8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2006

Kosan Biosciences Incorporated

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

000-31633	94-3217016
(Commission File Number)	(IRS Employer Identification No.)

3832 Bay Center Place, Hayward, CA 94545

(Address of principal executive offices, including Zip Code)

Registrant’s telephone number, including area code: (510) 732-8400

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On August 7, 2006, Kosan Biosciences Incorporated (the “Company”) entered into an offer letter (the “Offer Letter”) with Gary S. Titus, pursuant to which Mr. Titus will serve as the Company’s Senior Vice President and Chief Financial Officer, effective as of September 5, 2006.

Pursuant to the terms of the Offer Letter, Mr. Titus will receive an annual base salary of $300,000. Mr. Titus will also be eligible to participate in the Company’s executive officer cash bonus plan, pursuant to which he can earn up to 35% of his annual base salary. The Offer Letter provides for the granting of a stock option to purchase 150,000 shares of common stock (the “Stock Option”) under the Company’s 2006 Equity Incentive Plan at an exercise price per share equal to the closing price as reported on the Nasdaq Global Market on the trading day before Mr. Titus’ first day of full-time employment with the Company. The Stock Option is subject to a four year vesting schedule, with one-fourth of the shares vesting after one year of employment and the remainder vesting in equal monthly increments over the remaining three years.

The foregoing description is subject to, and qualified in its entirety by, the Offer Letter, which is attached hereto as Exhibit 10.42.

Item 5.02 Departure of Directors or Principal Officers; Election of Officers; Appointment of Officers.

On August 14, 2006, the Board of Directors of the Company appointed Gary S. Titus as the Company’s Senior Vice President and Chief Financial Officer, effective September 5, 2006. David L. Johnson has agreed to resign as the Company’s principal accounting officer and principal financial officer, effective September 5, 2006.

Mr. Titus, 46, served as Acting Chief Financial Officer of Nuvelo, Inc., a biotechnology company, from October 2005 to August 2006. From July 2004 to October 2005, Mr. Titus served as Vice President Finance and Chief Accounting Officer of Nuvelo, Inc. and Senior Director Finance from January 2003 to July 2004. From January 2002 to January 2003, Mr. Titus served as Senior Director Finance of Metabolex, Inc., a biotechnology company. From May 2001 to January 2002, he served as Senior Director Finance of Intrabiotics Pharmaceuticals, Inc., a biotechnology company, and Director Finance from January 2000 to April 2001. Mr. Titus received a B.S. in Finance from the University of Florida and a B.S. in Accounting from the University of South Florida.

The terms of Mr. Titus’ Offer Letter are described in Item 1.01 above and are incorporated by reference herein.

Mr. Titus and the Company will enter into a Change in Control and Severance Agreement (the “Change in Control Agreement”), which provides for payment of certain benefits to Mr. Titus if, at any time within one month prior to, or 18 months following, a Change in Control (as defined in the Change in Control Agreement), his employment with the Company is terminated by means of either a Constructive Termination or an Involuntary Termination Without Cause (as such terms are defined in the Change in Control Agreement), including:

(A) Payment to Mr. Titus of a lump sum cash payment equal to (a) two times Mr. Titus’ annual base salary, plus (b) two times the greatest of (i) the cash bonus paid to Mr. Titus in the year prior to termination, (ii) the target cash bonus to be paid to Mr. Titus in the year in which the termination occurs and (iii) the target cash bonus as in effect immediately prior to the Change in Control;

(B) The vesting and exercisability of all outstanding options to purchase the Company’s common stock held by Mr. Titus on the date of termination will be accelerated in full, and any reacquisition or repurchase rights held by the Company in respect of common stock issued pursuant to any other stock award granted to Mr. Titus by the Company will lapse. In the event of a termination, the exercise period of any outstanding option held by Mr. Titus on the date of termination will be extended, if necessary, such that the exercise period will not terminate prior to the later of (a) 12 months after the effective date of termination and (b) the post-termination exercise period provided for in such option, subject to certain exceptions; and

(C) In the event the Mr. Titus timely elects continued coverage of a health, dental or vision plan sponsored by the Company under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company will pay the full amount of Mr. Titus’ COBRA premiums, including coverage for Mr. Titus’ eligible dependants, for a period equal to the earlier of (a) 24 months or (b) Mr. Titus’ death or the effective date of Mr. Titus’ coverage by a medical, dental or vision insurance plan of a subsequent employer. All other benefits (such as life insurance, disability coverage and 401(k) plan coverage) will terminate as of Mr. Titus’ termination date (except to the extent that a conversion privilege may be available thereunder).

Under the terms of the Change in Control Agreement, if the payments to Mr. Titus result in the imposition of any excise taxes, the Company is required to make an additional payment to Mr. Titus to cover such taxes (including any taxes on such additional payment).

On August 15, 2006, the Company issued a press release announcing the appointment of Gary S. Titus as Senior Vice President and Chief Financial Officer of the Company. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Number	Description
10.42	Employment Agreement between the Company and Gary S. Titus dated August 7, 2006.
99.1	Press Release entitled “Kosan Appoints Gary Titus Senior Vice President and Chief Financial Officer.”

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 hereunto duly authorized.

	Kosan Biosciences Incorporated
Dated: August 15, 2006	By:	/s/ Margaret A. Horn
		Margaret A. Horn, Senior Vice President, Legal and Corporate Development, General Counsel and Secretary

EXHIBIT INDEX

Number	Description
10.42	Employment Agreement between the Company and Gary S. Titus dated August 7, 2006.
99.1	Press Release entitled “Kosan Appoints Gary Titus Senior Vice President and Chief Financial Officer.”

EX-10.42

Exhibit 10.42

3832 Bay Center Place Hayward, CA 94545 Tel: 510-732-8400 Fax: 510-732-8401 www.kosan.com

August 4, 2006

Gary S. Titus, CPA

Dear Gary,

On behalf of Kosan Biosciences Incorporated (“Kosan” or the “Company”), I am pleased to extend to you an offer of employment for the position of Senior Vice Present and Chief Financial Officer, reporting to me. We are very excited at the prospect of having access to your biotechnology financial and planning expertise in moving Kosan forward and the contributions you will make to investor relations and the management team. I am looking forward to working closely with you.

This letter sets forth some important terms and conditions of your employment with Kosan. Please read it carefully.

Your monthly salary will be $25,000.00 ($300,000 on an annualized basis). Your personal coverage under Kosan’s current benefit plans will become effective on your first day of full-time work at Kosan (your “start date”). Your start date will be as soon as practical.

As soon as you accept this offer, we will recommend to the Board of Directors that you be granted an option to purchase 150,000 shares of Kosan Common Stock under the Kosan Stock Option Plan (the “Plan”). The option shares will vest over four years, with one-fourth vesting after one year of employment and the remainder vesting in equal monthly increments over the remaining three years as provided in the Plan. This option grant is subject to the approval of the Board and your execution of our standard Stock Option Agreement. Subject to Board or Compensation Committee approval of the grant, the exercise price will be equal to the closing price of the stock one trading day prior to your start date.

You will be eligible to participate in our bonus plan and can earn up to 35% of your annual salary based on achieving your goals and objectives and Kosan’s achievement of its corporate goals and objectives.

This offer of employment is contingent upon your successfully passing a background check as well as positive references. Your employment with the Company is for no specified period and constitutes at will employment. As a result, you are free to resign at any time, for any reason or for no reason. Similarly, the Company is free to conclude its employment relationship with you at any time, with or without cause, and with or without notice.

As a condition of your employment, you must carefully review, sign, and comply with the enclosed Employee Proprietary Information and Invention Assignment Agreement. Also as a condition of your employment, you agree to abide by the Company’s policies and procedures, as adopted from time to time, and to refrain from any activities that conflict with your obligations to the Company. You represent that you do not have any agreements with any third parties (e.g., former employers), including but not limited to non-competition or proprietary information agreements, that will conflict with or limit your ability to discharge your duties to Kosan. You agree that, in the course of your work for Kosan, you will not make any unauthorized use or disclosure of any proprietary information or materials of any third party (e.g., a former employer).

The Immigration Reform and Control Act of 1986 requires that every person present to potential employers proof of identity and eligibility or authorization to accept employment in the United States. In order to comply with this law, and before you can become a Kosan employee, you must provide appropriate documentation to prove both your identity and legal eligibility to be employed by Kosan. Acceptable forms of documentation are described on the attachment to this offer letter. Please be sure to bring this documentation with you on your first day of employment.

This letter, (together with your Employee Proprietary Information and Inventions Agreement and any stock option grant agreement you receive) constitutes the complete and exclusive statement of your agreement with Kosan concerning the subject matter hereof. It supersedes any other agreements or promises made to you by anyone, whether oral or written, and it cannot be changed except in a written agreement, signed by you and a duly authorized officer of Kosan.

We are very excited at the prospect of your joining Kosan Biosciences and becoming a key contributor to our efforts. Please do not hesitate to contact Human Resources if you have any questions. This offer will remain open until August 10, 2006 at which time it will expire if not previously accepted in writing.

To indicate your acceptance of our offer, please sign and date one copy of this letter and the Employee Proprietary Information and Invention Assignment Agreement and return them to me.

Sincerely,

Kosan Biosciences		AGREED AND ACCEPTED:
By:	/s/ Robert G. Johnson, Jr.	/s/ Gary S. Titus
	Robert G. Johnson, Jr., MD, PhD,	Gary S. Titus, CPA
	Chief Executive Officer
		Date: August 7, 2006
		Date your employment begins:
		September 5, 2006

EX-99.1

Exhibit 99.1

Contact:

Kosan Biosciences

Jane Green

510.731.5335 (office)

415.652.4819 (mobile)

green@kosan.com

FOR IMMEDIATE RELEASE

KOSAN APPOINTS GARY TITUS SENIOR VICE PRESIDENT

AND CHIEF FINANCIAL OFFICER

Hayward, CA – August 15, 2006 – Kosan Biosciences Incorporated (Nasdaq:KOSN) announced today that Gary S. Titus has been appointed Senior Vice President and Chief Financial Officer of Kosan. Mr. Titus will serve as the company’s principal financial and accounting officer, responsible for SEC reporting and audit, compliance, treasury and finance as well as financial analysis and planning. Mr. Titus will also play a key role in managing the company’s relationships with investors, bankers and other external stakeholders. Mr. Titus will be a member of the senior executive team at Kosan and will report to Chief Executive Officer Robert G. Johnson, Jr., M.D., Ph.D.

“Kosan has made significant progress in advancing its pipeline of promising cancer therapeutics, and Gary will provide the high-quality expertise, experience and strategic direction we will need to achieve our goal of becoming a fully-integrated commercial cancer therapeutics company,” said Dr. Johnson. “I am confident that Gary will add breadth to our management team and strengthen our relationships within the financial community.”

“Over the last several months, financial consultant David Johnson has provided Kosan with the highest quality management support on an interim basis,” added Dr. Johnson. “Kosan’s board of directors and management team join me in expressing our deep appreciation to Dave for his dedication and service.”

Mr. Titus is an accomplished financial executive with more than 18 years of senior financial management experience focused largely on the biotechnology and healthcare industries. Mr. Titus joins Kosan from Nuvelo, Inc. where he most recently served as Acting Chief Financial Officer and also held the position of Vice President, Finance and Chief Accounting Officer. While at Nuvelo, Mr. Titus led several successful financings and represented the company in the investment community. Other accomplishments include providing financial counsel in support of a corporate merger and business development activities, including a collaboration with Bayer Healthcare. Prior to Nuvelo, Mr. Titus held senior finance positions at Metabolex, Inc., Intrabiotics Pharmaceuticals, Inc., and Johnson & Johnson, Inc. Mr. Titus holds a Bachelor of Science degree in Finance from the University of Florida, and a Bachelor of Science degree in Accounting from the University of South Florida, and is a Certified Public Accountant.

About Kosan

Kosan Biosciences is a biotechnology company advancing two new classes of anticancer agents through clinical development – Hsp90 (heat shock protein 90) inhibitors and epothilones. Kosan is leveraging its proprietary discovery platform to generate a pipeline of potentially significant product candidates, primarily in the area of oncology.

Hsp90 inhibitors have a novel mechanism of action targeting multiple pathways involved in cancer cell growth and survival. KOS-953 is Kosan’s proprietary formulation of 17-AAG, a geldanamycin analog. The agent is currently in Phase I and II clinical trials, primarily for multiple myeloma and HER2-positive breast cancer. In addition, intravenous and oral formulations of Kosan’s second-generation Hsp90 inhibitor, KOS-1022, are being evaluated in Phase I clinical trials.

Epothilones inhibit cell division with a mechanism of action similar to taxanes, one of the most successful classes of anti-tumor agents. KOS-862 is currently being studied in a Phase II single-agent clinical trial in patients with metastatic breast cancer, as well as a Phase II combination trial with Herceptin. KOS-1584, a second candidate designed to improve pharmacokinetics, is in Phase I clinical trials in patients with solid tumors. Kosan’s epothilone program is partnered with Roche through a global development and commercialization agreement.

For additional information on Kosan Biosciences, please visit the company’s website at www.kosan.com.

This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”). Such forward-looking statements include statements relating to Kosan’s plans to become a fully-integrated commercial cancer therapeutics company. Any statements contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause the results of Kosan to differ materially from those indicated by these forward-looking statements, including, among others, risks related to the clinical advancement of Kosan’s clinical candidates, including the risk that clinical trials may not demonstrate safety and efficacy sufficient to obtain the requisite regulatory approvals or to result in a marketable product; and other risks detailed from time to time in the Company’s SEC reports, including its Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 and other periodic filings with the SEC. Kosan does not undertake any obligation to update forward-looking statements.

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