prompt resale of shares of ARCA’s common stock received, may also result in downward pressure on the price of ARCA’s common stock.

As of March 31, 2009, approximately 210,000 shares of ARCA’s common stock were issuable upon the exercise of outstanding warrants, which were all exercisable as of this date. Once a warrant is exercised, if the shares of ARCA common stock issued upon the exercise of any such warrant are not available for sale in the open market without further registration under the Securities Act, then the holder can arrange for the resale of shares either by invoking any applicable registration rights, causing the shares to be registered under the Securities Act and thus freely transferable, or by relying on an exemption to the Securities Act. If these registration rights, or similar registration rights that may apply to securities ARCA may issue in the future, are exercised, it could result in additional sales of ARCA’s common stock in the market, which may have an adverse effect on ARCA’s stock price.

In the absence of a significant strategic transaction, ARCA will need to raise significant additional capital to finance its capital requirements, including the research, development and commercialization of its drug products. If future securities offerings are successful, they could dilute ARCA’s current stockholders’ equity interests and reduce the market price of its common stock.

ARCA does not expect to pay cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment.

ARCA anticipates that it will retain its earnings, if any, for future growth and therefore does not anticipate paying cash dividends in the future. As a result, only appreciation of the price of its common stock will provide a return to stockholders. Investors seeking cash dividends should not invest in its common stock.

ARCA has implemented anti-takeover provisions that could discourage, prevent or delay a takeover, even if the acquisition would be beneficial to ARCA’s stockholders.

Provisions of ARCA’s certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire ARCA, even if doing so would benefit ARCA’s stockholders. These provisions:

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establish a classified board of directors so that not all members of ARCA’s board may be elected at one time;

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authorize the issuance of up to 5 million additional shares of preferred stock that could be issued by ARCA’s board of directors to increase the number of outstanding shares and hinder a takeover attempt;

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limit who may call a special meeting of stockholders;

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prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of ARCA’s stockholders; and

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establish advance notice requirements for nominations for election to ARCA’s board of directors or for proposing matters that can be acted upon at a stockholder meeting.

Specifically, ARCA’s certificate of incorporation provides that all stockholder action must be effected at a duly called meeting and not by a written consent. The bylaws provide, however, that ARCA’s stockholders may call a special meeting of stockholders only upon a request of stockholders owning at least 50% of ARCA’s common stock. These provisions of ARCA’s certificate of incorporation and bylaws could discourage potential acquisition proposals and could delay or prevent a change in control. ARCA designed these provisions to reduce ARCA’s vulnerability to unsolicited acquisition proposals and to discourage certain tactics that may be used in proxy fights. These provisions, however, could also have the effect of discouraging others from making tender offers for ARCA’s shares. As a consequence, they also may inhibit fluctuations in the market price of ARCA’s shares that could result from actual or rumored takeover attempts. Such provisions also may have the effect of preventing changes in ARCA’s management.

ARCA is permitted to issue shares of ARCA’s preferred stock without stockholder approval upon such terms as ARCA’s board of directors determines. Therefore, the rights of the holders of ARCA’s common stock are subject to, and may be adversely affected by, the rights of the holders of ARCA’s preferred stock that may be issued in the future. In addition, the issuance of preferred stock could have a dilutive effect on the holdings of ARCA’s current stockholders.

ARCA is subject to the Delaware anti-takeover laws regulating corporate takeovers. These anti-takeover laws prevent a Delaware corporation from engaging in a merger or sale of more than 10% of its assets with any stockholder, including all affiliates and associates of the stockholder, who owns 15% or more of the corporation’s outstanding voting stock, for six years following the date that the stockholder acquired 15% or more of the corporation’s stock unless:

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the board of directors approved the transaction where the stockholder acquired 15% or more of the corporation’s stock;

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after the transaction in which the stockholder acquired 15% or more of the corporation’s stock, the stockholder owned at least 85% of the corporation’s outstanding voting stock, excluding shares owned by directors, officers and employee stock plans in which employee participants do not have the right to determine confidentially whether shares held under the plan will be tendered in a tender or exchange offer; or

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on or after this date, the merger or sale is approved by the board of directors and the holders of at least two-thirds of the outstanding voting stock that is not owned by the stockholder.

The provisions of ARCA’s governing documents and current Delaware law may, collectively:

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lengthen the time required for a person or entity to acquire control of ARCA through a proxy contest for the election of a majority of ARCA’s board of directors;

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discourage bids for ARCA’s common stock at a premium over market price; and

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generally deter efforts to obtain control of ARCA.

Risks Related to Intellectual Property and Other Legal Matters

ARCA is party to securities litigation and defending these lawsuits could hurt ARCA’s business. The volatility of the market price could engender additional class action securities litigation.

Following periods of volatility in the market price of a company’s securities, class action securities litigation has often been instituted against such a company. This risk is especially acute for biotechnology companies, which have experienced greater than average stock price volatility in recent years and, as a result, have been subject to, on average, a greater number of securities class action claims than companies in other industries. Any such litigation instigated against ARCA could result in substantial costs and a diversion of management’s attention and resources, which could significantly harm ARCA’s business, financial condition and operating results.

For example, in December 2006, after Nuvelo announced that alfimeprase did not meet its primary endpoint in the first of two planned Phase III trials for the treatment of acute peripheral arterial occlusion and in the first of two planned Phase III trials for the treatment of catheter occlusion, the closing price of one share of Nuvelo’s common stock was $81 (as adjusted for the 20-to-1 reverse stock split) on the day of the announcement, as compared with a closing price of $391 (as adjusted for the 20-to-1 reverse stock split) on the trading day prior to the announcement. On February 9, 2007, Nuvelo and certain of Nuvelo’s former and current officers and directors were named as defendants in a purported securities class action lawsuit filed in the U.S. District Court for the Southern District of New York. The suit alleged violations of the Securities Exchange Act of 1934 related to the clinical trial results of alfimeprase, which Nuvelo announced on December 11, 2006, and sought damages on behalf of purchasers of Nuvelo’s common stock during the period between January 5, 2006 and December 8, 2006. Specifically, the suit alleged that Nuvelo misled investors regarding the efficacy of alfimeprase and the drug’s likelihood of success. The plaintiff sought unspecified damages and injunctive relief. Three additional lawsuits were filed in the Southern District of New York on February 16, 2007, March 1, 2007 and March 6, 2007, respectively. On April 10, 2007, three separate motions to consolidate the cases, appoint lead plaintiff, and appoint lead plaintiff’s counsel were filed. On April 18, 2007, Nuvelo filed a motion to transfer the four cases to the Northern District of California. The Court granted Nuvelo’s motion to transfer the cases to the Northern District of California in July 2007. Plaintiffs have filed motions for consolidation, lead plaintiff and lead plaintiff’s counsel in the Northern District of California. Plaintiffs filed their consolidated complaint in the Northern District of California on November 9, 2007. Nuvelo filed a motion to dismiss plaintiffs consolidated complaint on December 21, 2007. Plaintiffs filed an opposition to Nuvelo’s motion to dismiss on February 4, 2008. On June 12, 2008, the Court held a hearing on the motion to dismiss.

On December 4, 2008, the Court issued an order dismissing plaintiff’s complaint, and granting leave to amend. On January 23, 2009, the plaintiffs filed an amended complaint, alleging similar claims. On March 24, 2009, the defendants filed a motion to dismiss the amended complaint. Based on the Court’s December 4, 2008 order, and plaintiff’s amended complaint, ARCA believes that any attorneys’ fees, loss or settlement payment with respect to this suit will be paid by its insurance providers. However, it is possible that ARCA could be forced to incur material expenses in the litigation if the case is not finally dismissed, or if the parties cannot achieve a settlement, and, in the event of an adverse outcome, ARCA’s business could be harmed.

In addition, Variagenics, with which Nuvelo merged in 2003, has been named as a defendant in a securities class action lawsuit alleging the failure to disclose additional and excessive commissions purportedly solicited by and paid to underwriters who are also named defendants in the lawsuit. Plaintiffs in the suit allege that underwriters took these commissions and in exchange allocated shares of Variagenics’ stock to their preferred customers through alleged agreements with these preferred customers that tied the allocation of initial public offering shares to agreements by the customers to make additional aftermarket purchases at pre-determined prices. As a result of Nuvelo’s merger with Variagenics, ARCA is obligated to continue to defend against this litigation. ARCA believes that any attorneys’ fees, loss or settlement payment with respect to this suit will not be material to ARCA’s financial position or results of operations, and that any loss, settlement payment or attorneys’ fees accrued with respect to the suit will be paid by Nuvelo’s insurance provider. Because of a recent court ruling, the settlement class, as defined in the settlement papers, is no longer feasible. While a new complaint has not been filed against ARCA, there are several “focus” cases against other issuers in which new complaints have been filed. Defendant issuers in the “focus” cases filed motions to dismiss the new complaints. On March 26, 2008, the District Court issued an order granting in part and denying in part the “focus” issuers motions to dismiss. The “focus” issuers had been advised that plaintiffs intended to file new complaints against ARCA, but none have been filed yet. ARCA believes that any attorneys’ fees, loss or settlement payment with respect to this suit will be paid by Nuvelo’s insurance provider. However, it is possible that ARCA could be forced to incur material expenses in the litigation if the parties cannot achieve a settlement, and, in the event of an adverse outcome, ARCA’s business could be harmed.

If product liability lawsuits are successfully brought against ARCA, then ARCA will incur substantial liabilities and may be required to limit commercialization of Gencaro or other product candidates.

ARCA faces product liability exposure related to the testing of its product candidates in human clinical trials, and may face exposure to claims by an even greater number of persons once it begins marketing and distributing its products commercially. If ARCA cannot successfully defend itself against product liability claims, then it will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

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decreased demand for its products and product candidates;

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injury to its reputation;

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withdrawal of clinical trial participants;

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costs of related litigation;

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substantial monetary awards to patients and others;

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loss of revenues; and

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the inability to commercialize its products and product candidates.

ARCA has obtained limited product liability insurance coverage. Such coverage, however, may not be adequate or may not continue to be available to ARCA in sufficient amounts or at an acceptable cost, or at all. ARCA may not be able to obtain commercially reasonable product liability insurance for any product approved for marketing.

Defending against claims relating to improper handling, storage or disposal of hazardous chemicals, radioactive or biological materials could be time consuming and expensive.

ARCA’s research and development of product candidates may involve the controlled use of hazardous materials, including chemicals, radioactive and biological materials. ARCA cannot eliminate the risk of accidental contamination or discharge and any resultant injury from the materials. Various laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous materials. ARCA may be sued or be required to pay fines for any injury or contamination that results from its use or the use by third parties of these materials. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair its research, development and production efforts.

The loss of any rights to market key products would significantly impair ARCA’s operating results.

ARCA has licensed from CPEC, who has licensed rights in Gencaro from BMS, the exclusive rights to Gencaro for all therapeutic and diagnostic uses in any country until the later of (i) 10 years from the first commercial sale of Gencaro in such country, or (ii) the termination of ARCA’s commercial exclusivity in such country. This license includes a sublicense to ARCA from BMS. ARCA is obligated to use commercially reasonable efforts to develop and commercialize Gencaro, including obtaining regulatory approvals. ARCA’s ability to develop and commercialize Gencaro is dependent on numerous factors, including some factors that are outside of its control. CPEC has the right to terminate ARCA’s license if ARCA materially breaches its obligations under the license agreement and fails to cure any such breach within the terms of the license.

If ARCA’s license agreement with CPEC is terminated for reasons related to non-payment of fees, or for any other breach, then ARCA would have no further rights to develop and commercialize Gencaro for any indication. The termination of this license, or of any other agreement which enables ARCA to market a key product or product candidate, could significantly and adversely affect ARCA’s business.

Third parties may own or control patents or patent applications that ARCA may be required to license to commercialize its product candidates or that could result in litigation that would be costly and time consuming.

ARCA’s or any strategic partner’s ability to commercialize Gencaro and other product candidates depends upon its ability to develop, manufacture, market and sell these drugs without infringing the proprietary rights of third parties. A number of pharmaceutical and biotechnology companies, universities and research institutions have or may be granted patents that cover technologies similar to the technologies owned by or licensed to ARCA. ARCA may choose to seek, or be required to seek, licenses under third party patents, which would likely require the payment of license fees or royalties or both. ARCA may also be unaware of existing patents that may be infringed by Gencaro, the genetic testing ARCA intends to use in connection with Gencaro or its other product candidates. Because patent applications can take many years to issue, there may be other currently pending applications that may later result in issued patents that are infringed by Gencaro or ARCA’s other product candidates. Moreover, a license may not be available to ARCA on commercially reasonable terms, or at all.

There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally. If a third party claims that ARCA is infringing on its technology, then ARCA’s business and results of operations could be harmed by a number of factors, including:

•

infringement and other intellectual property claims, even if without merit, are expensive and time-consuming to litigate and can divert management’s attention from ARCA’s core business;

•

monetary damage awards for past infringement can be substantial;

•

a court may prohibit ARCA from selling or licensing product candidates unless the patent holder chooses to license the patent to ARCA; and

•

if a license is available from a patent holder, ARCA may have to pay substantial royalties.

ARCA may also be forced to bring an infringement action if it believes that a competitor is infringing its protected intellectual property. Any such litigation will be costly, time-consuming and divert management’s attention, and the outcome of any such litigation may not be favorable to ARCA.

ARCA’s intellectual property rights may not preclude competitors from developing competing products and ARCA’s business may suffer.

ARCA’s competitive success will depend, in part, on ARCA’s ability to obtain and maintain patent protection for its inventions, technologies and discoveries, including intellectual property that ARCA licenses. The patent positions of biotechnology companies involve complex legal and factual questions, and ARCA cannot be certain that ARCA’s patents and licenses will successfully preclude others from using ARCA’s technology. Although Gencaro has an established patent strategy, the timing of the grant of a patent cannot be predicted. Patent applications describing and seeking patent protection of methods, compositions or processes relating to proprietary inventions involving human therapeutics could require ARCA to generate data, which may involve substantial costs. In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued. Consequently, ARCA cannot be certain that any of its patent applications will result in the issuance of patents or, if any patents are issued, that they

will provide significant market protection or will not be circumvented or challenged and found to be unenforceable or invalid. In some cases, patent applications in the U.S. and certain other jurisdictions are maintained in secrecy until patents issue, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, ARCA cannot be certain of the priority of inventions covered by pending patent applications. Moreover, ARCA may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office to determine priority of invention or in opposition proceedings in a foreign patent office, any of which could result in substantial cost to ARCA, even if the eventual outcome is favorable. There can be no assurance that a court of competent jurisdiction would hold any patents issued valid. An adverse outcome could subject ARCA to significant liabilities to third parties, require disputed rights to be licensed from third parties or require ARCA to cease using such technology. ARCA could also incur substantial costs in seeking to enforce its proprietary rights against infringement.

While the composition of matter patents on the compound have expired, ARCA holds the intellectual property arising from the discovery of the interaction of Gencaro with the polymorphisms of the ß ₁ and a _2c receptors. ARCA has filed patent applications that claim the use of Gencaro with the diagnosis of a patient’s receptor genotype. ARCA’s NDA requested a label that will include a claim that efficacy varies based on receptor genotype and a recommendation in the prescribing information that prospective patients be tested for their receptor genotype. Under applicable law, a generic bucindolol label would likely be required to include this recommendation as it pertains directly to the safe or efficacious use of the drug. Such a label could be considered as inducing infringement, carrying the same liability as direct infringement. Even if the patents are granted, the approved label may not contain language covered by the patents, or ARCA may be unsuccessful in enforcing them.

ARCA may not be able to effectively protect its intellectual property rights in some foreign countries, as many countries do not offer the same level of legal protection for intellectual property as the U.S. Furthermore, the patent applications describing ARCA’s proprietary methods are filed only in the U.S.

ARCA requires its employees, consultants, business partners and members of its scientific advisory board to execute confidentiality agreements upon the commencement of employment, consulting or business relationships with ARCA. These agreements provide that all confidential information developed or made known during the course of the relationship with ARCA be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions resulting from work performed for ARCA, utilizing the property or relating to the business of ARCA and conceived or completed by the individual during employment shall be the exclusive property of ARCA to the extent permitted by applicable law.

Third parties may breach these and other agreements with ARCA regarding its intellectual property and ARCA may not have adequate remedies for the breach. Third parties could also fail to take necessary steps to protect ARCA’s licensed intellectual property, which could seriously harm ARCA’s intellectual property position.

If ARCA is not able to protect its proprietary technology, trade secrets and know-how, then its competitors may develop competing products. Any issued patent may not be sufficient to prevent others from competing with ARCA. Further, ARCA has trade secrets relating to Gencaro, and such trade secrets may become known or independently discovered. ARCA’s issued patents and those that may issue in the future, or those licensed to ARCA, may be challenged, opposed, invalidated or circumvented, which could limit ARCA’s ability to stop competitors from marketing related products or the term of patent protection that ARCA may have for its product candidates. All of these factors may affect ARCA’s competitive position.

If the manufacture, use or sale of ARCA’s products infringe on the intellectual property rights of others, ARCA could face costly litigation, which could cause ARCA to pay substantial damages or licensing fees and limit its ability to sell some or all of its products.

Extensive litigation regarding patents and other intellectual property rights has been common in the biopharmaceutical industry. Litigation may be necessary to assert infringement claims, enforce patent rights, protect trade secrets or know-how and determine the enforceability, scope and validity of certain proprietary rights. The defense and prosecution of intellectual property lawsuits, U.S. Patent and Trademark Office interference proceedings, and related legal and administrative proceedings in the U.S. and internationally involve complex legal and factual questions. As a result, such proceedings are costly and time-consuming to pursue, and their outcome is uncertain.

Regardless of merit or outcome, ARCA’s involvement in any litigation, interference or other administrative proceedings could cause ARCA to incur substantial expense and could significantly divert the efforts of ARCA’s technical and management personnel. Any public announcements related to litigation or interference proceedings initiated or threatened against ARCA could cause ARCA’s stock price to decline. An adverse determination may subject ARCA to the loss of its proprietary position or to significant liabilities, or require ARCA to seek licenses that may include substantial cost and ongoing royalties. Licenses may not be available from third parties, or may not be obtainable on satisfactory terms. An adverse determination or a failure to obtain necessary licenses may restrict or prevent ARCA from manufacturing and selling its products, if any. These outcomes could materially harm ARCA’s business, financial condition and results of operations.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Information with respect to the meeting of the stockholders of Nuvelo held in January 2009 was included in the Company’s Annual Report on Form 10-K, filed on March 27, 2009 and is incorporated herein.

ITEM 5.

OTHER INFORMATION

Not applicable.

ITEM 6.

EXHIBITS

The following documents are filed as part of this quarterly report on Form 10-Q. The Company will furnish a copy of any exhibit listed to requesting stockholders upon payment of the Company’s reasonable expenses in furnishing those materials.


Exhibit Number		Description

2.1		Agreement and Plan of Merger and Reorganization, dated as of September 24, 2008, among Nuvelo, Inc., Dawn Acquisition Sub, Inc. and ARCA biopharma, Inc.(1)

2.2		Amendment No. 1 to Agreement and Plan of Merger and Reorganization dated October 28, 2008, by and among Nuvelo, Inc., Dawn Acquisition Sub, Inc. and ARCA biopharma, Inc.(2)

3.1		Amended and Restated Certificate of Incorporation of the Registrant, as amended.(3)

3.2		Amended and Restated Bylaws of the Registrant, as amended.(3)

4.1		Form of Common Stock Certificate.(4)

4.2		Warrant to Purchase Stock Agreement, dated July 17, 2007, by and between ARCA Discovery, Inc. and Silicon Valley Bank.(3)

4.3		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and SVB Financial Group.(3)

4.4		Warrant to Purchase Stock Agreement, dated August 19, 2008, by and between ARCA biopharma, Inc. and Silicon Valley Bank.(3)

4.5		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and SVB Financial Group.(3)

4.6		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and Boulder Ventures IV, L.P.(3)

4.7		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and Boulder Ventures IV, L.P.(3)

4.8		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and Boulder Ventures IV (Annex), L.P.(3)

4.9		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and Boulder Ventures IV (Annex), L.P.(3)

4.10		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and InterWest Partners IX, LP.(3)

4.11		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and InterWest Partners IX, LP.(3)

4.12		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and Atlas Venture Fund VII, L.P.(3)

4.13		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and Atlas Venture Fund VII, L.P.(3)

4.14		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and The Peierls Foundation, Inc.(3)

4.15		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and The Peierls Foundation, Inc.(3)

4.16		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and Skyline Venture Partners Qualified Purchaser Fund IV, L.P.(3)

4.17		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and Skyline Venture Partners Qualified Purchaser Fund IV, L.P.(3)

10.1§*		License and Sublicense Agreement, dated October 28, 2003, by and between ARCA Discovery, Inc. and CPEC, L.L.C.

10.2§*		Amendment to License and Sublicense Agreement, dated February 22, 2006, by and between ARCA Discovery, Inc. and CPEC L.L.C.

10.3§*		Exclusive License Agreement, dated October 14, 2005, by and between ARCA biopharma, Inc. and the University of Colorado’s License Equity Holdings, Inc.

10.4§*		First Amendment to Exclusive License Agreement, dated June 23, 2006, by and between ARCA biopharma, Inc. and the University of Colorado’s License Equity Holdings, Inc.

10.5§*		Second Amendment to Exclusive License Agreement, dated July 20, 2006, by and between ARCA biopharma, Inc. and the University of Colorado’s License Equity Holdings, Inc.

10.6*		Third Amendment to Exclusive License Agreement, dated July 19, 2007, by and between ARCA biopharma, Inc. and the University of Colorado’s License Equity Holdings, Inc.

10.7§*		Fourth Amendment to Exclusive License Agreement, dated August 22, 2007, by and between ARCA biopharma, Inc. and the University of Colorado’s License Equity Holdings, Inc.

10.8§*		Diagnostic, Collaboration and Option Agreement, dated June 23, 2006, by and between ARCA biopharma, Inc. and CardioDX, Inc.

10.9§*		Amendment to Diagnostic, Collaboration and Option Agreement, dated October 1, 2007, by and between ARCA biopharma, Inc. and CardioDX, Inc.

10.10§*		Manufacturing Agreement, dated September 11, 2006, by and between ARCA biopharma, Inc. and Patheon, Inc.

10.11§*		Development, Commercialization and Licensing Agreement, dated February 1, 2007, by and between ARCA biopharma, Inc. and Laboratory Corporation of America Holdings, Inc.

10.12*		Amendment No. 1 to Development, Commercialization and Licensing Agreement, dated May 14, 2007, by and between ARCA biopharma, Inc. and Laboratory Corporation of America Holdings, Inc.


10.13§*		Amendment No. 2 to Development, Commercialization and Licensing Agreement, dated June 10, 2008, by and between ARCA biopharma, Inc. and Laboratory Corporation of America Holdings, Inc.

10.14§*		Unrestricted Research Grant with the University of Colorado, dated July 27, 2007, by and between ARCA Discovery, Inc. and University of Colorado Health Services Center.

10.15§*		Unrestricted Research Grant with the University of Colorado, dated January 16, 2009, by and between ARCA biopharma, Inc. and University of Colorado Health Services Center.

10.16*		Materials Transfer Agreement, dated October 14, 2005, by and between ARCA Discovery, Inc. and the University of Colorado.

10.17		Lease, dated February 8, 2008, by and between ARCA Discovery, Inc. and Arista Place, LLC.(3)

10.18		Loan and Security Agreement, dated July 17, 2007, by and between ARCA biopharma, Inc. and Silicon Valley Bank.(3)

10.19		First Amendment to Loan and Security Agreement, dated January 21, 2009, by and between ARCA biopharma, Inc. and Silicon Valley Bank.(3)

10.20		Second Amendment to Loan and Security Agreement, dated March 23, 2009, by and between ARCA biopharma Colorado, Inc. and Silicon Valley Bank.(3)

10.21		Third Amendment to Loan and Security Agreement, dated April 6, 2009, by and between ARCA biopharma Colorado, Inc. and Silicon Valley Bank.(5)

10.22		Fourth Amendment to and Assumption of Loan and Security Agreement, dated April 10, 2009, by and between ARCA biopharma, Inc., ARCA biopharma Colorado, Inc. and Silicon Valley Bank.(5)

10.23†		ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.24†		Amendment No. 1 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.25†		Amendment No. 2 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.26†		Amendment No. 3 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.27†		Amendment No. 4 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.28†		Amendment No. 5 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.29†		Amendment No. 6 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.30†		ARCA biopharma, Inc. 2004 Stock Incentive Plan, Form of Executive Incentive Stock Option Agreement.(4)

10.31†		ARCA biopharma, Inc. 2004 Stock Incentive Plan, Form of Non-Executive Incentive Stock Option Agreement.(4)

10.32†		ARCA biopharma, Inc. 2004 Stock Incentive Plan, Form of Nonqualified Stock Option Agreement.(4)

10.33†		ARCA biopharma, Inc. 2004 Equity Incentive Plan (f/k/a Nuvelo, Inc. 2004 Equity Incentive Plan), Form of Partial Acceleration Stock Option Agreement.(3)

10.34†		ARCA biopharma, Inc. 2004 Equity Incentive Plan (f/k/a Nuvelo, Inc. 2004 Equity Incentive Plan), Form of No Acceleration Stock Option Agreement.(3)

10.35†		ARCA biopharma, Inc. 2004 Equity Incentive Plan (f/k/a Nuvelo, Inc. 2004 Equity Incentive Plan), Form of Director Stock Option Agreement.(3)

10.36†		ARCA biopharma, Inc. 2004 Equity Incentive Plan (f/k/a Nuvelo, Inc. 2004 Equity Incentive Plan), Form of Notice of Grant of Stock Option.(3)

10.37†		ARCA biopharma, Inc. 2004 Equity Incentive Plan (f/k/a Nuvelo, Inc. 2004 Equity Incentive Plan), Form of Notice of Director Grant of Stock Option.(3)

10.38		Form of Indemnification Agreement between ARCA biopharma, Inc. and its directors and officers.(3)

10.39†		Amended and Restated Employment and Retention Agreement, dated June 4, 2008, by and between ARCA biopharma, Inc. and Michael R. Bristow.(3)

10.40†		Amended and Restated Employment and Retention Agreement, dated July 7, 2008, by and between ARCA biopharma, Inc. and Richard B. Brewer.(3)

10.41†		Amended and Restated Employment Agreement, dated June 12, 2008, by and between ARCA biopharma, Inc. and Christopher D. Ozeroff.(3)

10.42†		Assignment and Assumption Agreement, dated January 26, 2009, by and between ARCA biopharma, Inc. and ARCA biopharma Colorado, Inc.(3)

10.43†		Assignment and Assumption Agreement, dated January 26, 2009, by and between ARCA biopharma, Inc. and ARCA biopharma Colorado, Inc.(3)

10.44†		Assignment and Assumption Agreement, dated January 26, 2009, by and between ARCA biopharma, Inc. and ARCA biopharma Colorado, Inc.(3)

10.45†		Letter Employment Agreement, dated January 27, 2009 and effective February 2, 2009, by and between ARCA biopharma, Inc. and Lee Bendekgey.(6)

10.46†		Employment Agreement, dated February 24, 2009, by and between ARCA biopharma, Inc. and Randall St. Laurent.(3)

10.47†		Employment Agreement, dated February 23, 2009, by and between ARCA biopharma, Inc. and Kathryn E. Falberg.(3)

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Filed herewith.

†	Compensatory plan or agreement.

§	Confidential treatment has been requested for portions of this document, which are omitted and filed separately with the SEC.

(1)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Nuvelo, Inc.’s Form 8-K, filed September 25, 2008, File No. 000-22873.

(2)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Nuvelo, Inc.’s Form 8-K, filed October 29, 2008, File No. 000-22873.

(3)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from ARCA biopharma, Inc.’s Form 10-K, filed on March 27, 2009, File No. 000-22873.

(4)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from ARCA biopharma, Inc.’s Form 8-K, filed on January 28, 2009, File No. 000-22873.

(5)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from ARCA biopharma, Inc.’s Form 8-K, filed on April 10, 2009, File No. 000-22873.

(6)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from ARCA biopharma, Inc.’s Form 8-K, filed on February 2, 2009, File No. 000-22873.

SIGNATURE

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 hereunto duly authorized.


ARCA biopharma, Inc. (Registrant)

By:		/s/ Kathryn E. Falberg
		Kathryn E. Falberg
		Chief Financial Officer and Chief Operating Officer

Dated: May 15, 2009

EXHIBIT INDEX


Exhibit Number		Description

2.1		Agreement and Plan of Merger and Reorganization, dated as of September 24, 2008, among Nuvelo, Inc., Dawn Acquisition Sub, Inc. and ARCA biopharma, Inc.(1)

2.2		Amendment No. 1 to Agreement and Plan of Merger and Reorganization dated October 28, 2008, by and among Nuvelo, Inc., Dawn Acquisition Sub, Inc. and ARCA biopharma, Inc.(2)

3.1		Amended and Restated Certificate of Incorporation of the Registrant, as amended.(3)

3.2		Amended and Restated Bylaws of the Registrant, as amended.(3)

4.1		Form of Common Stock Certificate.(4)

4.2		Warrant to Purchase Stock Agreement, dated July 17, 2007, by and between ARCA Discovery, Inc. and Silicon Valley Bank.(3)

4.3		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and SVB Financial Group.(3)

4.4		Warrant to Purchase Stock Agreement, dated August 19, 2008, by and between ARCA biopharma, Inc. and Silicon Valley Bank.(3)

4.5		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and SVB Financial Group.(3)

4.6		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and Boulder Ventures IV, L.P.(3)

4.7		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and Boulder Ventures IV, L.P.(3)

4.8		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and Boulder Ventures IV (Annex), L.P.(3)

4.9		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and Boulder Ventures IV (Annex), L.P.(3)

4.10		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and InterWest Partners IX, LP.(3)

4.11		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and InterWest Partners IX, LP.(3)

4.12		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and Atlas Venture Fund VII, L.P.(3)

4.13		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and Atlas Venture Fund VII, L.P.(3)

4.14		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and The Peierls Foundation, Inc.(3)

4.15		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and The Peierls Foundation, Inc.(3)

4.16		Warrant to Purchase Stock Agreement, dated October 10, 2008, by and between ARCA biopharma, Inc. and Skyline Venture Partners Qualified Purchaser Fund IV, L.P.(3)

4.17		Amendment No. 1 to Warrant to Purchase Stock Agreement, dated February 19, 2009, by and between ARCA biopharma, Inc. and Skyline Venture Partners Qualified Purchaser Fund IV, L.P.(3)

10.1§*		License and Sublicense Agreement, dated October 28, 2003, by and between ARCA Discovery, Inc. and CPEC, L.L.C.

10.2§*		Amendment to License and Sublicense Agreement, dated February 22, 2006, by and between ARCA Discovery, Inc. and CPEC L.L.C.

10.3§*		Exclusive License Agreement, dated October 14, 2005, by and between ARCA biopharma, Inc. and the University of Colorado’s License Equity Holdings, Inc.

10.4§*		First Amendment to Exclusive License Agreement, dated June 23, 2006, by and between ARCA biopharma, Inc. and the University of Colorado’s License Equity Holdings, Inc.

10.5§*		Second Amendment to Exclusive License Agreement, dated July 20, 2006, by and between ARCA biopharma, Inc. and the University of Colorado’s License Equity Holdings, Inc.

10.6*		Third Amendment to Exclusive License Agreement, dated July 19, 2007, by and between ARCA biopharma, Inc. and the University of Colorado’s License Equity Holdings, Inc.

10.7§*		Fourth Amendment to Exclusive License Agreement, dated August 22, 2007, by and between ARCA biopharma, Inc. and the University of Colorado’s License Equity Holdings, Inc.

10.8§*		Diagnostic, Collaboration and Option Agreement, dated June 23, 2006, by and between ARCA biopharma, Inc. and CardioDX, Inc.

10.9§*		Amendment to Diagnostic, Collaboration and Option Agreement, dated October 1, 2007, by and between ARCA biopharma, Inc. and CardioDX, Inc.

10.10§*		Manufacturing Agreement, dated September 11, 2006, by and between ARCA biopharma, Inc. and Patheon, Inc.

10.11§*		Development, Commercialization and Licensing Agreement, dated February 1, 2007, by and between ARCA biopharma, Inc. and Laboratory Corporation of America Holdings, Inc.

10.12*		Amendment No. 1 to Development, Commercialization and Licensing Agreement, dated May 14, 2007, by and between ARCA biopharma, Inc. and Laboratory Corporation of America Holdings, Inc.


10.13§*		Amendment No. 2 to Development, Commercialization and Licensing Agreement, dated June 10, 2008, by and between ARCA biopharma, Inc. and Laboratory Corporation of America Holdings, Inc.

10.14§*		Unrestricted Research Grant with the University of Colorado, dated July 27, 2007, by and between ARCA Discovery, Inc. and University of Colorado Health Services Center.

10.15§*		Unrestricted Research Grant with the University of Colorado, dated January 16, 2009, by and between ARCA biopharma, Inc. and University of Colorado Health Services Center.

10.16*		Materials Transfer Agreement, dated October 14, 2005, by and between ARCA Discovery, Inc. and the University of Colorado.

10.17		Lease, dated February 8, 2008, by and between ARCA Discovery, Inc. and Arista Place, LLC.(3)

10.18		Loan and Security Agreement, dated July 17, 2007, by and between ARCA biopharma, Inc. and Silicon Valley Bank.(3)

10.19		First Amendment to Loan and Security Agreement, dated January 21, 2009, by and between ARCA biopharma, Inc. and Silicon Valley Bank.(3)

10.20		Second Amendment to Loan and Security Agreement, dated March 23, 2009, by and between ARCA biopharma Colorado, Inc. and Silicon Valley Bank.(3)

10.21		Third Amendment to Loan and Security Agreement, dated April 6, 2009, by and between ARCA biopharma Colorado, Inc. and Silicon Valley Bank.(5)

10.22		Fourth Amendment to and Assumption of Loan and Security Agreement, dated April 10, 2009, by and between ARCA biopharma, Inc., ARCA biopharma Colorado, Inc. and Silicon Valley Bank.(5)

10.23†		ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.24†		Amendment No. 1 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.25†		Amendment No. 2 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.26†		Amendment No. 3 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.27†		Amendment No. 4 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.28†		Amendment No. 5 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.29†		Amendment No. 6 to the ARCA Discovery, Inc. 2004 Stock Incentive Plan.(4)

10.30†		ARCA biopharma, Inc. 2004 Stock Incentive Plan, Form of Executive Incentive Stock Option Agreement.(4)

10.31†		ARCA biopharma, Inc. 2004 Stock Incentive Plan, Form of Non-Executive Incentive Stock Option Agreement.(4)

10.32†		ARCA biopharma, Inc. 2004 Stock Incentive Plan, Form of Nonqualified Stock Option Agreement.(4)

10.33†		ARCA biopharma, Inc. 2004 Equity Incentive Plan (f/k/a Nuvelo, Inc. 2004 Equity Incentive Plan), Form of Partial Acceleration Stock Option Agreement.(3)

10.34†		ARCA biopharma, Inc. 2004 Equity Incentive Plan (f/k/a Nuvelo, Inc. 2004 Equity Incentive Plan), Form of No Acceleration Stock Option Agreement.(3)

10.35†		ARCA biopharma, Inc. 2004 Equity Incentive Plan (f/k/a Nuvelo, Inc. 2004 Equity Incentive Plan), Form of Director Stock Option Agreement.(3)

10.36†		ARCA biopharma, Inc. 2004 Equity Incentive Plan (f/k/a Nuvelo, Inc. 2004 Equity Incentive Plan), Form of Notice of Grant of Stock Option.(3)

10.37†		ARCA biopharma, Inc. 2004 Equity Incentive Plan (f/k/a Nuvelo, Inc. 2004 Equity Incentive Plan), Form of Notice of Director Grant of Stock Option.(3)

10.38		Form of Indemnification Agreement between ARCA biopharma, Inc. and its directors and officers.(3)

10.39†		Amended and Restated Employment and Retention Agreement, dated June 4, 2008, by and between ARCA biopharma, Inc. and Michael R. Bristow.(3)

10.40†		Amended and Restated Employment and Retention Agreement, dated July 7, 2008, by and between ARCA biopharma, Inc. and Richard B. Brewer.(3)

10.41†		Amended and Restated Employment Agreement, dated June 12, 2008, by and between ARCA biopharma, Inc. and Christopher D. Ozeroff.(3)

10.42†		Assignment and Assumption Agreement, dated January 26, 2009, by and between ARCA biopharma, Inc. and ARCA biopharma Colorado, Inc.(3)

10.43†		Assignment and Assumption Agreement, dated January 26, 2009, by and between ARCA biopharma, Inc. and ARCA biopharma Colorado, Inc.(3)

10.44†		Assignment and Assumption Agreement, dated January 26, 2009, by and between ARCA biopharma, Inc. and ARCA biopharma Colorado, Inc.(3)

10.45†		Letter Employment Agreement, dated January 27, 2009 and effective February 2, 2009, by and between ARCA biopharma, Inc. and Lee Bendekgey.(6)

10.46†		Employment Agreement, dated February 24, 2009, by and between ARCA biopharma, Inc. and Randall St. Laurent.(3)

10.47†		Employment Agreement, dated February 23, 2009, by and between ARCA biopharma, Inc. and Kathryn E. Falberg.(3)

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Filed herewith.

†	Compensatory plan or agreement.

§	Confidential treatment has been requested for portions of this document, which are omitted and filed separately with the SEC.

(1)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Nuvelo, Inc.’s Form 8-K, filed September 25, 2008, File No. 000-22873.

(2)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from Nuvelo, Inc.’s Form 8-K, filed October 29, 2008, File No. 000-22873.

(3)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from ARCA biopharma, Inc.’s Form 10-K, filed on March 27, 2009, File No. 000-22873.

(4)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from ARCA biopharma, Inc.’s Form 8-K, filed on January 28, 2009, File No. 000-22873.

(5)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from ARCA biopharma, Inc.’s Form 8-K, filed on April 10, 2009, File No. 000-22873.

(6)	Previously filed with the SEC as an Exhibit to and incorporated herein by reference from ARCA biopharma, Inc.’s Form 8-K, filed on February 2, 2009, File No. 000-22873.

Exhibit 10.1

LICENSE AND SUBLICENSE AGREEMENT

by and between

CPEC L.L.C. and

ARCA DISCOVERY, INC.

LICENSE AGREEMENT (this “Agreement”) effective as of October 28, 2003 (“Effective Date”), by and between CPEC, L.L.C., a Delaware limited liability company (“CPEC”) having an office at 99 Hayden Avenue, Suite 200, Lexington, MA 02421 (“CPEC”) and ARCA Discovery, Inc., a corporation organized and existing under the laws of the State of Colorado and having its principal office at 12635 East Montview Boulevard, Suite 100, Aurora, CO 80010 (“ARCA”).

WITNESSETH:

WHEREAS, CPEC is the owner or licensee of the CPEC Intellectual Property, as defined herein and;

WHEREAS, ARCA desires to obtain exclusive license rights under the CPEC Intellectual Property, and CPEC desires to grant such license to ARCA, upon the terms and conditions set forth herein; and

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

Article I

DEFINITIONS

Unless specifically set forth to the contrary herein, the following terms, where used in the singular or plural, shall have the respective meanings set forth below:

1.1.

“ Affiliate ” shall mean (i) any corporation or business entity of which more than fifty percent (50%) of the securities or other ownership interests representing the equity, the voting stock or general partnership interest are owned, controlled or held, directly or indirectly, by a Party; (ii) any corporation or business entity which, directly or indirectly, owns, controls or holds more than fifty percent (50%) (or the maximum ownership interest permitted by law) of the securities or other ownership interests representing the equity, voting stock or general partnership interest of a Party or (iii) any corporation or business entity of which a Party has the right to acquire, directly or indirectly, at least fifty percent (50%) of the securities or other ownership interests representing the equity, voting stock or general partnership interest thereof.

1.2.	“ BMS Intellectual Property ” means any Patent Assets and Know-How included in the CPEC Intellectual Property that arise from CPEC’s rights under the BMS License and are subject to the BMS License.

1.3.	“ BMS License ” means the Agreement dated as of December 6, 1991, as amended, between Bristol-Myers Squibb Company (“BMS”) and Cardiovascular Pharmacology and Engineering Consultants, Inc., a predecessor-in-interest of CPEC, a copy of which is attached as Exhibit 1.3 .

1.4.	“ BMS Option ” shall have the same meaning as such term is defined in the BMS License.

1.5.	“ Calendar Quarter ” shall mean the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31.

1.6.	“ Calendar Year ” shall mean each successive period of twelve (12) months commencing on January 1 and ending on December 31.

1.7.	“ Centralized Procedure ” shall mean the European Union Centralized Procedure for marketing authorization in accordance with Council Regulation no. 2309/93 of July 22, 1993 or any successor regulations.

1.8.	“ Compound ” shall mean the chemical compound known as “Bucindolol” or Benzonitrile, 2-[2-hydroxy-3-[[2-(1H-indol-3-yl)-1,1-dimethylethyl]amino]propoxy]-, monohydrochloride.

1.9.	“ CPEC/Incara ” Agreement” shall mean the Assignment and Termination Agreement by and between CPEC and Incara Pharmaceuticals Corporation (“Incara”), effective as of the effective Date.

1.10.

“ CPEC Intellectual Property ” shall mean the Patent Assets and CPEC Know-How.

1.11.

“ CPEC Know-How ” shall mean any and all information and materials, including but not limited to, discoveries, improvements, information, processes, formulae, data, inventions, invention disclosures, know-how and trade secrets, patentable or otherwise, that relate to Compound or Product, including without limitation, all chemical, pharmaceutical, toxicological, biochemical, and biological, technical and nontechnical data, and information relating to the results of tests, assays, methods, and processes, and specifications and/or other documents containing information and related data, and any preclinical, clinical, assay control, manufacturing, regulatory, and any other data or information used or useful for the development, manufacturing and/or regulatory approval of Compound or Product that are owned or controlled by CPEC and as to which CPEC has the right to license or sublicense to another party including any data included in or generated as a result of or under an IND.

1.12.

“ End of Phase 2 Meeting ” shall mean the first end of Phase 2 meeting with the FDA, as defined in 21 CFR Section 312.47, intended to determine the safety of proceeding to Phase 3, evaluate the Phase 3 plan and protocols and identify any additional information necessary to support an NDA for Product.

1.13.

“ Europe ” shall mean any of the United Kingdom, France, Germany, Spain or Italy.

1.14.

“ FDA ” shall mean the United States Food and Drug Administration and any successor agency having substantially the same functions, and any corresponding or successor regulatory authority in Europe or having jurisdiction over the Centralized Procedure if the context so indicates.

1.15.

“ Field ” shall mean all human and animal health uses and indications, whether therapeutic or diagnostic.

1.16.

“ First Commercial Sale ” shall mean the first sale of Product in any country by ARCA, its Affiliate or its sublicensee(s), for end use or consumption, after all required Regulatory Approvals have been granted by the governing health authority of such country.

1.17.

“ GAAP ” shall mean generally accepted accounting principles in the United States.

1.18.

“ IND ” shall mean an investigational new drug application and any amendments thereto relating to the use of Compound or Product in the United States or the equivalent application in any other regulatory jurisdiction in the Territory, the filing of which is necessary to commence clinical testing of pharmaceutical products in humans.

1.19.

“ NDA ” shall mean a new drug application filed with the FDA for marketing authorization of a Product in the United States, or a corresponding submission in Europe or under the Centralized Procedure or with the Japanese Ministry of Health, Labour and Welfare if the context so indicates, and any amendments and supplements thereto.

1.20.

“ Net Sales ” shall mean the [ * ] for commercial [ * ], commencing upon the date of First Commercial Sale, [ * ]

(i) [ * ]

(ii) [ * ]

(iii) [ * ]

(iv) [ * ]

(v) [ * ]

(vi) [ * ]

Sales or other transfers between ARCA and its Affiliates shall be [ * ] of Net Sales and [ * ]

1.21.

“ Party ” shall mean CPEC or ARCA.

1.22.

“ Patent Assets ” shall mean the United States patents and patent applications which as of the Effective Date are owned by CPEC or to which CPEC has rights from a Third Party, and relate to Compound or Product, including but not limited to methods of their development, manufacture, or use, or otherwise relate to CPEC Know-How, including all

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

certificates of invention and applications for certificates of invention, substitutions, divisions, continuations, continuations-in-part, patents issuing thereon or reissues or reexaminations thereof and any and all foreign patents and patent applications corresponding thereto, supplementary protection certificates or the like of any such patents and current and future patent applications, including but not limited to any counterparts thereof which have been or may be filed in other countries.

1.23.

“ Product ” shall mean any product in final form for commercial sale by prescription, over-the-counter, or by any other method (or, where the context so indicates, the product being tested in clinical trials), which contains Compound as the therapeutically active ingredient in all dosage forms and package configurations.

1.24.

“ Proprietary Information ” shall mean any and all scientific, clinical, regulatory, marketing, financial and commercial information or data, whether communicated in writing, orally or by any other means, which is owned and under the protection of one Party and is being provided by that Party to the other Party in connection with this Agreement.

1.25.

“ Regulatory Approval ” shall mean all approvals (including pricing approvals where required), product and/or establishment licenses, registrations or authorizations of all regional, federal, state or local regulatory agencies, necessary for the manufacture and sale of Product in a regulatory jurisdiction.

1.26.

“ Royalty Year ” shall mean, (i) for the year in which the First Commercial Sale occurs, the 12 month period commencing with first day of the month in which the date of First Commercial Sale occurs and (ii) for each subsequent year, each successive twelve (12) month period.

1.27.

“ SEC ” shall mean the United States Securities and Exchange Commission or any successor agency.

1.28.

“ Territory ” shall mean all of the countries in the world.

1.29.

“ Third Party(ies) ” shall mean a person or entity who or which is neither a Party nor an Affiliate of a Party.

Article II

LICENSE; SUBLICENSES

2.1.

License Grant . In consideration of and subject to the terms and conditions of this Agreement, CPEC hereby grants to ARCA an exclusive (even as to CPEC) (i) sublicense in the Territory under the BMS Intellectual Property to develop, make, have made, use, import, offer for sale, market, commercialize, distribute and sell and otherwise dispose of Compound and Product in the Territory for use in the Field and (ii) license in the Territory under the CPEC Intellectual Property (other than the BMS Intellectual Property), to develop, make, have made, use, import, offer for sale, market, commercialize, distribute and sell and otherwise dispose of Compound and Product in the Territory for use in the Field. The sublicense hereunder is intended to convey to ARCA all of CPEC’s rights as licensee under the BMS License.

2.2.

Sublicenses . ARCA shall have the right to grant sublicenses in the Field to Affiliates or to any Third Party to develop, make, have made, use, import, offer for sale, market, commercialize, distribute and sell and otherwise dispose of Compound or Product in the Territory, with the prior written consent of CPEC which consent shall not be unreasonably withheld.

Article III

DEVELOPMENT AND COMMERCIALIZATION

3.1.

Exchange of Information . As soon as reasonably practicable after the Effective Date, CPEC shall disclose to ARCA all CPEC Intellectual Property not previously available or made available to ARCA, including copies of all patent files in CPEC’s possession or control, and shall also provide to ARCA all correspondence in CPEC’s possession or control relating to the BMS License. ARCA shall pay or reimburse CPEC for all reasonable costs associated with the transfer to ARCA of any data, including any regulatory filings (including the IND), or any other information or filings.

3.2.	Diligence; Development and Commercialization .

3.2.1

ARCA shall use commercially reasonable efforts to develop and commercialize Product. As used herein, “commercially reasonable efforts” shall mean efforts and resources normally used by a pharmaceutical company for a product to which it has rights similar to those granted hereunder, which is of similar market potential at a similar stage in its development or product life, taking into account issues of safety and efficacy, product profile, the competitiveness of the marketplace, the proprietary position of the compound or product, the regulatory and reimbursement structure involved, the profitability of the applicable products, and other relevant factors.

3.2.2

In addition to the diligence obligations set forth in Section 3.2.1 above, ARCA shall also:

(a)

[ * ] within [ * ] of the Effective Date; and

(b)

Receive an Institutional Review Board (“IRB”) approval of the protocol for a Phase 3 clinical trial with Product (after an End of Phase 2 Meeting) in patients with congestive heart failure within [ * ] after the Effective Date and commence such Phase 3 clinical trial within [ * ] after such IRB approval, and have raised sufficient financing to complete such trial prior to its commencement.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

3.3.	Regulatory Matters .

(a) ARCA shall own, control, retain primary legal responsibility and shall pay all costs for the preparation, filing and prosecution of all filings and regulatory applications required to obtain authorization to commercially develop, sell and use Product in the Territory. ARCA shall promptly notify CPEC upon the receipt of Regulatory Approvals and of the date of First Commercial Sale.

(b) CPEC shall transfer to ARCA, at ARCA’s expense, as soon as practicable after the Effective Date, any IND or other regulatory filings relating to Compound or Product owned or controlled by CPEC. If requested by ARCA, CPEC will permit ARCA to cross reference any active Drug Master File relating to Compound or Product.

3.4.	Trademark . ARCA shall select, own and maintain trademarks for Product in the Territory.

3.5.

BMS License . CPEC will take no action to cause termination of, or otherwise impair CPEC’s rights under the BMS License and shall reasonably cooperate (at ARCA’s request and at no cost to CPEC) to protect ARCA’s sublicense under the BMS License, provided, however, that CPEC shall not be required to incur any obligations under the BMS License.

Article IV

CONFIDENTIALITY AND PUBLICITY

4.1.

Non-Disclosure and Non-Use Obligations . All Proprietary Information disclosed by one Party to the other Party hereunder shall be maintained in confidence and shall not be disclosed to any Third Party or used for any purpose except as expressly permitted herein without the prior written consent of the Party that disclosed the Proprietary Information to the other Party during the term of this Agreement and for a period of five years thereafter. The foregoing non-disclosure and non-use obligations shall not apply to the extent that such Proprietary Information:

(a)

is known by the receiving Party at the time of its receipt, and not through a prior disclosure by the disclosing Party, as documented by business records;

(b)

is or becomes properly in the public domain or knowledge;

(c)

is subsequently disclosed to a receiving Party by a Third Party who may lawfully do so and is not under an obligation of confidentiality to the disclosing Party; or

(d)

is developed by the receiving Party independently of Proprietary Information received from the other Party, as documented by research and development records.

4.2.	Permitted Disclosure of Proprietary Information . Notwithstanding Section 4.1, a Party receiving Proprietary Information of another Party may disclose such Proprietary Information:

(a)

to governmental or other regulatory agencies in order to obtain patents pursuant to this Agreement, or to gain approval to conduct clinical trials or to market Product, but such disclosure may be only to the extent reasonably necessary to obtain such patents or authorizations;

(b)

by each of ARCA or CPEC to its respective agents, consultants, Affiliates, ARCA sublicensees and/or other Third Parties for the research and development, manufacturing and/or marketing of the Compound and/or Product (or for such parties to determine their interests in performing such activities) on the condition that such Third Parties agree to be bound by the confidentiality obligations consistent with this Agreement; or

(c)

if required to be disclosed by law or court order, provided that notice is promptly delivered to the non-disclosing Party in order to provide an opportunity to challenge or limit the disclosure obligations; provided, however, without limiting any of the foregoing, it is understood that the Parties or their Affiliates may make disclosure of this Agreement and the terms hereof in any filings required by the SEC, may file this Agreement as an exhibit to any filing with the SEC and may distribute any such filing in the ordinary course of its business, provided, however, that to the maximum extent allowable by SEC rules and regulations (as interpreted by SEC staff), the Parties shall be obligated to maintain the confidentiality obligations set forth herein and shall redact any confidential information set forth in such filings; and further provided that the Parties shall reasonably agree on the timing and content of any disclosure of this Agreement or its terms (other than disclosure required by law), and shall in any case give notice prior to such disclosure.

Notwithstanding the above, ARCA shall also have the right to publish the results of clinical trials, and other Proprietary Information concerning the Compound and the Product, for the purpose of marketing and promoting the Compound and the Product, provided, however, that any issues relating to patent protection, including the filing of a patent application if applicable, shall be resolved prior to any such results being submitted for publication.

Article V

PAYMENTS; ROYALTIES AND REPORTS

5.1.

Milestone Payments . Subject to the terms and conditions contained in this Agreement, and in consideration of the rights granted by CPEC hereunder, ARCA shall pay CPEC the following milestone payments, contingent upon occurrence of the specified event for Product:

(a) US $2,500,000 upon the submission of an NDA with the FDA;

(b) US $500,000 upon [ * ];

(d) US $5,500,000 upon obtaining Regulatory Approval for marketing in the United States by the FDA;

(e) US $2,500,000 upon [ * ]; and

(f) US $1,500,000 upon [ * ].

ARCA shall notify CPEC in writing within ten (10) days after the achievement of each milestone and such notice shall be accompanied by the appropriate milestone payment.

5.2.	Royalties .

5.2.1. Royalties Payable By ARCA.

(i) Subject to the terms and conditions of this Agreement, and in further consideration of the rights granted by CPEC hereunder, ARCA shall pay to CPEC royalties in the applicable percentage set forth below for Net Sales in each Royalty Year of Products by ARCA, its Affiliates or sublicensees:


Annual Net Sales:	Royalty Rate:
Up to the first [ * ]:	8	%
Over [ * ] but less than [ * ]:	10	%
Over [ * ] but less than [ * ]:	15	%
Over [ * ]:	20	%

(ii) Royalties on Net Sales at the rates set forth above shall accrue as of the date of First Commercial Sale of Product in the applicable country and shall continue and accrue on Net Sales in such country until the later of (a) 10 years from First Commercial Sale of Product or (b) termination of ARCA’s commercial exclusivity in that country.

(iii) The payment of royalties set forth above shall be subject to the following conditions:

(a) only one payment shall be due with respect to the same unit of Product;

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

(b) no royalties shall accrue on the disposition of Product by ARCA, Affiliates or sublicensees as samples (promotion or otherwise) or as donations (for example, to non-profit institutions or government agencies) or to clinical trials; and

(c) ARCA shall be responsible for payment of and shall pay (i) any royalties or other obligations owed by ARCA to any Third Party in connection with Compound or Product or relating to the Patent Assets, and (ii) to CPEC, the royalty owed by CPEC to BMS under the BMS License; provided, that ARCA’s obligation with respect to the BMS royalty shall be satisfied by payment of such royalty to CPEC at the same time and under the same procedure as royalties are paid hereunder.

(d) Subject to the last sentence of this Subsection 5.2.1(iii)(d), in the event that Incara notifies ARCA in writing that CPEC is in breach of the CPEC/Incara Agreement as a result of CPEC’s failure to pay the royalty payable to Incara thereunder (the “Incara Royalty”), and specifies the amount of the unpaid Incara Royalty, ARCA shall be entitled (but shall have no obligation) within sixty (60) days after such notice from Incara, to (i) cure such breach by CPEC by paying such unpaid Incara Royalty and (ii) if it cures such breach, assume CPEC’s rights and obligations under and pursuant to the terms and conditions of the CPEC/Incara Agreement, provided that ARCA shall enter into a written agreement with Incara to such effect and shall have a good faith expectation that it has the intention and capability to perform such obligations, all in accordance with the terms of the Side Agreement entered into as of the Effective Date by and among CPEC, ARCA and Incara. Any such royalties paid directly by ARCA to Incara shall be credited or offset against the royalties paid or payable from ARCA to CPEC hereunder, and the accuracy of such credits or offsets shall be subject to Section 5.4 of this Agreement. In the event that ARCA shall assume CPEC’s rights and obligations under the CPEC/Incara Agreement, CPEC shall have no further obligations to Incara with respect to such agreement. ARCA shall not have the right to cure any CPEC breach of the CPEC/Incara Agreement or to assume CPEC’s obligations thereunder if ARCA is in breach of this Agreement or if ARCA has otherwise improperly caused the breach of the CPEC/Incara Agreement.

5.2.2. Affiliate Sales . In the event that ARCA transfers Compound (for conversion to Product) or Product to one of its Affiliates, there shall be no royalty due at the time of transfer. Subsequent sales of Product by the Affiliate to end users such as patients, hospitals, medical institutions, health plans or funds, wholesalers (which are not sublicensees), pharmacies or other retailers, shall be reported as Net Sales hereunder by ARCA.

5.2.3. Combination Product . Notwithstanding the provisions of Section 5.3.1, in the event a Product is sold as a combination product with other biologically active components, Net Sales, for purposes of royalty payments on the combination product, shall be calculated by [ * ]. If no such separate sales are made by ARCA or its Affiliates, Net Sales for royalty determination shall be calculated by [ * ].

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

5.3.

Reports; Payment of Royalty . During the term of the Agreement for so long as royalty or other payments are due, ARCA shall furnish to CPEC a quarterly written report for the Calendar Quarter showing the Net Sales of all Products subject to royalty payments sold by ARCA and its Affiliates during the reporting period, the countries in which such Net Sales occurred, the royalties or other payments payable to CPEC under this Agreement and, in the case of sales outside the United States, the calculation of the conversion to United States dollars. Reports shall be due on the forty-fifth (45 ^th ) day following the close of each Calendar Quarter. Royalties or other payments shown to have accrued by each royalty report, if any, shall be due and payable on the date such report is due. ARCA shall keep complete and accurate records in sufficient detail to enable the royalties or other payments hereunder to be determined.

5.4.

Audits . Upon the written request of CPEC and not more than once in each Calendar Year, ARCA shall permit an independent certified public accounting firm selected by CPEC and reasonably acceptable to ARCA to have access during normal business hours, upon ten-days notice to ARCA, to such of the records of ARCA as may be reasonably necessary to verify the accuracy of the royalty reports hereunder for any Royalty Year ending not more than twenty-four (24) months prior to the date of such request (provided that such accounting firm first agrees to a nondisclosure agreement acceptable to ARCA). The accounting firm shall disclose to CPEC only whether the royalty reports are correct or incorrect and the specific details concerning any discrepancies.

5.4.1. If such accounting firm concludes that additional royalties were owed during such Royalty Year, ARCA shall pay the additional royalties within thirty (30) days of the date CPEC delivers to ARCA such accounting firm’s written report so concluding. In the event such accounting firm concludes that amounts were overpaid by ARCA during such period, CPEC shall repay ARCA the amount of such overpayment within thirty (30) days of the date CPEC receives such accounting firm’s written report so concluding. The fees charged by such accounting firm shall be paid by CPEC; provided , however , that if an error in favor of CPEC of more than the greater of (i) $100,000 or (ii) five percent (5%) of the royalties due hereunder for the period being reviewed is discovered, then the fees and expenses of the accounting firm shall be paid by ARCA.

5.4.2. Upon the expiration of twenty-four (24) months following the end of any Royalty Year the calculation of royalties payable with respect to such year shall be binding and conclusive upon CPEC, and ARCA shall be released from any liability or accountability with respect to royalties for such year.

5.4.3. CPEC shall treat all financial information subject to review under this Section 5.5 in accordance with the confidentiality provisions of this Agreement.

5.5.

Payment Exchange Rate . All payments to CPEC under this Agreement shall be made in United States dollars. In the case of sales outside the United States, the rate of exchange to be used in computing Net Sales shall be calculated monthly in accordance with GAAP and based on the conversion rates published in the Wall Street Journal, Eastern edition (if available).

5.6.

Tax Withholding . If laws, rules or regulations require withholding of income taxes or other taxes imposed upon payments set forth in this Article V, CPEC shall provide ARCA, prior to any such payment, once each Royalty Year or more frequently if required, with all forms or documentation required by any applicable taxation laws, treaties or agreements to such withholding or as necessary to claim a benefit thereunder (including, but not limited to Form W-8BEN or any successor forms) and ARCA shall make such withholding payments as required and subtract such withholding payments from the payments set forth in this Article V. ARCA will use commercially reasonable efforts consistent with its usual business practices and cooperate with CPEC to ensure that any withholding taxes imposed are reduced as far as possible under the provisions of the current or any future taxation treaties or agreements between foreign countries.

5.7.

Exchange Controls . Notwithstanding any other provision of this Agreement, if at any time legal restrictions prevent the prompt remittance of part or all of the royalties with respect to Net Sales in any country, payment shall be made through such lawful means or methods as ARCA may determine. If the royalty rate specified in this Agreement should exceed the permissible rate established in any country, the royalty rate for sales in such country shall be adjusted to the highest legally permissible or government-approved rate.

Article VI

REPRESENTATIONS AND WARRANTIES

6.1.	CPEC Representations and Warranties . CPEC represents and warrants to ARCA that as of the Effective Date:

(a)

this Agreement has been duly executed and delivered by CPEC and constitutes legal, valid, and binding obligations enforceable against CPEC in accordance with its terms, except as enforceability is limited by (A) any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditor’s rights generally, or (B) general principles of equity, whether considered in a proceeding in equity or at law;

(b)

no approval, authorization, consent, or other order or action of or filing with any court, administrative agency or other governmental authority is required for the execution and delivery by CPEC of this Agreement or the consummation by CPEC of the transactions contemplated hereby;

(c)

CPEC has the full corporate power and authority to enter into and deliver this Agreement, to perform and to grant the licenses granted under Article II hereof and to consummate the transactions contemplated hereby; all corporate acts and other proceedings required to be taken to authorize such execution, delivery, and consummation have been duly and properly taken and obtained; and

(d)

CPEC owns or possesses an exclusive license in and to the CPEC Intellectual Property and has the right to grant the licenses granted in this Agreement. CPEC has not previously assigned, and shall not assign, transfer, convey or otherwise encumber its right, title and interest in the CPEC Intellectual Property or enter into any agreement with any Third Party which is in conflict with the rights granted to ARCA pursuant to this Agreement. The BMS License is in full force and effect, CPEC is in compliance in all material respects with the BMS License and, to CPEC’s knowledge, no defaults have occurred and no notices of defaults have been received under the BMS License. The BMS Option has terminated and BMS has consented to the license grant in Article II.

6.2.	ARCA Representations and Warranties . ARCA represents and warrants to CPEC that as of the Effective Date:

(a)

this Agreement has been duly executed and delivered by ARCA and constitutes legal, valid, and binding obligations enforceable against ARCA in accordance with its terms, except as enforceability is limited by (A) any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditor’s rights generally, or (B) general principles of equity, whether considered in a proceeding in equity or at law;

(b)

it has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. All corporate acts and other proceedings required to be taken to authorize such execution, delivery, and consummation have been duly and properly taken and obtained; and

(c)

no approval, authorization, consent, or other order or action of or filing with any court, administrative agency or other governmental authority is required for the execution and delivery by it of this Agreement or the consummation by it of the transactions contemplated hereby.

Article VII

PATENT MATTERS

7.1.

Filing, Prosecution and Maintenance of Patent Applications or Patents . ARCA shall have the first right to file, prosecute and maintain the Patent Assets in CPEC’s name and shall be responsible for the payment of all patent prosecution and maintenance costs, subject to the next sentence. Upon ARCA’s request, CPEC shall reasonably cooperate in the filing, prosecution or maintenance of any patent application or patent included in the Patent Assets. If ARCA elects not to file, prosecute or maintain a patent application or patent included in the Patent Assets in any particular country, it shall provide CPEC with written advance notice sufficient to avoid any loss or forfeiture, and CPEC shall have the right, but not the obligation, at its sole expense, to file, prosecute or maintain such patent application or patent in such country in CPEC’s name. If CPEC elects to file, prosecute or maintain such patent application or patent then, at CPEC’s option, either (a) such patent or patent application in such country shall no longer be deemed a Patent Asset under this Agreement or (b) ARCA shall reimburse CPEC for all fees, costs and expenses incurred by CPEC in filing, prosecuting or maintaining such patent application or patent upon invoice therefor.

7.2.

Patent Office and Court Proceedings . Each Party shall inform the other Party of any request for, filing, or declaration of any proceeding before a patent office seeking to protest, oppose, cancel, reexamine, declare an interference proceeding, initiate a conflicts proceeding, or analogous process involving a patent application or patent included in the Patent Assets, or of the filing of an action in a court of competent jurisdiction seeking a judgment that a patent included in the Patent Assets is either invalid or unenforceable or both. Each Party thereafter shall cooperate fully with the other with respect to any such patent office or court proceeding. Each Party will provide the other with any information or assistance that is reasonable.

7.3.	Enforcement and Defense .

(a) Each Party shall promptly give the other Party notice of any infringement in the Territory of any patent application or patent included in the Patent Assets that comes to such Party’s attention. The Parties will thereafter consult and cooperate fully to determine a course of action, including, without limitation, the commencement of legal action by any Party. However, ARCA shall have the first right to initiate and prosecute such legal action at its own expense and in the name of CPEC and ARCA, or to control the defense of any declaratory judgment action relating to Patent Assets. ARCA shall promptly inform CPEC if ARCA elects not to exercise such first right, and CPEC thereafter shall have the right either to initiate and prosecute such action or to control the defense of such declaratory judgment action in the name of CPEC and, if necessary, ARCA. In no event shall CPEC be obligated to enforce or defend any of the Patent Assets.

(b) If ARCA elects not to initiate and prosecute an infringement or defend a declaratory judgment action in any country in the Territory as provided in Subsection 7.3(a), and CPEC elects to do so, the cost of any agreed-upon course of action, including the costs of any legal action commenced or any declaratory judgment action defended, shall be borne solely by CPEC.

(c) For any such legal action or defense, in the event that any Party is unable to initiate, prosecute, or defend such action solely in its own name, the other Party will join such action voluntarily and will execute all documents necessary for the Party to prosecute, defend and maintain such action. In connection with any such action, the Parties will cooperate fully and will provide each other with any information or assistance that either reasonably may request.

(d) Any recovery obtained by ARCA or CPEC shall be shared as follows:

(i)

the Party that initiated and prosecuted, or maintained the defense of, the action shall recoup all of its costs and expenses (including attorneys’ fees) incurred in connection with the action, whether the recovery is by settlement or otherwise;

(ii)

the other Party then shall, to the extent possible, recover its costs and expenses (including attorneys’ fees) incurred in connection with the action;

(iii)

if CPEC initiated and prosecuted, or maintained the defense of, the action, the amount of any recovery remaining then shall be retained by CPEC; and

(iv)

if ARCA initiated and prosecuted, or maintained the defense of, the action, the amount of any recovery remaining shall be retained by ARCA, except that CPEC shall receive a portion equivalent to the royalties it would have received in accordance with the terms of this Agreement if the infringing sales were deemed Net Sales but limited to not more than 20% of any such remaining recovery.

7.4.

Patent Term Extensions or Restorations and Supplemental Protection Certificates . The Parties shall cooperate with each other in obtaining patent term extensions or restorations or supplemental protection certificates or their equivalents in any country in the Territory where applicable and where desired by ARCA. If elections with respect to obtaining such extension or supplemental protection certificates are to be made, ARCA shall have the right to make the election and CPEC shall abide by such election. CPEC shall notify ARCA of (a) the issuance of each U.S. patent included within the Patent Assets, giving the date of issue and patent number for each such patent, and (b) each notice pertaining to any patent included within the Patent Assets pursuant to the United States Drug Price Competition and Patent Term Restoration Act of 1984 (hereinafter called the “ 1984 Act”), including notices pursuant to §§ 101 and 103 of the 1984 Act from persons who have filed an abbreviated NDA (“ANDA”). Such notices shall be given promptly, but in any event within five (5) calendar days of each such patent’s date of issue or receipt of each such notice pursuant to the Act, whichever is applicable. CPEC shall notify ARCA of each filing for patent term extension or restoration under the 1984 Act, any allegations of failure to show due diligence and all awards of patent term restoration (extensions) with respect to the Patent Assets.

Article VIII

TERM AND TERMINATION

8.1.

Term and Expiration . This Agreement shall be effective as of the Effective Date and unless terminated earlier pursuant to Section 8.2 below, the term of this Agreement shall continue in effect on a country-by-country basis until the expiration of the royalty obligations contained in this Agreement (as provided for in Section 5.3.1 (ii)), at which time the Agreement shall automatically terminate in such country.

8.2.	Termination .

8.2.1. Termination for Cause . Either Party may terminate this Agreement by notice to the other Party at any time during the term of this Agreement as follows:

(a) if the other Party is in breach of any material obligation hereunder by causes and reasons within its control, or has breached, in any material respect, any representations or warranties set forth in Article VI, and has not cured such breach within ninety (90) days after notice requesting cure of the breach, provided, however, that if the breach is not capable of being cured within ninety (90) days of such written notice, the Agreement may not be terminated sooner than one hundred twenty (120) days of such written notice so long as the breaching Party commences and is taking commercially reasonable actions to cure such breach as promptly as practicable;

(b) upon the filing or institution of bankruptcy, reorganization, liquidation or receivership proceedings, or upon an assignment of a substantial portion of the assets for the benefit of creditors by the other Party; provided , however , in the case of any involuntary bankruptcy, reorganization, liquidation, receivership or assignment proceeding such right to terminate shall only become effective if the Party consents to the involuntary proceeding or such proceeding is not dismissed within ninety (90) days after the filing thereof; or

(c) by ARCA, (i) if ARCA reasonably concludes, based on clinical trial results, that a significant safety or efficacy issue exists relating to Product, or (ii) if ARCA’s sublicense under the BMS License is impaired in any material respect by any action of CPEC or any successor in interest to CPEC.

8.2.2. Licensee Rights Not Affected .

(a) All rights and licenses granted pursuant to this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of 11 U.S.C. §101 et seq. (the “Bankruptcy Code”), licenses of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that ARCA and CPEC shall retain and may fully exercise all of their respective rights, remedies and elections under the Bankruptcy Code.

(b) The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against CPEC under the Bankruptcy Code, ARCA shall be entitled to all applicable rights under Section 365 (including Section 365 (n)) of the Bankruptcy Code. Upon rejection of this Agreement by CPEC or a trustee in bankruptcy for CPEC, pursuant to Section 365(n), ARCA may elect (i) to treat this Agreement as terminated by such rejection or (ii) to retain its rights (including any right to enforce any exclusivity provision of this Agreement) to intellectual property (including any embodiment of such intellectual property) under this Agreement and under any agreement supplementary to this Agreement for the duration of this Agreement and any period for which this Agreement could have been extended by CPEC. Upon written request to the trustee in bankruptcy or CPEC, the trustee or CPEC, as applicable, shall (A) provide to ARCA any intellectual property (including such embodiment) held by the trustee or CPEC and shall provide to ARCA a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property and (B) not interfere with the rights of ARCA to such intellectual property as provided in this Agreement or any agreement supplementary to this Agreement, including any right to obtain such intellectual property (or such embodiment or duplicates thereof) from a third party.

(c) In the event ARCA is a debtor in a bankruptcy proceeding, whether voluntary or involuntary, all rights and licenses granted pursuant to this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365 of the Bankruptcy Code, executory contracts (subject to the Bankruptcy Court’s approval). The Parties agree that applicable law does not excuse CPEC from accepting performance by, or rendering performance under this Agreement and all rights and licenses granted hereunder to, a person or entity other than ARCA.

8.3.	Effect of Expiration or Termination .

(a) Except as set forth in this Agreement, in the event of termination of this Agreement, the rights and obligations hereunder, excluding any payment obligation that has accrued as of the termination date and excluding rights and obligations relating to confidentiality, shall terminate immediately, except that ARCA and its Affiliates and sublicensees shall have the right to sell or otherwise dispose of the stock of any Product subject to this Agreement then on hand or in process of manufacture. Expiration or termination of this Agreement shall not relieve the Parties of any obligation accruing prior to such expiration or termination. In addition to any other provisions of this Agreement which by their terms continue after the expiration of this Agreement, the provisions of Article IV shall survive the expiration or termination of this Agreement and shall continue in effect for five (5) years from the date of expiration or termination. In addition, any other provision required to interpret and enforce the Parties’ rights and obligations under this Agreement shall also survive, but only to the extent required for the full observation and performance of this Agreement. Any expiration or early termination of this Agreement shall be without prejudice to the rights of any Party against the other accrued or accruing under this Agreement prior to termination. Except as expressly set forth herein, the rights to terminate as set forth herein shall be in addition to all other rights and remedies available under this Agreement, at law, or in equity, or otherwise.

(b) Upon termination of this Agreement by CPEC pursuant to Section 8.2.1(a) or by ARCA pursuant to Section 8.2.1(c), ARCA shall return to CPEC all CPEC Intellectual Property provided to ARCA prior to such termination and, if requested to do so by CPEC (except if such termination is pursuant to Section 8.2.1 (c) (ii)), shall provide an exclusive license to CPEC for all know-how and intellectual property relating to Compound or Product that was developed by ARCA during the Term of this Agreement and as to which ARCA has the right to license, provided that ARCA shall retain the rights for such intellectual property for any fields and uses that do not involve the Compound or Product.

Article IX

MISCELLANEOUS

9.1

Force Majeure . Neither Party shall be held liable or responsible to the other Party nor be deemed to have defaulted under or breached the Agreement for failure or delay in fulfilling or performing any term of the Agreement during the period of time when such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party including, but not limited to, fire, flood, embargo, war, acts of war (whether war be declared or not), insurrection, riot, civil commotion, strike, lockout or other labor disturbance, act of God or act, omission or delay in acting by any governmental authority or the other Party. The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably practicable.

9.2

Assignment . The Agreement may not be assigned or otherwise transferred without the prior written consent of the other Party; provided, however, that either Party may assign this Agreement without consent of the other Party to an Affiliate or in connection with the transfer or sale of its business or all or substantially all of its assets related to Compound or Product or in the event of a merger, consolidation, change in control or similar corporate transaction. Any permitted assignee shall assume all obligations of its assignor under this Agreement.

9.3

Severability . In the event that any of the provisions contained in this Agreement are held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affect the substantive rights of the Parties. In such event, the Parties shall replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, implement the purposes of this Agreement.

9.4

Notices . All notices or other communications which are required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by nationally-recognized overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

if to ARCA to:

ARCA Discovery, Inc.

12635 East Montview Boulevard

Suite 100

Aurora, CO 80010

Attention: President

Fax No.: 303-315-5082

if to CPEC to:

CPEC LLC

99 Hayden Avenue

Suite 200

Lexington, MA 02421

Attention: Chief Executive Officer

Fax No.: 781-862-3859

or to such other address as the Party to whom notice is to be given may have furnished to the other Parties in writing in accordance herewith. Any such communication shall be deemed to have been given when delivered if personally delivered or sent by facsimile on a Business Day, upon confirmed delivery by nationally-recognized overnight courier if so delivered and on the third Business Day following the date of mailing if sent by registered or certified mail.

9.5.	Applicable Law and Dispute Resolution . The Agreement shall be governed by and construed in accordance with the laws of the United States of America and State of New York without reference to any rules of conflict of laws.

(a) The Parties agree to attempt initially to solve all claims, disputes, or controversies arising under, out of, or in connection with this Agreement (a “Dispute”) by conducting good faith negotiations. Any Disputes which cannot be resolved by good faith negotiation within twenty (20) Business Days, shall be referred, by written notice from either Party to the other, to the Chief Executive Officer or President of each Party. Such officers shall negotiate in good faith to achieve a resolution of the Dispute referred to them within twenty (20) business days after such notice is received by the Party to whom the notice was sent. If the officers are unable to settle the Dispute between themselves within twenty (20) business days, they shall so report to the Parties in writing. The Dispute shall then be referred to mediation as set forth in the following Subsection 9.5 (b).

(b) Upon the Parties receiving the officers’ report that the Dispute referred to them pursuant to Subsection 9.5 (a) has not been resolved, the Dispute shall be referred to mediation by written notice from either Party to the other. The mediation shall be conducted pursuant to the American Arbitration Association (“AAA”) procedures. The place of the mediation shall be New York, New York. If the Parties have not reached a settlement within twenty (20) business days of the date of the notice of mediation, the Dispute shall be referred to arbitration pursuant to Subsection 9.5 (c) below.

(c) If after the procedures set forth in Subsections 9.5 (a) and (b) above, the Dispute has not been resolved, a Party shall decide to institute arbitration proceedings, it shall give written notice to that effect to the other Party. The Parties shall refrain from instituting the arbitration proceedings for a period of sixty (60) days following such notice. During such period, the Parties shall continue to make good faith efforts to amicably resolve the dispute without arbitration. If the Parties have not reached a settlement during that period the arbitration proceedings shall go forward and be governed by the AAA rules then in force. Each such arbitration shall be conducted by a panel of three arbitrators having experience in the pharmaceutical industry: one arbitrator shall be appointed by each of CPEC and ARCA and the third arbitrator, who shall be the Chairman of the tribunal, shall be appointed by the two Party-appointed arbitrators. Any such arbitration shall be held in New York, New York, USA.

The arbitrators shall have the authority to grant specific performance. Judgment upon the award so rendered may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and an order of enforcement, as the case may be. In no event shall a demand for arbitration be made after the date when institution of a legal or equitable proceeding based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Each Party shall bear its own costs and expenses incurred in connection with any arbitration proceeding and the Parties shall equally share the cost of the mediation and arbitration levied by the AAA.

Any mediation or arbitration proceeding entered into pursuant to this Section 9.5 shall be conducted in the English language. Subject to the foregoing, for purposes of this Agreement, each Party consents, for itself and its Affiliates, to the jurisdiction of the courts of the State of New York, county of New York and the U.S. District Court for the Southern District of New York.

9.6.

Entire Agreement . This Agreement, including the exhibits and schedules hereto, contains the entire understanding of the Parties with respect to the subject matter hereof and supersedes all previous writings and understandings. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by all Parties hereto.

9.7.

Independent Contractors . It is expressly agreed that the Parties shall be independent contractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency. Neither Party shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior consent of such other Party.

9.8.	Waiver . The waiver by a Party hereto of any right hereunder or the failure to perform or of a breach by another Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise.

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

9.10.

Counterparts . The Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

9.11.

Use of Names . Except as otherwise provided in this Agreement, neither Party shall use the name of the other Party in relation to this transaction in any public announcement, press release or other public document without the consent of such other Party, which consent shall not be unreasonably withheld or delayed; provided, however, that either Party may use the name of the other Party in any document required to be filed to obtain Regulatory Approval or to comply with applicable laws, rules or regulations.

9.12.

LIMITATION OF LIABILITY . NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES ARISING OUT OF THIS AGREEMENT, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.


CPEC L.L.C.

By:	/s/ G L Cooper
	Name:	G L Cooper
	Title:	President

ARCA DISCOVERY, INC.

By:	/s/ Michael R. Bristow
	Name:	Michael R. Bristow
	Title:	President

Exhibit 10.2

Execution Copy

AMENDMENT TO THE LICENSE AND SUBLICENSE AGREEMENT

BY AND BETWEEN

CPEC LLC AND ARCA DISCOVERY INC.

THIS AMENDMENT (the “Amendment”), dated as of February, 22, 2006 (“Amendment Effective Date”), by and between CPEC LLC, a Delaware limited liability company having an office at 33 Hayden Avenue, Lexington, MA 02421 (“CPEC”) and ARCA Discovery, Inc., a corporation organized and existing under the laws of the State of Colorado and having its principal office at 1400 Sixteenth Street, Suite 220, Denver, Colorado 80202 (“ARCA”), amends the License and Sublicense Agreement effective as of October 28, 2003 (the “License Agreement”) by and between CPEC and ARCA.

WITNESSETH:

WHEREAS , CPEC and ARCA desire to amend the License Agreement upon the terms and conditions set forth herein, effective as of the Amendment Effective Date.

NOW , THEREFORE , in consideration of the premises contained herein, and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the parties hereto agree, effective as of the Amendment Effective Date, as follows:

1. Except as otherwise defined herein, all defined terms used herein shall have the meanings set forth in the License Agreement.

2. Article 1 of the License Agreement is hereby amended to add the following new Sections to the end thereof:

“1.30 “ ARCA’s Series A Preferred Stock Financing ” shall mean ARCA’s first preferred stock financing on or subsequent to the Amendment Effective Date which, in one or more closings, raises an aggregate of at least $5 million in new funds.

1.31 “ Equity Agreements ” shall mean the Subscription Agreement in the form attached as Exhibit A, the Voting Agreement in the form attached as Exhibit B, the Investor Rights Agreement in the form attached as Exhibit C and the Right of First Refusal and Co-Sale Agreement in the form attached as Exhibit D.”

3. Section 3.2.2 of the License Agreement is hereby amended and restated to read in its entirety as follows:

“3.2.2 In addition to the diligence obligations set forth in Section 3.2.1 above, ARCA shall also:

(a) complete ARCA’s Series A Preferred Stock Financing within three (3) months of the Amendment Effective Date; and

(b) either (i) receive an Institutional Review Board (“IRB”) approval of the protocol for a Phase 3 clinical trial with Product (after an End of Phase 2 Meeting) in patients with congestive heart failure within twelve (12) months after the Amendment Effective Date and commence such Phase 3 clinical trial within three (3) months after such IRB approval, and have raised sufficient financing to complete such trial prior to its commencement; or (ii) within eighteen (18) months of the Amendment Effective Date either (A) file an NDA for Product or (B) obtain an agreement with the FDA to permit a rolling review of the NDA for Product and file the initial section of such NDA in accordance with such agreement.”

4. Section 5.1 of the License Agreement is hereby amended and restated to read in its entirety as follows:

“ 5.1 Milestone Payments. Subject to the terms and conditions contained in this Agreement, and in consideration of the rights granted by CPEC hereunder, ARCA shall pay CPEC the following milestone payments, contingent upon occurrence of the specified event:

(a) US $1,000,000 upon the closing of ARCA’s Series A Preferred Stock Financing;

(b) US $500,000 upon the submission of an NDA with the FDA;

(d) US $250,000 upon [ * ];

(e) US $8,000,000 within six (6) months of obtaining Regulatory Approval for marketing in the United States by the FDA;

(f) US $2,750,000 within six (6) months of [ * ]; and

(g) US $1,750,000 within six (6) months of [ * ].

For clarification, the parties acknowledge and agree that the first date of any rolling, initial or partial submission of any NDA or any portion or section of an NDA shall constitute the date of submission of an NDA for purposes of the foregoing milestone payments. ARCA shall notify CPEC in writing within ten (10) days after the achievement of each milestone and such notice shall be accompanied by the appropriate milestone payment.”

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

5. Section 5.2.1 (i) of the License Agreement is hereby amended and restated to read in its entirety as follows:

“(i) Subject to the terms and conditions of this Agreement, and in further consideration of the rights granted by CPEC hereunder, ARCA shall pay to CPEC royalties in the applicable percentage set forth below for Net Sales in each Royalty Year of Products by ARCA, its Affiliates or sublicensees:


Annual Net Sales:	Royalty Rate:
Up to the first [ * ]:	7.5	%
Over [ * ] and up to [ * ]:	10	%
Over [ * ]:	20	%”

6. Section 5.2 of the License Agreement is hereby amended to add at the end thereof a new Section 5.2.4 which shall read in its entirety as follows:

“5.2.4 Royalty Buy-Down . At any time during the period commencing on the Effective Date and expiring [ * ] after obtaining Regulatory Approval for marketing Product in the United States (the “Option Period”), ARCA shall have the option to buy-down the royalty rates set forth in Section 5.2.1 (i) as follows: For annual Net Sales over [ * ], and up to [ * ], ARCA shall have the option to buy-down up to two and one-half (2 ¹ / 2 ) percentage points (down to a rate of 7.5%), and for annual Net Sales over [ * ], ARCA shall have the option to buy-down up to eight (8) percentage points (down to a rate of 12%). To exercise the buy-down option, ARCA shall provide CPEC with a written notice electing to exercise the buy-down option at any time during the Option Period and, within [ * ] thereafter, pay to CPEC [ * ] reduction in royalty rate. The applicable royalty rate reduction shall be effective as of the date the related payment is made in full to CPEC.”

7. Article V of the License Agreement is hereby amended to add at the end thereof a new Section 5.8 which shall read in its entirety as follows:

“5.8. Equity Issuance . Subject to the terms and conditions contained in this Agreement and the Equity Agreements and in further consideration of the rights granted by CPEC hereunder and pursuant to the Amendment, ARCA shall, on the Amendment Effective Date, issue to CPEC and/or its designees an aggregate of 400,000 shares of ARCA’s Common Stock, $.001 par value per share.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

8. Section 9.4 of the License Agreement is hereby amended by:

(a) replacing the address of ARCA with the following:

“ARCA Discovery, Inc.

1400 16 ^th Street

Suite 220

Denver, CO 80202

Attention: President and Chief Executive Officer

Fax No.: 303-825-0883”;

and

(b) replacing the address of CPEC with the following:

CPEC LLC

33 Hayden Avenue

Lexington, MA 02421

Attention: Chief Executive Officer

Fax No.: 781-862-3859”

9. Except as expressly amended or waived by this Amendment, all of the provisions of the License Agreement shall remain in full force and effect. All references to the License Agreement, from and after the Amendment Effective Date, shall be to the License Agreement as amended by this Amendment.

10. In the event that any of the provisions contained in this Amendment are held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affect the substantive rights of the Parties. In such event, the Parties shall replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, implement the purpose of this Amendment.

11. This Amendment shall be governed by and construed in accordance with the laws of the State of New York without reference to any rules of conflicts of law.

12. The waiver by a Party hereto of any right hereunder or the failure to perform or of a breach by another Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise.

13. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF , the Parties have executed this Amendment as of the date first set forth above.


CPEC LLC.

By:		/s/ Mark S. Butler
Name:		Mark S. Butler
Title:		Executive Vice President

ARCA DISCOVERY, INC.

By:		/s/ Michael R. Bristow
Name:		Michael R. Bristow
Title:		President and Chief Executive Officer

Exhibit A

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Exhibit B

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Exhibit C

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Exhibit D

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Exhibit 10.3

EXCLUSIVE LICENSE AGREEMENT

For Licensing Patent Rights

This Agreement is made and entered into by and between THE REGENTS OF THE UNIVERSITY OF COLORADO, a body corporate, having its principal office at 201 Regent Hall, Regent Drive, Boulder, CO 80309 (hereinafter “ University ”) and ARCA Discovery, Inc., a Delaware corporation having its principal office at 1400 16 ^th Street, Suite 220, Denver, CO 80202 (hereinafter “ Licensee ”).

WITNESSETH

WHEREAS, University is the owner of certain Patent Rights (as later defined herein) relating to expression profiling in the intact human heart and a method of treating heart failure with bucindolol, identified as University Case nos. 2002.026H, CU1297H and CU1298H, developed by inventors Michael Bristow et. al , and has the right to grant licenses under said Patent Rights; and

WHEREAS, University has granted certain rights to such Patents Rights to Myogen, Inc. (“Myogen”); and

WHEREAS, Myogen has relinquished some of its rights in the Patent Rights and has permitted University the right to grant certain licenses under said Patent Rights; and

WHEREAS, Licensee is interested in licensing and further developing the Patent Rights for commercial applications; and

WHEREAS, University desires to have the Patent Rights developed and commercialized to benefit the public and is willing to grant a license hereunder.

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

ARTICLE 1. DEFINITIONS

For the purposes of this Agreement, the following words and phrases shall have the following meanings:

1.01

“Bucindolol” means the beta-adrenergic–receptor antagonist having the chemical formula: 2-{2-hydroxy-
3{{2-(3-indolyl)-1,1-dimethylethyl}amino}propoxy}-benzonitrile hydrochloride, and its racemates, isomers, prodrugs, active metabolites, analogs and any pharmaceutically acceptable salt or complex thereof, and diagnostics used in connection with its prescription.

1 of 22

1.02	“Bucindolol Invention” shall mean an Invention relating solely to the use of Bucindolol as a therapeutic or as a diagnostic used solely in connection with the development of Bucindolol.

1.03	“Effective Date” shall mean the date of the last signature on this Agreement.

1.04	“Fields of Use” shall mean the fields of use identified in Appendix B .

1.05

“Improvement” shall mean any invention in the field of human heart disease diagnosis, prevention and therapy, the practice of which would also require the practice of an invention claimed in or covered by the Patent Rights, and which is a modification of the inventions claimed in or covered by the Patent Rights and is created in whole or in part by Michael Bristow.

1.06

“Invention” shall mean an invention in the field of human cardiovascular disease diagnosis, prevention and therapy conceived of or reduced to practice by University employees Dr. Michael Bristow, so long as he is voluntarily involved in Licensee as an employee, consultant or director, or by Dr. Leslie Leinwand, and their University of Colorado collaborators (defined as those
co-inventors indicated on invention disclosure forms or individuals named in research grants obtained by Drs. Bristow and Leinwand).

1.07

“IVEP Invention” shall mean an Invention of a biological entity identified as being potentially involved in one or more disease states including, without limitation, any human genes or gene products (including variants, post-translational modifications, isoforms and polymorphisms thereof) by Licensee by use of in vivo expression profiling techniques claimed by the Patent Rights.

1.08

“Know-How” shall mean, and be limited to, University’s proprietary information which has been created, developed, or fixed in any tangible medium of expression and which is directly related to the use of, or desirable for the practice of, the Patent Rights. All Know-How due under this Agreement shall be delivered to Licensee prior to or on the Effective Date in written, electronic, oral or other form of communication.

1.09	“Licensed Process(es)” shall mean any process, art, or method, that is covered in whole or in part by an issued, unexpired, valid and enforceable claim or a pending claim contained in the Patent Rights or that incorporates or makes use of Know-How.

1.10	“Licensed Product(s)” shall mean any:

(a)

product or part thereof that is covered in whole or in part by an issued, unexpired, valid and enforceable claim or a pending claim contained in the Patent Rights or that incorporates or makes use of Know-How; or

(b)

product, chemical composition, apparatus, or part thereof that is manufactured or discovered by using a Licensed
Process(es) or is employed to practice a Licensed Process(es); or

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(c)

product produced, discovered, manufactured or created through the use of any Licensed Product defined in §1.010(a) or §1.010(b).

1.11	“Net Sales” shall mean the [ * ], whether invoiced or not, less [ * ]. Net sales shall also include the [ * ] received by Licensee as determined by the [ * ].

1.12	“Patent Rights” shall mean all of the following University intellectual property:

(a)

the United States and foreign patents and/or patent applications and/or provisional patent applications listed in
Appendix A ; and

(b)

United States and foreign patents issued from the applications listed in Appendix A and from divisionals and continuations of these applications; and

(c)

claims of United States and foreign continuation-in-part applications, and of the resulting patents, which are directed to subject matter specifically described in the United States and foreign applications listed in Appendix A ; and

(d)

any reissues or reexaminations of United States and foreign patents described in (a), (b) or (c) above.

1.13	“Royalty” shall mean any consideration paid by Licensee pursuant to this Agreement.

1.14	“Territory” shall mean the geographical area identified in Appendix B .

ARTICLE 2. GRANT OF RIGHTS AND ACCEPTANCE

2.01	University hereby grants and Licensee accepts, during the term and subject to the terms and conditions of this Agreement, and further subject to University’s right to do so without incurring liability to third parties:

(a)

an exclusive license to make, have made, use, sell, offer to sell and import the Know-How in the Territory and within the Fields of Use; and

(b)

an exclusive license of University’s Patent Rights, except for Patent Rights in University Case No. 2002.026H, in the Territory to make, have made, use, sell, offer to sell, and import any Licensed Products in the Fields of Use and to practice any Licensed Processes in the Fields of Use; and

(c)

an exclusive license of University’s Patent Rights in University Case No. 2002.026H in the Territory to make, have made, use, sell, offer to sell and import any Licensed Products in the Fields of Use and to practice any Licensed Process in the Fields of Use (provided that such license may be converted into a co-exclusive license subject to Myogen’s right to obtain a co-exclusive license for such Patent Rights from University).

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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2.02	This Agreement confers no license or rights by implication, estoppel, or otherwise under any patent applications or patents of University other than Patent Rights regardless of whether such patents are dominant or subordinate to Patent Rights.

2.03	Improvements and New Inventions

(a)

Improvements. Subject to any preexisting contractual obligations, requirements of applicable law, and notwithstanding certain obligations to Myogen, Inc. (“ Myogen ”) under Section 5.2 of the Intellectual Property Agreement, as amended, between University License Equity Holdings, Inc. (“ ULEHI ”) and Myogen, University reference #IR360H-03, dated November 23, 2003 (the “ Myogen-ULEHI Agreement ”), Licensee shall have the option to include Improvements in the Patent Rights. Within thirty (30) days of notification by inventor(s) to University of an Improvement, University shall disclose such Improvement to Licensee. Licensee shall have six (6) months from such disclosure to exercise the option, and shall reimburse University for all patent costs incurred prior to and during the option period. Upon exercise of the option, the Improvement shall be deemed included in the Patent Rights licensed under this Agreement. If at the time of the invention of the Improvement a University researcher who is not a founder, employee or consultant of Licensee is named as an inventor on any such Improvement, Licensee shall pay an acquisition payment of ten thousand dollars ($10,000) to University; however, such acquisition payment shall not exceed ten thousand dollars ($10,000) in total per Improvement, and said Improvement shall be included in Patent Rights. Such acquisition payments shall be separate from Licensee’s obligations to pay patent costs and fees as described in Section 8 herein.

(b)

New Inventions. Subject to any preexisting contractual obligations or any amendments to the any of the Myogen agreements (if such amendment is agreed to by ARCA) and requirements of applicable law, University hereby grants Licensee:

(1)

[ * ] option to license on commercially reasonable terms an IVEP Invention or a Bucindolol Invention; and

(2)

[ * ] option to license on commercially reasonable terms any Invention declined to be licensed by Myogen under the Myogen-ULEHI Agreement, as provided therein. The fee for such options shall be [ * ] to University if a University researcher, who is also not a founder, employee or consultant of Licensee, is named as an inventor on any patent for each such Invention licensed by Licensee [ * ] and such Invention shall be included in the Patent Rights. Such acquisition payments shall be separate from Licensee’s obligations to pay patent costs and fees as described in Section 8 herein.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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2.04	This Agreement shall be subject to the mandatory public laws in any country where this Agreement will produce an effect.

ARTICLE 3. SUBLICENSING

3.01	Upon notification by Licensee to University, Licensee may sublicense to one or more third parties the rights granted in Article 2 subject to the following limitations:

(a)

Licensee agrees that any sublicenses granted by it shall impose restrictions and conditions upon sublicensees that are consistent with those imposed upon Licensee; and

(b)

University agrees that, in the event University terminates this Agreement for any reason, any sublicenses granted shall survive such termination and shall be enforceable by both University and sublicensee; and

(c)

Licensee agrees that any sublicenses granted shall adequately protect University’s security and property interest in University’s Know-How and Patent Rights.

3.02	Any sublicenses granted by Licensee shall provide only for cash consideration from sublicensees unless University has expressly consented otherwise in writing in advance.

3.03	Licensee agrees to forward to University a complete copy of each fully executed sublicense agreement postmarked within thirty (30) days of the execution of such agreement.

ARTICLE 4. GOVERNMENT AND UNIVERSITY RIGHTS

4.01

Notwithstanding any use of descriptive terms within this Agreement such as “exclusive”, this Agreement is subject to all of the terms and conditions of Title 35 USC §§ 200 et al (“ Bayh-Dole Act ”) and 37 CFR Part 401, as such may be amended. Further, Licensee agrees to take all reasonable action necessary to enable University to satisfy its obligations hereunder. Such terms and conditions shall include Licensee’s obligation to assure that any Licensed Products used or sold in the United States shall be manufactured substantially in the United States.

4.02	University shall have the transferable right to practice the Patent Rights and Know-How for nonprofit research and education purposes.

4.03	University shall have the right to publish any information included in the Patent Rights and the Know-How provided that University takes reasonable steps to avoid the loss of any patent rights as a result of University exercising its rights under this §4.03.

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ARTICLE 5. ROYALTIES

5.01	As consideration for the disclosure of University’s Know-How as well as the licenses and rights under University’s Patent Rights, Licensee agrees to pay to University:

(a)

nonrefundable Annual Minimum Royalties as set forth in Appendix C ; and

(b)

Earned Royalties as set forth in Appendix C ; and

(c)

Benchmark Royalties as set forth in Appendix C ; and

(d)

Sublicensing Royalties as set forth in Appendix C .

5.02	No multiple Royalties shall be payable in the event that any Licensed Products or Licensed Processes are covered by more than one of the Patent Rights.

5.03

On sales of Licensed Products by Licensee to sublicensees or on sales made in other than arm’s-length transactions, the value of the Net Sales attributed under this Article 5 to such a transaction shall be that which would have been received in an arm’s-length transaction, based on a like transaction at that time.

5.04

Unless otherwise provided herein, all payments required under this Agreement shall be due within thirty (30) days of written notice from University. Payments past due shall bear interest at the rate of one and one-half percent (1 1/2%) per month compounded, or the maximum interest rate allowed by applicable law, whichever is less.

ARTICLE 6. REPORTS, RECORDS AND AUDITS

6.01

On or before the thirtieth (30 ^th ) day following the end of each calendar quarter during the term of this Agreement, Licensee shall provide to University written accounts of the Net Sales of Licensed Products and/or Licensed Processes subject to Royalty hereunder made during the prior three (3) month period and shall simultaneously pay to University the Royalties due on such Net Sales, if any, in United States Dollars. Annual Minimum Royalties, if any, which are due University and prorated for each calendar quarter, shall be paid by Licensee along with the written report due under this Agreement. The written report shall discuss the progress and results, as well as ongoing plans, with respect to the Licensed Products and/or Licensed Processes. University shall have the right to request one meeting per year to discuss such information. Net Sales shall be reported in the format of Appendix D .

6.02

Licensee shall keep accurate records in sufficient detail to reflect its operations under this Agreement and to enable the Royalties accrued and payable under this Agreement to be determined. Such records shall be retained for at least three (3) years after the close of the period to which they pertain, or for such longer time as may be required to finally resolve any question or discrepancy raised by University.

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6.03

Upon the request of University, with reasonable notice, but not more frequently than once a year, Licensee shall permit an independent public accountant selected and paid by University to have access during regular business hours to such records as may be necessary to verify the accuracy of Royalty payments made or payable hereunder. Said accountant shall disclose information acquired to University only to the extent that it should properly have been contained in the royalty reports required under this Agreement. If an inspection shows an underreporting or underpayment in excess of five percent (5%) for any twelve (12) month period, then Licensee shall reimburse University for the cost of the inspection and pay the amount of the underpayment including any interest as required by this Agreement. If an inspection shows an overpayment of Royalties, such sums shall be applied to and deducted from the following Royalty payments, or subsequent payments, until the overpayment has been extinguished.

6.04	Licensee acknowledges that University is subject to the Colorado Public Records Act (C.R.S. §§ 24-72-201 et seq.). All plans and reports marked “Confidential” shall be treated by University as confidential to the extent permitted under §§ 24-72-204.

6.05

Each party shall vigilantly protect the confidential information related to the Patent Rights and Know-How from disclosure to third parties; and no such disclosure shall be made except under sufficiently protective confidentiality agreements. All written documents containing confidential information and other material in tangible form, as well as oral communications containing confidential information received by either party under this Agreement shall be disclosed only pursuant to such confidentiality agreements and shall remain the property of the disclosing party, and such documents and materials, together with copies of excerpts thereof, shall promptly be returned to disclosing party upon request, except one copy may be retained for archival purposes. This section shall cover oral communications containing confidential information provided that such oral communications containing confidential information are summarized in writing by the disclosing party and provided to the recipient within thirty (30) days of such oral disclosure.

ARTICLE 7. DUE DILIGENCE AND PERFORMANCE

7.01

Licensee shall use commercially reasonable efforts to proceed with the development, manufacture, exploitation and sale or lease of Licensed Products and Licensed Processes and to diligently develop markets for the Licensed Products and Licensed Processes throughout the term of this Agreement. Licensee acknowledges and agrees to the performance milestones defined in Appendix E.

7.02	Licensee agrees to develop a vigorous sublicensing program to effect commercialization of Licensed Products and Licensed Processes in any Field of Use or Territory that Licensee decides not to exploit for itself, subject to commercial constraints and Licensee’s reasonable business judgment.

7.03	University may terminate this Agreement or convert this Agreement to a non-exclusive Agreement if Licensee fails to meet any of the due diligence or performance requirements of this Article 7, subject to provisions of section 10.03(c).

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ARTICLE 8. PATENTS, COSTS, AND ENFORCEMENT

8.01	Licensee shall [ * ] University, within thirty (30) days of University’s invoice, an [ * ].

8.02

Licensee shall control and diligently pursue the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Patent Rights on or after the Effective Date, using patent counsel of its choice. Licensee shall [ * ], except as otherwise provided in this Article 8.

8.03 (a)

Licensee shall keep University advised as to the status of the Patent Rights by providing University, in a timely manner prior to their due date, with copies of all official documents and material correspondence relating to the prosecution, maintenance, and validity of any patent applications and patents included in the Patent Rights. University shall have reasonable opportunities to consult with Licensee on such patent applications and patents and shall provide such other reasonable assistance from time to time at the request of Licensee as necessary to file, prosecute and maintain such applications, at Licensee’s expense. Licensee shall diligently seek legally appropriate claims under the Patent Rights, and shall not abandon prosecution of any patent application without first notifying University a reasonable time in writing prior to any bar date, of Licensee’s intention and reason therefor, and providing University with reasonable opportunity to assume responsibility for prosecution, maintenance and associated costs of such patents and patent applications. If University pursues such patent protection, then from that time forward all such subject patent applications and any patents arising therefrom shall be excluded from the Patent Rights under this Agreement and Licensee shall forfeit all rights under this Agreement to such patent applications and any patents arising therefrom.

(b)

No claims of the filed patent applications or issued patent or foreign patent rights constituting Patent Rights hereunder shall be modified, deleted, or abandoned by Licensee or its patent counsel without reasonable, prior written notice to University and reasonable opportunity for University to consult with Licensee. Licensee’s obligations under this §8.03 shall include, without limitation, an obligation to inform University in a timely manner if Licensee will not pursue patents in any foreign countries where patent protection may be available, in order that University may prosecute patents in such countries if University so desires. If University pursues such foreign patent protection, or an issued patent which Licensee intends to abandon, then from that time forward such subject patent applications and any patents arising therefrom, or such issued patents, shall no longer be considered Patent Rights under this Agreement and Licensee shall forfeit all rights under this Agreement to such patent applications, any patents arising therefrom, or such issued patents. University shall be [ * ] with those patent applications and patents it decides to pursue and maintain.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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8.04

If Licensee fails to diligently prosecute the Patent Rights, University may provide Licensee with written notice that University wishes to resume control of the preparation, filing, prosecution, and maintenance of any and all patent applications or patents included in the Patent Rights. If University elects to resume such responsibilities, Licensee agrees to cooperate fully with University, its attorneys, and agents in preparation, filing, prosecution, and maintenance of any and all patent applications or patents and to provide University with complete copies of any and all documents or other materials that University deems necessary to undertake such responsibilities.

8.05

University and Licensee agree to inform the other party promptly in writing of any suspected infringement of the Patent Rights by a third party. Licensee shall have, for a period of [ * ] from the date of any notice of infringement of the Patent Rights, the first right to institute suit against such third party. If Licensee institutes such a suit, it shall bear all costs of the litigation and shall be entitled to retain the entire amount of any recovery or settlement less earned royalties due to University. Thereafter, University and Licensee shall each have the right to institute an action for infringement of the Patent Rights against such third party in accordance with the following:

(a)

If both University and Licensee agree to institute suit jointly, the suit shall be brought in both their names, the out-of-pocket costs thereof shall be borne equally, and any recovery or settlement shall be shared equally. University and Licensee shall agree to the manner in which they shall exercise control over such suit. Each party, at its option, may be represented by separate counsel of its own selection, the fees for which shall be paid for by the respective parties;

(b)

In the absence of an agreement to institute a suit jointly, University may, but is not obligated to, institute suit, and at its option, join Licensee as a plaintiff. If University decides to institute suit, it shall notify Licensee in writing. Licensee’s failure to notify University in writing within fifteen (15) days after the date of University’s notice, that it will join in enforcing the Patent Rights pursuant to the terms hereof, shall be deemed conclusively to be Licensee’s assignment to University of all rights, causes of action, and damages resulting from any such alleged infringement. University shall bear the entire cost of such litigation and shall be entitled to retain the entire amount of any recovery or settlement;

(c)

In the absence of an agreement to institute a suit jointly, and if University does not notify Licensee of its intent to pursue legal action within ninety (90) days of the end of the one hundred twenty (120) day period as provided above, Licensee may institute suit. Licensee shall bear the entire cost of such litigation and shall be entitled to retain the entire amount of any recovery or settlement less earned royalties due University;

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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(d)

If Licensee undertakes to defend the Patent Rights by litigation, Licensee may defer from its royalty payments to University with respect to the Patent Rights subject to suit an amount not exceeding fifty percent (50%) of Licensee’s expenses and costs of such action, including reasonable attorney’s fees, provided however, that such deferral shall not exceed fifty percent (50%) of the total royalty due to University for each calendar year, and that such deferred payments shall be delivered to University upon settlement of the litigation.

8.06

In the event that a declaratory judgment action alleging invalidity or non-infringement of any of the Patent Rights shall be brought against Licensee or raised by way of counterclaim or affirmative defense in an infringement suit brought by Licensee under § 8.05, pursuant to this Agreement and the provisions of Chapter 29 of Title 35, U.S. Code or other statutes, or in the case of any action against Licensee alleging infringement by the Licensed Products or Licensed Processes, Licensee may:

(a)

defend the suit in its own name, at its own expense, and on its own behalf and collect for its use, damages, profits, and awards of whatever nature recoverable for such claims consistent with §8.05; and

(b)

settle any claim or suit for declaratory judgment involving the Patent Rights, except that Licensee shall have no right to deny the validity of any patent, patent claim, or patent application included in the Patent Rights in any compromise or settlement of any claim or suit for declaratory judgment without the express prior written consent of University; provided however, that

University shall have a continuing right to intervene in such actions described in subparagraphs (a) and (b). Licensee shall take no action to compel University either to initiate or to join in any such declaratory judgment action. If Licensee elects not to defend against such declaratory judgment action, University, at its option, may do so at its own expense and shall be entitled to retain the entire amount of any recovery or settlement.

8.07	In all cases, Licensee agrees to keep University reasonably apprised of the status and progress of any litigation.

ARTICLE 9. NO WARRANTIES, INDEMNIFICATIONS AND INSURANCE

9.01

UNIVERSITY MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES WHATSOEVER WITH RESPECT TO USE, SALE, OR OTHER DISPOSITION BY LICENSEE, SUBLICENSEE(S), OR THEIR VENDEES OR OTHER TRANSFEREES OF LICENSED PRODUCTS OR LICENSED PROCESSES INCORPORATING OR MADE BY USE OF THE PATENT RIGHTS. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OR SALE OF SUCH PRODUCTS OR PROCESSES WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, SERVICE MARK, OR OTHER RIGHTS.

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9.02	Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement shall be construed as:

(a)

A warranty or representation by University as to rights in Know-How or the validity or scope of any of the Patent Rights;

(b)

A warranty or representation that the Patent Rights or anything made, used, sold or otherwise disposed of under the License will or will not infringe patents, copyrights or other rights of third parties; or

(c)

An obligation to furnish any know-how or technology not agreed to in this Agreement, to bring or prosecute actions or suits against third parties for infringement (except to the extent described in §8.05) or to provide any services other than those specified in this Agreement.

9.03

Licensee shall indemnify, defend, and hold harmless University, its regents, employees, students, officers, agents, affiliates, and representatives from and against all liability, demands, damages, losses, and expenses, for death, personal injury, illness, property damage, noncompliance with applicable laws and any other claim, proceeding, demand, expense and liability of any kind whatsoever in connection with or arising out of:

(a)

the use by or on behalf of Licensee, its sublicensees, affiliates, directors, officers, employees, or third parties of any Patent Rights; or

(b)

the design, manufacture, production, distribution, advertisement, consumption, sale, lease, sublicense or use of any Licensed Product(s), Licensed Process(es) or materials by Licensee, or other products or processes developed in connection with or arising out of the Patent Rights; or

(c)

any right or obligation of Licensee under this Agreement.

9.04	Licensee shall obtain general liability insurance, including product liability insurance, on such terms and in such amounts as are reasonable and customary within the industry.

ARTICLE 10. DURATION AND TERMINATION

10.01

The term of the License shall commence on the Effective Date and extend to the date of expiration of the last to expire of any patents embodying the Licensed Products or Licensed Processes, including any continuations, continuations-in-part, reissues, renewals or extensions thereof. The obligation to pay the Royalty set forth under Article 5 with respect to each Licensed Product or Licensed Process shall expire when the patent covering such Licensed Product or Licensed Process expires.

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10.02

Licensee may terminate this Agreement at any time on sixty (60) days written notice to University if Licensee:

(a)

pays all amounts due, including the pro-rata Annual Minimum Royalties, as well as all non-cancelable costs, to University through the termination date;

(b)

submits a final report of the type described in Article 6;

(c)

returns any confidential materials provided to Licensee by University in connection with this Agreement;

(d)

suspends its use and sales of the Licensed Product(s) and Licensed Process(es); provided, however, that Licensee may for a period of one hundred and eighty (180) days after the effective date of such termination sell all Licensed Products that may be in inventory subject to Licensee’s obligations in Article 5 and Article 6; and

(e)

provides University the right to access any regulatory information filed with any U.S. or foreign government agency with respect to Licensed Products and Licensed Processes.

10.03

University may terminate this Agreement in the event that:

(a)

Licensee fails to pay University any amounts when due to University hereunder and Licensee fails to make such payment within sixty (60) days of written notice from University; or

(b)

Licensee becomes insolvent, files a Chapter 7 petition in bankruptcy, has such a petition filed against it, and such petition is not dismissed within ninety (90) days; or

(c)

Licensee is in material breach or default of this Agreement other than those occurrences listed in §10.03 (a) or (b), and Licensee fails to cure the breach or default within sixty (60) days of written notice of the breach or default. Licensee’s ability to cure such breach shall be limited to the first two material breaches properly noticed under the terms of this Agreement, regardless of the nature of those breaches. Any subsequent material breach shall entitle University to terminate this Agreement immediately. Events constituting a material breach or default shall include, but are not limited to, the following:

(i)

failure by Licensee to meet any performance milestone in Appendix E ;

(ii)

operation, manufacture, use of or sale of the Licensed Products or Licensed Processes outside the Fields of Use or Territory;

(iii)

failure to keep adequate records or permit inspection or audit.

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ARTICLE 11. MISCELLANEOUS

11.01

This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado.

11.02

All notices, demands or consents required or permitted hereunder shall be deemed sufficient if given in writing and personally delivered, sent by registered mail, postage prepaid, or by a nationally recognized overnight courier service, and addressed to the party to receive such notice at the address given below, or such other address as may hereafter be designated by notice in writing.


University:		Licensee:

Technology Transfer Office University of Colorado, 588 SYS Suite 390, 4001 Discovery Drive Boulder, CO 80309-0588 <License Administrator, Case #s 2002.026H, CU1297H, CU1298H> Electronic funds transfer can be made to: Routing Transit Number (RTN): [ * ] Account Number: [ * ] Bank Name: [ * ] City, State: [ * ] Payee/beneficiary: [ * ] Attention: [ * ] Please include sufficient information to identify payment. Licensee is responsible for electronic transfer expenses.		ARCA Discovery, Inc. 1400 16 ^th Street, Suite 220 Denver, CO 80202 Attention: Dr. Michael Bristow

11.03

Licensee agrees not to identify University in any promotional advertising, press releases, sales literature or other promotional materials to be disseminated to the public or any portion thereof without University’s prior written consent in each case, except that Licensee may state that it has a license for the Patent Rights from University. Licensee further agrees not to use the name of University or any University faculty member, inventor, employee or student or any trademark, service mark, trade name, copyright or symbol of University, without the prior written consent of the University, entity or person whose name is sought to be used.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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11.04

Licensee agrees to:

(a)

cause Licensed Products or the product of Licensed Processes sold under this Agreement to be marked with the notice of the patent numbers or patent pending, as may be appropriate;

(b)

comply with all laws and regulations of the United States and any other country as appropriate concerning or controlling the import or export of the Licensed Products, data, software, laboratory prototypes or other commodities. University makes no representation that a license or consent for export will not be required by applicable governmental agencies, or if required, that it will be issued; and

(c)

comply with all applicable statutes, regulations, and guidelines, including applicable governmental regulations, policies and guidelines in its use of any University - supplied materials (“Materials”). Licensee agrees not to use the Materials for research involving human subjects or clinical trials in the United States without complying with 21 C.F.R. Part 50 and 45 C.F.R. Part 46 (as those regulations may be amended from time to time). Licensee agrees not to use the Materials for research involving human subjects or clinical trials outside of the United States without notifying University in writing, of such research or trials and complying with the applicable regulations of the appropriate national control authorities. Written notification to University of research involving human subjects or clinical trials outside of the United States shall be given no later than sixty (60) days prior to commencement of such research or trials.

11.05

In the event of any dispute arising out of or relating to this Agreement, the affected party shall promptly notify the other party in writing, and upon the other party’s receipt of such notice (“ Notice Date ”), the parties shall attempt in good faith to resolve the matter. Any disputes not so resolved shall be referred to senior executives of the parties, who shall meet at a mutually acceptable time and location within thirty (30) days of the Notice Date and shall attempt to mediate the dispute and negotiate a settlement. If the senior executives fail to meet within thirty (30) days of the Notice Date, or if the matter remains unresolved for a period of sixty (60) days after the Notice Date, the dispute may be submitted to a court of competent jurisdiction in the State of Colorado, and, by execution and delivery of this Agreement, each party (a) accepts, generally and unconditionally, the jurisdiction of such court and any related appellate court, and (b) irrevocably waives any objection it may now or hereafter have as to the venue of any such suit, action or proceeding brought in such court or that such court is an inconvenient forum. However, either party shall be free to seek appropriate injunctive relief without compliance with the mediation procedures set forth herein.

11.06

The terms and provisions contained in this Agreement constitute the entire Agreement between the parties and shall supersede all previous communications, representations, agreements or understandings, either oral or written, between the parties hereto with respect to the subject matter hereof, and no agreement or understanding varying or extending this Agreement will be binding upon either party hereto, unless in writing which specifically refers to this Agreement, signed by duly authorized officers or representatives of the respective parties, and the provisions of this Agreement not specifically amended thereby shall remain in full force and effect according to their terms.

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11.07

The provisions and clauses of this Agreement are severable, and in the event that any provision or clause is determined to be invalid or unenforceable under any controlling body of the law, such invalidity or unenforceability will not in any way affect the validity or enforceability of the remaining provisions and clauses hereof.

11.08

This Agreement does not establish a joint venture, agency or partnership between the parties, nor create an employer - employee relationship. This Agreement may be assigned to a party that acquires substantially all of the assets of Licensee upon thirty (30) days prior written notice to University. A change in control of Licensee shall not be considered an assignment of this Agreement.

11.09

The parties agree that nothing in this Agreement is intended or shall be construed as a waiver, either express or implied, of any of the immunities, rights, benefits, defenses or protections provided to University under governmental or sovereign immunity laws from time to time applicable to University, including, without limitation, the Colorado Governmental Immunity Act (C.R.S. §§24-10-101, et seq.) and the Eleventh Amendment to the United States Constitution.

11.10

The provisions of Articles 1, 8 and 11, and §§ 6.01, 6.02, 9.01-9.03, and any other provision of this Agreement that by its nature is intended to survive, shall survive any termination or expiration of this Agreement.

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IN WITNESS WHEREOF the parties hereto have caused this Agreement, which is effective on the date of the last to sign below, to be executed in duplicate by their respective duly authorized officers.


University:		Licensee:

		ARCA Discovery, Inc.

By:	/s/ David N Allen	By:	/s/ Timothy D. Hoogheem
Title:	Associate VP	Title:	Chief Business & Financial Officer
Date:	October 14, 2005	Date:	October 14, 2005

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APPENDIX A

PATENT RIGHT S


CU ID #	Patent #	Title, Inventors
2002.026H	[ * ]	[ * ]

2002.026H	[ * ]	[ * ]

2002.026H	[ * ]	[ * ]

2002.026H	[ * ]	[ * ]

2002.026H	[ * ]	[ * ]

2002.026H	[ * ]	[ * ]

CU1297H	[ * ]	[ * ]

CU1298H	[ * ]	[ * ]

CU1297H/ CU1298H	[ * ]	[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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APPENDIX B

FIELDS OF USE and TERRITORY

Territory = worldwide

Fields of Use = all fields

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APPENDIX C

ROYALTIES

In accordance with Articles 5 and 6, Licensee shall pay the following Royalties to University:

Annual Minimum Royalty: [ * ] until first commercial sales of Licensed Product(s) and/or Licensed Process(es) occurs, payable quarterly in accordance with section 6.01; [ * ] of Licensed Product(s) and/or Licensed Process(es), payable quarterly in accordance with section 6.01. The Annual Minimum Royalty will be credited against any Earned Royalties that are payable for each reporting period.

Earned Royalty: A percentage of Net Sales as follows: [ * ] of Net Sales. If the Licensed Product or Licensed Process is sold as a combination product, or as a part of bundled products, in such a way that the price of the Licensed Product or Licensed Process included in the combination product is not separately stated on the invoice, for the purpose of determining [ * ] payments, Net Sales for the combination product, or bundled products, shall be determined by multiplying Net Sales of the combination product by the fraction [ * ]. If such [ * ] are not established, then the parties shall negotiate in good faith to determine the method of calculating Net Sales for combination products. No [ * ] shall be payable on Bucindolol.

Benchmark Royalties : Payable within thirty (30) days of each event, as follows:

(a) With respect to the [ * ] involving any Licensed Product(s) and/or Licensed Process(es) (excluding Bucindolol), [ * ].

(b) With respect to the [ * ] involving any Licensed Product(s) and/or Licensed Process(es) (excluding Bucindolol), [ * ].

Sublicensing Royalties : Licensee shall pay University Sublicensing Royalties for all sublicense consideration received for the sublicense of the Patent Rights (excluding Bucindolol, and other than the sublicense of the Patent Rights to any Affiliates of Licensee) according to the following schedule: (a) [ * ], (b) [ * ] and (c) [ * ]. For purposes of this Agreement, an “Affiliate” shall mean every corporation, or entity, which, directly or indirectly, or through one or more intermediaries, controls, is controlled by, or is under common control with Licensee, as well as every officer, director, agent and representative of any such corporation or entity. For the purposes of the definition of Affiliate, the word “control” (including, with correlative meaning, the terms “controlled by” or “under common control with”) means the actual power, either directly or

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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indirectly through one or more intermediaries, to direct or cause the direction of the management and policies of such entity, whether by ownership of at least fifty percent (50%) of the voting stock of such entity, or by contract or otherwise.

Notwithstanding the foregoing, the exclusion of Royalties on Bucindolol shall apply to the Patent Rights but shall not apply to Improvements or other new Inventions involving Bucindolol that are created with the use of University facilities.

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APPENDIX D

ROYALTY REPORT


Licensee:		Case No.:
Inventor:		Patent No.
Period Covered: From:	/ /	Through:	/ /
Prepared By:		Date:
Approved By:		Date:

If license covers several major product lines, please prepare a separate report for each line. Then combine all product lines into a summary report. A discussion of the progress and results, as well as ongoing plans, with respect to the Licensed Products and/or Licensed Processes, see § 6.01, is attached.

Report Type:

____ Single Product Line Report: _____________________________________________

____ Multiproduct Summary Report. Page 1 of _____ Pages

____ Product Line Detail. Line: ____________ Trademark: ___________ Pages: _____

Gross
Sales

* Less:
Allowances

Net
Sales

Royalty
Rate

Period Royalty Amount

Country

This Year

Last Year

U.S.A.

Canada

Europe

Japan

Other :

TOTAL:

Sublicense Fees this quarter: $________ (attach page showing names, addresses, and telephone numbers; and amount of fees received; territory; field of use)

Total Royalty: $________

The following royalty forecast is non-binding and for University internal planning purposes only:

Royalty Forecast Under This Agreement:

Next Quarter:_________ Q2:__________ Q3: ________ Q4: _________

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APPENDIX E

PERFORMANCE MILESTONES

Licensee agrees to the following:

On or before [ * ], Licensee shall deliver to University a business plan that communicates the Licensee’s product development and marketing (strategic, tactical and financial) plans for Patent Rights. This document shall include forecasts showing the funds, personnel and time budgeted and planned for development of the Licensed Product(s) and Licensed Process(es) and Licensee shall provide similar reports or updates, as the case may be, to University on [ * ].

Licensee agrees that if any particular patent application or issued patent that is a part of the Patent Rights is not developed, sublicensed or being diligently used in research and development within [ * ] of the filing of the respective patent application, Licensee shall relinquish all rights to that portion of the Patent Rights to University without additional compensation, credit or refund of any amounts paid.

Within [ * ] of the Effective Date, Licensee shall have raised a total of at least [ * ].

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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Exhibit 10.4

FIRST AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT

For Licensing Patent Rights

This First Amendment, made and entered into as of June 23, 2006(the First Amendment Effective Date”) by and between THE REGENTS OF THE UNIVERSITY OF COLORADO, a body corporate, having its principal office at 201 Regent Hall, Regent Drive, Boulder, CO 80309 (hereinafter “ University ”) and ARCA Discovery, Inc., a Delaware corporation having its principal office at 1200 17 ^th Street, Suite 620, Denver, CO 80202 (hereinafter “ Licensee ”), amends that certain Exclusive Licensing Agreement between the Parties dated October 14, 2005 (the “ License Agreement ”).

WITNESSETH

WHEREAS, University owns certain Patent Rights (as defined in the License Agreement) relating to a method of treating heart failure with bucindolol, identified as University Case nos. CU1297H and CU1298H, and set forth on Appendix A hereto (the “Bucindolol Patent Rights”), developed by inventors Michael Bristow et. al , and previously licensed its interest in the Bucindolol Patent Rights to Licensee under the License Agreement; and

WHEREAS, the University of Cincinnati (“ Cincinnati ”) is co-owner with University of the Bucindolol Patent Rights, identified as UC Technology Case 104-040; and

WHEREAS, Cincinnati has assigned its interest in the Bucindolol Patent Rights to University, pursuant to that certain Patent Assignment Agreement dated June 22, 2006 between Cincinnati and University (the “ Patent Assignment Agreement ”); and

WHEREAS, Licensee is interested in obtaining exclusive rights to all of the Bucindolol Patent Rights in order to develop them for commercial applications; and

WHEREAS, University desires to have the Bucindolol Patent Rights developed and commercialized to benefit the public and is willing to amend the License Agreement in order to convey the interest formerly held by Cincinnati to Licensee, so that Licensee obtains an exclusive license of both Cincinnati’s and University’s interest in the Bucindolol Patent Rights.

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

ARTICLE 1. DEFINITIONS

For the purposes of this Amendment, the following words and phrases shall have the following meanings:

1.01	“Cincinnati Patent Rights” mean Cincinnati’s ownership interest in the Bucindolol Patent Rights, which was conveyed to University in the Patent Assignment Agreement.

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All other definitions used herein shall have the same meaning as defined in the License Agreement.

ARTICLE 2. GRANT OF RIGHTS AND ACCEPTANCE

2.01

The License Agreement is hereby amended to add the Cincinnati Patent Rights to the Bucindolol Patent Rights previously licensed to Licensee under the License Agreement. The intent of this Amendment is to grant Licensee an exclusive license to the entire Bucindolol Patent Rights, including the Cincinnati Patent Rights.

2.02

As consideration for this grant, Licensee shall issue to University 90,000 shares of ARCA Common Stock, pursuant to the Subscription Agreement between Licensee and University dated June 23, 2006. No additional Royalties, milestone payments, or any other consideration shall be owed by Licensee under this Amendment.

ARTICLE 3. MISCELLANEOUS

11.01

Except as expressly amended by this Amendment, all provisions of the License Agreement shall remain in full force and effect.

11.02

This Amendment shall be governed by and construed in accordance with the laws of the State of Colorado.

11.03

The provisions and clauses of this Amendment are severable, and in the event that any provision or clause is determined to be invalid or unenforceable under any controlling body of the law, such invalidity or unenforceability will not in any way affect the validity or enforceability of the remaining provisions and clauses hereof.

IN WITNESS WHEREOF the parties hereto have caused this First Amendment, which is effective on the First Amendment Effective Date, to be executed in duplicate by their respective duly authorized officers.


University:		Licensee:

The Regents of the University of Colorado		ARCA Discovery, Inc.

By:	/s/ David N Allen	By:	/s/ Timothy D. Hoogheem
Title:	Associate VP	Title:	Chief Business & Financial Officer
Date:	June 23, 2006	Date:	June 23, 2006

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APPENDIX A

BUCINDOLOL PATENT RIGHTS


UC104-040 CU1297H	[ * ]	[ * ]

UC104-040 CU1298H	[ * ]	[ * ]

UC104-040 CU1297H/ CU1298H	[ * ]	[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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Exhibit 10.5

SECOND AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT

For Licensing Patent Rights

This Second Amendment is made and entered into as of July 20, 2006 (the “Second Amendment Effective Date”) by and between THE REGENTS OF THE UNIVERSITY OF COLORADO, a body corporate, having its principal office at 201 Regent Hall, Regent Drive, Boulder, CO 80309 (hereinafter “University”) and ARCA Discovery, Inc., a Delaware corporation having its principal office at 1200 17 ^th Street, Suite 620, Denver, CO 80202 (hereinafter “Licensee”).

WITNESSETH

WHEREAS , the parties entered into an Exclusive License Agreement on October 14, 2005 (the “License Agreement”); and

WHEREAS , the License Agreement was subsequently amended on June 23, 2006; and

WHEREAS , pursuant to the terms of the License Agreement, Licensee has an option to exclusively license the Inventions (as defined in the License Agreement); and

WHEREAS , University owns certain Patent Rights (as defined in the License Agreement) relating to two biologic pathways involving proteins known as “YY1 and Cardiac Hypertrophy” and “ERK1/2 and Cardiac Hypertrophy”, and identified as University Case nos. CU1402H and CU1403H, as set forth on Appendix A hereto (collectively, the “YY1 and ERK1/2 Patent Rights” or the “Inventions”), developed by inventors Carmen Sucharov et al ; and

WHEREAS , Licensee desires to extend the time period for exercising this option while it investigates the commercial potential of the Inventions; and

WHEREAS , University desires to have Licensee license the Inventions and is willing to extend the option period in order to allow Licensee additional time to evaluate the Inventions.

NOW, THEREFORE , in consideration of the premises and the mutual covenants contained herein, and for good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1. DEFINITIONS

1.01	Any defined terms not defined herein shall have the same meaning as defined in the License Agreement.

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ARTICLE 2. EXTENSION OF OPTION

2.01

The License Agreement is hereby amended to grant Licensee an exclusive option to license the YY1 and ERK1/2 Patent Rights, on the terms provided for in the License Agreement (except as otherwise modified herein), which option shall expire on the
one-year anniversary of the date of this Second Amendment.

2.02

The license fee for each of the Inventions shall be [ * ], as provided in Section 2.03 (b)(2) of the License Agreement, with the following modification: In the event that Licensee does not pay the license fee for one or both Inventions within 60 days of the execution of this Second Amendment, the license fee for the Inventions that remain unlicensed shall [ * ] for the remainder of the option period.

2.03

Licensee shall be responsible for the preparation and filing, [ * ] of PCT patent applications (and additional U.S. utility applications if so preferred by Licensee) for the YY1 and ERK1/2 Patent Rights. Licensee shall also be responsible for the diligent prosecution of such applications during the option period, or until the receipt of written notice from Licensee declining the Option, whichever is earlier, [ * ]. Licensee shall keep University advised as to the status of the YY1 and ERK1/2 Patent Rights by providing University, in a timely manner prior to their due date, with copies of all official documents and material correspondence relating to the prosecution, maintenance and validity of the YY1 and ERK1/2 Patent Rights.

ARTICLE 3. PERFORMANCE MILESTONES

3.01	The following Performance Milestones shall, with respect to the Inventions only, be substituted for the Performance Milestones in Appendix E of the License Agreement, but shall:

a. On or before January 1, 2008, Licensee shall deliver to University a business plan that communicates the Licensee’s product development and marketing (strategic, tactical and financial) plans for the Inventions. This document shall include forecasts showing the funds, personnel and time budgeted and planned for development of any Licensed Product(s) and Licensed
Process(es) incorporating the Inventions. Licensee shall provide similar reports or updates, as the case may be, to University on [ * ].

b. Licensee agrees that if any particular patent application or issued patent that is a part of the YY1 or ERK1/2 Patent Rights is not developed, sublicensed, being diligently used in research and development, or being diligently pursued for commercialization, within two (2) years of the filing of the respective Patent Cooperation Treaty (PCT) or United States Utility Application, Licensee shall relinquish all rights to that portion of the Patent Rights to University without additional compensation, credit or refund of any amounts paid.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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ARTICLE 4. MISCELLANEOUS

4.01	Except as expressly amended by this Second Amendment, all provisions of the License Agreement shall remain in full force and effect.

4.02	This Second Amendment shall be governed by and construed in accordance with the laws of the State of Colorado.

4.03

The provisions and clauses of this Second Amendment are severable, and in the event that any provision or clause is determined to be invalid or unenforceable under any controlling body of the law, such invalidity or unenforceability will not in any way affect the validity or enforceability of the remaining provisions and clauses hereof.

IN WITNESS WHEREOF the parties hereto have caused this Second Amendment, which is effective on the Second Amendment Effective Date, to be executed in duplicate by their respective duly authorized officers.


University:		Licensee:

The Regents of the University of Colorado		ARCA Discovery, Inc.

By:	/s/ David N Allen	By:	/s/ Michael Bristow
Title:	Associate VP	Title:	President and Chief Executive Officer
Date:	August 9, 2006	Date:	August 11, 2006


Approved as to Legal Sufficiency:

By:		Illegible
Title:
Date:

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APPENDIX A

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

4 of 4

Exhibit 10.6

THIRD AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT

This Third Amendment is made and entered into as of July 19, 2007 (the “Third Amendment Effective Date”) by and between THE REGENTS OF THE UNIVERSITY OF COLORADO, a body corporate, having its principal office at 201 Regent Hall, Regent Drive, Boulder, CO 80309 (hereinafter “University”) and ARCA Discovery, Inc., a Delaware corporation having its principal office at 1200 17 ^th Street, Suite 620, Denver, CO 80202 (hereinafter “Licensee”).

WITNESSETH

WHEREAS , the parties entered into an Exclusive License Agreement on October 14, 2005 (the “License Agreement”); and

WHEREAS , the License Agreement was subsequently amended on June 23, 2006 and July 20, 2006; and

WHEREAS , the July 20, 2006 amendment granted Licensee a one year option for an exclusive license to, among others, the ERK1/2 Patent Rights owned by University; and

WHEREAS , the parties now desire to amend the License Agreement to extend the option period for the ERK1/2 Patent Rights to August 20, 2007;

NOW, THEREFORE , the parties agree as follows:

ARTICLE 1. DEFINITIONS

1.01	Any defined terms not defined herein shall have the same meaning as defined in the License Agreement.

ARTICLE 2. EXTENSION OF OPTION

2.01	The License Agreement is hereby amended to extend Licensee’s exclusive option to license the ERK1/2 Patent Rights (University Case Number CU1403H) to August 20, 2007.

ARTICLE 3. MISCELLANEOUS

3.01	Except as expressly amended by this Third Amendment, all provisions of the License Agreement shall remain in full force and effect.

3.02	This Third Amendment shall be governed by and construed in accordance with the laws of the State of Colorado.

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3.03

The provisions and clauses of this Third Amendment are severable, and in the event that any provision or clause is determined to be invalid or unenforceable under any controlling body of the law, such invalidity or unenforceability will not in any way affect the validity or enforceability of the remaining provisions and clauses hereof.


UNIVERSITY:		LICENSEE:

The Regents of the University of Colorado		ARCA Discovery, Inc.

By:	David Allen	By:	Christopher Ozeroff
Title:	Assoc. V.P., Technology Transfer	Title:	EVP Business Development & GC
Date:	August 17, 2007	Date:	August 13, 2007

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Exhibit 10.7

FOURTH AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT

This Fourth Amendment is made and entered into as of August 22, 2007 (the “Fourth Amendment Effective Date”) by and between THE REGENTS OF THE UNIVERSITY OF COLORADO, a body corporate, having its principal office at 1800 Grant Street, 8 ^th Floor, Denver, CO 80203 (hereinafter “University”) and ARCA Discovery, Inc., a Delaware corporation having its principal office at 1200 17 ^th Street, Suite 620, Denver, CO 80202 (hereinafter “Licensee”).

WITNESSETH

WHEREAS , the parties entered into an Exclusive License Agreement on October 14, 2005 (as previously amended, the “License Agreement”); and

WHEREAS , the License Agreement was subsequently amended on June 23, 2006, July 20, 2006 and July 19, 2007; and

WHEREAS , the July 20, 2006 amendment granted Licensee a one year option for an exclusive license to, among others, the ERK1/2 patent rights owned by University, and provided for an [ * ] for patent rights licensed after 60 days from July 20, 2006; and

WHEREAS , the parties further amended the License Agreement to extend the option period for the ERK1/2 patent rights to [ * ]; and

WHEREAS , Licensee has indicated its desire to exercise its option with respect to the ERK1/2 patent rights and desires that such ERK1/2 patent rights be included in the Patent Rights and University desires to have the ERK1/2 patent rights developed and commercialized to benefit the public and is willing to grant such exercise of the option rights; and

WHEREAS , the parties agree that the economic terms set forth in Appendix C of the License Agreement constitute commercially reasonable terms for the ERK1/2 patent rights;

NOW, THEREFORE , the parties agree as follows:

ARTICLE 1. DEFINITIONS

1.01	Any defined terms not defined herein shall have the same meaning as defined in the License Agreement.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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ARTICLE 2. GRANT OF LICENSE

2.01	The following intellectual property shall be included under the Patent Rights in Appendix A of the License Agreement as a New Invention: CU Disclosure made by Dr. Carmen Sucharov entitled “[ * ]” (hereinafter “CU1403H Disclosure”) and related PCT application [ * ], filed [ * ] and entitled “[ * ].”

2.02	CU1403H Disclosure shall be subject to all of the rights and obligations, including but not limited to, the payment of milestones and royalties and all patent costs and expenses as enumerated in the License Agreement.

ARTICLE 3. ACQUISITION FEES

3.01	Licensee shall pay [ * ] to University within ten (10) business days of the Fourth Amendment Effective Date.

ARTICLE 4. PERFORMANCE MILESTONES

4.01	The following Performance Milestones shall, with respect to the CU1403H Disclosure Invention only, be substituted for the Performance Milestones in Appendix E of the License Agreement:

a. On or before July 1, 2008, Licensee shall deliver to University a business plan that communicates the Licensee’s product development and marketing (strategic, tactical and financial) plans for the CU1403H Disclosure Invention. This document shall include forecasts showing the funds, personnel and time budgeted and planned for development of any Licensed Product(s) and Licensed Process(es) incorporating the CU1403H Disclosure Invention. Licensee shall provide similar reports or updates, as the case may be, to University on [ * ].

b. Licensee agrees that if any particular patent application or issued patent that is a part of the CU1403H Disclosure Patent Rights is not developed, sublicensed, being diligently used in research and development, or being diligently pursued for commercialization, within eighteen (18) months of the Fourth Amendment Effective Date, Licensee shall relinquish all rights to that portion of the Patent Rights to University without additional compensation, credit or refund of any amounts paid.

ARTICLE 5. MISCELLANEOUS

5.01	Except as expressly amended by this Fourth Amendment, all provisions of the License Agreement shall remain in full force and effect.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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5.02	This Fourth Amendment shall be governed by and construed in accordance with the laws of the State of Colorado.

5.03

The provisions and clauses of this Fourth Amendment are severable, and in the event that any provision or clause is determined to be invalid or unenforceable under any controlling body of the law, such invalidity or unenforceability will not in any way affect the validity or enforceability of the remaining provisions and clauses hereof.

IN WITNESS WHEREOF the parties hereto have caused this Fourth Amendment, which is effective on the Fourth Amendment Effective Date, to be executed in duplicate by their respective duly authorized officers.


UNIVERSITY:		LICENSEE:

The Regents of the University of Colorado		ARCA Discovery, Inc.

By:	David Allen	By:	Christopher Ozeroff
Title:	Assoc. V.P., Technology Transfer	Title:	EVP Business Development & GC
Date:	October 11, 2007	Date:	October 25, 2007

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Exhibit 10.8

DIAGNOSTIC COLLABORATION AND OPTION AGREEMENT

T HIS D IAGNOSTIC C OLLABORATION AND O PTION A GREEMENT (“ Agreement ”) is entered as of June 23, 2006 (the “ Effective Date ”), by and between CardioDx, I NC ., a Delaware corporation having a place of business located at 3183 Porter Drive, Palo Alto, CA 94304 (“ CardioDx ”) and ARCA D ISCOVERY , I NC . , a Delaware corporation having a place of business at 1200 Seventeenth Street, Suite 620, Denver, Colorado 80202 (“ ARCA ”). CardioDx and ARCA may be referred to individually herein as a “ Party ” or collectively as the “ Parties .”

B ACKGROUND

W HEREAS , ARCA is a new company engaged in the in-licensing, development and commercialization of genomically-tailored therapies for heart failure and other cardiovascular diseases;

W HEREAS , under that certain License and Option Agreement dated August 16, 2004, as amended March 8, 2006 and June 23, 2006 (the “ UC Alpha License ”), between CardioDx and the University of Cincinnati (“ UC ”), and that certain License and Option Agreement dated August 10, 2004, as amended March 8, 2006 and June 23, 2006 (the “ UC Beta License ”) (the UC Alpha License and the UC Beta License are herein referred to collectively as the “ UC Licenses ”), CardioDx is the exclusive licensee of certain intellectual property owned by UC relating to human heart disease diagnosis; and

W HEREAS , ARCA desires to obtain, and CardioDx is willing to grant to ARCA, sublicenses under certain of the technology exclusively licensed by CardioDx pursuant to the terms set forth herein.

N OW , T HEREFORE , in consideration of the foregoing premises and the mutual covenants set forth below, the Parties hereby agree as follows:

A GREEMENT

1.	D EFINITIONS .

1.1 “ Affiliate ” means a corporation, or entity, which, directly or indirectly, or through one or more intermediaries, Controls, is Controlled by, or is under common Control with a Party, and its officers, directors and employees (acting within the scope of their duties to the corporation or entity).

1.2 “ Alpha Patent Rights ” means Invention Disclosure [ * ], entitled “[ * ]”; Invention disclosure number [ * ], entitled “[ * ]”; U.S. Patent Application Serial Number [ * ] filed [ * ], US Patent Application Serial Number [ * ] filed on [ * ] US Patent Application, Serial Number [ * ], filed, [ * ], and Patent Application [ * ] filed [ * ] any letters patent issued thereon, and any foreign counterparts thereof, as well as all continuations, continuations-in-part, divisions, and renewals thereof, all patents which may be granted thereon, and all or reissues, reexaminations, extensions, patents of additions and patents of importation thereof.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

1.3 “ Alpha Licensed Products ” means any and all products and processes, the manufacture, use, importation, sale, offer for sale or practice of which would constitute an infringement of any Valid Alpha Claim of the Alpha Patent Rights in the country in which such Alpha Licensed Product is manufactured, used, imported, sold or practiced.

1.4 “ Arbitration Request ” has the meaning set forth in Section 9.3 .

1.5 “ Beta Patent Rights ” means Invention Disclosure number [ * ], entitled “[ * ];” Invention Disclosure number [ * ], entitled “[ * ];” U.S. Patent [ * ] and US Patent Application, Serial Number [ * ], filed, [ * ], any letters patent issued thereon, and any foreign counterparts thereof, as well as all continuations, continuations-in-part, divisions, and renewals thereof, all patents which may be granted thereon, and all or reissues, reexaminations, extensions, patents of additions and patents of importation thereof.

1.6 “ Beta Licensed Products ” means any and all products and processes, the manufacture, use, importation, sale, offer for sale or practice of which would constitute an infringement of any Valid Beta Claim of the Beta Patent Rights in the country in which such Beta Licensed Product is manufactured, used, imported, sold or practiced.

1.7 “ Bucindolol ” means the beta-adrenergic–receptor antagonist having the chemical formula: 2-{2-hydroxy-3{{2-(3-indolyl)-1,1-dimethylethyl}amino}propoxy}-benzonitrile hydrochloride, and its racemates, isomers, prodrugs, active metabolites, analogs and any pharmaceutically acceptable salt or complex thereof.

1.8 “ Change of Control ” with respect to either ARCA or CardioDx, means (i) any consolidation or merger with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the company immediately prior to such consolidation, merger or reorganization, own less than fifty percent (50%) of the voting power of the surviving or successor entity (or in the event stock or ownership interests of an Affiliate are issued in such transaction, less than fifty percent (50%) of the voting power of such Affiliate) immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions in which in excess of fifty percent (50%) of the company’s voting power is transferred, but excluding (x) any transaction effected exclusively to change the domicile of the company, or (y) any transaction effected principally for bona fide equity financing purposes in which cash is received by the company or indebtedness of the company is cancelled or converted or a combination thereof, and (ii) a sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions of all or substantially all of the assets of the company.

1.9 “ Confidential Information ” has the meaning set forth in Section 4.1 .

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

1.10 “ Control ” means the actual power, either directly or indirectly through one or more intermediaries, to direct or cause the direction of the management, policies or decision making of such entity or project, whether by the ownership of at least fifty-one percent (51%) of the voting stock of such entity, or by contract or otherwise.

1.8 “Diagnostic Tests” means genetic tests used to identify certain genetic variants or markers for the purpose of prescribing Bucindolol, which ARCA intends to potentially develop for FDA approval and commercial use.

1.9 “ Field ” means human cardiovascular disease diagnosis for the purpose of prescribing or using Bucindolol.

1.10 “Genetic Marker Sub-license” has the meaning set forth in Section 2.1 .

1.11 “ Licensed Products ” shall mean the Alpha Licensed Products and the Beta Licensed Products.

1.12 [ * ] has the meaning set forth in Section 3.1 .

1.13 “ Net Sales ” means the aggregate [ * ]. In the event that a Licensed Product contains an active component (including a SNP) not covered by a Valid Claim, a Valid Alpha Claim, or a Valid Beta Claim in the country in which the Licensed Product is sold, “Net Sales” from such sales shall be calculated by [ * ], irrespective of the number of such active components.

1.14 “ Notice of Interest ” has the meaning set forth in Section 3.1 .

1.15 “ Notice Date ” has the meaning set forth in Section 9.3 .

1.16 “ Notice Period ” has the meaning set forth in Section 3.1

1.17 “ Patent Rights ” shall mean the Alpha Patent Rights and the Beta Patent Rights.

1.18 [ * ] has the meaning set forth in Section 3.1 .

1.19 [ * ] has the meaning set forth in Section 3.1 .

1.20 “ Supply Agreement ” has the meaning set forth in Section 3.1.

1.21 “ Term ” has the meaning set forth in Section 6.1.

1.22 “ Territory ” means worldwide.

1.23 “ Third Party ” means any entity other than ARCA, CardioDx or an Affiliate of either ARCA or CardioDx.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

1.24 “ Valid Alpha Claim ” means (a) an issued and unexpired claim within the Alpha Patent Rights that has not been held unpatentable, invalid or unenforceable by a court or other government agency of competent jurisdiction and has not been admitted to be invalid or unenforceable through reissue, re-examination, disclaimer or otherwise, or (b) a claim in a pending application within the Alpha Patent Rights, unless such application has been pending for more than 42 months from the date of the first office action.

1.25 “ Valid Beta Claim ” means (a) an issued and unexpired claim within the Beta Patent Rights that has not been held unpatentable, invalid or unenforceable by a court or other government agency of competent jurisdiction and has not been admitted to be invalid or unenforceable through reissue, re-examination, disclaimer or otherwise, or (b) a claim in a pending application within the Beta Patent Rights, unless such application has been pending for more than 42 months from the date of the first office action.

1.26 “ Valid Claim ” means either a Valid Alpha Claim or a Valid Beta Claim.

2.	G RANT OF R IGHTS .

2.1 Sublicense to ARCA.

(a) Sublicense . Subject to the terms and conditions of this Agreement, including Section 2.1(b) below, CardioDx hereby grants to ARCA a non-exclusive, royalty-bearing sublicense, to make, have made, use, sell, offer for sale and import Licensed Products and practice the processes contained within Valid Claims within the Territory, and only in the Field (the “ Genetic Marker Sublicense ”).

(b) Limitations on Exercise . Notwithstanding the sublicense grant in Section 2.1(a) , ARCA’s right to exercise the Genetic Marker Sublicense shall be limited as follows: ARCA shall not be able to exercise the Genetic Marker Sublicense until the earlier to occur of the following: 1) [ * ]. In addition to the foregoing, ARCA may also exercise the Genetic Marker Sublicense [ * ] in accord with the provisions of Section 3.1 .

2.2 Sublicensing by ARCA.

(a) ARCA may only sublicense the Genetic Marker Sublicense to Affiliates or Third Parties with the prior written consent of CardioDx; provided, that after the limitation on exercise of Section 2.1(b) expires, ARCA may upon written notice to CardioDx, grant sublicenses of its rights hereunder to a maximum of two of the parties listed on Exhibit A hereto (the
“ Pre-Approved Sublicensees ”). In addition, ARCA may, upon execution of a Supply Agreement, and with prior written notice, grant one sublicense in accord with Section 3.1(c)(iv) and this Section 2.2. Upon request from ARCA, the Parties agree to negotiate in good faith amendment of Exhibit A for the purpose of substituting new entities for existing Pre-Approved Sublicensees.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

(b) In all sublicenses granted by ARCA hereunder, ARCA shall include a requirement that the sublicensee use its commercially reasonable efforts to bring the subject matter of the sublicense into commercial use as quickly as is reasonably possible, consistent with sound and reasonable business practices and judgment. ARCA shall further provide in such sublicenses that such sublicenses are subject and subordinate to the terms and conditions of the UC licenses (except as modified by this Agreement) and this Agreement, except: (i) the sublicensee may not further sublicense; and (ii) the rate of royalty on Net Sales paid by the sublicensee to ARCA.

(c) Copies of all sublicense agreements shall be provided to CardioDx within fifteen (15) days of execution of each sublicense. ARCA hereby assumes responsibility for the performance of all obligations so imposed on its sublicensees by this Agreement and will itself pay and account to CardioDx for all payments and reports due under this Agreement which may accrue by reason of the operations of each sublicense, as if it were ARCA’s own commercial activity.

(d) On Net Sales of Licensed Products sold or disposed by a sublicensee, [ * ].

(e) ARCA shall provide, in all sublicenses granted by it under this Agreement, that ARCA’s interest in such sublicenses shall terminate upon termination or expiration of this Agreement as provided in Section 6.4.

2.3 Additional Covenants of ARCA.

(a) ARCA shall use commercially reasonable efforts to bring the Licensed Products into commercial use as quickly as is reasonably possible, consistent with sound and reasonable business practices and judgment.

(b) ARCA agrees and acknowledges that that this Agreement is subject and subordinate to the terms and conditions of the UC Licenses, except: (i) ARCA may not sublicense except as set forth herein; and (ii) ARCA shall be subject to a different royalty rate and other non-royalty obligations, as set forth herein, than are set forth in the UC Licenses. Obligations in the UC Licenses that are applicable to this Agreement shall be binding upon ARCA as if it were a party to the UC Licenses, and ARCA shall assume all such obligations arising in connection with its exercise of its rights under this Agreement, except as specifically modified herein. The Parties acknowledge and agree that UC is an intended third party beneficiary under this Agreement.

2.4 Reservation of Rights. Except as expressly set forth herein, no right or license under the Patent Rights is granted or shall be granted by assumption, implication, estoppel or otherwise.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

3.	C ARDIO D X R IGHTS .

3.1 [ * ]

(a) Definition . As set forth below, CardioDx shall have [ * ], as the case may be, pursuant to the terms set forth in this Section 3.1 (a “ Supply Agreement ”).

(b) [ * ] Notice . After ARCA begins active preparation of a New Drug Application for Bucindolol (the determination of which shall be within the discretion of ARCA) and has provided a detailed written specification to CardioDx regarding the Diagnostic Tests (including specific limitations and restrictions on how and where the Diagnostic Tests will be performed), [ ^* ].

(c) Exercise of the [ * ].

(i) Within thirty (30) days after receiving the [ * ] (the “ Notice Period ”), CardioDx may notify ARCA in writing (the “ Notice of Interest ”) that CardioDx desires to [ * ] If CardioDx does not issue a Notice of Interest to ARCA within the Notice Period, the [ * ] shall terminate and neither Party shall have any further obligation to the other Party under this Section 3.1 .

(ii) If CardioDx does issue the Notice of Interest, the Parties will then [ * ] from receipt of the [ * ], provided, however, if the written specification provided to CardioDx under Section 3.1(b) is materially altered, then the [ * ] will be reset [ * ]. These discussions will include a [ * ]. Notwithstanding the foregoing, during the [ * ], ARCA may engage in [ * ] regarding a [ * ], to the extent that ARCA believes such discussions are reasonably necessary to engage a [ * ] (as set forth in Section 3.1(c)(iv) below) or as an [ * ] to CardioDx, in either case to avoid the delay of FDA approval or commercial launch of Bucindolol.

(iii) If, despite exercising good faith and commercially reasonable efforts, the Parties are unable to [ * ] within [ * ], then neither Party shall have any further obligation to the other Party under this Section 3.1 .

(iv) If the parties enter into a Supply Agreement, ARCA shall have the right to sublicense one Pre-Approved Sublicensee as a third-party commercial source for the Diagnostic Tests subject to the terms and conditions provided for in this Agreement (including those set forth in Section 2.2).

3.2 [ * ]. If requested by CardioDx, ARCA will negotiate in good faith to enter into one or more agreements with CardioDx under which ARCA [ * ] on commercial terms acceptable to the Parties, including [ * ] by ARCA in connection with such services. If requested by CardioDx, ARCA will also negotiate in good faith regarding a [ * ] for the parties’ products, on mutually agreeable terms.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

3.3 Royalties and Fees Payable by ARCA . Subject to the terms and conditions of this Agreement, and in further consideration of the rights granted by CardioDx hereunder, ARCA shall pay to CardioDx royalties as set forth below for Net Sales of Licensed Products sold or disposed of by ARCA and such other fees as set forth below.

(a) Royalties . ARCA shall pay royalties to CardioDx on Net Sales of Licensed Products at the lesser rate of (1) 150% of the royalty rate payable and actually paid by CardioDx to UC for such Net Sales under the UC Licenses, or (2) the lowest rate then in-effect for any similarly-situated, non-government CardioDx sublicensee of the Patent Rights.

(b) Fees .

(i) ARCA shall pay to CardioDx one-third (1/3) of the milestone payments described in Article 3 of each of the UC Licenses for the milestone events of the “First commercial revenue from Net Sales” and the “First $500,000.00 of cumulative revenue from Net Sales.” Such payments shall become due from ARCA to CardioDx upon the date that such payments are due from CardioDx to UC pursuant to the terms set forth in the UC Licenses.

(ii) ARCA shall pay to CardioDx one-third (1/3) of any minimum royalty payments due from CardioDx to UC pursuant to the terms set forth in Article 3 of the UC Licenses; provided, however, that A) ARCA’s payment obligations for such minimum royalty payments shall only begin to accrue as of the date of the first commercial launch of Bucindolol and the Diagnostic Tests; and B) that ARCA’s minimum royalty obligation shall be offset dollar-for-dollar by Diagnostic Test royalties paid to UC.

(c) Non-Royalty Sublicensing Income . To the extent that CardioDx is required to make any payment to UC for
Non-Royalty Sublicensing Income (as defined in the UC Licenses) resulting from any payments made pursuant to this Agreement or pursuant to any agreement that sublicenses any rights granted under this Agreement, then ARCA shall pay to CardioDx the amount of any such payments on the date that any such payments are due from CardioDx to UC.

3.4 ARCA must report to CardioDx the date of first sale of Licensed Products immediately following that sale.

3.5 Subsequent to the date of first sale of Licensed Products, ARCA shall deliver to CardioDx within sixty (60) days after the end of each calendar quarter a written report showing its sales of Licensed Products and its computation of remuneration to CardioDx due under this Agreement for such calendar quarter and at the same time make the payment of the remuneration due. If it had no sale of any Licensed Products the report shall so state. All Net Sales shall be segmented in each such report according to sales on a country-by-country and patent-by-patent basis, including the rates of exchange used for conversion to USA Dollars from the currency in which such sales were made.

(d) In cases of sales outside the USA, royalty payments shall be made in net USA Dollars. The amounts shall be calculated using currency exchange rates as set forth in The Wall Street Journal on the last day of the calendar quarter.

(e) All payments due shall be made without deduction for taxes, assessments, or other charges of any kind which may be imposed on ARCA by the Government of the country where the transactions occur or any political subdivision thereof with respect to any amounts payable to CardioDx pursuant to this Agreement, and such taxes, assessments, or other charges shall be assumed by ARCA. Late payments shall be subject to an interest charge of one and one half percent (1 1/2%) per month.

3.6 ARCA shall keep full, true and accurate books of accounts and other records containing all information and data which may be necessary to ascertain and verify the remuneration payable to CardioDx hereunder for a period of three (3) years following the year to which such records relate. During the Term of this Agreement and for a period of three (3) years following its termination, CardioDx and UC shall have the right to audit, or have an agent, accountant or other representative audit such books, records and supporting data upon fifteen (15) days notice. Any audit shall be at CardioDx’s or UC’s expense, except that ARCA shall reimburse CardioDx or UC for the cost of the audit in the event that CardioDx or UC discovers an underpayment of ten percent (10%) or more of the amount due.

3.7 Reports . ARCA intends to undertake further clinical development and potential commercialization and, if warranted, FDA approval of genetic tests incorporating the Patent Rights for use in the Field. ARCA agrees to report to CardioDx on a regular basis of its regulatory progress in this regard; provided that such obligation shall expire when the [ * ] expires if the Parties have not entered into [ * ]. At CardioDx’s request, the parties will meet on a quarterly basis for this purpose. Information shared under this provision shall be subject to Article 4, and used only for purposes of the Field. At ARCA’s request, CardioDx agrees to report to ARCA information reasonably necessary to assist ARCA in forecasting when the payments under Section 3.3(b) will be due by ARCA. At ARCA’s request, the Parties will confer on a quarterly basis for this purpose.

4.	C ONFIDENTIALITY .

4.1 Confidential Information. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the Parties, during the Term and for a period of five (5) years thereafter, the receiving Party shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose other than as expressly provided in this Agreement any information disclosed to it by, or obtained directly or indirectly from, the other Party pursuant to this Agreement (“ Confidential Information ”). Each Party may use such Confidential Information only to the extent required to accomplish the purposes of this Agreement. Each Party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own to ensure that its employees, agents, consultants and other representatives do not disclose or make any unauthorized use of the Confidential Information, but in no event less than reasonable care. Each Party will promptly notify the other upon discovery of any unauthorized use or disclosure of Confidential Information.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

4.2 Exceptions. The nonuse and nondisclosure obligations set forth in Section 4.1 shall not apply to any information that the receiving Party can prove by competent written evidence contemporaneously maintained:

(a) is now, or hereafter becomes, through no act or failure to act on the part of the receiving Party, generally known or available to the public;

(b) is known by the receiving Party at the time of receiving such information;

(c) is hereafter furnished to the receiving Party, as a matter of right and without restriction on disclosure, by a Third Party who is under no restriction on disclosure;

(d) is independently discovered or developed by the receiving Party without the use of Confidential Information belonging to the disclosing Party; or

(e) is the subject of a written permission to disclose provided by the disclosing Party.

4.3 Authorized Disclosures. Each Party may disclose Confidential Information belonging to the other Party to the extent such disclosure is reasonably necessary in complying with applicable court orders or governmental regulations; provided, however, that the receiving Party shall provide prompt notice of such court order or regulation to the disclosing Party to enable the disclosing Party to seek a protective order or otherwise prevent or restrict such disclosure.

4.4 Publicity. The Parties may issue a joint press release announcing the execution of this Agreement and agree that each Party may desire or be required to issue press releases relating to the Agreement or activities hereunder. The Parties agree to consult with each other reasonably and in good faith with respect to the text and timing of any press releases prior to the issuance thereof; provided that a Party may not unreasonably withhold consent to such releases, and that either Party, after reasonable prior notice to the other, may issue such press releases as it determines are reasonably necessary to comply with laws or regulations or for appropriate market disclosure. In addition, following the initial joint press release announcing this Agreement (if any), each Party shall be free to disclose, without the other Party’s prior written consent, the existence of this Agreement, the identity of the other Party, and those terms of the Agreement and information regarding the Parties’ activities hereunder that has already been publicly disclosed in accordance herewith.

Notwithstanding the foregoing, either Party may disclose the terms of this Agreement to: (i) Third Parties for due diligence purposes or similar investigations relating to transactions involving the rights and obligations of the Parties under this Agreement or in connection with corporate financing transactions; and (ii) any Affiliates or permitted sublicensees, as long as such disclosure is made under confidentiality obligations substantially as protective as those of this Article 4 .

5.	I NTELLECTUAL P ROPERTY .

5.1 Ownership.

(a) Any rights not expressly granted to ARCA hereunder are reserved by CardioDx. No license or right is granted by CardioDx either directly or by implication, estoppel, or otherwise, other than as expressly set forth in this Agreement.

(b) Any rights not expressly granted to CardioDx hereunder are reserved by ARCA. No license or right is granted by ARCA either directly or by implication, estoppel, or otherwise, other than as expressly set forth in this Agreement.

6.	T ERM AND T ERMINATION .

6.1 Term. This Agreement shall commence as of the Effective Date, and unless terminated earlier as provided in this Article 6 , shall expire on the earlier of : (i) termination of either of the UC Licenses, or (ii) conversion of either of the UC Licenses to a non-exclusive license (the “ Term ”).

6.2 Termination for Cause. Either Party may terminate this Agreement upon written notice to the other Party if such Party breaches any material provision of this Agreement and fails to cure or commence action to cure such breach within the ninety (90) day period following receipt of written notice from the non-breaching Party specifying the nature of the breach in reasonable detail. Failure to exercise a termination right under this Agreement shall not preclude either Party from pursuing any other damages, compensation or relief to which it may be entitled in connection with a material breach of this Agreement.

6.3 Termination without Cause. ARCA may terminate this Agreement without cause upon sixty (60) days written notice if: 1) ARCA determines not to further pursue regulatory approval of Bucindolol; or 2) if ARCA determines to commercialize Bucindolol without use of the Diagnostic Tests

6.4 Effect of Termination or Expiration. Expiration or termination of this Agreement shall not relieve the Parties of any obligation accruing prior to such expiration or termination. Upon any expiration or termination of this Agreement, all rights and licenses granted under this Agreement by CardioDx shall terminate. ARCA may elect to obtain a license by advising UC in writing, within sixty (60) days after ARCA’s receipt of written notice of a termination or conversion described in Section 6.1 , of its agreement to tender to UC all the performance (including obligations for payment) previously due to CardioDx under this Agreement. The provisions of Articles 4, 5 , 6 , 7 , 8 , and 9 shall survive any termination or expiration of this Agreement in accordance with their terms.

6.5 Effect of Termination or Expiration on Sublicenses by ARCA. Termination or expiration of this Agreement shall terminate all sublicenses which may have been granted by ARCA. Any sublicense granted by ARCA shall contain a provision corresponding to this Section 6.5.

7.	R EPRESENTATIONS AND W ARRANTIES .

7.1 Mutual Representations and Warranties. Each Party represents and warrants to the other that:

(a) Corporate Power . It is duly organized and validly existing under the laws of its jurisdiction of incorporation or formation, and has full corporate or other power and authority to enter into this Agreement and to carry out the provisions hereof.

(b) Due Authorization . It is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and the person or persons executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate or partnership action.

(c) Binding Agreement . This Agreement is legally binding upon it, enforceable in accordance with its terms. The execution, delivery and performance of this Agreement by it does not conflict with any agreement, instrument or understanding, oral or written, to which it is a Party or by which it may be bound, nor violate any material law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.

7.2 No Conflicts. ARCA represents and warrants that ARCA is not a party to any arrangement or agreement that would materially adversely affect ARCA’s ability to comply with the terms of this Agreement or to grant the rights and options granted to CardioDx hereunder. CardioDx represents, warrants and covenants to ARCA that, as of the Effective Date, neither CardioDx nor, to the knowledge of CardioDx, UC is in material breach of the UC Licenses; and that CardioDx is not a party to any arrangement or agreement that would materially adversely affect CardioDx’s ability to comply with the terms of this Agreement or to grant the rights granted to ARCA hereunder.

7.3 Intellectual Property Representations. CardioDx, represents and warrants to ARCA that: (i) CardioDx has not granted any right to any Third Party that would conflict with the rights granted to ARCA hereunder; and (ii) to the knowledge of CardioDx, as of the Effective Date, there is (a) no litigation, investigation, proceeding or claim pending or threatened concerning the validity or enforceability of, or infringement by, any of the Patent Rights; and (b) no infringement of the Patent Rights by any Third Party. CardioDx also represents and warrants that ARCA’s proposed manufacture and sale of Bucindolol does not require any additional license of intellectual property owned or licensed by CardioDx as of June 1, 2006, other than this Agreement.

7.4 CardioDx Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, CARDIODX MAKES NO OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND ASSUMES NO RESPONSIBILITIES WHATSOEVER, WITH RESPECT TO THE LICENSES GRANTED UNDER THIS AGREEMENT. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, CARDIODX EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THOSE ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES.

7.5 Limitation of Liability. EXCEPT IN CONNECTION WITH LIABILITY FOR BREACH OF ARTICLE 4 (CONFIDENTIALITY), NO PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY LICENSE GRANTED HEREUNDER; PROVIDED, HOWEVER, THAT THIS ARTICLE 7.5 SHALL NOT BE CONSTRUED TO LIMIT ARCA’S OR CARDIODX’S INDEMNIFICATION OBLIGATIONS UNDER ARTICLE 8 .

7.6 Maximum Liability. IN NO EVENT WILL CARDIODX BE LIABLE TO ARCA FOR AN AMOUNT IN EXCESS OF THE TOTAL AMOUNT PAID TO CARDIODX HEREUNDER.

8.	I NDEMNIFICATION .

8.1 By ARCA. ARCA shall indemnify, defend and hold harmless CardioDx, its directors, officers, employees and agents from all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) (collectively “ Losses ”) that they may suffer as a result of any claims, demands, actions or other proceedings (collectively, “ Claims ”) made or instituted by a Third Party against any of them to the extent that such Claims arise from or relate to the possession, research, development, manufacture, use, sale or administration of Licensed Products by ARCA, its employees, officers, directors, agents, Affiliates, and/or such Third Parties, or any breach of any of the representations or warranties of ARCA in Article 7 . As a condition of the foregoing indemnification obligation, CardioDx shall (a) promptly inform ARCA of a Claim after CardioDx receives notice of the Claim; (b) permit ARCA to assume direction and control of the defense of the Claim (including the right to settle the Claim solely for monetary consideration); and (c) cooperate as reasonably requested by ARCA (at its expense) in the defense of the Claim; provided that CardioDx’s failure to promptly notify ARCA shall not diminish ARCA’s obligations under this section except to the extent that ARCA is materially prejudiced as a result of such failure. CardioDx shall have the right to participate, at its expense, in the defense of any Claim that is subject to indemnification as set forth in this Section 8.1 . Notwithstanding the foregoing, ARCA will not enter into any settlement without CardioDx’s written consent, such consent not to be unreasonably withheld.

8.2 By CardioDx. CardioDx shall indemnify, defend and hold harmless ARCA, its directors, officers, employees and agents from all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) (collectively “ Losses ”) that they may suffer as a

result of any claims, demands, actions or other proceedings (collectively, “ Claims ”) made or instituted by a Third Party against any of them to the extent that such Claims arise from or relate to any breach of any of the representations or warranties of CardioDx in Article 7 . As a condition of the foregoing indemnification obligation, ARCA shall (a) promptly inform CardioDx of a Claim after ARCA receives notice of the Claim; (b) permit CardioDx to assume direction and control of the defense of the Claim (including the right to settle the Claim solely for monetary consideration); and (c) cooperate as reasonably requested by CardioDx (at its expense) in the defense of the Claim; provided that ARCA’s failure to promptly notify CardioDx shall not diminish CardioDx’s obligations under this section except to the extent that CardioDx is materially prejudiced as a result of such failure. ARCA shall have the right to participate, at its expense, in the defense of any Claim that is subject to indemnification as set forth in this Section 8.2 . Notwithstanding the foregoing, CardioDx will not enter into any settlement without ARCA’s written consent, such consent not to be unreasonably withheld.

9.	M ISCELLANEOUS .

9.1 Assignment. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the Parties hereto. This Agreement may not be assigned or transferred by either Party without the express written consent of the other Party; provided, however , that CardioDx and ARCA may assign the Agreement without such consent to its successor in interest in connection with a Change of Control or in connection with a change in domicile of either Party. Any attempted assignment or transfer in violation of this Article 9.1 will be null and void.

9.2 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without the application of any principle that leads to the application of the laws of any other jurisdiction.

9.3 Dispute Resolution.

(a) Disputes . In the event of any dispute arising out of or relating to this Agreement, the affected Party shall promptly notify the other Party (“ Notice Date ”), and the Parties shall attempt in good faith to resolve the matter. Any disputes not so resolved shall be referred to senior executives, who shall meet at a mutually acceptable time and location within thirty (30) days of the Notice Date and shall attempt to negotiate a settlement. If the senior executives fail to meet within thirty (30) days of the Notice Date, or if the matter remains unresolved for a period of sixty (60) days after the Notice Date, either Party may submit settlement of the dispute to binding arbitration in the manner set forth herein.

(b) Arbitration . If a Party intends to begin an arbitration to resolve a dispute arising under this Agreement, such Party shall provide written notice (the “ Arbitration Request ”) to the other Party (the “ Non-Triggering Party ”) of such intention and the issues for resolution. From the date of the Arbitration Request and until such time as the dispute has become finally settled, the running of the time periods as to which a Party must cure a breach of this Agreement becomes suspended as to the subject matter of the dispute. Within ten (10) business days after the receipt of the Arbitration Request, the other Party may, by written notice, add additional issues for resolution.

(c) Arbitration Procedure . Discovery shall be under the local rules of evidence of the jurisdiction under which arbitration occurs. The Arbitration shall be held under the rules of the American Arbitration Association, in Santa Clara County, CA if the Non-Triggering Party is CardioDx, and in Denver County, CO if the Non-Triggering Party is ARCA. The Arbitration shall be in English, using three (3) independent arbitrators. Each Party shall select one independent arbitrator within forty five (45) days of the Arbitration Request, and the two (2) arbitrators selected by the Parties shall select the third independent arbitrator within ninety (90) days after the Arbitration Request. The arbitrators may award any remedy allowed by law, excluding punitive damages and attorneys’ fees. Promptly after rendering a decision, the arbitrators shall issue to both Parties a written opinion of the findings of fact and conclusions of law. The decision of the arbitrators shall be binding upon the Parties without the right of appeal. Either Party may enter a judgment upon the decision rendered by the arbitrators in any court having jurisdiction thereof. The Parties shall share equally the reasonable documented cost of such Arbitration procedure. Each Party shall bear its own cost in participating in such proceeding.

(d) No Arbitration of Patent/Confidentiality Issues . Unless otherwise agreed by the Parties, disputes relating to patents and non-disclosure, non-use and maintenance of Confidential Information shall not be subject to arbitration, and shall be submitted to a court of competent jurisdiction. In addition, either Party may seek preliminary or injunctive relief and/or other equitable relief in any court of competent jurisdiction.

9.4 Notices. Any notice to be given under this Agreement must be in writing and delivered either in person, by any method of mail (postage prepaid) requiring return receipt, or by overnight courier, or by facsimile confirmed thereafter by any of the foregoing, to the Party to be notified at its address(es) given below, or at any address such Party has previously designated by prior written notice to the other. Notice shall be deemed sufficiently given for all purposes upon the earlier of: (a) the date of actual receipt; (b) if mailed, three (3) days after the date of postmark; or (c) if delivered by overnight courier, the next business day the overnight courier regularly makes deliveries.


If to CardioDx:		If to ARCA:

CardioDx, Inc.		ARCA Discovery, Inc.
3183 Porter Dr.		1200 Seventeenth Street, Suite 620
Palo Alto, CA 94304		Denver, CO 80202

Attn: Chief Executive Officer		Attn: Chief Business and Financial Officer

Fax: (650) 565-8202		Fax: 303-825-0883

9.5 Fees and Expenses . Each Party shall be responsible for the fees and expenses of its outside advisors, including its legal counsel, relating to the negotiation and drafting of this Agreement.

9.6. Independent Contractors. The relationship of the Parties, as established by this Agreement, is solely that of independent contractors. This Agreement does not create any partnership, joint venture, employer-employee or similar business relationship between the Parties, except as expressly set forth herein. Neither Party is a legal representative of the other Party, and no Party can assume or create any obligation, representation, warranty or guarantee, express or implied, on behalf of the other Party for any purpose whatsoever.

9.7 No Third Party Beneficiaries. Except as otherwise provided herein, this Agreement is neither expressly nor impliedly made for the benefit of any Party other than those executing it.

9.8 Non-Waiver. The failure of a Party to insist upon strict performance of any provision of this Agreement or to exercise any right arising out of this Agreement shall neither impair that provision or right nor constitute a waiver of that provision or right, in whole or in part, in that instance or in any other instance. Any waiver by a Party of a particular provision or right shall be in writing, shall be as to a particular matter and, if applicable, for a particular period of time and shall be signed by such Party.

9.9 Force Majeure. Except with regard to the payment of money, a Party shall not 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 to the extent, and for so long as, such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party including but not limited to fires, earthquakes, floods, embargoes, wars, acts of war (whether war is declared or not), acts of terrorism, insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or the other Party. If a Force Majeure event is declared by either party under this section, and such event persists for more than one hundred eighty (180) days, then the other party shall have the right to terminate this Agreement without further cost or liability.

9.10 U.S. Export Laws and Regulations. Each Party hereby acknowledges that the rights and obligations of this Agreement are subject to the laws and regulations of the United States relating to the export of products and technical information. Without limitation, each Party shall comply with all such laws and regulations.

9.11 Severability. If, for any reason, any part of this Agreement is adjudicated invalid, unenforceable or illegal by a court of competent jurisdiction, such adjudication shall not affect or impair, in whole or in part, the validity or enforceability of any remaining portions of this Agreement.

9.12 Entire Agreement; Modification. The terms and provisions contained in this Agreement, and any Exhibits attached hereto, constitute the entire agreement between the Parties and shall supersede all previous communications, representations, agreements or understandings, either oral or written, between the Parties hereto with respect to the subject matter hereof, and no agreement or understanding varying or extending this Agreement will be binding upon either Party hereto, unless in writing which specifically refers to this Agreement, signed by a duly authorized officer or representative of each Party, and the provisions of this Agreement not specifically amended thereby shall remain in full force and effect according to their terms.

9.13 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

<< Signature Page Follows >>

I N W ITNESS W HEREOF , the Parties have caused this Agreement to be executed by their respective duly authorized officers as of the Effective Date.


C ARDIO D X , I NC .		ARCA D ISCOVERY , I NC .

By:	/s/ David Levinson	By:	/s/ Timothy D. Hoogheem
Name:	David Levinson	Name:	Timothy D. Hoogheem
Title:	President and CEO	Title:	Chief Business & Financial Officer

A-1

EXHIBIT A

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Exhibit 10.9

FIRST AMENDMENT TO DIAGNOSTIC COLLABORATION AND OPTION

AGREEMENT

This First Amendment to the Diagnostic Collaboration and Option Agreement (this “ Amendment ”) is made as of October 1, 2007, (the “ Amendment Date ”) by and between CardioDX, Inc., a Delaware corporation with its principal place of business at 3183 Porter Drive, Palo Alto, California 94304 (“ CardioDX ”) and ARCA Discovery, Inc., a Delaware corporation having a place of business at 1200 Seventeenth Street, Suite 620, Denver, Colorado 80202 (“ ARCA ”).

B ACKGROUND

WHEREAS, the parties entered into a Diagnostic Collaboration and Option Agreement dated as of June 23, 2006 (the “ Original Agreement ”);

NOW THEREFORE, the parties agree to amend the Original Agreement as follows:

A MENDMENT

1. Section 2.2(b) . The following two new sentences shall be added after the last sentence of Section 2.2(b) of the Original Agreement as follows:

“Notwithstanding clause (i) in the previous sentence, any sublicense from ARCA to [ * ], shall be deemed to include any wholly-owned subsidiary of [ * ], including any wholly-owned subsidiary that [ * ] acquires during the term of the sublicense between ARCA and [ * ], subject to the terms and conditions of this Agreement and the sublicense from ARCA to [ * ]. The wholly-owned subsidiaries of [ * ] as of the date of this amendment are listed on Exhibit B hereto.”

2. Section 2.2(f) . A new section 2.2(f) shall be added as follows:

“In the event a sublicense of the Genetic Marker Sublicense is properly granted hereunder by ARCA to [ * ], and [ * ] desires to itself grant a Genetic Marker Sublicense to [ * ], ARCA shall be authorized hereunder to permit [ * ] to grant a Genetic Marker Sublicense to [ * ] directly: provided (i) that ARCA obtains prior written approval from UC for such action; (ii) that such Sublicense shall be considered as a sublicense by ARCA for purpose of any ARCA obligation under this Agreement (including, without limitation, ARCA’s obligations under Section 2.2(c)); and (iii) that such Sublicense complies with all other provisions of this Agreement. Such Sublicense shall also be counted as a sublicense by ARCA, for purposes of Section 2.2(a).

3. Exhibit A to the Original Agreement . Exhibit A to the Original Agreement shall be amended and restated in its entirety as follows:

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

3. Exhibit B . A new Exhibit B shall be hereby added to the Original Agreement and read as follows:

“ EXHIBIT B

[ * ]

4. No Other Amendments . Except as otherwise amended by this Amendment, all other terms and conditions in the Original Agreement will remain in full force and effect.

IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be executed by their respective duly authorized officers or representatives as of the Amendment Date.


CARDIODX, INC.		ARCA DISCOVERY, INC.

By:	/s/ David Levinson	By:	/s/ Christopher D. Ozeroff
Name:	David Levinson	Name:	Christopher D. Ozeroff
Title:	President & CEO	Title:	EVP Bus. Dev. and General Counsel
Date:	October 29, 2007	Date:	October 23, 2007

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Exhibit 10.10

PATHEON PROPOSAL :ARC-FYM1-0800-0406-R5



1. Parties:	Patheon Inc. (“Patheon”)	ARCA Discovery, Inc. (“Client”)
	7070 Mississauga Road, Suite 350	1400 – 16 ^th Street, Suite 220
	Mississauga, Ontario	Denver, Colorado 80202
	Canada

2. Product :	• Bucindolol HCl Tablets (six strengths) (“Product”)

3. Indication:	• Heart Failure

4. Contract:	This Proposal (including the Project Scope, Budget Summary, Standard Terms and Conditions for Pharmaceutical Development Services (“Terms and Conditions”) when accepted by Client shall become a contract binding on the parties (“Contract”).

5. Description of Services:	See Project Scope (Part A).

6. Payment and Currency:	See Budget Summary (Part B).

7. Legal Terms:	See Terms and Conditions (Part C).

8. Effective Date:	, 200

9. Term:	From the Effective Date until completion by Patheon of the pharmaceutical development services (“Services”).

10. Date of Confidentiality Agreement:	March 8, 2006

11. Date of PatheonPartner ^TM External User Account / Access Form	, 200 [If applicable]

12. Date:	, 200


Patheon Inc.		ARCA Discovery, Inc.

By:	/s/ Nicholas Dowd	By:	Christopher Ozeroff
Name:	Nicholas Dowd	Name:	Christopher Ozeroff
Title:	V.P. & Controller	Title:	EVP Business Development & GC

CONFIDENTIAL

Patheon Proposal # ARC-FYM1-0800-0406-R5

21-September-2006

Table of Contents


Part A: PROJECT SPECIFICS AND DETAILS

1.	PROJECT SCOPE	5

2.	PROJECT INITIATION	6

3.	ENVIRONMENTAL, HEALTH AND SAFETY	6

4.	ANALYTICAL DEVELOPMENT	6

	4.1. Cleaning Residuals Assay (Method Evaluation and Validation)	6

	4.2. Drug Product Potency and Related Substances Assay (Method Inter Lab Qualification)	6

	4.3. Drug Product Dissolution Assay – Profile by HPLC (Method Development)	6

	4.4. Drug Product Dissolution Assay – Profile by HPLC (Method Validation – six strengths)	6

5.	FEASIBILITY MANUFACTURING – 3.125, 6.25 AND 12.5 MG	7

6.	FEASIBILITY MANUFACTURING – 25, 50 AND 100 MG	8

7.	CTM / REGISTRATION MANUFACTURING – 3.125, 6.25 AND 12.5 MG	9

8.	CTM / REGISTRATION MANUFACTURING – 25, 50 AND 100 MG	10

9.	STABILITY – CTM / REGISTRATION BATCHES	12

10.	VALIDATION	14

11.	STABILITY – VALIDATION	15

12.	PROJECT SUPPORT	17

13.	HIGH LEVEL TIMELINE	17

14.	GENERAL INFORMATION	18

Standard Assumption:		18

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PART B: BUDGET SUMMARY

PART C: LEGAL TERMS AND CONDITIONS

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PART A:

Bucindolol HCl Tablets (six strengths)

Technology Transfer

For

ARCA Discovery, Inc.

Proposal No.: ARC-FYM1-0800-0406-R5

Dated: 21-September-2006

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Patheon Proposal # ARC-FYM1-0800-0406-R5

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The proposal outlines the Services that Patheon is proposing to perform for the Client relating to the Product. The initial sections describe the Services to be performed by Patheon that address Client’s specific project requirements. The section below entitled General Information provides additional background information on pharmaceutical development services by Patheon. The check boxes under the General Information section will indicate whether or not a particular item is applicable to this specific project.

1.	Project Scope

For general information on the pharmaceutical development services provided by Patheon please refer to the section below entitled “General Information”.

Patheon will perform the following activities to support the Technology Transfer of Bucindolol HCl Tablets (six strengths):

•

Project Initiation

•

Environmental, Health and Safety

•

Analytical Services

•

Manufacturing

•

Stability

•

Validation

This proposal has been adjusted to reflect a campaign of three common granulation batches, each compressed into 2 or 3 strengths for a total of 5 or 7 lots required for registration (per campaign price).

In order to support the technology transfer the following capital expenditures need to be made at the sole expense of the Client:

•

Blister tooling ~$30,000 per set x 1 set = $30,000

•

Compressing tooling ~$7,000 per round set

~$14,000 per shaped set

All estimated costs are quoted in USD. A 15% handling fee will not be applied to tooling and change parts (only applicable to project consumables.

Prior to expanding the capital expenditures, the Client shall pre-pay Patheon for all costs of the capital expenditures. Therefore, Patheon shall order the necessary equipment and provide invoices to the Client for the costs of the equipment.

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In the budget summary, a rebate of $100,000 USD over first 20 commercial batches is applied at the validation stage. A 10% discount is applied to each milestone.

2.	Project Initiation

Project Initiation Fee covers a series of activities at the start of a project that are performed by cross functional team members.

3.	Environmental, Health and Safety

Active Pharmaceutical Ingredient(s):

•

Bucindolol HCl

•

Patheon’s preliminary categorization = Category 2

Prior to the commencement of analytical method development, formulation development and manufacturing activities, a thorough review by Patheon of the Environmental, Health and Safety (EH&S) requirements for Drug Substance will be completed. The Budget Summary for this Project Scope assumes that the EH&S review will determine that Drug Substance can be safely handled at Patheon. A summary report of the evaluation will be provided to the Client.

4.	Analytical Development

Patheon will perform method evaluation, validation and inter-laboratory qualification for the Client.

A protocol and report will be generated for each method to support the analytical work.

Analytical Methods

4.1.	Cleaning Residuals Assay (Method Evaluation and Validation)

4.2.	Drug Product Potency and Related Substances Assay (Method Inter Lab Qualification)

4.3.	Drug Product Dissolution Assay – Profile by HPLC (Method Development)

4.4.	Drug Product Dissolution Assay – Profile by HPLC (Method Validation – six strengths)

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5.	*Feasibility Manufacturing – [ ], [ * ] and [ * ] mg**

Patheon will manufacture:

•

Bucindolol HCl Tablets ([ * ], [ * ] and [ * ] mg strengths)

•

One (1) batch compressed into three (3) tablet strengths

•

Approximately [ * ] kilograms

•

Common blend approach for three (3) strengths

•

Excipients released as per USP/NF

•

Batch record

•

Bulk packaged

•

cGMP conditions

•

No QA review

Feasibility Manufacturing Process Train:

•

Blender

•

Tablet Press

•

Tablet Coater

The following in-process and finished product testing is based upon one set of analysis for each of the described tests. If additional sample testing is required, these will be considered as additional activities for which a separate costing will be provided to the Client.

Testing (one set of analysis):

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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CONFIDENTIAL

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In-Process Testing:

• Blend Homogeneity

(One blend, 10 samples)

• Flow Properties

• Bulk and Tap Densities

(Including one sieve analysis)

• Moisture (LOD or KF)

• Physical Parameters (ie. appearance, weight, weight variation, hardness, thickness, disintegration, friability for beginning, middle and end run)

Finished Product Testing per strength:

• Content Uniformity (as per USP)

• Potency and Related Substances

• Dissolution (profile)

• Moisture (LOD or KF)

6.	*Feasibility Manufacturing – [ ], [ * ] and [ * ] mg**

Patheon will manufacture:

•

Bucindolol HCl Tablets ([ * ], [ * ] and [ * ] strengths)

•

One (1) batch compressed into three (3) tablet strengths

•

Approximately [ * ] kilograms

•

Common blend approach for three (3) strengths

•

Excipients released as per USP/NF

•

Batch record

•

Bulk packaged

•

cGMP conditions

•

No QA review

•

Manufacturing report

Feasibility Manufacturing Process Train:

•

Blender

•

Tablet Press

•

Tablet Coater

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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Testing (one set of analysis):

In-Process Testing:

• Blend Homogeneity

(One blend, 10 samples)

• Flow Properties

• Bulk and Tap Densities

(Including one sieve analysis)

• Moisture (LOD or KF)

• Physical Parameters (ie. appearance, weight, weight variation, hardness, thickness, disintegration, friability for beginning, middle and end run)

Finished Product Testing per strength:

• Content Uniformity (as per USP)

• Potency and Related Substances

• Dissolution (profile)

• Moisture (LOD or KF)

7.	*CTM / Registration Manufacturing – [ ], [ * ] and [ * ] mg**

Patheon will manufacture:

•

Bucindolol HCl Tablets ([ * ], [ * ] and [ * ] mg strengths)

•

One (1) batch compressed into three (3) strengths

•

Approximately [ * ] kilograms

•

Common blend approach for three (3) strengths, compressed as follows:

•

[ * ] mg – 3 batches

•

[ * ] mg – 2 batches

•

[ * ] mg – 2 batches

•

Excipients release as per USP/NF

•

Batch record

•

Packaged into PVC/PVDC blister, HDPE bottles (two counts – to be determined)

•

cGMP conditions

•

QA review

CTM / Registration Manufacturing Process Train:

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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Patheon Proposal # ARC-FYM1-0800-0406-R5

21-September-2006

•

Blender

•

Tablet Press

•

Tablet Coater

Testing (one set of analysis):

In-Process Testing:

• Blend Homogeneity

(One blend, 10 samples)

• Flow Properties

• Bulk and Tap Densities

(Including one sieve analysis)

• Moisture (LOD or KF)

• Physical Parameters (ie. appearance, weight, weight variation, hardness, thickness, disintegration, friability for beginning, middle and end run)

Finished Product Testing per lot:

• Content Uniformity (as per USP)

• Potency and Related Substances

• Dissolution (profile)

• Moisture (LOD or KF)

8.	*CTM / Registration Manufacturing – [ ], [ * ] and [ * ] mg**

Patheon will manufacture:

•

Bucindolol HCl Tablets ([ * ], [ * ] and [ * ] mg strengths)

•

One (1) batch compressed into three (3) strengths

•

Approximately [ * ] kilograms

•

Common blend approach for three (3) strengths, compressed as follows:

•

[ * ] mg – 3 batches

•

[ * ] mg – 2 batches

•

[ * ] mg – 2 batches

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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•

Excipients release as per USP/NF

•

Batch record

•

Packaged into PVC/PVDC blister, HDPE bottles (two counts – to be determined)

•

cGMP conditions

•

QA review

•

Manufacturing report

CTM / Registration Manufacturing Process Train:

•

Blender

•

Tablet Press

•

Tablet Coater

Testing (one set of analysis):

In-Process Testing:

• Blend Homogeneity

(One blend, 10 samples)

• Flow Properties

• Bulk and Tap Densities

(Including one sieve analysis)

• Moisture (LOD or KF)

• Physical Parameters (ie. appearance, weight, weight variation, hardness, thickness, disintegration, friability for beginning, middle and end run)

Finished Product Testing per lot:

• Content Uniformity (as per USP)

• Potency and Related Substances

• Dissolution (profile)

• Moisture (LOD or KF)

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9.	Stability – CTM / Registration Batches

The proposed stability program is based on three (3) registration batches per strength (six strengths) packaged into three (3) configurations. Alternative approaches can be discussed with the Client.

Bracket/Matrix Proposal for Bucindolol HCl Tablets

Batch

Strength (mg)

[ * ]
(Note 1)

[ * ]
(Note 1)

[ * ]
(Note 1)

[ * ]
(Note 1)

[ * ]
(Note 1)

[ * ]
(Note 1)

[ * ]
(Note 1)

Container

(Note 2)

Schedule

Time

Point

(Months)

This design is recommending a combined bracketed and matrixed approach. A full study program would require 54 lots with 8 pull points for a total of 432 analytical samples. This design reduces it to 36 lots because of the bracket design. With 8 pull points, this would give a total of 288 analytical samples which is equivalent to a reduction of about 33%.

The matrix design reduces the number of pull points to 6 which leads to a total of 216 analytical samples - equivalent to a reduction of about 50%. It is clear that the majority of this reduction arises from the bracketing.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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One reason for this is that it is mandatory that every sample be tested at T=0 and T=36 months (end of shelf life). In addition it is assumed that an NDA will be filed at 12 months and so every sample must be tested at this time point. If a different filing date is intended, the matrix can be modified accordingly.

In order to justify any such reduced study design, it is important that the client has stability data already available on this product (or one that is very similar and the data indicate that this product undergoes little or no change and that there is little or no variance in the analytical data).

It is also recommended that the design be discussed with appropriate Regulatory Agencies prior to commencement to ensure that they will accept it.

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Testing per sample:

•

Potency and Related substances

•

Dissolution (profile)

•

Physical testing including appearance

10.

Validation

Patheon will complete:

•

Validation activities on 14 validation batches

•

[ * ] mg – 3 batches

•

[ * ] mg – 2 batches

•

[ * ] mg – 2 batches

•

[ * ] mg – 2 batches

•

[ * ] mg – 2 batches

•

[ * ] mg – 3 batches

•

Protocols prepared for the Master Validation plan, processing validation, packaging validation, equipment qualification/validation and cleaning validation

The scope and degree of the validation will be discussed and approved by the Client before proceeding. Since final validation approach has not yet been defined, a typical costing has been presented for review. A final budget cost will be proposed to the Client once a validation protocol has been agreed upon.

Validation costs listed in this proposal are for validation of 14 commercial batches. Manufacturing costs for the validation batches are additional and will be based on commercial rates.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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11.

Stability – Validation

The proposed stability program is based on three (3) registration batches per strength (six strengths) packaged into three (3) configurations. Alternative approaches can be discussed with the Client.

Bracket/Matrix Proposal for Bucindolol HCl Tablets

Batch

Strength (mg)

[ * ]
(Note 1)

[ * ]
(Note 1)

[ * ]
(Note 1)

[ * ]
(Note 1)

[ * ]
(Note 1)

[ * ]
(Note 1)

[ * ]
(Note 1)

Container

(Note 2)

Schedule

Time Point

(Months)

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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It is also recommended that the design be discussed with appropriate Regulatory Agencies prior to commencement to ensure that they will accept it.

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Testing per sample:

•

Potency and Related substances

•

Dissolution (profile)

•

Physical testing and appearance

12.

Project Support

Patheon will provide project management support to monitor the progress of the project against established timelines and will provide the Client with frequent updates. The project manager will coordinate regular biweekly teleconference meetings and quarterly face-to-face meetings. The fee for project management is incorporated in the breakdown cost for each activity in the Budget Summary.

13.

High Level Timeline

The attached High Level Timeline is presented at this stage as a projected estimate of the duration and achievable milestones, based upon Patheon’s experience and history. The High Level Timeline should not be taken as part of an agreed legal deliverable of this proposal.

Once the project has been awarded to Patheon and the relevant legal documentation is in place, a revised Timeline detailing set milestones and duration of deliverables will be agreed upon between Patheon and the Client. The revised Timeline would likely have a similar duration and would be based upon resources and the availability of manufacturing time at the initiation of the project.

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14.

General Information

This section provides additional background information on the pharmaceutical development services performed by Patheon, The check boxes below indicate whether or not a particular item is applicable to the project described above.

Standard Assumption:

The approach used would be outlined in a more detailed protocol prepared by Patheon and on request approved by the Client. Further studies may be required in the later development stages of the project. Where required these would be discussed and agreed separately with the Client.

It is assumed that the drug substance and/or formulation does not absorb/adsorb to any metal, glass or other components used during the processing and analytical testing of the batch. The fees for any investigational work associated with drug substance and/or formulation interacting with components are not included within this proposal.

The identification of unknown impurities detected during the study is not included as part of this proposal.

A) Project Initiation


x		Applicable		¨		Not Applicable

The Project Initiation Fee covers a series of activities at the start of a project. These activities include (but are not limited to) scientific review of Client documentation, literature research and review, procurement of project specific equipment and tooling, analytical method research and attendance by cross functional team members for initial Client “kick-off “ meetings.

B) Environmental, Health & Safety


x		Applicable		¨		Not Applicable

If it is determined by Patheon’s Environmental Health and Safety personnel that any of the active ingredients are a Category III or Category IV compound (an occupational exposure level) then an air sampling method will be required at Client’s expense prior to commercialization. Patheon reserves the right, in its sole and absolute discretion, to conduct an air sampling method on Category I and II compounds, at such price and upon such terms as may be mutually agreed to between the parties prior to commercialization.

Prior to commercialization, Patheon will evaluate the Product and the proposed launch volume and, at the Client’s request, select the appropriate Patheon facility for commercialization. The Patheon facility used for performance of the Services will not necessarily be the facility available for commercialization.

Patheon will not receive any active pharmaceutical ingredients (API) from the Client until a MSDS has been received, Patheon has completed the categorization of the API and that the Client has completed and returned the EH&S Survey to Patheon.

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C) Analytical Development

Analytical Protocols and Reports


x		Applicable		¨		Not Applicable

Analytical protocols will be drafted by Patheon for validation activities only and submitted to the Client for approval prior to execution with the exception of the Cleaning Residuals Assay, which will be approved internally by Patheon. No protocols will be issued for method development activities. Upon completion of the development activities, a summary of the data will be provided to the Client. The analytical methods have been based upon HPLC unless otherwise stated.

An analytical report will be provided to the Client once the method validation is complete. If method validation is not specified in the title of an analytical method under this Project Scope, then the validation of such analytical method is not included in this Project Scope and the additional method validation costs will be quoted separately by Patheon.

API Receipt and Release


x		Applicable		¨		Not Applicable

Patheon will receive and release the active pharmaceutical ingredients (API) for Clinical Trial Material (CTM) manufacture based on the following: (i) Identification testing; and (ii) the accompanying Certificate of Analysis (COA) from the API Vendor (Client qualified) and COA from the Client.

Reference Standards for Drug Substances and Related Substances


x		Applicable		¨		Not Applicable

The Client shall provide Patheon with accurate, appropriate, sufficient and the most current applicable reference standards (such as USP, NF, BP, EP, and JP for the drug substances and related substances to complete the scope of work outlined herein.

Method Development


¨		Applicable		x		Not Applicable

Patheon will develop the test method required to support the Project. The method development will cover the sample preparation procedures, HPLC conditions, calibration procedures, specificity, detection limit (if applicable), quantitation limit (if applicable), accuracy and repeatability.

Forced Degradation Study


¨		Applicable		x		Not Applicable

In order to assess whether the drug substance or drug product potency assay is suitable for use as stability–indicating assay, a series of experiments will be performed to study degradation. The drug substance or drug product will be treated with acidic, basic, oxidative, light and thermal conditions, the stressed samples will be analyzed by the potency method using DAD and ensure that the active peak is pure from peak purity assessment. If the peak purity fails, the method needs to be redeveloped for stability-indicating, and a change of scope will be issued.

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Patheon Proposal # ARC-FYM1-0800-0406-R5

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Drug Product Dissolution Assay by HPLC (Method Development)


¨		Applicable		x		Not Applicable

Patheon will develop the assay required for testing dissolution of the drug product. The development will challenge the following parameters:

• Sink condition

• Selection of medium, apparatrus speed

• Optimization of medium conc. & pH

• System suitability

• Specificity

• Accuracy

• Repeatability

Interlab Qualification


x		Applicable		¨		Not Applicable

Inter-Laboratory Qualification involves the comparison of two different series of laboratory analyses for the same lot of material/product. This verifies that both laboratories (i.e., the originating and receiving laboratories) are following the same procedure accurately and producing results that are precise and equivalent. The Client needs to provide to Patheon the method validation report. The following parameters will be performed at both Patheon and the originating laboratory:

• System Suitability

• Stability of Standard and Sample Solution

• Repeatability

• Quantitation Limit (if applicable)

• Detection Limit (if applicable)

Method Transfer


¨		Applicable		x		Not Applicable

Method Transfer is an on site validation process in the receiving laboratory, which verifies that method performs in the receiving laboratory in an equivalent manner to the originating laboratory. The Client needs to provide to Patheon the method validation report. The following parameters will be performed at Patheon as the receiving laboratory:

• System Suitability

• Linearity

• Stability of Standard and Sample Solutions

• Repeatability

• Quantitation Limit (if applicable)

• Detection Limit (if applicable)

Method Evaluation


x		Applicable		¨		Not Applicable

Patheon will evaluate the test method(s) required to support the Project. Method evaluation will cover the sample preparation procedures, HPLC conditions, calibration procedures, specificity, accuracy, repeatability and detection/quantitation limits (if appropriate). If the method(s) is/are deemed unsuitable, new method(s) will be developed and billed as a change of scope

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Method Validation Phase Levels

Patheon will validate the test method required to support the Project. The validation will challenge the following parameters based on the Project Clinical Phase Level:

Phase I


¨		Applicable		x		Not Applicable

• System Suitability

• Linearity

• Specificity

• Range

• Accuracy

• Repeatability

• Solution Stability

• Quantitation Limit (if applicable)

• Detection Limit (if applicable)

Phase II


¨		Applicable		x		Not Applicable

• System Suitability

• Linearity

• Specificity

• Range

• Accuracy

• Intermediate Precision

• Repeatability

• Solution Stability

• Quantitation Limit (if applicable)

• Detection Limit (if applicable)

Phase III


x		Applicable		¨		Not Applicable

• System Suitability

• Linearity

• Specificity

• Range

• Accuracy

• Intermediate Precision

• Repeatability

• Solution Stability

• Robustness

• Quantitation Limit (if applicable)

• Detection Limit (if applicable)

D) Microbiology


¨		Applicable		x		Not Applicable

The cost allocated to this Service in the Budget Summary of Part B is the per sample price and will vary depending on the number of samples required for method validation. If a worst case scenario approach were taken, the cost would be based upon testing MLT and PET (if applicable) at two dilutions and/or the usage of the largest volume of diluent(s) based on specification. Testing will be done in compliance with the applicable Pharmacopeia (ie. USP/NF, EP, JP etc.). Client will be billed based on the actual number of samples required in order to successfully validate the Product.

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E) Stability


x		Applicable		¨		Not Applicable

The analytical data used for the release of each lot manufactured at Patheon will be considered as initial (T=0) data if the stability study commences not more than 1 month after release testing.

Cost efficiencies for analytical testing have been built into the stability program based upon the number of samples pulled in a given month. The cost for this stability program assumes that all lots will be placed on stability at the same time. If these lots are not placed on stability at the same time, the cost will be adjusted accordingly through a Change of Scope Agreement.

F) Formulation Development, Manufacturing, Protocols and Reports


¨		Applicable		x		Not Applicable

Formulation Development

The approach used in formulation development would be outlined in a detailed protocol prepared by Patheon and approved by the Client. The formulation development studies would be conducted using suitable laboratory scale equipment. If stated in the formulation development section, drug product will be hand packaged into suitable containers for the stability study.

Prototype Manufacturing

Manufacturing batch records that specify the manufacturing procedures and acceptance criteria will be prepared by Patheon and submitted to the Client for information.

Report

Upon completion of the manufacturing activities, a formulation development report (one formulation development report would include all formulation development activities up until and including prototype batch manufacture) will be provided to the Client for review and approval.

G) Manufacturing Validation

Master Validation Plan


x		Applicable		¨		Not Applicable

This high level document outlines the planned validation activities. The price includes protocol generation and approval. For multiple strengths, a single master validation plan is typically generated.

Process Validation


x		Applicable		¨		Not Applicable

The process validation includes the generation and approval of the process validation protocol, execution of the validation batches, and the generation and approval of a final process validation report. Three batches per strength are to be manufactured. For multiple strengths, separate protocols and reports will be generated. The specific testing plan for a process validation is not known at the time of quotation, therefore the pricing is based on the following assumptions for testing and sampling of solid dose products on a per batch basis. Blender and drums: blend uniformity (up to a total of 24 samples),

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physical blend testing (bulk/tapped density, sieve analysis); Cores: Beginning, middle and end (30 cores for content uniformity), ID, appearance, dissolution, water content; Coated Tablets (one coating pan): release testing per pan, (ID, appearance, potency, content uniformity, related substances, dissolution, weight variation, water content, micro).

For liquids and semi-solids, it is assumed that the testing consists of the following: ID, appearance, blend homogeneity, potency and related substances, viscosity, foreign particulate testing, specific gravity and micro. These tests could be performed on the primary finished pack (eg uniformity within a filled tube).

Packaging Validation


x		Applicable		¨		Not Applicable

The packaging validation includes the generation and approval of the packaging validation protocol, execution time for the validation batches, and the generation and approval of a final packaging validation report. Packaging validation is a standard solid dose or semi-solid/liquid into a single SKU (stock keeping unit), and that three batches are to be packaged per SKU. For additional strengths or SKUs, it is assumed that there will be a separate protocol and report generated. It is assumed that for analytical tests, only identification will be required during the packaging activities. Packaging validation will analyze for fill count, fill volume, labeling, lot numbering and expiration date printing, cartoning, tube crimping, tube seal, bottle/cap seal etc.

Bulk Hold Time Study


¨		Applicable		x		Not Applicable

The bulk hold time study includes the generation and approval of a protocol, the execution of the protocol, and the generation and approval of a final report. It is assumed that the study will be conducted for one strength, for each of the blend (solid or liquid/semi solid), cores and coated tablets. Three time points is assumed for the study and that the testing will consist of the following: Blend: potency and related substances; Cores: Appearance, dissolution, water content, potency and related substances Coated Tablets: ID, appearance, potency and related substances, dissolution, weight variation, water content, micro.

Cleaning Validation


x		Applicable		¨		Not Applicable

The cleaning validation includes the generation and approval of a protocol, execution and the generation and approval of a final cleaning validation report. It is assumed that 3 separate trials will be required for the study, and that each trial will cover up to 16 pieces of equipment (analyzed in 4 groups of 4 pieces of equipment).

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Part B: Budget Summary

Once a project has been awarded to Patheon, a detailed budget will be presented to the Client that will include a budget breakdown by milestones and Unique Identity Numbers for billing.

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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PART C

STANDARD TERMS AND CONDITIONS

FOR PHARMACEUTICAL DEVELOPMENT SERVICES

1.	Services :

(a)

Patheon agrees to perform the pharmaceutical development services described in the Project Scope (“Services”).

(b)

Parties must agree on changes, deletions or additions to the Services (“Changes”).

(c)

Minor Changes shall be confirmed by electronic mail, facsimile or other written document. Significant Changes (such as a request by the Client to change the Project Scope) shall be confirmed by a Change of Scope Agreement.

2.	Payment and Deposit :

Payment

(a)

Client shall pay Patheon for the Services as outlined in this Contract and for any Changes which shall be invoiced separately at Patheon’s then prevailing hourly rates.

(b)

If Client causes any delay to Patheon’s provision of Services for reason within its control (such as a delay in responding to a Patheon inquiry or a delay in the delivery of the active pharmaceutical ingredient (“API”)), then Patheon shall be entitled to charge the Client for any additional costs incurred in the provision of the Services as a result of the delay.

(c)

Patheon invoices may be issued upon completion of each milestone set out in the Budget Summary and shall be due and payable within 30 days of receipt of such invoice. Client may request that Patheon forward each invoice to the facsimile number and/or email address stipulated by the Client from time to time. Interest on past due accounts will accrue at a rate of 2% per month.

(d)

Prior to the commencement of any Services by Patheon pursuant to this Contract, Client shall pre-pay to Patheon the amount of the estimated billings related to such Services. Patheon will provide estimates of the monthly billings to the Client and update such estimates as required. On or before the first day of each month during the term of this Contract, Client shall forward to Patheon payment for the estimated monthly billings for that particular month. To the extent that such estimated monthly billings are increased by Patheon following payment thereof, Client shall promptly forward to Patheon payment for the amount of such increase. These pre-payment amounts will be credited toward monthly invoices until the Services, as modified from time to time, are fully completed or until this Contract expires or is terminated for whatever reason. All pre-payments shall be adjusted in the final invoice under this Contract. Patheon may, at its option, suspend, from time to time, all Services until such time as the pre-payment amounts due have been received in full by Patheon.

3.	Supply of API and Materials :

(a)

Client shall, at its expense, supply Patheon with sufficient quantities of the API for Patheon’s use in performing the Services.

(b)

The costs of all third party suppliers’ fees and the purchase of project specific items (such as raw materials, excipients, packaging, special equipment, change parts, laboratory columns and reagents, reference standards including those under the applicable United States Pharmacopoeia, the National Formulary, the British Pharmacopoeia, the European Pharmacopoeia or the Japanese Pharmacopoeia) necessary for Patheon to perform the Services shall be purchased by Patheon and charged to Client at Patheon’s cost plus an additional 15% as a handling charge. Notwithstanding anything to the contrary contained herein, Patheon acknowledges and agrees that it will not charge Client an additional 15% handling charge on any purchase of tooling required for the Services performed herein.

(c)

If applicable, Patheon and the Client will cooperate and provide such assistance to each other as may be reasonably necessary to permit the import of the API and other materials into the country where the Services will be performed.

4.	Termination :

(a)

Either party may terminate this Contract if the other party is in material breach of any provisions of this Contract and the other party fails to remedy such breach within 30 days of the date of notice of such breach by the non-breaching party.

(b)

Client may terminate this Contract immediately for any business reason.

(c)

Any re-scheduling of any part of the Services beyond 120 days requested by Client shall, at Patheon’s option, be deemed to be a termination of the Contract.

(d)

Upon completion or expiry of the Contract or if the Client terminates the Contract for any business reason or if Patheon terminates the Contract because of: (i) Client’s failure to cure any default within the 30 day notice period; or (ii) Client rescheduling any part of the Services beyond the 120 days, then Client shall pay to Patheon:

•

any fees and expenses due to Patheon for the Services rendered up to the date of completion, expiry or termination;

•

all reasonable actual costs incurred by Patheon to complete activities associated with the completion, expiry or termination and close of the Services rendered up to the date of completion, expiry or termination including, without limitation disposal fees that may be payable in respect of any materials and supplies owned by the Client to be disposed of by Patheon; and

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21-September-2006

•

any reasonable additional costs incurred by Patheon in connection with the Services that are required to fulfill applicable regulatory and contractual requirements.

(e)

Client shall arrange for the pickup from the Patheon site of all materials and supplies owned by Client within 10 business days after the earlier of the completion, termination or expiration of this Contract. Patheon shall charge a $30.00 per square foot per month storage fee for all materials and supplies stored at the Patheon site after the tenth business day following the completion, termination or expiration of the Contract.

5.	Intellectual Property :

(a)

The term “Intellectual Property” includes, without limitation, rights in patents, patent applications, formulae, trade-marks, trade-mark applications, trade-names, trade secrets, inventions, copyright, industrial designs and know-how.

(b)

For the term of this Contract, Client hereby grants to Patheon, a non-exclusive, paid-up, royalty-free, non-transferable license of Client’s Intellectual Property which Patheon must use in order to perform the Services, which license Patheon may use only for the performance of the Services hereunder.

(c)

All Intellectual Property generated or derived by Patheon in the course of performing the Services, to the extent it is specific to the development, manufacture, use and sale of the Client’s Product that is the subject of the Services, shall be the exclusive property of Client.

(d)

All Intellectual Property generated or derived by Patheon in the course of performing the Services which are not specific to, or dependent upon, Client’s Product and which have application to manufacturing processes or formulation development of drug products or drug delivery systems shall be the exclusive property of Patheon. Patheon hereby grants to Client, a non-exclusive, paid-up, royalty-free, transferable license of such Intellectual Property which Client may use for the manufacture of Client’s Product.

6.	Indemnity:

Indemnification by Client

Subject to Sections 6B and 6C(c), Client shall defend, indemnify and hold Patheon, its affiliates and their respective directors, officers, employees and agents (collectively, “Patheon Indemnitees”) harmless from and against any and all third-party actions, causes of action, costs (including reasonable legal fees), claims, damages, liabilities and expenses (collectively, “Losses”) relating to or arising from:

•

the manufacture (except as may be contemplated by the Services) or distribution of the Client’s Product or the use of the Client’s Product by patients either as part of or outside of the scope of any clinical trials;

•

the performance of the Services in accordance with the terms of this Contract;

•

any misrepresentation, negligence or willful misconduct by Client or any of its affiliates and their respective directors, officers, employees and agents (collectively, “Client Indemnitees”);

•

any breach by the Client of the Client’s obligations or warranties under this Contract; or

•

any claim of infringement or alleged infringement of any third party’s intellectual property rights in respect of the Client’s Product.

This indemnity shall not apply to the extent that such Losses are:

•

determined to have resulted from the negligence or willful misconduct of Patheon; or

•

for which Patheon is obligated to indemnify the Client Indemnitees pursuant to Section 6B.

Indemnification by Patheon

Subject to Sections 6A and 6C(c), Patheon shall defend, indemnify and hold the Client Indemnitees harmless from and against any and all Losses resulting from, relating to or arising from the breach by Patheon of any of its obligations or warranties under this Contract except to the extent that such Losses are:

•

determined to have resulted from the negligence or willful misconduct of Client; or

•

for which Client is obligated to indemnify the Patheon Indemnitees pursuant to Section 6A.

Limitation of Liability

(a)

If Patheon fails to materially perform any part of the Services in accordance with the terms of this Contract, then Client’s sole remedy, subject to subparagraph (b), shall be to request Patheon to:

•

repeat that part of the Service at Patheon’s costs provided that Client provides the API; or

•

reimburse Client for the price for that part of the Service, excluding the cost of the API.

(b)

Under no circumstances whatsoever shall Patheon reimburse Client for the cost of the API unless the loss of API occurred through the negligence or willful misconduct of Patheon, provided, however, that in no case shall Patheon liability for the loss of API exceed the total amount of $40,000 in any and all circumstances. Client acknowledges that the Services involve scientific experiments that require the use of judgment and any loss of API in exercising such judgment shall not be regarded as loss due to Patheon’s negligence or willful misconduct.

(c)

Under no circumstances whatsoever shall either party be liable to the other in contract, tort, negligence, breach of statutory duty or otherwise for (i) any (direct or indirect) loss of profits, of production, of anticipated savings, of business or goodwill or (ii) any other liability, damage, cost or expense of any kind incurred by the other party of an indirect or consequential nature, regardless of any notice of the possibility of such damages.

No Warranty

PATHEON MAKES NO WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, BY FACT OR LAW, OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS CONTRACT. PATHEON MAKES NO WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY OF MERCHANTABILITY IN RESPECT OF THE CLIENT’S PRODUCT.

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7.	Regulatory Filings :

(a)

Client shall have the sole responsibility for filing of all documents with the applicable regulatory authority (such as the United States Food and Drug Administration (“FDA”), the Health Products and Food Branch of Health Canada or the European Medicine Evaluation Agency) (the “Regulatory Authority”) and to take any other actions that may be required for the receipt of approval from the Regulatory Authority for the commercial manufacture of the Client’s Product.

(b)

At least 21 days prior to filing any documents with the Regulatory Authority that incorporate data generated by Patheon, Client shall provide Patheon with a copy of the documents incorporating such data so as to give Patheon the opportunity to verify the accuracy and regulatory validity of such documents as it relates to the Patheon-generated data.

(c)

If Patheon is selected as the commercial site of manufacture of the Product which is the subject of the Services under this Contract, then at least 21 days prior to filing with the Regulatory Authority any documentation which is or is equivalent to the FDA’s Chemistry and Manufacturing Controls (“CMC”) portion of the New Drug Application or of the Abbreviated New Drug Application, as the case may be, Client shall provide Patheon with a copy of the CMC portion as well as all supporting documents which have been relied upon to prepare the CMC portion. Such disclosure shall permit Patheon to verify that the CMC portion accurately describes the Services that Patheon has performed and the manufacturing processes that Patheon will perform pursuant to this Contract.

8.	Shipping (if applicable):

Shipments (if applicable) of Client’s Product shall be made EXW (as defined in INCOTERMS 2000) Patheon’s shipping point unless otherwise mutually agreed. Risk of loss or of damage to such Product shall transfer to the Client when the Product is loaded onto the carrier’s vehicle by Patheon for shipment at the EXW point. The Product shall be transported in accordance with the Client’s instructions.

9.	Miscellaneous:

Assignment

Neither this Contract, nor any of either party’s rights hereunder, may be assigned or otherwise transferred by either party without the prior written consent of the other party, which consent shall not be unreasonably withheld.

Force Majeure

Except for payment obligations, neither party will be responsible for delay or failure in performance resulting from acts beyond the reasonable control and without the fault or negligence of such party, including, but not limited to, strikes or other labour disturbances, lockouts, quarantines, communicable disease outbreaks, riots, wars, acts of terrorism, fires, floods, storms, interruption of or delay in transportation, defective equipment, lack of or inability to obtain fuel, power or components or compliance with any order or regulation of any government entity.

Survival

Any termination or expiration of this Contract shall not affect any outstanding obligations or payments due hereunder prior to such termination or expiration, nor shall it prejudice any other remedies that the parties may have under this Contract. The Confidentiality Agreement and sections 4, 5, 6 and 7 of the Contract shall survive the expiration or termination of this Contract.

Independent Contractors

The parties are independent contractors and this Contract shall not be construed to create between Patheon and the Client any other relationship such as, by way of example only, that of employer-employee, principal, agent, joint-venturer, co-partners or any similar relationship.

Confidentiality

The Confidentiality Agreement entered into between the parties shall apply to all confidential information about the parties and the Services to be conducted under this Contract and such Confidentiality Agreement is deemed to be incorporated herein by reference. If the Confidentiality Agreement expires or terminates prior to the expiration or termination of this Contract, then the terms of the Confidentiality Agreement shall nonetheless continue to govern the parties’ obligations of confidentiality for the term of this Contract and for 5 years thereafter.

Patheon Partner ^TM

In order to participate in the PatheonPartner ^TM program, Client must submit a completed PatheonPartner ^TM External User Account/Access Form to its Patheon project manager. If applicable, the PatheonPartner ^TM External User Account/Access Form signed by the Client shall apply to the Client’s use of the PatheonPartner ^TM website in respect of the Services.

Other Terms

No terms, provisions or conditions of any purchase order or other business form or written authorization used by Client or Patheon will have any effect on the rights, duties or obligations of the parties, or otherwise modify, this Contract, regardless of any failure of Client or Patheon to object to such terms, provisions, or conditions unless such document specifically refers to this Contract and is signed by both parties.

Insurance

Each party shall maintain during the term of this Contract general liability and product liability insurance. Either party may request evidence of such insurance.

Entire Agreement

This Contract constitutes the complete agreement between the parties with respect to this subject matter and supersedes all other prior agreements and understandings, whether written or oral. Any modifications, amendment or supplement to this Contract must be in writing and signed by authorized representatives of both parties.

Facsimile

This Contract may be signed in counterparts and by facsimile.

Choice of Law

This Contract is governed by the laws of the State of Delaware applicable therein, without regard to any conflicts-of-law principle that directs the application to another jurisdiction’s law.

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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CONFIDENTIAL

Exhibit 10.11

DEVELOPMENT, COMMERCIALIZATION AND LICENSING AGREEMENT

BETWEEN

ARCA DISCOVERY, INC.

AND

LABORATORY CORPORATION OF AMERICA HOLDINGS

D ATED F EBRUARY 1, 2007

DEVELOPMENT, COMMERCIALIZATION AND LICENSING AGREEMENT

This Development, Commercialization and Licensing Agreement (this “Agreement” ) is made and entered into as of February 1, 2007 (the “Effective Date” ) between ARCA Discovery, Inc., a Delaware corporation (hereinafter “ARCA” ), and Laboratory Corporation of America Holdings, a Delaware corporation (hereinafter “LabCorp” ).

INTRODUCTION

A. ARCA holds certain proprietary rights to Bucindolol and to the Diagnostic Tests (as such terms are hereinafter defined).

B. ARCA intends to seek FDA approval for the use of Bucindolol in the treatment of heart failure and other indications and for labeling for Bucindolol that recommends or requires use of the Diagnostic Tests with Bucindolol.

C. LabCorp possesses development and commercialization capabilities with respect to laboratory testing services and desires to collaborate with ARCA to develop, make, market and sell the Diagnostic Tests in the United States in connection with the administration of Bucindolol (the “ Services ”).

D. LabCorp desires to obtain from ARCA, and ARCA desires to grant to LabCorp, an exclusive license to practice the ARCA Patent and use the Trademark in connection therewith, and an exclusive sublicense to ARCA’s rights in the Diagnostic Tests for the development, marketing, manufacture and sale of the Diagnostic Tests on the terms and conditions set forth this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement, the terms defined in this Article I shall have the following meanings, whether used in their singular or plural forms. Use of the singular shall include the plural and vice versa, unless the context requires otherwise:

1.1 “Act” shall mean the U.S. Food, Drug and Cosmetic Act, as amended, 21 U.S.C. 301 et. seq., and the regulations promulgated thereunder.

1.2 “Affiliate” shall mean, with respect to any Party, any corporation or other entity that, directly or indirectly, by itself or through one or more intermediaries, controls, or is controlled by, or is under common control with such party, or has the power to direct or cause the direction of the management and policies of a Party, whether through the ownership of voting securities, by contract or otherwise. Control will be presumed if one Party owns, either of record or beneficially, more than 50% of the voting stock of any other Party, at the applicable time during the term of this Agreement.

Development, Commercialization and Licensing Agreement-Confidential-Page 1

1.3 “ARCA Inventions” shall have the meaning set forth in Section 8.1 of this Agreement.

1.4 “ARCA Know-How” shall mean all Know-How owned or Controlled by ARCA as of the Effective Date.

1.5 “ARCA Patent” means U.S. Provisional Application Serial No. 60/609,689 filed September 14, 2004; U.S. Provisional Application Serial No. 60/610,706 filed September 17, 2004; International Patent Application titled “Method for treatment with bucindolol based on genetic targeting,” WO 20061031955 A2, filed September 14, 2005; U.S. Application Serial No. 11/226,908 filed September 14, 2005; any letters patent issued from any of the foregoing, and all continuations, continuations-in-part, divisions, and renewals thereof, all patents which may be granted thereon, and all or reissues, reexaminations, extensions, patents of additions and patents of importation thereof.

1.6 “ARCA Technology” shall mean the ARCA Patent and all ARCA Know-How related thereto.

1.7 “Bankruptcy Event” shall mean the Party in question becomes insolvent, or voluntary or involuntary proceedings by or against such Party are instituted in bankruptcy or under any insolvency law, or a receiver or custodian is appointed for such, or proceedings are instituted by or against such Party for corporate reorganization or the dissolution of such Party, which proceedings, if involuntary, shall not have been dismissed within sixty (60) days after the date of filing, or such Party makes an assignment for the benefit of its creditors, or substantially all of the assets of such Party are seized or attached and not released within sixty (60) days thereafter.

1.8 “Bucindolol” shall mean the beta-adrenergic-receptor antagonist having the chemical formula bucindolol HCL (oral)2-{2-hydroxy-3 { {2-(3-indolyl)-1, 1-dimethylethyl}amino}propxy}-benzonit, and its racemates, isomers, prodrugs, active metabolites, analogs and any pharmaceutically acceptable salt or complex thereof.

1.9 “CardioDx” shall mean CardioDx, Inc., a Delaware corporation.

1.10 “CardioDx Agreement” shall mean that certain Diagnostic Collaboration and Option Agreement dated as of June 23, 2006 between ARCA and CardioDx, as the same may be amended from time to time.

1.11 “Change of Control” means an event as a result of which the holders of the outstanding voting securities of a Party or the Persons with the power to direct or cause the direction of the management and policies of a Party as of the Effective Date of this Agreement cease to own a majority of the outstanding voting securities of such Parry or the power to direct or cause the direction of the management and policies of such Party.

1.12 “Combination Product” shall have the meaning set forth at 21 C.F.R.§ 3.2(e).

1.13 “Commercial Plan” shall have the meaning set forth in Section 5.2 of this Agreement.

Development, Commercialization and Licensing Agreement-Confidential-Page 2

1.14 “Commercial Platform” shall mean [ * ] method of performing the Diagnostic Tests. [ * ].

1.15 ^“ Commercialization Plans” shall mean, collectively, the Commercial Plan, the Marketing and Sales Plan, and the Reimbursement Plan.

1.16 “Controlled” shall mean the legal authority or right of a Party hereto to grant a license or sublicense of intellectual property rights to another Party hereto, or to otherwise disclose proprietary or trade secret information to such other Party, without breaching the terms of any agreement with a Third Party, infringing upon the intellectual property rights of a Third Party, or misappropriating the proprietary or trade secret information of a Third Party.

1.17 “Diagnostic Tests” shall mean [ * ].

1.18 ^“ Diagnostics Committee” shall have the meaning set forth in Section 3.2 of this Agreement.

1.19 “Dollars” and “$” shall mean United States dollars.

1.20 “Drug Product” shall mean any pharmaceutical preparation in finished dosage form containing Bucindolol for administration to human patients.

1.21 “Effective Date” shall mean the effective date of this Agreement as set forth on the first page hereof.

1.22 “FDA” shall mean the United States Food and Drug Administration or any successor agency thereto.

1.23 “Field” shall mean [ * ].

1.24 “GMP” shall mean the current Good Manufacturing Practice regulations and the Quality System Regulations promulgated by the FDA, including 21 C.F.R. Parts 210, 211, and 820 et seq., as such regulations may be amended from time to time, and such equivalent regulations or standards of countries outside the United States as may be applicable to activities conducted hereunder.

1.25 “Governmental Authority” means any applicable federal, state, local or other governmental body with jurisdiction over the applicable subject matter.

1.26 “Homebrew Assay” shall mean an in-house laboratory test developed pursuant to the Clinical Laboratory Improvement Amendments of 1988.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 3

1.27 “Indemnitee” shall have the meaning set forth in Section 11.3 of this Agreement.

1.28 “Indemnitor” shall have the meaning set forth in Section 11.3 of this Agreement.

1.29 “Information” shall mean any and all information and data, including scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, financial, and commercial information.

1.30 “IVD Product” shall mean an in vitro diagnostic medical device, as defined in regulation at 21 C.F.R. § 809.3(a), that is developed for the Commercial Platform and that requires Regulatory Approval.

1.31 “IVD Kit” shall mean an IVD Product that is developed in a kit form and that requires Regulatory Approval so that the Commercial Platform may be performed in a de-centralized fashion by LabCorp or by Third Parties.

1.32 “Joint Inventions” shall have the meaning set forth in Section 8.1 of this Agreement.

1.33 “Know-How” shall mean all proprietary material and information including data, technical information, know-how, experience, inventions, discoveries, trade secrets, compositions of matter and methods, that relate to the development, utilization, manufacture or use of the Diagnostic Tests or Drug Product, including but not limited to processes, techniques, methods, products, materials and compositions.

1.34 “LabCorp Inventions” shall have the meaning set forth in Section 8.1 of this Agreement.

1.35 “Loss” shall have the meaning set forth in Section 11.1 of this Agreement.

1.36 “Marketing and Sales Plan” shall have the meaning set forth in Section 5.3 of this Agreement.

1.37 “Net Sales” shall [ * ].

1.38 “New Inventions” shall have the meaning set forth in Section 8.1 of this Agreement.

1.39 “Party” shall mean ARCA or LabCorp, and “Parties” shall mean ARCA and LabCorp.

1.40 “Patents” shall mean all existing patents and patent applications and all patent applications hereafter filed, including any continuation, continuation-in-part, division, provisional or any substitute applications, any patent issued with respect to any such patent applications, any reissue, reexamination, renewal or extension (including any supplementary protection certificate) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent, and all foreign counterparts of any of the foregoing.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 4

1.41 “Permitted Sublicensees” shall have the meaning set forth in Section 2.6 of this Agreement.

1.42 “Person” shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization or government or political subdivision thereof.

1.43 “Regulatory Approval” shall mean any and all approvals, clearances or other authorizations of any Governmental Authority in the Territory necessary for commercial sale of in vitro diagnostics and/ or new drug products intended for human use, including, without limitation and where applicable, approval of labeling and manufacturing.

1.44 “Regulatory Authority” shall mean any Governmental Authority with jurisdiction over in vitro diagnostics and/or new drug products intended for human use in the Territory, including in the United States the FDA.

1.45 “Regulatory Plan” shall have the meaning set forth in Section 4.3 of this Agreement.

1.46 “Reimbursement Plan” [*].

1.47 “Standards for Commercial Demand” shall mean (i) with respect to the Homebrew Assay or IVD Product (but not the IVD Kit) form of the Commercial Platform: the turnaround time for delivering Diagnostic Test results that is expressly stated as a “Standard for Commercial Demand” in the Commercial Plan, and (ii) with respect to the IVD Kit form of the Commercial Platform: the turnaround time for delivering IVD Kits that is expressly agreed upon by the parties in writing as a “Standard for Commercial Demand” prior to commercial launch of the IVD Kits.

1.48 “Technology Transfer” means the transfer of technical and regulatory information by LabCorp that is necessary to enable ARCA to perform or have performed, or manufacture or have manufactured, the Commercial Platform in a manner that is acceptable to both Parties (and is agreed to by both Parties as part of the Commercial Plan). The Technology Transfer provisions in the Commercial Plan may contain provisions to protect the confidentiality, proprietary nature, and use of any trade secrets, proprietary information, or other intellectual property of LabCorp, and provisions intended to compensate LabCorp for the value of the information being transferred (through royalties or otherwise).

1.49 “Territory” shall mean the United States of America and its territories.

1.50 “Third Party” shall mean any person or entity that is not a Party or an Affiliate of any Party to this Agreement.

1.51 “Trademark” shall have the meaning set forth in Section 4.6 of this Agreement.

1.52 “UC” shall mean the University of Cincinnati.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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1.53 “UC Licenses” shall mean certain licenses granted by the UC in and to certain intellectual property relating pursuant to that certain License and Option Agreement dated August 16, 2004, as amended March 8, 2006 and June 23, 2006 between CardioDx and UC, and that certain License and Option Agreement dated August 10, 2004, as amended March 8, 2006 and June 23, 2006, between CardioDx and UC.

1.54 “Valid Claim” shall mean [ * ].

ARTICLE II

LICENSE GRANTS; EXCLUSIVITY

2.1 Sublicense of Rights Under CardioDx Agreement. Subject to and in accordance with the other provisions of this Agreement, ARCA hereby grants to LabCorp (and to those Affiliates [ * ]) an exclusive sublicense to ARCA’s rights under the CardioDx Agreement to make, have made, use, sell, offer for sale, and import the Diagnostic Tests in the Territory for use in the Field. LabCorp shall have the option, at any time during the term of this Agreement, to [ * ] pursuant to this Section 2.1. In the event LabCorp elects to do so, LabCorp will notify ARCA in writing, in which case [ * ].

2.2 License to ARCA Technology. Subject to and in accordance with the other provisions of this Agreement, ARCA hereby grants to LabCorp and its Affiliates and LabCorp and its Affiliates hereby accept an exclusive [ * ] license [ * ], to the ARCA Technology (including without limitation the right to practice the processes contained within Valid Claims) to make, have made, perform, use, sell, offer for sale, and import the Diagnostic Tests in the Territory for use in the Field, and an exclusive [ * ] license to use the Trademark in connection with marketing and sales activity related to the Diagnostic Tests. These licenses to the ARCA Technology and the Trademark convey no rights to the manufacture, use, sale or other commercialization of the Drug Product, which rights are expressly reserved exclusively to ARCA, and shall not interfere with or restrict, in any way, ARCA’s rights, or those of its licensees, to develop, make, have made, perform, use, sell, offer for sale or import the Drug Product.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 6

2.3 Sublicenses of Third Party Rights to LabCorp. LabCorp understands that the rights that may be granted hereunder include certain rights sublicensed to ARCA pursuant to the CardioDx Agreement and the UC Licenses, and that the sublicense granted to LabCorp in Section 2.1 is subject and subordinate to the terms and conditions of the UC Licenses and the CardioDx Agreement, [ * ].

2.4 No Implied Licenses. Except as specifically set forth in this Agreement, neither Party shall acquire any license or other intellectual property interest, by implication or otherwise, to any information disclosed to it under this Agreement or under any Patents or Know-How Controlled by the other Party or its Affiliates.

2.5 Exclusivity. During the term of this Agreement, ARCA shall not grant the license rights set forth in this Article II to any Third Party, except as permitted by this Agreement [ * ] . ARCA acknowledges that it is not reserving any license or rights to use or otherwise exploit the ARCA Technology with respect to Diagnostic Tests in the Territory for use in the Field [ * ] or any of its rights under the CardioDx Agreement to make, have made, perform, use, sell, offer for sale, or import Diagnostic Tests in the Territory for use in the Field.

2.6 Sublicensing by LabCorp. [ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 7

2.7 Right of First Refusal for [ * ] . During the term of this Agreement, ARCA shall provide LabCorp with written notice prior to the first occasion that ARCA solicits any interest in, makes any offers for, or engages in any negotiations with any other Persons with respect to [ * ].

2.8 Rights of LabCorp Affiliates under CardioDx Agreement. [ * ].

ARTICLE III

GENERAL; DIAGNOSTICS COMMITTEE

3.1 General. Each Party agrees to use commercially reasonable efforts to execute and perform those components of the Commercialization Plans for which it is responsible in a timely manner, to maintain and utilize its staff and facilities consistent with such undertaking, and to cooperate with the other Party in the activities conducted under this Agreement. The personnel assigned to this Agreement shall have experience which is relevant to the Field and a background suitable to the difficulty of the tasks involved. Each of the Parties will endeavor to provide continuity of involvement in projects by key personnel assigned to the Agreement.

3.2 Diagnostics Committee. In accordance with the terms and conditions of this Agreement, the Parties shall consult with a committee (the “Diagnostics Committee”) which shall be comprised of [ * ], with the total number of committee members not to exceed six members, unless otherwise agreed by the Parties. [ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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[ * ]. Each of ARCA and LabCorp shall, as soon as possible and in any case no later than [ * ] following the Effective Date, [ * ] and give written notice thereof to the other Party. [ * ]. Members of the Diagnostics Committee shall serve in such capacities, on such terms and conditions, and for such duration as shall be determined by the Party appointing same. [ * ].

3.3 Meetings of the Diagnostics Committee. Unless otherwise agreed by the Parties from time to time, the Diagnostics Committee will meet at such times and places as determined by the Parties on no less frequently than a quarterly basis. The Diagnostics Committee will endeavor to hold such quarterly meetings in person, but may conduct meetings in person or by conference telephone or video conference, and may also act without a meeting if a written consent to an action or decision is signed by each co-chair (or his/her written designee member of the Diagnostics Committee). The co-chairs will keep minutes reflecting actions taken at meetings, which the Parties will use their commercially reasonable efforts to cause to be circulated and signed by each co-chair (or his/her written designee member of the Diagnostics Committee) within thirty (30) days following each meeting. The Diagnostics Committee may amend or expand upon the foregoing procedures for its internal operation at a meeting of the Diagnostics Committee or by written consent of the Diagnostics Committee as aforesaid.

3.4 Functions and Powers of the Diagnostics Committee. The Diagnostics Committee shall perform the following functions:

(a) consult with ARCA on the design and development of the Regulatory Plan, and with LabCorp on the design and development of the Commercial Platform, the Commercial Plan, the Marketing and Sales Plan and the Reimbursement Plan in the manner contemplated by this Agreement;

(b) consult with LabCorp on development of the IVD Kit;

(d) following commercial launch of the Drug Product, consult on the commercial and sales progress of the IVD Product and IVD Kit; and

(e) perform such other functions as appropriate to further the purposes of this Agreement as determined by the Parties, except that the development, commercialization, and promotion of the Homebrew Assay shall be the sole responsibility of LabCorp, not within the scope of functions and powers of the Diagnostic Committee, and shall be conducted in conformance with all applicable laws and regulations as interpreted and enforced by Regulatory Authorities.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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3.5 Diagnostics Committee Actions or Decisions. Actions or decisions by the Diagnostics Committee pursuant to the terms of this Agreement shall be taken or made by [ * ].

3.6 Obligation of Parties. ARCA and LabCorp shall provide the Diagnostics Committee and its authorized representatives with reasonable access during regular business hours to all records and documents relating to this Agreement, which it may reasonably require in order to perform its obligations hereunder; provided that if such documents are under a bona fide obligation of confidentiality to a Third Party, then ARCA or LabCorp, as the case may be, may withhold access thereto to the extent necessary to satisfy such obligation.

3.7 Limits of Powers of the Diagnostics Committee. The Diagnostics Committee shall only have such powers as are specifically delegated to it hereunder or as the Parties may otherwise agree in writing from time to time.

3.8 Disputes. If the Diagnostics Committee fails to reach agreement on a matter before it for consideration, then either Party may by written notice to the other Party invoke the dispute resolution procedure set forth in Article XII, unless otherwise indicated in this Agreement.

3.9 Agendas. Each Party will use commercially reasonable efforts to notify the other at least three business days prior to the date of a meeting of the Diagnostics Committee, proposing the agenda items it wishes to discuss at such meeting. Notwithstanding the foregoing, the Diagnostics Committee shall be free to consider any matter related to this Agreement which is within the scope of its responsibilities and is brought to its attention by any Party at any meeting.

ARTICLE IV

DEVELOPMENT PHASE

4.1 Scope. LabCorp shall commence and diligently pursue the development of the Commercial Platform, as more particularly set forth in this Article IV[ * ].

4.2 Development of Commercial Platform. [ * ] will be responsible for using commercially reasonable efforts to design and develop the Commercial Platform. [ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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[ * ]. The Parties will use reasonable commercial efforts to obtain a Regulatory Approval of the Commercial Platform that will permit (among other things) ARCA and LabCorp to market the usefulness of the Diagnostic Tests in determining the appropriateness of, and the clinical outcomes expected from use of the Drug Product, and to reference the Commercial Platform in the labeling of the Drug Product. [ * ]

4.3 Regulatory Plan. [ * ] will develop a regulatory plan (the “Regulatory Plan”). The purpose of the Regulatory Plan is to provide the Parties with an outline of the overall strategy and timelines, and identifying documentation necessary to obtain, Regulatory Approval of the Drug Product and the Commercial Platform, and the degree to which the Regulatory Approval of the Commercial Platform will be integrated with that of the Drug Product. [ * ]. The Regulatory Plan will be completed within [ * ] and will clearly indicate:

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 11

[ * ]

4.4 Regulatory Approval; Assistance with Regulatory Submissions

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 12

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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[ * ]

4.5 IVD Kit. LabCorp wi11 use commercially reasonable efforts to seek Regulatory Approval for the Commercial Platform as an IVD Kit following the initial Regulatory Approval of the IVD Product, in accord with the Commercial Plan. [ * ]

4.6 Trademark for the Diagnostic Tests. ARCA will be primarily responsible for identifying a trademark to be used in connection with the marketing, sale, distribution and promotion of the Commercial Platform in the Territory (the “Trademark”). The Trademark shall be acceptable to LabCorp. As soon as practical, and prior to first commercial sale of the Drug Product, and to the extent it is legally able to do so, ARCA will file and prosecute a trademark application with the United States Patent and Trademark Office to try to obtain a federal trademark registration for the use of the Trademark in connection with the marketing, sale, distribution and promotion of the Commercial Platform, including, if applicable, the IVD Product. ARCA shall be responsible for, and pay all fees and costs relating to, the prosecution, maintenance and defense of the Trademark. Subject to its reasonable commercial judgment, ARCA will use reasonable commercial efforts to obtain Regulatory Approval to include the Trademark in the labeling for the Drug Product, and ARCA agrees to include the Trademark in the labeling for the Drug Product if permitted to do so. ARCA shall own all right, title and interest in and to the Trademark, subject to LabCorp’s license under Section 2.2; provided that ARCA shall have the right to reasonably approve all such uses of the Trademark by LabCorp. Each Party shall notify the other Party promptly upon learning of any actual, alleged, or threatened infringement of the Trademark or of any unfair trade practices, trade dress imitation, passing off of counterfeit goods, or like offenses.

ARTICLE V

COMMERCIALIZATION PHASE

5.1 Scope. Except as otherwise agreed by the Parties, LabCorp shall be primarily responsible for using commercially reasonable efforts to establish, implement and fund all aspects of the commercialization of the Commercial Platform in the Territory pursuant to the terms and conditions of this Agreement and in compliance with all applicable laws and regulations as interpreted and enforced by Regulatory Authorities.

5.2 Commercial Plan. LabCorp shall develop, in consultation with the Diagnostics Committee, a commercial plan for the commercialization of the Commercial Platform in the Territory (the “Commercial Plan”), except that LabCorp shall have sole responsibility for

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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marketing a Homebrew Assay, which shall not be inconsistent with the Commercialization Plans. The Commercial Plan will be subject to change based on the guidance of Regulatory Authorities and on the terms and conditions of Regulatory Approval and will be updated with more detailed and specific descriptions following receipt of Regulatory Approval. [ * ]. The initially approved Commercial Plan will be completed within [ * ] and will include the following elements, among others:

[ * ]

5.3 Marketing and Sales Plan. LabCorp [ * ] will develop a marketing and sales plan for the promotion, advertising, education, marketing, launch, sale and/or distribution of the IVD Product and IVD Kit in the Territory pursuant to the conditions of Regulatory Approval and all activities incident thereto (the “Marketing and Sales Plan”). [ * ] A proposed Marketing and Sales Plan will be distributed [ * ] and an approved Marketing and Sales Plan shall be completed within [ * ]. The Marketing and Sales Plan will specify the marketing and sales programs that LabCorp will initiate in connection with the commercial launch of the IVD Product and IVD Kit and will provide for appropriate integration of the IVD Product and IVD Kit into LabCorp’s existing sales and marketing infrastructure. The Marketing and Sales Plan will include the following elements, among others:

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 15

[ * ]

The Marketing and Sales Plan shall be updated, as appropriate and in consultation with the Diagnostics Committee, no later than [ * ].

5.4 [ * ]

5.5 Commercialization Efforts. LabCorp shall use its commercially reasonable efforts to make, market, advertise, promote, distribute and sell the Commercial Platform [ * ] in accordance with the Commercialization Plans, the provisions of this Agreement, and all applicable laws and regulations as interpreted and enforced by Regulatory Authorities. The Commercialization Plans shall be deemed incorporated into this Agreement. LabCorp will use commercially reasonable efforts to conduct the commercialization activities relating to the Commercial Platform in accordance with the timetables and other provisions of the Commercialization Plans and will integrate such activities into LabCorp’s existing sales, marketing and distribution infrastructure to support the sale and distribution of the IVD Product and IVD Kit throughout the Territory.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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LabCorp shall have [ * ], with respect to any rights conferred upon LabCorp under this Agreement after receiving the prior written consent of ARCA, which consent will not be unreasonably withheld. Any [ * ]shall be pursuant to a written agreement, the terms and conditions of which shall be consistent with those of this Agreement, and a true and complete copy of which shall be immediately supplied to ARCA upon execution and delivery.

ARCA shall use commercially reasonable efforts to make, market, advertise, promote, distribute and sell the Drug Product and to maximize sales of the Drug Product for use throughout the Territory.

5.6 Advertising and Education. All advertising and educational materials relating to the Commercial Platform and related materials shall be prepared by LabCorp (or its subcontractors), and such materials related to the IVD Product or IVD Kit shall be subject to reasonable approval by ARCA and any such materials for different versions of the IVD Product or IVD Kit shall be consistent. Any such materials for the Homebrew Assay shall not be inconsistent with materials relating to the Drug Product, the IVD Product, or the IVD Kit, or to applicable laws as interpreted and enforced by Regulatory Authorities. Where appropriate or necessary, all packaging, labeling and advertising and educational materials for the Commercial Platform shall contain the legend, “Manufactured under license from ARCA Discovery Inc., Denver, Colorado, U.S.A.”

5.7 Training Program. LabCorp shall develop training programs relating to the Commercial Platform for its sales forces and for any Third Parties engaged in selling or promotion. The Parties agree to utilize such training programs on an ongoing basis to assure a consistent, focused promotional strategy. Training shall be carried out reasonably in advance of the time at which Regulatory Approval is expected. As additional members are added to LabCorp’s sales forces, training will be given to groups of the newly selected members. The costs of training such personnel and the preparation of related materials shall be borne [ * ].

5.8 Consultation with the Diagnostics Committee. LabCorp shall consult with the Diagnostics Committee from time to time, but no less frequently than quarterly, on matters relating to the commercialization of the Commercial Platform in the Territory, including, as appropriate, the progress of LabCorp’s commercialization activities in the Territory, coordination of reimbursement procedures and training, regulatory matters, technical support, product positioning, marketing and advertising and other activities relating to the commercialization of the Commercial Platform in the Field prior to and following commercial launch. The Diagnostics Committee will be the principal provider of input from ARCA to LabCorp on the Commercialization Plans and will be afforded the opportunity to consult with LabCorp representatives in the preparation of all material marketing, sales, distribution, advertising, educational and promotional plans for the Commercial Platform, review all details, and provide LabCorp with comments on such plans.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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ARTICLE VI

MANUFACTURE AND SUPPLY

6.1 Manufacture and Supply. [ * ]

6.2 [ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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[ * ]

ARTICLE VII

PAYMENTS

7.1 Royalties and Fees Payable by LabCorp. Subject to the terms and conditions of this Agreement, and in further consideration of the rights granted by ARCA hereunder, LabCorp shall [ * ].

7.2 Milestone Equity Issuances. Subject to the terms and conditions of this Agreement, and in further consideration of the rights granted by ARCA hereunder, ARCA shall issue a total of [ * ] shares of its common stock to LabCorp, which shares shall be issued subject to a Stock Restriction Agreement, mutually acceptable to the Parties, that will provide for the following vesting schedule:

(a) [ * ] shares of the common stock in this grant shall vest upon [ * ]

(b) [ * ] shares of the common stock in this grant shall vest upon [ * ]

7.3 Records and Audit Rights.

(a) LabCorp shall keep full, true and accurate books of accounts and other records containing all information and data which may be necessary to ascertain and verify [ * ] for a period of three years following the year to which such records relate. During the term of this Agreement and for a period of three years following its termination, ARCA, CardioDx and UC shall have the right to audit, or have an agent, accountant or other representative audit (in each case in a manner that does not unreasonably interfere with LabCorp’s operations) such books, records and supporting data upon fifteen (15) days prior written notice. Any audit shall be at ARCA’s, CardioDx’s or UC’s expense (as applicable) [ * ]. Any underpayment of amounts due from LabCorp hereunder shall be paid within thirty (30) days of the delivery of a written accountant’s report to the Parties.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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(b) Beginning with first commercial sale of the Drug Product, ARCA shall provide a written report to LabCorp on a quarterly basis (within sixty days after the end of each calendar quarter) indicating [ * ]. ARCA shall keep full, true and accurate books of accounts and other records containing all information and data which may be necessary to ascertain and verify the [ * ] for a period of three years following [ * ] LabCorp shall have the right to audit, or have an agent, accountant or other representative audit (in each case in a manner that does not unreasonably interfere with ARCA’s operations) such books, records and supporting data upon fifteen (15) days prior written notice. Any audit shall be at [ * ] expense [ * ]

ARTICLE VIII

INVENTIONS; CONFIDENTIALITY; PUBLICITY

8.1 Inventions. [ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

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8.2 Confidentiality; Exceptions. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, the Parties agree that, for the term of this Agreement and for ten years thereafter, the receiving Party shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as provided for in this Agreement any Information and other materials furnished to it by the other Party pursuant to this Agreement or any Information relating to Joint Inventions developed during the course of performing this Agreement and assigned to the other Party pursuant to Section 8.1 (collectively, “Confidential Information”), except to the extent that it can be established by the receiving Party that such Confidential Information:

(a) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party and such receiving Party has documentary evidence to that effect;

(b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;

(c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;

(d) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others; or

(e) was independently developed by the receiving Party without use of the Confidential Information of the disclosing Party.

8.3 Authorized Disclosure and Use. Each Party may disclose Confidential Information hereunder to the extent such disclosure is reasonably necessary in filing or prosecuting Patent applications, prosecuting or defending litigation, or complying with applicable governmental regulations, provided that if a Party is required by law or regulation to make any such disclosure of the other Party’s Confidential Information, it will, except where impracticable for necessary disclosures, give reasonable advance notice to the other Party of such disclosure requirement and will where applicable use its reasonable efforts to seek confidential treatment of such Confidential Information required to be disclosed.

8.4 Survival. This Article VIII shall survive the termination or expiration of this Agreement for a period of ten years.

8.5 Termination of Prior Agreement. This Agreement supersedes the Clinical Trials Confidential Disclosure Agreement between the Parties, dated February 27, 2006. All Information exchanged between the Parties under that agreement shall be deemed Confidential Information and shall be subject to the terms of this Article VIII.

8.6 Publicity. The Parties shall consult and coordinate with each other respecting the text and timing of any publicity, press, or news releases or other public announcements or disclosures prior to issuance thereof regarding the existence or terms of this Agreement and the transactions contemplated hereby; provided , however , that neither Party shall issue any such press releases, announcements or disclosures without the other Party’s consent, which may not be unreasonably withheld. Except as otherwise explicitly provided in this Agreement, neither Party shall use the name, trademark, trade name or logo of the other for marketing, advertising, or promotional claims without the prior written consent of the other Party. Notwithstanding the

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foregoing, either Party may issue such press releases or otherwise make such public statements or disclosures (such as in annual reports to stockholders or filings with the Securities and Exchange Commission) as it determines, based on advice of counsel, are reasonably necessary to comply with applicable laws and regulations; provided , however , that a Party shall not issue any such press releases or make such statements or disclosures without the other Party’s prior review and comment: In addition, following any initial press release(s) announcing this Agreement or other public disclosure approved by both Parties, either Party shall be free to disclose, without the other Party’s prior written consent, the existence of this Agreement, the identity of the other Party and those terms of the Agreement which have already been publicly disclosed in accordance herewith.

8.7 Specific Performance. Each Party acknowledges and agrees that disclosure or distribution of the Confidential Information or use of the Confidential Information of the other Party contrary to the terms of this Agreement may cause irreparable harm to the disclosing Party for which damages at law may not provide an adequate remedy and agrees that the provisions of this Article may be specifically enforced without regard to the provisions of Article XII and are in addition to any and all other remedies available at law or in equity.

8.8 Issuance and Maintenance of ARCA Patent. ARCA agrees that it shall use commercially reasonable efforts to prosecute all patent applications within the ARCA Patent and use commercially reasonable efforts to obtain valid, issued patents based on such applications. During the term of this Agreement, ARCA shall submit all filings, make all payments, and take all other actions reasonably necessary to maintain the ARCA Patent, once issued, as valid, in force and in good standing with the U.S. Patent and Trademark Office (at its own expense).

8.9 Enforcement of Rights to ARCA Technology and Trademark. During the term of this Agreement, ARCA agrees that it shall, at its own expense, use commercially reasonable efforts to .enforce its rights with respect to any material infringement or misappropriation in the Territory by a Third Party of any of the ARCA Technology or the Trademark. Without limiting the foregoing, in the event a Third Party is infringing on the ARCA Technology or Trademark by making, performing, using, selling or importing Diagnostic Tests and ARCA is unsuccessful in persuading such infringer to desist and fails to have initiated and diligently pursue an infringement suit within a reasonable time (not to exceed [ * ]) after ARCA first becomes aware of the basis for such suit, ARCA shall grant LabCorp and its Affiliates the right to file suit on its behalf to enforce its rights with respect to the Field only, and ARCA agrees to cooperate and provide reasonable assistance to LabCorp and its Affiliates in connection with such suit. LabCorp and its Affiliates shall have the right to any recovery or damages obtained as a result of a suit brought by LabCorp and its Affiliates (whether by settlement, judgment or otherwise).

ARTICLE IX

REPRESENTATIONS, WARRANTIES AND COVENANTS

9.1 Mutual Representations, Warranties and Covenants. Each Party hereby represents, warrants and covenants to the other Parry as follows:

(a) Such Party: (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or organized; (ii) has the

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 22

corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder; and (iii) has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder.

(b) This Agreement is a legal and valid obligation binding upon such Party and enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by such Party does not conflict with any material agreement, instrument or understanding, oral or written, to which it is a party or by which it is bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over it.

(c) All material consents, approvals and authorizations of all governmental authorities and other persons required to be obtained by such Party in connection with the execution and delivery and performance of this Agreement have been and shall be obtained.

9.2 LabCorp Representations, Warranties and Covenants. LabCorp (and each of its Affiliates acting under this Agreement, to the extent applicable) hereby represents, warrants and covenants to ARCA as follows:

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 23

[ * ]

9.3 ARCA Representations, Warranties and Covenants. ARCA hereby represents, warrants and covenants to LabCorp as follows:

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 24

[ * ]

ARTICLE X

TERM AND TERMINATION

10.1 Term. This Agreement shall commence as of the Effective Date and, unless sooner terminated as provided herein, shall continue in effect until the ten (10) year anniversary of the Effective Date.

10.2 Termination by LabCorp. This Agreement may be terminated by LabCorp in whole or in part as provided below:

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 25

(a) At any time during the term of this Agreement if ARCA materially breaches this Agreement, which breach is not cured within sixty (60) days of written notice thereof from LabCorp.

(b) At any time during the term of this Agreement upon written notice if ARCA becomes and remains subject to a Bankruptcy Event.

(d) [ * ]

(e) At any time during the term of this Agreement for any reason upon written notice given by LabCorp at least [ * ] prior to the effective date of such termination.

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 26

[ * ]

10.3 Termination by ARCA. This Agreement may be terminated by ARCA in whole or in part as provided below:

(a) At any time during the term of this Agreement if LabCorp materially breaches this Agreement, which breach is not cured within sixty (60) days of written notice thereof from ARCA.

(b) At any time during the term of this Agreement upon written notice if LabCorp becomes and remains subject to a Bankruptcy Event.

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 27

[ * ]

10.4 Automatic or Mutual Termination.

[ * ]

10.5 Loss of Exclusivity. [ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 28

10.6 Effect of Termination.

(a) Upon termination of this Agreement for any reason, each Party shall cooperate with the other Party for an orderly wind-down of the services provided by LabCorp hereunder and all rights granted by ARCA to LabCorp under this Agreement shall revert back to ARCA. Any termination of this Agreement as provided herein shall not be an exclusive remedy but shall be in addition to any remedies whatsoever that may be available to the terminating party.

(b) Upon any termination or expiration of this Agreement, each Party shall return to the other Party all Information of the other Party in such Party’s Control, except that one copy may be retained solely for archival purposes.

[ * ]

10.7 Surviving Rights. Except as expressly modified above in this [ * ] of this Agreement will survive termination or expiration of this Agreement.

10.8 Accrued Rights, Surviving Obligations. Unless explicitly provided otherwise in this Agreement, termination, relinquishment, or expiration of the Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit to either Party prior to such termination, relinquishment, or expiration, including damages arising from any breach hereunder. Such termination, relinquishment, or expiration shall not relieve any Party from obligations which are expressly indicated to survive termination or expiration of the Agreement.

ARTICLE XI

INDEMNIFICATION; INSURANCE

11.1 LabCorp Indemnification. LabCorp hereby agrees to save, defend, and hold ARCA and its agents and employees harmless from and against any and all suits, claims, actions, demands, liabilities, expenses and/or loss, including reasonable legal expense and attorneys’ fees (“Losses”) resulting from: [ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 29

[ * ]

11.2 ARCA Indemnification. ARCA hereby agrees to save, defend, and hold LabCorp and its agents and employees harmless from and against any and all Losses resulting from: [ * ]

11.3 Indemnification Procedures. A Party (the “Indemnitee”) which intends to claim indemnification under this Section shall notify the other Party (the “Indemnitor”) within a reasonable time in writing of any action, claim or liability in respect of which the Indemnitee believes it is entitled to claim indemnification, provided that the failure to give timely notice to the Indemnitor shall not release the Indemnitor from any liability to the Indemnitee to the extent the Indemnitor is not prejudiced thereby. The Indemnitor shall have the right, by notice to the Indemnitee, to assume the defense of any such action or claim after the Indemnitor’s receipt of notice of any action or claim with counsel of the Indemnitor’s choice and at the sole cost of the Indemnitor. If the Indemnitor does not so assume the defense of such third party claim, the Indemnitee may assume such defense with reasonable counsel of its choice and at the sole cost of the Indemnitor. If the Indemnitor so assumes such defense, the Indemnitee may participate therein through counsel of its choice, but at the sole cost of the Indemnitee. The Party not assuming the defense of any such claim shall render all reasonable assistance to the Party assuming such defense upon request, and all reasonable out-of-pocket costs of such assistance shall be for the account of the Indemnitor. No such claim shall be settled other than by the Party defending the same, and then only with the consent of the other Party which shall not be unreasonably withheld; provided that the Indemnitee shall have no obligation to consent to any settlement of any such action or claim which imposes on the Indemnitee any liability or obligation which cannot be assumed and performed in full by the Indemnitor, and the Indemnitee shall have no right to withhold its consent to any settlement of any such action or claim if the settlement involves only the payment of money by the Indemnitor or its insurer.

11.4 [ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 30

11.5 Insurance. Each Party will during the term of this Agreement carry insurance policies in such amounts and providing such coverage as is reasonable and customary for commercial entities providing services like those being rendered by such party under this Agreement.

ARTICLE XII

DISPUTE RESOLUTION

12.1 Disputes.

(a) The Parties recognize that disputes may arise from time to time respecting this Agreement and the rights and obligations of the Parties under this Agreement, and desire to establish the procedures in this Article to facilitate their resolution in an expedient and commercially reasonable manner by mutual cooperation and without resort to litigation.

(b) Except as otherwise provided in this Agreement or agreed by the Parties, disputes within the Diagnostics Committee will be resolved as recited in this Article. If the Diagnostics Committee is unable to resolve such a dispute within thirty (30) days, either Party, by written notice to the other, may have such dispute referred to their respective executive officers designated below or their successors, for attempted resolution by good faith negotiations:


For LabCorp:		[ * ]

For ARCA:		[ * ]

In the event the designated executive officers are not able to resolve any unresolved dispute within the Diagnostics Committee within thirty (30) days after written notice by either Party referring the matter to them as provided herein, either Party may by written notice to the other commence the process set forth in Section 12.2 below.

(c) Except as otherwise provided in this Agreement or agreed by the Parties, any other unresolved dispute regarding the interpretation of or the Parties’ respective rights and obligations under this Agreement shall first be referred to the Diagnostics Committee, then to the two executives, as aforesaid, then to the Arbitration process set forth in Section 12.2 below.

12.2 Arbitration by Expert Panel. Except to the extent otherwise provided in this Agreement or by agreement of the Parties, any dispute, controversy, or claim arising out of or relating to the validity, construction, enforceability, or performance of this Agreement, including any dispute relating to alleged breach or to termination of this Agreement, that remains unresolved after going through the process set forth in Section 12.1 above shall be subject to the following alternative dispute resolution process (“Arbitration”):

(a) The Party invoking the Arbitration shall give written notice ( “Arbitration Notice” ) thereof to the other Party, setting forth in reasonable detail the issues to be resolved. As soon as possible but in any event within fifteen (15) days following such delivery of such notice, each Party will appoint one neutral expert in the subject matter of the issues in dispute to serve as an arbitrator, and these two arbitrators will as soon as possible but in any event within ten (10) days following delivery of such notice appoint a third similarly qualified neutral expert to serve as the third arbitrator (such three arbitrators, the “Panel” ).

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 31

(b) The members of the Panel shall be “neutral” in that they are not nor have they been within the previous five years employees or paid consultants of either Party, nor have any other extended familial, close social or other material relation to either Party, and “expert” in that they are highly qualified in the field of the issues under dispute.

(c) The Panel shall hold a hearing (the “Hearing”) on the merits of the dispute as soon as possible but in no event more than sixty (60) days following delivery of the Arbitration Notice. Each Party may if it has time submit one written brief, along with reasonable supporting materials, setting forth the issues of the dispute and a specific suggested resolution requested by such Party, which will be submitted simultaneously to the Panel and the other Party. The Hearing shall take place over a period of no more than two full consecutive business (or if agreeable to the Panel, calendar) days following a reasonable procedure adopted by the Panel for presentations, questions and answers, and discussions. Within ten (10) days following the Hearing, the Panel will present its decision (“Decision”) in writing, acting with the concurrence of at least two Arbitrators, which will choose the resolution requested by one of the Parties (or if the Panel desires, offers a resolution other than either resolution requested by the Parties), together with a statement in reasonable detail of the reasons therefor.

12.3 Disputes About the Arbitration. All disputes relating to the proper execution of the Arbitration (including, without limitation, failure of a Party to comply with the timing or other requirements of the arbitration or the fairness or appropriateness of an arbitrator) shall be finally settled in a binding manner on both Parties by a retired federal court judge or, if not available, some other experienced professional adjudicator or arbitrator appointed by the President or other senior executive of the American Arbitration Association (such retired judge, adjudicator, or arbitrator, a “Referee”) in an expedited hearing not to exceed one full business day (“Referee Hearing”) within fifteen (15) days of invocation in writing by either Party.

12.4 Fees and Costs of the Arbitration. Each Party shall bear its own costs of the Arbitration (including any Referee Hearing), but will share equally for payment of the fees and costs of the Panel and of any Referee.

12.5 Waivers or Alterations to the Dispute Resolution Procedure. The Parties may mutually agree in writing to waive or alter aspects of these Arbitration provisions in any Arbitration. The time limits provided in this Article XII may be waived or altered in case of serious hardship or inconvenience on the part of any Arbitrator or Referee, provided that any such waiver or alteration be minimized to the extent possible in accordance with the intent of the Parties at the time of the execution and delivery of this Agreement that the Arbitration procedure yield expedited resolutions.

12.6 Arbitration Confidentiality. All aspects of the Arbitration and any Referee Hearing, including the Decision, shall be confidential, and all participants including the Panel and the Referee shall be bound by judicially enforceable obligations of strict confidentiality except to the extent the Parties agree in writing to waive in whole or part such confidentiality.

Development, Commercialization and Licensing Agreement-Confidential-Page 32

12.7 Survival. Any duty to arbitrate under this Agreement shall remain in effect and enforceable after termination of this Agreement for any reason.

12.8 Jurisdiction. For the purposes of this Article XII, the Parties agree to accept the jurisdiction of the Federal District Court Delaware, for the purposes of enforcing Decisions agreed to by the Parties and for enforcing the agreements reflected in this Article.

12.9 Exceptions. Notwithstanding the provisions of this Article XII, proceedings may be brought in any court of competent jurisdiction for the limited purpose of: (i) obtaining preliminary or permanent injunctive relief, (ii) recovering possession of property (such as replevin, claim and delivery, attachment or the like), or (iii) impleading, joining or adding another party as a third-party defendant in any legal action brought by a Third Party.

ARTICLE XIII

MISCELLANEOUS

13.1 Assignment.

(a) [ * ]

(b) Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the Parties. Any assignment not in accordance with this Agreement shall be null and void and of no effect.

13.2 Costs and Expenses. Except as otherwise provided in this Agreement, or as agreed to from time to time by the Parties, each Party shall bear all of its own costs and expenses incurred in connection with performing its respective obligations under this Agreement.

13.3 Retained Rights. Nothing this Agreement shall limit in any respect the right of either Party to conduct research and development with respect to and market products outside the Field using such Party’s technology.

13.4 Force Majeure. Neither Party shall lose any rights hereunder or be liable to the other Party for damages or losses on account of failure of performance by the defaulting Party if the failure is occasioned by government action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or other cause beyond the reasonable control of the defaulting Party, provided that the Party claiming force majeure has exerted commercially reasonable efforts to avoid or remedy such force majeure, provided that in no event shall a Party be required to settle any labor dispute or disturbance.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Page 33

13.5 Further Actions. Each Party agrees to execute, acknowledge, and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

13.6 No Trademark Rights. Except as otherwise provided herein, no right, express or implied, is granted by the Agreement to use in any manner the name “LabCorp,” “ARCA” or any other trade name or trademark of the other Party or its Affiliates in connection with the performance of this Agreement.

13.7 Notices. All notices hereunder shall be in writing and shall be deemed given when delivered personally, the same business day as sent by facsimile transmission (receipt verified), three business days after being mailed by registered or certified mail (return receipt requested), postage prepaid, or the next business day after being sent by express courier service (next business day delivery provided), to the Parties at the following addresses (or at such other address for a parry as shall be specified by like notice.


If to ARCA, addressed to:		ARCA Discovery, Inc. 1200 Seventeenth Street, Suite 620 Denver, Colorado 80202 Attention: Chief Executive Officer Telephone: (303) 893-1606 Facsimile: (303) 825-0883

If to LabCorp, addressed to:		Laboratory Corporation of America Holdings 430 South Spring Street Burlington, North Carolina 27215 Attention: Law Department Telephone: (336) 436-8069 Facsimile: (336) 226-3835

With a copy to:		Parker, Poe, Adams & Bernstein L.L.P. P.O. Box 389 150 Fayetteville Street, Suite 1400 Raleigh, North Carolina 27602 Telephone: (919) 828-0564 Facsimile: (919) 834-4564 Attn: Frank E. Silber, Esq.

13.8 Waiver. Except as specifically provided for herein, the waiver from time to time by either of the Parties of any of their rights or their failure to exercise any remedy shall not operate or be construed as a continuing waiver of same or of any other of such Party’s rights or remedies provided in this Agreement.

Development, Commercialization and Licensing Agreement-Confidential-Page 34

13.9 Severability. If any term, covenant, or condition of this Agreement or the application thereof to any Party or circumstance shall, to any extent, be held to be invalid or unenforceable, then (i) the remainder of this Agreement, or the application of such term, covenant, or condition to Parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant, or condition of this Agreement shall be valid and be enforced to the fullest extent permitted by law; and (ii) the Parties hereto covenant and agree to renegotiate any such term, covenant, or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant, or condition of this Agreement or the application thereof that is invalid or unenforceable, it being the intent of the Parties that the basic purposes of this Agreement are to be effectuated.

13.10 Ambiguities. Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision.

13.11 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

13.12 Days. Unless otherwise explicitly stated herein, references in this Agreement to a number of days shall mean calendar days. As used in this Agreement, “business day” refers to any day other than a Saturday, Sunday, and any day on which banking institutions in the State of Delaware are either required or permitted to close pursuant to applicable law, rule, regulation or executive order.

13.13 Governing Law. This Agreement, and any dispute or controversy arising out of or relating thereto, shall in all respects be governed by and construed according to the laws of the State of Delaware (excluding its conflicts of law principles).

13.14 Entire Agreement. This Agreement sets forth all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto and supersedes and terminates all prior agreements and understandings between the Parties. There are no covenants, promises, agreements, warranties, representations, conditions, or understandings, either oral or written, between the Parties other than as set forth herein and therein. No subsequent alteration, amendment, change of addition to this Agreement shall be binding upon the Parties hereto unless reduced to writing and signed by the respective authorized officers of the Parties.

Development, Commercialization and Licensing Agreement-Confidential-Page 35

IN WITNESS WHEREOF, the Parties hereto have caused this Development, Commercialization and Licensing Agreement to be executed by their duly authorized representatives as of the day and year first above written.


ARCA DISCOVERY, INC., a Delaware corporation

By:		/s/ Richard B. Brewer
		Richard B. Brewer
		Chief Executive Officer

LABORATORY CORPORATION OF AMERICA HOLDINGS, a Delaware corporation

By:		/s/ Bradford T. Smith
		Name: Bradford T. Smith
		Title: E.V.P.

Development, Commercialization and Licensing Agreement-Confidential-Page 36

EXHIBIT A

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Exhibits

EXHIBIT B

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Development, Commercialization and Licensing Agreement-Confidential-Exhibits

Exhibit 10.12

AMENDMENT NO. 1

DEVELOPMENT, COMMERCIALIZATION AND LICENSING AGREEMENT

This AMENDMENT NO. 1 TO DEVELOPMENT, COMMERCIALIZATION AND LICENSING AGREEMENT (“Amendment”) is made and effective as of May 14, 2007, by and between Laboratory Corporation of America Holdings (“LabCorp”) and ARCA Discovery, Inc. (“ARCA”).

WHEREAS, LabCorp and ARCA entered into a Development, Commercialization and Licensing Agreement dated February 1, 2007 (the “License Agreement”); and

WHEREAS, the parties desire to amend the terms of the License Agreement.

NOW, THEREFORE, in consideration of the promises and mutual covenants of the parties and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, LabCorp and ARCA agree to the following amendments to the License Agreement:

1. Sections 2.6 and 2.8 of the License Agreement are hereby amended by deleting the words “ninety (90) days” in each such section and replacing such words with “one hundred eighty (180) days.

2. Except as expressly herein amended, the terms and conditions of the License Agreement as existed prior to this Amendment shall remain in full force and effect. This Amendment shall be governed by and construed according to the laws of the State of Delaware.

IN WITNESS WHEREOF, LabCorp and ARCA have caused this Amendment to be executed, by the duly authorized officers of each party, on the dates shown below.


ARCA Discovery, Inc.		Laboratory Corporation of America Holdings

By:	/s/ Christopher Ozeroff	By:	/s/ Bradford T. Smith


Name:	Christopher Ozeroff	Name:	Bradford T. Smith
Title:	EVP Bus. Dev. & GC	Title:	Executive Vice President
Date:	May 14, 2007	Date:	May 18, 2007

Exhibit 10.13

AMENDMENT NO. 2

DEVELOPMENT, COMMERCIALIZATION AND LICENSING AGREEMENT

This Amendment No. 2 to Development, Commercialization and Licensing Agreement (the “Amendment”) is made and effective as of May , 2008, by and between Laboratory Corporation of America Holdings (“LabCorp”) and ARCA Discovery, Inc. (“ARCA”).

WHEREAS, LabCorp and ARCA entered into a Development, Commercialization and Licensing Agreement dated February 1, 2007, which was amended pursuant to an Amendment No. 1 dated May 14, 2007 (as amended, the “License Agreement”), and

WHEREAS, the parties desire to further amend the terms of the License Agreement.

NOW, THEREFORE, in consideration of the promises and mutual covenants of the parties and other good valuable consideration, the receipt and sufficiency of which is hereby acknowledged, LabCorp and ARCA agree to the following amendments to the License Agreement:

1. Inclusion of LabCorp Wholly-Owned Subsidiaries as Licensees .

a. Section 2.1 of the License Agreement shall be amended by deleting the parenthetical that currently states “(and to those Affiliates [ * ]”, and replacing it with “[ * ].

b. Section 2.8 of the License Agreement is hereby deleted in its entirety.

c. Section 10.2(j) of the License Agreement is hereby deleted in its entirety.

d. Exhibit A of the License Agreement is hereby deleted in its entirety.

e. For informational purposes, attached as Exhibit A to this Amendment is a list of wholly-owned subsidiaries of LabCorp as of the date of this Amendment.

2. Permitted Sublicensees .

a. In Section 2.6 of the License Agreement, the [ * ] are hereby deleted and replaced with [ * ].

b. Exhibit B of the License Agreement is hereby deleted in its entirety and replaced with Exhibit B of this Amendment.

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

c. The following language shall be added to the end of Section 2.6: “ARCA expressly acknowledges that LabCorp shall be permitted to enter into a sublicense with [ * ], subject to the terms of this Section 2.6, [ * ]. If LabCorp enters into a sublicense with [ * ] shall be deemed to be LabCorp’s [ * ] sublicensee [ * ] under this Section 2.6.”

3. A new Section 3.10 shall be added, as follows: “3.10 Additional Committees. The Parties agree that it is desirable to delegate certain responsibilities of the Diagnostics Committee to subcommittees with more narrowly defined responsibilities. The following subcommittees shall be set up within 30 days of the date of Amendment No. 2 to this Agreement, each with the specific responsibilities as set forth below. The Diagnostics Committee shall retain the responsibility for approving each of the deliverables identified below. Each Party, acting through its individual representatives on the subcommittees, shall have an obligation to use commercially reasonable efforts to complete these deliverables within the applicable timelines. The obligations set forth in this new Section 3.10 shall supersede any inconsistent obligations in any other provision of this Agreement:

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

[ * ]

4. Removal of Prior Deadlines. In Sections 4.3 and 5.2 (relating to the Regulatory Plan and Commercial Plan), in the last sentence before clause (a) of each such Section, the words “will be completed within [ * ] and” shall be deleted. In Section 5.3, the following sentence shall be deleted: “A proposed Marketing and Sales Plan will be distributed to the Diagnostics Committee within [ * ] and an approved Marketing and Sales Plan shall be completed within [ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

[ * ]

5. No Other Amendments . Except as otherwise amended by this Amendment, all other terms and conditions in the License Agreement will remain in full force and effect. This Amendment shall be governed by and construed according to the laws of the State of Delaware.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective duly authorized officers or representatives as of the dates shown below.


ARCA Discovery, Inc.		Laboratory Corporation of America Holdings

By:	/s/ Christopher Ozeroff	By:	/s/ Bradford T. Smith


Name:	Christopher Ozeroff	Name:	Bradford T. Smith
Title:	EVP Bus. Dev. & GC	Title:	Executive Vice President
Date:	June 10, 2008	Date:	June 6, 2008

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

EXHIBIT A

W HOLLY -O WNED S UBSIDIARIES OF L AB C ORP

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

EXHIBIT B

P ERMITTED S UBLICENSEES

[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Exhibit 10.14

LOGO

1200 17 ^th Street, Suite 620

Denver, Colorado 80202

Phone: 303-893-1599, Fax: 303-825-0883

July 27, 2007

Michael R. Bristow, M.D., PhD.

Division of Cardiology

University of Colorado Health Sciences Center

Denver, CO 80262

Dear Michael,

ARCA Discovery, Inc. wishes to make unrestricted gifts to the University of Colorado Foundation in support of your laboratory and the research associated with heart failure. We direct these contributions to be allocated as summarized below.


• Lab Personnel Costs -	$	197,000	annually
• General Laboratory Costs		90,000	annually

Total Commitment	$	*287,000*

ARCA expects to fund this commitment through monthly payments of $23,917. These payments are contingent upon ARCA’s financial condition, therefore this arrangement can be terminated at ARCA’s discretion. The effective date of the arrangement is July 1, 2007.

Sincerely,

/s/ Richard B. Brewer

Richard B. Brewer

President & CEO


Acknowledged:		/s/ Michael Bristow
		Michael Bristow, M.D., PhD.

ARCA Discovery, Inc

INTERNAL USE ONLY

(Annual Costs)


*Name*	*Estimated Percentage of Salary Supported*	Amount of Contribution
[ * ]	[ * ]	[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Exhibit 10.15

LOGO

8001 Arista Place, Suite 200

Broomfield, CO 80021

Phone: 720-940-2200, Fax: 720-208-9261

January 16, 2009

Michael R. Bristow, M.D., PhD.

Division of Cardiology

University of Colorado Health Sciences Center

Denver, CO 80262

Dear Michael,

ARCA biopharma, Inc. wishes to make unrestricted gifts to the University of Colorado Foundation in support of your laboratory and the research associated with heart failure during the 2008/2009 academic year. We hope that our contributions can support your laboratory costs as summarized below:


• Lab Personnel Costs -	$	152,000	annually
• General Laboratory Costs		90,000	annually

Total Commitment	$	*242,000*

ARCA expects to fund this commitment through monthly payments of $20,167. These payments are contingent upon ARCA’s financial condition, therefore this arrangement can be terminated at ARCA’s discretion. The effective date of the arrangement is July 1, 2008.

Sincerely,

/s/ Richard B. Brewer

Richard B. Brewer

President & CEO


Acknowledged:		/s/ Michael Bristow
		Michael Bristow, M.D., PhD.

ARCA biopharma, Inc

INTERNAL USE ONLY

(Annual Costs)


*Name*	*Estimated Percentage of Salary Supported*	Amount of Contribution
[ * ]	[ * ]	[ * ]

[*]	Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.

Exhibit 10.16

UNIVERSITY OF COLORADO MATERIALS TRANSFER AGREEMENT

Parties

This is an Agreement, dated October 14, 2005 (the “Effective Date”), between the Regents of the University of Colorado, a body corporate, contracting on behalf of the University of Colorado Health Sciences Center (“UCHSC”), and ARCA Discovery, Inc., a Delaware corporation with a principal place of business located at 1400 16 ^th Street, Suite 220, Denver, CO 80202 (“Recipient”).

Materials

Biological materials to which this Agreement applies: one or more samples, to be specified by Recipient, from the Human Cardiac Tissue Bank of the Department of Cardiology at the UCHSC (“Biological Materials”), and any related information or material supplied in connection therewith.

Whereas, UCHSC owns and is in possession of Biological Materials and has a right to provide said Biological Materials to Recipient as provided under this Agreement;

Whereas, Recipient is conducting specific research activities described in the research plan set forth in Appendix A (“Research”);

Now therefore, to protect UCHSC’s proprietary interests with respect to the Biological Materials, UCHSC agrees to provide Biological Materials to Recipient for purposes of conducting the Research, subject to the following terms and conditions:

(a)

Recipient shall reimburse UCHSC thirty-five thousand dollars ($35,000) of the annual costs of support incurred by UCHSC to meet the obligations of this Agreement. Such annual payment shall be due in quarterly installments of eight thousand seven hundred and fifty dollars ($8,750) payable thirty (30) days from the first day of each quarter. The parties acknowledge that Recipient is current on such payments through September 30, 2005.

(b)

Recipient shall reimburse UCHSC fifty percent (50%) of the costs for equipment upkeep and replacement, and fifty percent (50%) of the costs for tissue procurement, such payments not to exceed ten thousand dollars ($10,000) for any given year without Recipient’s prior approval; provided that UCHSC may terminate this agreement if Recipient declines to approve such excess amounts within ninety (90) days after written request from UCHSC. Such payments shall be due within thirty (30) days of invoice by the UCHSC Cardiology administrator.

(c)

Payments more than sixty (60) days past due shall bear interest at the rate of one and one-half percent (1 ¹ / 2 %) per month compounded, or the maximum interest rate allowable by applicable law, whichever is less.

(d)

Nothing in this Agreement requires UCHSC to provide Biological Materials to Recipient in amounts that would prohibit or substantially hinder UCHSC from carrying on its own research.

2.	Recipient agrees that Biological Materials may be used solely in Recipient’s facilities, or such other party’s facilities as the Recipient and UCHSC shall agree to in writing or as otherwise permitted under Section 3 below, and that Recipient will follow all applicable NIH guidelines.

3. (a)

Recipient must maintain control of Biological Materials and may not transfer control to third parties, except as otherwise permitted under this Section 3, without the prior written consent of UCHSC, and whose consent will not be unreasonably withheld.

(b)

Recipient may provide samples of the Biological Materials to any third party for chemical or biological analysis and testing, where such third party has entered into a collaborative research and development agreement with Recipient or when the information from such analysis may be commercialized by Recipient or by third parties under an agreement with Recipient; provided that Recipient notifies UCHSC of any third party that has been provided samples of the Biological Materials.

(c)

In the event that a third party is provided commercial rights to the data derived from the chemical and/or genetic analysis of the Biological Materials, Recipient will use commercially reasonable efforts to negotiate a cost-free subscription for UCHSC for nonprofit research purposes to the commercial database of such third party containing data derived from the chemical and/or genetic analysis of the Biological Materials. The subscription would preferably freely permit UCHSC’s use of the subscription database(s) for the purpose of grant or contract preparation and submittal to a non-profit or government agency for research funding and UCHSC research use, and publication of UCHSC’s own research results (subject to UCHSC’s obligation to take reasonable steps prior to publication to protect ARCA intellectual property rights). In the event that Recipient cannot provide UCHSC with access to the commercial database of such third party under the terms described above, Recipient will use commercially reasonable efforts to make data that Recipient receives from third party analysis available to UCHSC for purposes of grant or contract preparation and submittal to a non-profit or government agency, for funding of UCHSC’s nonprofit research use.

(d)

Recipient’s use of Biological Materials pursuant to this Agreement shall comply with the non-competition and other provisions of the Strategic Alliance Agreement between ARCA and Myogen, Inc., dated October 7, 2005.

(a)

Nothing in this Agreement grants Recipient rights under any patents or in any know-how of UCHSC.

(b)

UCHSC places no restrictions other than those specified in this Agreement on Recipient’s use of Biological Materials.

(c)

UCHSC will not make claims to test data, results, lab notes, reports or other works created or prepared without use of UCHSC funds, facilities, or personnel acting in their capacity as UCHSC employees, and Recipient shall own exclusively all intellectual property or other rights in any such test data, results, lab notes, reports or other works created or prepared using the Biological Materials.

BIOLOGICAL MATERIALS ARE PROVIDED WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. RECIPIENT AGREES THAT UCHSC AND ITS EMPLOYEES AND AGENTS HAVE NO LIABILITY IN CONNECTION WITH BIOLOGICAL MATERIALS PROVIDED UNDER THIS AGREEMENT OR THEIR USE BY RECIPIENT UNDER THIS AGREEMENT.

RECIPIENT AGREES TO INDEMNIFY UNIVERSITY FOR LIABILITY , LOSS, OR DAMANGE THEY MAY SUFFER AS A RESULT OF CLAIMS, DEMANDS, COSTS OR JUDGMENTS AGAINST UNIVERSITY ARISING OUT OF THE ACTIVITIES TO BE CARRIED OUT PURSUANT TO THIS AGREEMENT.

This Agreement will terminate on the earliest of the following dates: (i) five (5) years from the Effective Date; (ii) when Recipient determines that it has obtained all required Biological Materials and states so in writing; (iii) when UCHSC’s supply of Biological Materials becomes exhausted; (iv) when all other business agreements, such as patent licenses, between Recipient and UCHSC or its agents have terminated; (v) immediately after any continuous fifteen (15) month period in which Recipient fails to make the support payments specified in Article 1. In the event this Agreement terminates pursuant to clause (i) of this Section 6, Recipient will have the option to renew this Agreement under substantially similar terms.

UCHSC and Recipient will make reasonable efforts to monitor the supply and use of samples from the Heart Tissue Bank in order to assure that each entity maintains an adequate supply of tissue in amounts that would not prohibit or substantially hinder UCHSC from carrying on its own research or commercial activities.

This Agreement sets forth the entire agreement and understanding between the parties regarding the subject matter herein and cannot be changed or amended except by written agreement executed by both parties. This Agreement may be assigned to a party that acquires substantially all of the assets of Recipient upon thirty (30) days prior written notice to UCHSC. A change in control of Recipient shall not be considered an assignment of this Agreement.

9.	Any notice or communication permitted or required hereunder must be in writing.

10.

All waivers to this Agreement must be in writing. The failure of either party to insist upon strict performance of any provision of this Agreement, or to exercise any right provided for herein, shall not be deemed to be a waiver for the future of such provision or right, and no waiver or any provision or right shall affect the right of the waiving party to enforce any other provision or right herein.

11.

This Agreement will be governed by and interpreted in accordance with the laws of the State of Colorado as those laws are applied to contracts entered into and to be performed entirely in Colorado by Colorado residents. Venue for purposes of filing any legal action arising out of or in connection with this Agreement shall lie in Denver, Colorado which shall be deemed to be a convenient forum.

12.	If any provision of this Agreement is determined to be unenforceable for any reason, the remaining provisions hereof shall be unaffected and remain in full force and effect.

13.	This Agreement may be executed in several counterparts, all of which shall constitute one agreement. This Agreement may be executed and delivered by facsimile.

The authorized signatures below verify agreement between the parties.


For UCHSC		For Recipient
		ARCA Discovery, Inc.

/s/ David N. Allen		/s/ Timothy D. Hoogheem
David N. Allen		Timothy D. Hoogheem
Director, Technology Transfer Office		Chief Business and Financial Officer
University of Colorado		1400 16 ^th Street
4001 Discovery Drive, Suite 390		Suite 220
Boulder Colorado, 80309		Denver, CO 80202
Date:	October 14, 2005	Date:	October 14, 2005

Exhibit A

Research Plan: ARCA Discovery, Inc. will use the Human Cardiac Tissue Bank for cardiovascular therapeutic research, particularly discovery and characterization of genetic polymorphisms that impact the natural history of cardiovascular disease, and development of therapeutics and diagnostics to treat patients, where the diagnosis and/or indications will be guided by the presence or absence of these polymorphisms.

EXHIBIT 31.1

CERTIFICATION

I, Richard Brewer, certify that:

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

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

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

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

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

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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

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

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2009

/s/ Richard B. Brewer

Richard B. Brewer

President and Chief Executive Officer

(Principal Executive Officer)

EXHIBIT 31.2

CERTIFICATION

I, Kathryn E. Falberg, certify that:

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

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2009

/s/ Kathryn E. Falberg

Kathryn E. Falberg

Chief Financial Officer and Chief Operating Officer

(Principal Financial Officer)

EXHIBIT 32.1

ARCA BIOPHARMA, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SEC. 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Richard B. Brewer, Chief Executive Officer of ARCA biopharma, Inc. (the “Company”), and Kathryn E. Falberg, Chief Financial Officer of the Company, each hereby certifies that, to the best of his/her knowledge:

(1) The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2009, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”) fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act; and

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

In Witness Whereof , the undersigned have set their hands hereto as of the 15th day of May, 2009.


/s/ Richard B. Brewer				/s/ Kathryn E. Falberg
Richard B. Brewer				Kathryn E. Falberg
President and Chief Executive Officer (Principal Executive Officer)				Chief Financial Officer and Chief Operating Officer (Principal Financial Officer)

“This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of ARCA biopharma, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.”