10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2005

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 0-23223

CURAGEN CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	06-1331400
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

322 East Main Street, Branford, CT 06405

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (203) 481-1104

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

Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

Yes  x    No  ¨

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

Yes  ¨    No  x

The number of shares outstanding of the Registrant’s common stock as of October 31, 2005 was 55,628,247.

CURAGEN CORPORATION AND SUBSIDIARY

FORM 10-Q

INDEX

		Page
PART I. Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets, September 30, 2005 (unaudited) and December 31, 2004	3
	Condensed Consolidated Statements of Operations, for the Three and Nine Months Ended September 30, 2005 and 2004 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows, for the Nine Months Ended September 30, 2005 and 2004 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6 - 10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11 - 37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II. Other Information
Item 6.	Exhibits	39
Signatures		40
Exhibit Index

2

CURAGEN CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share data)

	September 30, 2005			December 31, 2004
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	33,357		$	23,849
Short-term investments		16,827			83,921
Marketable securities		182,433			220,350
Cash and investments		232,617			328,120
Income taxes receivable		685			829
Inventory		4,394			—
Accounts receivable		2,088			234
Other current assets		13			64
Prepaid expenses		1,357			1,499
Total current assets		241,154			330,746
Property and equipment, net		26,011			24,132
Intangible and other assets, net		12,967			14,334
Total assets	$	280,132		$	369,212
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,101		$	1,840
Accrued expenses		6,758			4,143
Accrued payroll and related items		1,988			2,075
Interest payable		1,212			4,900
Current portion of deferred revenue		6,991			4,244
Other current liabilities		2,100			1,520
Total current liabilities		22,150			18,722
Long-term liabilities:
Convertible subordinated debt		176,228			240,000
Accrued long-term liabilities		505			1,000
Deferred revenue, net of current portion		8,738			—
Total long-term liabilities		185,471			241,000
Commitments and contingencies
Minority interest in subsidiary		707			2,593
Stockholders’ equity:
Common Stock; $.01 par value, issued and outstanding 55,621,198 shares at September 30, 2005, and 50,646,538 shares at December 31, 2004		556			506
Additional paid-in capital		514,478			489,725
Accumulated other comprehensive loss		(2,237	)		(1,114	)
Accumulated deficit		(437,147	)		(379,889	)
Unamortized stock-based compensation		(3,846	)		(2,331	)
Total stockholders’ equity		71,804			106,897
Total liabilities and stockholders’ equity	$	280,132		$	369,212

See accompanying notes to condensed consolidated financial statements

3

CURAGEN CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Revenue:
Grant revenue	$	639		$	395		$	1,975		$	753
Instrument and reagent sales		3,029			—			6,239			—
Collaboration revenue		2,120			2,003			5,294			4,534
Total revenue		5,788			2,398			13,508			5,287
Operating expenses:
Grant research		534			302			1,479			402
Cost of instrument and reagent sales		958			—			1,636			—
Research and development		20,419			17,341			53,456			57,073
Asset impairment		—			1,909			—			1,909
General and administrative		5,003			4,533			13,957			14,336
Restructuring and related charges		1,280			—			1,280			—
Total operating expenses		28,194			24,085			71,808			73,720
Loss from operations		(22,406	)		(21,687	)		(58,300	)		(68,433	)
Interest income		2,081			2,125			6,395			6,177
Interest expense		(2,775	)		(3,360	)		(9,370	)		(9,582	)
Gain (loss) on extinguishment of debt		358			—			1,766			(294	)
Loss before income taxes and minority interest in subsidiary loss		(22,742	)		(22,922	)		(59,509	)		(72,132	)
Income tax benefit		140			111			285			295
Minority interest in subsidiary loss		423			1,333			1,966			4,128
Net loss		($22,179	)		($21,478	)		($57,258	)		($67,709	)
Basic and diluted net loss per share	$	(0.42	)	$	(0.43	)	$	(1.12	)	$	(1.36	)
Weighted average number of shares used in computing basic and diluted net loss per share		52,731			49,994			51,120			49,891

See accompanying notes to condensed consolidated financial statements

4

CURAGEN CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2005			2004
Cash flows from operating activities:
Net loss		($57,258	)		($67,709	)
Adjustments to reconcile net loss to net cash used in operating activities:
Asset impairment expense		47			1,909
Depreciation and amortization		6,369			7,212
Non-monetary compensation		1,511			312
Stock-based 401(k) employer plan match		387			588
(Gain) loss on extinguishment of debt		(1,766	)		294
Minority interest		(1,966	)		(4,128	)
Changes in assets and liabilities:
Income taxes receivable		144			(296	)
Inventory		(3,837	)		—
Accounts receivable		(1,854	)		(371	)
Other current assets		51			11
Prepaid expenses		142			387
Intangible and other assets, net		(135	)		(102	)
Accounts payable		2,012			(2,436	)
Accrued expenses		2,858			778
Accrued payroll and related items		(87	)		470
Interest payable		(3,688	)		(1,900	)
Current portion of deferred revenue		2,747			(841	)
Other current liabilities		601			(529	)
Accrued long-term liabilities		5			—
Deferred revenue, net of current portion		8,738			—
Net cash used in operating activities		(44,979	)		(66,351	)
Cash flows from investing activities:
Acquisitions of property and equipment		(8,330	)		(4,000	)
Acquisitions of non-perpetual licenses		(770	)		(1,063	)
Loans to employees, net of repayments		—			(38	)
Convertible loan to collaborator		—			(5,000	)
Net inflows (outflows) from purchases and maturities of short-term investments		67,216			(27,835	)
Net inflows from purchases and maturities of marketable securities		36,462			4,841
Net cash provided by (used in) investing activities		94,578			(33,095	)
Cash flows from financing activities:
Payments on capital lease obligations		—			(204	)
Proceeds from exercise of stock options		601			401
Proceeds from issuance of convertible debt		—			110,000
Payment for extinguishment of debt		(61,540	)		(20,000	)
Proceeds from issuance of common stock		22,000			—
Payments of stock issuance costs		(1,152	)		—
Payment of financing costs		—			(3,769	)
Net cash (used in) provided by financing activities		(40,091	)		86,428
Net increase (decrease) in cash and cash equivalents		9,508			(13,018	)
Cash and cash equivalents, beginning of period		23,849			42,843
Cash and cash equivalents, end of period	$	33,357		$	29,825
Supplemental cash flow information:
Interest paid	$	12,230		$	10,679
Income tax benefit payments received	$	524			—
Acquisition/construction of property, plant and equipment, unpaid at end of period	$	74		$	815

See accompanying notes to condensed consolidated financial statements

5

CURAGEN CORPORATION AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of CuraGen Corporation’s management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring accruals, necessary to present fairly its consolidated financial position, results of operations and cash flows. Interim results are not necessarily indicative of the results that may be expected for the entire year. The condensed consolidated financial statements of CuraGen Corporation and subsidiary (the “Company”) include CuraGen Corporation (“CuraGen”) and its majority-owned subsidiary, 454 Life Sciences Corporation (“454”), and accordingly, all material intercompany balances and transactions have been eliminated.

The 2004 condensed consolidated financial statements have been reclassified to conform to the classifications used in 2005. All dollar amounts are shown in thousands, except par value and per share data.

The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in CuraGen’s Annual Report on Form 10-K for the year ended December 31, 2004.

2. Significant Accounting Policy

Due to 454’s receipt of $11,500 of initial milestones from Roche Diagnostics (“Roche”) during 2005, of which $1,000 was received in the first quarter, $1,000 was received in the second quarter and $9,500 was received in the third quarter, 454 adopted the following significant accounting policy in the third quarter of 2005:

Milestone revenue—454 recognizes revenue when (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the price is fixed or determinable and, (4) the collectibility is reasonably assured, in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition”. Milestone revenue related to the License, Supply and Distribution Agreement with F. Hoffmann-La Roche will be recognized on a straight line basis beginning on the date the milestone was earned through October 2010.

3. Comprehensive Loss

Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income” (“SFAS 130”), requires reporting and displaying of comprehensive income and its components. In accordance with SFAS 130, the accumulated balance of other comprehensive loss is disclosed as a separate component of stockholders’ equity and is comprised of unrealized gains and losses on short-term investments and marketable securities. A summary of total comprehensive loss is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Net loss	($	22,179	)	($	21,478	)	($	57,258	)	($	67,709	)
Other comprehensive loss:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period		(638	)		1,043			(1,123	)		(1,738	)
Reclassification adjustment for losses (gains) included in net loss		7			25			62			(11	)
Net unrealized gains (losses) on securities		(631	)		1,068			(1,061	)		(1,749	)
Total comprehensive loss	($	22,810	)	($	20,410	)	($	58,319	)	($	69,458	)

6

The Company periodically reviews its investment portfolio to determine if there is an impairment that is other than temporary, and to date, has not experienced any impairments in its investments that were other than temporary. The Company’s investment objectives for cash equivalents, short term investments and marketable securities (the “investment portfolio”) are to preserve capital while maintaining liquidity and generating favorable yields within the limitations of the investment guidelines outlined in CuraGen’s and 454’s investment policies. These investment policies provide guidelines for sector diversification, maximum maturity and duration, concentration limits and credit quality. These policies also outline unacceptable investments.

In evaluating whether the individual investments in the investment portfolio are not other than temporarily impaired, the Company considered the credit rating of the individual securities, the cause of the impairment of the individual securities, and the severity of the impairment of the individual securities. In order for an individual investment to be impaired, its credit rating and the cause and severity of the impairment must be equal to or more than 5% of the book value of the investment.

4. Stock-Based Compensation

Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”) requires expanded disclosures of stock-based compensation arrangements with employees and non-employees, and encourages (but does not require) compensation cost to be measured based on the fair value of the equity instruments awarded to employees. Companies are permitted to continue to apply Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) for equity instruments awarded to employees, which recognizes compensation cost based on the intrinsic value of the equity instruments awarded. The Company will continue to apply APB 25 to its stock-based compensation awards to employees through December 31, 2005. Effective January 1, 2006, the Company will apply the provisions of Statement of Financial Accounting Standards No. 123R “Share-Based Payment” (“SFAS 123R”) issued in December 2004. SFAS 123R eliminates the ability to account for stock-based compensation using APB 25, and requires that such transactions be recognized as compensation cost in the income statement based on fair values on the measurement date, which is generally the date of the grant.

Currently, the Company uses the Black-Scholes formula to estimate the value of stock options granted to employees for purposes of SFAS 123 disclosure, and expects to continue to use this acceptable option valuation upon the required adoption of SFAS 123R. The Company will transition to fair value based accounting for stock-based compensation using a modified version of the prospective application (“modified prospective application”). Under the modified prospective application, as it is applicable to the Company, SFAS 123R applies to new awards and to awards modified, repurchased, or cancelled after January 1, 2006. Additionally, compensation cost for the portion of awards for which the requisite service has not been rendered (generally referring to non-vested awards) that are outstanding as of January 1, 2006 must be recognized as the remaining requisite service is rendered during the period of and/or for the periods after the adoption of SFAS 123R. The attribution of compensation cost for those earlier awards will be based on the same method and on the same grant date fair values previously determined for the pro forma disclosures required under SFAS 123. Future levels of compensation cost recognized related to stock-based compensation awards will be impacted by new awards and/or modifications, repurchases and cancellations of existing awards before and after the adoption of SFAS 123R. The Company is evaluating the requirements of SFAS 123R and expects that the adoption of SFAS 123R will have a material impact on its consolidated results of operations. The Company has not yet determined whether the adoption will result in amounts that are similar to the current pro forma disclosures under SFAS 123.

Had compensation cost for the Company’s stock option plans been determined in accordance with SFAS 123, the Company’s net loss and net loss per share would have approximated the pro forma amounts shown below for each of the three and nine month periods ended September 30, 2005 and 2004. The pro forma disclosure may not be indicative of pro forma results in future periods, because of the fact that options vest over several years, pro forma compensation expense is recognized as the options vest and additional awards may also be granted. The three and nine month periods ended September 30, 2004 pro forma expense and net loss disclosures below have been adjusted to reflect differences discovered during the preparation of the 2004 pro forma disclosures.

7

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Net loss, as reported	($	22,179	)	($	21,478	)	($	57,258	)	($	67,709	)
Stock-based employee compensation expense included in net loss		455			58			1,188			252
Total stock-based employee compensation expense determined under Black-Scholes option pricing model		(1,167	)		(750	)		(3,234	)		(2,346	)
Pro forma net loss	($	22,891	)	($	22,170	)	($	59,304	)	($	69,803	)
Basic and diluted net loss per share:
As reported	($	0.42	)	($	0.43	)	($	1.12	)	($	1.36	)
Pro forma	($	0.43	)	($	0.44	)	($	1.16	)	($	1.40	)

The fair values of options granted during the three month periods ended September 30, 2005 and 2004 were estimated as of the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Three Months Ended September 30,
	2005		2004
Expected dividend yield	0	%	0	%
Expected stock price volatility - CuraGen	81	%	82	%
Expected stock price volatility - 454	.10	%	.10	%
Risk-free interest rate - CuraGen	3.93	%	3.65	%
Risk-free interest rate - 454	4.06	%	3.65	%
Expected option term in years - CuraGen	4.4		6.1
Expected option term in years - 454	7.8		8.0

5. Restructuring and Related Charges

In June 2003, the Company announced a restructuring plan intended to focus resources on continuing to advance its pipeline of protein, antibody, and small molecule therapeutics into preclinical and clinical development. In connection with the June 2003 restructuring plan, a charge of $2,888 was recorded in the second quarter of 2003, including $1,742 related to employee separation costs, $1,046 of operating lease obligations and $100 of asset impairment costs. The cash requirements under the June 2003 restructuring plan were $2,681, of which $2,373 was paid prior to September 30, 2005. The remaining cash requirements of $308 will be paid through 2008.

In September 2005, the Company underwent a corporate restructuring to focus on advancing its therapeutic pipeline through clinical development. In connection with the September 2005 restructuring plan, a charge of $1,280 was recorded in the third quarter of 2005, including $1,111 related to employee separation costs, $130 of operating lease obligations and $39 of asset impairment costs. The cash requirements under the September 2005 restructuring plan were $1,057, of which $2 was paid prior to September 30, 2005. The remaining cash requirements of $1,055 will be paid through the second quarter of 2006.

6. Segment Reporting

The Company currently operates in two business segments: CuraGen and 454. CuraGen is a biopharmaceutical development company dedicated to improving the lives of patients by developing novel protein, antibody and small molecule therapeutics in the areas of oncology, inflammatory diseases, and diabetes. 454, the Company’s majority-owned subsidiary, has commercialized novel instrumentation and technologies for rapidly and comprehensively determining the nucleotide sequence of entire genomes (“whole genome sequencing”) and performing ultra-deep sequencing of, or accurate detection of mutations in target genes of interest. The operations of 454 are run by a separate management team and governed by a separate Board of Directors made up of members of CuraGen’s management team and Board of Directors. All of the Company’s revenues are generated in the United States and all assets are located in the United States.

8

	September 30, 2005			December 31, 2004
Cash and investments:
CuraGen	$	223,510		$	320,296
454		9,107			7,824
Total	$	232,617		$	328,120
Total assets:
CuraGen	$	264,994		$	364,385
454		22,892			16,231
Intercompany eliminations		(7,754	)		(11,404	)
Total	$	280,132		$	369,212

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
Revenues:
CuraGen	$	944		$	1,719		$	3,395		$	4,155
454		4,877			707			10,443			1,333
Intercompany eliminations		(33	)		(28	)		(330	)		(201	)
Total	$	5,788		$	2,398		$	13,508		$	5,287
Operating expenses:
CuraGen	$	22,061		$	19,460		$	55,854		$	60,336
454		6,166			4,653			16,284			13,585
Intercompany eliminations		(33	)		(28	)		(330	)		(201	)
Total	$	28,194		$	24,085		$	71,808		$	73,720
Net loss:
CuraGen	$	21,367		$	18,922		$	53,489		$	59,792
454		1,235			3,889			5,735			12,046
Minority interest in subsidiary loss		(423	)		(1,333	)		(1,966	)		(4,129	)
Total	$	22,179		$	21,478		$	57,258		$	67,709
Capital expenditures:
CuraGen	$	101		$	2,497		$	7,411		$	3,223
454		688			219			1,101			792
Intercompany eliminations		(180	)		—			(182	)		(15	)
Total	$	609		$	2,716		$	8,330		$	4,000
Depreciation and amortization:
CuraGen	$	1,879		$	1,725		$	4,588		$	5,415
454		588			601			1,781			1,797
Total	$	2,467		$	2,326		$	6,369		$	7,212

7. Inventory

454’s inventory is recorded at the lower of cost or market on the first-in-first-out basis for non-lot controlled items, and on a specific identification basis for lot controlled items. A summary of inventory is as follows:

	September 30, 2005
Finished goods	$	1,409
Work in process		540
Raw materials		2,445
Total	$	4,394

8. Extinguishment of Debt

During the third quarter of 2005, the Company repurchased a total of $49,822 of its 6% convertible subordinated debentures due February 2007, for total consideration of $49,118, plus accrued interest of $936 to the date of repurchase. As a result of the transaction, in the third quarter of 2005, the Company recorded a gain of $358 in “Gain on extinguishment of debt,” which is net of the write-off of the ratable portion of unamortized deferred financing costs relating to the repurchased debt.

9

9. Issuance of Common Stock

In August 2005, the Company issued 4,000,000 shares of its common stock at a public offering price of $5.50 per share. Net proceeds, after underwriting discounts and stock issuance costs, were $20,848. The net proceeds were used during August and September 2005 in the repurchases of the Company’s outstanding convertible debt.

See Note 8 which describes the Company’s repurchase of $49,822 of its 6% convertible subordinated debentures due February 2007, during the third quarter of 2005.

10. 454 and Roche Commercialization Milestone

On October 7, 2005, 454 and Roche Applied Science announced the commercial launch, including world-wide sales and distribution, of the Genome Sequencer 20 System and reagents from 454 by Roche Applied Science. Roche Applied Science, a business area of Roche Diagnostics, is now selling 454’s products through its sales and marketing teams, distributing 454’s products through its established supply chain, and providing technical support to purchasers of the Genome Sequencer 20 System and the associated reagents. Achievement of this commercialization milestone triggered a $7,500 payment to 454 from Roche, which was received in October 2005.

10

CURAGEN CORPORATION AND SUBSIDIARY

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations as of September 30, 2005 and for the three and nine month periods ended September 30, 2005 and 2004 should be read in conjunction with the sections of our audited condensed consolidated financial statements and notes thereto as well as our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are included in our Annual Report on Form 10-K for the year ended December 31, 2004.

Overview

We are a biopharmaceutical development company dedicated to improving the lives of patients by developing novel protein, antibody and small molecule therapeutics in the areas of oncology, inflammatory diseases, and diabetes. Our pipeline of therapeutics is based on targets from the human genome that we believe play a role in important mechanisms underlying disease.

Using our knowledge of the human genome, we have taken a systematic approach to identifying and validating the most promising therapeutic targets of the human genome that are both applicable and amenable to drug development. We have established development alliances with Abgenix, Inc. (“Abgenix”) to support our antibody projects, Bayer AG (“Bayer”) to support small molecule projects for diabetes, TopoTarget A/S (“TopoTarget”) to support small molecule histone deacetylase (“HDAC”) inhibitor projects for oncology and inflammatory diseases, and Seattle Genetics, Inc. (“Seattle Genetics”) to support antibody-drug conjugate projects. We utilize partners or contract manufacturing organizations for manufacturing of our clinical development products under current good manufacturing practices (“cGMP”).

As our pipeline has matured over the past few years, we have decreased our early-stage drug target discovery efforts and focused our resources on the advancement of our pipeline of potential protein, antibody and small molecule therapeutics through clinical development.

Pipeline

Velafermin (CG53135)

Velafermin (CG53135), also referred to as recombinant human fibroblast growth factor – 20, is a protein therapeutic we discovered that is being investigated as a potential protein therapeutic for the prevention and treatment of oral mucositis (“OM”) in cancer patients who are receiving chemotherapy, with or without radiotherapy for the treatment of their underlying disease. Velafermin (CG53135) is a growth factor that is believed to play a role in maintaining the integrity of the gastrointestinal tract by causing regeneration of epithelial and mesenchymal cells, enabling repopulation of the layers of the gastrointestinal tract damaged by chemotherapy and radiotherapy.

In September 2005, we announced the completion of patient enrollment in our Phase II randomized, placebo-controlled multi-center study to determine the safety and efficacy of a single-dose of velafermin (CG53135) for the prevention of OM. To date, more than 200 patients have been randomized and treated with a single administration of either placebo or one of three dosages of velafermin (CG53135) immediately after bone marrow transplantation. We expect to complete the study by the end of 2005 and anticipate presenting results during the first quarter of 2006. In addition, in January 2005, we initiated a Phase I clinical trial on velafermin (CG53135) to explore its role for the treatment of OM, as opposed to the prevention strategy discussed above. This Phase I trial will evaluate the safety and tolerability of intravenously administered velafermin (CG53135) on cancer patients who develop OM as a consequence of the chemotherapy they receive for the treatment of their underlying disease. We anticipate completing this Phase I study by the end of 2005.

11

PXD101

In June 2004, we added PXD101, a novel HDAC inhibitor, to our pipeline through a license and collaboration agreement with TopoTarget. PXD101 is one of the most advanced HDAC inhibitors in development and is being investigated as a potential treatment for both solid and hematologic cancers either alone, or in combination with other cancer drugs.

Data generated from two Phase I clinical trials evaluating PXD101 in patients with solid tumors and hematologic cancers enabled us to initiate in January 2005 a Phase II clinical trial on PXD101 for the treatment of advanced multiple myeloma. This Phase II open-label clinical trial will enroll approximately 25 to 50 patients who have failed at least two prior treatment regimens at multiple sites in Europe and the US. This trial is expected to be completed by mid-2006.

Based upon preclinical and clinical findings with PXD101, we have initiated two Phase Ib clinical trials to evaluate regimens consisting of PXD101 in combination with other chemotherapeutic agents. In September 2005, we announced the initiation of patient dosing in a Phase Ib trial evaluating the safety and potential activity of PXD101 in combination with paclitaxel and/or carboplatin for patients with advanced solid tumors, including ovarian cancer. In September 2005, we also announced the initiation of patient dosing in a Phase Ib trial evaluating the safety and potential activity of PXD101 in combination with 5-fluorouracil for patients with advanced solid tumors, including colorectal cancer. Preliminary results from both of these trials are expected to be available in the fourth quarter of 2006.

CR002

CR002, which stemmed from our collaboration with Abgenix, is a novel fully-human monoclonal antibody with the potential to treat forms of kidney inflammation, such as IgA nephropathy, that, if left untreated, could progress to kidney failure. CR002 neutralizes platelet derived growth factor-D, an autocrine growth factor, which is believed to be involved in the pathogenesis of mesangioproliferative diseases, or conditions where the growth of mesangial cells are involved in disease progression, including IgA nephropathy, diabetic nephropathy and, potentially, lupus nephritis.

In July 2005, we announced the completion of our Phase I trial on CR002 to determine the safety and maximum tolerated dose in healthy male volunteers. Results from this trial will be presented at the American Society of Nephrology’s Renal Week Annual Meeting on November 12, 2005 in Philadelphia, PA. We also announced in July 2005, that as we continue to focus our pipeline on the treatment of cancer and on cancer supportive care, we will seek to license CR002 to a partner with the necessary resources for developing and marketing a nephrology product.

CR011

In October 2004, we announced the advancement to preclinical development of CR011, a fully-human monoclonal antibody-drug conjugate, which we are investigating as a potential treatment for metastatic melanoma. CR011 is the second fully-human monoclonal antibody stemming from our collaboration with Abgenix, and applies antibody-drug conjugate technology that we licensed from Seattle Genetics. We anticipate that CR011 will enter clinical trials during the first half of 2006.

CT052

In October 2004, we also announced the advancement to preclinical development of CT052, an investigational small molecule drug for the potential management of adult-onset (type 2) diabetes, which will be co-developed with Bayer. This compound represents the first drug candidate to enter preclinical development from our ongoing collaboration with Bayer that was established to identify and develop promising drugs for the treatment of diabetes based upon targets we discovered. We anticipate that CT052 will enter clinical trials during the first half of 2006.

Other

In addition to velafermin (CG53135), PXD101, CR002, CR011, and CT052, we have several potential protein, antibody and small molecule therapeutics currently being evaluated in, or being prepared for, animal studies. These programs may lead to the filing of investigational new drug applications (“INDs”) in the future.

12

454 Life Sciences

To enable us to focus on our pipeline, in 2000 we announced the formation of a separate technology development subsidiary, 454 Life Sciences Corporation (“454”). 454 is a majority-owned subsidiary which has commercialized novel instrumentation and technologies for rapidly and comprehensively determining the nucleotide sequence of entire genomes—“whole genome sequencing”—and performing ultra-deep sequencing of, or accurate detection of mutations in, target genes of interest. Scientists, using the 454 technology platform, will be able to generate whole genome sequences for a wide variety of viral, bacterial and small fungi organisms. 454 believes its affordable, high-throughput technology will expand the whole genome sequencing market beyond genome centers, where the majority of such sequencing services are currently performed, to research centers and academic institutions.

In 2005, 454 began commercializing its instrument systems and reagents to customers that desire high-throughput sequencing without the need for, and complexity of, large-scale robotics. In May 2005, 454 entered into an exclusive five-year world-wide agreement with F. Hoffmann-LaRoche for the promotion, sale, and distribution of 454’s high-throughput Genome Sequencing Systems, including proprietary kits and reagents, by Roche Diagnostics (“Roche”). The Genome Sequencer 20 System uses technology to produce more than 20 million raw bases per 5.5-hour run on a single instrument. The software included with the Genome Sequencer 20 System enables mapping or de novo assembly for whole genome shotgun sequencing of genomes up to 50 megabases. Many biologically meaningful and complex regions of genomes can be analyzed with this system without the time or cost constraints of current DNA-sequencing methods. The Genome Sequencer 20 System provides an enabling solution for ultra-high-throughput DNA sequencing.

As of September 2005, 454 had sold and installed nine Genome Sequencer 20 Systems at genome sequencing centers and research institutions. In October 2005, Roche began promoting, selling and distributing 454’s products, including the Genome Sequencer 20 System and reagents. 454 manufactures and supplies instrument systems and reagents to Roche, and earns both a margin on such sales to Roche and a royalty on sales to third parties completed by Roche. Under the terms of the agreement, Roche may sell 454’s products to all markets, with the exception of regulated diagnostics. Roche has the rights to negotiate distribution of 454’s products for use in the regulated diagnostic market and for renewal of the distribution agreement contingent upon meeting minimum performance criteria. As of September 30, 2005, 454 had received $11.5 million in milestone payments from Roche following the achievement of all pre-commercialization milestones under the agreement. As a result of Roche’s commercial launch of 454’s products, 454 received a $7.5 million milestone payment from Roche in October 2005.

454 also offers contract sequencing services to clients world-wide from its Measurement Services Center, located in Branford, Connecticut. 454 will continue to incur substantial research and development expenses as it plans to scale-up its technology to analyze larger model organisms, including human DNA, and to develop other sequencing applications for its technology.

Summary

We expect to generate value for our shareholders by developing therapeutics. We expect to become profitable by commercializing a subset of therapeutics stemming from our development pipeline and establishing partnerships with pharmaceutical and biotechnology companies for the co-development and co-commercialization of other therapeutics from our development pipeline. Our failure to successfully complete clinical trials, obtain regulatory approval, and develop pharmaceutical products that we can commercialize would materially adversely affect our business, financial condition and results of operations. Royalties or other revenue generated from commercial sales of products developed through the application of our technologies and expertise are not expected for several years, if at all. We expect that our revenue or income sources for at least the next several years may be limited to: 454 grant, service and product revenue, royalties and milestones; our collaboration revenues; and interest income.

We expect to continue to incur substantial expenses relating to our research and development efforts, as we focus on preclinical studies and clinical trials required for the development of therapeutic protein, antibody and small molecule product candidates and external programs identified by our platform as being promising and synergistic with our products and expertise, and as 454 continues work on the development and commercialization of its technology for whole genome analysis. Conducting clinical trials is a lengthy, time-consuming and expensive process which may not generate sufficient data to support the safety and efficacy of our products. We will incur substantial expenses for, and devote a significant amount of time to, these studies. As a result, we expect to incur continued losses over the next several years. Results of operations for any period may be unrelated to the results of operations for any other period. In addition, historical results should not be viewed as indicative of future operating results.

During the period ended September 30, 2005, we determined that acquisitions of property and equipment on account, which were previously reported as a component of changes in operating assets and liabilities and purchases of property and equipment, should not have been reported in the statements of cash flows. Our financial statements for the nine months ended September 30, 2004 have been revised to reflect a decrease in cash flows used in operating activities with a corresponding increase in cash flows used in investing activities of $0.8 million. Purchases of property and equipment acquired on account have now been presented as supplemental disclosure of non-cash items. This revision has no effect on net income or the amount of cash and cash equivalents reported.

13

All dollar amounts in the tables set forth below are shown in millions, unless otherwise noted.

Critical Accounting Policies and Use of Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses and as such, actual results may differ from our estimates under different assumptions or conditions. Our significant accounting policies are fully described in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2004.

Results of Operations

The following tables set forth a comparison of the components of our net loss for the three and nine month periods ended September 30, 2005 and 2004:

	Three months ended September 30,
	2005		2004			$ Change			% Change
Grant revenue	$	0.6	$	0.4		$	0.2		50	%
Instrument and reagent sales		3.0		—			3.0		100	%
Collaboration revenue		2.1		2.0			0.1		5	%
Grant research expenses		0.5		0.3			0.2		67	%
Cost of instrument and reagent sales		0.9		—			0.9		100	%
Research and development expenses		20.4		17.3			3.1		18	%
Asset impairment expense		—		1.9			(1.9	)	100	%
General and administrative expenses		5.0		4.5			0.5		11	%
Restructuring and related charges		1.3		—			1.3		100	%
Interest income		2.1		2.1			—		—
Interest expense		2.8		3.4			(0.6	)	(18	)%
Gain on extinguishment of debt		0.4		—			0.4		100	%
Income tax benefit		0.1		0.1			—		—
Minority interest in subsidiary loss		0.4		1.3			(0.9	)	(69	)%
Net loss	$	22.2	$	21.5
	Nine months ended September 30,
	2005		2004			$ Change			% Change
Grant revenue	$	2.0	$	0.8		$	1.2		150	%
Instrument and reagent sales		6.2		—			6.2		100	%
Collaboration revenue		5.3		4.5			0.8		18	%
Grant research expenses		1.5		0.4			1.1		275	%
Cost of instrument and reagent sales		1.6		—			1.6		100	%
Research and development expenses		53.5		57.1			(3.6	)	(6	)%
Asset impairment expense		—		1.9			(1.9	)	100	%
General and administrative expenses		14.0		14.3			(0.3	)	(2	)%
Restructuring and related charges		1.3		—			1.3		100	%
Interest income		6.4		6.2			0.2		3	%
Interest expense		9.4		9.6			(0.2	)	(2	)%
Gain (loss) on extinguishment of debt		1.8		(0.3	)		2.1		(700	)%
Income tax benefit		0.3		0.3			—		—
Minority interest in subsidiary loss		2.0		4.1			(2.1	)	(51	)%
Net loss	$	57.3	$	67.7

The following tables set forth a comparison of revenue by segment, for the three and nine month periods ended September 30, 2005 and 2004:

	Three months ended September 30,
	2005		2004		$ Change			% Change
Grant revenue:
454	$	0.6	$	0.4	$	0.2		50	%
Total	$	0.6	$	0.4
Instrument and reagent sales
454	$	3.0	$	—	$	3.0		100	%
Total	$	3.0	$	—
Collaboration revenue:
CuraGen	$	0.9	$	1.7	$	(0.8	)	(47	)%
454		1.2		0.3		0.9		300	%
Total	$	2.1	$	2.0

14

	Nine months ended September 30,
	2005		2004		$ Change			% Change
Grant revenue:
454	$	2.0	$	0.8	$	1.2		150	%
Total	$	2.0	$	0.8
Instrument and reagent sales
454	$	6.2	$	—	$	6.2		100	%
Total	$	6.2	$	—
Collaboration revenue:
CuraGen	$	3.3	$	4.1		($0.8	)	(20	)%
454		2.0		0.4		1.6		400	%
Total	$	5.3	$	4.5

Grant revenue. The increase in grant revenue for the three and nine month periods ended September 30, 2005, as compared to the same respective periods in 2004, was a result of two federal grants awarded to 454 in May and September 2004 from the National Human Genome Research Institute, one of the National Institutes of Health (“NIH”). These grants will partially fund the continued scale up of 454’s technology toward sequencing larger genomes. We expect the full year 2005 grant revenue to increase in comparison to 2004, as the research outlined in these two grants will be conducted for the entire year.

Instrument and reagent sales. During the three and nine month periods ended September 30, 2005, 454 commercialized its novel instruments and reagents and recognized $3.0 million, and $6.2 million, respectively, in revenue related to sales to its customers. 454 sold four instrument systems during the third quarter, bringing the installed base to nine customers. In October 2005, 454 and Roche announced the commercial launch, including world-wide sales and distribution, of the Genome Sequencing 20 System and reagents. 454 will receive a margin on products manufactured for Roche and royalties on net sales of licensed products. Due to the commercial launch with Roche and additional instruments expected to be sold directly by 454, sales during the remainder of 2005 are expected to continue to increase.

Instruments sold directly by 454 are recognized upon the completion of installation of the equipment and training of customer personnel. However, certain customers have required that 454’s instruments be tested prior to their acceptance of the instruments. For those customers, revenue is recognized upon acknowledgement of acceptance from the customer. Reagent sales are recognized upon shipment of the products under FOB shipping or FOB destination based upon terms and conditions outlined in 454 customers’ purchase orders. Sales of instruments and reagents to Roche Applied Science will be recognized upon shipment of products under FOB shipping point.

Collaboration revenue. Our collaboration revenue for the three and nine month periods ended September 30, 2005 decreased slightly as compared to the same periods in 2004, due to timing differences in the work performed, however we expect that the full year 2005 collaboration revenue will increase as compared to 2004, reflecting ongoing progress on the Bayer alliance.

The increase in 454’s collaboration revenue for the three and nine month periods ended September 30, 2005, as compared to the same respective periods in 2004, was related to additional sales of genomic analysis services and revenue recognized for the amortization of the initial $11.5 million of milestone payments from Roche. We expect 454’s 2005 collaboration revenue to continue to increase during the remainder of 2005 as its technology is commercially accepted in the marketplace and as additional revenue is recognized for the amortization of the $7.5 million commercial launch milestone payment from Roche.

Grant research expenses. The increase in grant research expenses for the three and nine month periods ended September 30, 2005 as compared to the same respective periods in 2004, was a result of two federal grants awarded to

15

454 in May and September 2004 from the NIH, which will partially fund the scale up of 454’s technology toward sequencing larger genomes. Grant research expenses for the first grant were recorded beginning in mid-May 2004 and for the second grant beginning at the end of September 2004. The expenses included personnel costs and lab supplies that were directly related to the research outlined in the grant award. We expect 2005 grant expenses to increase in comparison to 2004, as the research outlined in these two grants will be conducted for the entire year.

Cost of instrument and reagent sales. Effective February 1, 2005, the date on which 454 successfully completed the installation of its first sequencing instrument at a customer site, 454 began to capitalize, in inventory, the costs of manufacturing instrumentation and reagents for commercial sale. Included in cost of instrument and reagent sales is (1) raw material, which was previously capitalized as a fixed asset, valued at the net book value on February 1, 2005 and (2) raw material purchased, and direct labor and manufacturing overhead costs incurred, after February 1, 2005. 454’s cost of instrument and reagent sales are recorded at the lower of cost or market on the first-in-first-out basis for non-lot controlled items and on a specific identification basis for lot controlled items. Based on our execution of the License, Supply and Distribution Agreement with Roche, we anticipate that 454’s margins on future sales of instruments and reagents will decrease.

Research and development expenses. The following table sets forth a comparison of research and development expenses by segment, for the three and nine month periods ended September 30, 2005 and 2004:

	Three months ended September 30,
	2005		2004		$ Change			% Change
Research and development expenses:
CuraGen	$	17.4	$	14.1	$	3.3		23	%
454		3.0		3.2		(0.2	)	(6	)%
Total	$	20.4	$	17.3
	Nine months ended September 30,
	2005		2004		$ Change			% Change
Research and development expenses:
CuraGen	$	45.2	$	47.3		($2.1	)	(4	)%
454		8.3		9.8		(1.5	)	(15	)%
Total	$	53.5	$	57.1

Research and development expenses consist primarily of: contractual and manufacturing costs; salary and benefits; perpetual license fees and milestone payments; supplies and reagents; depreciation and amortization; and allocated facility costs. Our research and development efforts are concentrated on four major project areas: clinical candidates; our majority-owned subsidiary, 454; preclinical drug candidates; and collaborations. With the exception of 454, we budget and monitor our research and development costs by expense category, rather than by project, because these costs often benefit multiple projects and/or our technology platform.

Below is a summary that reconciles our total research and development expenses for the three and nine month periods ended September 30, 2005 and 2004 by the major categories mentioned above:

	Three months ended September 30,
	2005		2004		$ Change			% Change
Contractual and manufacturing costs	$	6.0	$	4.3	$	1.7		40	%
Salary and benefits		4.4		6.0		(1.6	)	(27	)%
Perpetual license fees and milestone payments		5.4		—		5.4		100	%
Supplies and reagents		1.1		3.2		(2.1	)	(66	)%
Depreciation and amortization		1.1		1.3		(0.2	)	(15	)%
Allocated facility costs		2.4		2.5		(0.1	)	(4	)%
Total research and development expenses	$	20.4	$	17.3
	Nine months ended September 30,
	2005		2004		$ Change			% Change
Contractual and manufacturing costs	$	14.9	$	11.7	$	3.2		27	%
Salary and benefits		13.3		17.9		(4.6	)	(26	)%
Perpetual license fees and milestone payments		10.5		7.2		3.3		46	%
Supplies and reagents		5.4		9.5		(4.1	)	(43	)%
Depreciation and amortization		3.2		4.1		(0.9	)	(22	)%
Allocated facility costs		6.2		6.7		(0.5	)	(7	)%
Total research and development expenses	$	53.5	$	57.1

16

The increase in our research and development expenses for the three month period ended September 30, 2005, as compared to the same period in 2004 was primarily due to the milestone payment of approximately $4.8 million related to the TopoTarget collaboration. The decrease in our research and development expenses for the nine month period ended September 30, 2005, as compared to the same period in 2004 was primarily due to reductions in salary and benefits, and supplies and reagents, in connection with the October 2004 restructuring plan; offset by increased contractual service costs related to clinical trials and manufacturing and the Bayer collaboration; as well as an increase in milestone payments made to TopoTarget. We anticipate our research and development expenses for the full year 2005 to be consistent with research and development expenses for the full year 2004.

The decreases in research and development expenses for 454 for the three and nine month periods ended September 30, 2005, as compared to the same respective periods in 2004, were primarily due to certain lab supplies and reagents and contractual services recorded as grant research expenses in 2005 that were classified as research and development expenses in 2004. Additionally, various 454 personnel that were in research and development in 2004 have been moved into instrument and reagent production in 2005, and, as such, salary and benefits, lab supplies and reagents, and allocated facility costs which were expensed as research and development in 2004 are capitalized into inventory and expensed as costs of goods sold in 2005 when the corresponding products are sold. We expect 454’s research and development expenses to decrease as compared to 2004 primarily due to certain lab supplies and reagents and contractual services recorded as grant research expenses in 2005 that were classified as research and development expenses in 2004. Additionally, as noted above, various personnel that were in research and development in 2004 have been moved into instrument and reagent production in 2005.

As soon as we advance a potential clinical candidate into clinical trials, we begin to track the direct research and development expenses associated with that potential clinical candidate. The following table shows the cumulative direct research and development expenses as of September 30, 2005, which were incurred on or after we started conducting a Phase I clinical trial for a clinical candidate:

		Cumulative Costs
Therapeutic Area and Clinical Candidate	Class	As of September 30, 2005		Indication	Trial Status
Cancer Supportive Care
Velafermin (CG53135)	Protein	$	23.1	Oral Mucositis	Phase II
Oncology
PXD101	Small Molecule	$	16.7	Various Cancers	Phase II
Kidney Inflammation
CR002	Antibody	$	1.4	IgA Nephropathy	Phase I

Currently, our potential pharmaceutical products require significant research and development efforts and preclinical testing, and will require extensive clinical trials prior to submitting an application to regulatory agencies for their commercial use. Although we are conducting human studies with respect to velafermin (CG53135), PXD101, and CR002, we may not be successful in developing or commercializing these or other products. Our product candidates are subject to the risks of failure inherent in the development and commercialization of pharmaceutical products and we cannot currently reliably estimate when, if ever, our product candidates will generate revenue and cash flows.

Completion of research and development, preclinical testing and clinical trials may take many years. Estimates of completion periods for any of our major research and development projects are highly speculative and variable, and dependent on the nature of the disease indication, how common the disease is among the general populace, and the results of the research. For example, preclinical testing and clinical trials can often go on for an indeterminate period of time since the results of tests are continually monitored, with each test considered “complete” only when sufficient data has been accumulated to assess whether the next phases are warranted or whether the effort should be abandoned. Typically, Phase I clinical trials are expected to last between 12 and 24 months, Phase II clinical trials are expected to last between 24 and 36 months and Phase III clinical trials are expected to last between 24 and 60 months. The most significant time and costs associated with clinical development are the Phase III trials as they tend to be the longest and largest studies conducted during the drug development process.

17

In addition, many factors may delay the commencement and speed of completion of preclinical testing and clinical trials, including the number of patients participating in the trial, the duration of patient follow-up required, the number of clinical sites at which the trials are conducted, and the length of time required to locate and enroll suitable patient subjects. The successful completion of our development programs and the successful development of our product candidates are highly uncertain and are subject to numerous challenges and risks. Therefore, we cannot presently estimate anticipated completion dates for any of our projects, as described more fully in the Risk Factors section under the heading “Risks Related to Our Business.”

Due to the variability in the length of time necessary to develop a product candidate, the uncertainties related to the cost of projects and the need to obtain governmental approval for commercialization, accurate and meaningful estimates of the ultimate costs to bring our product candidates to market are not available. If our major research and development projects are delayed, then we can expect to incur additional costs in conducting our preclinical testing and clinical trials and a longer period of time before we become profitable from our operating activities, as described more fully in the Risk Factors titled “We have a history of operating losses and expect to incur losses in the future” and “We may need to raise additional funding, which may not be available on favorable terms, if at all.” Accordingly, the timing of the potential market approvals for our existing clinical stage product candidates, velafermin (CG53135), PXD101, CR002, and future product development candidates, will have a significant impact on our capital requirements.

General and administrative expenses. The following table sets forth a comparison of general and administrative expenses by segment, for the three and nine month periods ended September 30, 2005 and 2004:

	Three months ended September 30,
	2005		2004		$ Change		% Change
General and administrative expenses:
CuraGen	$	3.3	$	3.4	(0.1	)	(3	)%
454		1.7		1.1	0.6		55	%
Total	$	5.0	$	4.5
	Nine months ended September 30,
	2005		2004		$ Change		% Change
General and administrative expenses:
CuraGen	$	9.4	$	11.0	($1.6	)	(15	)%
454		4.6		3.3	1.3		39	%
Total	$	14.0	$	14.3

The decreases in our general and administrative expenses for the three and nine month periods ended September 30, 2005, as compared to the same respective periods in 2004, are a result of careful control of expenses as well as the 2004 corporate restructuring and lower patent prosecution costs. Accordingly, our general and administrative expenses are expected to decrease slightly for the full year 2005 as compared to 2004.

The increases in 454’s general and administrative expenses for the three and nine month periods ended September 30, 2005, as compared to the same respective periods in 2004, are attributable to growth in the number of employees as a result of the commercialization of 454’s high-throughput Genome Sequencing Systems. Accordingly, 454’s general and administrative expenses are expected to increase during the full year 2005 as compared to 2004.

Restructuring and related charges. In September 2005, we underwent a corporate restructuring to focus on advancing our therapeutic pipeline through clinical development. In connection with the September 2005 restructuring plan, a charge of $1.3 million was recorded in the third quarter of 2005, including $1.1 million related to employee separation costs and $0.1 million of operating lease obligations. The cash requirements under the September 2005 restructuring plan were $1.1 million, of which substantially all will be paid through the second quarter of 2006.

Interest income. Interest income for the three month period ended September 30, 2005 decreased slightly compared to the same period in 2004 primarily due to lower cash and investment balances offset by higher yields in our investment portfolio. Interest income for the nine month period ended September 30, 2005 increased slightly compared to the same period in 2004 primarily due to higher yields in our investment portfolio offset by lower cash and investment balances. We earned an average yield of 3.0% in the third quarter of 2005 as compared to 2.2% in the third quarter of 2004, and an average yield of 2.8% in the first nine months of 2005 as compared to 2.1% during the same period in 2004. During the remainder of 2005, we expect the yields in our investment portfolio to continue to increase and to be slightly higher than 2004. However, due to the utilization of cash and investment balances in the normal course of operations, and the second and third quarter repurchases of $14.0 million, and $49.8 million, respectively, of our 6%

18

convertible subordinated debentures due 2007, we anticipate interest income will decrease slightly in 2005 as compared to 2004.

Interest expense. We expect interest expense, including interest paid to debt holders as well as amortization of deferred financing costs, to decrease during 2005 as compared to 2004. The anticipated decrease is related to the second and third quarter 2005 repurchases of $14.0 million and $49.8 million, respectively, of our 6% convertible subordinated debentures due 2007.

Gain on extinguishment of debt. During the three and nine month periods ended September 30, 2005, we repurchased $49.8 million and $63.8 million, respectively, of our 6% convertible subordinated debentures due February 2007, for total consideration of $49.1 million and $61.5 million, respectively, plus accrued interest to the date of repurchase of $0.9 million and $1.2 million, respectively. As a result of these transactions, during the three and nine month periods ended September 30, 2005, we recorded a gain of $0.4 million and $1.8 million, respectively, in “Gain on extinguishment of debt”, which is net of the write-off of the ratable portion of unamortized deferred financing costs relating to the repurchased debt.

Income tax benefit. We recorded an income tax benefit during the three and nine month periods ended September 30, 2005 as a result of Connecticut legislation, which allows companies to obtain cash refunds from the State of Connecticut at a rate of 65% of their annual research and development expense credit, in exchange for forgoing carryforward of the research and development credit. For the year ended December 31, 2004, the income tax benefit included the resulting expiration of the State of Connecticut statute, as it relates to the Year 2000 income tax benefit. We expect the 2005 income tax benefit to be consistent with 2004 (before adjustments to reflect statute expiration), as 2005 qualified expenses are expected to remain relatively constant as compared to 2004.

Minority interest in subsidiary loss. Minority interest in subsidiary loss for the three and nine month periods ended September 30, 2005 (which is the portion of 454’s loss attributable to shareholders of 454 other than us) decreased as compared to the same periods in 2004 due to 454 revenue recognized during the periods, from the sales of instruments and reagents as well as sales of genomic analysis services. During the remainder of 2005, losses attributed to the minority ownership in 454 are expected to decrease, as 454 increases sales of instruments and reagents as well as genomic analysis services. In the event that during 2006 the cumulative losses applicable to the minority interest in subsidiary exceed the minority interest in the equity capital of 454, all further losses applicable to the minority interest will be charged to us.

Liquidity and Capital Resources

Since our inception, we have financed our operations and met our capital expenditure requirements primarily through private placements of equity securities, convertible subordinated debt offerings, public equity offerings, revenues received under our collaborative research agreements and government grants, and exercises of stock options. As of September 30, 2005, we had recognized $119.0 million of cumulative sponsored research revenues from collaborative research agreements and government grants. At September 30, 2005, our gross investment in lab and office equipment, computers, land and leasehold improvements was $52.3 million. Since inception, we have not had any off-balance sheet arrangements. To date, inflation has not had a material effect on our business.

In August 2005, we issued 4,000,000 shares of our common stock at a public offering price of $5.50 per share. Net proceeds, after underwriting discounts and stock issuance costs, were $20.8 million. The net proceeds were used during August and September 2005 in the repurchases of our outstanding convertible debt as described below.

During 2005, we repurchased $63.8 million of our 6% convertible subordinated debentures due February 2007, for total consideration of $61.5 million, plus accrued interest to the date of repurchase of $1.2 million. As a result of these transactions, we recorded a gain of $1.8 million in “Gain on extinguishment of debt”, which is net of the write-off of the ratable portion of unamortized deferred financing costs relating to the repurchased debt.

In May 2005, 454 entered into an exclusive five-year world-wide agreement with Roche for the promotion, sale, and distribution of 454’s high-throughput Genome Sequencing Systems, including proprietary kits and reagents with Roche. Under the terms of the agreement, 454 will receive up to $62.0 million in license fees, milestones related to instrument releases, minimum royalties and research funding, in addition to a margin on products manufactured for Roche, and royalties on Roche’s net sales of licensed products. As of September 30, 2005, 454 had received $11.5 million in milestone payments from Roche following the achievement of all initial milestones under the agreement.

19

On October 7, 2005, 454 and Roche announced the commercial launch, including world-wide sales and distribution, of the Genome Sequencer 20 System and reagents from 454 by Roche. 454’s technology will enable researchers to sequence up to 100 times faster than current commercial platforms at a fraction of the price. Roche, a business area of Roche Diagnostics, is now selling 454’s products through its extensive sales and marketing teams, distributing 454’s products through its established supply chain, and providing technical support to purchasers of the Genome Sequencer 20 System and the associated reagents. Achievement of this commercialization milestone triggered a $7.5 million payment to 454 from Roche, which was received in October 2005.

Under the financial terms of the agreement entered into with TopoTarget in June 2004, we made a $5.0 million equity investment in TopoTarget, which was recorded as a Convertible Loan Receivable. On June 10, 2005, TopoTarget completed an IPO of 11,500,000 shares of common stock at a per share price of DKK 22,50 ($3.70 USD). Simultaneously, on June 10, 2005, the Convertible Loan Receivable in the amount of $5.3 million (including accrued interest) was automatically converted into 1,429,687 shares of TopoTarget common stock, providing us with an approximate 3.58% ownership in TopoTarget. In addition, we agreed to a six-month lock-up agreement with respect to our shares of TopoTarget common stock. In August 2005, under the terms of the license and collaboration agreement entered into with TopoTarget, we paid TopoTarget a milestone payment of $4.8 million for extension of the PXD101 Phase II program into the United States.

454 received two federal grants during 2004, for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursement by the grantor agency for any expenditures disallowed under the terms of the grant. Additionally, any noncompliance with the terms of the grant could lead to loss of current or future awards.

Cash and investments. The following table depicts the components of our operating, investing and financing activities for the nine months ended September 30, 2005, using the direct cash flow method:

Cash received from collaborators	$	16.0
Cash received from customers		5.2
Cash received from grantor		1.9
Cash paid to suppliers and employees		(63.1	)
Restructuring and related charges paid		0.5
Interest income received		6.2
Interest expense paid		(12.2	)
Income tax benefit received		0.5
Net cash and investments used in operating activities		(45.0	)
Cash paid to acquire property and equipment, net of sales proceeds		(8.3	)
Cash paid to acquire non-perpetual licenses		(0.8	)
Net cash and investments used in investing activities		(9.1	)
Cash received from employee stock option exercises		0.6
Cash received from the issuance of common stock, net of stock issuance costs		20.8
Cash paid for extinguishment of debt		(61.5	)
Net cash and investments used in financing activities		(40.1	)
Unrealized loss on marketable securities		(1.3	)
Net decrease in cash and investments		(95.5	)
Cash and investments, beginning of period		328.1
Cash and investments, end of period	$	232.6

In accordance with our investment policy, we are utilizing the following investment objectives for cash and investments: (1) investment decisions are made with the expectation of minimum risk of principal loss, even with a modest penalty in yield; (2) appropriate cash balances and related short-term funds are maintained for immediate liquidity needs, and appropriate liquidity is available for medium-term cash needs; and (3) maximum yield is achieved.

Future Liquidity. During the next twelve months, we expect to continue to fund our operations through a combination of the following sources: cash and investment balances; instrument and reagent sales; collaboration revenue; milestone payments; interest income; grant revenue; potential public securities offerings; and/or private strategic-driven common stock offerings. We also plan to continue making substantial investments to advance our preclinical and clinical drug pipeline, as well as commercializing 454’s genomic analysis technology. In that regard, we foresee the following as significant uses of liquidity: contractual services related to clinical trials and manufacturing; salary and benefits; perpetual license fees; supplies and reagents; potential milestone payments; and

20

costs related to 454, as it continues to commercialize and develop new technologies for whole genome analysis; external programs identified by our platform as being promising and synergistic with our products and expertise; and cost-sharing of contractual service costs with Bayer related to CT052 preclinical development, in which both parties will jointly fund the relevant preclinical research, development and commercialization activities. In addition, we expect the payments of interest to the holders of our convertible subordinated debt due in 2007 and in 2011 to be a continued significant use of liquidity.

Depending on market and other conditions, from time to time, we may continue to repurchase or refinance portions of the existing 6% convertible subordinated debentures due 2007 in open market purchases, in privately negotiated transactions, or otherwise. Such repurchases may be material and also may affect interest income and interest expense as well as gain on extinguishment of debt. In addition, we also may use sources of liquidity for working capital, general corporate purposes and potentially for future acquisitions of complementary businesses or technologies. The amounts and timing of our actual expenditures will depend upon numerous factors, including the amount and extent of our acquisitions, our product development activities, and our investments in technology and the amount of cash generated by our operations. Actual expenditures may vary substantially from our estimates. Our failure to use sources of liquidity effectively could have a material adverse effect on our business, results of operations and financial condition.

We believe that our existing cash and investment balances and other sources of liquidity will be sufficient to meet our requirements for the next twenty-four months. Our operating and capital expenditures are considered to be crucial to our future success, and by continuing to make strategic investments in our preclinical and clinical drug pipeline, we believe that we are building substantial value for our shareholders. The adequacy of our available funds to meet our future operating and capital requirements, including the repayment of the remaining balance of our $66.2 million of 6% convertible subordinated debentures due February 2, 2007 and our $110.0 million of 4% convertible subordinated notes due February 15, 2011, will depend on many factors. These factors include: the number, breadth and progress of our research, product development and clinical programs; the costs and timing of obtaining regulatory approvals for any of our products; potential future acquisitions of complementary businesses or technologies; in-licensing of pharmaceutical products; and costs incurred in enforcing and defending our patent claims and other intellectual property rights.

While we will continue to explore alternative sources for financing our business activities, including the possibility of public securities offerings and/or private strategic-driven common stock offerings, we cannot be certain that in the future these sources of liquidity will be available when needed or that our actual cash requirements will not be greater than anticipated. In appropriate strategic situations, we may seek financial assistance from other sources, including contributions by others to joint ventures and other collaborative or licensing arrangements for the development and testing of products under development. However, should we be unable to obtain future financing either through the methods described above or through other means, we may be unable to meet the critical objective of our long-term business plan, which is to successfully develop and market pharmaceutical products, and may be unable to continue operations. This result could cause our shareholders to lose all or a substantial portion of their investment.

Contractual Obligations

In the table below, we set forth our enforceable and legally binding obligations, along with our future commitments related to all contracts that we are likely to continue, regardless of the fact that they are cancelable as of September 30, 2005. Some of the figures we include in this table are based on management’s estimates and assumptions about these obligations, including their duration, anticipated actions by third parties, progress of our clinical programs and other factors.

	Payments Due Year Ended December 31,
	Total		2005		2006		2007		2008		2009		Thereafter
Long-term debt obligations	$	176.2	$	—	$	—	$	66.2	$	—	$	—	$	110.0
Interest on convertible subordinated debt		30.2		—		8.4		6.4		4.4		4.4		6.6
Operating leases		8.4		0.7		2.7		2.6		1.2		0.5		0.7
Purchase commitments (1)		16.2		6.5		6.3		1.5		0.4		0.3		1.2
Other long-term liabilities		0.5		—		—		0.5		—		—		—
Total	$	231.5	$	7.2	$	17.4	$	77.2	$	6.0	$	5.2	$	118.5

(1) Includes commitments for capital expenditures, manufacturing costs related to 454’s instrument systems, manufacturing costs associated with advancing our preclinical pipeline, and costs associated with clinical trial development and other supporting arrangements, which are subject to certain limitations and in certain

21

circumstances cancellation clauses. The clinical trial commitments and supporting arrangements are for our protein therapeutic velafermin (CG53135), our novel HDAC inhibitor PXD101, and our fully-human monoclonal antibody CR002. Excludes amounts included on our balance sheet as liabilities and certain purchase obligations and potential future milestone payments as discussed below.

The expected timing of payment of the obligations discussed above is estimated based on current information. Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or services, repurchases of debentures, or changes to agreed-upon amounts for some obligations.

Purchase obligations for supplies and reagents are not included in the table above, as our purchase orders typically represent authorizations to purchase rather than binding agreements. For the purposes of this table, contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase orders are based on our current operating needs and are fulfilled by our vendors within short time periods. We do not have significant agreements for the purchase of supplies and reagents specifying minimum quantities or set prices.

In addition, we have committed to make potential future milestone payments to third-parties as part of in-licensing and development programs. Payments under these agreements generally become due and payable only upon achievement of certain developmental, regulatory and/or commercial milestones. Until the achievement of these milestones is both probable and reasonably estimable, such contingencies are not recorded on our consolidated balance sheet and are not included above.

Recently Enacted Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (“SFAS 123R”) which is a revision of FASB Statement 123, “Accounting for Stock-Based Compensation”. Statement 123, as originally issued, is effective until the provisions of SFAS 123R are fully adopted. SFAS 123R is effective for public entities that do not file as a small business issuer, as of the beginning of the first fiscal year beginning after June 15, 2005, and therefore, we will be required to adopt SFAS 123R on January 1, 2006. The proforma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial statement recognition. SFAS 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. Under SFAS 123R, we must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at date of adoption. The transition methods include modified prospective and retroactive adoption options. We anticipate utilizing the modified prospective method which requires that compensation expense be recorded for all unvested stock options at the beginning of the first quarter of adoption of SFAS 123R, while the retroactive methods would record compensation expense for all unvested stock options beginning with the first period restated. We are evaluating the requirements of SFAS 123R and expect that the adoption of SFAS 123R will have a material impact on our consolidated results of operations. We have not yet determined the effect of adopting SFAS 123R, nor have we determined whether the adoption will result in amounts that are similar to the current pro forma disclosures under SFAS 123.

In March 2004, the FASB issued Emerging Issues Task Force (“EITF”) Issue No. 03-1 “Other-Than-Temporary Impairments and Its Application of Certain Investments.” This statement provides guidance for assessing impairment losses on debt and equity investments. EITF Issue No. 03-1 also requires additional disclosures in the footnotes to the financial statements for investments that are deemed to be temporarily impaired. In September 2004, the FASB delayed the accounting provisions of EITF Issue No. 03-1, however, the disclosure requirements remain effective and have been adopted. We will evaluate the effect, if any, of EITF 03-1 when final guidance is released.

Certain Factors That May Affect Results of Operations

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues or other financial items, any statement of the plans and objectives of

22

management for future operations, any statements concerning proposed new products or licensing or collaborative arrangements, any statements regarding future economic conditions or performance, and any statement of assumptions underlying any of the foregoing. It is our intent that such statements be protected by the safe harbor created thereby. Forward-looking statements are subject to certain risks and uncertainties. Examples of such statements include, but are not limited to, “estimate,” “project,” “plan,” “intend,” “expect,” “believe,” “anticipate,” “should,” “may,” “will,” and similar expressions.

Forward-looking statements may include statements about our:

• anticipated progress of clinical development programs;

• anticipated progress in technology development and commercialization strategy;

• results and projected timetables of our clinical trials;

• potential future licensing fees, milestone payments, grants and royalty payments;

• ability to market, commercialize and achieve market acceptance for our product candidates or products that we develop;

• expected future financial results, including estimated revenue, operations and expenditures;

• estimates regarding the future sufficiency of our cash resources;

• expectation that we may repurchase or refinance a portion of the existing 6% convertible subordinated debentures due 2007; and

• plans to continue to explore alternative sources for financing our business activities.

These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements, therefore, should be considered in light of all of the information included or referred to in this report, including the cautionary information set forth under the heading Risk Factors below. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law.

23

Risk Factors

Risks Related to Our Business

Because we are in the early stages of drug development, we do not know whether we will be able to commercialize any of our products or to what extent we will generate revenue or become profitable.

We have not completed development of any product based on our research. Although we have three products being investigated in clinical trials, we cannot be certain that these or any future products will receive marketing approval. If we are unable to commercialize products, we may not be able to recover our investment in our product development efforts. Even if we are able to commercialize products, we may not be able to recover our investment in our product development efforts.

Because clinical trials for our products are expensive and protracted and their outcome is uncertain, we must invest substantial amounts of time and money that may not yield viable products.

Conducting clinical trials is a lengthy, time-consuming and expensive process. Before obtaining regulatory approvals for the commercial sale of any product, we must demonstrate through laboratory, animal and human studies that such product is both effective and safe for use in humans. We will incur substantial expense for, and devote a significant amount of time to, these studies.

Completion of clinical trials takes many years. The exact length of time required varies substantially according to the type, complexity, novelty and intended use of the product candidate. The Company and the FDA monitor the progress of each phase of testing, and may require the modification, suspension, or termination of a trial if it is determined to present excessive risks to patients. Our rate of commencement and completion of clinical trials may be delayed by many factors, including:

• our inability to manufacture sufficient quantities of materials for use in clinical trials;

• our inability to identify, enroll and initiate sites to conduct clinical trials;

• variability in the number and types of patients available for each study, as well as the difficulty in enrolling patients in each study;

• difficulty in maintaining contact with patients after treatment, resulting in incomplete data;

• unforeseen safety issues or side effects;

• poor efficacy or unanticipated adverse effects of products during the clinical trials;

• scientific review board, institutional review board, or contractual review board delays at institutions assisting us with our clinical trials; and

• government or regulatory delays.

Studies that we conduct, or studies which third parties conduct on our behalf, may not demonstrate sufficient effectiveness and safety to obtain the requisite regulatory approvals for these or any other potential products. Regulatory authorities may not permit us to undertake any additional clinical trials. The clinical trial process may be accompanied by substantial delay and expense and there can be no assurance that the data generated in these studies ultimately will be sufficient for marketing approval by the FDA.

24

We have three products in clinical development and our other products are in preclinical or earlier stages of development. None of these products may demonstrate sufficient effectiveness or safety to obtain the requisite regulatory approvals required for initiation or continuation of clinical studies or obtaining marketing approval.

Because we have limited experience in developing, commercializing and marketing products, we may be unsuccessful in our efforts to do so.

Currently, we are developing several potential pharmaceutical products. These products will require significant research and development and preclinical testing, and will require extensive clinical testing prior to our submitting any regulatory application for their commercial use. Although we are conducting human studies with respect to three products, we have limited experience with these activities and may not be successful in developing or commercializing these or other products. These activities, if undertaken without the collaboration of others, will require the expenditure of significant funds. Such potential pharmaceutical products will be subject to the risks of failure inherent in the development of pharmaceutical products based on new technologies. Before we can commercialize a product, we must rigorously test the product in the laboratory and complete extensive human studies. Even if we complete such studies, our ability to develop and commercialize products will depend on our ability to:

• complete laboratory testing and human studies;

• obtain and maintain necessary intellectual property rights to our products;

• obtain and maintain necessary regulatory approvals related to the efficacy and safety of our products;

• enter into arrangements with third parties to manufacture our products on our behalf; and

• deploy sales and marketing resources effectively or enter into arrangements with third parties to provide these functions.

As a result of these possibilities, we may not be able to develop through our research and development activities any commercially viable products. We cannot be certain that expenses for testing and study will yield profitable products or even products approved for marketing by the FDA or other regulatory authorities. If we are not successful in identifying products that we can develop commercially, we may be unable to recover the large investment we have made in research, development and manufacturing. In addition, should we choose to develop pharmaceutical products internally, we will have to make significant investments in pharmaceutical product development, marketing, sales and regulatory compliance resources, and we will have to establish or contract for the manufacture of products under the FDA cGMPs. Any potential products developed by our licensees will be subject to the same risks.

We do not have any marketed products. If we develop products that can be marketed, we intend to market the products either independently or together with collaborators or strategic partners. If we decide to market any products independently, we will incur significant additional expenditures and commit significant additional management resources to establish a sales force. For any products that we market together with partners, we will rely, in whole or in part, on the marketing capabilities of those parties. We may also contract with third parties to market certain of our products. Ultimately, we and our partners may not be successful in marketing our products.

We depend on a limited number of suppliers to manufacture and supply critical components of, and services for, our development and clinical programs.

Currently, we contract with third-party manufacturers or develop products with partners and use the partners’ manufacturing capabilities. As we use others to manufacture our products, we depend on those parties to comply with cGMPs, and other regulatory requirements and to deliver materials on a timely basis. These parties may not perform adequately. Any failures by these third parties may delay our development of products or the submission of these products for regulatory approval.

We depend on collaborators and third-party research organizations to design, conduct, and support our laboratory testing and human studies. These third parties include clinical trial sites, contract research organizations, and collaborators performing laboratory testing and human studies. If we are unable to obtain any necessary services on acceptable terms, we may not complete our product development efforts in a timely manner. As we rely on collaborators and third parties for laboratory testing and human studies, we may lose some control over these activities and become too dependent upon these parties. These third parties may not complete testing activities or human studies on schedule or when we request.

25

Because neither we nor any of our collaborative partners have received marketing approval for any product resulting from our research and development efforts, and may never be able to obtain any such approval, we may not be able to generate any product revenue.

All the products being developed by our collaborative partners will require additional research and development, extensive preclinical studies and clinical trials and regulatory approval prior to any commercial sales. In some cases, the length of time that it takes for our collaborative partners to achieve various regulatory approval milestones may affect the payments that we are eligible to receive under our collaboration agreements. We and our collaborative partners may need to address a number of technical challenges successfully in order to complete development of our products. Moreover, these products may not be effective in treating any disease or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use.

We may be unable to manufacture or obtain sufficient quantities of our products and ensure their proper performance and quality.

Biopharmaceuticals must be produced under the cGMPs of the FDA or comparable regulations if used outside the U.S. We do not have facilities capable of manufacturing drug products under cGMPs and must outsource any such production. We are devoting resources to establishing our own manufacturing capabilities to support development and preclinical activities and are contracting with third-party vendors for the manufacture of materials for use in humans. We may be unable to contract successfully for cGMPs manufacture of any products and may be unable to obtain required quantities of our products economically. We may not be able to obtain capacity to produce a sufficient amount of a commercial product to meet our clinical development and commercial needs. Failure to meet the demand for a product may adversely affect our ability to continue to market the product.

Compliance with government regulation is critical to our business and failure to satisfy regulatory requirements could impair our business.

Prior to the marketing of any new drug developed by us, or by our collaborators, that new drug must undergo an extensive regulatory review process in the United States and other countries. This regulatory process, which includes preclinical and clinical studies, as well as post-marketing surveillance to establish a compound’s safety and efficacy, can take many years and require the expenditure of substantial resources. Data obtained from such studies are susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Even if the FDA or other regulatory agencies allow clinical testing of our products, we will still need to obtain institutional review board approval for each site participating in a clinical study, which may involve additional delays. The rate of completion of clinical trials depends upon, among other factors, the enrollment of patients. Patient enrollment is a function of many factors, including:

• availability of approved therapies or interventions;

• timing and restriction of institutional review board approval;

• the size of the patient population;

• proximity of patients to clinical sites;

• eligibility criteria for the study;

• time commitment of a patient to the study; and

• existence of competitive clinical trials.

We have not had any of our product candidates receive approval for commercialization in the United States or elsewhere. Neither we nor our collaborators may be able to conduct clinical testing or obtain the necessary approvals from the FDA or other regulatory authorities for any products. Failure by us or our collaborators to obtain required governmental approvals will delay or preclude our collaborators or us from marketing drugs developed with us or limit the commercial use of such products and could have a material adverse effect on our business, financial condition and results of operations. Even where a product is exempted from FDA clearance or approval, the FDA or other regulatory

26

agencies may impose restrictions as to the types of customers to which we can market and sell our products. Such restrictions may materially and adversely affect our business, financial condition and results of operations.

In addition, the FDA or other regulatory agencies may condition marketing approval on the conduct of specific post-marketing studies to further evaluate safety and efficacy. Rigorous and extensive regulation of pharmaceutical products continues after approval, particularly with respect to compliance with cGMPs, reporting of adverse effects, advertising, promotion and marketing. Discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions, any of which could materially adversely affect our business.

We must obtain regulatory approval by governmental agencies in other countries prior to commercialization of our products in those countries. Foreign regulatory systems may be just as rigorous, costly and uncertain as in the United States.

We rely significantly on our collaborative partners, and our business could be harmed if we are unable to maintain strategic alliances.

As part of our business strategy, we have strategic research and development alliances with companies to gain access to specific technologies. These alliances with other pharmaceutical and biotechnology companies may provide us with access to unique technologies, access to capital, near-term revenues, milestone and/or royalty payments, and potential profit sharing arrangements. In return, we provide access to unique technologies, expertise in genomics, and information on the molecular basis of disease, drug targets, and drug candidates. We currently have significant strategic alliances with Abgenix, Bayer, TopoTarget, and Seattle Genetics, in addition to numerous smaller agreements to facilitate these efforts. In these strategic alliances, either party can terminate the agreement at any time the alliance permits them to or if either party materially breaches the contract. We may not be able to maintain or expand existing alliances or establish any additional alliances. If any of our existing collaborators were to breach or terminate their agreements with us or otherwise fail to conduct activities successfully and in a timely manner, the preclinical or clinical development or commercialization of product candidates or research programs may be delayed or terminated, which may materially and adversely affect our business, financial condition and results of operations.

We depend on attracting and retaining key employees.

We are highly dependent on the principal members of our management and scientific staff, including David M. Wurzer, Executive Vice President and Chief Financial Officer; Timothy M. Shannon, M.D., Executive Vice President and Chief Medical Officer; and Christopher K. McLeod, Executive Vice President of CuraGen and Chief Executive Officer and President at 454. Our future success will depend in part on the continued services of our key scientific and management personnel. We are currently conducting a search for a permanent Chief Executive Officer. In May 2005, Patrick J. Zenner, a CuraGen board member and former President and Chief Executive Officer of Hoffmann-La Roche, Inc. was appointed by the CuraGen Board of Directors as Chairman and Chief Executive Officer of CuraGen on an interim basis, until completion of the ongoing search. Our future success will also depend in part on our ability to attract, hire and retain additional personnel. The loss of services of any of these personnel could materially adversely affect our business, financial condition and results of operations. We have entered into employment agreements with all of the principal members of our management team. There is intense competition for such qualified personnel and there can be no assurance that we will be able to continue to attract and retain such personnel. Failure to attract and retain key personnel could materially, adversely affect our business, financial condition and results of operations.

We depend on academic collaborators, consultants and scientific advisors.

We have relationships with collaborators and consultants at academic and other institutions that conduct research or provide consulting services at our request. These collaborators and consultants are not our employees. Substantially all of our collaborators and consultants are employed by employers other than us and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. As a result, we have limited control over their activities and, except as otherwise required by our collaboration and consulting agreements, can expect only limited amounts of their time to be dedicated to our activities. Our ability to discover genes and biological pathways involved in human disease, explore and validate biological activity of therapeutic candidates and commercialize products based on those discoveries may depend in part on continued collaborations with researchers at academic and other institutions. We may not be able to negotiate additional acceptable collaborations with collaborators or consultants at academic and other institutions.

27

Our academic collaborators, consultants and scientific advisors may have relationships with other commercial entities, some of which could compete with us. Our academic collaborators, consultants and scientific advisors sign agreements which provide for confidentiality of our proprietary information and of the results of studies. We may not be able to maintain the confidentiality of our technology and other confidential information in connection with every academic collaboration or advisory arrangement, and any unauthorized dissemination of our confidential information could materially adversely affect our business, financial condition and results of operations. Further, any such collaborator, consultant or advisor may enter into an employment agreement or consulting arrangement with one of our competitors.

Competition in our field is intense and likely to increase.

We are subject to significant competition from organizations that are pursuing strategies, approaches, technologies and products that are similar to our own. Many of the organizations competing with us have greater capital resources, research and development staffs and facilities and marketing capabilities. In addition, research in the field of drug development is highly competitive. Our competitors include:

• biotechnology companies;

• pharmaceutical companies;

• academic and research institutions; and

• government agencies.

We compete with biotechnology and pharmaceutical companies that develop, produce and market therapeutic compounds in the U.S., Europe and elsewhere. We face competition from a number of biotechnology and pharmaceutical companies with products in preclinical development, clinical trials or approved for conditions identical or similar to the ones we are pursuing. Other companies engaged in research and development we face intense competition from include:

• Amgen, Inc.;

• Genentech, Inc.;

• Gloucester Pharmaceuticals, Inc.;

• Human Genome Sciences, Inc.;

• Merck & Co., Inc.;

• Millennium Pharmaceuticals, Inc.;

• Novartis, Inc.;

• Nuvelo, Inc.;

• major biotechnology and pharmaceutical companies; and

• universities and other research institutions.

The competitors listed above were selected based upon identifying those companies that we feel have business models, are developing drugs or have drugs approved for therapeutic indications that are similar to the ones we are pursuing.

A number of competitors are producing proteins from genes and claiming both the proteins as potential therapeutics as well as claiming antibodies against these proteins. In many cases generic antibody claims are being issued by the United States Patent and Trademark Office (“USPTO”) even though competitors have not actually made antibodies against the protein of interest, or do not have cellular, animal, or human data to support the use of these antibodies as therapeutics. These claims on proteins as therapeutics and these claims covering all antibodies against the proteins and methods of use in broad human indications are being filed at a rapid rate, and some number of these

28

claims have issued and may continue to issue. In addition, purified proteins, therapeutic data, and antibodies, including polyclonal antibodies, mouse monoclonal antibodies and, in some cases, fully-human monoclonal antibodies, are being generated against a large number of targets within the human genome. All of these activities may make it difficult to commercialize products, or, if licenses are made available, may make the royalty burden on these products so high as to prevent commercial success.

We may engage in acquisitions that are unsuccessful.

In the future, we may engage in acquisitions in order to exploit technology or market opportunities. We are not experienced in acquiring and integrating new businesses. If we acquire another company, we may not be able to integrate the acquired business successfully into our existing business in a timely and non-disruptive manner or at all. Furthermore, an acquisition may not produce the revenues, earnings or business synergies that we anticipate. If we fail to integrate the acquired business effectively or if key employees of that business leave, the anticipated benefits of the acquisition would be jeopardized. The time, capital management and other resources spent on an acquisition that fails to meet our expectations could cause our business and financial condition to be materially and adversely affected. In addition, acquisitions can involve material non-recurring charges and amortization of significant amounts of non-cash acquisition costs that could adversely affect our results of operations.

If our patent applications do not result in issued patents, then our competitors may obtain rights to commercialize our discoveries.

Our business and competitive position depends on our ability to protect our products and processes. We continually file patent applications for our proprietary methods, novel uses of genes, and our development products. As of the date of this report, we had been issued approximately 94 patents with respect to aspects of our gene portfolio, products, processes and technologies.

Our commercial success also depends in part on obtaining patent protection on genes and proteins for which we or our collaborators discover utility and on products, methods and services based on such discoveries. We have applied for patent protection on novel genes and proteins, novel mutants of known genes and their uses, partial sequences of novel proteins and their gene sequences and uses, and novel uses for previously identified genes discovered by third parties. We have applied for patents on antibodies against the proteins we have discovered, and we have sought or have had our partners seek patent protection on the antibodies we produce against these proteins. We have sought and intend to continue to seek patent protection for novel uses for genes and proteins and therapeutic antibodies that may have been patented by third parties. In such cases, we would need a license from the holder of the patent with respect to such gene or protein in order to make, use or sell such gene or protein for such use. We may not be able to acquire such licenses on commercially reasonable terms, if at all. Our patent application filings that result from the identification of genes associated with the cause or effect of a particular disease generally seek to protect the genes and the proteins encoded by such genes as well as antibodies raised against these gene products. We also seek patent protection for our therapeutic, diagnostic and drug screening methods and products.

In 2001, the USPTO issued guidelines for patent applications reflecting the USPTO’s current policy regarding statutory written description and utility requirements for patentability. The implementation of these guidelines may cause the USPTO initially to reject some of our pending new gene and protein patent applications. There is no guarantee that the USPTO will approve them. We strive especially to gain issued patents for our commercially important genes and proteins.

The patent positions of pharmaceutical, biopharmaceutical and biotechnology companies, including us, are generally uncertain and involve complex legal and factual questions. Our patent applications may not protect our products, processes and technologies because of the following reasons:

• there is no guarantee that any of our pending patent applications will result in additional issued patents;

• there is no guarantee that any patents issued to us or our collaborative customers will provide a basis for commercially viable products;

• there is no guarantee that any patents issued to us or our collaborative customers will provide us with any competitive advantages;

• there is no guarantee that any patents issued to us or our collaborative customers will not be challenged or circumvented or invalidated by third parties; and

29

• there is no guarantee that any patents issued to others will not have an adverse effect on our ability to do business.

In addition, patent law relating to the scope of claims in the technology fields in which we operate is evolving. The degree of future protection for our proprietary rights is uncertain. Furthermore, there can be no assurance that others will not independently develop similar or alternative technologies, duplicate any of our technologies, or, if patents are issued to us, design around the patented technologies developed by us. In addition, we could incur substantial costs in litigation if we are required to defend ourselves in patent suits brought by third parties or if we initiate such suits.

The issuance of patents may not provide us with sufficient protection.

We may not be able to obtain further patents for our products, processes and technologies, or, if we are able to obtain further patents, these patents may not provide us with substantial protection or be commercially beneficial. The issuance of a patent is not conclusive as to its validity or enforceability, nor does it provide the patent holder with freedom to operate without infringing the patent rights of others. A patent could be challenged by litigation and, if the outcome of such litigation were adverse to the patent holder, competitors could be free to use the subject matter covered by the patent, or the patent holder may license the technology to others in settlement of such litigation. The invalidation of key patents owned by or licensed to us or non-approval of pending patent applications could increase competition, and materially adversely affect our business, financial condition and results of operations. In addition, any application or exploitation of our technology could infringe patents or proprietary rights of others and any licenses that we might need as a result of such infringement might not be available to us on commercially reasonable terms, if at all. Third parties have indicated to us that they believe we may be required to obtain a license in order to perform certain processes that we use in the conduct of our business or in order to market potential drugs we have in development.

We cannot predict whether our pending patent applications, or those of our competitors, will result in the issuance of valid patents. Litigation, which could result in substantial cost to us, also may be necessary to enforce our patent and proprietary rights and/or to determine the scope and validity of others’ proprietary rights. We may participate in interference proceedings that may in the future be declared by the USPTO to determine priority of invention, which could result in substantial cost to us. The outcome of any such litigation or interference proceeding might not be favorable to us, and we might not be able to obtain licenses to technology that we require or, even if obtainable, such technology may not be available at a reasonable cost.

The public availability of genomic sequence information or other sequence information prior to the time we apply for patent protection on a corresponding full-length or partial gene could adversely affect our ability to obtain patent protection with respect to such gene or gene sequences. In addition, certain other groups are attempting to rapidly identify and characterize genes through the use of gene expression analysis and other technologies. To the extent any patents issue to other parties on such partial or full-length genes or uses for such genes, the risk increases that the sale of potential products, including therapeutics, or processes developed by us or our collaborators may give rise to claims of patent infringement. Others may have filed and in the future are likely to file patent applications covering genes or gene products or antibodies against the gene products that are similar or identical to our products. Any such patent application may have priority over our patent applications. Any legal action against us or our collaborators claiming damages and seeking to enjoin commercial activities relating to the affected products and processes could, in addition to subjecting us to potential liability for damages, require us or our collaborators to obtain a license in order to continue to manufacture or market the affected products and processes or could enjoin us from continuing to manufacture or market the affected products and processes. There can be no assurance that we or our collaborators would prevail in any such action or that any license required under any such patent would be made available on commercially acceptable terms, if at all. We believe that there may be significant litigation in the industry regarding patent and other intellectual property rights. If we become involved in such litigation, it could consume a substantial portion of our managerial and financial resources.

There is substantial uncertainty concerning the extent to which supportive data will be required for issuance of patents for human therapeutics. If data additional to that available to us is required, our ability to obtain patent protection could be delayed or otherwise adversely affected. Although the USPTO issued utility guidelines in 1995 that addressed the requirements for demonstrating utility for biotechnology inventions, particularly for inventions relating to human therapeutics, there can be no assurance that the USPTO examiners will follow such guidelines or that the USPTO’s position will not change with respect to what is required to establish utility for gene sequences and products and methods based on such sequences.

30

We cannot be certain that our security measures will protect our confidential information and proprietary technologies.

We also rely upon trade secret protection for some of our confidential and proprietary information that is not subject matter for which patent protection is being sought. We have taken security measures to protect our proprietary technologies, processes, information systems and data and continue to explore ways to enhance such security. Such measures, however, may not provide adequate protection for our trade secrets or other proprietary information. While we require employees, academic collaborators and consultants to enter into confidentiality and/or non-disclosure agreements where appropriate, any of the following could still occur:

• proprietary information could be disclosed;

• others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets, technology or disclose such information; or

• we may not be able to meaningfully protect our trade secrets.

If the security of our confidential information is breached, our business could be materially adversely affected.

We depend upon our ability to license technologies.

We may have to acquire or license certain components of our technologies or products from third parties. We may not be able to acquire from third parties or develop new technologies, either alone or with others. We may not be able to acquire licenses on commercially reasonable terms. Failure to license or otherwise acquire necessary technologies could materially adversely affect our business, financial condition and results of operations.

454’s technology platform is in development and the initial stages of commercialization.

The technology platform of 454 is still in development. The success of commercialization of the 454 technology platform depends on many factors, including:

• the acceptance of 454’s technology in the market place;

• technical performance of 454’s platform in relation to existing and new technologies;

• sufficient support and execution by Roche under the exclusive distribution agreement; and

• 454’s ability to obtain from suppliers key components for the manufacture of the 454 instrument and reagents.

454 is subject to competition from organizations that have developed or are developing technologies and products to service 454’s potential customers.

Many of the organizations competing with 454 may have greater capital resources, research and development staffs and facilities and marketing capabilities. 454’s competitors include:

• Applera Corporation - Applied Biosystems;

• Affymetrix, Inc.;

• GE Healthcare;

• Solexa, Inc.;

• Perlegen Sciences, Inc.; and

• other companies recently formed or soon to be funded to develop whole genome sequencing technologies.

We believe that the future success of 454 will depend in large part on our ability to maintain a competitive position in instruments for the high throughput nucleic acid sequencing field. Before we recover development expenses for our products or technologies, such products or technologies may become obsolete as a result of

31

technological developments by us or others. Our products could also be made obsolete by new technologies which are less expensive or more effective. We may not be able to make the enhancements to our technology necessary to compete successfully with newly emerging technologies. The market for high throughput nucleic acid sequencing may not be sufficient to generate revenues significant enough for 454 to achieve profitability.

454 has a limited history of manufacturing instrument systems and consumable products, and its success, in part, depends on its ability to provide commercially successful products to Roche.

454 has limited experience manufacturing products and consumable reagents in significant volumes. 454 has only recently begun manufacturing products on a commercial scale and may be unable to provide products in the volumes required, or to complete projects at its facility. 454 may encounter previously unknown manufacturing difficulties that could significantly reduce production or the ability to manufacture its systems and products economically.

454 does not have a history of managing inventory levels. Reagents are subject to obsolescence. If inventory of consumables is not managed appropriately, this could result in 454 having to write-off expired products, potentially impacting its ability to provide products and services.

If a natural disaster were to significantly damage 454’s facility or a supplier of critical components, or if other events were to cause operations to fail, these events could prevent 454 from manufacturing products and offering its services.

For the foreseeable future, we will rely on a single distributor, Roche, to generate most 454 product revenue. If Roche is unable to sell 454’s products effectively, it could materially and adversely affect the results of our operations.

We have granted Roche the right to be our exclusive, worldwide sales and marketing distributor for 454’s high-throughput Genome Sequencing Systems, including proprietary kits and reagents. As a result, we are dependent on Roche and its ability to effectively market 454’s current products. If Roche is unable to sell 454’s products effectively, we will not have the ability to seek other customers for 454’s products at least until such time as satisfactory arrangements are made with Roche.

A portion of 454’s sales are to international customers and international sales are subject to risks.

454’s instrument systems and reagents will be sold internationally by Roche. 454 also offers sequencing services to clients world-wide and intends to expand its international presence. International sales entail a variety of risks, including:

• currency exchange fluctuations;

• unexpected changes in legislative or regulatory requirements of foreign countries into which products are imported;

• difficulties in obtaining export licenses or other trade barriers and restrictions resulting in delivery delays; and

• significant taxes or other burdens of complying with a variety of foreign laws.

In addition, sales to international customers typically result in longer payment cycles and greater difficulty in accounts receivable collection. 454 is also subject to general geopolitical risks, such as political, social and economic instability and changes in diplomatic and trade relations. One or more of these factors could have a material adverse effect on 454’s business, financial condition and operating results.

Patents may not provide sufficient protection for the 454 technology.

454’s products and services are based on the combination of several complex technologies. 454 has developed some of these technologies internally and has pursued patent protection in the U.S. and other countries for certain developments, improvements, and inventions it has developed that are incorporated into 454’s products or that fall within its fields of interest. Other of the technologies utilized by 454 are owned by third parties and are used by 454 under license. There are relatively few decided court cases interpreting the scope of patent claims in these technologies, and 454 believes that its products and services do not infringe the technology covered by valid and

32

enforceable patents. This belief could be successfully challenged by third parties. 454’s patent applications may not protect its products, processes and technologies because of the following reasons:

• there is no guarantee that any of 454’s pending patent applications will result in additional issued patents;

• 454 may develop additional proprietary technologies that are not patentable;

• there is no guarantee that any patents issued to 454 or its collaborative customers will provide a basis for commercially viable products;

• there is no guarantee that any patents issued to 454 or its collaborative customers will provide 454 with any competitive advantages;

• there is no guarantee that any patents issued to 454 or its collaborative customers will not be challenged or circumvented or invalidated by third parties; and

• there is no guarantee that any patents issued to others will not have an adverse effect on 454’s ability to do business.

454 could be subject to claims for infringing on patents of other intellectual property rights.

In addition, patent law relating to the scope of claims in the technology fields in which 454 operates is still evolving. Due to the fact that 454’s business depends in large part on advancements made in genomic sequencing technology, there remains a constant risk of intellectual property litigation affecting the company. The patent positions of organizations developing these products, services and technology, including 454, are generally uncertain and could involve complex legal and factual questions. The degree of future protection for 454’s proprietary rights is uncertain. Furthermore, there can be no assurance that others will not independently develop similar or alternative technologies, duplicate any of 454’s technologies, or, if patents are issued to 454, design around the patented technologies developed by 454. In addition, 454 could incur substantial costs in litigation if they are required to defend themselves in patent lawsuits brought by third parties, or if 454 initiates such lawsuits.

From time to time, third parties may assert that 454 is infringing patents owned by such third parties. 454 will endeavor to settle such claims by mutual agreement on a satisfactory basis, which would result in withdrawal of the claim and/or result in the granting of licenses to 454. However, 454 cannot make any assurances as to the outcome of any future claims.

It is uncertain whether we will be able to successfully develop and commercialize our new products or to what extent we can increase our revenues or become profitable.

Our mission was to develop a new DNA sequencing technology and we are now using that technology to enable next generation genomic discoveries. This has resulted in the sale of new instruments, consumable and services. Although we have developed DNA sequencing machines and provide DNA sequencing services to customers with our machines, we cannot be certain that we can successfully develop any new products or that they will continue to receive commercial acceptance. Therefore we may not be able to recover our continued investment in product development.

We could be liable for any failure to comply with hazardous product regulations.

Our research and development activities involve the controlled use of hazardous materials and chemicals. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of such materials and certain waste products. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by federal, state and local laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and any liability could exceed our resources.

Risks Related to Our Financial Results

We have a history of operating losses and expect to incur losses in the future.

We have incurred losses since inception, principally as a result of research and development and general and administrative expenses in support of our operations. We anticipate incurring additional losses over the next several years as we focus our resources on prioritizing, selecting and advancing our most promising drug candidates. We may never be profitable or achieve significant revenues. For example, we experienced net losses of $90.3 million in 2004, $74.5 million in 2003 and $90.4 million in 2002, and as of September 30, 2005 had an accumulated deficit of $437.1 million.

33

Our quarterly operating results have fluctuated greatly and may continue to do so.

Our operating results have fluctuated on a quarterly basis. We expect that losses will continue to fluctuate from quarter to quarter and that these fluctuations may be substantial. Our results of operations are difficult to predict and may fluctuate significantly from period to period, which may cause our stock price to decline and result in losses to investors. Some of the factors that could cause our operating results to fluctuate include:

• progress of clinical development of our product candidates;

• the nature, pricing and timing of products and services provided to our collaborators;

• our ability to compete effectively in our therapeutic discovery and development efforts against competitors that have greater financial or other resources or drug candidates that are in further stages of development;

• acquisition, licensing and other costs related to the expansion of our operations;

• losses and expenses related to our investments;

• regulatory developments or changes in public perceptions relating to the use of genetic information and the diagnosis and treatment of disease based on genetic information;

• regulatory actions and changes related to the development of drugs;

• changes in intellectual property laws that affect our patent rights;

• payments of milestones, license fees or research payments under the terms of our external alliances and collaborations and our ability to monitor and enforce such payments; and

• the timing of intellectual property licenses that we may enter into.

We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of future performance. In addition, fluctuations in quarterly results could affect the market price of our common stock in a manner unrelated to our long-term operating performance.

The market price of our common stock is highly volatile.

The market price of our common stock has fluctuated widely and may continue to do so. For example, during the third quarter of 2005, the closing sale price of our stock ranged from a high of $6.49 per share to a low of $4.37 per share. Many factors could cause the market price of our common stock to rise and fall. These factors include:

• variations in our quarterly operating results;

• announcements of technological innovations, clinical results, or new products by us or our competitors;

• introduction of new products or new pricing policies by us or our competitors;

• acquisitions or strategic alliances by us or others in our industry;

34

• announcement by the government or other agencies regarding the economic health of the United States and the rest of the world;

• the hiring or departure of key personnel;

• changes in market valuations of companies within the biotechnology industry; and

• changes in estimates of our performance or recommendations by financial analysts.

We have a large amount of debt and our debt service obligations may prevent us from taking actions that we would otherwise consider to be in our best interests.

As of September 30, 2005, we had total outstanding consolidated debt of $176.2 million; and for the year ended December 31, 2004, we had a deficiency of earnings available to cover fixed charges of $97.2 million. A variety of uncertainties and contingencies will affect our future performance, many of which are beyond our control. We may not generate sufficient cash flow in the future to enable us to meet our anticipated fixed charges, including our debt service requirements with respect to our notes due in 2007 and in 2011.

The following table shows, as of September 30, 2005, the remaining aggregate amount of our interest payments due in each of the years listed (in millions):

Year	Aggregate Interest
2006	$	8.4
2007		6.4
2008		4.4
2009		4.4
2010		4.4
Thereafter		2.2
Total	$	30.2

Our substantial leverage could have significant negative consequences for our future operations, including:

• increasing our vulnerability to general adverse economic and industry conditions;

• limiting our ability to obtain additional financing;

• requiring the dedication of a substantial portion of our expected cash flow to service our indebtedness, thereby reducing the amount of our expected cash flow available for other purposes, including working capital and capital expenditures;

• limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; or

• placing us at a possible competitive disadvantage compared to less leveraged competitors and competitors that have better access to capital resources.

Our debt investments are impacted by the financial viability of the underlying companies.

We have a diversified portfolio of investments of which $95.3 million at September 30, 2005 was invested in U.S. Treasuries and debt investments that are sponsored by the U.S. Government. Our corporate fixed-rate debt investments

35

comply with our policy of investing in only investment-grade debt instruments. The ability for the debt to be repaid upon maturity or to have a viable resale market is dependent, in part, on the financial success of the underlying company. Should the underlying company suffer significant financial difficulty, the debt instrument could either be downgraded or, in the worst case, our investment could be worthless. This would result in our losing the cash value of the investment and incurring a charge to our statement of operations.

We may need to raise additional funding, which may not be available on favorable terms, if at all.

We believe that we have sufficient capital to satisfy our capital needs for at least the next twenty-four months. However, our future funding requirements will depend on many factors and we anticipate that, at some future point, we will need to raise additional capital to fund our business plan and research and development efforts on a going-forward basis. To the extent that we need to obtain additional funding, the amount of additional capital we would need to raise would depend on many factors, including:

• the number, breadth and progress of our research, product development and clinical programs;

• our ability to establish and maintain additional collaborations;

• the progress of our collaborators;

• our costs incurred in enforcing and defending our patent claims and other intellectual property rights; and

• the costs and timing of obtaining regulatory approvals for any of our products.

We expect that we would raise any additional capital we require through public or private equity offerings, debt financings or additional collaborations and licensing arrangements. We cannot be certain that in the future these sources of liquidity will be available when needed or that our actual cash requirements will not be greater than anticipated. In appropriate strategic situations, we may seek financial assistance from other sources, including contributions by others to joint ventures and other collaborative or licensing arrangements for the development and testing of products under development. If we raise additional capital by issuing equity securities, the issuance of such securities would result in ownership dilution to our shareholders. If we raise additional funds through collaborations and licensing arrangements, we may be required to relinquish rights to certain of our technologies or product candidates, or to grant licenses on unfavorable terms. The relinquishing of rights or granting of licenses on unfavorable terms could materially adversely affect our business, financial condition and results of operations. If adequate funds are not available, our business, financial condition and results of operations would be materially adversely affected. However, should we be unable to obtain future financing either through the methods described above or through other means, we may be unable to meet the critical objective of our long-term business plan, which is to successfully develop and market pharmaceutical products. If we require additional capital at a time when investment in biotechnology companies such as ours, or in the marketplace in general, is limited due to the then prevailing market or other conditions, we may not be able to raise such funds at the time that we desire or any time thereafter.

Risks Related to Our Convertible Debt and Our Common Stock into which Our Debt is Convertible

We have significant leverage as a result of the issuances of our debt in 2000 and 2004.

In February 2000, in connection with the sale of our 6% convertible subordinated debentures due in 2007, we incurred $150.0 million of indebtedness. In February 2004, we repurchased $20.0 million of these debentures, for total consideration of $20.0 million, plus accrued interest of $0.05 million to the date of repurchase. In April and May 2005, we repurchased $14.0 million of these debentures, for total consideration of $12.4 million, plus accrued interest of $0.2 million to the date of repurchase. During July 2005, we repurchased $25.9 million of these debentures, for total consideration of $25.3 million, plus accrued interest of $0.8 million to the date of repurchase. During August and September 2005, we repurchased $23.9 million of these debentures, for total consideration of $23.8 million, plus accrued interest of $0.1 million to the date of repurchase. As a result of the remaining indebtedness of $66.2 million, our interest payment obligations amount to $4.0 million per year.

36

In February 2004, in connection with the sale of our 4% convertible subordinated notes due in 2011, we incurred an additional $100.0 million of indebtedness. In addition, in March 2004, the initial purchasers exercised their option to purchase an additional $10.0 million of 4% convertible subordinated notes due in 2011, providing us with additional net proceeds of approximately $9.7 million. As a result of this indebtedness of $110.0 million, our interest payment obligations amount to $4.4 million per year. The degree to which we are leveraged could adversely affect our ability to obtain further financing for working capital, acquisitions or other purposes and could make us more vulnerable to industry downturns and competitive pressures. Our ability to meet our debt service obligations will depend upon our future performance, which may be subject to the financial, business and other factors affecting our operations, many of which are beyond our control.

These notes, due in 2007 and in 2011, are effectively subordinated to all of our secured indebtedness and all indebtedness of our subsidiaries. These notes are our general unsecured obligations and are not guaranteed by any of our subsidiaries. Accordingly, these notes are effectively subordinated to all of our current and future secured indebtedness to the extent of the assets securing the indebtedness. Furthermore, our right to receive any distribution of assets of any subsidiary upon that subsidiary’s liquidation, reorganization or otherwise, is subject to the prior claims of creditors of that subsidiary, except to the extent we also are recognized as a creditor of that subsidiary. As a result, these notes are effectively subordinated to the claims of such creditors.

There are no restrictive covenants in our indentures relating to our ability to incur future indebtedness.

The indentures governing our notes due in 2007 and in 2011 do not contain any financial or operating covenants or restrictions on the payment of dividends, the incurrence of indebtedness, transactions with affiliates, incurrence of liens or the issuance or repurchase of securities by us or any of our subsidiaries. We may therefore incur additional debt, including secured indebtedness senior to these notes. As part of our growth strategy, we potentially may use proceeds from the 2004 offering to finance future acquisitions of complementary businesses or technologies, which may cause us or our subsidiaries to incur significant indebtedness to which these notes would be subordinate.

These notes, due in 2007 and in 2011, are obligations exclusively of CuraGen Corporation. Our subsidiaries are separate and distinct legal entities. Our subsidiaries have no obligation to pay any amounts due on these notes or to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other payments. In addition, any payment of dividends, distributions, loans or advances by our subsidiaries to us could be subject to statutory or contractual restrictions. Payments to us by our subsidiaries will also be contingent upon our subsidiaries’ earnings and business considerations.

Our debt service obligations may adversely affect our cash flow.

A higher level of indebtedness increases the risk that we may default on our debt obligations. We cannot be certain that we will be able to generate sufficient cash flow to pay the interest on our debt or that future working capital, borrowings or equity financing will be available to pay or refinance such debt. If we are unable to generate sufficient cash flow to pay the interest on our debt, we may have to delay or curtail our research and development programs.

The level of our indebtedness among other things, could:

• make it difficult for us to make payments on our notes;

• make it difficult for us to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements or other purposes;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

• make us more vulnerable in the event of a downturn in our business.

37

Our ability to repurchase notes, if required, with cash upon a change in control or fundamental change may be limited.

In certain circumstances involving a change in control, we may be required to repurchase some or all of the notes due in 2007. In certain circumstances involving a fundamental change, we may be required to repurchase some or all of the notes due in 2011. We cannot be certain that we will have sufficient financial resources at such time or would be able to arrange financing to pay the repurchase price of the notes. Our ability to repurchase the notes in such event may be limited by law, by the indenture and by such indebtedness and agreements as may be entered into, replaced, supplemented or amended from time to time.

Securities we issue to fund our operations could cause dilution to our shareholders’ ownership.

The conversion of our notes into shares of common stock will dilute the ownership interest of our current shareholders. We may decide to raise additional funds through a public or private debt or equity financing to fund our operations. If we raise funds by issuing equity securities, the percentage ownership of current shareholders, including the ownership that holders of the notes would have upon conversion, will be reduced, and the new equity securities may have rights prior to those of the common stock issuance upon conversion of the notes. We may not obtain sufficient financing on terms that are favorable to existing shareholders and us.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our outstanding long-term liabilities as of September 30, 2005 consisted of $66.2 million of our 6% convertible subordinated debentures due February 2, 2007, $110.0 million of our 4% convertible subordinated notes due February 15, 2011, an accrued long-term liability of $0.5 million for the remaining future minimum payments under a license agreement (see Note 11 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2004) and the long-term portion of 454’s deferred revenue in the amount of $8.7 million. As the debentures and notes bear interest at a fixed rate, our results of operations would not be affected by interest rate changes. During the third quarter of 2005, we repurchased $49.8 million of our 6% convertible subordinated debentures due February 2007. As of September 30, 2005, the market value of our $66.2 million 6% convertible subordinated debentures due 2007, based on quoted market prices, was estimated at $65.6 million, and the market value of our $110.0 million 4% convertible subordinated notes due 2011, based on quoted market prices, was estimated at $85.9 million. Although future borrowings may bear interest at a floating rate, and our result of operations would therefore be affected by interest rate changes, currently we do not anticipate any significant future borrowings at floating interest rates, and therefore do not believe that a change of 100 basis points in interest rates would have a material effect on our financial condition.

There have been no other significant changes in our market risk compared to the disclosures in Item 7a of our Annual Report on Form 10-K for the year ended December 31, 2004.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As required by Rule 13a -15 under the Securities Exchange Act of 1934, the Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), performed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, these officers have concluded that, as of September 30, 2005, our disclosure controls and procedures were adequate and designed to provide reasonable assurance that the information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

(b) Changes in Internal Controls

There have been no changes in our internal controls over financial reporting, identified in connection with the above-mentioned evaluation of such internal controls, that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

38

Part II - Other Information

Item 6. Exhibits

Exhibit 4.1	Amended and Restated Bylaws of the Registrant
Exhibit 10.1	Amendment, Assignment and Assumption of Lease, dated August 23, 2005, (16 Commercial Street, Branford, CT) by and between 16 Commercial Street Associates, LLC, the Registrant and 454 Life Sciences Corporation
Exhibit 10.2	Lease, as amended and restated, dated August 23, 2005, (20 Commercial Street, Branford, CT) by and between 20 Commercial Street Associates, LLC and 454 Life Sciences Corporation
Exhibit 10.3	Lease, as amended and restated, dated July 1, 2005, (322 East Main Street, Branford, CT) by and between T.K.J. Associates, LLC and the Registrant
Exhibit 31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

39

SIGNATURES

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

	CuraGen Corporation
Dated: November 4, 2005	By:	/s/    PATRICK J. ZENNER
		Patrick J. Zenner
		Interim Chief Executive Officer and
		Chairman of the Board (principal executive officer of
		the registrant)
Dated: November 4, 2005	By:	/s/    DAVID M. WURZER
		David M. Wurzer
		Executive Vice-President, Chief Financial Officer
		and Treasurer (principal financial and accounting
		officer of the registrant)

40

CURAGEN CORPORATION

EXHIBIT INDEX

No.
Exhibit 4.1	Amended and Restated Bylaws of the Registrant
Exhibit 10.1	Amendment, Assignment and Assumption of Lease, dated August 23, 2005, (16 Commercial Street, Branford, CT) by and between 16 Commercial Street Associates, LLC, the Registrant and 454 Life Sciences Corporation
Exhibit 10.2	Lease, as amended and restated, dated August 23, 2005, (20 Commercial Street, Branford, CT) by and between 20 Commercial Street Associates, LLC and 454 Life Sciences Corporation
Exhibit 10.3	Lease, as amended and restated, dated July 1, 2005, (322 East Main Street, Branford, CT) by and between T.K.J. Associates, LLC and the Registrant
Exhibit 31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).

EX-4.1

Exhibit 4.1

Adopted March 12, 1998

CURAGEN CORPORATION

AMENDED AND RESTATED BY-LAWS

ARTICLE I - STOCKHOLDERS

Section 1. Annual Meeting.

An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall fix each year.

Section 2. Special Meetings.

Subject to the rights of the holders of any class or series of preferred stock of the Corporation, special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors authorized. Special meetings of the stockholders may be held at such place within or without the State of Delaware as may be stated in such resolution.

Section 3. Notice of Meetings.

Written notice of the place, date, and time of all meetings of the stockholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation of the Corporation, as amended and restated from time to time).

When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

Section 4. Quorum.

At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all

- 1 -

Adopted March 12, 1998

purposes, unless or except to the extent that the presence of a larger number may be required by law. Where a separate vote by a class or classes is required, a majority of the shares of such class or classes present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter.

If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time.

Section 5. Organization.

The Chairman of the Board of Directors or, in his or her absence, such person as the Board of Directors may have designated or, in his or her absence, the Chief Executive Officer of the Corporation or, in his or her absence, the President or, in his or her absence such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary of the Corporation, the By-Laws of the meeting shall be such person as the chairman of the meeting appoints.

Section 6. Conduct of Business.

The Chairman of the Board of Directors or his or her designee or, if neither the Chairman of the Board nor his or her designee is present at the meeting, then a person appointed by a majority of the Board of Directors, shall preside at, and act as chairman of, any meeting of the stockholders. The chairman of any meeting of stockholders shall determine the order of business and the procedures at the meeting, including such regulation of the manner of voting and the conduct of discussion as he or she deems to be appropriate.

Section 7. Notice of Stockholder Business and Nominations.

A. Annual Meetings of Stockholders.

Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation’s notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this Section, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section.

B. Special Meetings of Stockholders.

Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the notice of meeting given pursuant to Section 2 above. Nominations of persons for election to the Board of Directors may be made at a special

- 2 -

Adopted March 12, 1998

meeting of stockholders at which directors are to be elected (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice of the special meeting, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section.

C. Certain Matters Pertaining to Stockholder Business and Nominations.

(1) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph A of this Section or a special meeting pursuant to paragraph B of this Section, the stockholder must have (i) given timely notice thereof in writing to the Secretary of the Corporation, (ii) in the case of other business to be brought before an annual meeting, such other business must otherwise be a proper matter for stockholder action and (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the Corporation with a Solicitation Notice, as that term is defined below in this paragraph (C)(1), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law to carry any such proposal, or in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of at least a percentage of the Corporation’s voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this section, the stockholder or beneficial holder proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this section. To be timely, a stockholder’s notice pertaining to an annual meeting shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the forty-fifth (45th) day nor earlier than the close of business on the seventy-fifth (75th) day prior to the first anniversary of the preceding year’s mailing date for stockholder proxy materials; provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after the date of the annual meeting in the preceding year; or if an annual meeting was not held in the preceding year, notice by the stockholder to be timely must be so delivered by the later of the close of business on the ninetieth (90) day prior to the date of such annual meeting or the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation. Such stockholder’s notice for an annual meeting or a special meeting shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of

- 3 -

Adopted March 12, 1998

such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, (ii) the class and number of shares of the Corporation that are owned beneficially and held of record by such stockholder and such beneficial owner and (iii) whether either such stockholder or the beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “Solicitation Notice”). A stockholder shall also comply with all applicable requirements of the Exchange Act (or any successor provision), and the rules and regulations thereunder with respect to the matters set forth in these By-Laws. Nothing in this Section 7(C)(1) shall be deemed to affect any rights of the stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

(2) Notwithstanding anything in the second sentence of paragraph C (1) of this Section to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least fifty-five (55) days prior to the first anniversary of the preceding year’s mailing date for stockholder proxy materials (or, if the annual meeting is held more than thirty (30) days before or sixty (60) days after the date of the annual meeting in the preceding year, at least one hundred (100) days prior to such annual meeting), a stockholder’s notice required by this Section shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall have been delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.

(3) In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph C(1) of this Section shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the ninetieth (90th) day prior to such special meeting nor later than the close of business on the later of the sixtieth (60th) day prior to such special meeting, or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.

D. General.

(1) Only such persons who are nominated in accordance with the procedures set forth in this Section shall be eligible to serve as directors and only such business shall be conducted

- 4 -

Adopted March 12, 1998

at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section. Except as otherwise provided by law or these By-Laws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section and, if any proposed nomination or business is not in compliance herewith to declare that such defective proposal or nomination shall be disregarded.

(2) For purposes of this Section, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

Section 8. Proxies and Voting.

At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this Section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

All voting, including on the election of directors but excepting where otherwise required by law, may be by voice vote. Any vote not taken by voice shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. The Corporation may, and to the extent required by law, shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting may, and to the extent required by law, shall, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability.

Except as otherwise provided in the terms of any class or series of Preferred Stock of the Corporation, all elections at any meeting of stockholders shall be determined by a plurality of the votes cast, and except as otherwise required by law, all other matters determined by stockholders at a meeting shall be determined by a majority of the votes cast affirmatively or negatively.

- 5 -

Adopted March 12, 1998

Section 9. Action Without Meeting.

Any action required or permitted to be taken by the stockholders of the Corporation may be effected only at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by written consent.

Section 10. Stock List.

A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his or her name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held.

The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

- 6 -

Adopted March 12, 1998

ARTICLE II - BOARD OF DIRECTORS

Section 1. General Powers, Number, Election, Tenure and Qualification.

A. The business and affairs of the Corporation shall be managed by or under the direction of its Board of Directions.

B. Subject to the rights of the holders of any series of Preferred Stock then outstanding to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Board.

C. On or prior to the Effective Time, as defined in Article FOURTH of the Corporation’s Restated Certificate of Incorporation, the Board of Directors of the Corporation shall divide the directors into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the annual meeting of stockholders or any special meeting in lieu thereof in 1999, the term of office of the second class to expire at the annual meeting of stockholders or any special meeting in lieu thereof in 2000, and the term of office of the third class to expire at the annual meeting of stockholders or any special meeting in lieu thereof in 2001. At each annual meeting of stockholders or special meeting in lieu thereof following such initial classification, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders or special meeting in lieu thereof after their election and until their successors are duly elected and qualified.

Section 2. Vacancies and Newly Created Directorships.

Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the directors then in office even though less than a quorum, or by a sole remaining director. In the event of any increase or decrease in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as a director of the class of which he is a member until the expiration of his current term or his prior death, retirement, removal or resignation and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall if reasonably possible be apportioned by the Board of Directors among the three classes of directors so as to ensure that no one class has more than one director more than any other class. To the extent reasonably possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation and newly eliminated directorships shall be subtracted from those classes whose terms of office are to expire at the earliest dates following such allocation, unless otherwise provided for from time to time by resolution adopted by a majority of the directors then in office, although less than a quorum. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board of Directors until the vacancy is filled.

- 7 -

Adopted March 12, 1998

Section 3. Resignation and Removal.

Any director may resign at any time upon written notice to the Corporation at its principal place of business or to the Chief Executive Officer, President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed from office at any time only for cause. A director may be removed for cause only after a reasonable notice and opportunity to be heard before the body proposing to remove him.

Section 4. Regular Meetings.

Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A written notice of each regular meeting shall not be required.

Section 5. Special Meetings.

Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors, if any, the President, the Treasurer, the Secretary or one or more of the directors then in office and shall be held at such place, on such date, and at such time as they or he or she shall fix. Notice of the place, date, and time of each such special meeting shall be given to each director by whom it is not waived by mailing written notice not less than three (3) days before the meeting or orally, by telegraph, telex, cable or telecopy given not less than twenty-four (24) hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.

Section 6. Quorum.

At any meeting of the Board of Directors, a majority of the total number of members of the Board of Directors shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof.

Section 7. Action by Consent.

Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.

- 8 -

Adopted March 12, 1998

Section 8. Participation in Meetings By Conference Telephone.

Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting.

Section 9. Conduct of Business.

At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law.

Section 10. Powers.

The Board of Directors may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, including, without limiting the generality of the foregoing, the unqualified power:

(1) To declare dividends from time to time in accordance with law;

(2) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine;

(3) To authorize the creation, making and issuance, in such form as it may determine, of written obligations of every kind, negotiable or non-negotiable, secured or unsecured, to borrow funds and guarantee obligations, and to do all things necessary in connection therewith;

(4) To remove any officer of the Corporation with or without cause, and from time to time to devolve the powers and duties of any officer upon any other person for the time being;

(5) To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents;

(6) To adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine;

(7) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and,

- 9 -

Adopted March 12, 1998

(8) To adopt from time to time regulations, not inconsistent with these By-Laws, for the management of the Corporation’s business and affairs.

Section 11. Compensation of Directors.

Directors, as such, may receive, pursuant to a resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, their services as members of committees of the Board of Directors.

- 10 -

Adopted March 12, 1998

ARTICLE III - COMMITTEES

Section 1. Committees of the Board of Directors.

The Board of Directors, by a vote of a majority of the Board of Directors, may from time to time designate committees of the Board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-Laws of the Corporation. Any committee so designated may exercise the power and authority of the Board of Directors to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law if the resolution which designates the committee or a supplemental resolution of the Board of Directors shall so provide. In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.

Section 2. Conduct of Business.

Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third (1/3) of the members of any committee shall constitute a quorum unless the committee shall consist of one (1) or two (2) members, in which event one (1) member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of such committee.

- 11 -

Adopted March 12, 1998

ARTICLE IV - OFFICERS

Section 1. Enumeration.

The officers of the Corporation shall consist of a President, a Treasurer, a Secretary and such other officers as the Board of Directors or the Chairman of the Board may determine, including, but not limited to, a Chairman of the Board of Directors, a Chief Executive Officer, one or more Vice Presidents, Assistant Treasurers and Assistant Secretaries.

Section 2. Election.

The Chairman of the Board, if any, the President, the Treasurer and the Secretary shall be elected annually by the Board of Directors at their first meeting following the annual meeting of the stockholders. The Board of Directors or the Chairman of the Board, if any, may, from time to time, elect or appoint such other officers as it or he or she may determine, including, but not limited to, one or more Vice Presidents, Assistant Treasurers and Assistant Secretaries.

Section 3. Qualification.

No officer need be a stockholder. The Chairman of the Board, if any, and any Vice Chairman appointed to act in the absence of the Chairman, if any, shall be elected by and from the Board of Directors, but no other officer need be a director. Two or more offices may be held by any one person. If required by vote of the Board of Directors, an officer shall give bond to the Corporation for the faithful performance of his or her duties, in such form and amount and with such sureties as the Board of Directors may determine. The premiums for such bonds shall be paid by the Corporation.

Section 4. Tenure and Removal.

Each officer elected or appointed by the Board of Directors shall hold office until the first meeting of the Board of Directors following the next annual meeting of the stockholders and until his or her successor is elected or appointed and qualified, or until he or she dies, resigns, is removed or becomes disqualified, unless a shorter term is specified in the vote electing or appointing said officer. Each officer appointed by the Chairman of the Board, if any, shall hold office until his or her successor is elected or appointed and qualified, or until he or she dies, resigns, is removed or becomes disqualified, unless a shorter term is specified by any agreement or other instrument appointing such officer. Any officer may resign by giving written notice of his or her resignation to the Chairman of the Board, if any, the President, or the Secretary, or to the Board of Directors at a meeting of the Board, and such resignation shall become effective at the time specified therein. Any officer elected or appointed by the Board of Directors may be removed from office with or without cause by vote of a majority of the directors. Any officer appointed by the Chairman of the Board, if any, may be removed with or without cause by the Chairman of the Board.

- 12 -

Adopted March 12, 1998

Section 5. Chairman of the Board.

The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and stockholders at which he or she is present and shall have such authority and perform such duties as may be prescribed by these By-Laws or from time to time be determined by the Board of Directors. The Chairman of the Board shall also have the power and authority to determine the compensation and duties of all officers, employees and agents of the Corporation and shall have the power and authority to sign all stock certificates, contracts and other instruments of the Corporation which are authorized.

Section 6. President.

Except for meetings at which the Chief Executive Officer or the Chairman of the Board, if any, presides, the President shall, if present, preside at all meetings of stockholders, and if a director, at all meetings of the Board of Directors. The President shall, subject to the control and direction of the Chief Executive Officer and the Board of Directors, have and perform such powers and duties as may be prescribed by these By-Laws or from time to time be determined by the Chief Executive Officer or the Board of Directors. The President shall have power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized. In the absence of a Chief Executive Officer, the President shall be the chief executive officer of the Corporation and shall, subject to the direction of the Board of Directors, have general supervision and control of its business and shall have general supervision and direction of all of the officers, employees and agents of the Corporation.

Section 7. Chief Executive Officer

The Chief Executive Officer shall be the chief executive officer of the Corporation and shall, subject to the direction of the Board of Directors, have general supervision and control of its business. Unless otherwise provided by resolution of the Board of Directors, in the absence of the Chairman of the Board, if any, the Chief Executive Officer shall preside at all meetings of the stockholders and, if a director, meetings of the Board of Directors. The Chief Executive Officer shall have general supervision and direction of all of the officers, employees and agents of the Corporation.

Section 8. Vice Presidents.

The Vice Presidents, if any, in the order of their election, or in such other order as the Board of Directors may determine, shall have and perform the powers and duties of the President (or such of the powers and duties as the Board of Directors may determine) whenever the President is absent or unable to act. The Vice Presidents, if any, shall also have such other powers and duties as may from time to time be determined by the Board of Directors.

- 13 -

Adopted March 12, 1998

Section 9. Treasurer and Assistant Treasurers.

The Treasurer shall, subject to the control and direction of the Board of Directors, have and perform such powers and duties as may be prescribed in these By-Laws or be determined from time to time by the Board of Directors. All property of the Corporation in the custody of the Treasurer shall be subject at all times to the inspection and control of the Board of Directors. The Treasurer shall have the responsibility for maintaining the financial records of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions and of the financial condition of the Corporation. Unless otherwise voted by the Board of Directors, each Assistant Treasurer, if any, shall have and perform the powers and duties of the Treasurer whenever the Treasurer is absent or unable to act, and may at any time exercise such of the powers of the Treasurer, and such other powers and duties, as may from time to time be determined by the Board of Directors.

Section 10. Secretary and Assistant Secretaries.

The Board of Directors shall appoint a Secretary and, in his or her absence, an Assistant Secretary. The Secretary or, in his or her absence, any Assistant Secretary, shall attend all meetings of the directors and shall record all votes of the Board of Directors and minutes of the proceedings at such meetings. The Secretary or, in his or her absence, any Assistant Secretary, shall notify the directors of their meetings, and shall have and perform such other powers and duties as may from time to time be determined by the Board of Directors. If the Secretary or an Assistant Secretary is elected but is absent from any meeting of directors, a temporary Secretary may be appointed by the directors at the meeting

Section 11. Bond.

If required by the Board of Directors, any officer shall give the Corporation a bond in such sum and with such surety or sureties and upon such terms and conditions as shall be satisfactory to the Board of Directors, including without limitation a bond for the faithful performance of the duties of his office and for the restoration to the Corporation of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his control and belonging to the Corporation.

Section 12. Action with Respect to Securities of Other Corporations.

Unless otherwise directed by the Board of Directors, the President, the Treasurer or any officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation.

- 14 -

Adopted March 12, 1998

ARTICLE V - STOCK

Section 1. Certificates of Stock.

Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by the Chairman of the Board of Directors, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, certifying the number of shares owned by him or her. Any or all of the signatures on the certificate may be by facsimile.

Section 2. Transfers of Stock.

Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 4 of this Article of these By-Laws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.

Section 3. Record Date.

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for such other action as hereinbefore described; provided, however, that if no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

- 15 -

Adopted March 12, 1998

Section 4. Lost, Stolen or Destroyed Certificates.

In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity.

Section 5. Regulations.

The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.

Section 6. Interpretation.

The Board of Directors shall have the power to interpret all of the terms and provisions of these By-Laws, which interpretation shall be conclusive.

- 16 -

Adopted March 12, 1998

ARTICLE VI - NOTICES

Section 1. Notices.

Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mail, postage paid, or by sending such notice by courier service, prepaid telegram or mailgram, or telecopy, cable, or telex. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at his or her last known address as the same appears on the books of the Corporation. The time when such notice is received, if hand delivered, or dispatched, if delivered through the mail or by courier, telegram, mailgram, telecopy, cable, or telex shall be the time of the giving of the notice.

Section 2. Waiver of Notice.

A written waiver of any notice, signed by a stockholder, director, officer, employee or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, director, officer, employee or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver. Attendance of a director or stockholder at a meeting without protesting prior thereto or at its commencement the lack of notice shall also constitute a waiver of notice by such director or stockholder.

- 17 -

Adopted March 12, 1998

ARTICLE VII -INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 1. Right to Indemnification.

Each person who was or is made a party or is threatened to be made a party to or is otherwise involved (including, without limitation, as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “Indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith; provided, however, that, except as provided in Section 3 of this Article with respect to proceedings to enforce rights to indemnification or as otherwise required by law, the Corporation shall not be required to indemnify or advance expenses to any such Indemnitee in connection with a proceeding (or part thereof) initiated by such Indemnitee unless such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

Section 2. Right to Advancement of Expenses.

The right to indemnification conferred in Section 1 of this Article shall include the right to be paid by the Corporation the expenses (including attorney’s fees) incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an Indemnitee in his capacity as a director or officer (and not in any other capacity in which service was or is rendered by such Indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this Section 2 or otherwise. The rights to indemnification and to the advancement of expenses conferred in Sections 1 and 2 of this Article shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators. Any repeal or modification of any of the provisions of this Article shall not adversely affect any right or protection of an Indemnitee existing at the time of such repeal or modification.

- 18 -

Adopted March 12, 1998

Section 3. Right of Indemnitees to Bring Suit.

If a claim under Section 1 or 2 of this Article is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee shall also be entitled to be paid the expenses of prosecuting or defending such suit. In (i) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the Indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its board of directors, independent legal counsel, or its stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article or otherwise shall be on the Corporation.

Section 4. Non-Exclusivity of Rights.

The rights to indemnification and to the advancement of expenses conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporation’s Certificate of Incorporation as amended from time to time, these By-Laws, any agreement, any vote of stockholders or disinterested directors or otherwise.

Section 5. Insurance.

The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

- 19 -

Adopted March 12, 1998

Section 6. Indemnification of Employees and Agents of the Corporation.

The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.

- 20 -

Adopted March 12, 1998

ARTICLE VIII - CERTAIN TRANSACTIONS

Section 1. Transactions with Interested Parties.

No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction or solely because the votes of such director or officer are counted for such purpose, if:

(a) The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or

(b) The material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or

(c) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders.

Section 2. Quorum.

Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

- 21 -

Adopted March 12, 1998

ARTICLE IX - MISCELLANEOUS

Section 1. Facsimile Signatures.

In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these By-Laws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

Section 2. Corporate Seal.

The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.

Section 3. Reliance upon Books, Reports and Records.

Each director, each member of any committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

Section 4. Fiscal Year.

Except as otherwise determined by the Board of Directors from time to time, the fiscal year of the Corporation shall end on the last day of December of each year.

Section 5. Time Periods.

In applying any provision of these By-Laws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.

Section 6. Pronouns.

Whenever the context may require, any pronouns used in these By-Laws shall include the corresponding masculine, feminine or neuter forms.

- 22 -

Adopted March 12, 1998

ARTICLE X - AMENDMENTS

These By-Laws may be amended or repealed by the affirmative vote of a majority of the whole Board at any meeting or by the stockholders by the affirmative vote of seventy percent (70%) of the outstanding voting power of the then-outstanding shares of capital stock of the Corporation, entitled to vote generally in the election of directors, at any meeting at which a proposal to amend or repeal these By-Laws is properly presented

- 23 -

EX-10.1

Exhibit 10.1

AMENDNDMENT, ASSIGNMENT AND ASSUMPTION OF LEASE

WITH LANDLORD’S CONSENT AND NOVATION

This AMENDNDMENT, ASSIGNMENT AND ASSUMPTION OF LEASE WITH LANDLORD’S CONSENT AND NOVATION made and entered into as of August 23, 2005, by and among 16 Commercial Street Associates, LLC, a Connecticut limited liability company, having a place of business is 431 Orange Street, New Haven, Connecticut 06511, (hereinafter known as “Landlord”) CuraGen Corporation, a Connecticut corporation, having a place of business is 322 East Main Street, Branford, Connecticut 06405, (hereinafter known as “Assignor”) and 454 Life Sciences Corporation, a Connecticut corporation, having a place of business 16 Commercial Street, Branford, Connecticut 06405, (hereinafter known as “Assignee”).

WITNESSETH:

WHEREAS, Landlord and Assignor entered into a certain Lease Agreement dated as of May 24, 2001 (the “Lease”) with respect to certain real property with improvements thereon known as 16 Commercial Street, Branford, Connecticut (defined in the Lease as the “Premises”) and

WHEREAS, Assignor is desirous of assigning its rights as tenant under the Lease to Assignee; and

WHEREAS, Assignee is desirous of assuming the Lease and all obligations, as tenant, arising thereunder; and

WHEREAS, Assignor is desirous of being released from any future obligations, as tenant, arising under the Lease; and

WHEREAS, Assignee and Landlord each desire to amend the Term and Rent described in the Lease.

NOW THEREFORE, for the premises set forth above, the promises contained herein and the consideration of One ($1.00) Dollar and other good and valuable considerations received to Assignor’s full satisfaction of ASSIGNEE, the parties hereto agree as follows:

1. Except as otherwise defined herein, any and all defined terms used herein shall have the meaning set forth in the Lease.

2. ASSIGNMENT, ASSUMPTION AND ESTOPPEL

A. Assignor, as tenant, does hereby give, grant, bargain, sell and confirm, transfer, assign and set over unto Assignee and unto Assignee’s heirs, administrators, successors and assigns forever, the Lease, with respect to the premises known as 16 Commercial Street, Branford Connecticut.

1

TO HAVE AND TO HOLD said Lease and all rights, privileges, powers and immunities arising thereunder or appertaining thereto unto the said Assignees, and unto the Assignee’s heirs, administrators, successors and assigns forever, to the use and behalf of the Assignees and the heirs, administrators, successors and assigns of the Assignees.

AND ALSO, the Assignor does for the Assignor and the Assignor’s heirs, administrators, successors and assigns, covenant with the Assignees and the Assignee’s heirs, administrators, successors and assigns, that at and until the ensealing of these presents, the Assignor is the sole and absolute owner of the Lease and has good right to bargain, sell and transfer the Lease in manner and form as herein set forth and that the Lease is free from all encumbrances whatsoever.

AND FURTHERMORE, the Assignor does by these presents bind the Assignor and the heirs, administrators, successors and assigns of the Assignor forever, to WARRANT AND DEFEND the Lease to the Assignee and the heirs, administrators, successors and assigns of the Assignee, against all claims and demands whatsoever, except those of the Tenant and/or Lessee under the Lease which are made pursuant to the terms hereof.

AND Assignor does hereby make, constitute and appoint the Assignee, the Assignor’s true and lawful attorney, irrevocable in the name of the Assignor or otherwise, but at Assignees’ own proper cost and charges, to have, use and take all lawful ways and means for the enforcement of said Lease as fully as Assignor might or could do if these presents were not made.

AND Assignor will whenever reasonably required by Assignees, or Assignee’s heirs, administrators, successors and assigns to do so, execute, acknowledge and deliver any and all such other and further acts, assignments, transfers, confirmations and any instruments of further assurance, approvals and consents which Assignee or Assignee’s heirs, administrators, successors or assigns may hereafter reasonably deem necessary or proper in order to complete, insure and perfect the transfer hereby made.

B. Assignee hereby unconditionally and absolutely assumes the Lease, as amended hereby, as “Tenant”, together with all obligations, promises and undertakings arising thereunder.

C. Assignor and Assignee each hereby acknowledges and represents that (a) the Premises and Landlord’s improvements thereon have been completed to its satisfaction; (b) the Lease is now in full force and effect and has not been amended or modified in any respect, except as set forth herein; (c) no rent has been paid for any period commencing after September 1, 2005; (d) no default exists by Landlord or Assignor under the Lease and neither Assignor nor Assignee has any defenses, offsets or counterclaims which it could assert against the payment of rent and/or the performance of the other terms, covenants and conditions of the Lease; and (e) this statement is being provided by Assignee and Assignor in order to induce Landlord to amend the Lease as set forth herein and to consent to the assignment of the Lease, as hereinbefore referred to, with full knowledge that Landlord is relying upon the statements and representations herein made by Assignor and Assignee.

2

3. AMENDMENT

A. The Section of the Lease entitled “TERM AND USE” is hereby deleted and the following is set forth in lieu and substitution therefore:

“TERM AND USE”

The Term of the Lease and the estate hereby granted (collectively the “Term of the Lease”) shall commence June 1, 2001 (hereinafter known as the “Commencement Date”) and shall end on August 31, 2011 (hereinafter known as “End of Term”).

The Premises shall be used by the Tenant for office, lab use and manufacturing. Landlord in its reasonable discretion reserves the right to limit uses that would constitute an environmental concern, disturb the quiet enjoyment of other tenants of the Landlord, or overtax the capacity of the Premises.

B. Section of the Lease entitled “RENT” is hereby deleted and the following is set forth in lieu and substitution therefore:

“RENT”

The Rent under this Lease for the Term hereof shall begin on the Commencement Date and stop at the End of Term. Rent shall include the Base Rent and Common Area Charges.

1. Base Rent shall be paid as follows:

Commencing on September 1, 2005, the Base Rent in the total amount of $1,080,000.00 (the “Base Rent”) shall be payable in monthly installments, in advance, on the first day of each month during the Term of the Lease as follows:

A. From September 1, 2005 through August 31, 2006, the monthly Base Rent shall be $11,250.00;

B. From September 1, 2006 through August 31, 2008, the monthly Base Rent shall be $15,000.00;

C. From September 1, 2008 through August 31, 2011, the monthly Base Rent shall be $16,250.00.

2. In addition to Base Rent, the Tenant shall pay the Landlord for all expenses with respect to the operation, management, and maintenance of the interior and exterior of the building, the grounds, and all areas incidental to the Premises, hereinafter referred to as “Common Area Charges.” The costs shall include such items as, but not limited to, real estate taxes, all property insurance, sewer taxes or usage

3

fees, water usage fees, landscape maintenance, snow removal, security, administrative costs, management fees, roof repairs that result from the Tenant’s improvements, general maintenance and repairs (other than those for which Tenant is responsible, referred to as “Tenant’s Repairs”), and contractor fees. Common Area Charges shall exclude depreciation, interest and amortization payments on any mortgage or other indebtedness of Landlord, capital expenditures, leasing commissions, structural repairs, and expenses reimbursed to the Landlord by property insurance.

During the first lease year, the Tenant shall pay $3,044.00 per month in addition to Base Rent (hereinafter referred to as “CAC Contribution”) towards the Common Area Charges. The Landlord will reconcile the difference between the CAC Contribution and the Common Area Charges once each Lease year. Also, the monthly CAC Contribution will be adjusted at the end of each Lease year by the Landlord to reflect the projected costs for the upcoming year. The Landlord will provide notice of the new CAC Contribution for the upcoming lease year.

3. The Rent shall be paid to the Landlord at the address specified herein, or at such other place as the Landlord may designate, in lawful money of the United States of America, as and when the same shall become due and payable and without abatement of offset and without notice or demand therefor.

4. If any installment of Rent as provided for in this Lease is not received at the Landlord’s address within (10) ten days after the same is due and payable, the Tenant shall pay an additional amount equal to (5%) five percent of the monthly Rent so due.

5. As used herein, “Lease Year” shall mean the period commencing on the Commencement Date and ending on the End of Term, including twelve consecutive calendar months.”

D. The following section is hereby added to the Lease:

“Option to Renew”

Provided that during the Term of this Lease, Tenant has been in full compliance with each and every term, covenant and condition of this Lease, and there has been no breach or default herein or hereunder, Tenant shall have the right to extend the term of the within Lease for one (1) additional five (5) year period commencing with the End Date. In order to effectively exercise the within option, Tenant shall give written notice thereof not less than twelve (12) months prior to the End Date, time being of the essence. In the event of the effective exercise of the within option, the term hereof shall be extended for an additional five (5) year period on the same terms, covenants and conditions as set forth in the Lease, except for the within option and with the further exception that the per annum Base Rent for and during the first Lease Year of the extended term shall be “Fair Market Rental” as indicated below.

4

The term “Fair Market Rental” is defined to mean the prevailing market rate for comparable property and comparable buildings in the greater New Haven area including new construction. The determination of Fair Market Rental shall exclude as a factor the terms of this Lease. The formula for determining Fair Market Rental is as follows:

Within thirty (30) days of the exercise of the option to renew, the parties shall each appoint a licensed commercial real estate agent located in the Greater New Haven area, which real estate agents shall select a third such agent. Within twenty (20) days thereafter, the three real estate agents so selected shall determine the Fair Market Rental of the Demised Premises, as of the option date.

If either party fails to select a real estate agent within the time period set forth above, the real estate agent selected within the required time period alone shall determine the Fair Market Rental.

The determination of Fair Market Rental as outlined above shall be conclusive on the parties. The real estate agents chosen by the parties shall give notice to the parties stating their determination and shall furnish to each party a signed copy of that determination.

Each party shall pay the fees and expenses of the real estate agent appointed by such party and one-half (1/2) of the fees and expenses of the third real estate agent properly incurred.

In no event shall the Base Rent for the first Lease Year of the extended period be less than the Base Rent for the Lease Year September 1, 2010 through August 31, 2011.”

4. NOVATION

Upon the full execution of this Agreement, Landlord hereby agrees that CuraGen Corporation is released from any obligations arising under the Lease from the date hereof.

5. NOTICES

Whenever notice is required by conditions of this lease, such notice shall be given or served in person, or sent by a nationally recognized overnight carrier, or by registered or certified mail, return receipt requested, and addressed as follows:

To Tenant at:

Peter Dacey, Vice President of Finance and Operations

454 Life Sciences Corporation

16 Commercial Street

Branford, Connecticut 06405

5

6. LANDLORD’S CONSENT

Subject to the amendments to the Lease set forth herein, Landlord by its signature below hereby consents to the Assignment of the Lease by Assignor to Assignee.

IN WITNESS WHEREOF, the Assignor, Assignee and Landlord have made, executed and delivered the within instrument as of the 23 day of August, 2005.

In the Presence of:

	ASSIGNOR: CuraGen Corporation
/S/    SHANNA LAVACCA	By:	/S/    DAVID M. WURZER
		David M. Wurzer
	Its	EVP/CFO
/s/    ELIZABETH A. WHAYLAND
	ASSIGNEE: 454 Life Sciences Corporation
/S/    SEAN CASSIDY	By:	/S/    PETER J. DACEY
		Peter J. Dacey
	Its	Vice President of Finance and Operations
/S/    JENNIFER CAVALLARO
	LANDLORD: 16 Commercial Street Associates, LLC
/S/    DANIEL N. HOFFNUNG	By:	/S/    RICHARD MICHAUD
		Richard Michaud
	Its	Member
/S/    ANDREW ULLMAN
/S/    DANIEL N. HOFFNUNG	By:	/S/    FREDERICK P. PETRELLA
		Frederick P. Petrella
	Its	Member
/S/    ANDREW ULLMAN

6

STATE OF CONNECTICUT	)
	)	ss: Branford	August 23, 2005
COUNTY OF NEW HAVEN	)

Personally appeared David M. Wurzer, EVP & CFO of CuraGen Corporation, signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such officer, and the free act and deed of said corporation, before me.

/s/    TERRIE B. ESTES        

COMMISSIONER OF THE SUPERIOR COURT
NOTARY PUBLIC

Terrie B. Estes

Notary Public

My Commission Expires Nov. 30, 2009

7

STATE OF CONNECTICUT	)
	)	ss: Branford	August 23rd 2005
COUNTY OF NEW HAVEN	)

Personally appeared Peter J. Dacey, VP of Finance of 454 Life Sciences Corporation, signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such officer, and the free act and deed of said corporation, before me.

/S/    MEGHAN L. BENSON        

COMMISSIONER OF THE SUPERIOR COURT
NOTARY PUBLIC

Meghan L. Benson

Notary Public

My Commission Expires Oct. 31, 2009

STATE OF CONNECTICUT	)
	)	ss: New Haven	August 25, 2005
COUNTY OF NEW HAVEN	)

Personally appeared Richard Michaud and Frederick P. Petrella, Members of 16 Commercial Street Associates, LLC, signers and sealers of the foregoing instrument, and each acknowledged the same to be his free act and deed as such officer, and the free act and deed of said company, before me.

/S/    DANIEL N. HOFFNUNG        

Daniel N. Hoffnung

Commissioner of the Superior Court

8

EX-10.2

Exhibit 10.2

SECOND AMENDMENT OF LEASE AGREEMENT

This Second Amendment of Lease Agreement is made and entered into as of the 23 day of August, 2005, by and between 20 Commercial Street Associates, LLC (the “Landlord”) and 454 Corporation, Inc. (the “Tenant”).

W I T N E S S E T H

WHEREAS, Landlord and Tenant entered into a certain Lease Agreement dated as of May 18, 2001, which Lease Agreement was amended by a certain Amendment of Lease Agreement dated as of July 1, 2001 (collectively the “Lease”), each with respect to certain real property together with improvements thereon known as 20 Commercial Street, Branford, Connecticut (defined in the Lease as the “Premises”); and

WHEREAS, Landlord and Tenant desire to amend the Lease to extend the Term and set forth the Rent due with respect to said extension.

NOW THEREFORE, in consideration of the premises set forth above and the mutual promises set forth herein, and other valuable consideration, the parties hereto agree as follows:

1. Except as otherwise defined herein, any and all defined terms used herein shall have the meaning set forth in the Lease.

2. The Section of the Lease entitled “TERM AND USE” is hereby deleted and the following is set forth in lieu and substitution therefor:

“TERM AND USE

The Term of the Lease and the estate hereby granted (collectively the “Term of the Lease”) shall commence June 8, 2001 (hereinafter known as the “Commencement Date”) and shall end on August 31, 2011 (hereinafter known as “End of Term”).

The Premises shall be used by the Tenant for the specific use as a biotechnology, manufacturing, engineering and research facility and the like, for doing all things incidental and necessary to the foregoing uses and as office space for corporate office activities. Landlord in its reasonable discretion reserves the right to limit uses that would constitute an environmental concern, disturb the quiet enjoyment of other tenants of the Landlord located at the same premises, or overtax the capacity of the Premises.

3. Section of the Lease entitled “RENT” is hereby deleted and the following is set forth in lieu and substitution therefor:

“RENT

The term Rent shall include the Base Rent, as defined in paragraph 1 below, and the Common Area Charges, as defined in paragraph 2 below (collectively the “Rent”).

1. Commencing on September 1, 2005, the Base Rent in the total amount of $864,000.00 (the “Base Rent”) shall be payable in monthly installments, in advance, on the first day of each month during the Term of the Lease as follows:

A. From September 1, 2005 through August 31, 2006, the monthly Base Rent shall be $9,000.00;

B. From September 1, 2006 through August 31, 2008, the monthly Base Rent shall be $12,000.00;

C. From September 1, 2008 through August 31, 2011, the monthly Base Rent shall be $13,000.00.

2. In addition to the Base Rent, the Tenant shall pay the Landlord for all expenses with respect to the operation, management, and maintenance of the interior and exterior of the building, the grounds, and all areas incidental to the Premises, hereinafter referred to as “Common Area Charges.” The costs shall include such items as, but not limited to, real estate taxes, all property insurance, sewer taxes or usage fees, water usage fees, landscape maintenance, snow removal, security, administrative costs, management fees, roof repairs that result from the Tenant improvements, general maintenance and repairs (other than those for which tenant is responsible, referred to as “Tenant’s Repairs”), and contractor fees. Common Area Charges shall exclude depreciation, interest and amortization payments on any mortgage or other indebtedness of Landlord, capital expenditures, leasing commissions, structural repairs, and expenses reimbursed to the Landlord by property insurance.

During the first lease year, the Tenant shall pay $2,887.00 per month in addition to Base Rent (hereinafter referred to as “CAC Contribution”) towards the Common Area Charges. The Landlord will reconcile the difference between the CAC Contribution and the Common Area Charges once each Lease year. Also, the monthly CAC Contribution will be adjusted at the end of each Lease year by the Landlord to reflect the projected costs for the upcoming year. The Landlord will provide notice of the new CAC Contribution for the upcoming lease year.

3. The Rent shall be paid to the Landlord at the address specified herein, or at such other place as the Landlord may designate, in lawful money of the United States of America, as and when the same shall become

due and payable and without abatement of offset and without notice or demand therefor.

4. If any installment of Rent as provided for in this Lease is not received at the Landlord’s address within fifteen (15) days after the same is due and payable, the Tenant shall pay an additional amount equal to five (5%) percent of the monthly Rent so due.

5. As used herein, “Lease Year” shall mean the period commencing on the Commencement Date and ending on the End of Term, including twelve consecutive calendar months.”

4. The following section is hereby added to the Lease:

“Option to Renew

Provided that during the Term of this Lease, Tenant has been in full compliance with each and every term, covenant and condition of this Lease, and there has been no breach or default herein or hereunder, Tenant shall have the right to extend the term of the within Lease for one (1) additional five (5) year period commencing with the End Date. In order to effectively exercise the within option, Tenant shall give written notice thereof not less than twelve (12) months prior to the End Date, time being of the essence. In the event of the effective exercise of the within option, the term hereof shall be extended for an additional five (5) year period on the same terms, covenants and conditions as set forth in the Lease, except for the within option and with the further exception that the per annum Base Rent for and during the first Lease Year of the extended term shall be “Fair Market Rental” as indicated below.

The term “Fair Market Rental” is defined to mean the prevailing market rate for comparable property and comparable buildings in the greater New Haven area including new construction. The determination of Fair Market Rental shall exclude as a factor the terms of this Lease. The formula for determining Fair Market Rental is as follows:

Within thirty (30) days of the exercise of the option to renew, the parties shall each appoint a licensed commercial real estate agent located in the Greater New Haven area, which real estate agents shall select a third such agent. Within twenty (20) days thereafter, the three real estate agents so selected shall determine the Fair Market Rental of the Demised Premises, as of the option date.

If either party fails to select a real estate agent within the time period set forth above, the real estate agent selected within the required time period alone shall determine the Fair Market Rental.

The determination of Fair Market Rental as outlined above shall be conclusive on the parties. The real estate agents chosen by the parties shall give notice to the parties stating their determination and shall furnish to each party a signed copy of that determination.

Each party shall pay the fees and expenses of the real estate agent appointed by such party and one-half (1/2) of the fees and expenses of the third real estate agent properly incurred.

In no event shall the Base Rent for the first Lease Year of the extended period be less than the Base Rent for the Lease Year September 1, 2010 through August 31, 2011.”

5. Tenant hereby acknowledges and represents that (a) the Premises and Landlord’s improvements thereon have been completed to its satisfaction; (b) the Lease is now in full force and effect and has not been amended or modified in any respect, except as set forth herein; (c) no rent has been paid for any period commencing after September 1, 2005; (d) no default exists by Landlord or Tenant under the Lease and Tenant has no defenses, offsets or counterclaims which it could assert against the payment of rent and/or the performance of the other terms, covenants and conditions of the Lease; and (e) this statement is being provided by Tenant in order to induce Landlord to amend the Lease as set forth herein with full knowledge that Landlord is relying upon the statements and representations herein made by Tenant.

6. Except as specifically set forth herein, each and every term and condition of the Lease shall remain in full force and effect.

IN WITNESS WHEREOF, the Landlord and the Tenant have caused this Amendment of Lease Agreement to be duly executed on the day and year first above written.

	Landlord:
	20 Commercial Street Associates, LLC
/s/    DANIEL N. HOFFNUNG
/s/    ANDREW ULLMAN	/s/    RICHARD MICHAUD
	Richard Michaud
	Member
/s/    DANIEL N. HOFFNUNG
/s/    ANDREW ULLMAN	/s/    FREDERICK PETRELLA
	Frederick Petrella
	Member
/s/    SEAN CASSIDY
	Tenant:
/s/    JENNIFER CAVALLARO	454 Corporation, Inc.
	/s/    PETER J. DACEY
	Peter J. Dacey
	Vice President of Finance and Operations

STATE OF CONNECTICUT	)
	)	ss: Branford	August 23, 2005
COUNTY OF NEW HAVEN	)

Personally appeared Peter J. Dacey, VP of Finance of 454 Corporation, Inc., signer and sealer of the foregoing instrument, and acknowledged the same to be his free act and deed as such officer, and the free act and deed of said corporation, before me.

/s/    MEGHAN L. BENSON        

COMMISSIONER OF THE SUPERIOR COURT
NOTARY PUBLIC

Meghan L. Benson

Notary Public

My Commission Expires Oct. 31, 2009

STATE OF CONNECTICUT	)
	)	ss: New Haven	August 25, 2005
COUNTY OF NEW HAVEN	)

Personally appeared Richard Michaud and Frederick P. Petrella, Members of 16 Commercial Street Associates, LLC, signers and sealers of the foregoing instrument, and each acknowledged the same to be his free act and deed as such officer, and the free act and deed of said company, before me.

/s/    DANIEL N. HOFFNUNG        

Daniel N. Hoffnung

Commissioner of the Superior Court

EX-10.3

Exhibit 10.3

LEASE

THIS INDENTURE OF LEASE (“Lease”) made and entered into as of July 1, 2005, by and between T.K.J. ASSOCIATES, L.L.C., a Connecticut limited liability company having an address at No. 1 Selden Avenue, Branford, Connecticut 06405, hereinafter referred to as Landlord; and CURAGEN CORPORATION, a Delaware corporation having an office at 322 East Main Street, Branford, Connecticut 06405, hereinafter referred to as Tenant.

WITNESSETH:

WHEREAS, Landlord and Tenant are parties to that certain lease dated May 29, 1998, amended October 12, 1999 and further amended April 23, 2002 (the “Amended Lease”), pursuant to which Amended Lease Tenant is leasing space on the first, second and third floors of Landlord’s building located at 322 East Main Street, Branford, Connecticut (the “Building”), and warehouse space at 10 Sylvia Street, Branford, Connecticut (the “Warehouse”) collectively the leased space is sometimes referred to herein as the “leased premises” or “Demised Premises”; and

WHEREAS, the current term of the Lease including all options to renew expires on May 31, 2006, and Landlord and Tenant have agreed to modify the term of the lease; and

WHEREAS, Landlord and Tenant desire and intend that the terms and provisions of this Lease shall hereafter apply to and govern the leasing of all the space at 322 East Main Street and 10 Sylvia Street, Branford, Connecticut, and replace and supersede the Amended Lease;

NOW, THEREFORE, the parties hereto, and for their successors and assigns, hereby covenant and agree as follows:

1. Lease. Landlord and Tenant hereby agree that the terms and provisions of this Lease replace and supersede the terms and provisions of the Amended Lease, that the leasing of all space at 322 East Main Street and 10 Sylvia Street, Branford, Connecticut is and shall be governed by this Lease from July 1, 2005 forward and the Amended Lease is hereby canceled in its entirety as of midnight June 30, 2005. Notwithstanding the foregoing, each party shall continue to remain liable for all payments past due and the performance of any obligations remaining unperformed under the Amended Lease as of the date of this Lease and continuing through June 30, 2005.

2. Leased Premises. In consideration of the rent and covenants herein reserved and contained on the part of the Tenant to be paid, performed and observed, the Landlord does hereby lease, demise, and let unto the Tenant and the Tenant does hereby hire from the Landlord upon the terms, provisions, covenants and conditions hereinafter set forth: (a) the entire first (1^st) and second (2^nd) floors of the Building, as more particularly depicted on Exhibits “A” and “B” attached hereto but subject to the right of access by the tenant occupying the space currently occupied by the Canavan Corporation described in (b) below; (b) approximately 16,548 square feet of space on the third (3^rd) floor of the building excluding the space currently occupied by Canavan Corporation more particularly depicted on Exhibit “C” attached hereto; and (c) approximately 2,474 space feet of space in the Warehouse located at 10 Sylvia Street, more particularly depicted on Exhibit “D” attached hereto.

3. Length of Term. The term of this Lease shall commence on July 1, 2005 and continue until June 30, 2008, both inclusive.

4. Rent. The total rent payable during the term hereof shall be Two Million Four Hundred Seventy Nine Thousand, Six Hundred Sixty Nine and 20/100 Dollars ($2,479,669.20) payable in equal monthly installments in the amount of Sixty Eight Thousand, Eight Hundred Seventy Nine and 70/100 Dollars ($68,879.70) per month. Said rent to be paid in advance without demand on the first (1^st) day of the month commencing July 1, 2005 and continuing to and including June 1, 2008.

5. Additional Rent, Taxes, Sewer, Insurance & Maintenance:

(a) Taxes: Tenant shall pay to Landlord as additional rent an amount equal to One Hundred Percent (100%) of the real estate taxes payable with respect to the Building and the Warehouse in which the Demised Premises are located and/or on the land on which said buildings are located in any tax year, or portion thereof, in which this Lease shall be in effect. Any additional rent due hereunder shall be pro-rated for the period of time during the tax year in question that the Tenant occupies the Demised Premises herein. For purposes of this Lease, the “tax year” shall be the payment year in effect in the Town of Branford, July 1 through June 30.

The Tenant shall be responsible for and shall pay when due any and all taxes attributable to leasehold improvements made by Tenant at its expense.

(b) Sewer: IN THE event that the Town of Branford or any subdivision thereof levies or has levied a sanitary sewer assessment or similar use charge against the building and land within which the Demised Premises are located, it is recognized that the Tenant shall be responsible and shall pay to the Landlord, as additional rent, an amount equal to One Hundred Percent (100%) of the assessment installment, including interest, and the use charge or installments thereof due and/or apportioned during the term of this Lease. It is expressly understood that the Tenant is liable for One Hundred Percent (100%) of said assessment installment, including interest, and the use charge falling due during the term of its tenancy, and said obligations to so pay shall cease with the expiration of its tenancy.

(c) Insurance: Tenant shall pay to Landlord, as additional rent, an amount equal to One Hundred Percent (100%) of Landlord’s expense for fire and extended coverage, public liability and similar insurance for the buildings and the land on which the Demised Premises are located, in effect during the term the Tenant occupies the Demised Premises.

(d) Maintenance - Common Charges: Tenant shall pay to Landlord, during each month of the term of this Lease, as additional rent, an amount equal to One Hundred Percent (100%) of Landlord’s operating expenses with respect to the buildings in which the Demised Premises are located and/or on the land on which said buildings are located. Operating expense shall include, without limitation, all utilities, gardening and landscaping, lawn mowing, lighting, snow removal, sanding, trash, rubbish and garbage removal, parking lot maintenance and repair and all maintenance, repairs and replacements of the heating, air conditioning and ventilating systems.

(e) Payment: The additional rent payable by Tenant as described in Sections (a) Taxes, (b) Sewer, (c) Insurance and (d) Maintenance – Common Charges of this Article shall be paid in advance without demand by Tenant to Landlord in Twelve (12) equal monthly installments of Thirteen Thousand Two Hundred Sixty-Five and 72/100 Dollars ($13,265.72), commencing on the first (1^st) day of July 2005 and on the first (1^st) day of each month during the term hereof to and including June, 2008.

On or before August 1, 2006 and August 1, 2007, Landlord shall submit to Tenant an itemized summary of all expenses, described in this Section 5 paid by Landlord for the previous lease year – July 1 through June 30. In the event Landlord’s actual expenses exceed the amount paid by Tenant, Tenant shall pay to the Landlord within thirty (30) days of Landlord’s submission of the itemized summary, the difference between the amount paid by Landlord during the previous lease year and the amount actually paid by Tenant pursuant to this Section 5 during the previous lease year.

In the event that Landlord’s actual expenses are less than the amount actually paid by Tenant pursuant to this Section 5 during the previous lease year, Landlord shall apply the difference between the Tenant’s payments and Landlord’s actual expenses to the Tenant’s payments of Additional Rent coming due after the date of Landlord’s submission of its itemized summary or in the event of the end of the term of this Lease, Landlord shall pay the difference to Tenant within thirty (30) days of August 1, 2008.

-2-

The monthly amount to be paid by Tenant in the second (2^nd) and third (3^rd)) years of this Lease shall be adjusted to reflect the Landlord’s actual expenses as shown on Landlord’s itemized summary; provided, however, if Tenant disputes the adjusted amount Tenant shall continue to pay the amount of Thirteen Thousand Two Hundred Sixty-five and 72/100 Dollars ($13,265.72) per month subject to payment or credit for any actual differences as provided herein.

In the event Tenant fails to pay the additional rent when the same shall become due, Landlord may pay the Tenant’s proportionate share and/or the taxes attributable to the Tenant’s leasehold improvements and add the amount so paid to the next month’s rent accruing hereunder. Landlord shall have the right to collect the same from Tenant as additional rent and Landlord shall have the same remedy for the non-payment hereof as for the non-payment of rent as herein provided.

6. Quiet Enjoyment. The Landlord covenants with the Tenant that it has good right to lease said premises and that it will suffer and permit the Tenant (it keeping all of the covenants on its part as herein contained) to occupy, possess and quietly enjoy said premises during the term hereof, without hindrance from Landlord or any person claiming by, from or under it, subject, nevertheless, to the terms of this Lease and any mortgage, ground lease or agreements to which this Lease is subordinated.

7. Tenant’s Covenants. The Tenant covenants with the Landlord to hire said leased premises and to pay rent and all other charges and payments to be made herein, and to keep all of its covenants as contained herein, that it will commit no waste, nor suffer the same to be committed thereon. Tenant shall promptly comply with all present and future laws, orders and regulations of all state, federal, municipal and local governments, departments, commissions and boards and any direction of any public officers pursuant to law. Notwithstanding any provision to the contrary herein, Tenant shall not be liable to Landlord for any violation of any environmental law or regulation that is determined to have been caused directly or indirectly by any person or entity other than Tenant and its employees, agents, contractors, licensees, successors and assigns.

8. No Representations. The Tenant accepts the building improvements and personalty on the leased premises in their present state and without any representation or warranty by the Landlord or its agents as to the condition of such property or as to the use which may be made thereof. The Landlord shall not be responsible for any latent defect or change of condition in such building improvements and personalty and the rent hereunder shall in no case be withheld or diminished on account of any defect in such property or in the change of the condition thereof, any damage occurring thereto or the existence with respect thereto of any violations of the laws or regulations of any governmental authority.

9. Alterations. Tenant shall make no changes in or to the leased premises of any nature without Landlord’s prior written consent, which consent shall not unreasonably be withheld or delayed. Notwithstanding the foregoing sentence, Tenant may make alterations or improvements to the leased premises which do not exceed the sum of $5,000.00 in cost (materials and labor), so long as such alterations and improvements are interior and non-structural, and are commensurate and compatible with the architecture, design, style and of the same quality of material and construction, as the other portions of the leased premises and the Building. Tenant shall provide Landlord, upon its request, final and complete drawings and specifications as may be necessary to obtain required building permits for all work to be done in connection with any build-out of the leased premises and any alterations made by the Tenant. Landlord shall approve or disapprove Tenant’s plans within a reasonable time thereafter. In the event Landlord disapproves Tenant’s plans, Landlord shall set forth the reasons therefor. Any revised plans shall correct any deficiencies and conform to any objections set forth by Landlord. It is specifically agreed herein that, in the event that any utility services, facilities, equipment, electrical lines or duct-work need to be altered in any respect in the

-3-

course of Tenant’s build-out of or changes or alterations to, the Demised Premises, all costs and expenses of the same shall be paid by Tenant.

Upon receipt of Landlord’s written consent, Tenant, at Tenant’s expense, may make alterations, installations, additions or improvements which are non-structural and which do not affect utility services or plumbing and electrical lines, in or to the interior of the leased premises by using contractors and mechanics first approved by Landlord. Tenant shall, before making any alterations, additions, installations or improvements, at its expense, obtain all permits, approvals and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Landlord. Tenant agrees to carry and will cause Tenant’s contractors and sub-contractors to carry such workman’s compensation, general liability, personal and property damage insurance as Landlord may require. If any mechanic’s lien is filed against the leased premises or the Building for work claimed to have been done for, or materials furnished to, Tenant, the same shall be discharged by Tenant within thirty (30) days thereafter, at Tenant’s expense, or by the filing of a bond required by law. Unless otherwise agreed by Landlord in writing prior to installation, all fixtures, paneling, partitions and like installations, installed in the leased premises at any time, either by Tenant or by Landlord in Tenant’s behalf, shall, upon installation become the property of Landlord and shall remain upon and be surrendered with the leased premises unless Landlord, by notice to Tenant no later than sixty (60) days prior to the date fixed as the termination of this Lease, elects to relinquish Landlord’s right thereto and to have them removed by Tenant, in which event the same shall be removed from the premises by Tenant prior to the expiration of the Lease, at Tenant’s expense. All property permitted or required to be removed by Tenant at the end of the term remaining in the leased premises after Tenant’s removal, shall be deemed abandoned and may, at the election of Landlord, either be retained as Landlord’s property or may be removed from the premises by Landlord at Tenant’s expense.

Notwithstanding any provision or term of this Lease to the contrary, Tenant acknowledges Landlord’s concerns regarding the conversion of laboratory space in the building to office space. In the event Landlord consents in writing to the conversion of laboratory space to office space, all utility and mechanical systems, including but not limited to plumbing, electricity, HVAC, phone, data, security, alarm and sprinkler, that require modification or capping, shall be completed in accordance with a plan approved by Landlord in writing prior to the work being performed which plan shall allow for the space to be easily converted back to laboratory space. Existing tile flooring, if covered, shall be covered in a manner, approved by Landlord in writing prior to the work, that provides for the removal of the covering without damage, stain, discoloration, residue, or alteration of the existing tile floors.

10. Damage, Injury. Insurance. (a) Tenant shall indemnify and save harmless Landlord from and against any and all liability, damage, penalties or judgments arising from injury to person or property sustained by anyone in and about the leased premises resulting from any act or acts or omission or omissions of Tenant, or Tenant’s officers, agents, servants, employees, contractors, or sublessees. Tenant shall, at its own cost and expense, defend any and all suits or actions (just or unjust) which may be brought against Landlord or in which Landlord may be impleaded with others upon any such above-mentioned matter, claim or claims.

(b) The Landlord shall not be liable for any damage or injury to the leased premises, or to any property of the Tenant of any other person thereon, from water, rain, snow, ice, sewerage, steam, gas or electricity which may leak into or issue or flow from any part of the Building of which the leased premises are a part, or from the bursting, breaking, obstruction, leaking or any defect of any of the pipes or plumbing, appliances or from electric wiring or other fixtures in the Building, or from the condition of the premises or Building or any part thereof, from the street or subsurface, unless caused by Landlord’s negligence or willful neglect.

-4-

(c) Tenant shall provide at its expense, and keep in force during the term of this lease, general liability insurance in a good and solvent insurance company or companies licensed to do business in the State of Connecticut, selected by Tenant, and reasonably satisfactory to the Landlord, in the amount of at least One Million ($1,000,000.00) Dollars combined single limit in respect to any one occurrence with respect to injury or death to any one or more than one person and One Million ($1,000,000.00) Dollars with respect to damages to property. Such policy or policies shall include Landlord and any mortgagee named by Landlord as assureds. Tenant agrees to deliver certificates of such insurance to Landlord prior to the beginning of the term of this Lease and thereafter not less than ten (10) days prior to the expiration of any such policy. Such insurance shall be noncancellable without ten (10) days’ written notice to Landlord, and to each such mortgagee.

(d) If by reason of any act or omission or negligence on the part of Tenant or any employee or agent of Tenant, whether or not Landlord has consented to the same, the rate of fire or other property insurance of Landlord or of any other Tenant in the Building shall be higher than it otherwise would be, Tenant shall reimburse Landlord, and all such other Tenants, on demand, for that part of the premiums for such insurance paid by Landlord or such other Tenants, because of such act or omission or negligence on the part of Tenant or any employee or agent of Tenant. Tenant shall also pay any increase in premiums on any rent insurance carried by Landlord for its protection against rent loss and fire or other casualty if such increase shall result from any of the foregoing events.

(e) All insurance policies carried by Tenant covering the leased premises, as required herein, shall expressly waive any right on the part of the insurer or the insured against the Landlord, except as otherwise specifically provided herein.

11. Assignment and Subletting. Tenant, for itself, its successors and assigns, expressly covenants that it shall not assign, mortgage or encumber this Lease, nor sublet, or suffer or permit the leased premises or any part thereof to be used by others, without the prior written consent of Landlord in each instance. Any merger or consolidation of Tenant or the transfer of more than fifty (50%) percent of the stock of Tenant shall be deemed an assignment. Notwithstanding the foregoing sentence, any trading of Tenant’s stock on a nationally-recognized security exchange will not be deemed an assignment. If this Lease be assigned, or if the leased premises or any part thereof be sublet or occupied by anyone other than Tenant, Landlord may, after default by Tenant, collect from the assignee, subtenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, subtenant or occupant as Tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. Notwithstanding the foregoing, Tenant shall be permitted to sublet the leased premises provided that:

(i) Tenant submits to Landlord the name and address of the proposed subtenant;

(ii) Tenant delivers to Landlord a term sheet containing the material business terms of the proposed sublease and a copy of any sublease which is executed;

(iii) The character of the proposed subtenant is reasonably satisfactory to Landlord and shall not in Landlord’s opinion, adversely affect the Building or Landlord’s financial interest therein;

(iv) Tenant delivers to Landlord banking, financial and other credit information relating to the proposed subtenant and such information is reasonably satisfactory to Landlord; and

(v) The sublease expressly provides that it is subject and subordinate to this Lease.

-5-

The consent by Landlord to any assignment or subletting shall not constitute a waiver of the necessity for such consent to any subsequent assignment or subletting. This prohibition against assigning or subletting shall be construed to include a prohibition against any assignment or subletting by operation of law. Notwithstanding any provision to the contrary in this paragraph 12, Landlord shall not unreasonably withhold or delay its consent to any assignment of this Lease provided that the conditions set forth in this paragraph 12 have been satisfied. Any rentals and other consideration paid or payable to Tenant by any subtenant or assignee in excess of the rentals and other payments due under this Lease from Tenant to Landlord shall be paid by Tenant as and when received by Tenant to Landlord in addition to the rental and other payments otherwise due hereunder.

12. Condemnation. It is expressly agreed that if the entire leased premises shall be taken by public or quasi-public authority under the power of eminent domain or condemnation, this Lease shall terminate on the date of such taking and the rights of the Tenant shall forthwith cease, with rent to be apportioned as of the date of such taking. No part of any award for such taking shall belong to Tenant. If any part of the leased premises shall be taken as aforesaid, and such partial taking shall render that portion not so taken unsuitable for the business of Tenant, then this Lease and the term herein shall cease and terminate as aforesaid. If such partial taking is not extensive enough to render the leased premises unsuitable for the business of Tenant, then this Lease shall continue in effect except that the rent shall be reduced in the same proportion that the floor area of the leased premises taken bears to the original floor area demised and Landlord shall, upon receipt of the award in condemnation, make all necessary repair or alterations to the Building in which the leased premises are located, but such work shall not exceed the scope of the work done in the original construction of said Building, nor shall Landlord in any event be required to spend for such work an amount in excess of the amount received by the Landlord as damages for part of the leased premises so taken. “Amount received by the Landlord” shall mean that part of the award in condemnation which is free and clear to Landlord of any collection by mortgagees for the value of the diminished fee. Notwithstanding the foregoing, if more than twenty (20%) percent of the floor area of the Building shall be taken as aforesaid, Landlord may, by written notice to Tenant, terminate this Lease, such termination to be effective as aforesaid. If this Lease is terminated as provided in this paragraph, the rent shall be paid up to the day that possession is so taken by public authority and Landlord shall make an equitable refund of any rent paid by Tenant in advance. In no event shall Tenant be entitled to, and Tenant expressly waives hereby, all claims to any condemnation award for any taking, whether whole or partial, and whether for diminution in value of the leasehold or to the fee although, Tenant shall have the right, to claim from the condemnor, but not from Landlord, such compensation as may be recoverable by Tenant in its own right for damage to Tenant’s business, relocation costs and fixtures.

13. Maintenance. Tenant shall, throughout the term of this Lease, take good care of the leased premises and the fixtures and appurtenances therein. Tenant shall be responsible for all damage or injury to the Demised Premises or any other part of the Demised Premises and Warehouse and the systems and equipment thereof, whether requiring structural or non-structural repairs caused by or resulting from carelessness, omission, neglect or improper conduct of Tenant, Tenant’s subtenants, agents, employees, invitees or licensees, or which arise out of any work, labor, service or equipment done for or supplied to Tenant or any subtenant or arising out of the installation, use or operation of the property or equipment of Tenant or any subtenant. Tenant shall also repair all damage to the Demised Premises caused by the moving of Tenant’s fixtures, furniture and equipment. Landlord shall maintain in good working order and repair the exterior and the structural portions of the Demised Premises as well as the public portions of the Building interior and the Building plumbing and electrical systems located outside of but serving the leased premises. Landlord shall maintain in good working order and repair the heating, air-conditioning and ventilating systems located within the Demised Premises. All of Landlord’s expenses incurred in the maintenance of the Demised Premises shall be considered operating expenses payable by Tenant as additional rent in accordance with Section 5 of this Lease. Tenant shall maintain in good working order and repair those portions of utility systems, including but not limited to, plumbing, electrical and lighting systems (including the purchase and replacement of light bulbs), located within the

-6-

Demised Premises. Tenant agrees to give prompt notice of any defective condition in the Demised Premises for which Landlord may be responsible hereunder. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Landlord by reason of inconvenience, annoyance or injury to business arising from Landlord or others making repairs, alterations, additions or improvements in or to any portion of the Demised Premises or in and to the fixtures, appurtenances or equipment thereof, provided Landlord is prosecuting such repairs, alterations, additions or improvements with reasonable diligence. It is specifically agreed that Tenant shall not be entitled to any set off or reduction of rent by reason of any failure of Landlord to comply with the covenants of this or any other article of this Lease. Tenant agrees that Tenant’s sole remedy at law in such instance will be by way of an action for damages for breach of contract. Upon the expiration or other termination of the term of this Lease, Tenant shall quit and surrender to Landlord the Demised Premises, broom-clean, and in good order and condition, ordinary wear excepted, and Tenant shall remove all of its property.

14. Destruction. (a) If the leased premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give immediate notice thereof to Landlord and this Lease shall continue in full force and effect except as hereinafter set forth. (b) If the leased premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of Landlord and the rent, until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the premises which is usable. (c) If the leased premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by Landlord, subject to Landlord’s right to elect not to restore the same as hereinafter provided. (d) If the leased premises are rendered wholly unusable or (whether or not the leased premises are damaged in whole or in part) if the building shall be so damaged that Landlord shall decide to demolish it or to rebuild it, then, in any of such events, Landlord may elect to terminate this lease by written notice to Tenant, given within ninety (90) days after such fire or casualty, specifying a date for the expiration of the lease, which date shall not be more than sixty (60) days after the giving of such notice, and upon the date specified in such notice the term of this Lease shall expire as fully and completely as if such date were the date set forth above for the termination of this Lease and Tenant shall forthwith quit, surrender and vacate the premises without prejudice however, to Landlord’s rights and remedies against Tenant under the Lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date and any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant. Unless Landlord shall serve a termination notice as provided for herein, Landlord shall make the repairs and restorations under the conditions of (b) and (c) hereof, with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Landlord’s control. After any such casualty, Tenant shall cooperate with Landlord’s restoration by removing from the premises as promptly as reasonably possible, all of Tenant’s salvageable inventory and movable equipment, furniture, and other property. Tenant’s liability of rent shall resume five (5) days after written notice from Landlord that the premises are substantially ready for Tenant’s occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Landlord and Tenant each hereby releases and waives all right of recovery against the other or any one claiming through or under each of them by way of subrogation or otherwise. The foregoing release and waiver shall be in force only if both releasors’ insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance. If, and to the extent, that such waiver can be obtained only by the payment of additional premiums, then the party benefiting from the waiver shall pay such premium within ten (10) days after written demand or shall be deemed to have agreed that the party obtaining insurance coverage shall be free of any further obligation under the provisions hereof with respect to waiver of subrogation. Tenant acknowledges that Landlord will not carry insurance on Tenant’s furniture

-7-

and/or furnishings or any fixtures or equipment, improvements, or appurtenances removable by Tenant and agrees that Landlord will not be obligated to repair and damage thereto or replace the same.

15. Subordination and Non-Disturbance. This Lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which the leased premises are a part, provided that the holder thereof agrees to recognize Tenant’s rights under this Lease and not to disturb Tenant’s possession of the leased premises as long as Tenant is not in default of its obligations under this Lease. This clause shall be self-operative and no further instrument shall be required by any ground or underlying lessor or by any mortgagee affecting any lease or the real property of which the leased premises are a part. In confirmation of such subordination, Tenant shall execute promptly any certificate that Landlord may request in writing.

16. Attornment. Tenant shall in the event of the sale or assignment of the Landlord’s interest in the Building, or in the event of any proceedings brought for the foreclosure of, or in the event of exercise of the power of sale under any mortgage made by Landlord covering the Building, attorn to the purchaser and recognize such purchaser as Landlord under this Lease, provided the purchaser agrees to recognize Tenant’s rights under this Lease and not to disturb Tenant’s possession of the leased premises as long as Tenant is not in default of its obligations under this Lease.

17. Use of Premises. Tenant shall use and occupy the leased premises as a biopharmaceutical research laboratory and offices, and for no other purpose. Tenant shall not bring any animal onto or within the leased premises for research or other purposes.

18. Signs. The Tenant further covenants and agrees with the Landlord not to place, or permit to be placed, any signs, advertising display material, antennas or mechanical devices or any other items on the exterior of the building, sidewalk, common areas or property adjoining said leased premises in which said leased premises are located, except as permitted in writing by the Landlord, or as currently maintained thereon.

19. Default; Remedies.

A. If Tenant defaults in fulfilling any of the covenants of this Lease, other than the covenants for the payment of rent, or in making any other payment herein provided, or if the leased premises become vacant or deserted, or if the leased premises are damaged by reason of negligence or carelessness of Tenant, its agents, employees, or invitees, then, in any one or more of such events, upon Landlord serving a written ten (10) business days’ notice upon Tenant specifying the nature of said default, and upon the expiration of said ten (10) business days, if Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of such a nature that the same cannot be completely cured or remedied within said ten (10) business day period, and if Tenant shall not have diligently commenced curing such default within such ten (10) business day period, and shall not thereafter with reasonable diligence and in good faith proceed to remedy or cure such default, Landlord may serve a written three (3) day notice of cancellation of this Lease upon Tenant, and upon the expiration of said three (3) days, this Lease and the term hereunder shall end and expire as fully and completely as if the date of expiration of such three (3) day period were the date herein definitely fixed for the end and expiration of this Lease and the term thereof, and Tenant shall then quit and surrender the leased premises to Landlord, but Tenant shall remain liable as hereinafter provided.

B. If the notice provided for in paragraph A hereof shall have been given, and the term shall expire as aforesaid; or (1) if Tenant shall fail to make any payment of the rent reserved herein or in making any other payment herein provided within fifteen (15) days of the date due on three (3) or more occasions during any lease year; or (2) if any execution or attachment shall be issued against Tenant or any of Tenant’s property whereupon the leased premises shall be taken or

-8-

occupied or attempted to be taken or occupied by someone other than Tenant; or (3) if Tenant shall become bankrupt or insolvent, or file any debtor proceedings or take or have taken against Tenant in any court pursuant to any statute either of the United States or of any state a petition in bankruptcy or insolvency or for reorganization of or for the appointment of a receiver or trustee of all or a portion of Tenant’s property, or if Tenant makes an assignment for the benefit of creditors then, and in any of such events, Landlord may, upon five (5) days written notice to Tenant, have the option to terminate this Lease, re-enter the leased premises either by force or otherwise, and dispossess Tenant and the legal representative of Tenant or other occupant of the leased premises, by summary proceedings or otherwise, and remove their effects and hold the leased premises as if this Lease had not been made, but Tenant shall remain liable hereunder as hereinafter provided, and Tenant hereby waives any required notice to quit. If Tenant shall make default hereunder prior to a date fixed as the commencement of any renewal or extension of this Lease, Landlord may cancel and terminate such renewal or extension agreement by written notice, but Tenant shall remain liable as hereinafter provided.

C. In the case of any such default, re-entry, expiration, and/or dispossess by summary proceedings or otherwise, (a) the fixed rent and all other payments shall become due thereupon and be paid to the time of such re-entry, dispossess, and/or expiration, together with such expenses as Landlord may incur for legal expenses, attorney’s fees, brokerage, and/or putting the leased premises in good order, or for preparing the same for re-rental; (b) Landlord may relet the leased premises or any part or parts thereof, either in the name of Landlord or otherwise, for a term or terms, which may, at Landlord’s option, be less than or exceed the period which would otherwise have constituted the balance of the term of this Lease, and may grant concessions or free rent; and\or (c) Tenant or the legal representative of Tenant shall also pay Landlord as liquidated damages for the failure of Tenant to observe and perform said Tenant’s covenants herein contained, any deficiency between rent and additional rents hereby reserved and/or covenants to be paid and the net amount, if any, of the rents collected or to be collected on account of the lease or leases of the leased premises for each month of the period which would otherwise have constituted the balance of the term of this Lease. Landlord shall use commercially reasonable efforts to relet the leased premises; provided, however, the failure of Landlord to relet the leased premises or any part or parts thereof shall not release or affect Tenant’s liability for damages. In computing such damages, there shall be added to the said deficiency such expenses as Landlord may incur in connection with reletting, such as legal expenses, attorneys’ fees, brokerage, and expenses for keeping the leased premises in good order or for preparing the same for reletting. Any such damages shall be paid in monthly installments by Tenant on the rent days specified in this Lease, and any suit brought to collect the amount of the deficiency for any month or months shall not prejudice in any way the right of Landlord to collect the deficiency for any subsequent month or months by a similar proceeding. In lieu thereof, Landlord may immediately accelerate such deficiency for the entire balance of the term. Landlord at Landlord’s option, may make such alterations, repairs, replacements, and/or decorations in the leased premises as Landlord in Landlord’s sole judgment considers advisable and necessary for the purpose of reletting the leased premises; and the making of such alterations and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Landlord shall in no event be liable in any way whatsoever for failure to relet the leased premises, or in the event that the leased premises are relet, for failure to collect the rent thereof under such reletting. Any such action may be an action for the full amount of all rents and damages suffered or to be suffered by Landlord. In the event of a breach or threatened breach by Tenant of any of the covenants or provisions hereof, Landlord shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings, and other remedies were not herein provided for. Mention in this Lease of any particular remedy shall not preclude Landlord from any other remedy in law or in equity. The foregoing remedies and rights of Landlord are cumulative. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant’s being evicted or dispossessed for any cause, or in the event of Landlord’s obtaining possession of the leased premises by reason of the violation by Tenant of the covenants and conditions of this Lease, or otherwise.

-9-

20. Costs of Enforcement. Tenant covenants that in the event the Landlord is required to employ an attorney in order to enforce any provision of this Lease, the Tenant shall pay reasonable attorneys’ fees and all other costs of collection.

21. Security, Cleaning, Maintenance and Refuse. Subject to the provisions of Section 5. Additional Rent of this Lease, the Landlord will provide all exterior maintenance, including, but not limited to, the cutting of the grass and maintenance of other landscaping, snow plowing, and removal of snow from adjacent sidewalks. Tenant at its expense shall provide cleaning service and maintenance of the Demised Premises including all halls and lavatories and exterior stairways. Tenant shall, at its own expense, keep and maintain refuse dumpsters of a kind approved or specified by Landlord, in the area specified by Landlord, and prepare same for collection in the manner and at the times specified by Landlord.

Tenant, at its sole cost and expense shall provide such security system as it desires in its sole discretion, subject however to the provisions of Section 9. Alterations of this Lease, and, at its sole cost and expense, Tenant shall provide Landlord and the occupant of the space currently occupied by Canavan Corporation, access to the security codes, access cards, etc. to allow access to the Building and the Canavan Corporation space.

22. No Recording. Notice of Lease. Tenant covenants that in the event this Lease is recorded upon the Land Records of the Town of Branford by Tenant, it shall become null and void at the option of the Landlord. The parties agree to execute and Tenant agrees to record, at its sole cost and expense, a Notice of Lease setting forth the terms of this Lease.

23. Utilities. Tenant agrees to make its own arrangements with the public utility company servicing the leased premises for the furnishing of electricity, telephone and other utilities excluding natural gas and water service used or consumed in the Building and Warehouse and for the installation of meters therefore. Landlord shall not be responsible for charges for electricity, telephone or any other utilities used or consumed in the Building and Warehouse, all of which charges shall promptly be paid by Tenant, when due, to the applicable utility or vendor. All meters at the leased premises for the purposes of measuring Tenant’s consumption of the respective utility shall be maintained by Tenant, at Tenant’s sole cost and expense, in good order and condition. Landlord shall not be liable in any way to Tenant for any failure or defect in the supply or character of gas, electric energy, or other utility furnished to the Demised Premises. Interruption or curtailment of such services shall not constitute a constructive or partial eviction nor entitle Tenant to any compensation or abatement of rent. All utility expenses, including but not limited to gas, water and electricity metered and billed to the Landlord’s account shall be considered operating expenses and payable by Tenant as additional rent in accordance with Section 5 of this Lease. At its option, Tenant may, at its own cost and expense, make the necessary connections into Landlord’s generator in order to provide for service to the Demised Premises, provided, however, that such generator has the requisite capacity to provide such service, and further, provided that Tenant indemnifies Landlord for any damages to such generator and any loss of use resulting from Tenant’s efforts to connect to, and Tenant’s use of, such generator. Tenant shall give Landlord prior notice of its determination to use the generator and inform Landlord of the date(s) of anticipated connection thereto. Tenant shall continue semi-annual servicing of the generator and shall be responsible for all costs therefor and for fueling and operation of such generator, and Tenant shall provide Landlord with copies of all maintenance and service records and billing statements within fifteen (15) days of Tenant’s receipt of those records and billing statements.

24. Notice. Any and all notices, acceptances or any other communication provided for herein shall be given in writing by registered or certified mail which shall be addressed as set forth below. Each such notice shall be deemed given at the time it is mailed in any post office or branch post office regularly maintained by the United States Government.

-10-

Landlord’s Address:

No. 1 Selden Avenue

Branford, Connecticut 06405

with a copy to:

Anthony J. Fazzone, Esquire

One Town Center

Cheshire, Connecticut 06410

Tenant’s Address:

322 East Main Street

Branford, Connecticut 06405

25. Landlord’s Access to Premises. Landlord shall have the right to enter upon the leased premises at all reasonable hours for the purpose of inspecting or of making repairs to the same, or exhibiting the same to prospective purchasers or mortgagees of the Building. Except in cases of emergency, Landlord shall make reasonable efforts to contact Tenant and provide Tenant the opportunity to accompany Landlord in its entry upon the leased premises. If repairs are required to be made by Tenant pursuant to the terms hereof, Landlord may demand that Tenant make the same forthwith, and if Tenant refuses or neglects to commence such repairs and complete the same within thirty (30) days after such demand, or within such longer time as is reasonably required under the circumstances, Landlord may (but shall not be required so to do) make or cause such repairs to be made and shall not be responsible to Tenant for any loss or damage that may accrue by reason thereof. If Landlord makes or causes such repairs to be made, Tenant agrees that it will forthwith, on demand, pay to Landlord the reasonable cost thereof as additional rent within the next month’s rent, and if it shall default in such payment, Landlord shall have the same remedy for the non-payment thereof that as for the non-payment of rent as herein provided. For a period commencing six (6) months prior to the termination of this Lease or any renewal term hereof, Landlord may have reasonable access to the leased premises for the purpose of exhibiting the same to prospective Tenants.

26. Rules and Regulations. Tenant, its servants, employees, agents, visitors and licensees shall observe faithfully, and comply strictly with, the Rules and Regulations and such other and further reasonable Rules and Regulations as Landlord or its agents may from time to time adopt. Nothing in this Lease contained shall be construed to impose upon Landlord any duty or obligation to enforce the Rules and Regulations or terms, covenants or conditions in any other lease, as against any other Tenant and Landlord shall not be liable to Tenant for violation of the same by any other Tenant, its servants, employees, agents, visitors or licensees. A copy of the current Rules and Regulations with which Tenant shall comply are attached to this Lease as Exhibit E.

27. No Broker. Tenant and Landlord each warrants and represents to the other that neither party has dealt with any real estate broker, salesperson or finder in connection with this Lease, and each agrees to indemnify and hold the other harmless from and against any and all claims, suits, liabilities and expenses (including, without limitation, attorneys’ fees and disbursements) incurred by either party as a result of the foregoing warranty and representation of the other failing to be true.

28. Exculpatory Clause. Tenant shall look only to Landlord’s estate and property in the Building and the land on which the Building is located for the satisfaction of Tenant’s remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default by Landlord hereunder, and no other property or assets of such Landlord or any principals, shareholders or partners in the same shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant’s remedies under or with respect to this Lease, the relationship of Landlord and Tenant hereunder or Tenant’s use or occupancy of the leased premises. The limitation on Tenant’s right to look only to Landlord’s estate

-11-

and property in the Building for satisfaction of remedies for the collection of a judgment (or other judicial process) requiring the payment of money by Tenant in the event of any default by Landlord hereunder shall not limit in any way Tenant’s right to specifically enforce any provision of this Lease.

29. Licenses and Permits. Tenant will apply for, comply with and maintain all licenses and permits necessary of the operation of Tenants’s business in the leased premises, including any environmental, health and safety permits required because of the nature of Tenant’s business.

30. Additional Use Limitations. Tenant hereby agrees not to: (a) overload the floor; (b) in its use of electric current, exceed the capacity of the existing feeders to the Building or the risers or wiring installation and Tenant may not use any electrical equipment which, in Landlord’s opinion, reasonably exercised, will overload such installations or interfere with the use thereof by other Tenants of the Building; (c) use the leased premises in a manner that causes or in Landlord’s reasonable opinion would likely cause physical damage to the Building, or any part thereof; (d) use the leased premises in a manner that impairs or unreasonably interferes with any Building services or any machinery or equipment used in connection with operating and maintaining the Building or unreasonably interferes with, annoys or inconveniences Landlord or other Tenants of the Building.

31. Interest. In every case in which Tenant is required by the terms of this Lease to pay to Landlord a sum of money and payment is not made with ten (10) days after the same shall become due, interest shall be payable on such sum or so much thereof as shall be unpaid from the date it first became due until it is paid. Such interest shall be at an annual rate (the “Interest Rate”) which shall be two (2) percentage points higher than the Prime Lending Rate (as hereinafter defined), but in no event more than the highest rate of interest which at such time shall be permitted under the laws of the State of Connecticut. The term, “Prime Lending Rate” shall mean the rate announced from time to time by Citibank, N.A., its successors and assigns, at its main office in New York, New York as its prime rate; or if such bank shall not exist, the rate announced by such other commercial bank in New York City as shall be designated by Landlord as its prime rate.

32. Parking. Tenant and Tenant’s employees shall park their cars only in those portions of the parking areas designated for employee parking by Landlord. Landlord shall provide Tenant with sixty (60) unreserved parking spaces.

33. Air-Conditioning and Heating. Subject to the provisions of Section 5. Additional Rent of this Lease, Landlord shall maintain all heating and air-conditioning apparatus servicing the Building and the leased premises and cause heat and air-conditioning service to be made available to Tenant on a continuous basis throughout the respective heating and air-conditioning seasons.

Notwithstanding any provision to the contrary contained in this Lease, in the event that the conduct of Tenant’s business requires any upgrade in capacity to, or any alteration, renovation or improvement to the heating, air-conditioning system or other utility or utility system (as used in this paragraph 33, collectively, “utility system”), Tenant shall be responsible for all costs of materials and labor incurred in connection with any such upgrade, alteration or improvement undertaken.

34. Remedies Cumulative. All rights and remedies of Landlord herein created or remedies otherwise existing at law or equity are cumulative and the exercise of one or more rights or remedies shall not be taken to exclude or waive the right to be exercised of any other. All such rights and remedies may be exercised and enforced concurrently and whenever and as often as Landlord deems desirable. The failure of Landlord to insist upon strict performance by Tenant of any of the covenants, conditions and agreements of this Lease shall not be deemed a waiver of any of Landlord’s rights or remedies and shall not be deemed a waiver of any of said rights or remedies concerning any subsequent or continuing breach or default by Tenant of any of the covenants, conditions and agreements of this Lease. No surrender of the leased premises shall be effected by

-12-

Landlord’s acceptance of rental or by any other means whatsoever unless the same be evidenced by Landlord’s written acceptance of such as a surrender.

35. Provisions Severable. If any term or provision of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such terms or provisions to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term or provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.

36. Lease Not Binding Unless Executed. Submission by Landlord of the within Lease for execution by Tenant, shall confer no rights nor impose any obligations on either party unless and until both Landlord and Tenant shall have executed this Lease and duplicate originals thereof shall have been delivered to the respective parties.

37. Entire Agreement. This Lease and the Exhibits attached set forth the entire agreement between the parties. Any prior conversations or writings are merged herein and extinguished. No subsequent amendment to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by both parties. If any provision contained in any exhibit or rider is inconsistent with the printed provisions of this Lease, the provision contained in said exhibit or rider shall supersede said printed provision.

38. Estoppel Certificates. Tenant shall, upon at least ten (10) days prior written request by Landlord, execute and deliver to Landlord a written declaration in recordable form: (1) ratifying this Lease; (2) expressing the commencement and termination dates thereof; (3) certifying that this Lease is in full force and effect and has not been assigned, modified, supplemented or amended (except by such writings as shall be stated); (4) that all conditions under this Lease to be performed by Landlord have been satisfied; (5) that there are no defenses or offsets against the enforcement of this Lease by the Landlord or stating those claimed by Tenant; (6) the amount of advanced rental, if any (or none if such is the case) paid by Tenant; (7) the date to which rental has been paid; (8) the amount of security deposited with Landlord (or none if such is the case); (9) that Tenant has no options or rights of first refusal to purchase the Building or any part of the premises of which it is a part; (10) that no actions are pending against the Tenant under the bankruptcy laws of the United States or any state thereof; (11) that Tenant has not sublet the leased premises and has not assigned any of its rights under the Lease and, if not, to state relevant information; (12) to the best of Tenant’s knowledge, the use, maintenance or operation of the leased premises complies with all environmental laws. Such declaration shall be executed and delivered by Tenant from time to time as may be requested by Landlord. Landlord’s mortgage lenders and/or purchasers shall be entitled to rely upon the same.

39. Captions and Headings. The captions and headings used in this Lease are for convenience and reference only, and in no way shall be used to construe or modify the provisions set forth in this Lease.

40. Holding Over. Any holding over after the expiration of this term or any renewal term without Landlord’s consent shall be construed to be a tenancy from month-to-month at one and one-half times the rent herein specified (150%), prorated on a monthly basis and shall otherwise be on the terms herein specified so far as applicable.

41. Waiver of Jury Trial. Each of the parties hereto hereby waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use of or occupancy of the leased premises, and any other statutory remedy.

42. Audio-Visual Room. Landlord and Tenant agree that any and all audio-visual equipment, accessories and furniture currently located or used in or within the audio-visual room, which Audio-Visual Room is a portion of the space being leased to the Tenant and part of the Third Floor Space, is owned by Landlord and shall remain the personal property of Landlord throughout

-13-

the term of the Lease and following any termination thereof. Tenant agrees to use and handle all such personal property with care and to maintain and repair such personal property, at Tenant’s expense, throughout the term of the Lease, and to deliver same to Landlord upon termination of the Lease in substantially the same condition as such personal property exists as of the date hereof, reasonable wear and tear excepted.

43. Connecticut Law. This Lease shall be construed in accordance with the laws of the State of Connecticut.

44. Binding Effect. The successors and permitted assigns of the parties hereto shall be bound by the terms and conditions of this Lease.

IN WITNESS WHEREOF, the parties have caused these premises to be duly signed and executed the day and date first above written.

Signed, Sealed and Delivered In the Presence Of:	TENANT: CURAGEN CORPORATION
/s/    ELIZABETH A. WHAYLAND	By:	/S/    DAVID M. WURZER
	Its	EVP & CFO
/s/    SHANNA LAVACCA
	LANDLORD: T.K.J. ASSOCIATES, L.L.C.
/s/    CHERYL L. TYLER
	By:	/S/    M. JOSEPH CANAVAN
	Its	Member
/s/    KAREN ABBATELLO

STATE OF CONNECTICUT	)
	)	ss: BRANFORD
COUNTY OF NEW HAVEN	)

The foregoing instrument was acknowledged before me on August 23, 2005 by David M. Wurzer, EVP & CFO of CURAGEN CORPORATION, a Delaware corporation, on behalf of the corporation.

/s/    TERRIE B. ESTES        

Commissioner of the Superior Court

Notary Public

My Commission Expires: 11/30/2009

-14-

STATE OF CONNECTICUT	)
	)	ss: BRANFORD
COUNTY OF NEW HAVEN	)

The foregoing instrument was acknowledged before me on September 1, 2005 by M. Joseph Canavan, Member of T.K.J. ASSOCIATES, L.L.C., a Connecticut limited liability company, on behalf of the company.

/s/    KAREN ABBATELLO        

Commissioner of the Superior Court

Notary Public

My Commission Expires: 11/30/2009

-15-

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY

ACT OF 2002

I, Patrick J. Zenner, certify that:

1. I have reviewed this quarterly report of CuraGen Corporation;

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

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

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

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

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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

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

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 4, 2005

/s/    PATRICK J. ZENNER        

Patrick J. Zenner

Interim Chief Executive Officer and Chairman of the Board (principal executive officer of the registrant)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY

ACT OF 2002

I, David M. Wurzer, certify that:

1. I have reviewed this quarterly report of CuraGen Corporation;

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

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

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

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

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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

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

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 4, 2005

/s/    DAVID M. WURZER        

David M. Wurzer

Executive Vice-President, Chief Financial Officer

and Treasurer (principal financial and accounting officer of the registrant)

EX-32

EXHIBIT 32

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of CuraGen Corporation, a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the period ended September 30, 2005 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 4, 2005	By:	/s/    PATRICK J. ZENNER
		Patrick J. Zenner
		Interim Chief Executive Officer and Chairman of the Board (principal executive officer of the registrant)
Dated: November 4, 2005	By:	/s/    DAVID M. WURZER
		David M. Wurzer
		Executive Vice-President, Chief Financial Officer and Treasurer (principal financial and accounting officer of the registrant)