UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

PONIARD PHARMACEUTICALS, INC.

Notice of 20082010 Annual Meeting of Shareholders

TO THE SHAREHOLDERS:

        The 20082010 Annual Meeting of Shareholders of Poniard Pharmaceuticals, Inc. will be held at the Company's corporate headquartersprincipal executive offices located at 7000 Shoreline Court, Suite 270, South San Francisco, California 94080, on Tuesday,Wednesday, June 24, 2008,9, 2010 at 9:00 a.m., Pacificlocal time, for the following purposes:

1.

To elect nineten members to the Board of Directors.Directors;



2.

To ratify the appointment of KPMGErnst & Young LLP as the Company's independent registered public accounting firm for 2008.2010;



3.

To approve an amendment and restatement of the Company's Amended and Restated 2004 Incentive Compensation Plan (i) to increase the number of shares of common stock issuable under the plan from 9,738,159 shares to 10,938,159 shares and (ii) to increase the limits on the number of shares that may be granted as awards to individuals in a calendar year to qualify such awards as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code. Shareholders are also being asked to approve the material terms for performance-based awards under the plan; and



4.

To transact such other business as may properly come before the annual meeting or any adjournments or postponements thereof.

Our Board of Directors unanimously recommends that you vote forFOR Proposals 1, 2 and 23 above.

        Your attention is directed to the accompanying proxy statement for further information with respect to the matters to be acted upon at the annual meeting. The presence of the holders of a majority of the shares entitled to vote at the annual meeting, in person or represented by proxy, is necessary to constitute a quorum. To ensure representation at the annual meeting, you are urged to complete, sign and date the enclosed proxy card and return it promptly in the enclosed postage-prepaid envelope.

        The record date for determining shareholders entitled to notice of, and to vote at, the annual meeting, or any adjournments or postponements thereof, is the close of business on April 25, 2008.16, 2010.

BY ORDER OF THE BOARD OF DIRECTORS



Gerald McMahonRonald A. Martell
Chairman and Chief Executive Officer

May 29, 2008April 28, 2010
South San Francisco, California

YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD REGARDLESS OF WHETHER OR NOT YOU PLAN ON ATTENDING THE 2010 ANNUAL MEETING, WE ASK THAT YOU VOTE AS PROMPTLY AS POSSIBLE BY USING ONE OF THREE CONVENIENT METHODS: (1) BY ACCESSING THE INTERNET SITE DESCRIBED IN THESE VOTING MATERIALS OR VOTING INSTRUCTION FORM PROVIDED TO ATTENDYOU; (2) BY CALLING THE ANNUAL MEETING.TOLL-FREE NUMBER; OR (3) BY SIGNING, DATING AND RETURNING ANY PROXY CARD OR INSTRUCTION FORM PROVIDED TO YOU. VOTING BY INTERNET OR BY TELEPHONE IS FAST AND CONVENIENT, AND YOUR VOTE IS IMMEDIATELY CONFIRMED AND TABULATED.

PONIARD PHARMACEUTICALS, INC.
7000 SHORELINE COURT, SUITE 270
SOUTH SAN FRANCISCO, CA 94080
(650) 583-3774

PROXY STATEMENT FOR 2010 ANNUAL MEETING OF SHAREHOLDERS

General

        This proxy statement is furnished in connection with the solicitation by the board of directors of Poniard Pharmaceuticals, Inc. of proxies in the accompanying form for use at the Annual Meetingannual meeting of Shareholdersshareholders to be held on Tuesday,Wednesday, June 24, 2008,9, 2010, and any adjournments or postponements thereof. The annual meeting will be held at 9:00 a.m., Pacificlocal time, at the Company's corporate headquartersprincipal executive offices located at 7000 Shoreline Court, Suite 270, South San Francisco, California 94080.

        The approximate date of mailing thisThis proxy statement is first being furnished via the Internet and the accompanying proxy cardNotice of Internet Availability of Proxy Materials is May 29, 2008.first being mailed to shareholders entitled to vote at the annual meeting on or about April 28, 2010.

Record Date and Voting SecuritiesShares

        Only holders of sharesrecord of our common stock outstanding atas of the close of business on April 25, 2008,16, 2010, the record date for the annual meeting, are entitled to receive notice of, and to vote at, the annual meeting. On the record date, there were 34,687,72447,073,262 shares of common stock outstanding. Each holder of common stock is entitled to one vote for each share held of record in such person's name on the record date. Holders of common stock are entitled to vote on all proposals properly presented at the annual meeting.

Quorum

        Under Washington law and our articles of incorporation, a quorum consisting of a majority of the shares entitled to vote must be represented in person or by proxy for the transaction of business at the annual meeting. Abstentions and broker non-votes are counted as present for purposes of determining a quorum. See "Required Vote; Abstentions and Broker Non-Votes" below.

Internet Availability of Proxy Materials; Requesting Paper or E-Mail Copies

        Under rules adopted by the U.S. Securities and Exchange Commission (SEC), we are furnishing proxy materials to our shareholders via the Internet, instead of mailing printed copies of these materials to each shareholder. On or about April 28, 2010, we mailed to all shareholders entitled to vote at the annual meeting a Notice of Internet Availability of Proxy Materials directing shareholders to a web site,www.proxyvote.com, where they can access our proxy materials and view instructions on how to vote online or by telephone. Our 2009 Annual Report to Shareholders was made available at the same time and by the same method. If you would prefer to receive paper or e-mail copies of our annual report to shareholders and proxy materials for this annual meeting or for all future meetings of shareholders, please follow the instructions included in the Notice of Internet Availability of Proxy Materials.

Voting Procedures

        All votes cast by proxy or in person at the annual meeting will be tabulated by a representative of BNY Mellon Shareowner Services, our transfer agent, who will act as the inspector of election for the meeting. The inspector of election will separately tabulate affirmative and negative votes, abstentions and broker non-votes. The inspector will also determine whether a quorum is present.

        Shares that are properly voted on the Internet or by telephone or for which proxy cards are properly executed and returned will be voted at the annual meeting in accordance with the directions given, or in the absence of directions, will be voted FOR the election of the ten nominees to the board of directors named herein and FOR Proposals 2 and 3. It is not expected that any additional matters will be brought before the annual meeting, but if other matters are properly presented, the persons named as proxies will vote in their discretion on such matters.

        The manner in which your shares may be voted depends on how your shares are held. If you own shares of record, meaning that your shares are represented by certificates or book entries in your name so that you appear as a shareholder on the records of BNY Mellon Shareowner Services, our transfer agent, and you request a paper copy of the proxy materials as indicated in your Notice of Internet Availability of Proxy Materials, a proxy card for voting these shares will be included with the paper proxy statement you receive. If you own shares in street name, meaning that your shares are held by a bank or brokerage firm or other nominee, and you request a paper copy of the proxy materials as indicated in your Notice of Internet Availability of Proxy Materials, or if you have already requested paper copies of proxy materials through your bank, brokerage firm or other nominee, you may instead receive a voting instruction form from that institution with this proxy statement that instructs you how to vote your shares.

        Record holders and many street name holders may vote on the Internet or by telephone, as described below. The law of Washington, under which we are incorporated, specifically permits electronically transmitted proxies, provided that each proxy contains or is submitted with information, such as a security or control number, from which the inspector of election can determine that the proxy is authorized by you.

Voting Via the Internet or by Telephone

        Shares Registered in Your Name.    Shareholders of record may vote shares of common stock by using a touch-tone telephone to call 1-800-579-1639 (toll-free 24 hours a day/7 days a week) or via the Internet by accessing the web sitewww.proxyvote.com. You will need to have your proxy card in hand when you access the web site or when you call. Votes submitted by telephone or via the Internet must be received by 11:59 p.m., Eastern Time, on June 8, 2010. Submitting your proxy by telephone or via the Internet will not affect your right to vote in person should you decide to attend the annual meeting.

        Shares Registered in the Name of a Bank or Broker.    Most beneficial owners of shares held in street name receive instructions from their bank, brokerage firm or other nominee, rather than our proxy card. A number of brokers and banks are participating in a program provided through Broadridge Financial Solutions, Inc. that offers the means to grant proxies to vote shares via the Internet. Votes submitted via the Internet must be received by 11:59 p.m., Eastern Time, on June 8, 2010. Submitting your vote via the Internet will not affect your right to vote in person should you decide to attend the annual meeting. A beneficial owner who wishes to vote at the annual meeting must have an appropriate proxy from his or her broker or bank appointing the beneficial owner as attorney-in-fact for purposes of voting the beneficially held shares at the annual meeting.

Required VotesVote; Abstentions and Broker Non-Votes

        Election of Directors (Proposal 1).    The holders of common stock are entitled to vote for the election of directors. Each common shareholder voting on Proposal 1 has the right toelection of directors may cumulate his or her votes and cast as many votes as are equal to the number of directors to be elected multiplied by the number of votes such shareholder is entitled to cast. These votes may be cast for one nominee or distributed among as many nominees as the shareholder desires. If a shareholder wishes to cumulate his or her votes, such shareholder should multiply the number of votes he or she is entitled to cast by the number of directors to be elected (deriving a cumulative total) and then writespecify the number of

votes for each director next to each director's namein the section entitled "Cumulative Voting Instructions" on the proxy card. The total votes cast in this manner may not exceed the cumulative total. If a shareholder does not wish to cumulate votes for directors, the shareholder should indicate a vote "for" or "against" each nominee, as provided on the proxy card. Under Washington law and our articles of incorporation, ifproxy. If a quorum is present at the annual meeting, the nineten nominees for election as directors who receive the greatest number of votes cast for the election of directors by the holders of common shares entitled to vote at the annual meeting will be elected directors.

        Ratification of Independent Registered Public Accounting Firm (Proposal 2).    TheIf a quorum is present at the annual meeting, the proposal relating to the ratification of the appointment of KPMGErnst & Young LLP as our independent registered public accounting firm for 20082010 will be adopted if the number of votes cast in favor of the proposal by holders of common shares entitled to vote exceeds the number of votes cast against the proposal at the annual meeting.

        Broker        Amendment and Restatement of Amended and Restated 2004 Incentive Compensation Plan (Proposal 3).    If a quorum is present, the proposal relating to the amendment and restatement of the Amended and Restated 2004 Incentive Compensation Plan will be adopted if the number of votes cast in favor of the proposal by holders of common stock entitled to vote exceeds the number of votes cast against the proposal at the annual meeting.

        Abstentions and broker non-votes and abstentions will have no impact on the vote relating to Proposals 1, 2 and 23 because they will not represent votes cast at the annual meetingmeeting. However, abstentions and broker non-votes are counted as present for purposes of votingdetermining whether a quorum is present for the transaction of business at the annual meeting. An abstention occurs when a shareholder withholds such shareholder's vote by checking the "abstain" box on such proposals.the proxy, or when a shareholder present at a meeting does not cast a ballot. Broker non-votes occur when a brokerbrokerage firm, bank or other nominee has not received customer instructions and the brokerbrokerage firm, bank or nominee either does not exercise, or is not permitted to exercise, discretion to vote those shares on a particular matter. Brokerage firms, banks and other nominees generally have discretionary authority to vote their customers' shares on the ratification of the appointment of Ernst & Young LLP as our registered public accounting firm (Proposal 2). Brokers, maybanks and other nominees do not have discretionary authority to vote

their clients' proxies in the brokers' own discretion as tocustomers' unvoted shares on the election of directors and the ratification of independent registered public accounting firm if the clients have not furnished voting instructions prior to the annual meeting.

        Proxies solicited by the board of directors will be voted in favor of the director nominees and "for" Proposal 2, unless shareholders direct otherwise in their proxies. The proxy cards also confer discretionary authority to vote the shares authorized to be voted thereby on any matter that was not known(Proposal 1) or on the dateamendment of this proxy statement, but that properly may be presented for action at the annual meeting.our incentive compensation plan (Proposal 3).

YOUR VOTE IS IMPORTANT. ACCORDINGLY, WE ASK THATWHETHER OR NOT YOU COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD REGARDLESS OF WHETHER YOU PLANEXPECT TO ATTEND THE ANNUAL MEETING.MEETING, WE URGE YOU TO VOTE YOUR PROXY AS PROMPTLY AS POSSIBLE VIA THE INTERNET, BY TELEPHONE OR BY SIGNING, DATING AND RETURNING A PROXY CARD.

Revocation

        A shareholder may revoke a proxy at any time before its exercise by:

•

voting again by Internet or by telephone;



•

delivering a written notice or a later-dated proxy card to our corporate secretary at our principal executive offices; or



•

voting in person at the annual meeting.

        Any shareholder owning common stock in street name may change or revoke voting instructions by timely delivery of a valid later-dated proxy,contacting the bank or brokerage firm or other nominee holding the shares or by obtaining a legal proxy from such institution and voting in person at the annual meeting. However,You should contact your attendance at the annual meeting will not, by itself, revoke yourbank or brokerage account representative to learn how to obtain a legal proxy.

Expenses of Solicitation

        We have retained Mellon Investor Services LLC, 480 Washington Boulevard, 27th Floor, Jersey City, NJ 07310The board of directors of Poniard is soliciting your proxy to help solicit proxies. We will payvote your shares at the annual meeting, and the cost of their services, which is estimated at approximately $6,500, plus reasonable expenses. Proxiessuch solicitation will be solicitedborne by personal interview, mail and telephone.the company. In addition weto solicitation by mail, our directors, officers and regular employees may solicit proxies personally, via e-mail, or by telephone or facsimile. These persons will not receive any additional compensation for assisting in the solicitation. We also will reimburse brokerage firms, nominees, custodians and other persons who represent beneficial owners of stockfiduciaries for their reasonable expenses in forwarding solicitation materials to beneficial owners. Our directors, officers and regular employees also may solicit proxies, personally or by telephone or facsimile, without additional compensation.

We have not retained the services of a proxy solicitor.

ELECTION OF DIRECTORS
(PROPOSAL 1)

Nominees for Director

        NineTen directors are to be elected by the holders of common stock at the annual meeting. These directors willeach serve one-year terms that will expire at the 2009 Annual Meetingour 2011 annual meeting of Shareholders,shareholders, or untilat such time as their successors have been elected and qualified. All of the director nominees currently serve as directors of our company.company and were selected by the board upon the recommendation of its nominating and corporate governance committee. In connection with our $65 million equity financing, which closed on April 26, 2006, we entered into an agreement to use our best efforts to cause one person designated by MPM Capital Management or MPM,LLC (MPM) and one person designated by mutual agreement of MPM and Bay City Capital Management IV LLC or Bay(Bay City Management,Management), the lead investors in the financing, to be nominated and elected to our board of directors. Mr. Simon initially was nominated and electedappointed to the board in April 2006 upon the recommendation of MPM, which recommendation was independently evaluated, approved and recommended toby the board by our nominating and corporate governance committee based on the criteria described under the heading "Director Nominations and Qualifications" below.committee. MPM and Bay City Management have not recommended a second designee. Two current directors, Drs.Frederick B. Craves and Carl S. Goldfischer, are managing members of Bay City Capital LLC, an affiliate of Bay City Management.

        Unless a shareholder withholds his or her vote, each proxy will be voted for the election of the following nominees:

        GERALD McMAHON,MCMAHON, PhD, age 53,55, has served as Chairman of our board of directors since June 2004 and was appointed our Chief Executive Officer infrom May 2004 and Chairman of the Board of Directors in June 2004. Dr. McMahon served as our President from June 2005 to May 2007. Dr. McMahonFebruary 2010. Previously, he was President of SUGEN, Inc., a biopharmaceutical company focused on the discovery and development of novel, targeted small-molecule drugs, from March 2002 to January 2004. Prior thereto, he held a number of research and development management positions at SUGEN anddrugs. Dr. McMahon played a key role in the discovery and development of several innovative cancer products, including SUTENT®Sutent®, a multi-targeted protein kinase inhibitor for the treatment of advanced cancers, currently marketed by Pfizer, Inc.Pfizer. He joined SUGEN whichin 1993 and, following acquisition of SUGEN by Pharmacia in 1999, Dr. McMahon joined in 1993, was acquired byserved as a key executive and manager of R&D at Pharmacia Corp. in 1999, which subsequently was acquiredas President of SUGEN until the acquisition of Pharmacia by Pfizer in 2003. Dr. McMahon currently is a director of Trellis Bioscience,Biosciences, Inc., a privately held development stage biotechnology company. Dr. McMahoncompany focusing on the discovery and development of novel therapeutic antibodies. He holds a BS degreeB.S. in biology and a PhD in biochemistry from Rensselaer Polytechnic Institute. Having served as the company's Chief Executive Officer for almost six years, Dr. McMahon brings to the board an in-depth understanding of the science and clinical history of the company's picoplatin product candidate.

        ROBERT.ROBERT S. BASSO, age 62,65, was appointed a director in May 2007. Mr. Basso founded BEST Partners LLC, an independent consulting firm, in 2006.2007. He has nearly 40 years of experience in the financial services industry. Prior to his positionMr. Basso served as executive vice presidentExecutive Vice President of Fidelity's National Financial, Services unit, following its acquisitiona Fidelity Investments company providing clearing services and execution products, from July 2003 to December 2004 and as a financial services consultant to Fidelity Investments from January 2005 to January 2006. From January 1990 to June 2003, he served as Chairman and President of Correspondent Services Corporation, or CSC, thea subsidiary of UBS AGPaineWebber Inc., a brokerage firm providing clearing, subsidiary, Mr. Basso was president

execution, settlement, administrative and chairmanmanagement information services, and as Managing Director of CSC. Prior to that, he served as president of Broadcort Capital Corp., the Merrill Lynch & Co. clearing subsidiary, which he established and developed. Mr. Basso also was a managing director ofUBS PaineWebber UBS and Merrill Lynch.Inc. He began his Wall Street career with Loeb, Rhoades & Company. Mr. Basso serves as an advisor to several independent entities. He is currently a trustee of the Securities Industry Foundation for Investor Education (SIFIE). He earnedholds a B.S. degree from Seton Hall University and an M.B.A. from Pace University. Mr. Basso brings to the board broad financial and executive experience, as well as important insights on managing the challenges of operating in a highly-regulated industry. Given his extensive experience in the financial services industry, Mr. Basso has been determined to be an audit committee financial expert by the board.

        FREDERICK B. CRAVES, PhD, age 62,66, has been a director since July 1993. Dr. Craves is an investment partner, a Managing Director and a co-founder of Bay City Capital LLC or BCC,(BCC), a merchant bank providing advisory services and investing in life sciences companies, and serves as a member of the board of directors and Chairman of the Executive Committee of BCC. Prior to founding BCC, he spent over 20 years leading and managing biotechnology and pharmaceuticals companies. Dr. Craves was Executive Vice President of Schering Berlin and Chief Executive Officer and President of Berlex Biosciences, a research, development and manufacturing organization. He foundwas a founder of Burrill & Craves, a merchant bank focused on biotechnology and emerging pharmaceutical companies. He was also the founding Chairman of the Board and Chief Executive Officer of Codon, and

co-founder of Creative Biomolecules. Dr. Craves previously served as a director of Medarex, Inc., a public biopharmaceutical company which was acquired by Bristol-Meyers Squibb in September 2009 (from 1998 to 2005), and Incyte Corporation, a public drug discovery and development company (from 1993 to 2006). He presently is a member of the board of directors of VIA Pharmaceuticals.Pharmaceuticals, Inc., a public biotechnology company, as well as Progenetech Inc., a private molecular diagnostics company, and ReSet Therapeutics, Inc., a private biotechnology company. He also servicesserves as a member of The J. David Gladstone Institutes' Advisory Council and is a member of the board of trustees of Loyola Marymount University in Los Angeles. Dr. Craves earned a BSB.S. degree in biology from Georgetown University and a PhD in Pharmacologypharmacology and Toxicologytoxicology from the University of California, San Francisco. Dr. Craves extensive life science industry and capital markets experience makes him a valued advisor and board thought leader on issues relating to corporate finance, business development and strategic planning. Having served on the board for over 16 years, he has an intimate knowledge of the company's operations and strategic vision.

        E. ROLLAND DICKSON, MD, age 74,76, has been a director since May 1998. In December 2003, Dr. Dickson retired as the Mary Lowell Leary Professor of Medicine at the Mayo Medical School and as Director of Development at the Mayo Foundation for Medical Education and Research, positions which he had held since 1993. Dr. Dickson continues to hold Emeritus titles for each of these positions. In 1999, Dr. Dickson was appointed to the Boardboard of Trusteestrustees of the Mayo Foundation. Dr. Dickson is a director of Axcan Pharma, Inc., a publicly owned biotechnologyprivately held pharmaceutical company, and Pathways Diagnostic Corporation, a development stage biotechnology company, and is a member of the scientific advisory committee of BCC. He also serves as the Chairman of the Board of Directors at A.J. Palumbo Charitable Foundation in Pittsburg, PA and is the Chairman of the Board of Directors of Mayo Clinic Stiftung in Frankfurt, Germany. Dr. Dickson received his MSM.S. degree from the University of Minnesota and his MDM.D. degree from The Ohio State University. Dr. Dickson's extensive scientific and medical knowledge and experience bring to the board an important perspective on the requirements and behaviors of the medical community and cancer patients with respect to the company's efforts to develop and commercialize its picoplatin product candidate.

        CARL S. GOLDFISCHER, MD, age 49,51, has been a director since March 2000. He has been Managing Director of BCC since July 2001 and serves on its Boardboard of Directorsdirectors and Executive Committee.executive committee. He joined BCC as an Executive-in-Residence in January 2001. Dr. Goldfischer was the Vice President, Finance and Chief Financial Officer of ImClone Systems Incorporated from May 1996 to July 2000. Dr. Goldfischer is a director of Brain Cells,EnteroMedics, Inc. and MAP Pharmaceuticals, Inc., both public biopharmaceuticallife science companies, and a director of Etex Corporation, EnteroMedics,Brain Cells, Inc., PTC Therapeutics, Inc., Metabolex, Inc. and Nevro Corporation,Epizyme, Inc., all privately held development stage biotechnology or medical

device companies. He is a member of the Boardboard of Trusteestrustees of Sarah Lawrence College. Dr. Goldfischer received his MDM.D. degree from Albert Einstein College of Medicine in 1988, and served as a resident in radiation oncology at Montefiore Hospital of the Albert Einstein College of Medicine until 1991. Dr. Goldfischer brings to the board extensive public and private life science company and industry investment, financial operations, strategic planning and transactional experience.

        ROBERT M. LITTAUER, age 59,61, has been a director since May 2004. Mr. Littauer has over 30 years'years of experience in the medical technology, high technology and biotechnology industries. From June 1987 to September 1996, he served the company in various management positions, including Senior Vice President, Chief Financial Officer and Treasurer. Mr. Littauer has been Vice President, Chief Financial Officer and Treasurer of Light Sciences Oncology, Inc., a Seattle-based private biotechnology company, since November 2005. He served as Chief Executive Officer of Kaleidos Pharma, Inc., a privately owned biotechnology company, from August 2002 to September 2004. Previously, he served as Vice President and Chief Financial Officer of Detto Technologies, Inc., a privately owned software developer, from June 2001 to July 2002. He was Chief Executive Officer from January 2001 to April 2001, and Vice President and Chief Financial Officer from October 2000 to January 2001, of Plymedia, Inc., a privately owned developer of digital imaging technology. Prior to that, he held Chief Financial Officer and senior executive positions at Avenue A, Inc. (subsequently aQuantive, Inc.), anpurchased by Microsoft Corporation), a public internet media company, and at Ostex International, Inc., a public medical diagnostics company. Mr. Littauer received an MBAM.B.A. degree and a BSB.S. degree in Industrial Engineeringindustrial engineering and Operationsoperations from Cornell University. Mr. Littauer brings to the board broad financial and operations management experience in the life science and high tech industries, particularly with respect to financing strategies, risk assessment and internal control of financial reporting. Given his strong financial experience, Mr. Littauer has been determined to be an audit committee financial expert by the board.

        GARY A. LYONS, age 58, became a director in July 2009. Mr. Lyons has provided business development consulting services to the company since April 2009. He has served as a director of Neurocrine Biosciences, Inc., a public biotechnology company focused on neurological and endocrine diseases and disorders, since February 1993 and held various executive positions with Neurocrine, including President and Chief Executive Officer, from February 1993 to January 2008. Prior to joining Neurocrine, Mr. Lyons held a number of senior management positions at Genentech, Inc., including Vice President of Business Development, Vice President of Sales, and Director of Sales and Marketing. In addition to the Neurocrine board, Mr. Lyons currently serves on the boards of directors of Rigel Pharmaceuticals, Inc, Vical Incorporated and Facet Biotech Corporation, all public biotechnology companies. Mr. Lyons holds a B.S. degree in marine biology from the University of New Hampshire and an M.B.A. from Northwestern University's J.L. Kellogg Graduate School of Management. Mr. Lyons brings to the board extensive pharmaceutical industry corporate management and business development experience.

        RONALD A. MARTELL, age 46,48, has been a director since June 20062006. Mr. Martell was appointed our Chief Executive Officer in February 2010, and was appointedhe served as our President and Chief Operating Officer infrom May 2007.2007 to February 2010. Prior thereto, Mr. Martell served as Senior Vice President, Commercial OperationOperations of ImClone Systems Incorporated from January 2004 to August 2006. While at ImClone, Mr. Martell was been responsible for overseeing the company's sales, marketing, and project and alliance management. Mr. Martell joined ImClone in November 1998 as Vice President, Marketing. From 1988 to 1998, he served in a variety of positions at Genentech, Inc., most recently as Group Manager, Oncology Products. Mr. Martell brings to the board a deep familiarity with the company's operations, strategy and vision and a strong record of successful corporate and product portfolio planning and management. As the company's Chief Executive Officer, he provides a critical link between management and the board, enabling the board to provide its oversight function with the benefit of management's perspective of the business.

        NICHOLAS J. SIMON III, age 53,55, has been a director since April 2006. He is a Managing Director of Clarus Ventures, LLC, a life sciences focused venture capital firm that he co-founded in 2005. He has served as a general partner of MPM BioVentures III since October 2001. Mr. Simon has more than 26 years of industry and investment experience in biotechnology. From 2000 to July 2001, he was Chief Executive Officer, founder and a director of Collabra Pharma, Inc., a pharmaceutical development company. From 1989 to March 2000, Mr. Simon served in various management positions at Genentech, Inc., including Vice President of Business and Corporate Development. Mr. Simon previously served as a director of Barrier Therapeutics, Inc. from 2003 to 2007 and CoTherix, Inc. from 2003 to 2007, both public biotechnologies companies. Mr. Simon currently serves on the boardboards of directors of ARYx Therapeutics, Inc., aAchillion Pharmaceuticals, Inc. and Avanir Pharmaceuticals, Inc., all public biotechnology company.companies. In addition, he is a director of CoMentis, Inc., Pearl Therapeutics, Inc., Sientra, Inc., NeoSil Incorporated, QuatRx Pharmaceuticals Co. and Verus Pharmaceuticals, Inc,Inc., which are private biotechnology companies. He also is on the advisory council at the Gladstone Institute, a private not-for-profit research institute affiliated with the University of California, San Francisco. Mr. Simon received a BSB.S. degree in microbiology from the University of Maryland and an MBAM.B.A. in marketing from Loyola University. Mr. Simon brings to the board more than 26 years of biotechnology industry and investment experience focused on the development of innovative product candidates and the optimization of shareholder value.

        DAVID R. STEVENS, PhD, age 59,61, has been a director since May 2004. Dr. Stevens has participated in the pharmaceutical and biotechnology industries since 1978. He is currently chairmanChairman of CanCog Techonologies,Advanced Headache Intervention, Inc., a contract research organization,privately held medical device company, and Cedus, Inc., a privately held biopharmaceutical company. He is also a board member of Micro-Imaging Solutions, LLC, a privately held medical device company, and Aqua Bounty Technologies, Inc., a biotechnology firm. Dr. Stevens is a memberfirm listed on the AIM market of the boards of Advanced Cosmetic Intervention, Inc., Advanced Headache Intervention, Inc. and Micro-Imaging Solutions, LLC, all private medical device companies.London Stock Exchange. He was an advisor to BCC from 1999 through Decemberto 2006. Dr. Stevens was formerlypreviously President and Chief Executive OfficerCEO of Deprenyl Animal Health, Inc., a public veterinary pharmaceutical company, from 1990 to 1998, and Vice President, Research and Development, of Agrion Corp., a private biotechnology company, from 1985 to 1988. He began his career in pharmaceutical research and development at the former Upjohn Company, where he contributed to the preclinical developmentevaluation of Xanax®Xanax and Halcion®.Halcion. Dr. Stevens received BSB.S. and DVM degrees from Washington State University, and a PhD in Comparative Pathologycomparative pathology from the University of California, Davis. He is a Diplomate of the American College of Veterinary Pathologists.

        It is intended that votes will be cast pursuant Dr. Stevens has worked in the pharmaceutical and biotechnology industries since 1978. He brings to the enclosed proxy card forboard a diversity of management, operational and product development experience and a unique perspective on the election as directorscompany's business, strategic goals and results of the foregoing nominees.operations.

        All nominees have consented to serve as directors. If any nominee is not available as a candidate for election as a director at the annual meeting, the proxy holders will have the discretionary authority under the proxy to vote for thesuch substitute nominee, if any, recommended by the existing directors. We presently know of no circumstance that would render any of the named nominees unavailable.

        Pursuant to our restated bylaws, shareholders seeking to nominate other candidates for election to the board of directors at the annual meeting must give written notice to our corporate secretary not less than 60 days or more than 90 days before the annualdate of the scheduled meeting. Such notice must contain certain information as to the shareholder giving the notice and each proposed nominee, as described under the heading "Director Nominations and Qualifications" below. If less than 70 days' notice or prior public disclosure of the date of the scheduled annual meeting is given or made, notice by the shareholder must be given not later than the tenth day following the earlier of the mailing ofdate on which notice of the annual meeting was mailed or the date on which public disclosure of the annual meeting date was made. Our restated bylaws provide that no person will be elected a director unless nominated in accordance with the restated bylaws.

        Our board of directors recommends that shareholders voteFOR each of the director nominees.

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Board Leadership Structure

        Our board of directors does not have a policy on whether the same person should serve as both Chief Executive Officer and Chairman of the Board or, if the roles are separate, whether the Chairman should be selected from the nonemployee directors or should be an employee. The board of directors believes that it should have the flexibility to make these determinations in the way it believes best provides for appropriate leadership for the company at a given time.

        The board believes the current leadership structure, with Mr. Martell serving as Chief Executive Officer and Dr. McMahon serving as non-executive Chairman is in the best interests of the company at this time. The Chief Executive Officer has responsibility for setting the strategic direction of the company and the day-to-day leadership and performance of the company, while the Chairman has a greater focus on governance of the board of directors. This balance between the two positions enables Mr. Martell to focus on the operational and strategic challenges presently facing the company, with Dr. McMahon providing board leadership on matters of governance and management oversight.

        Dr. Dickson has served as the board lead independent director since June 2007. In addition to coordinating the activities of the other nonemployee and independent directors, the lead independent director's primary functions include:

•

providing the Chairman of the Board with input as to the preparation of the agendas for meetings of the board of directors and providing input, as appropriate, to the chairs of committees of the board of directors;



•

advising the Chairman of the Board as to the quality, quantity and timeliness of the information to be provided by management that is necessary or appropriate for the board to effectively and responsibly perform its duties;



•

recommending the retention of advisers and consultants who report directly to the board of directors;



•

developing the agendas for and serving as chairman of the executive sessions of the board's nonemployee and independent directors; and



•

serving as principal liaison between the nonemployee and independent directors and the Chairman of the Board and the Chief Executive Officer on sensitive issues.

        Our corporate governance principles require that at each regular meeting of the board of directors, or at such other times as determined by the lead independent director or required by applicable law, the nonemployee and independent directors shall meet in executive session without management present.

Board Role in Risk Oversight

        The role of the company's board of directors is to oversee the Chief Executive Officer, the President, the Chief Financial Officer and other senior management in the competent, lawful and ethical operation of the company, including management's establishment and implementation of appropriate practices and policies with respect to areas of potentially significant risk to the company. Our board believes that a fundamental part of risk oversight is regular communications with senior management during board and committee meetings to understand the risks the company faces and determine what level of risk is appropriate, as well as how that level of risk may change over time or due to circumstances. Our board also engages in risk management discussions and considers risks to the company as part of the strategic planning process, the annual budget review and approval, and through review of compliance issues in committees of our board, as appropriate. While the board has

the ultimate oversight responsibility for such risk management process, various committees of the board are structured to oversee specific risks, as follows:

Board Independence

        The board of directors has determined that, with the exceptions of Drs.Dr. McMahon, Craves and GoldfischerMr. Martell and Mr. Martell,Lyons, all of our current directors and director nominees are "independent directors" as defined in Rule 42005605 of the Nasdaq MarketplaceListing Rules.

Board Meetings and Attendance

        The board of directors met fourfive times and held an additional nine12 telephone board meetings during 2007.2009. Each board member attended 75% or more of the aggregate number of the meetings of the board and the committees on which he served. We do not have a specific policy regarding director attendance at the annual shareholders' meeting; however, all directors are encouraged to attend if available. Except for Mr. Basso,Lyons, Dr. Goldfischer and Mr. Littauer, all of the director nominees recommended for election at the 20082010 annual meeting of shareholders attended the 20072009 annual meeting.

Board Committees;Committees and Shareholder Communications with the Board

        The board of directors has a standing audit committee, compensation committee, and nominating and corporate governance committee. The written charter of each committee is available on the "Investors—Corporate Governance" page of our web site atwww.poniard.com. A description of the process for shareholders to send communications to the board or a particular director also is posted on our web site.

Audit Committee

        The primary functions of the audit committee are to represent and assist the board of directors with the oversight of:

•

the integrity of the company's financial statements and internal controls;



•

the company's compliance with legal and regulatory requirements;



•

the independent auditor's qualifications and independence; and



•

the performance of the audit function by the independent auditor.

        The audit committee has ultimate authority to select, evaluate and, where appropriate, replace the independent auditor, approve all audit engagement fees and terms, and engage outside advisors, including its own counsel, as it deems necessary to carry out its duties. The audit committee also is responsible for performing other related responsibilities set forth in its charter.

        The current members of the audit committee are Mr. Littauer, Dr. Stevens and Mr. Basso, with Mr. Littauer acting as chair. Mr. Martell served on the audit committee until prior to his appointment as president and chief operating officer of our company on May 7, 2007. Mr. Martell resigned from the committee on May 4, 2007, on which date Mr. Basso was appointed to the committee. Our board of directors has determined that each member of our audit committee is "independent" under applicable rules promulgated by the SEC and Nasdaq. Each member of the audit committee is able to read and understand fundamental financial statements, including our balance sheet, income statement and cash flow statement. Our board of directors has determined that both Messrs. Littauer and Basso meet the definition of "audit committee financial expert" under applicable SEC rules. The audit committee convened in person threesix times and held an additional fivesix telephone meetings in 2007.2009. The audit committee's report begins on page 3238 of this proxy statement.

Compensation Committee

        The primary function of the compensation committee is to discharge the responsibilities of the board of directors relating to the compensation of our chief executive officer and other executives, employees and non-employeenonemployee directors and relating to our retirement, welfare and other benefit plans. The committee has the authority to delegate authority to subcommittees and, to the extent permitted by applicable law, regulations and listing standards, may delegate authority to one or more members of the board or company officers. The committee oversees our Amended and Restated 2004 Incentive Compensation Plan (the 2004(2004 Plan) and any other compensation and stock-based plans. The compensation committee has established an equity awards subcommittee to administer 2004 Plan awards to individuals who are subject to Section 16 of the Securities Exchange Act of 1934 (Exchange Act) or whose compensation is subject to the compensation limits of Section 162(m) of the Internal Revenue Code (Code). The equity awards subcommittee is comprised of two compensation committee members who, in addition to being "independent" under applicable Nasdaq rules, also qualify as "outside directors" under Rule 16b-3 under the Exchange Act and as "outside directors" under Section 162(m) of the Code. The compensation committee, with board approval, has delegated to Dr. McMahon, as chief executive officer, and Ms. Loewy, as chief financial officer, authority to grant stock options under the 2004 Plan, within a percentage range and subject to a 60,000 share cap, to new employees who are not "officers" for purposes of Section 16 under the Exchange Act.

        The current members of the compensation committee are Messrs. Simon, Littauer and Basso and Dr. Dickson, with Mr. Simon acting as chair. Mr. Martell served on the compensation committee until prior to his appointment as president and chief operating officer on May 7, 2007. Mr. Martell resigned from the committee on May 4, 2007, on which date Mr. Basso was appointed to the committee. Mr. Basso and Dr. Dickson serve as the compensation committee's equity awards subcommittee. Our board of directors has determined that each member of our compensation committee is "independent" under applicable Nasdaq rules. The compensation committee convened in person threefive times and held an additional sixeight telephone meetings in 2007.2009. The compensation committee's report is set out on page 1721 of this proxy statement. Additional information on the committee's processes and procedures, including the role of executive officers and compensation consultants in recommending the amount or form of executive compensation, areis addressed in the Compensation"Compensation Discussion and AnalysisAnalysis" below.

Nominating and Corporate Governance Committee

        The primary functions of the nominating and corporate governance committee are to:

•

identify individuals qualified to become members of our board of directors;



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approve and recommend candidates to fill vacancies on, or to be elected to, the board;



•

develop, update as necessary and recommend to the board corporate governance principles and policies applicable to our company; and



•

monitor compliance with such principles and policies.

        The nominating and corporate governance committee also recommends candidates for election as chief executive officer and other corporate officers, oversees succession planning for senior management and performs other related responsibilities set forth in its charter.

        The current members of the nominating and corporate governance committee are Drs. Dickson and Stevens and Mr. Basso, with Dr. Dickson acting as chair. Our board of directors has determined that each member of our nominating and corporate governance committee is "independent" under applicable Nasdaq rules. Dr. Craves served on our nominating and corporate governance committee until April 10, 2008, pursuant to an exemption available under the applicable Nasdaq rules. Our board of directors determined that Mr. Craves was not "independent" because he had received direct and

indirect payments from the company in connection with our 2006 equity financing. The board, however, determined that the past payments received by Dr. Craves would not interfere with the exercise of Dr. Craves' independent judgment in carrying out his responsibilities as a member of the committee and that, due to his extensive professional contacts within the biotechnology and financial sectors and his extensive experience with the company, Dr. Craves' service on the committee was in the best interests of the company and our shareholders. Because he was not an "independent director," the available Nasdaq exemption limited Dr. Craves' service on our nominating and corporate governance committee to two years. Accordingly, on April 10, 2008, Dr. Craves stepped down from the committee and Mr. Basso was appointed to serve in his place. The nominating and corporate governance committee convened in person one time and held one additional telephone meetings during 2007.two times in 2009.

Director Nominations and Qualifications

        The nominating and corporate governance committee will consider nominees for the board of directors recommended by shareholders with respect to elections to be held at an annual meeting, although the committee is not obligated to recommend such nominees to the board. In accordance with our restated bylaws, to nominate a director for election to the board of directors at an annual meeting of shareholders, a shareholder must deliver written notice of such nomination to our corporate secretary not fewer than 60 days nor more than 90 days prior to the date of the annual meeting (or if less than 70 days' notice or prior public disclosure of the date of such annual meeting is given or made to the shareholders, not later than the tenth day following the earlier of the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made). The notice of a shareholder's intention to nominate a director must include:

•

information regarding the shareholder making the nomination, including the shareholder's name and address and the number of shares of our stock beneficially owned by the shareholder;



•

the name and business address of the person being nominated, his or her biographical data and other relevant information, including that which would be required in a proxy statement filed pursuant to the SEC's proxy rules if the person were to be nominated for election by the board of directors; and



•

the written consent of each such nominee to serve as a director if elected.

        The chairman of the board, other directors and executive officers also may recommend director nominees to the nominating and corporate governance committee. The committee will evaluate nominees recommended by shareholders using the same criteria that it uses to evaluate all other nominees. These criteria include the candidate's personal and professional ethics, training, experience, commitment, independence, diversity, industry knowledge and contacts and financial or accounting expertise, as well as other factors that are listed in the Director Selection Guidelines attached as an exhibit to the nominating and corporate governance committee charter. The committee has not in the past retained any third party to assist it in identifying candidates. In evaluating director nominees, the committee evaluates all candidates under consideration, as it deems appropriate. If a shareholder properly recommends a director nominee, the nominating and corporate governance committee will use the same criteria used for evaluating other nominees, in addition to the information relating to the director nominee provided by the shareholder.

        The nominating and corporate governance committee charter requires the committee to approve and recommend to the board guidelines for evaluating the qualifications of candidates for board

membership. The committee and the board have established the following general director selection guidelines:

•

a high standard of personal and professional ethics, integrity and values;



•

experience at the policy-making level in business, government or education sectors;



•

ability to objectively consider matters affecting interests of the company and its shareholders;



•

willingness to devote the required amount of time to perform the duties and responsibilities of board membership;



•

commitment to serve on the board over a period of several years to develop knowledge about the company's business operations;



•

absence of involvement in activities that create a conflict of interest with a director's responsibilities to the company and its shareholders; and



•

willingness and capacity to act in the best interests of the company and its constituents and to objectively appraise management performance.

        The committee does not have a formal diversity policy. The committee seeks nominees with a broad diversity of experience, professional skills, geographic representations and backgrounds. The committee does not assign specific weights to particular criteria. Rather, the board believes that the backgrounds and qualifications of directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the board to fulfill its responsibilities.

Code of Ethics and Code of Conduct

        We have adopted a Code of Ethics that applies to our chief executive officer, chiefsenior financial officer, principal accounting officer, controller or other senior accounting officers, including our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, and a Code of Conduct that applies to all officers, directors and employees of our company. These codes are posted on our web site atwww.poniard.com under the heading "Investors—Corporate Governance." We intend to satisfy the disclosure requirements regarding any amendment to or waiver of the Code of Ethics with respect to the covered persons by posting such information on our web site.

Compensation Committee Interlocks and Insider Participation

        The current members of the compensation committee are Messrs. Simon, Littauer and Basso and Dr. Dickson, with Mr. Simon acting as chair. All members of our compensation committee are independent directors and none of them are present or past employees of the company, except Mr. Littauer, who served the company in various management positions at the company from 1987 to 1996. Mr. Martell served on the compensation committee until May 4, 2007, at which time Mr. Basso was appointed to serve on the committee. Mr. Martell was appointed to serve as our president and chief operating officer on May 7, 2007. None of our executive officers serves as a member of the compensation committee or board of directors of any entity that has an executive officer serving as a member of our compensation committee.

Executive Officers of the Registrant

        Information with respect to our current executive officers, as designated by resolution of our board of directors on February 27, 2008,March 10, 2010, is set forth below.below:

Business Experience

Gerald McMahon, PhD, was appointed Chief Executive Officer of the Company in May 2004 and Chairman of the Board of Directors in June 2004. Dr. McMahon served as our President from June 2005 to May 2007. Previously, he was President of SUGEN, Inc., a biopharmaceutical company focused on the discovery and development of novel targeted small-molecule drugs. At SUGEN, Dr. McMahon played a key role in the discovery and development of several innovative cancer products, including Sutent®, a multi-targeted protein kinase inhibitor for the treatment of advanced cancers marketed by Pfizer Inc. SUGEN was acquired by Pharmacia Corp. in 1999, which subsequently was acquired by Pfizer in 2003. Prior to his role at SUGEN, which he joined in 1993, Dr. McMahon held several research and development management positions at Sandoz Pharmaceuticals (now Novartis), where his responsibilities included the establishment of external collaborations and the development of corporate alliances within the United States and Europe. Dr. McMahon has contributed to more than 100 scientific publications and was a Staff Scientist and Principal Investigator at the Massachusetts Institute of Technology and Tufts University School of Medicine early in his career. He holds a B.S. in Biology and a PhD in Biochemistry from Rensselaer Polytechnic Institute.

        Ronald A. Martell was appointed Chief Executive Officer in February 2010. He served as President and Chief Operating Officer inof the company from May 2007. He initially2007 to February 2010. Mr. Martell joined the Company'scompany's board of directors in June 2006. Mr. Martell served as Senior Vice President, Commercial OperationOperations of ImcloneImClone Systems Incorporated from January 2004 to August 2006. While at ImClone, Mr. Martell was been responsible for overseeing the company's sales, marketing, and project and alliance management. Mr. Martell joined ImClone in November 1998 as Vice President, Marketing. From 1988 to 1998, he served in a variety of positions at Genentech, Inc., most recently as Group Manager, Oncology Products.

Michael S. Perry was appointed President and Chief Medical Officer in February 2010. Dr. Perry has been a consultant to the company since September 2009 and is a Venture Partner with Bay City Capital LLC (since November 2005). He was Chief Development Officer at VIA Pharmaceuticals, Inc., a publicly held drug development company, from April 2005 until May 2009. Prior thereto, he served as Chairman and Chief Executive Officer of Extropy Pharmaceuticals, Inc., a privately held pediatric specialty pharmaceutical company, from June 2003 to April 2005. From 2002 to 2003, Dr. Perry served as President and Chief Executive Officer of Pharsight Corporation, a publicly held software and consulting services firm. From 2000 to 2002, Dr. Perry served as Global Head of Research and Development for Baxter BioScience. From 1997 to 2000, Dr. Perry was President and Chief Executive Officer of both SyStemix Inc. and Genetic Therapy Inc., two wholly owned subsidiaries of Novartis Corp., and from 1994 to 1997, he was Vice President of Regulatory Affairs for Novartis Pharma (previously Sandoz Pharmaceuticals). Prior to 1994, Dr. Perry held various management positions with Syntex Corporation, Schering-Plough Corporation and BioResearch Laboratories, Inc. Dr. Perry holds a Doctor of Veterinary Medicine, a Ph.D. in Biomedical Pharmacology and a B.Sc. in Physics from the University of Guelph, Ontario, Canada. He is also a graduate of the International Management Program at Harvard Business School.

        Caroline M. LoewyGregory L. Weaver was appointed Chief Financial Officer in July 2006. She initially joined the Company in June 2006 as Executiveand Senior Vice President, of Strategic Planning. Ms. Loewy has served in a business and financial consulting capacity to biotechnology companies since 2004. Prior thereto, she was Executive Director, Equity Research at Morgan Stanley, Inc. from March 2000 to June 2004, where she covered large cap biotechnology stocks. Previously, she was with Prudential Securities, first as an associate capital goods analyst in San Francisco from 1993 to 1996 and then as a senior biotechnology analyst in New York from 1996 to 2000. Ms. Loewy holds an M.B.A. from Carnegie Mellon, Tepper School of Business and a BA in economics from the University of California, Berkeley.

Robert L. De Jager, M.D. was appointed Chief Medical OfficerFinance in February 2008.2009. Prior to joining the Company, Dr. De Jagercompany, Mr. Weaver served as Chief Financial Officer of Talyst Inc., a privately held pharmacy automation information technology company, from April 2007 to December 2008. Prior to that, he served as Senior Vice President Clinical Development and Chief MedicalFinancial Officer of Kosan Biosciences Incorporated,Sirna Therapeutics, a publicly held life biotechnologypublic RNAI therapeutics company, from NovemberFebruary 2006 until November 2007,sale of the company to Merck, Inc. in December 2006. From November 2004April 2002 to May 2006,September 2005, Mr. Weaver was Chief Financial Officer of Nastech Pharmaceuticals, a public drug delivery company. From April 1999 to April 2002, Mr. Weaver was Chief Financial Officer of Ilex Oncology, Inc., a public cancer drug development company, and from 1996 to 1998, he was Chief Financial Officer of Prism Technologies, a privately held medical device manufacturer. In addition, Mr. Weaver held increasingly senior positions with Fidelity Capital in Boston and Arthur Andersen LLP. Mr. Weaver has served as Chief Medical Officer and Vice President, Clinical Research and Development at Conforma Therapeutics Corporation, a biotechnology company acquired by Biogen Idec Inc., and Senior Director, Oncology Research & Development of Biogen Idec from May 2006 to November 2006. From 2001 to November 2004, Dr. De Jager served as Vice President, Research & Development, Oncology and Internal Medicine at Daiichi Pharmaceutical Corporation and previously served as its Executive Director, Research and Development, Oncology and Senior Director, Research and Development, Oncology. Prior to joining Daiichi Pharmaceutical Corporation, Dr. De Jager served in various positions at Rgene Therapeutics, Inc., Perlmmune, Inc. (formerly Akzo-Organon Teknika/Biotechnology Research Institute), and Sanofi Research. Dr. De Jager has been a principal investigator and served on committees of many cancer organizations, including the European Organization for Research and Treatment of Cancer (EORTC), the Southeastern Cancer Study Groupdirector and the Eastern Cooperative Oncology Group. He earnedchairman of the audit committee of Celsion Corp., a public oncology drug development company, since 2005, and as a director and the chairman of the audit committee of SCOLR Pharmaceuticals, a public drug delivery company, from 2007 to 2009. Mr. Weaver is a certified public accountant and received his M. D. degreeM.B.A. in finance from Boston College and his B.S. degree in premedical sciencesaccounting from the Free University of Brussels in Belgium, and did postdoctoral training at Lenox Hill Hospital (internship), the Mayo Clinic (residency in internal medicine) and Memorial Sloan-Kettering Cancer Center (fellowship in medical oncology and clinical pharmacology).Trinity University.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

        We are a biopharmaceutical company focused on the development and commercialization of cancer therapy products.therapeutics. We do not currently have any revenues from product sales, as our product candidates remain in the development stage. Our headquarters is locatedDuring 2009 and early 2010, in South San Francisco, California,order to conserve our capital resources, we implemented a restructuring plan, which included reductions in our workforce and we also maintain an officechanges in Seattle, Washington. Additional information about our businessexecutive management team. Effective February 5, 2010, Ronald A. Martell succeeded Gerald McMahon, Ph.D., as Chief Executive Officer. Dr. McMahon remains non-executive Chairman of our board of directors.

        This Compensation Discussion and development programs is available athttp://www.poniard.com.

ObjectivesAnalysis describes the compensation policies and Components

        Ourdecisions of the compensation program for thosecommittee with respect to our executive officers, including the following executive officers named below in the 2009 Summary Compensation Table (current positions are listed below) (collectively, the "named executive officers"):

•

Gerald McMahon, Ph.D., Chairman of the Board and Former Chief Executive Officer



•

Ronald A. Martell, Chief Executive Officer (formerly President and Chief Operating Officer)



•

Gregory L. Weaver, Chief Financial Officer and Senior Vice President, Finance



•

Robert L. De Jager, M.D., Former Chief Medical Officer

Objectives and Components

        Our compensation program for our executive officers is designed to attract and retain qualified employees and encourage, measure and reward efforts that we believe will build value in the company over the long-term. Until such time as we have revenues, weWe believe that the progress of our product candidates through the development process and progress toward obtaining United States and foreign marketing approvals are the best ways to create value for our shareholders and the best measures of our success.

        The components of our executive compensation program are:

•

base salaries;



•

annual incentives in the form of cash bonuses; and

•

long-term incentives in the form of stock optionequity awards.

Compensation Philosophy and Principles

        Our compensation philosophy is to motivate, measure and reward employees for performance that we believe will result in superior operational resultsefficient and buildeffective progress toward the achievement of our product development and corporate partnering goals and building long-term value for our shareholders. Our executive compensation program is designed to:

•

focus decision-making and behavior on long and near-term goals that are consistent with our overall business strategy;



•

reinforce a pay-for-performance culture through a balance of fixed and incentive pay opportunities that link individual compensation to individual and corporate performance;



•

allow us to attract and retain employees with the skills critical to our long-term success; and



•

align management's financial interests with the interests of our shareholders.

        The design and ongoing administration of our overall compensation program for our named executive officers are guided by the following general principles and goals:

•

clear communication of desired behaviors and the use of incentive pay to reward the achievement of corporate performance goals;



•

maintenance of total compensation at market competitive levels;



•

provision of a range of compensation opportunities based on performance; and



•

provision of opportunities to participate in shareholder value creation.

Total Compensation

        Our total compensation program is designed to encourage and reward performance and to recruit and retain employees. We have included three components in our compensation structure—base salaries, cash bonuses and equity awards, primarily in the form of stock option grants—options—to be competitive with other companies in our industry. We doThe compensation committee of our board of directors is responsible for reviewing our executive compensation program to evaluate its competitiveness and consistency with our overall compensation philosophy. During 2006 and 2007, the compensation committee retained AON Consulting—Radford Surveys, or Radford, to review and analyze our cash-based compensation arrangements and our equity programs for our chief executive officer and other executive officers relative to market. In completing its assessment, Radford reviewed our executive compensation data against that of 25 U.S.-based biotechnology companies having a market capitalization between $88.2 million and $289.7 million, generating limited revenues from product sales and having between 13 and 370 employees. This peer group, which was approved by our compensation committee and management, was comprised of the following companies:

        In conducting our review based on the data provided by Radford, we did not focus on the total value of thesethe three components of the compensation program when we benchmarkbenchmarked our compensation with that of other companies. Instead, we believebelieved it iswas more appropriate to benchmark the three components individually in light of their different properties and level of risk. For a development-stagedevelopment stage company such as ours, stock options are highly speculative and are not likely to maintain value unless our product candidates ultimately reach the market and generate sales and profits. Cash incentive bonuses are only paid when certain performance goals are met and thus also are uncertain. Our goal is to be competitive in each of the three components of our total compensation program. The amount of each component is influenced by the executive's level of responsibility and role at the company and industry surveys. In general, we try to position executive compensation at the median for each component.

        The compensation committee of our board of directors reviews our executive compensation program to evaluate its competitiveness and consistency with our overall compensation philosophy. During 2006 and 2007, the committee retained AON Radford Consulting, or Radford, to review and analyze compensation arrangements for our chief executive officer and other executives and our current equity programs relative to market. In completing its assessment, Radford reviewed our executive compensation data against that of 25 U.S. based biotechnology companies having a market capitalization between $88.2 million and $289.7 million, generating limited revenues from product sales

and having between 13 and 370 employees. This peer group, which was approved by our compensation committee and management, was comprised of the following companies:

        Based on the peer group compensation data collected in the Radford "CEO Compensation Assessment" dated May 15, 2006 and the Radford "2006 Executive Compensation Review" dated July 26, 2006, including supplements to those reports, which we refer to as the Radford Studies, our compensation committee targeted executive annual base salaries for 2007 and 2008 to the peer group 50^th - 75^th percentile and each of annual incentive awards and long-term compensation to the peer group 50^th percentile. We believe that these compensation targets are consistent with our goal of providing competitive executive compensation packages while conserving our resources and creating incentives for and rewarding the attainment of corporate operational and strategic goals. The

        For 2009 compensation, the compensation committee utilizeddid not retain Radford or any other compensation consultant to review or analyze our compensation arrangements or to provide additional survey and benchmarking information. Rather, the datacompensation committee reviewed the levels and components of compensation based on the Radford Studies in these Radford studies,prior years and made its own assessment of compensation arrangements and amounts appropriate for the company and individual executive officers based upon a variety of factors, including the company's need to preserve capital, uncertainties arising from the failure of the company's phase 3 SPEAR trial to meet its primary endpoint, the company's decision to refocus its resources on developing registration strategies and partnering to support the continued development of its picoplatin product candidate, as well as The Radford Global Life Sciences Survey, 2006 Executive Survey Totals, to evaluate the competitivenesscurrent difficult business, economic and financing environment. For 2009, the compensation committee approved a 4.0% cost of living salary increase for each of the componentsnamed executive officers, determined that no annual incentive bonuses would be paid under its annual incentive program and made no equity awards to the named executive officers, except for a restricted stock unit (RSU) grant to Mr. Martell and an option grant to Mr. Weaver in connection with his commencement of 2007 executive compensation, as well as to determine total compensation for new executives joining the company and to determine long-term incentive awards granted to executives during 2007.employment in 2009, both described below.

        Base Salaries.    Base salaries are provided to employees as compensation for basic services to the company and to meet the objective of attracting and retaining the talent that we need to run our business. Salaries provide a consistent cash flow to employees, assuming acceptable levels of performance and ongoing employment.

        Our goal is to establish base salary levels for our executives and other employees that are consistent with those of biotechnology companies of a similar size and at a similar stage of development. We believe that this strategy is important to enable us to compete for and retain qualified executives in a highly competitive environment.

        We generally establish each executive officer's annual base salary based on:

•

an objective evaluation of salaries of individuals in similar positions within companies in the biotechnology industry that are of a similar size and stage of development, including the use of peer group data in the Radford "CEO Compensation Assessment," the Radford "2006 Executive Compensation Review,"surveys as described above,above; and The Radford Global Life Sciences Survey, 2006 Executive Survey Totals; and



•

a subjective evaluation of the executive's experience, responsibilities within the company, and performance in achieving specific corporate objectives.

        We initiallyBased on the Radford Studies, we historically target base salaries at the median base salary level for executives in similar positions within the biotechnology industry, targeting the 50^th - 75^th percentile range of executive base salaries in our peer group. We then adjust each executive's salary either up or down from that midpoint based on the individual executive's individual's experience and scope of responsibilities. Each executive is reviewed and evaluated for potential adjustments to his or her base salary annually.

        Annual base salary reviews for all executive officers are conducted in conjunction with our company-wide employee performance evaluation process. Baseprocess that occurs during the fourth quarter of the year. Any base salary adjustments are typically effective on January 1 of the next year. Although the compensation committee generally utilized the Radford Studies and other industry surveys in evaluating adjustments to previously established executive base salaries (other than for Mr. Weaver, who joined

the company in 2009 as its Chief Financial Officer and Senior Vice President, Finance), the compensation committee, in light of the company's limited financial resources and other factors described above, determined that no adjustments would be made to 2009 salaries for the executive officers named in the Summary Compensation Table were increased by 5.5% in 2007, based on the increasedother than a 4.0% cost of living.living increase for each of the executive officers. This iscost of living increase was consistent with the level of annual cost of living increases provided by similar companies in the biotechnology industry, as reflected in various industry surveys reviewed by the compensation committee. The base salary of Mr. Martell, who joined the company during 2007,Weaver was determined based on data inreviewed by the Radford studies, including the "Radford 2006 Executive Compensation Review"compensation committee and the "2006 Radford Biotechnology Survey,"was comparable to that of our prior Chief Financial Officer, with the goal of providing a base salary sufficiently competitive to attract him to our company. The compensation committee also utilized the Radford studies to evaluate previously established executive base salaries. Based on this evaluation, the compensation committee determined that, for 2007, no additional adjustments should be made to the annual base salaries of executives other than those adjustments based on cost of living increases and, for Ms. Loewy, an increase due to her increased responsibilities and performance.

        None of our executive officers is a party to any agreement with the company requiring the payment of a minimum amount of annual base salary. However, in the event of a material reduction in salary, an executive officer may be entitled to terminate employment and receive certain benefits described in the section below entitled "Potential Payments Upon Termination or Change of Control."

        In a continued effort to conserve cash resources, the compensation committee has determined not to increase 2010 base salaries for the executive officers, other than to increase Mr. Martell's salary in 2010 in connection with his appointment as Chief Executive Officer.

        Annual Incentive Awards.    Our annual incentive awards are designed to encourage executives to focus on achieving important near-term company-wide goals in a timely manner. As part of our process of establishing our operating plan for each coming year, the executive officers identify the corporate goals important to building our value and advancing our long-term business objectives. These corporate goals are then submitted to the compensation committee and the board of directors for approval.

        Along with our other employees, executive officers are eligible for annual cash incentive awards paid in the form of a cash bonus,under our Management Incentive Plan, based on the extentlevel of accomplishment of thesethe predetermined annual corporate goals. For 2007,2009, we identified specific corporate goals in the following general areas:

•

enrollment during 2007Enrollment of patientssubjects in Phase IIIthe phase 3 trial of picoplatin in small cell lung cancer, Phase II trial of picoplatin in colorectal and prostate cancer, and Phase I trial of oral picoplatin;cancer;



•

raiseRaising sufficient capital to provide operating capital until first quarter 2009; andoperate the company into 2010;



•

manageActivities related to preserving the company withinvalue of research programs; and



•

Activities related to regulatory and manufacturing milestones for the 2007 approved budget.approval of picoplatin.

        The compensation committee assigned a relative weight to each of the areas of corporate goals identified above in formulating the annual incentive awards paid tofor each executive, whichexecutive. These relative weights were 70%55%, 20%25%, 15% and 10%5%, respectively. The amount of each executive's annual incentive award is determined based on the compensation committee's assessment of actual company performance versus these corporate goals. Based on this assessment, the compensation committee determines and approves the incentive amounts to be paid to each executive officer.

        For 2007,2009, the compensation committee establishedused the following percentages of annual base salary as the maximum payout amounts for annual incentive awards to the named executive officers named inofficers. These percentages were the Summary Compensation Table:

•

Dr. McMahon: 50%



•

same as those used for 2008 (except that Mr. Martell: 35%



•

Ms. Loewy: 30%



•

Dr. Karlin: 25%



•

Ms. Wight: 20%

        The foregoing maximum payout amounts are applied to each executive's annual base salary in effect at the end of the year and, except for 2007,Mr. Weaver, were initially determined by the compensation committee based on generally available industry surveys, including the BioWorld 2006 Compensation Report. The compensation committee used data presented in the Radford "CEO Compensation Assessment" and the Radford "2006 Executive Compensation Review," as well as The Radford Global Life Sciences Survey, 2006 Executive Survey Totals, to evaluate the 2007 payout levels and determined that the current levels are competitive.

In cases in which the compensation committee determines that all of the corporate goals have been met, the executives willcan receive 100% of their maximum payout amounts. If less than all of the corporate goals have not been met, a percentage below 100% of the maximum payout amount ismay be awarded to reflect partial achievement of the corporate goals. In the event of extraordinary achievement of corporate goals, an amount in excess of the 100% maximum payout amount may be awarded. Conversely, the compensation committee may determine that no payout will be made if overall performance of the company does not warrant payment of the awards. In addition, the compensation committee retains general discretion to take into account additional corporate accomplishments and circumstances in assessing achievement of annual corporate goals.

        In 2007, we met a major portionDespite achieving nearly all of our predetermined 2007the 2009 annual corporate goals. The most heavily weighted corporate goals, related to the clinical development of picoplatin. Our colorectalmanagement recommended and prostate cancer Phase I trials enrolled on schedule. We began Phase II trials in both indications, and completed enrollment of the Phase II trial in prostate cancer. We had positive initial data from our Phase I trial of oral picoplatin. We also were able to complete a successful $75 million financing to fund operations through at least the second quarter of 2009. However, our Phase III trial of picoplatin in small cell lung cancer, while making good progress, advanced more slowly than projected. Consequently, the compensation committee concludedagreed that on balance, our 2007 performance was strong,there would be no payout under the overall levelManagement Incentive Plan for 2009, in light of achievementthe uncertainties following the failure of corporate goals was 80%the company's phase 3 SPEAR trial in November 2009 and 2007the company's immediate efforts to preserve its cash resources for 2010. Therefore, the named executive officers received no annual incentive awards therefore would equal 80% of each executive officer's maximum payout amount. Mr. Martell'sbonus for 2009. For 2010 only, annual incentive payment was proratedaward opportunities have been increased by 50% from the commencement datemaximum percentages of his employment withannual base salary set forth above for each of the company in 2007.named executive officers because no awards were made for 2009.

        Long-Term Incentives.    OurUntil 2009, our long-term incentives consistto executive officers consisted solely of stock option awardsoptions under our Amended and Restated 2004 Incentive Compensation Plan, or the 2004 Plan, andPlan. Stock options are an important element of our compensation program. Weprogram as we believe that stock optionsthey are an effective way to emphasize long-term company performance and to reward our executives and other employees for value creation on the same basis as our shareholders. Therefore, a substantialA portion of each named executive officer's compensation is in the form of equity awards.stock options; however, during 2009, no stock options were granted to executive officers other than to Mr. Weaver, who received his stock option in connection with his commencement of employment in February 2009. During 2009, we also granted an RSU to Mr. Martell, as described below. Future grants under the 2004 Plan similarly may be in the form of stock options and/or RSUs.

        Pursuant to our 2004 Plan, eachEach executive officer typically receives a sizable option grant under the 2004 Plan at the time he or she joins the company or receives a significant promotion. In addition, our executive officers and other employees receive annual option awards under the 2004 Plan. In establishing the size of these awards, the executive's level of responsibility, as well as competitive factors in our industry, are considered. The equity awards subcommittee of the compensation committee of our board compensation committee establishes the level of new hire, promotion-related, and annual stock option awards targeted at the median levels set out in generally available industry surveys and set out for our peer group in the Radford "CEO Compensation Assessment" and the Radford "2006 Executive Compensation Review." In addition, during 2006, the compensation committee requested Radford's assistance to determine executive equity grants for 2007 and for subsequent years. Radford prepared a written recommendation based on our peer group (adjusted for certain companies who had since been acquired or otherwise undergone a corporate transaction or had a significant change in business status) on which grants made to our named executive officers in 2007 were based. In making such grants, the equity awards subcommittee targeted the median number of option awards in order to be competitive in attracting and retaining employees, while limiting the potential dilution to our shareholders.employees.

        The equity awards subcommittee of our board compensation committee approves all stock option awards to executive officers. Annual stock option grants are awarded around year-end. These options vest based on our standard 48-month vesting period for annual option grants detailed below.        For

We strive to focus our resources on the development of our product candidates. Accordingly, our executive officers do not receive any material perquisites.

Supplementary Compensation PoliciesRisk Management

        WeAs part of the compensation committee's risk oversight function, it considers whether the company's compensation policies and practices for employees create risks that are reasonably likely to have adopted several additionala material adverse effect on the company. In conducting its evaluation, the compensation committee has reviewed the company's current practices and procedures for awarding cash and equity compensation to employees through the annual performance review process, especially as such practices and processes apply to the establishment of goals that are taken into consideration in the payment of bonuses. The compensation committee does not believe that the company's compensation practices, which are guided by relevant market practices, company-wide goals and a mix of incentives tied to current and longer-term performance, incentivize inappropriate risk-taking by employees. Further, the compensation committee believes that there is sufficient board of director oversight of the company's processes for compensation determinations to avoid the establishment of incentives that are materially adverse to the company's interests. Accordingly, the compensation committee has determined that the company's compensation policies designedat this time do not create risks that are reasonably likely to ensure that our overall executive compensation structure is responsive to shareholder interests and competitive with other companies in our industry. Specific policies include:have a material adverse effect on the company.

        LimitationsLimits on Deductibility of Compensation.Compensation

        Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, generally limits the tax deductibility of compensation paid by a public company to its chief executive officer and certain other highly compensated executive officers, including the executive officers (other than the chief financial officer) named in the Summary Compensation Table, to $1 million in the year the compensation becomes taxable to the executive. There is an exception to the limit on deductibility for performance-based compensation that meets certain requirements. We believe that the compensation for our executives, including stock options awarded under our 2004 Plan qualifiesqualify for the exception. In 2007,2009, compensation to our chief executive officer and each of our other named executive officers did not exceed $1 million for purposes of Section 162(m), and we expect the same to be true for 2008.2010. However, we may in the future approve annual compensation that exceeds the $1 million limitation if we believe that doing so is appropriate in the best interests of the company andorder to support our shareholders.

        Severance and Change of Control Agreements.    All ofcompensation philosophy with respect to our executive officers are parties to standard form executive severance and change of control agreements. During February 2008, the board and the compensation committee completed a review of its executive severance and change of control agreements relative to market survey data provided by Radford. Based on such review, no benefit changes were approved to the executive severance agreements, except to bring such agreements into compliance with, or to qualify for exemption from, Section 409A of the Code. However, the compensation committee amended the form executive change of control agreements to increase certain benefits payable thereunder to be consistent with current industry practice. For example, Dr. McMahon's severance payment following certain terminations of employment after a change of control was increased from one times base salary to two times base salary and other executives' severance payments were increased from 50% of base salary to one times base salary. Adjustments were also made to performance bonus opportunities. Prior to amendment, executives were eligible toofficers.

receive an amount equal to 50% of the annual bonus that would have been paid but for the termination of employment following a change of control or, if greater, the percentage of annual bonus accrued through the date of termination. Following amendment of the change of control agreements, executives are eligible for the annual performance bonus, prorated for the number of days served during the year of termination, as well as a severance payment equal to one times the annual performance bonus. We believe that these agreements and their terms, as amended, are customary in the industry and necessary to attract and retain qualified, experienced executive personnel. These agreements and the potential amounts payable under them to the executives named in the Summary Compensation Table are described in the section below entitled "Potential Payments Upon Termination or Change of Control."

Compensation Committee Report

        The compensation committee of the board of directors has reviewed and discussed the Compensation Discussion and Analysis above with management, and, based on such review and discussions, the compensation committee recommended to the board that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the year ended December 31, 2007, and in our proxy statement for the 20082010 annual meeting of shareholders.

2007 2009 SUMMARY COMPENSATION TABLE

        The following table sets forth all compensation earned by each of the named executive officers for the 2007during 2009 and, 2006 fiscalwhere applicable, prior years. The named executive officers are the former principal executive officer, the principal financial officer and the threetwo other most highly compensatedexecutive officers who were servingserved through 2009. Effective February 5, 2010, Mr. Martell succeeded Dr. McMahon as executive officers at December 31, 2007.Chief Executive Officer of the company. Columns required by SEC rules are omitted in this table and the tables following it where there is no amount to report.

(1)

The amounts reported in the Salary column represent the dollar amount of base salary earned by each named executive officer in 2007 and 2006.the year indicated.

(2)

The amounts reported in the Stock Awards column and the Option Awards column represent the dollar amount recognized as stock-based compensation expense in the year indicated for financial reporting purposes, related to stock options granted to each named executive officer in the year indicated and years prior togrant date fair value of such year, excluding any reduction for estimated forfeitures, determinedawards, computed in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004),Share-Based Payment (SFAS 123R)Codification Topic 718 (FASB ASC Topic 718). See Note 3, "Stock-Based10, "Share-based Compensation," of the notes to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2007 for the assumptions used in determining such amounts.the amounts for option awards. The grant date fair value for RSUs granted to Mr. Martell was computed based on the closing sale price of our common stock on the grant date as reported on The Nasdaq Global Market.

(3)

The amounts reported in the Non-Equity Incentive Plan Compensation column represent the amounts of annual incentive bonus awards earned by the named executive officer in the year indicated, but paid in the following year. TheNo incentive bonus earned by Mr. Martell is proratedawards were paid for the eight-month period of fiscal 2007 during which he served as an executive officer.2009.

(4)

TheExcept as noted otherwise, the amounts reported in the All Other Compensation column represent company contributions to our 401(k) plan, except for Mr. Martell.plan.

(5)

This amount represents the signing bonus paid to Mr. Martell upon joining the company as President and Chief Operating Officer on May 7, 2007.

(6)

This amount reflects payments to Mr. Martell to reimburse him for relocation costs ($65,413), including tax reimbursements ($52,130).

(7)

As described above, on February 5, 2010, Dr. McMahon left the position of Chief Executive Officer and Mr. Martell was appointed as Chief Executive Officer. Dr. McMahon remains non-executive Chairman of the board of directors.

(8)

Mr. Martell joined the company as presidentPresident and chief operating officerChief Operating Officer on May 7, 2007.2007, and on February 5, 2010, became Chief Executive Officer. Mr. Martell also serves on the board of directors, which he joined in June 2006.

(6)(9)

This amount represents the signing bonus paid to Mr. Martell upon joiningWeaver joined the company as presidentChief Financial Officer and chief operating officerSenior Vice President, Finance on May 7, 2007.February 18, 2009.

(10)

Dr. De Jager joined the company as Chief Medical Officer on February 1, 2008 and left the company on February 5, 2010.

(7)

This amount reflects payments to Mr. Martell to reimburse him for moving costs ($65,413), including tax reimbursements ($52,130).

(8)

This amount represents a bonus paid to Dr. Karlin in connection with his efforts related to the company's clinical trials.

2009 GRANTS OF PLAN-BASED AWARDS—2007AWARDS

        The following table provides information regarding equity and non-equity awards granted to each of the named executive officers in 2007.2009.

(1)

The amounts shown in the Estimated Future Payouts Under Non-Equity Incentive Plan Awards columncolumns reflect the payout levels for annual incentive bonus awards described in the Compensation"Compensation Disclosure and Analysis." The target amount shown is a percentpercentage of 20072009 annual base salary as follows: Dr. McMahon: 50%; Mr. Martell: 35%; Ms. Loewy:Mr. Weaver: 30%; and Dr. Karlin: 25%; and Ms. Wight: 20%De Jager: 30%. The minimum pay outpayout level is 0% of the target amount shown. The maximum payout level is 100% of the target amount. Our annual incentive awards program is described in more detail in the Compensation"Compensation Discussion and AnalysisAnalysis" above. For 2009, no payouts were made under the annual incentive awards program.

(2)

Because the lowest possible payment is $0, no threshold payout amount is indicated.

(3)

The exercise price of the options is equal to the closing sale price of our common stock on the grant date as reported on The Nasdaq Global Market.

(4)

The amount reported represents the full grant date fair value of the options or RSUs granted to each named executive officer in 2007, determined2009, computed in accordance with SFAS 123R.FASB ASC Topic 718. See Note 3, "Stock-Based10, "Share-based Compensation," of the notes to consolidated financial statements of the company set forth in our Annual Report on Form 10-K for fiscal year 2007 for the assumptions used in determining suchthe amounts for option awards. The grant date fair value.value for RSUs was computed based on the closing sale price of our common stock on the grant date, as reported on The Nasdaq Global Market.

(5)

Mr. Weaver joined the company on February 18, 2009. The optionamounts shown has a ten-year term and vests in equal monthly installments over the four years following the dateEstimated Future Payouts Under Non-Equity Incentive Plan Awards columns are pro-rated for his 10.5 months of grant.service in 2009.

(6)

The option shown has a ten year term andRSU awarded to Mr. Martell under the 2004 Plan vests 50% in equal monthly installments over25% on each of the first four years from the date of grant and 50% on the seven-year anniversaryanniversaries of the grant date, of grant. Vesting of the second 50% of the option is subject to accelerated vesting of up to 25% in each year, to the extent of the company's actual achievement of the annual performance goals established under the annual incentive bonus program,upon certain events described in the discretion of the equity awards subcommittee of our board of directors."Compensation Discussion and Analysis."

(7)

The option shown was granted under the 2004 Plan when Mr. MartellWeaver joined the company in May 2007,February 2009, has a ten-year term of ten years and vests 25% one year afteron the one-year anniversary of the grant date of grant and thereafter in equal monthly installmentsthereafter over the next three years.

        A portion of the options awarded to Dr. McMahon, Ms. Loewy, Dr. Karlin and Ms. Wight in 2006, and reported in the Grants of Plan-Based Awards table in our 2007 proxy statement, were subject to shareholder approval of an amendment to increase the number of shares authorized for issuance under our 2004 Plan. Shareholders approved this amendment to the 2004 Plan at our 2007 annual meeting on June 14, 2007. The total grant date fair value for these options was determined on the approval date, June 14, 2007, and totaled $4,112,916.

        Employment Letter with Dr. McMahon.    We entered into an employment letter with Dr. McMahon on April 26, 2004. Under that employment letter, we agreed that Dr. McMahon will serve as our chief executive officer, commencing on May 11, 2004. The employment letter sets Dr. McMahon's annualized base salary at $375,000 per year (including for services as a member of the board), subject to increase or decrease in the board's discretion, and provides for cash bonuses of up to 50% of Dr. McMahon's annual base salary, at the discretion of the board. Pursuant to the employment letter, Dr. McMahon received a stock option to purchase 91,666 shares of our company's common stock at an exercise price of $15.00, which option vests 25% at the end of one year from date of grant and thereafter in equal monthly installments over the next three years and expires ten years from the date of grant. The employment letter provides for accrued vacation of four weeks per year and fringe benefits comparable to those payable to our other senior executives. The employment letter further contains nonsolicitation and noncompetition provisions that are effective during the term of Dr. McMahon's employment and for one year thereafter. The term of the employment letter is four years (until May 11, 2008), subject to earlier termination by either party upon 30 days' prior written notice. The severance and change of control agreements described under the heading "Potential Payments Upon Termination or Change of Control" below provide for certain termination benefits in the event that Dr. McMahon's employment is terminated by us without cause or by him with good reason before or after a change of control of the company.

        Salary and Cash Incentive Awards in Proportion to Total Compensation.Compensation:    As discussedDuring 2009, no equity awards were granted to either of Drs. McMahon or DeJager, resulting in the Compensation Discussion and Analysis, we believe that a substantial portionall of each named executive officer'stheir compensation should befor 2009 being payable in the form of equity awards.cash. The following table sets forth the percentage of each named executive officer's total compensation we paid in the form of base salary and cash incentive awards for fiscal 2007.2009.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 20072009

        The following table provides information relating to holdings ofabout unexercised stock options and unvested stock awards held by the named executive officers as of December 31, 2007. Options2009. Equity awards granted in 20072009 also are disclosed in the 2009 Grants of Plan-Based Awards Table and the related compensation costs are disclosed in the Summary Compensation Table.

Option Exercises and Stock Vested in 20072009

        None of the named executive officers exercised any stock options during 2007.2009, and no stock awards held by any of the named executive officer vested during 2009.

Pension Benefits and Nonqualified Deferred Compensation

        We do not provide pension arrangements or post-retirement health coverage for our executive employees. OurWe also do not maintain any nonqualified deferred compensation plans, but our executive officers are eligible to participate in our 401(k) defined contribution plan. At our discretion,For 2009, we may contributecontributed to each participant a discretionary matching contribution equal to 5%10% of the participant's compensation that has beenwas contributed to the plan for 2009, up to a maximum matching contribution of $500.$500 per participant.

Potential Payments Upon Termination or Change of Control

        All of the named executive officers are parties to standard formforms of executive severance and change of control agreements. The information below describes and quantifies certain compensation that would become payable under these agreements if the named executive officer's employment had been terminated on December 31, 2007,2009, based on the named executive officers'officer's compensation and service levels as of such date, and, if applicable, based on the company's closing stock price on December 31, 20072009 (the last trading day of fiscal 2007)2009). Payments and benefits payable under the executive severance and change of control agreements are in addition to benefits paid generally to salaried employees of the company, including distributions under the company's 401(k) plan and accrued salary and vacation pay. The named executive officers are not entitled to any potential payments or benefits not otherwise available generally to salaried employees of the company in the event of termination of employment by the company for cause or by the executive without good reason or due to retirement. The executive severance and change of control agreements were amended and restated in March 2008, andFebruary 2009 for then currently serving executive officers solely to reflect 409A amendments made to such agreements in December 2008. The amendments did not affect the changeamount of control disclosures below describe compensation payable under the agreements as amended. The executive severance agreements were also amended in March 2008 for 409A tax compliance reasons; no amendments were made that otherwise affected compensationor types of benefits payable under those agreements.

        Effective February 5, 2010, Mr. Martell succeeded Dr. McMahon as Chief Executive Officer. The description of the agreements and the amounts shown below for each of the named executive officers reflect the terms of their agreements as of December 31, 2009. As discusseda result of his termination, Dr. McMahon became eligible to receive severance benefits in accordance with the Compensation Discussion and Analysis, during 2007, the compensation committee evaluated itsterms of his severance agreement as described below.

executive severance and change of control agreements based on market data provided from its independent consultant. Based on such recommendations, benefits payable under severance agreements were not changed in 2007, but some benefits payable under change of control agreements were amended as described below. Amendments made to the change of control agreements are described in more detail in the Compensation Discussion and Analysis above.

Executive Severance Agreements

        Termination by the Company without Cause or by the Executive for Good Reason Absent a Change of Control.    TheAs of December 31, 2009, the executive severance agreements of Mr. Martell, Ms. Loewy,Mr. Weaver and Dr. Karlin and Ms. WightDe Jager each providesprovide that, if the executive is terminated without cause, or if the executive resigns for good reason, he or she is entitled to receive receive:

•

severance pay equal to 75% of current annual base salary,salary;



•

continued medical, dental and vision insurance benefits for up to nine months' medical and dentalmonths (or until such earlier time as the executive qualifies for comparable insurance benefits from another employer); and



•

if applicable, reimbursement of excise taxes.

        Cash severance payments are in the form of salary continuation, payable at normal payroll intervals during the nine months following the date of termination. Each of these severance agreements runs for an initial term of one year and renews automatically for successive one-year periods unless either party gives nine months' prior notice of non-renewal.

        As of December 31, 2009, Dr. McMahon's executive severance agreement providesprovided that, if he is terminated without cause or if he resigned for a good reason, he would have been entitled to receive:

•

severance paymentpay equal to 100% of current annual base salary, payable in the form of salary continuation for one year following the date of termination,termination;



•

continued medical, dental and vision insurance benefits for up to one year's medical and dentalyear (or until such earlier time as Dr. McMahon qualifies for comparable insurance benefits from another employer); and



•

if applicable, reimbursement of excise taxes.

        Dr. McMahon's severance agreement runsran for an initial term of fourtwo years and renewscould be renewed automatically for successive two-year periods unless either party givesgave 90 days' prior notice of non-renewal.

        In all cases, as a condition to receiving any severance payment, each executive must execute a general release of claims against the company in a form satisfactory to the company in its sole discretion. To the extent that severance payments and benefits under the change of control agreements described below are payable to the named executive officer, no payments will be made to such executive under his or her executive severance agreement.

        The executive severance agreements generally define "cause" as: a clear refusal to carry out any of the executive's material lawful duties; a persistent failure to carry out any of the executive's lawful duties after reasonable notice and an opportunity to correct the failure; violation by the executive of a state or federal criminal law involving a crime against the company or any other crime involving moral turpitude; the executive's current abuse of alcohol or controlled substances; deception, fraud, misrepresentation or dishonesty by the executive; or any incident materially compromising the executive's reputation or ability to represent the company with investors, customers or the public.public; or any material violation by the executive of the severance agreement, subject to certain notice and opportunity-to-cure provisions set forth in the agreements.

        "Good reason" generally includes a material reduction of the executive's annual base salary below the level in effect on the date of the agreement, regardless of any change in the executive's duties; the assignment ofto the executive toof any duties materially inconsistent with or resulting in a material diminution of the executive's position, authority, duties or responsibilities (excluding actions of the company not taken in bad faith and promptly remedied); requiring the executive to be based at any office or location more than a designated number of miles from the city in which the executive

currently is employed; oremployed (30 miles in the case of Dr. McMahon and 50 miles in the case of the other named executive officers); the company's failure to properly assign the executive severance agreement to a successor entity.entity; or any other material violation by the company of the severance agreement, subject to certain notice and opportunity-to-cure provisions set forth in the agreements.

        The estimated values of severance and other benefits payable to each named executive officer, based on a hypothetical termination of employment by the company without cause or by the executive

with good reason on December 31, 2007,2009, in circumstances in which there is no change of control (as defined below) of the company, are set forth in the following table:

        Termination due to Death or Total Disability Absent a Change of Control.    The executiveexecutive's severance agreement and the executive's employment terminate automatically upon the death or total disability of the executive. "Total disability" is defined as the named executive officer's inability to perform his or her essential duties for a period or periods aggregating 12 weeks in any 365 day period as a result of physical or mental illness, loss of legal capacity or any cause beyond the executive's control, unless the executive is granted a leave of absence by our board of directors. If the executive's employment ishad terminated by reason of death or total disability duringas of December 31, 2009, the term of the severance agreement, the executive, if applicable, or his or her legal representative isfamily members would have been entitled to receive continued medical, dental and dentalvision insurance benefits for up to nine months in the cases of Ms. Loewy,Mr. Martell, Mr. Weaver and Dr. Karlin and Ms. WightDe Jager and for up to one year in the case of Dr. McMahon. The estimated values of these benefits are reflected in the preceding table.

Change of Control Agreements and 2004 Plan Change of Control Provisions

        Termination by the Company without Cause or by the Executive for Good Reason Following a Change of Control.    The change of control agreements as amended in March 2008, provide each of the named executive officers with termination compensation if, within two years following a change of control of the company, the executive's employment with the company or an affiliated company is terminated without cause or the executive terminates his or her employment for good reason. In such case, as of December 31, 2009, each named executive officer, other than Dr. McMahon, is entitled to receive receive:

•

an amount equal to the annual performance bonus (prorated for the number of days served during the year of termination); twelve months of



•

continued medical, dental and dentalvision insurance benefits; benefits for up to one year (or until such earlier time as the executive qualifies for comparable insurance benefits from another employer);



•

severance pay equal to one times the annual performance bonus and one times annual base salary; and



•

full acceleration of stock option vesting.

        As of December 31, 2009, Dr. McMahon iswould have been entitled to receive:

•

the annual performance bonus (prorated for the number of days served during the year of termination);



•

continued medical, dental and vision insurance benefits for up to eighteen months of medical and dental(or until such earlier time as Dr. McMahon qualifies for comparable insurance benefits; benefits from another employer);



•

severance pay equal to one times the annual performance bonus and two times annual base salary; and



•

full acceleration of stock option vesting.

        All cash amounts are payable in a lump sum within ten working days of the date of termination. Sums payable with respect to an annual performance bonus are based on the average bonus paid or payable during the three prior fiscal years (or any shorter period of employment) immediately preceding the year in which the change of control occurs.. Under the terms of our 2004 Plan, all vested stock options expire three months after the date of termination of service. The change of control agreements also provide for reimbursement of any excise taxes payable by the executive as a consequence of the payments or benefits received under the change of control agreement or any benefit plan of the company.

        A "change of control" under the agreements is generally deemed to occur upon shareholder approval of certain mergers, consolidations or reorganizations of the company, the liquidation or dissolution of the company, or the salecertain sales of all or substantially all of the assets of the company; acquisition of beneficial

ownership of 20% or more of the outstanding common stock or voting power of the company by a person or group of related persons, if such acquisition is not approved in advance by a majority of the incumbent directors;directors (subject to certain exceptions); acquisition of beneficial ownership of 33% or more of the outstanding common stock or voting power of the company by a person or group of related persons, if such acquisition is approved in advance by a majority of the incumbent directors;directors (subject to certain exceptions); or the failure of incumbent board members (or persons nominated or appointed by incumbent board members) to hold a majority of the seats on the company's board of directors.

        The definitions of "cause" and "good reason" under the change of control agreements are substantially the same as those in the executive severance agreements described above. Each change of control agreement, as amended, runs for an initial one-year term and renews automatically for

successive one-year periods unless either party gives 90 days' prior written notice of non-renewal, except that Dr. McMahon's amended change of control agreement hashad an initial two-year term and renewscould be renewed for successive two-year periods. If a change of control occurs, each agreement automatically renews and runs for a period of two additional years.

        2004 Plan.    In addition to the change of control agreements, the 2004 Plan provides for accelerated vesting of options and other equity awards upon a change of control, which is defined in the 2004 Plan as a merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation of the company as a result of which shareholders of the company receive cash, stock or other property in exchange for or in connection with their shares of common stock. No acceleration occurs under the 2004 Plan in a merger in which the holders of common stock immediately prior to the merger have the same proportionate ownership of common stock in the surviving corporation after the merger, a reincorporation or the creation of a holding company. Mr. Martell's outstanding RSU grant similarly accelerates in vesting in connection with a transaction in which shareholders of the company receive cash, stock or other property in exchange for or in connection with their shares of common stock.

        The estimated values of severance and other benefits payable to each named executive officer based on a hypothetical termination of employment by the company without cause or by the executive with good reason on December 31, 20072009 following a change of control of the company, are set forth in the following table. The values reported assume that the change of control occurred pursuant to the change of control agreements, as amended in March 2008, but use salary, bonus and service levels in effect for the named executive officers as of December 31, 2007. The following table also sets forth the incremental value of accelerated vesting that may occur under the 2004 Plan in the event of a change of control (as defined for purposes of the 2004 Plan):

        Termination due to Death or Total Disability Following a Change of Control.    The executive's change of control agreement and the executive's employment during the two years following a change of control terminate automatically upon the death or total disability of the named executive officer. "Total disability" is defined in the agreements as the named executive officer's inability to perform his or her essential duties for a period or periods aggregating 12 weeks in any 365 day period as a result of physical or mental illness, loss of legal capacity or any cause beyond the executive's control, unless the executive is granted a leave of absence by our board. If the executive's employment ishad terminated by reason of death or total disability during the two yearsas of December 31, 2009 following a change of control of the company, the executive, if applicable, or his or her legal representatives arefamily members would have been entitled to continued medical, dental and dentalvision insurance benefits for up to one year, except for Dr. McMahon who iswould have been entitled to continued medical and dental insurance benefits for up to eighteen months. The estimated values of these benefits are reflected in the preceding table.

Director CompensationDIRECTOR COMPENSATION

        For 2007, non-employee2009, our nonemployee directors received an annual fee of $20,000 for service on the board of directors, together with a fee of $2,000 for each in-person board meeting. Payment for attendance at telephonic board meetings was $500 for up to one hour, $1,000 for one to two hours and $1,500 for more than two hours. Non-employeeNonemployee directors also received a fee of $500 for attendance at each meeting of a committee on which they served. The audit committee chairman received an annual retainer in 20072009 of $10,000, and each audit committee member received a 20072009 annual retainer of $6,000. The chairmen of the compensation committee and the nominating and corporate governance committee each received annual retainers in 20072009 of $6,500. The members of each of the compensation committee and the nominating and corporate governance committee received a 20072009 annual retainer of $4,000. We also reimburse each of our non-employeenonemployee directors for reasonable travel expenses incurred in connection with attending board and board committee meetings.

        Non-employeeNonemployee directors also receive stock option grants under our Stock Option Grant Program for Nonemployee Directors (the NED Program), which is administered under our 2004 Plan. Each new non-employeenonemployee director, upon initial election or appointment to the board of directors, receives an initial option to purchase 30,000 shares of common stock at an exercise price equal to the fair market value per share of common stock on the grant date. In addition, each non-employeenonemployee director automatically receives an annual option grant to purchase 15,000 shares of common stock immediately following each annual meeting of shareholders at an exercise price equal to the fair market value per share of common stock on the grant date, provided that a non-employeenonemployee director who has received the initial option grant for 30,000 shares of common stock within five months prior to any such annual meeting of shareholders, does not receive thean annual grant for such annual meeting. The NED Program was amended in June 2007 to increase the initial option grants from 20,000 to 30,000 shares and the annual option grants from 10,000 to 15,000 shares. All options granted to non-employeenonemployee directors under the NED Program have a term of ten years and vest 50% one year after the date of grant and 50% two years after the date of grant. Separate from the NED Program, the lead independent director on the board is also eligible for an additional option grant which, for 2009, was an option grant for 7,500 shares.

        In addition, in April 2009, the company entered into a consulting agreement with Gary Lyons prior to his commencement of services as a nonemployee director on July 7, 2009. As amended on July 11, 2009, the consulting agreement provides that Mr. Lyons will be paid a monthly payment of $20,000 (pro-rated for partial months of service) and will be granted 170,000 RSUs in exchange for his business

development consulting services to the company. The RSUs granted to Mr. Lyons on July 11, 2009 vest 50% on each of the first two anniversaries of the grant date, subject to 100% accelerated vesting upon the achievement of either a partnering transaction or a corporate transaction (generally as defined in the 2004 Plan). The consulting agreement was subsequently amended, pursuant to which, effective March 11, 2010, Mr. Lyons will be paid a monthly sum of $10,000 per month (pro-rated for any partial months) for providing 25% of full-time service relating to business development consulting services to the company.

2009 DIRECTOR COMPENSATION TABLE

        The following table presents information relating to total compensation of directors for the fiscal year ended December 31, 2007.2009.

EQUITY COMPENSATION PLAN INFORMATION

        The following table presents information as of December 31, 2009 with respect to the company as president and chief operating officer on May 7, 2007. This table reflects only thecompany's compensation that Mr. Martell earned in 2007 as a director. Theplans, including individual compensation earned by Mr. Martell in 2007 as an executive officerarrangements, under which equity securities of the company is shownare authorized for issuance to employees and nonemployees of the company, such as directors, lenders, consultants, and advisors:

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding beneficial ownership, as of April 25, 2008,16, 2010, of the company's common stock by (a) each person known by the board of directors to beneficially own more than 5% of the outstanding common stock, (b) each director and nominee for director, (c) our chief executive officer and each executive officer named in the Summary Compensation Table, and (d) all executive officers and directors as a group. Except as otherwise indicated, we believe that the beneficial owners of the shares listed below have sole investment and voting power with respect to the shares.

---

*

Less than 1%



(1)

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock owned as of April 25, 200816, 2010 and shares of common stock which are issuable within 60 days of April 25, 2008, 16, 2010,




including pursuant to options or warrants to purchase common stock, are deemed beneficially owned for computing the percentage of the person holding such securities, but are not considered outstanding for purposes of computing the percentage of any other person.



(2)

Based on 34,687,72447,073,262 shares of common stock outstanding on April 25, 2008.16, 2010.



(3)

Includes 1,785,7141,785,713 shares of common stock issuable upon exercise of warrants and 15,83330,833 shares of common stock subject to options issuable within 60 days. MPM BioVentures III GP, L.P and MPM BioVentures III LLC (MPM III LLC) are the direct and indirect general partners of MPM BioVentures III-QP, L.P., MPM BioVentures III, L.P., BioVentures III Parallel Fund, L.P. and MPM BioVentures III GmbH & Co. Beteiligungs KG (the MPM III Funds). Luke Evnin, Ansbert Gadicke, Nicholas Galakatos, Dennis Henner, Nicholas J. Simon III, Michael Steinzmetz and Kurt Wheeler are members of MPM III LLC and MPM Asset Management Investors 2005 BVIII LLC (AM 2005) and exercise voting and investment control over the securities owned by the MPM III Funds and AM 2005. Each such individual disclaims beneficial ownership of the securities held by the MPM III Funds and AM 2005. Mr. Simon is a director of the company and the record holder of the option shares beneficially owned by the MPM Funds and AM 2005.

(4)

Includes 1,071,4291,071,428 shares of common stock issuable upon exercise of warrants. Bay City Management is general partner to Bay City Capital Fund IV, L.P. and Bay City Capital Fund IV Co-Investment Fund, L.P (the BCC Funds) and has voting and investment control over the securities held by the BCC Funds. Such control is exercised by BCC as a manager of Bay City Management. Fred B. Craves and Carl S. Goldfischer, directors of the company, are managers of Bay City Management and members and managing directors of BCC. Dr. Craves and Dr. Goldfischer each disclaims beneficial ownership of the securities held by the BCC Funds.



(5)

Includes 535,714 shares of common stock issuable upon exercise of warrants. Deerfield Capital, L.P. is the general partner of Deerfield Special Situations Funds, L.P. Deerfield Management , L.P. is the investment manager of the Deerfield Special Situations Fund International Limited. James E. Flynn is the managing member of the general partner of Deerfield Capital, L.P. and Deerfield Management, L.P., respectively, and exercisesMessrs. Fratini share voting and investment control overpower with respect to the securities owned by Deerfield Special Situations Funds, L.P. and Deerfield Special Situations Fund Limited, International (the Deerfield Funds). Mr. Flynn disclaims beneficial ownership of the securities held by the Deerfield Funds. See Schedule 13G filed with the SEC on February 14, 2008.shares.



(6)

OrbiMed Advisors LLC and OrbiMed Capital LLC hold these shares as investment advisors on behalf of Caduceus Capital Master Fund Limited, Caduceus Capital II, L.P., UBS Eucalyptus Fund LLC, PW Eucalyptus Fund Ltd. and HFR Sch Aggressive Master Trust, each of which has the right to receive or power to direct the receipt of dividends from, or proceeds from the sale of the securities held on its behalf. Samuel D. Isaly is a control person of OrbiMed Advisors and OrbiMed Capital LLC, President of OrbiMed Advisors LLC and Managing Director of ObiMed Capital LLC. See Schedule 13G filed with the SEC on February 14, 2008.



(7)

Includes 357,143 shares of common stock issuable upon exercise of warrants. Abingworth Management Ltd. is the investment manager of Abingworth Bioequities Master Fund Limited, Abingworth Bioventures IV LP, and Abingworth Bioventures IV Executives LP (the Abingworth Funds) and exercises voting and investment control over the securities owned by the Abingworth Funds. Dr. Joe Anderson, Mr. Michael Bigham, Dr. Stephen Bunting, Mr. David Leathers and Dr. Jonathan McQuitty comprise the investment committee of Abington Management Ltd. Each such individual disclaims beneficial ownership of the securities held by the Abingworth Management Ltd. and the Abingworth Funds. See Schedule 13G filed with the SEC on February 14, 2008.



(8)

Includes 523,9891,134,846 shares of common stock subject to options exercisable within 60 days.



(9)(7)

Consists of 15,000Includes 37,500 shares of common stock subject to options exercisable within 60 days.



(10)(8)

Includes 4,554,5834,554,584 shares of common stock beneficially owned by the BCC Funds, (see note (4) above), 1,071,4291,071,428 shares of common stock subject to warrants owned by BCC Funds (see note (4) above), and 81,66086,661 shares of common stock subject to options exercisable within 60 days held by Dr. Craves. Dr. Craves disclaims beneficial ownership of the securities held by the BCC Funds.



(11)(9)

Includes 82,90998,744 shares of common stock subject to options exercisable within 60 days.



(12)(10)

Includes 4,554,5834,554,584 shares of common stock beneficially owned by the BCC Funds, (see note (4) above), 1,071,4291,071,428 shares of common stock subject to warrants owned by BCC Funds (see note (4) above), and 99,994111,661 shares of common stock subject to options exercisable within 60 days held by Dr. Goldfischer. Dr. Goldfischer disclaims beneficial ownership of the securities held by the BCC Funds.

(13)(11)

Consists of 58,33173,331 shares of common stock subject to options exercisable within 60 days.



(14)(12)

Consists of 228,647678,647 shares of common stock subject to options exercisable within 60 days.



(15)(13)

Consists of 6,858,2116,363,249 shares of common stock beneficially owned by the MPM Funds and 1,785,714AM 2005, 1,785,713 shares of common stock subject to warrants owned by the MPM Funds and AM 2005 (see note (3) above), and 15,83330,833 shares of common stock subject to options exercisable within 60 days held by Mr. Simon. Mr. Simon disclaims beneficial ownership of the securities held by the MPM Funds and AM2005.AM 2005.



(14)

Includes 73,331 shares of common stock subject to options exercisable within 60 days.



(15)

Consists of 61,932 shares of common stock subject to options exercisable within 60 days.



(16)

Consists of 58,33188,141 shares of common stock subject to options exercisable within 60 days.



(17)

Includes 30,000 shares of common stock beneficially owned by the Alton Family Trust and 150,418 shares of common stock subject to options exercisable within 60 days.



(18)

Consists of 143,305 shares of common stock subject to options exercisable within 60 days.



(19)

Consists of 139,794 shares of common stock subject to options exercisable within 60 days.



(20)

Includes 2,857,1432,857,141 shares of common stock issuable upon exercise of warrants and 1,315,1122,472,886 shares of common stock subject to options exercisable within 60 days.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH MANAGEMENT

        In accordance with its charter, ourthe audit committee reviewsis responsible for the review, approval or ratification of any transaction or series of transactions with a director or senior officer of the company, a director nominee, a principal shareholder of the company, or any such person's immediate family members or affiliates in which the aggregate amount involved exceeds $120,000 (the current SEC disclosure threshold amount) or is otherwise disclosable under applicable rules and regulations of the SEC. Absent exceptional circumstances, transactions available to all relationshipscompany employees generally and/or transactions involving compensation approved, or recommended for approval by, the board compensation committee are excluded from this policy. The audit committee will consider relevant facts and transactions in whichcircumstances of each case, including the risks, costs and benefits to the company and our directorsshareholders, the terms of the transaction, and executive officersthe availability of other sources for comparable services or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. As required under the SEC rules, transactions that are determined to be directly or indirectly material to the company or a related person are disclosed in the company's Annual Report on Form 10-K and proxy statement. In addition, the audit committee reviews and approves or ratifies any related person transaction that is required to be disclosed.products. Any member of the audit committee who is a related person with respect to a transaction under review cannot participate in the deliberations or vote respecting approval or ratification of the transaction.

        BCC, an affiliate of Bay City Management, is a financial advisor to and indirectly controls the BCC Funds, which were among the investors in our $65 million equity financing that closed on April 26, 2006 and our $75$70 million public offering that closed on April 30, 2007. Two of our directors, Dr. FredFrederick B. Craves and Dr. Carl S. Goldfischer, are managing directors of BCC and possess capital and carried interests in the BCC Funds. Nicholas J. Simon, who was named a company director, following the 2006 financing, is affiliated with the MPM Funds and AM 2005, which also were investors in the 2006 financing and the 2007 public offering, and possesses capital and carried interests in the MPM Funds.Funds and AM 2005. The audit committee reviewed and approved or ratified the 2006 equity financing and the 2007 public offering and related transactions.

        During 2009, Gary A. Lyons, a director of the Company, received compensation for consulting services to the company in the amount of $140,000, pursuant to a consulting agreement dated April 1, 2009, as amended, between the Company and Mr. Lyons. The consulting agreement, as amended, was approved by the board compensation committee and therefore did not require review, approval or ratification by the board audit committee under the policy described above. Please refer to the 2009 Director Compensation Table above for additional information regarding total compensation paid to Mr. Lyons and other company directors during 2009.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Section 16(a) of the Securities Exchange Act, of 1934, as amended, requires our directors and certain officers, and persons who beneficially own more than 10% of our outstanding common stock, to file with the SEC initial reports of ownership and reports of changes in their beneficial ownership of our common stock. Directors, policymaking officers and greater-than-10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

        Based solely on our review of the copies of the forms we received, or written representations from certain reporting persons that no such forms were required for those persons, we believe that during 20072009 all filing requirements of Section 16(a) applicable to directors, executive officers and greater-than-10%

shareholders were complied with by such persons, except that three Form 4 reports relating to five option grants awarded to Michael K. Jackson, our principal accounting officer, were filed late.persons.

RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
(PROPOSAL 2)

        The audit committee has appointed Ernst & Young LLP to serve as our independent registered public accounting firm to conduct an audit of our accounts for fiscal year 2010.

        Selection of our independent registered public accounting firm is not required to be submitted to a vote of the shareholders for ratification by our bylaws or otherwise. However, the board of directors has elected to submit the selection of Ernst & Young LLP as our independent registered public accounting firm to shareholders for ratification as a matter of good corporate practice. If the shareholders fail to vote on an advisory basis in favor of the appointment, the audit committee will reconsider whether to retain Ernst & Young, and may retain that firm or another without resubmitting the matter to our shareholders. Even if shareholders vote on an advisory basis in favor of the appointment, the audit committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the company and our shareholders.

        Representatives of Ernst & Young are expected to be present at the annual meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

Our board of directors recommends that shareholders voteFOR Proposal 2.

Change of Principal Accounting Firm

        On May 22, 2009, the board of directors, based on the audit committee's recommendation, dismissed KPMG LLP as the company's independent registered public accountants and approved the engagement of Ernst & Young LLP to serve as the company's independent registered public accountants for the fiscal year 2009.

        The audit reports of KPMG on the consolidated financial statements of the company for the years ended December 31, 2008 and 2007 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle, except for KPMG's report dated March 16, 2009, which contained an explanatory paragraph that cited certain conditions that raised substantial doubt about the company's ability to continue as a going concern. The audit reports of KPMG on the effectiveness of internal control over financial reporting as of December 31, 2008 and 2007 did not contain any adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.

        During the company's fiscal years ended December 31, 2008 and 2007 and the subsequent interim period through May 22, 2009, there were no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to KPMG's satisfaction, would have caused KPMG to make reference to the subject matter of such disagreements in connection with its reports on the company's consolidated financial statements for such years.

        There were no "reportable events," as defined in Item 304(a)(1)(v) of Regulation S-K, during the company's fiscal years ended December 31, 2008 and 2007 and the subsequent interim period through May 22, 2009.

        The company provided KPMG with a copy of the above disclosures prior to its filing with the SEC and requested KPMG to furnish the company with a letter addressed to the SEC stating whether or not KPMG agrees with the above statements. A copy of KPMG's letter dated May 26, 2009 was furnished to the SEC as an exhibit to the company's Form 8-K filed on May 26, 2009.

        During the company's fiscal years ended December 31, 2008 and 2007 and the subsequent interim period through May 22, 2009, neither the company nor anyone on its behalf consulted Ernst & Young regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the company's financial statements, and no written report or oral advice of Ernst & Young was provided to the company that Ernst &Young concluded was an important factor considered by the company in reaching a decision as

to the accounting, auditing or financial reporting issue; or (ii) any matter that was the subject of a disagreement or reportable event as defined in Regulation S-K, Item 304(a)(1)(iv) and Item 304(a)(1)(v), respectively.

Principal Accounting Fees and Services

        Ernst & Young served as our registered independent public accountants in 2009. The aggregate fees billed for professional services rendered by Ernst & Young for fiscal year 2009 were as follows: