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 March 31, 2007

¨ 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 0-23272

NPS PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	87-0439579
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

383 Colorow Drive, Salt Lake City, Utah	84108-1256
(Address of Principal Executive Offices)	(Zip Code)

(801) 583-4939

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days.    YES  x    NO  ¨

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

Large Accelerated Filer  ¨    Accelerated Filer  x    Non-accelerated filer  ¨

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 each of the issuer’s classes of common stock, as of the latest practicable date is as follows:

Class	Outstanding at May 8, 2007
Common Stock $.001 par value	46,340,685

TABLE OF CONTENTS

		Page No.
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 5.	Other Information	26
Item 6.	Exhibits	26
SIGNATURES		27

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PART 1

FINANCIAL INFORMATION

Item 1. Financial Statements.

NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	March 31, 2007			December 31, 2006
Assets
Current assets:
Cash and cash equivalents	$	32,157		$	36,244
Marketable investment securities		99,798			109,908
Restricted cash and cash equivalents		2			21,921
Accounts receivable		9,984			15,534
Other current assets		4,685			6,082
Total current assets		146,626			189,689
Plant and equipment:
Building		15,010			15,010
Equipment		14,200			16,567
Leasehold improvements		3,029			3,029
		32,239			34,606
Less accumulated depreciation and amortization		13,038			14,757
Net plant and equipment		19,201			19,849
Goodwill, net of accumulated amortization		9,414			9,333
Debt issuance costs, net of accumulated amortization		4,934			5,569
Other assets		300			300
	$	180,475		$	224,740
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses	$	18,005		$	24,665
Deferred revenue		1,081			758
Current installments of notes payable and lease financing obligation		6,465			19,044
Total current liabilities		25,551			44,467
Notes payable		339,987			346,690
Lease financing obligation		18,843			18,843
Deferred revenue		5,667			5,045
Other liabilities		3,014			2,939
Total liabilities		393,062			417,984
Stockholders’ equity (deficit):
Common stock		47			46
Additional paid-in capital		679,116			677,474
Deferred compensation		—			—
Accumulated other comprehensive loss:
Net unrealized loss on marketable investment securities		(203	)		(326	)
Foreign currency translation		(1,531	)		(1,566	)
Accumulated deficit		(890,016	)		(868,872	)
Total stockholders’ deficit		(212,587	)		(193,244	)
	$	180,475		$	224,740

See accompanying notes to condensed consolidated financial statements.

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NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended March 31,
	2007			2006
Revenues:
Product sales	$	1,127		$	428
Royalties, milestones, and license fees		8,864			5,655
Total revenues		9,991			6,083
Operating expenses:
Cost of goods sold		952			—
Cost of royalties		1,047			454
Research and development		10,242			21,208
Selling, general and administrative		6,570			18,898
Restructuring charges		7,114			—
Total operating expenses		25,925			40,560
Operating loss		(15,934	)		(34,477	)
Other income (expense):
Interest income		1,970			2,579
Interest expense		(7,144	)		(6,635	)
Loss on disposition of equipment		(3	)		(2	)
Foreign currency transaction gain (loss)		(33	)		149
Other		—			57
Total other expense, net		(5,210	)		(3,852	)
Loss before income tax expense (benefit)		(21,144	)		(38,329	)
Income tax expense (benefit)		—			—
Net loss	$	(21,144	)	$	(38,329	)
Basic and diluted net loss per common and potential common share	$	(0.45	)	$	(0.83	)
Weighted average common and potential common shares outstanding - basic and diluted		46,625			46,236

See accompanying notes to condensed consolidated financial statements.

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NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2007			2006
Cash flows from operating activities:
Net loss	$	(21,144	)	$	(38,329	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,209			1,617
Realized loss on disposition of equipment		3			2
Compensation expense on deferred stock units, restricted stock units and restricted stock		393			588
Compensation expense on stock options and stock appreciation rights		896			5,654
Decrease in operating assets:
Accounts receivable		5,570			(1,781	)
Prepaid expenses, other current assets and other assets		1,506			316
Increase (decrease) in operating liabilities:
Accounts payable and other current accrued expenses		(6,700	)		(12,124	)
Deferred revenue		883			163
Other liabilities		60			907
Net cash used in operating activities		(17,324	)		(42,987	)
Cash flows from investing activities:
Sales and maturities of marketable investment securities		56,216			38,153
Purchases of marketable investment securities		(45,991	)		(12,949	)
Acquisitions of equipment and leasehold improvements		(20	)		(807	)
Proceeds from sale of fixed assets		24			6
Net cash provided by investing activities		10,229			24,403
Cash flows from financing activities:
Principal payments on notes payable and under lease financing obligation		(19,282	)		(1,345	)
Proceeds from issuance of common stock		353			788
Decrease in restricted cash and cash equivalents		21,919			1,101
Net cash provided by financing activities		2,990			544
Effect of exchange rate changes on cash		18			(41	)
Net decrease in cash and cash equivalents		(4,087	)		(18,081	)
Cash and cash equivalents at beginning of period		36,244			98,712
Cash and cash equivalents at end of period	$	32,157		$	80,631
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	15,423		$	4,395
Supplemental Schedule of Noncash Investing and Financing Activities:
Unrealized gains (losses) on marketable investment securities		123			(54	)

See accompanying notes to condensed consolidated financial statements.

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NPS PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements included herein have been prepared by NPS Pharmaceuticals, Inc. (NPS) in accordance with the rules and regulations of the United States Securities and Exchange Commission (SEC). The condensed consolidated financial statements are comprised of the financial statements of NPS and all its subsidiaries in which it owns a majority voting interest including a variable interest entity in which the Company is the primary beneficiary, collectively referred to as the Company. In management’s opinion, the interim financial data presented includes all adjustments (consisting solely of normal recurring items) necessary for fair presentation. All intercompany accounts and transactions have been eliminated. All monetary amounts are reported in U.S. dollars unless specified otherwise. Certain information required by accounting principles generally accepted in the United States of America has been condensed or omitted in accordance with rules and regulations of the SEC. Operating results for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for any future period or the year ending December 31, 2007.

These condensed consolidated financial statements should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk” sections of this Quarterly Report and the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2006, included in the Company’s 2006 Annual Report on Form 10-K filed with the SEC.

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions relating to reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. Certain prior year amounts have been reclassified to conform with the current year presentation.

(2) Loss Per Common Share

Basic loss per common share is the amount of loss for the period applicable to each share of common stock outstanding during the reporting period. Diluted loss per common share is the amount of loss for the period applicable to each share of common stock outstanding during the reporting period and to each share that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares.

Potential common shares of approximately 11.8 million and 11.5 million during the three months ended March 31, 2007 and 2006, respectively, that could potentially dilute basic earnings per share in the future were not included in the computation of diluted loss per share because to do so would have been anti-dilutive for the periods presented. Potential dilutive common shares for the three months ended March 31, 2007 and 2006 include approximately 5.2 million common shares related to convertible debentures and 6.6 million and 6.3 million, shares, respectively, related to stock options, stock appreciation rights, and restricted stock units.

(3) Operating Segments

The Company is engaged in the discovery, development, and commercialization of pharmaceutical products, and in its current state of development, considers its operations to be a single reportable segment. Financial results of this reportable segment are presented in the accompanying condensed consolidated financial statements. The Company’s subsidiaries operating outside of the United States of America had long-lived assets, including goodwill, of approximately $9.9 million and $9.8 million, respectively, as of March 31, 2007 and December 31, 2006. The Company recognized non-United States revenue of $1.6 million and $2.4 million, respectively, during the three months ended March 31, 2007 and 2006. Substantially all of the Company’s revenues for the three months ended March 31, 2007 and 2006 were from two and three licensees, respectively, of the Company. As of March 31, 2007 and December 31, 2006, the majority of the Company’s accounts receivable balances were from two licensees and four licensees, respectively.

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(4) Comprehensive Loss

The components of the Company’s comprehensive loss are as follows, in thousands:

	Three months ended March 31,
	2007			2006
Other comprehensive loss:
Gross unrealized gain (loss) on marketable investment securities	$	123		$	(54	)
Reclassification for realized loss on marketable investment securities		—			—
Net unrealized gain (loss) on marketable investment securities		123			(54	)
Foreign currency translation gain (loss)		35			(207	)
Net loss		(21,144	)		(38,329	)
Comprehensive loss	$	(20,986	)	$	(38,590	)

(5) Long-term Debt Obligations

The following table reflects the carrying value of our long-term debt obligations under our various financing arrangements as of March 31, 2007 and December 31, 2006 (in thousands):

	March 31, 2007		December 31, 2006
Convertible notes payable	$	192,000	$	192,000
Secured notes payable		154,452		173,734
Lease financing obligation		18,843		18,843
Total borrowings		365,295		384,577
Less current position		6,465		19,044
Total long-term debt obligations	$	358,830	$	365,533

(a) Convertible Notes Payable

In July 2003, the Company completed a private placement of $192.0 million in 3.0% Convertible Notes due June 15, 2008 (Convertible Notes). The Company received net proceeds from these Convertible Notes of approximately $185.9 million, after deducting costs associated with the offering. The Convertible Notes accrue interest at an annual rate of 3.0% payable semiannually in arrears on June 15 and December 15 of each year, beginning December 15, 2003. Accrued interest on the Convertible Notes was approximately $1.7 million as of March 31, 2007. The holders may convert all or a portion of the Convertible Notes into common stock at any time on or before June 15, 2008. The Convertible Notes are convertible into common stock at a conversion price of $36.59 per share, subject to adjustment in certain events. The Convertible Notes are unsecured senior debt obligations and rank equally in right of payment with all existing and future unsecured senior indebtedness. On or after June 20, 2006, the Company may redeem any or all of the Convertible Notes at redemption prices of 100% of their principal amount, plus accrued and unpaid interest through the day preceding the redemption date. Upon the occurrence of a “fundamental change,” as defined in the indenture governing the Convertible Notes, holders of the Convertible Notes may require the Company to redeem all or a part of the Convertible Notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest and liquidated damages, if any. The Company has filed a registration statement with the United States Securities and Exchange Commission covering the resale of the Convertible Notes and common stock issuable upon conversion of the Convertible Notes. The Company incurred debt issuance costs of $6.1 million, which are being amortized over a five-year period. The effective interest rate on the Convertible Notes, including debt issuance costs, is 3.6%.

Under the Registration Rights Agreement for the Convertible Notes, the Company could be subject to liquidated damages if the effectiveness of the registration statement covering the Convertible Notes is not maintained, or if the Company fails to perform certain other registration related performance obligations, at any time prior to the redemption of the Convertible Notes, the repayment of the Convertible Notes or certain corporate events as defined in the Convertible Notes agreement. The Company believes the likelihood of such an event occurring is remote and, as such, the Company has not recorded a liability as of March 31, 2007. In the unlikely event that it becomes probable that the Company would have to pay liquidated damages under the Registration Rights Agreement until a shelf registration statement, post effective amendment thereto, or prospectus supplement covering the Convertible Notes is again effective, or filed in the case of a prospectus supplement, the potential liquidated damages would be 0.5% of the aggregate principal amount of such Convertible Notes or 0.5% of the conversion price for common stock that has been issued upon conversion of a Convertible Note. Such liquidated damages would accrue from the date the Company was required to file such registration statement or prospectus supplement until the date the registration statement or prospectus supplement was actually filed.

(b) Secured Notes Payable

In December 2004, the Company completed a private placement of $175.0 million in Secured 8.0% Notes due March 30, 2017 (Secured Notes). The Company received net proceeds from the issuance of the Secured Notes of approximately $169.3 million, after deducting costs associated with the offering. The Secured Notes accrue interest at an annual rate of 8.0% payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year (Payment Date). The Secured Notes are

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secured by certain royalty and related rights of the Company under its agreement with Amgen. Additionally, the only source for interest payments and principal repayment of the Secured Notes is limited to royalty and milestone payments received from Amgen plus any amounts available in the restricted cash reserve account and earnings thereon as described later. The Secured Notes are non-recourse to NPS Pharmaceuticals, Inc. Payments of principal will be made on March 30 of each year commencing March 30, 2006, to the extent there is sufficient revenue available for such principal payment. As of March 31, 2007, the outstanding principal balance on the Secured Notes was $154.5 million. In connection with the issuance of the Secured Notes, the Company was required to place $14.2 million of the Secured Notes proceeds into a restricted cash reserve account to pay any shortfall of interest payments through December 30, 2006. The remaining amount in the restricted cash reserve account after December 30, 2006 was used to repay principal on March 30, 2007. In the event the Company receives royalty and milestone payments under its agreement with Amgen above certain specified amounts, a redemption premium on principal repayment will be owed. The redemption premium ranges from 0% to 41.5% of principal payments, depending on the annual net sales of Sensipar by Amgen. As of March 31, 2007, the Company classified $6.5 million of the Secured Notes as current based on royalty payments accrued during the three months ended March 31, 2007 less estimated redemption premiums. The Company may repurchase, in whole but not in part, the Secured Notes on any Payment Date at a premium ranging from 0% to 41.5% of outstanding principal, depending on the preceding four quarters’ sales of Sensipar by Amgen. The Company is accruing the estimated redemption premiums over the estimated life of the debt of six years using the “effective interest-rate” method. Accrued interest on the notes was approximately $620,000 as of March 31, 2007 which represents the Company’s estimate of the redemption premium. The Company incurred debt issuance costs of $5.7 million, which are also being amortized using the “effective interest-rate” method. The effective interest rate on the Secured Notes, including debt issuance costs and estimated redemption premiums, is approximately 11.3%.

(c) Lease Financing Obligations

In December 2005, the Company completed a sale-leaseback transaction with BioMed Realty, L.P., or BioMed Realty, a Maryland limited partnership, in which the Company agreed to sell its 93,000 square foot laboratory and office building located in Salt Lake City, Utah for $19.0 million and lease back the property under a 15-year lease. Net proceeds from the sale were $19.0 million. Under the terms of the lease the Company agreed to pay a base rent of $158,000 per month for the first three years of the lease. After year three, the Company’s rent increases at the rate of 2.75% per year for the remainder of the lease term. The lease is a triple-net lease and, as a result, the Company will continue to pay all costs associated with the building, including costs for maintenance and repairs, property taxes, insurance, and lease payments of $203,000 per year under the ground lease with the University of Utah. Under the terms of the sale, the Company assigned its 40-year ground lease with the University of Utah to BioMed Realty. Upon the expiration of the lease term, the Company has the right to (i) extend the lease for two separate five year periods, each at the current fair-market-rental value of the building, or (ii) purchase the building for 115% of its then fair-market-value. As the lease agreement in the sale-leaseback transaction contains a purchase option by the Company, SFAS No. 98, Accounting for Leases, requires the Company to account for the transaction as a financing, deferring the gain on the sale of $4.3 million. The effective interest rate on the lease financing obligation is 10.3%. Principal payments will commence in 2012. See also Note 10.

(6) Restructuring Charges

On June 12, 2006 as a result of the uncertainty with respect to the regulatory approval of PREOS^®, the Company announced an initiative to restructure operations (the 2006 Restructuring Plan). Under the 2006 Restructuring Plan, NPS reduced its worldwide workforce, including employees and contractors, by approximately 250 positions, eliminated all commercial sales and related field based activities, terminated its agreement with Allergan Inc. to promote Restasis^® Ophthalmic Emulsion to rheumatologists and closed and plans to sell the Company’s technical operations facility in Mississauga, Ontario, Canada within the next six months. The reduction in workforce involved all functional disciplines including selling, general and administrative employees as well as research and development personnel.

The charge related to the 2006 Restructuring Plan during the three months ended March 31, 2007 and 2006 was a credit of $19,000 and zero, respectively. Associated severance payments related to the 2006 Restructuring Plan were paid primarily in the second and third quarters of 2006 for severed United States employees and are anticipated to be paid by January 31, 2008 for severed Canadian employees.

On March 14, 2007, the Company announced an initiative to restructure operations and to reduce its work force from 196 employees to approximately 35 employees by the end of 2007 (the 2007 Restructuring Plan). Under the 2007 Restructuring Plan, the Company will close its operations in Toronto, Canada and Salt Lake City, Utah. These steps are part of the Company’s strategy to

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transition to an organization that will rely primarily on outsourcing research, development and clinical trial activities and manufacturing operations, as well as other functions critical to its business. The Company believes this approach enhances its ability to focus on late stage product opportunities, preserve cash, allocate resources rapidly to different projects and reallocate internal resources more effectively.

The charge related to the 2007 Restructuring Plan during the three months ended March 31, 2007 was $7.1 million. The charge during the three months ended March 31, 2007 was comprised of $6.4 million in severance related cash expenses, $435,000 for accelerated vesting of options under existing employee severance agreements and retirement plan and $269,000 for accelerated vesting of restricted stock units under employee retention plans. Associated severance payments are anticipated to be paid by December 31, 2007 for severed United States employees and are anticipated to be paid by December 31, 2008 for severed Canadian employees. Total anticipated restructuring charges as a result of the 2007 Restructuring Plan are estimated to be between $11.0 and $16.0 million.

A summary of accrued restructuring costs is as follows (in thousands):

	December 31, 2006		Charges			Cash			Non-Cash			March 31, 2007
2006 Restructuring Plan:
Severance	$	607	$	(19	)	$	(410	)	$	—		$	178
2007 Restructuring Plan:
Severance		—		7,139			(1,149	)		(704	)		5,286
	$	—	$	7,120		$	(1,559	)	$	(704	)	$	5,464

(7) Income Taxes

In July 2006, the Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or FIN 48. FIN No. 48 is an interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN No. 48 seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. In addition, FIN No. 48 provides guidance on derecognition, classification, interest and penalties, and accounting in interim periods and requires expanded disclosure with respect to the uncertainty in income taxes. The Company is subject to the provisions of FIN No. 48 as of January 1, 2007. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to FIN No. 48. In addition, the Company did not record a cumulative effect adjustment related to the adoption of FIN No. 48.

The Company’s policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. Penalties and interest paid or received are recorded in interest expense or interest income, respectively. During the three months ended March 31, 2007, the Company did not record any interest income or interest expense and penalties related to the settlement of audits for certain prior periods.

Tax years 2003 through 2006 are subject to examination by the United States Federal and Canadian Federal authorities.

(8) Commitments and Contingencies

The Company has agreed to indemnify, under certain circumstances, certain manufacturers and service providers from and against any and all losses, claims, damages or liabilities arising from services provided by such manufacturers and service providers or from any use, including clinical trials, or sale by the Company or any Company agent of any product supplied by the manufacturers. The Company has entered into long-term agreements with various third-party contract manufacturers for the production and packaging of drug product and vials. Under the terms of these various contracts, we are required to purchase certain minimum quantities of drug product each year.

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(9) Legal Proceedings

A consolidated shareholders’ securities class action lawsuit is currently pending against the Company and certain of its present and former officers and directors in the United States District Court for the District of Utah, Central Division. The consolidated complaint asserts that, during the class period, the Company and the individual defendants made false and misleading statements to the investing public concerning PREOS. The consolidated complaint alleges that false and misleading statements were made during the class period concerning the efficacy of PREOS as a treatment for postmenopausal osteoporosis, the potential market for PREOS, the dangers of hypercalcemic toxicity as a side effect of injectable PREOS, and the prospects of FDA approval of the Company’s New Drug Application for injectable PREOS. The consolidated complaint seeks compensatory damages in an unspecified amount, unspecified equitable or injunctive relief, and an award of an unspecified amount for plaintiff’s costs and attorneys fees. Additionally, on August 22, 2006, a shareholder of NPS filed a shareholder derivative action against certain of the Company’s present and former officers and directors. This action, which names the Company as a nominal defendant but is asserted on the company’s behalf, is pending in the Third Judicial District Court of Salt Lake County, State of Utah. The derivative complaint asserts allegations similar to those asserted in the securities class action described above. The derivative complaint also seeks compensatory damages in an unspecified amount, unspecified equitable or injunctive relief and an award of an unspecified amount for plaintiff’s costs and attorneys fees.

The Company and related defendants intend to vigorously defend themselves in both of these actions. The Company believes the claims are without merit and has filed a motion to dismiss the securities class action and has filed a motion to dismiss the shareholder derivative action. Although the company and related defendants are optimistic about their motions being granted, no assurances can be given in this regard. The Company maintains insurance for actions of this nature, which it believes is adequate.

(10) Subsequent Events

On May 9, 2007, the Company signed an Agreement of Purchase and Sale to repurchase from BioMed Realty its 93,000 square foot laboratory and office building located in Salt Lake City, Utah, for $20.0 million. Under the terms of the Agreement of Purchase and Sale, the 15-year lease obligation of the Company to BioMed Realty will be terminated. The Company expects the closing to occur on or before June 30, 2007.

On May 9, 2007, the Company signed an Agreement of Purchase and Sale with Transglobe Property Management Services Ltd. in Trust to sell its land and 85,795 square foot laboratory and office building located in Mississauga, Ontario, Canada for $4.8 million Cdn. The Company expects the closing to occur on or before June 30, 2007.

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

Cautionary Statement Regarding Forward-Looking Statements

The following discussion should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and related notes appearing elsewhere in this report. This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our management’s judgment regarding future events. In many cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “plan,” “expect,” “anticipate,” “estimate,” “predict,” “intend,” “potential” or “continue” or the negative of these terms or other words of similar import, although some forward-looking statements are expressed differently. All statements other than statements of historical fact included in this report and the documents incorporated by reference into this report regarding our financial position, business strategy and plans or objectives for future operations are forward-looking statements. Without limiting the broader description of forward-looking statements above, we specifically note that statements regarding potential drug candidates, their potential therapeutic effect, the possibility of obtaining regulatory approval, our ability or the ability of our collaborators to manufacture and sell any products, market acceptance, or our ability to earn a profit from sales or licenses of any drug candidate are all forward-looking in nature. We cannot guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors, including:

• Our ability to outsource activities critical to the advancement of our product candidates and manage those companies to whom such activities are outsourced;

• our ability to secure additional funds;

• the successful continuation of our strategic collaborations, our and our collaborators’ ability to successfully complete clinical trials, commercialize products and receive required regulatory approvals and the length, time and cost of obtaining such regulatory approvals;

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• competitive factors;

• our ability to maintain the level of our expenses consistent with our internal budgets and forecasts;

• the ability of our contract manufacturers to successfully produce adequate supplies of our product candidates and drug delivery devices to meet clinical trial and commercial launch requirements for us and our partners;

• changes in our relationships with our collaborators;

• variability of our royalty, license and other revenues;

• our ability to enter into and maintain agreements with current and future collaborators on commercially reasonable terms;

• the demand for securities of pharmaceutical and biotechnology companies in general and our common stock in particular;

• uncertainty regarding our patents and patent rights;

• compliance with current or prospective governmental regulation;

• technological change; and

• general economic and market conditions.

You should also consider carefully the statements set forth in Item 1A of this Quarterly Report entitled “Risk Factors” as well as the statements set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year-ended December 31, 2006, entitled “Risk Factors,” which address these and additional factors that could cause results or events to differ materially from those set forth in the forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. We have no plans to update these forward-looking statements.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to all such reports are available, free of charge, on our Internet website under “Investor Relations—SEC Filings,” as soon as reasonably practicable after we file electronically such reports with, or furnish such reports to, the SEC. Our Internet website address is http://www.npsp.com. Information on our website does not constitute a part of this Quarterly Report on Form 10-Q.

Overview

We are a biopharmaceutical company focused on the development and commercialization of small molecule drugs and recombinant proteins. Our current portfolio of approved drugs and product candidates are primarily for the treatment of bone and mineral disorders, gastrointestinal disorders and central nervous system disorders. Our product portfolio consists of one U.S. Food and Drug Administration, or FDA, approved product, another product candidate that has been granted marketing approval in Europe and is the subject of an approvable letter from the FDA in response to a new drug application we filed in May 2005, a product candidate that is presently the subject of a pivotal Phase III clinical study, and other product candidates in various stages of clinical development and preclinical development. Though we independently develop many of our product candidates, we have entered into collaboration agreements for several of our programs.

In March 2007, we announced that we were restructuring the company and reducing our work force from 196 employees to approximately 35 employees by the end of 2007. In conjunction with the reduction in force we are also closing our operations in Toronto, Canada and Salt Lake City, Utah. We determined that the restructuring was necessary in light of the additional clarity that has been reached with respect to the regulatory path forward for PREOS®. After meetings and discussions with the FDA, the regulatory path forward for PREOS® will be longer and require more capital than we initially expected. As a result, we have adopted a strategy to transition the company to an organization that will rely primarily on outsourcing research, development and clinical trial activities and manufacturing operations, as well as other functions critical to our business. We believe this approach enhances our ability to focus on our late stage product opportunities, including additional indications with our lead product candidates, preserve cash, allocate resources rapidly to different programs, and reallocate internal resources more effectively.

In June 2006, we announced an initiative to restructure operations by significantly reducing cash burn, reprioritizing our development portfolio, and leveraging our proprietary research and development assets. In connection with this restructuring, we reduced our worldwide workforce, including employees and contractors, by approximately 250 positions, eliminated all commercial sales and related field based activities, terminated our agreement with Allergan, Inc. to co-promote Allergan’s proprietary drug, Restasis® Ophthalmic Emulsion to rheumatologists, and determined to sell our technical operations facility in Mississauga, Ontario, Canada.

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We have incurred cumulative losses from inception through March 31, 2007 of approximately $890.0 million, net of cumulative revenues from research and license agreements of approximately $171.2 million. We expect to continue to incur significant operating losses over at least the next several years as we continue our current and anticipated development projects. Activities that will increase our operating losses include: seeking approval to market PREOS® in the U.S. from the FDA; the conduct of current and future clinical trials with teduglutide and potentially PREOS®; clinical and commercial manufacturing for teduglutide, PREOS®, and PREOTACT®; and, contractual commitments to fund research activities in our metabotropic glutamate receptor program.

Approved Products and Product Candidates Undergoing Regulatory Review

Our FDA approved product, cinacalcet HCl, is being marketed in the U.S. and the European Union for the treatment of secondary hyperparathyroidism in chronic kidney disease patients on dialysis and for the treatment of elevated calcium levels in patients with parathyroid carcinoma. We have licensed to Amgen worldwide rights to cinacalcet HCl, with the exception of Japan, China, North and South Korea, Hong Kong and Taiwan, where we have licensed such rights to Kirin Brewery, Ltd., or Kirin. Amgen developed and is marketing cinacalcet HCl in the U.S. under the brand name Sensipar^® and in Europe under the brand name Mimpara^®. Kirin filed a new drug application, or NDA, with the Japanese Pharmaceuticals and Medical Devices Agency in February 2006 for approval to market cinacalcet HCl in Japan for the treatment of patients with secondary hyperparathyroidism who are on dialysis. Both Amgen and Kirin have contractually committed to pay us royalties on their sales of cinacalcet HCl.

The European Commission has granted marketing authorization for PREOS® for the treatment of postmenopausal women with osteoporosis at high risk for fracture. The marketing authorization is valid in all 25 member states of the European Union, or EU. We have granted to Nycomed Danmark ApS, or Nycomed, the exclusive right to market and sell PREOS® in Europe. Nycomed is marketing PREOS® in Europe under the brand name PREOTACT®. Nycomed has launched PREOTACT® in Denmark, Germany, the United Kingdom, Italy, Spain, Greece, Netherlands and Austria. In May 2005, we filed an NDA for PREOS® with the FDA seeking approval to market PREOS® in the U.S. On March 9, 2006, we received notification from the FDA that the PREOS® NDA is approvable. Additional information regarding the approvable letter and our proposed path forward for PREOS® is provided below under the caption “Major Research and Development Projects.”

Major Research and Development Projects

Our major research and development projects involve teduglutide and PREOS^®. We and our corporate licensees also have other significant ongoing research and development activities with our proprietary compounds, including our work with AstraZeneca on metabotropic glutamate receptors, the development of calcilytic compounds by GlaxoSmithKline, the development of glycine reuptake inhibitors by Janssen and other proprietary clinical research programs.

Teduglutide. Teduglutide is an analog of glucagon-like peptide 2, a naturally occurring hormone that regulates proliferation of the cells lining the small intestine. We are independently investigating teduglutide as a potential treatment for short bowel syndrome, and other indications, including Crohn’s disease, chemotherapy-induced enteritis, necrotizing enterocolitis and various other gastrointestinal diseases.

We have completed enrollment of patients in a pivotal Phase III clinical study in adult short bowel syndrome patients to measure the ability of teduglutide to reduce a patient’s dependency on total parenteral nutrition. We expect top line results of the Phase III study in the second half of 2007. If the results of the Phase III study are positive we expect to file an NDA with the FDA for approval to market teduglutide for the treatment of short bowel syndrome.

A Phase IIa proof-of-concept clinical study to evaluate the possible utility of teduglutide in the treatment of patients with Crohn’s disease has been completed. Based on the results of that study we are advancing the clinical development of teduglutide for Crohn’s disease. We are conducting a safety and dose escalation study with teduglutide as part of our clinical development plan for this drug candidate.

We have reviewed encouraging findings from preclinical studies with teduglutide demonstrating the drug’s potential to prevent necrotizing enterocolitis and chemotherapy-induced enteritis/febrile neutropenia. We believe both indications represent serious unmet medical needs that may be addressed by teduglutide therapy, and are exploring the conduct of clinical studies in each of these indications.

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During the three months ended March 31, 2007 and 2006, we incurred $3.3 million and $5.1 million, respectively, in the research and development of this product candidate, including costs associated with the manufacture of clinical supplies of teduglutide. We have incurred costs of approximately $114.2 million since we assumed development obligations of this product candidate under our acquisition of Allelix Biopharmaceuticals Inc., or Allelix, in December 1999.

Our development administration overhead costs are included in total research and development expense for each period, but are not allocated among our various projects.

The goal of our teduglutide development program is to obtain marketing approval from the FDA, and analogous international agencies. We will consider the project substantially complete if we obtain those approvals even though subsequent to that time we might incur additional expenses in conducting additional clinical trials and follow-up studies. Before we can obtain such marketing approvals we will need to complete pivotal clinical trials with satisfactory results and submit an NDA to the FDA. We are unable to estimate the costs to completion or the completion date for the teduglutide program because of the on-going work with respect to the pivotal Phase III trial in adults with short bowel syndrome, the early stage of the clinical trials for other indications such as Crohn’s disease, necrotizing enterocolitis and chemotherapy-induced enteritis/febrile neutropenia, the risks associated with the clinical trial process, including the risks that patient enrollment in the clinical trials may be slow, that we may repeat, revise or expand the scope of future trials or conduct additional clinical trials not presently planned to secure marketing approvals, and the additional risks identified herein. We cannot predict when material cash inflows from our teduglutide program will commence, if ever, because of the many risks and uncertainties relating to the completion of clinical trials, receipt of marketing approval from the applicable regulatory agency, acceptance in the marketplace, and the availability of sufficient funds to complete development of the product. To date, we have not received any revenues from product sales of teduglutide. The risks and uncertainties associated with completing the development of teduglutide on schedule, or at all, include but are not limited to the following:

• Teduglutide may not be shown to be safe and efficacious in the pivotal and on-going clinical trials;

• We may be unable to obtain regulatory approval of the drug on a timely basis, or at all;

• We may be unable to secure adequate clinical and commercial supplies of teduglutide in order to complete preclinical studies, clinical trials and initiate commercial launch upon approval; and

• We may not have adequate funds to complete the development of teduglutide, and may not be successful in securing a corporate partner to share in the costs associated with the development and commercialization of this drug candidate.

A failure to obtain marketing approval for teduglutide or to timely complete development and obtain regulatory approval would likely have the following results on our operations, financial position and liquidity:

• We would not earn any sales revenue from teduglutide, which would increase the likelihood that we would need to obtain additional financing for our other development efforts;

• Our reputation among investors might be harmed, which might make it more difficult for us to obtain equity capital on attractive terms or at all; and

• Our profitability would be delayed and our business and stock price may be aversely affected.

PREOS^®. PREOS^® is our brand name for recombinant, full length, human parathyroid hormone that we are developing as a potential treatment for post-menopausal osteoporosis. During the three months ended March 31, 2007 and 2006 we incurred $1.7 million and $4.3 million, respectively, in the research and development of this product candidate, including costs associated with the manufacture of clinical and commercial supplies of PREOS^® but exclusive of commercial supply cost of PREOTACT®. We have incurred costs of approximately $343.4 million since we assumed development obligations for this product candidate under our acquisition of Allelix in December 1999.

Our development administration overhead costs are included in total research and development expense for each period, but are not allocated among our various projects.

The goal of our PREOS^® development program is to obtain marketing approval from the FDA and analogous international agencies. We will consider the project substantially complete if we obtain those approvals even though subsequent to that time we might incur additional expenses in conducting additional clinical trials and follow-up studies. The European Commission has granted marketing authorization for PREOS® in Europe. The marketing authorization is valid in all 25 member states of the EU. We have granted to Nycomed the exclusive right to market and sell PREOS® in Europe. Nycomed is marketing PREOS® in Europe under the brand name PREOTACT®. Nycomed has launched PREOTACT® in Denmark, Germany, the United Kingdom, Italy, Spain, Greece, Netherlands and Austria.

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We submitted an NDA for PREOS® to the FDA in May 2005. On March 9, 2006, we received notification from the FDA that the PREOS® NDA is approvable. In the approvable letter, the FDA indicated that our pivotal Phase III study with PREOS® demonstrated significant fracture risk reductions in post menopausal women with osteoporosis, but noted a higher incidence of hypercalcemia with PREOS® compared to placebo. The FDA expressed concern regarding hypercalcemia associated with the proposed daily dose of PREOS® and requested additional clinical information. The FDA also requested additional information regarding the reliability and use of the injection device for delivery of PREOS®. Since receiving the approvable letter from the FDA, we have had further communications with the FDA including an in person meeting in May 2006 with senior staff from the FDA’s Division of Endocrine and Metabolism Drug Products. During the meeting, the FDA proposed that we generate additional clinical data through the conduct of a new clinical trial in order to adequately address the hypercalcemia issue raised in the approvable letter. Since receiving the approvable letter we have been carefully evaluating the regulatory path forward for PREOS®. We have submitted a new clinical trial protocol for PREOS® to the FDA to support U.S. registration. After multiple communications with the FDA we believe the protocol design is now finalized. The clinical study under the protocol is a 12-month bone-mineral density bridging study designed to evaluate the relative efficacy and safety of PREOS® as compared to placebo in women with post-menopausal osteoporosis. We have concluded at this time that we will not initiate the study until we secure additional funding for the study from a corporate or financial partner. There is no assurance that we will secure additional funding on acceptable terms or at all.

We are currently supporting an investigator led study to explore the use of PREOS® program as a hormone replacement therapy to treat hypoparathyroidism. This is a condition in which patients do not produce adequate levels of parathyroid hormone, resulting in lower than normal levels of calcium in the blood. Hypoparathyroidism can result in hypocalcemia, vitamin D deficiency, hypercalciuria and brittle bones of poor quality.

Because of the on-going work with respect to the PREOS^® program, the FDA review process, the risks associated with the drug approval process, including the risk that we may have to repeat, revise or expand the scope of clinical trials or conduct additional clinical trials not presently planned to secure marketing approvals and the initiation of commercial manufacturing activities, and the additional risks identified herein, we are unable to estimate the costs to completion or the completion date for the PREOS^® program. Material cash inflows relating to our PREOS^® development program will not commence until after marketing approvals are obtained, and then only if PREOS^® finds acceptance in the marketplace. Because of the many risks and uncertainties relating to the receipt of marketing approval from the applicable regulatory agencies and acceptance in the marketplace, the availability of sufficient funds to complete development of the product, we cannot predict when material cash inflows from our PREOS^® program will commence, if ever. During the three months ended March 31, 2007, we recognized product sale revenues to Nycomed of $1.1 million, royalty income for PREOTACT® sales by Nycomed of $356,000, and milestone revenue of $69,000. The risks and uncertainties associated with completing the development of PREOS^® on a timely basis, or at all, and successfully commercializing PREOS® include but are not limited to the following:

• We may be unable to obtain regulatory approval of the drug in the United States on a timely basis or at all;

• We may be unable to secure adequate commercial supplies of PREOS^® and the injection delivery device in order to initiate commercial launch when and if PREOS^® is approved; and

• We may not have adequate funds to complete the development and prepare for the commercial launch of PREOS^® when and if approved in the United States.

A failure to obtain marketing approval for PREOS^®, secure adequate commercial supplies of PREOS^®, or secure adequate funds to complete development and prepare for commercial launch would likely have the following results on our operations, financial position and liquidity:

• We would not earn any U.S. sales revenue from PREOS^®, which would increase the likelihood that we would need to obtain additional financing for our other development efforts;

• Our reputation among investors might be harmed, which might make it more difficult for us to obtain equity capital on attractive terms or at all; and

• Our profitability would be delayed and our business and stock price may be aversely affected.

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Other Research and Development Programs

Most of the remaining research and development expenses for the three months ended March 31, 2007 and 2006, were generated by various early clinical stage programs, pre-clinical studies and drug discovery programs, including those described below.

Metabotropic Glutamate Receptor Program. Since 1996, we have been working to find compounds that act on targets in the central nervous system called metabotropic glutamate receptors, or mGluRs. We have discovered a number of compounds that activate or inhibit mGluRs and that are highly selective for specific subtypes of mGluRs. Our animal studies with a number of these compounds have demonstrated their potential as drug candidates for the treatment of central nervous system disorders such as chronic pain. Additionally, animal studies with a number of these compounds have demonstrated their potential as drug candidates for the treatment of gastrointestinal disorders such as gastroesophageal reflux disease, or GERD.

In March 2001, we entered into an agreement with AstraZeneca under which we collaborate exclusively in an extensive program around a number of mGluR subtypes. We granted AstraZeneca exclusive rights to commercialize mGluR subtype-selective compounds. Under our agreement, we are required to co-direct the research and pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel, through March 2009, unless earlier terminated by AstraZeneca or us upon six months advance written notice. In connection with our March 2007 restructuring, we plan to outsource our research obligations to a contract research organization. If certain milestones are met, AstraZeneca is required to pay us up to $30.0 million. AstraZeneca is also required to pay us royalties on sales of products that include those compounds. We have the right to co-promote any resulting product in the United States and Canada and to receive co-promotion revenue, if any. Should we elect to co-promote products, in some circumstances we will be required to share in the development and regulatory costs associated with those products, and we may not receive some late-stage milestone payments. AstraZeneca is engaged in Phase I clinical development activities with a compound active at mGluRs licensed from us.

During the three months ended March 31, 2007 and 2006, we incurred $1.0 million and $1.1 million, respectively, in research and development expenses under our collaboration with AstraZeneca.

Our development, administration and overhead costs are included in total research and development expenses for each period, but are not allocated among our various projects.

Calcilytic Compounds. We are pursuing a treatment for osteoporosis that focuses on the discovery and development of orally administered drugs called calcilytic compounds. Calcilytic compounds are small molecule antagonists of the calcium receptors that temporarily increase the secretion of the body’s own parathyroid hormone, which may result in the formulation of new bone. In animal studies, we determined that intermittent increases in circulating levels of parathyroid hormone can be obtained through use of calcilytics.

In 1993, we collaborated with GlaxoSmithKline for research, development and commercialization of calcium receptor active compounds from treatment of osteoporosis and other bone metabolism disorders. We are not expending any significant resources in the program. In December 2000, GlaxoSmithKline initiated a proof-of-concept Phase I clinical trial with a calcilytic compound for which we received a $1.0 million milestone payment. In November 2003, GlaxoSmithKline initiated new Phase I clinical studies with more advanced compounds for which we received an additional $2.0 million milestone payment. GlaxoSmithKline, has successfully completed a proof-of-concept clinical trial in non-osteoporatic, post-menopausal women with a calcilytic compound licensed from us for potential use in osteoporosis. The trial evaluated safety as well as certain surrogate efficacy biomarkers including PTH levels and biomarkers of bone turnover. GlaxoSmithKline continues to advance the calcilytics program and has informed us that they expect to initiate Phase II studies with a compound identified under the collaboration in the second quarter of 2007.

GlaxoSmithKline has paid us a total of $38.7 million for license fees, research support, milestone payments and equity purchases as part of our collaboration. We will receive additional payments of up to an aggregate of $32.0 million, which includes additional milestones under the December 2006 amendment noted below, if certain clinical milestones are achieved. We will also receive royalties on sales of any commercialized products based on compounds identified in the collaboration. In addition to the milestone and royalty payments, we have a limited right to co-promote any products that are developed through our collaboration and to receive co-promotion revenue, if any.

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In December 2006 we entered into an amendment to our agreement with GlaxoSmithKline under which we provided GlaxoSmithKline rights to additional compounds discovered by us. In connection with such amendment GlaxoSmithKline paid us a one time licensing fee of $3.0 million and agreed to pay us additional milestones payments for the achievement of certain clinical milestones with such compounds as well as royalties on sales of such compounds should GlaxoSmithKline commercialize any of such compounds.

Glycine Reuptake Inhibitors. We collaborated with Janssen on glycine reuptake inhibitors to identify prospective drug candidates for schizophrenia and dementia. Janssen has now assumed full responsibility for the development of product candidates identified under the collaboration. We are not expending any significant resources in the program. In November 2001, we received a milestone payment from Janssen as a result of the selection of a pre-clinical compound for further development as a potential treatment for schizophrenia. Janssen has informed us that they have moved a compound from this collaboration into a Phase 1 clinical trial. We will receive additional milestone payments of up to $20.5 million from Janssen, if certain milestones are met and royalties on sales of any drugs developed or sold by Janssen under this collaboration agreement.

Summary of other programs. The goal of our other programs is to discover, synthesize, develop and obtain marketing approval for product candidates. Material cash inflows will not commence until after marketing approvals are obtained, and then only if the product finds acceptance in the marketplace. Currently all compounds are in pre-clinical stages or early clinical stages. In order to obtain marketing approval, we or our corporate licensees, as the case may be, will need to initiate and complete all current and planned clinical trials with satisfactory results and submit a NDA to the FDA. Because of this, and the many risks and uncertainties relating to the completion of clinical trials, receipt of marketing approvals and acceptance in the marketplace, we cannot predict when material cash inflows from these programs will commence, if ever.

Results of Operations

Three Months Ended March 31, 2007 and 2006

The following table summarizes selected operating statement data for the three months ended March 31, 2007 and 2006 (amounts in thousands):

	Three months ended March 31,
	2007			2006
Revenue	$	9,991		$	6,083
Operating expenses:
Cost of good sold	$	952		$	—
% of revenues		10	%		—
Cost of royalties	$	1,047		$	454
% of revenues		10	%		7	%
Research and development	$	10,242		$	21,208
% of revenues		103	%		349	%
Selling, general and administrative	$	6,570		$	18,898
% of revenues		66	%		311	%
Restructuring charges	$	7,114		$	—

Revenues. Substantially all our revenues have come from license fees, research and development support payments, milestone payments, product sales and royalty payments from our licensees and collaborators. These revenues fluctuate from quarter to quarter. Our revenues were $10.0 million for the quarter ended March 31, 2007 compared to $6.1 million for the quarter ended March 31, 2006. We recognized revenue under our research and license agreements during the three months ended March 31, 2007 and 2006, respectively, primarily as follows:

• Under our agreement with Amgen, we recognized revenue of $8.3 million and $3.6 million;

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• Under our agreement with Kirin, we recognized revenue of zero and $2.0 million; and

• Under our agreement with Nycomed, we recognized revenue of $1.6 million and $443,000.

The increase in royalty revenue earned from Amgen is due to an increase in sales of cinacalcet HCl since launching in March 2004. The increase in product sales, milestone income and royalty income earned from Nycomed is due primarily to PREOTACT® not being approved in the EU until April 2006. During the three months ended March 31, 2007, we recognized PREOTACT® product sales revenue of $1.1 million, royalty revenue of $356,000 and milestone revenue of $69,000 from Nycomed. During the three months ended March 31, 2006, we recognized PREOTACT® product sales revenue of $428,000 and milestone revenue of $15,000. Additionally, during the three months ended March 31, 2006, we recognized milestone revenue of $2.0 million from Kirin for the filing of a new drug application with the Japanese Pharmaceuticals and Medical Devices Agency in February 2006 for cinacalcet HCl.

Cost of Goods Sold. Our cost of goods sold consists of the cost of inventory, subsequent to the April 2006 approval of PREOTACT® in the EU, for products sales to Nycomed. Costs associated with inventory build that were incurred prior to the EU approval of PREOTACT® have been previously expensed as research and development expense, creating an initial FIFO inventory layer with a carrying value of zero. As inventory is expensed under the FIFO methodology, cost of goods sold as a percentage of product revenue will continue to increase in future periods until the initial zero costed FIFO layer is consumed. We recorded cost of goods sold of $952,000 and zero, respectively, during the three months ended March 31, 2007 and 2006.

Cost of Royalties. Our cost of royalties consists of royalties owed under our agreement with the Brigham and Women’s Hospital on sales of cinacalcet HCl. We recorded cost of royalties of $1.0 million and $454,000, respectively, during the three months ended March 31, 2007 and 2006. The increase in cost of royalties is due to increased sales of cinacalcet HCl by Amgen.

Research and Development. Our research and development expenses arise primarily from compensation and other related costs of our personnel who are dedicated to research and development activities and from the fees paid and costs reimbursed to outside professionals to conduct research, pre-clinical and clinical trials, and to manufacture drug compounds and related supplies prior to FDA approval. Our research and development expenses decreased to $10.2 million for the quarter ended March 31, 2007 from $21.2 million in 2006. The decrease is principally due to a $2.7 million decrease in stock-based compensation, including $630,000 due to severance agreements, a $1.9 million decrease in the costs of advancing our PREOS® clinical program, a $1.9 million decrease in personnel costs due to the 2006 Restructuring Plan, a $1.2 million decrease in costs associated with the manufacture of clinical and commercial supplies of PREOS® and teduglutide, a $1.2 million decrease in the development costs of advancing our teduglutide clinical program and a $835,000 decrease in the development costs of advancing our central nervous system programs.

Selling, General and Administrative. Our selling, general and administrative expenses consist primarily of the costs of our management and administrative staff, business insurance, property taxes, professional fees and market research and promotion activities, including the cost of our sales force through June 2006, for our marketed products and product candidates. Our selling, general and administrative expenses decreased to $6.6 million for the quarter ended March 31, 2007 from $18.9 million for the quarter ended March 31, 2006. The decrease is due primarily to a $7.8 million decrease in pre-launch commercial support, educational and commercial activities, including personnel costs, associated with PREOS® and terminating our sales promotional activities around Kineret® and Restasis® in 2006, a $2.2 million decrease in compensation cost related to stock-based compensation, a $1.6 million decrease in compensation expense due to severance agreements and a $600,000 decrease in other selling, general and administrative costs, including decreases in personnel costs due to the 2006 Restructuring Plan.

Restructuring Charges. Our restructuring charges relate to our initiative to restructure operations which was announced in June 2006, referred to as our 2006 Restructuring Plan, and to our subsequent initiative to further restructure our operations which was announced in March 2007, referred to as our 2007 Restructuring Plan. Under the 2006 Restructuring Plan, we reduced our worldwide workforce, including employees and contractors, by approximately 250 positions, eliminated all commercial sales and related field based activities, terminated our agreement with Allergan Inc. to promote Restasis^® Ophthalmic Emulsion to rheumatologists and closed and plan to sell our technical operations facility in Mississauga, Ontario, Canada. The charge related to the 2006 Restructuring Plan during the three months ended March 31, 2007 and 2006, was a credit of $19,000 and zero, respectively, and was comprised primarily of severance related expenses. Under the 2007 Restructuring Plan, we announced that our worldwide workforce would be reduced from 196 employees to approximately 35 employees by the end of 2007. We also announced the closure of our operations in

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Toronto, Canada and Salt Lake City, Utah. The charge related to the 2007 Restructuring Plan during the three months ended March 31, 2007 and 2006, was $7.1 million and zero, respectively, and was comprised primarily of severance related expenses.

Total Other Expense, Net. Our total other expense, net, increased to $5.2 million for the three months ended March 31, 2007 from $3.9 million from the three months ended March 31, 2006. The increase in total other expense, net, for the three months ended March 31, 2007 compared to the same period in the prior year is due primarily to a $609,000 decrease in interest income due to lower average cash, cash equivalent and marketable security balances in 2007, a $509,000 increase in interest expense related to increasing our estimate of the effective interest rate on our Secured Notes for the cash sweep premium and a $182,000 decrease in foreign currency transaction gain/loss.

Liquidity and Capital Resources

The following table summarizes selected financial data (amounts in the thousands):

	March 31, 2007			December 31, 2006
Cash, cash equivalents, and marketable securities	$	131,955		$	146,152
Total assets		180,475			224,740
Current debt		6,465			19,044
Non-current debt		358,830			365,533
Stockholders’ deficit	$	(212,587	)	$	(193,244	)

We require cash to fund our operating expenses, to make capital expenditures, acquisitions and investments and to service our debt. We have financed operations since inception primarily through payments received under collaborative research and license agreements, the private and public issuance and sale of equity securities, and the issuance and sale of secured debt, convertible debt and lease financing. As of March 31, 2007, we had recognized $171.2 million of cumulative revenues from payments for research support, license fees, product sales, milestone and royalty payments, $563.0 million from the sale of equity securities for cash, $355.2 million from the sale of secured debt and convertible debt for cash and $19.0 million from the sale of our administration and laboratory building located in Salt Lake City, Utah, in a sale-leaseback transaction. Our principal sources of liquidity are cash, cash equivalents, and marketable investment securities, which totaled $132.0 million at March 31, 2007. Our $192,0 million 3.0% Convertible Notes, or Convertible Notes, mature in June 2008. Our current balance of cash, cash equivalents and marketable securities is not sufficient to repay the outstanding Convertible Notes. We are evaluating specific options to refinance a portion or all of the Convertible Notes as well as options to generate adequate new capital to repay a portion or all of the Convertible Notes. Although we have not selected a specific plan for addressing the maturity of the Convertible Notes, we believe that alternatives will be available to us although no assurances can be made. We plan to address our Convertible Notes by the end of 2007.

The primary objectives for our marketable investment security portfolio are liquidity and safety of principal. Investments are intended to achieve the highest rate of return to us, consistent with these two objectives. Our investment policy limits investments to certain types of instruments issued by institutions with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer.

On May 9, 2007, we signed an Agreement of Purchase and Sale with Transglobe Property Management Services Ltd. in Trust to sell our land and 85,795 square foot laboratory and office building located in Mississauga, Ontario, Canada, for $4.8 million Cdn. We expect the closing to occur on or before June 30, 2007. The sale of this facility is part of our restructuring initiatives which includes a plan to close our Mississauga and Toronto facilities and discontinue all operations in Canada.

In March 2007, we announced that we were restructuring the company and reducing our work force from 196 employees to approximately 35 employees by the end of 2007. In conjunction with the reduction in force we are also closing our operations in Toronto, Canada and Salt Lake City, Utah. We believe the restructuring will enhance our ability to focus on our late stage product opportunities, including additional indications with our lead product candidates, preserve cash, allocate resources rapidly to different programs, and reallocate internal resources more effectively.

In June 2006, as a result of the uncertainty with respect to the regulatory approval of PREOS® by the FDA, we announced an initiative to restructure operations, referred to as our 2006 Restructuring Plan. The primary objective of the 2006 Restructuring Plan was to maximize shareholder value by significantly reducing cash burn, reprioritizing our development portfolio and leveraging our proprietary research and development assets. Under the 2006 Restructuring Plan, we reduced our worldwide workforce, including employees and contractors, by approximately 250 positions, eliminated all commercial sales and related field based activities, terminated our agreement with Allergan, Inc. to co-promote Allergan’s proprietary drug, Restasis® Ophthalmic Emulsion to rheumatologists, and closed and are in the process of selling our technical operations facility in Mississauga, Ontario, Canada.

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In December 2005, we completed a sale-leaseback transaction with BioMed Realty, L.P., or BioMed Realty, a Maryland limited partnership, in which we agreed to sell our 93,000 square foot laboratory and office building located in Salt Lake City, Utah for $19.0 million and lease back the property under a 15-year lease with BMR – 383 Colorow Drive LLC, or BMR, a subsidiary of BioMed Realty. Net proceeds from the sale were $19.0 million after deducting miscellaneous closing expenses. Under the terms of the lease we will pay a base rent of $158,000 per month for the first three years of the lease. After year three, our rent increases at the rate of 2.75% per year for the remainder of the lease. The lease is a triple-net lease and, as a result, we will continue to pay all costs associated with the building, including costs for maintenance and repairs, property taxes, insurance, and lease payments under the ground lease with the University of Utah. Under the terms of the sale, we assigned the 40-year ground lease with the University of Utah to BioMed Realty. Upon the expiration of the lease term, we have the right to (i) extend the lease for two separate five year periods, each at the current fair-market-rental value of the building, or (ii) purchase the building for 115% of its then fair-market-value. On May 9, 2007, we signed an Agreement of Purchase and Sale to repurchase from BioMed Realty our 93,000 square foot laboratory and office building located in Salt Lake City, Utah, for $20.0 million. Under the terms of the Agreement of Purchase and Sale, our 15-year lease obligation to BMR will be terminated. We expect the closing to occur on or before June 30, 2007. We intend to sell the Salt Lake City facility as soon as practical after the closing of the transaction with BMR. Our re-purchase and subsequent sale of the building are part of our restructuring initiatives, which include a plan to close our Salt Lake City facility and discontinue all Salt Lake City operations.

In December 2004, we completed a private placement of $175.0 million in Secured 8.0% Notes due March 30, 2017, or Secured Notes. The Company received net proceeds from the issuance of the Secured Notes of approximately $169.3 million, after deducting costs associated with the offering. The Secured Notes accrue interest at an annual rate of 8.0% payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year. The Secured Notes are secured by certain royalty and related rights under our agreement with Amgen. Additionally, the only source for interest payments and principal repayment of the Secured Notes is limited to royalty and milestone payments received from Amgen plus any amounts available in the restricted cash reserve account and earnings thereon as described later. All payments received by us from Amgen will be applied to the payment of interest and principal on the Secured Notes until such notes are paid in full. The Secured Notes are non-recourse to NPS Pharmaceuticals, Inc. Payments of principal will be made on March 30 of each year, to the extent there is sufficient revenue available for such principal payment. In connection with the issuance of the Secured Notes, we were required to place $14.2 million of the Secured Notes proceeds into a restricted cash reserve account to pay any shortfall of interest payments through December 30, 2006. The remaining amount in the restricted cash reserve as of December 30, 2006 was used to repay principal and redemption premiums on March 30, 2007. In the event we receive royalty and milestone payments under our agreement with Amgen above certain specified amounts, a redemption premium on principal repayment will be owed. The redemption premium ranges from 0% to 41.5% of principal payments, depending on the annual net sales of cinacalcet HCl by Amgen. The Company may repurchase, in whole but not in part, the Secured Notes on any Payment Date at a premium ranging from 0% to 41.5% of outstanding principal, depending on the preceding four quarters’ sales of Sensipar® by Amgen. We are accruing the estimated redemption premiums over the estimated life of the debt of six years using the “effective interest-rate” method. Accrued interest in the notes was approximately $620,000 as of March 31, 2007 which represents our estimate of the redemption premium. We incurred debt issuance costs of $5.7 million, which are also being amortized using the “effective interest-rate” method. The effective interest rate on the Secured Notes, including debt issuance costs and estimated redemption premiums, is approximately 11.3%.

In April 2004, we signed a distribution and license agreement with Nycomed Danmark ApS, or Nycomed, in which we granted Nycomed the exclusive right to develop and market PREOS® in Europe. Nycomed also agreed to make an equity investment in NPS of $40.0 million through the purchase of 1.3 million shares of NPS common stock in the form of a private placement. We closed on the equity investment on July 7, 2004. The agreement also requires Nycomed to pay us up to 20.8 million euros in milestone payments upon regulatory approvals and achievement of certain sales targets to purchase drug product and devices from us and to pay us royalties on product sales. To date, we have earned 5.6 million euros in milestone payments from Nycomed. Nycomed has also committed to participate in fifty percent of the costs incurred in the conduct of certain Phase IIIb clinical trials up to a maximum contribution of 10.4 million euros and to expend at least 10.4 million euros in the conduct of certain Phase IV clinical studies. Under the terms of the agreement, we recognized revenue during the three months ended March 31, 2007 and 2006 of $1.6 million and $443,000, respectively.

In July 2003, we completed a private placement of $192.0 million of our 3.0 % Convertible Notes due June 15, 2008. Interest is payable semi annually in arrears on June 15 and December 15 of each year. Accrued interest on the Convertible Notes was approximately $1.7 million as of March 31, 2007. The holders may convert all or a portion of the Convertible Notes into common stock at any time on or before June 15, 2008. The Convertible Notes are convertible into our common stock at a conversion rate equal to approximately $36.59 per share, subject to adjustment in certain events. The Convertible Notes are unsecured senior debt obligations and rank equally in right of payment with all existing and future unsecured senior indebtedness. On or after June 20, 2006, we may redeem any or all of the Convertible Notes at a redemption price of 100 percent of their principal amount, plus accrued and unpaid interest to the day preceding the redemption date. The Convertible Notes will mature on June 15, 2008 unless earlier converted, redeemed at our option or redeemed at the option of the noteholder upon a “fundamental change”, as described in the

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Convertible Note indenture. Neither we nor any of our subsidiaries are subject to any financial covenants under the indenture. In addition, neither we nor any of our subsidiaries are restricted under the indenture from paying dividends, incurring debt, or issuing or repurchasing our securities.

The following table summarizes our cash flow activity for the three months ended March 31, 2007 and 2006 (amounts in thousands):

	Three months ended March 31,
	2007			2006
Net cash used in operating activities	$	(17,324	)	$	(42,987	)
Net cash provided by investing activities		10,229			24,403
Net cash provided by financing activities	$	2,990		$	544

Net cash used in operating activities was $17.3 million for the three months ended March 31, 2007 compared to $43.0 million for the three months ended March 31, 2006. The decrease in cash used in operating activities during the three months ended March 31, 2007 compared to same period in the prior year is primarily a result of a decreased net loss in the three months ended March 31, 2007, compared with the same period in the prior year. The net loss decreased $17.2 million during the first quarter of 2007 compared to the first quarter of 2006 due primarily to increased revenues recognized under license agreements and decreases in research and development expenses and selling, general and administrative expenses, offset by restructuring charges associated with our 2007 Restructuring Plan. Additionally, we recorded less non-cash compensation expense of $5.0 million in 2007 related to all equity awards.

Net cash provided by investing activities was $10.2 million for the three months ended March 31, 2007 compared to $24.4 million for the three months ended March 31, 2006. Net cash provided by investing activities during the three months ended March 31, 2007 and 2006 was primarily the result of selling marketable investment securities to fund current operations. Additionally, capital expenditures for the three months ended March 31, 2007 and 2006 were $20,000 and $807,000, respectively.

Net cash provided by financing activities was $3.0 million for the three months ended March 31, 2007 compared to $544,000 for the three months ended March 31, 2006. Cash provided financing activities during the three months ended March 31, 2007 primarily relates to decreases in our restricted cash balances of $21.9 million related to our Secured Notes offset by principal payments of $19.3 million on our Secured Notes. Similarly during the three months ended March 31, 2006, cash was used in financing activities to make principal payments $1.3 million on our Secured Notes offset by decreases in our restricted cash balances of $1.1 million related to our Secured Notes. Additionally, we received cash from the exercise of employee stock options and proceeds from the sale of stock by us pursuant to the employee stock purchase plan. Employee stock option exercises and proceeds from the sale of stock by us pursuant to the employee stock purchase plan provided approximately $353,000 and $788,000, respectively, of cash during the three months ended March 31, 2007 and 2006. Proceeds from the exercise of employee stock options vary from period to period based upon, among other factors, fluctuations in the market value of NPS’s stock relative to the exercise price of such options.

We could receive future milestone payments of up to $94.5 million in the aggregate if each of our current licensees accomplishes the specified research and/or development milestones provided in the respective agreements. In addition, all of the agreements require the licensees to make royalty payments to us if they sell products covered by the terms of our license agreements. However, we do not control the subject matter, timing or resources applied by our licensees to their development programs. Thus, potential receipt of milestone and royalty payments from these licensees is largely beyond our control. Some of the late-stage development milestone payments from AstraZeneca will not be due if we elect a co-promotion option under which we may commercialize products. Further, each of these agreements may be terminated before its scheduled expiration date by the respective licensee either for any reason or under certain conditions.

We have entered into certain research and license agreements that require us to make research support payments to academic or research institutions when the research is performed. Additional payments may be required upon the accomplishment of research milestones by the institutions or as license fees or royalties to maintain the licenses. As of March 31, 2007, we have a total commitment of up to $1.5 million for future research support and milestone payments. Further, depending on the commercial success of certain of our products, we may be required to pay license fees or royalties. For example, we are required to make royalty payments to certain licensors on teduglutide net sales and cinacalcet HCl royalty revenues. We expect to enter into additional sponsored research and license agreements in the future.

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Under our agreement with AstraZeneca, we are required to co-direct the research and pay for an equal share of the preclinical research costs, including capital and a minimum number of personnel through March 2009, unless earlier terminated by AstraZeneca or us upon six months advance written notice. Additionally, we have entered into long-term agreements with certain manufacturers and suppliers that require us to make contractual payment to these organizations. We expect to enter into additional collaborative research, contract research, manufacturing, and supplier agreements in the future, which may require up-front payments and long-term commitments of cash.

We expect that our existing capital resources including interest earned thereon, will be sufficient to allow us to maintain our current and planned operations through at least the next 12 months. However, our actual needs will depend on numerous factors, including the success of our restructuring and outsourcing initiative, the progress and scope of our internally funded development and commercialization activities; our ability to comply with the terms of our research funding agreements; our ability to maintain existing collaborations; our decision to seek additional collaborators; the success of our collaborators in developing and marketing products under their respective collaborations with us; our success in producing clinical and commercial supplies of our product candidates on a timely basis sufficient to meet the needs of our clinical trials and commercial launch; the costs we incur in obtaining and enforcing patent and other proprietary rights or gaining the freedom to operate under the patents of others; and our success in acquiring and integrating complementary products, technologies or businesses. Our clinical trials may be modified or terminated for several reasons including the risk that our product candidates will demonstrate safety concerns; the risk that regulatory authorities may not approve our product candidates for further development or may require additional or expanded clinical trials to be performed; and the risk that our manufacturers may not be able to supply sufficient quantities of our drug candidates to support our clinical trials or commercial launch, which could lead to a disruption or cessation of the clinical trials or commercial activities. We may also be required to conduct unanticipated clinical trials to obtain regulatory approval of our product candidates. In particular, the FDA proposed that we conduct a new clinical trial for PREOS^® in order to provide a complete response to the March 9, 2006 approvable letter. If any of the events that pose these risks comes to fruition, our actual capital needs may substantially exceed our anticipated capital needs and we may have to substantially modify or terminate current and planned clinical trials or postpone conducting future clinical trials. As a result, our business may be materially harmed, our stock price may be adversely affected, and our ability to raise additional capital may be impaired.

We will probably need to raise substantial additional funds to support our long-term product development, and commercialization programs. We regularly consider various fund raising alternatives, including, for example, partnering of existing programs, monetizing of potential revenue streams, debt or equity financing and merger and acquisition alternatives. We may also seek additional funding through strategic alliances, collaborations, or license agreements and other financing mechanisms. There can be no assurance that additional financing will be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research and development programs, or to obtain funds through arrangements with licensees or others that may require us to relinquish rights to certain of our technologies or product candidates that we may otherwise seek to develop or commercialize on our own.

Critical Accounting Policies and Estimates

Our discussion and analysis of our consolidated 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. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue and research and development costs. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect the significant judgments and estimates used in the preparation of our consolidated financial statements:

• revenue recognition;

• accrual of research and development expenses;

• share based payments; and

• valuation of long-lived and intangible assets and goodwill.

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Revenue Recognition. We earn our revenue from research and development support payments, product sales, license fees, milestone payments and royalty payments. As described below, significant management judgment and estimates must be made and used in connection with the revenue recognized in any accounting period. Material differences may result in the amount and timing of our revenue for any period if our management made different judgments or utilized different estimates.

We apply the provisions of Staff Accounting Bulletin No. 104, Revenue Recognition, or SAB No. 104, to all of our revenue transactions and Emerging Issues Task Force, or EITF, Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, to all revenue transactions entered into in fiscal periods beginning after June 15, 2003. We recognize revenue from our research and development support agreements as related research and development costs are incurred and the services are performed. The terms and conditions of our research and development support agreements are such that revenues are earned as the related costs are incurred. The principal costs under these agreements are for personnel employed to conduct research and development under these agreements. We recognize revenue from product sales when persuasive evidence of an arrangement exists, title to product and associated risk of loss has passed to the customer, the price is fixed or determinable, collection from the customer is reasonably assured and we have no further performance obligations. All revenues from product sales are recorded net of the applicable provision for returns in the same period the related sales are recorded. We recognize revenue from milestone payments as agreed upon events representing the achievement of substantive steps in the development process are achieved and where the amount of the milestone payment approximates the value of achieving the milestone. We recognize revenue from up-front nonrefundable license fees on a straight-line basis over the period we have continuing involvement in the research and development project. Royalties from licensees are based on third-party sales of licensed products and are recorded in accordance with the contract terms when third-party results are reliably measurable and collectability is reasonably assured. Cash received in advance of the performance of the related research and development support and for nonrefundable license fees when we have continuing involvement is recorded as deferred income. Where questions arise about contract interpretation, contract performance, or possible breach, we continue to recognize revenue unless we determine that such circumstances are material and/or that payment is not probable.

We analyze our arrangements entered into after June 15, 2003 to determine whether the elements can be separated and accounted for individually or as a single unit of accounting. Allocation of revenue to individual elements which qualify for separate accounting is based on the estimated fair value of the respective elements.

Accrual of Research and Development Expenses. Research and development costs are expensed as incurred and include salaries and benefits; costs paid to third-party contractors to perform research, conduct clinical trials, develop and manufacture drug materials and delivery devices; and associated overhead expenses and facilities costs. Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors. Invoicing from third-party contractors for services performed can lag several months. We accrue the costs of services rendered in connection with third-party contractor activities based on our estimate of management fees, site management and monitoring costs and data management costs. Differences between actual clinical trial costs from estimated clinical trial costs have not been material and are adjusted for in the period in which they become known.

Share-Based Payments. We grant options to purchase our common stock to our employees and directors under our stock option plans. Eligible employees can also purchase shares of our common stock at 85% of the lower of the fair market value on the first or the last day of each six-month offering period under our employee stock purchase plan. Share-based compensation expense recognized during the three months ended March 31, 2007 and 2006 was $896,000 and $5.7 million respectively. At March 31, 2007, total unrecognized estimated compensation expense related to non-vested stock options, stock appreciation rights, restricted stock and restricted stock units was $18.1 million, which is expected to be recognized over a weighted-average period of 2.01 years.

We determine the value of stock option awards on the date of grant using a Black-Scholes pricing model (Black-Scholes model). The determination of the fair value of share-based payment awards on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. If factors change and we employ different assumptions in future periods, the compensation expense that we record may differ significantly from what we have recorded in the current period.

Estimates of share-based compensation expenses are significant to our financial statements, but these expenses are based on option valuation models and will never result in the payment of cash by us. The application of these principles may be subject to further interpretation and refinement over time. There are significant differences among valuation models, and there is a possibility

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that we will adopt different valuation models in the future. This may result in a lack of consistency in future periods and materially affect the fair value estimate of share-based payments. It may also result in a lack of comparability with other companies that use different models, methods and assumptions.

For purposes of estimating the fair value of stock options granted during the three months ended March 31, 2007 and 2006 using the Black-Scholes model, we have made an estimate regarding our stock price volatility (weighted-average of 61.8 % and 53.2%, respectively). We used a combination of historical volatility and the implied volatility of market-traded options in our stock for the expected volatility assumption input to the Black-Scholes model. In calculating the estimated volatility for the three months ended March 31, 2007 and 2006, we weighted implied volatility at zero percent and historical volatility at 100 percent. The risk-free interest rate is based on the yield curve of U.S. Treasury strip securities for a period consistent with the expected life of the option in effect at the time of grant (weighted-average of 4.8% and 4.4%, respectively, for the three months ended March 31, 2007 and 2006). We do not target a specific dividend yield for our dividend payments, but we are required to assume a dividend yield as an input to the Black-Scholes model. The dividend yield assumption is based on our history and expectation of dividend payouts (weighted-average of zero for the three months March 31, 2007 and 2006). The expected term is estimated using historical option exercise information (weighted-average of 3.8 years and 3.4 years, respectively, for the three months ended March 31, 2007 and 2006).

Valuation of Long-lived and Intangible Assets and Goodwill. We assess the impairment of long-lived assets and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

• significant underperformance relative to expected historical or projected future operating results;

• significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

• significant negative industry or economic trends;

• significant decline in our stock price for a sustained period; and

• our market capitalization relative to net book value.

Our balance sheet reflects net long-lived assets of $33.8 million, including net goodwill of $9.4 million on March 31, 2007.

When we determine that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on a probability weighted projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Provision has been made for any impairment losses related to our long-lived assets.

We perform an annual impairment review of goodwill. We have not determined the existence of any indication of impairment sufficient to require us to adjust our historical measure of the value of such assets.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board, or FASB, issued Statement on Financial Accounting Standard No. 157, Fair Value Measurements, or SFAS No. 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS No. 157 does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact, if any, the adoption of SFAS No. 157 will have on our consolidated financial position, results of operations and cash flows.

In February 2007, the FASB issued Statement on Financial Accounting Standard No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of FASB Statement No. 115, or SFAS No 159. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value, with unrealized gains and losses related to these financial instruments reported in earnings at each subsequent reporting date. SFAS No. 159 is effective for first fiscal years beginning after November 15, 2007. We are currently evaluating the impact, if any, the adoption of SFAS No. 159 will have on our consolidated financial position, results of operations and cash flows.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk. Our interest rate risk exposure results from our investment portfolio, our convertible notes, our secured notes and our lease financing obligation. Our primary objectives in managing our investment portfolio are to preserve principal, maintain proper liquidity to meet operating needs and maximize yields. The securities we hold in our investment portfolio are subject to interest rate risk. At any time, sharp changes in interest rates can affect the fair value of the investment portfolio and its interest earnings. After a review of our marketable investment securities, we believe that in the event of a hypothetical ten percent increase in interest rates, the resulting decrease in fair market value of our marketable investment securities would be insignificant to the financial statements. Currently, we do not hedge these interest rate exposures. We have established policies and procedures to manage exposure to fluctuations in interest rates. We place our investments with high quality issuers and limit the amount of credit exposure to any one issuer and do not use derivative financial instruments in our investment portfolio. We invest in highly liquid, investment-grade securities and money market funds of various issues, types and maturities. These securities are classified as available for sale and, consequently, are recorded on the balance sheet at fair value with unrealized gains or losses reported as accumulated other comprehensive income as a separate component in stockholders’ equity (deficit). Our 3.0 percent Convertible Notes in the principal amount of $192.0 million due June 15, 2008, our 8.0 percent Secured Notes in the principal amount of $154.5 million and our $19.0 million lease obligation each have a fixed interest rate. The fair value of the Convertible Notes is affected by changes in the interest rates and by changes in the price of our common stock. The fair value of the Secured Notes is affected by changes in the interest rates and by historical rates of royalty revenues from cinacalcet HCl sales. The fair value of the lease obligation is affected by changes in the interest rates and by changes in the value of real estate and lease rates in Salt Lake City, Utah.

Foreign Currency Risk. We have research and development operations in Canada. Additionally, we have significant clinical and commercial manufacturing agreements which are denominated in euros. As a result, our financial results could be affected by factors such as a change in the foreign currency exchange rate between the U.S. dollar and the Canadian dollar or euro, or by weak economic conditions in Canada or Europe. When the U.S. dollar strengthens against the Canadian dollar or euros , the cost of expenses in Canada or Europe decreases. When the U.S. dollar weakens against the Canadian dollar or euro, the cost of expenses in Canada or Europe increases. The monetary assets and liabilities in our foreign subsidiary which are impacted by the foreign currency fluctuations are cash, accounts receivable, accounts payable, and certain accrued liabilities. A hypothetical ten percent increase or decrease in the exchange rate between the U.S. dollar and the Canadian dollar or euro from the March 31, 2007 rate would cause the fair value of such monetary assets and liabilities in our foreign subsidiary to change by an insignificant amount. We are not currently engaged in any foreign currency hedging activities.

It em 4. Controls and Procedures.

We maintain “disclosure controls and procedures” within the meaning of Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures, or Disclosure Controls, are designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our Disclosure Controls, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures.

Evaluation of Disclosure Controls and Procedures. As of March 31, 2007, we evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, which was done under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Immediately following the Signatures section of this Quarterly Report on Form 10-Q are certifications of our Chief Executive Officer and Chief Financial Officer, which are required in accordance with Rule 13a-14 of the Exchange Act. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented. Based on the controls evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the date of their evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely determination regarding required disclosure and that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

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Change in Internal Control over Financial Reporting. No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to material affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

It em 1. Legal Proceedings.

Information with respect to our legal proceedings is contained in Item 3, Legal Proceedings, of our Annual Report on Form 10-K for the fiscal year-ended December 31, 2006. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to this information.

Ite m 1A. Risk Factors.

Information with respect to the risks and uncertainties relative to our business is contained in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year-ended December 31, 2006. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to this information.

Ite m 5. Other Information.

Entry Into Material Definitive Agreements

Salt Lake City, Utah Real Property. On May 9, 2007, we entered into an Agreement of Purchase and Sale with BMR-383 Colorow Drive LLC, a Delaware limited liability company, or BMR, pursuant to which we will re-purchase from BMR our 93,000 square foot laboratory and office building located at 383 Colorow Drive, Salt Lake City, Utah. In December 2005, we sold the building to BMR as part of a sale-leaseback transaction and agreed to lease the entire building back under a 15-year lease, referred to as the “building lease.” The building is located on land in the Research Park of the University of Utah and is the subject of a 40-year ground lease with the university, which BMR will assign to us at the closing of the transaction. We intend to sell the building as soon as reasonably practical after the closing of the transaction with BMR. Our re-purchase and subsequent sale of the building are part of our restructuring initiative, which includes a plan to close our Salt Lake City facility and discontinue all Salt Lake City operations.

The purchase price for the building is $20.0 million, which amount we will pay to BMR at closing less any credits, deposits or offsets. Upon signing the agreement, we deposited $250,000 in cash with a third-party escrow agent as earnest money for the building purchase. Under the agreement, the earnest money is refundable to us only if we terminate the agreement prior to closing due to a breach by BMR of its obligations under the agreement. Under the agreement, we agree to release BMR from any liability associated with the environmental, structural or physical condition of the building. The agreement also contains representations and warranties, closing conditions, termination provisions and other provisions which are customary for a transaction of this nature. Upon the closing of the transaction, BMR will return to us a $300,000 security deposit under the building lease and the building lease will terminate.

The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Agreement of Purchase and Sale and the exhibits thereto, which are attached as Exhibit 10.1 to this Quarterly Report and incorporated by reference in their entirety herein.

Mississauga, Ontario Real Property. On May 9, 2007, we entered into an Agreement of Purchase and Sale with Transglobe Property Management Services Ltd. in Trust, or Transglobe, pursuant to which we will sell our land and 85,795 square foot laboratory and office building located at 6850 Goreway Drive, Mississauga, Ontario. We refer to the land and building as the “property.” Our sale of the property is part of our restructuring initiatives, which include a plan to close our Mississauga and Toronto facilities and discontinue all operations in Canada.

The sales price for the property is $4.8 million Cdn., which amount will be paid to us at closing less any credits, deposits or offsets. Upon signing the agreement, Transglobe deposited $100,000 Cdn. in cash with our Canadian counsel to be held in trust as earnest money for the sale transaction. The agreement contains a 30-day “conditional period” to allow Transglobe to inspect the property, evaluate financial information relating to the property, evaluate title to the property and obtain financing for the transaction. During the conditional period, if Transglobe is not satisfied with its inspection or evaluations, or if Transglobe is unable to secure satisfactory financing, Transglobe may terminate the agreement and will receive a refund of the earnest money. Upon the earlier of Transglobe’s waiver of the conditional period or the expiration of the conditional period without notice of termination from Transglobe, the parties will proceed with the closing under the agreement. The agreement also contains representations and warranties, closing conditions, termination provisions and other provisions which are customary for a transaction of this nature.

The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Agreement of Purchase and Sale and the exhibits thereto, which are attached as Exhibit 10.2 to this Quarterly Report and incorporated by reference in their entirety herein.

Item 6. E xhibits.

(a) Exhibits:

Exhibit Number	Description of Document
10.1	Agreement of Purchase and Sale, dated May 9, 2007, between NPS Pharmaceuticals, Inc. and BMR-383 Colorow Drive LLC
10.2	Agreement of Purchase and Sale, dated May 9, 2007, between NPS Allelix Corp. and Transglobe Property Management Services Ltd. in Trust
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32	Section 1350 Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer

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S IGNATURES

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.

	NPS PHARMACEUTICALS, INC.
Date: May 9, 2007	By:	/s/ N. ANTHONY COLES
		N. Anthony Coles,
		President and Chief Executive Officer (Principal Executive Officer)
Date: May 9, 2007	By:	/s/ GERARD J. MICHEL
		Gerard J. Michel,
		Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit Number	Description of Document
10.1	Agreement of Purchase and Sale, dated May 9, 2007, between NPS Pharmaceuticals, Inc. and BMR-383 Colorow Drive LLC
10.2	Agreement of Purchase and Sale, dated May 9, 2007, between NPS Allelix Corp. and Transglobe Property Management Services Ltd. in Trust
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32	Section 1350 Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer

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EX-10.1

Exhibit 10.1

AGREEMENT OF PURCHASE AND SALE

(383 Colorow Drive, Salt Lake City, Utah)

This Agreement of Purchase and Sale (“Agreement”) is made as of the 9th day of May, 2007 (“Effective Date”) between BMR-383 Colorow Drive LLC, a Delaware limited liability company (“Seller”), and NPS Pharmaceuticals, Inc., a Delaware corporation (“Purchaser”).

Subject to the terms and conditions of this Agreement, Seller will sell to Purchaser, and Purchaser will purchase from Seller the Property (as defined below), including an approximately 93,650 rentable square foot, three-story, laboratory and office building located at 383 Colorow Drive, Salt Lake City, Utah 84108 (the “Building”). The land underlying the Building is not owned by Seller and is subject to that certain Ground Lease dated the 10^th day of December, 2003 (the “Ground Lease”), between the Seller, as lessee, and the University of Utah, as ground lessor (“Ground Lessor”).

ARTICLE 1. PROPERTY/PURCHASE PRICE

1.1. Property. Subject to the terms and conditions of this Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, the following property (collectively, the “Property”):

(a) The Building;

(b) Seller’s leasehold interest in the land described in Exhibit A attached hereto (the “Land”), subject to the terms and conditions of the Ground Lease, and all other right, title and interest of Seller in and to (i) all and singular the rights, benefits, privileges, easements, tenements, hereditaments, and appurtenances thereon or in anyway appertaining to such Land; and (ii) all strips and gores and any land lying in the bed of any street, road or alley, open or proposed, adjoining such Land;

(c) All right, title and interest of Seller, if any, in and to all improvements and fixtures located on the Land (the “Improvements”). The Building, Land and Improvements are collectively referred to herein as the “Real Property; and

(d) The “Intangible Property,” being all, right, title and interest of Seller, if any, in and to: (i) all intangible personal property now or hereafter used exclusively in connection with the operation, ownership, maintenance, management, or occupancy of the Real Property (to the extent assignable); (ii) the plans and specifications for the Improvements (to the extent assignable); (iii) warranties, indemnities, applications, permits, approvals and licenses (to the extent applicable in any way to the above referenced Real Property or the Tangible Personal Property and assignable); and (iv) insurance proceeds and condemnation awards or claims thereto to the extent provided be assigned to Purchaser hereunder.

1.2. Purchase Price. The total purchase price to be paid to Seller by Purchaser for the Property shall be TWENTY MILLION DOLLARS ($20,000,000) (the “Purchase Price”). The Purchase Price, as adjusted for prorations, deposits and other adjustments as provided herein, shall be paid to Escrow Agent by wire transfer of immediately available funds or in cash.

1.3. Deposit of Earnest Money. Within two (2) business days (in this Agreement, a business day shall mean any day of the year other than any Saturday or Sunday or any other day on which banks located in San Diego, California generally are closed for business) after the Effective Date, Purchaser shall deposit TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) in cash (such amount, including any interest earned thereon, the “Earnest Money”) with the Escrow Agent (as defined below). The Escrow Agent shall hold and disburse the Earnest Money in accordance with the escrow provisions in Exhibit B. The Earnest Money shall be non-refundable, except as otherwise provided herein. Seller shall not deliver any instruction to the Escrow Agent calling for disbursement of the Earnest Money to Seller except following the occurrence of Purchaser’s default hereunder and the expiration of any applicable cure period or as otherwise expressly provided in this Agreement, and Seller further agrees to provide Purchaser with a copy of such instruction concurrently with the delivery thereof to the Escrow Agent. Provided such supplemental escrow instructions are not in conflict with this Agreement as it may be amended in writing from time to time, Seller and Purchaser agree to execute such supplemental escrow instructions as may be appropriate to enable Escrow Agent to comply with the terms of this Agreement

1.4. Title Company and Escrow Agent. The “Escrow Agent” and “Title Company” are: LandAmerica Commercial Services represented by Kathy Leicht, Senior Title Officer.

1.5. Closing Date. The “Closing Date” shall mean May 30, 2007.

ARTICLE 2. GROUND LEASE, NPS LEASE, OPERATIONS AND RISK OF LOSS

2.1. Ground Lease.

(a) Estoppel and Consent. Seller shall use commercially reasonable efforts to obtain an estoppel certificate from Ground Lessor under the Ground Lease, which contains among other things, Ground Lessor’s consent to the transfer of Seller’s leasehold interest in the Land and Improvements to Purchaser, in the form of Exhibit C (“Ground Lessor’s Consent”). Ground Lessor’s Consent shall be delivered to Ground Lessor no later than one (1) business day after the Effective Date and Seller shall apply commercially reasonable efforts to obtain the same, duly executed by Ground Lessor. In the event that Ground Lessor’s Consent is not obtained at least five (5) business days before the Closing Date, Seller may unilaterally extend the Closing Date one (1) time by up to thirty (30) days;

(b) Transfer Costs. Purchaser shall pay, if any, all: (i) transfer fees and other fees, costs and expenses charged by Ground Lessor in connection with the assignment of the Ground Lease, and (ii) recording costs and expenses relating to the recordation of the amendment to the Ground Lease. Each party shall pay the fees charged by its attorneys in connection with the assignment of the Ground Lease;

(c) Cooperation. The parties shall cooperate in good faith and with reasonable diligence to secure Ground Lessor’s Consent prior to the Closing Date.

2.2. NPS Lease. Upon the Closing, the Lease Agreement between the parties dated as of December 22, 2005 (the “NPS Lease”) shall terminate (the “NPS Lease Termination”) and the $300,000 security deposit tendered by Purchaser under the NPS Lease (less the amount of any unpaid monetary obligations of Purchaser as the Tenant under the NPS Lease which accrued prior to the Closing, including any outstanding rent, at the Closing) shall be credited to Purchaser against the Purchase Price at the Closing.

2.3. Ongoing Operations. From the Effective Date until the Closing:

(a) Maintenance of Insurance. Seller shall continue to carry its existing insurance through the Closing Date, and shall not allow any breach, default, termination or cancellation of such insurance policies or agreements to occur or exist.

(b) New Contracts. Without Purchaser’s prior written consent in each instance, Seller will not enter into or amend, terminate, waive any default under, or grant concessions regarding any contract or agreement that will be an obligation affecting the Property or binding on Purchaser after the Closing.

(c) Leasing Arrangements. Seller will not enter into any lease, sublease of space or other occupancy agreements affecting the Real Property, and any and all amendments and supplements thereto, and any and all guaranties and security received by landlord in connection therewith without Purchaser’s prior written consent.

(d) Ground Lease. Seller covenants and agrees not to modify the Ground Lease and to comply with the terms of the Ground Lease to the extent such compliance is not the obligation of Purchaser under the NPS Lease.

(e) Exclusive Negotiations. Seller shall: (i) remove the Property from the market, and (ii) not actively solicit or negotiate with any other prospective purchasers of the Property.

2.4. Damage. Upon the Effective Date, the full risk of loss with respect to the Property shall pass to Purchaser and shall remain with Purchaser after the Closing and delivery of the Deed (as defined below). Purchaser shall promptly give Seller written notice of any material damage to the Property, describing such damage, whether such damage is covered by insurance and the estimated cost of repairing such damage, provided that such damage is

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known to Purchaser. For purposes of this Section 2.4, “material” means damage in excess of $100,000. Seller shall transfer and assign any insurance proceeds or rights thereto to Purchaser at the Closing. This Agreement, and the parties’ obligations to purchase and sell the property, shall survive any such damage to the Property.

2.5. Condemnation. Seller shall promptly give Purchaser notice of any eminent domain proceedings that are contemplated, threatened or instituted with respect to the Property. Seller shall, at the Closing, assign to Purchaser its entire right, title and interest in and to any condemnation award, and Purchaser shall have the right during the pendency of this Agreement to negotiate and otherwise deal with the condemning authority in respect of such matter. This Agreement, and the parties’ obligations to purchase and sell the property, shall survive any such proceedings.

ARTICLE 3. CONDITIONS PRECEDENT

3.1. Conditions to Seller’s Obligation to Close. In addition to all other conditions set forth herein, the obligation of Seller to consummate the transactions contemplated hereunder shall be contingent upon the following:

(a) Representations. Purchaser’s representations and warranties contained herein shall be true and correct as of the date of this Agreement and the Closing Date;

(b) Performance. As of the Closing Date, Purchaser shall have performed its obligations hereunder and all deliveries to be made by Purchaser at Closing have been tendered;

(c) Ground Lease. Ground Lessor’s Consent shall have been obtained;

(d) Board Approval. Seller shall have obtained approval from the board of directors of BioMed Realty Trust, as sole owner of Seller, to enter into this Agreement and to execute the documents contemplated hereby; and

(e) Other Condition. Any other condition set forth in this Agreement to Seller’s obligation to close shall have been satisfied by the applicable date.

3.2. Conditions to Purchaser’s Obligation to Close. In addition to all other conditions set forth herein, the obligation of Purchaser to consummate the transactions contemplated hereunder shall be contingent upon the following:

(a) Representations. Seller’s representations and warranties contained herein shall be true and correct as of the date of this Agreement and the Closing Date;

(b) Performance. As of the Closing Date, Seller shall have performed its obligations hereunder and all deliveries to be made by Seller at Closing have been tendered;

(c) Default. As of the Closing Date, Seller shall not be in default under any agreement to be assigned to, or obligation to be assumed by, Purchaser under this Agreement;

(d) Ground Lease Condition. (1) Seller shall have obtained and delivered to Purchaser at least one (1) business day prior to the expiration of the Closing Date, the Ground Lessor’s Consent, and (2) as of the Closing Date, the Ground Lease shall be in full force and effect; and

(e) Title. Upon the sole condition of payment of the premium, at Closing, the Title Company shall irrevocably commit to issue to Purchaser an ALTA Owner’s Policy of title insurance, with extended coverage (i.e., with ALTA General Exceptions deleted), dated as of the date and time of the recording of the Deed (as defined below) vesting title in Purchaser, in the amount of the Purchase Price, insuring Purchaser as owner of good, marketable and indefeasible fee simple title to the Building and the Improvements, and Purchaser as holder of the leasehold interest in the Land pursuant to the Ground Lease, subject only to the Permitted Exceptions (the “Title Policy”). “Permitted Exceptions” means the following exceptions: exceptions approved by Purchaser pursuant to this Agreement; real estate and personal property taxes, and utility charges and assessments, not yet due and payable; the Ground Lease; tenants in possession; any exceptions to title as of the date and time title vested in Seller (December 20, 2005) or any exceptions thereafter caused or permitted to be caused by Purchaser; all laws,

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regulations and ordinances; all matters that would be shown on an ALTA survey of the Property; and the exceptions and other matters described on Exhibit H attached hereto.

(f) Bankruptcy. No proceeding has been commenced against Seller under the federal Bankruptcy Code or any state law for relief of debtors.

3.3. Failure of Condition Precedent. So long as a party is not in default beyond applicable notice and cure periods hereunder, if any condition to such party’s obligation to proceed with the Closing hereunder has not been satisfied as of the Closing Date and such condition is not cured within five (5) days after receipt of notice of default from the non-defaulting party, such non-defaulting party may, in its sole discretion, either (i) terminate this Agreement by delivering written notice to the other party on or before the Closing Date or other applicable date whereupon the Earnest Money shall be returned to Purchaser if Seller is the defaulting party or paid to Seller if Purchaser is the defaulting party, or (ii) elect to close, notwithstanding the non-satisfaction of such condition, in which event such party shall be deemed to have waived any such condition.

ARTICLE 4. DEFAULT AND REMEDIES

4.1. Purchaser’s Defaults; Seller’s Remedies.

(a) In the event of a breach by Purchaser of its obligations under this Agreement to effect the Closing, which breach is not cured within five (5) days after Purchaser’s receipt of notice of default from Seller (provided that no such cure period shall extend the Closing Date or apply for a breach of the obligation to close by the Closing Date) and Seller is willing, ready and able to perform its obligations hereunder, Seller’s sole remedy shall be to terminate this Agreement and receive and retain all of the Earnest Money and any earnings thereon as liquidated damages, not as a penalty. PURCHASER AND SELLER AGREE THAT IT WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO QUANTIFY THE ACTUAL DAMAGES TO SELLER IN THE EVENT OF A BREACH BY PURCHASER, THAT THE AMOUNT OF ALL EARNEST MONEY IS A REASONABLE ESTIMATE OF SUCH ACTUAL DAMAGES, AND THAT SELLER’S EXCLUSIVE REMEDY IN THE EVENT OF A BREACH BY PURCHASER SHALL BE TO RETAIN ALL EARNEST MONEY AND ANY EARNINGS THEREON AS LIQUIDATED DAMAGES.

/s/ GAK	/s/ NAC
Initials of Seller	Initials of Purchaser

(b) After Closing, in the event of a breach by Purchaser of its obligations under this Agreement that survive Closing, Seller may exercise any rights and remedies available at law or in equity.

4.2. Seller’s Defaults; Purchaser’s Remedies.

(a) In the event of a material breach by Seller of its obligations under this Agreement, which breach is not cured within five (5) days after Seller’s receipt of notice of default from Purchaser (provided that no such cure period shall extend the Closing Date or apply for a breach of the obligation to close by the Closing Date), Purchaser may elect one of the following two remedies: (a) terminate this Agreement and receive a refund of the Earnest Money, any earnings thereon, plus reimbursement from Seller for Purchaser’s reasonable out of pocket costs incurred in connection with the negotiation of this Agreement up to $25,000; or (b) enforce specific performance of this Agreement against Seller, including the right to recover reasonable attorneys’ fees. PURCHASER AND SELLER AGREE THAT IT WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO QUANTIFY THE ACTUAL DAMAGES TO PURCHASER IN THE EVENT OF A BREACH BY SELLER, THAT THE AMOUNT OF ALL EARNEST MONEY IS A REASONABLE ESTIMATE OF SUCH ACTUAL DAMAGES, AND THAT IN THE EVENT PURCHASER SELECTS TO ENFORCE ITS REMEDIES UNDER (A) ABOVE, PURCHASER SHALL RECEIVE A REFUND OF ALL EARNEST MONEY AND ANY EARNINGS THEREON, AND PURCHASER’S OUT OF POCKET COSTS.

(b) After Closing, in the event of a breach by Seller of its obligations under this Agreement that survive Closing, Purchaser may exercise any rights and remedies available at law or in equity.

4.3. Limited Liability. Notwithstanding anything to the contrary herein, Purchaser on its own behalf and on behalf of its agents, members, partners, employees, representatives, officers, directors, agents, related and

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affiliated entities, successors and assigns (collectively, the “Purchaser Parties”) hereby agrees that in no event or circumstance shall any of the members, partners, employees, representatives, officers, directors, agents, property management company, affiliated or related entities of Seller or Seller’s property management company have any personal liability under this Agreement. Seller on its own behalf and on behalf of its agents, members, partners, employees, representatives, related and affiliated entities, successors and assigns hereby agrees that in no event or circumstance shall any of the Purchaser Parties have any personal liability under this Agreement. Notwithstanding anything to the contrary contained herein, except with respect to Seller’s obligations to cooperate in causing the return of the Earnest Money to Purchaser: (a) the maximum aggregate liability of Seller, and the maximum aggregate amount which may be awarded to and collected by Purchaser (including, without limitation, for any breach of any representation, warranty and/or covenant of Seller) under this Agreement or any documents executed pursuant hereto or in connection herewith, including, without limitation, the Exhibits attached hereto (collectively, the “Other Documents”) shall, under no circumstances whatsoever, exceed 1% of the Purchase Price (the “CAP Amount”); and (b) no claim by Purchaser alleging a breach by Seller of any representation, warranty and/or covenant of Seller contained herein or any of the Other Documents may be made, and Seller shall not be liable for any judgment in any action based upon any such claim, unless and until such claim, either alone or together with any other claims by Purchaser alleging a breach by Seller of any such representation, warranty and/or covenant, is for an aggregate amount in excess of $50,000.00 (the “Floor Amount”), in which event Seller’s liability respecting any final judgment concerning such claim or claims shall be for the entire amount thereof, subject to the CAP Amount set forth in clause (a) above; provided, however, that if any such final judgment is for an amount that is less than or equal to the Floor Amount, then Seller shall have no liability with respect thereto, but Purchaser shall be the prevailing party for purposes of Section 8.13.

ARTICLE 5. CLOSING

5.1. Closing and Escrow. The consummation of the transaction contemplated herein (“Closing”) shall occur on the Closing Date at the offices of the Escrow Agent. Closing shall occur through an escrow with the Escrow Agent. Funds shall be deposited into and held by Escrow Agent in a closing escrow account with a bank satisfactory to Purchaser and Seller. Upon satisfaction or completion of all closing conditions and deliveries, Escrow Agent shall immediately record and deliver the Deed and deliver the closing documents to the appropriate parties and make disbursements according to the closing statements executed by Seller and Purchaser. Provided such supplemental escrow instructions are not in conflict with this Agreement as it may be amended in writing from time to time, Seller and Purchaser agree to execute such supplemental escrow instructions as may be appropriate to enable Escrow Agent to comply with the terms of this Agreement. The parties understand that the Closing shall occur in San Diego, California requiring that all necessary deliveries to escrow must be completed by 11:00 A.M. on the Closing Date.

5.2. Seller’s Deliveries in Escrow. On or before 11:00 A.M. on the Closing Date, Seller shall deliver in escrow to the Escrow Agent the following:

(a) Deed. That certain Special Warranty Deed substantially in the form of Exhibit D attached hereto (“Deed”), sufficient to vest title to the Property in Purchaser subject only to the Permitted Exceptions;

(b) Bill of Sale and Assignment of Ground Lease and Contracts. A counterpart of the Bill of Sale and Assignment of Ground Lease and Contracts substantially in the form of Exhibit E attached hereto (“Bill of Sale”), executed and acknowledged by Seller;

(c) NPS Lease Termination. A counterpart of the NPS Lease Termination substantially in the form of Exhibit F attached hereto;

(d) State Law Disclosures. Such disclosures and reports as are required by applicable state and local law in connection with the conveyance of real property;

(e) FIRPTA. A Foreign Investment in Real Property Tax Act affidavit executed by Seller;

(f) Authority. Evidence of the existence, organization and authority of Seller and of the authority of the persons executing documents on behalf of Seller required by and reasonably satisfactory to Purchaser’s counsel and Escrow Agent;

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(g) Ground Lease. A copy of the Ground Lessor’s Consent; and

(h) Other Deliveries. Any other Closing deliveries required to be made by or on behalf of Seller hereunder or reasonably required to effect the Closing of this transaction consistent with this Agreement.

5.3. Purchaser’s Deliveries in Escrow. On or before 9:00 AM on the Closing Date, Purchaser shall deliver in escrow to the Escrow Agent the following:

(a) Purchase Price. The Purchase Price, less (i) the Earnest Money that is applied to the Purchase Price plus or minus applicable prorations, deposited by Purchaser with the Escrow Agent, and (ii) in accordance with Section 2.2, the $300,000 security deposit under the NPS lease (less the amount of any unpaid monetary obligations of Purchaser as the Tenant under the NPS Lease, which accrued prior to the closing including any outstanding rent, at the Closing). The Purchase Price shall be tendered by Purchaser in immediate, same-day federal funds wired for credit into the Escrow Agent’s escrow account;

(b) Bill of Sale and Assignment of Ground Lease and Contracts. A counterpart of the Bill of Sale, executed by Purchaser;

(c) NPS Lease Termination. A counterpart of the NPS Lease Termination, executed by Purchaser;

(d) State Law Disclosures. Such disclosures and reports as are required by applicable state and local law in connection with the conveyance of real property;

(e) Indemnity. A mechanic’s lien indemnity, if required, in form reasonably satisfactory to the Escrow Agent and the Title Company; and

(f) Other Deliveries. Any other Closing deliveries required to be made by or on behalf of Purchaser hereunder or reasonably required to effect the Closing of this transaction consistent with this Agreement.

5.4. NPS Lease Termination. Upon receipt of the fully executed NPS Lease Termination, Title Company shall date the NPS Lease Termination the date of the Closing and deliver a completely executed copy of the NPS Lease Termination to Purchaser and Seller.

5.5. Closing Statements/Closing Costs.

(a) Seller and Purchaser shall deposit with the Escrow Agent executed closing statements consistent with this Agreement in the form required by the Escrow Agent.

(b) Seller and Purchaser shall execute such returns, questionnaires and other documents as shall be required with regard to all applicable real property transaction taxes imposed by applicable federal, state or local law or ordinance.

(c) Seller shall pay the fees of any counsel representing Seller in connection with this transaction. Seller shall also pay the following costs and expenses:

(i) one-half of the escrow fee, if any, which may be charged by the Escrow Agent or the Title Company; and

(ii) all of its recording fees.

(d) Purchaser shall pay the fees of any counsel representing Purchaser in connection with this transaction. Purchaser shall also pay the following costs and expenses:

(i) one-half of the escrow fee, if any, which may be charged by the Escrow Agent or the Title Company;

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(ii) the transfer fees, if any, associated with the assignment of the Ground Lease pursuant to Section 2.1;

(iii) the owner’s title insurance premium for an owner’s title insurance policy and any endorsements requested by Purchaser;

(iv) the excise, recording, deed, imposed transfer tax, documentary stamp tax or similar tax which becomes payable by reason of the transfer of the Property under applicable state or local law, including, without limitation, any real estate excise tax; and

(v) all of its recording fees.

5.6. Possession. At the time of Closing, Purchaser shall continue to possess the Property without interruption.

5.7. Return of Records. At the time of Closing, Seller shall return to Purchaser all books, records and other information relating to the Property, which were previously delivered to Seller by Purchaser (i.e. not items created by or at the request of Seller) and are currently in Seller’s possession.

ARTICLE 6. PRORATIONS AND ADJUSTMENTS

6.1. Prorations. At least two (2) business days prior to the Closing Date, Seller shall provide to Purchaser such information and verification reasonably necessary to support the prorations and adjustments under this Article 6. To the extent Purchaser pays operating expenses, taxes, ground lease rent, assessments and utility charges with respect to such Property pursuant to the NPS Lease, the Ground Lease or as the sole occupant of the Building, Purchaser shall continue to be responsible for and shall timely pay such charges pursuant to the terms and provisions of the NPS Lease and Seller shall not be responsible therefor. All other taxes, assessments and utility charges with respect to such Property shall be prorated between Seller and Purchaser, based on the actual number of days in the applicable period, as of the close of the day immediately preceding such Closing Date, with Seller bearing all such items to the extent attributable to the period prior to such Closing Date and Purchaser bearing all such items to the extent attributable the period commencing on such Closing Date. Seller shall receive a credit for any rent, operating expenses or other amounts to be paid (and remain unpaid) by Purchaser to Seller that accrue on or before the Closing Date pursuant to the terms of the NPS Lease.

6.3. Sales Commissions. Seller and Purchaser represent and warrant each to the other that they have not dealt with any real estate broker, sales person or finder in connection with this transaction. In the event of any claim for broker’s or finder’s fees or commissions in connection with the negotiation, execution or consummation of this Agreement or the transactions contemplated hereby, each party shall indemnify and hold harmless the other party from and against any such claim based upon any statement, representation or agreement of such party.

6.4. Pre-Closing Expenses. Purchaser will not be delinquent in paying all bills and invoices for labor, goods, material and services of any kind relating to the respective Property, utility charges, taxes or any other fee or charge that the Purchaser is obligated to pay pursuant to the NPS Lease relating to the period prior to such Closing.

ARTICLE 7. REPRESENTATIONS AND WARRANTIES

7.1. Seller’s Representations and Warranties. As a material inducement to Purchaser to execute this Agreement and consummate this transaction, Seller represents and warrants to Purchaser that:

(a) Organization and Authority. Seller has been duly organized, is validly existing, and is in good standing as a Delaware limited liability company. Seller is in good standing and is qualified to do business in the state in which the Real Property is located. Seller has the full right and authority and has obtained any and all consents required to enter into this Agreement and to consummate or cause to be consummated the transactions contemplated hereby. This Agreement has been, and all of the documents to be delivered by Seller at the Closing, will be, authorized and properly executed and constitute, or will constitute, as appropriate, the valid and binding obligations of Seller, enforceable in accordance with their terms.

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(b) Conflicts and Pending Actions or Proceedings. There is no agreement to which Seller is a party or, to Seller’s knowledge, binding on Seller or the Property which is in conflict with this Agreement, or which challenges or impairs Seller’s ability to execute or perform its obligations under this Agreement. There is not now pending or, to the best of Seller’s knowledge, threatened, any action, suit or proceeding before any court or governmental agency or body against Seller that would prevent Seller from performing its obligations hereunder or against or with respect to the Property. No condemnation, eminent domain or similar proceedings are pending or, to Seller’s knowledge, threatened with regard to the Property. Seller has not received any notice and has no knowledge of any pending or threatened liens, special assessments, impositions or increases in assessed valuations to be made against the Property.

(c) Ground Lease. To the present, actual knowledge of Seller, the Ground Lease is in full force and effect and no default, dispute or controversy exists with respect to Seller’s obligations and responsibilities under the Ground Lease.

7.2. Purchaser’s Representations and Warranties. As a material inducement to Seller to execute this Agreement and consummate this transaction, Purchaser represents and warrants to Seller that:

(a) Organization and Authority. Purchaser has been duly organized and is validly existing as a Delaware corporation, in good standing and will be qualified to do business in the state in which the Real Property is located on the Closing Date. Subject only to obtaining certain internal approvals prior to the Closing Date, Purchaser has the full right and authority and has obtained any and all consents required to enter into this Agreement and to consummate or cause to be consummated the transactions contemplated hereby. This Agreement has been, and all of the documents to be delivered by Purchaser at the Closing will be, authorized and properly executed and constitutes, or will constitute, as appropriate, the valid and binding obligation of Purchaser, enforceable in accordance with their terms.

(b) Conflicts and Pending Action. There is no agreement to which Purchaser is a party or to Purchaser’s knowledge binding on Purchaser which is in conflict with this Agreement. There is no action or proceeding pending or, to Purchaser’s knowledge, threatened against Purchaser which challenges or impairs Purchaser’s ability to execute or perform its obligations under this Agreement.

(c) “As-Is” Purchase. Purchaser is an experienced commercial real estate owner and, except as set forth in this Agreement or in any document executed at Closing pursuant to or in connection with this Agreement, shall rely solely upon its own evaluation and investigation of the condition and all aspects of the Property. Purchaser acknowledges that as the previous owner of the Property who sold the Property to Seller on December 20, 2005, and as the entity in possession and control of the Property for the entire time since it sold its interest in the Property, Purchaser is in the best position to know and understand the Property, and Purchaser has inspected the Property and all of the documents that Purchaser deems appropriate and has determined that the Property is satisfactory to Purchaser to proceed with this transaction. PURCHASER IS PURCHASING THE PROPERTY “AS-IS, WHERE IS AND WITH ALL FAULTS” IN ITS PRESENT CONDITION, SUBJECT TO REASONABLE USE, WEAR, TEAR, CONSTRUCTION ACTIVITIES AND NATURAL DETERIORATION BETWEEN THE DATE HEREOF AND THE CLOSING DATE AND FURTHER AGREES THAT NEITHER SELLER NOR ANY AGENT, DIRECT OR INDIRECT PARTNER, DIRECT OR INDIRECT MEMBER, EMPLOYEE OR REPRESENTATIVE OF THE FOREGOING (i) SHALL BE LIABLE FOR ANY LATENT OR PATENT DEFECTS IN THE PROPERTY OR (ii) HAVE MADE ANY REPRESENTATION WHATSOEVER REGARDING THE PROPERTY OR ANY PART THEREOF, THE CONSTRUCTION OR ANY OTHER THING RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND (iii) PURCHASER, IN EXECUTING, DELIVERING AND PERFORMING THIS AGREEMENT, HAS NOT AND DOES NOT RELY UPON ANY STATEMENT, INFORMATION, OR REPRESENTATION TO WHOMSOEVER MADE OR GIVEN, WHETHER TO PURCHASER OR OTHERS, AND WHETHER DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, MADE BY ANY PERSON, EXCEPT AS EXPRESSLY SET FORTH HEREIN. IN ADDITION TO THE FOREGOING, PURCHASER REPRESENTS THAT BEFORE THE EFFECTIVE DATE PURCHASER HAS EXAMINED THE PROPERTY AND OTHER MATTERS AS IT DEEMS APPROPRIATE, AND IS FAMILIAR WITH THE PHYSICAL AND ENVIRONMENTAL CONDITION OF THE PROPERTY AND HAS CONDUCTED SUCH OTHER INVESTIGATION OF THE AFFAIRS AND CONDITION OF THE PROPERTY AS PURCHASER CONSIDERS APPROPRIATE. NEITHER SELLER, NOR ANY AFFILIATE OF SELLER, NOR ANY AGENT, DIRECT OR INDIRECT PARTNER, DIRECT OR INDIRECT MEMBER, EMPLOYEE OR REPRESENTATIVE OF THE

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FOREGOING HAVE MADE OR WILL BE ALLEGED TO HAVE MADE ANY ORAL OR WRITTEN REPRESENTATIONS, WARRANTIES, PROMISES OR GUARANTIES WHATSOEVER TO PURCHASER, WHETHER EXPRESS OR IMPLIED, AND, IN PARTICULAR, NO SUCH REPRESENTATIONS, WARRANTIES, PROMISES OR GUARANTIES HAVE BEEN MADE OR WILL BE MADE OR WILL BE ALLEGED TO HAVE BEEN MADE WITH RESPECT TO THE PHYSICAL CONDITION, CONSTRUCTION, DESIGN, ENVIRONMENTAL CONDITION OR OPERATION OF THE PROPERTY, THE ACTUAL OR PROJECTED REVENUE AND EXPENSES OF THE PROPERTY, THE PERMITS, ZONING AND OTHER LAWS, REGULATIONS AND RULES APPLICABLE TO THE PROPERTY OR THE COMPLIANCE OF THE PROPERTY THEREWITH, THE CONSTRUCTION, DESIGN, CONDITION OR SAFETY OF THE PROPERTY OR ANY IMPROVEMENTS THEREON OR ANY UTILITIES AND SERVICES WITH RESPECT THERETO OR THE CONDITIONS OF ANY SOILS AND GEOLOGY, LOT SIZE, OR SUITABILITY OF THE PROPERTY OR ITS IMPROVEMENTS FOR A PARTICULAR PURPOSE, THE QUANTITY, QUALITY OR CONDITION OF ANY PERSONAL PROPERTY OR FIXTURES, THE USE OR OCCUPANCY OF THE PROPERTY OR ANY PART THEREOF OR ANY OTHER MATTER OR THING AFFECTING OR RELATED TO THE PROPERTY OR THE TRANSACTIONS CONTEMPLATED HEREBY, EXCEPT AS, AND SOLELY TO THE EXTENT SPECIFICALLY SET FORTH HEREIN. EXCEPT AS, AND SOLELY TO THE EXTENT, SPECIFICALLY SET FORTH HEREIN, NEITHER SELLER OR ANY AFFILIATE OF SELLER, NOR ANY AGENT, DIRECT OR INDIRECT PARTNER, DIRECT OR INDIRECT MEMBER, EMPLOYEE OR REPRESENTATIVE OF THE FOREGOING HAVE MADE OR WILL MAKE ANY ORAL OR WRITTEN REPRESENTATIONS, WARRANTIES, PROMISES OR GUARANTIES WHATSOEVER TO PURCHASER, WHETHER EXPRESS OR IMPLIED, AND, IN PARTICULAR, THAT NO SUCH REPRESENTATIONS, WARRANTIES, PROMISES OR GUARANTIES HAVE BEEN MADE OR WILL BE ALLEGED TO HAVE BEEN MADE WITH RESPECT TO THE TRUTH, ACCURACY OR COMPLETENESS OF ANY MATERIALS, REPORTS, DATA OR OTHER INFORMATION, INCLUDING WITHOUT LIMITATION THE CONTENTS OF THE BOOKS AND RECORDS OF SELLER OR REPORTS OR OTHER MATTERS LISTED ON EXHIBITS OR SCHEDULES TO THIS AGREEMENT OR REFERRED TO HEREIN, PHYSICAL CONDITION AND ENVIRONMENTAL SURVEYS, INFORMATIONAL BROCHURES WITH RESPECT TO THE PROPERTY, QUESTIONNAIRES (INCLUDING REIT QUESTIONNAIRES), RENT ROLLS, ANY INFORMATION PROVIDED IN CONNECTION WITH ANY OTHER REQUEST OF PURCHASER OR INCOME AND EXPENSE STATEMENTS, WHICH SELLER OR ITS REPRESENTATIVES MAY HAVE DELIVERED, MADE AVAILABLE OR FURNISHED TO PURCHASER IN CONNECTION WITH THE PROPERTY. PURCHASER HAS ENTERED INTO THIS AGREEMENT, AFTER HAVING MADE AND RELIED SOLELY ON ITS OWN INDEPENDENT INVESTIGATION, INSPECTION, ANALYSIS, APPRAISAL, EXAMINATION AND EVALUATION OF THE FACTS AND CIRCUMSTANCES AND THE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED HEREIN. PURCHASER ACKNOWLEDGES THAT THE DESIGN AND/OR CONSTRUCTION OF THE PROPERTY MAY NOT BE IN COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT OF 1990, AS AMENDED AND OTHER LAWS, AND SELLER MAKES NO REPRESENTATIONS WITH RESPECT TO SAME. WITHOUT LIMITING THE FOREGOING, NEITHER SELLER, NOR ANY AGENT, DIRECT OR INDIRECT PARTNER, DIRECT OR INDIRECT MEMBER, EMPLOYEE OR REPRESENTATIVE OF THE FOREGOING HAS MADE ANY REPRESENTATION OR WARRANTY WHATSOEVER REGARDING HAZARDOUS MATERIALS OF ANY KIND OR NATURE ON, ABOUT OR WITHIN THE PROPERTY OR THE PHYSICAL CONDITION OF THE PROPERTY AND PURCHASER AGREES TO ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING BUT NOT LIMITED TO, CONSTRUCTION OR DESIGN DEFECTS AND ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS MAY NOT HAVE BEEN REVEALED BY PURCHASER’S INVESTIGATIONS OR ANY OTHER INFORMATION PURCHASER HAS REVIEWED. NOTWITHSTANDING ANY OF THE FOREGOING, THE FOREGOING REPRESENTATION OF PURCHASER IS NOT INTENDED TO LIMIT, AND IS SUBJECT TO, THE SELLER REPRESENTATIONS.

7.3. Survival of Representations and Warranties. The representations and warranties set forth in this Article 7 are made as of the Effective Date and are remade as of the Closing Date, and such representations and warranties (and any representations and warranties in any other documents delivered to Purchaser pursuant to the provisions of this Agreement) shall not be deemed to be merged into or waived by the instruments of Closing, but shall survive for nine (9) months after the Closing Date.

9

ARTICLE 8. MISCELLANEOUS

8.1. Parties Bound. Neither party may assign this Agreement without the prior written consent of the other, and any such prohibited assignment shall be void; provided, however, that Purchaser may assign this Agreement without Seller’s consent to an Affiliate. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the respective legal representatives, successors, assigns, heirs, and devisees of the parties. For the purposes of this paragraph, the term “Affiliate” means (i) an entity that directly or indirectly controls, is controlled by or is under common control with Purchaser, or (ii) a partnership or other entity in which Purchaser or an entity described in (i) is a partner or other owner; and the term “control” means the power to direct the management of such entity through voting rights, ownership or contractual obligations.

8.2. Headings. The article and paragraph headings of this Agreement are for convenience only and in no way limit or enlarge the scope or meaning of the language hereof.

8.3. Expenses. Except as otherwise expressly provided herein, each party hereto shall pay its own expenses incident to this Agreement and the transactions contemplated hereunder, including all legal and accounting fees and disbursements.

8.4. Invalidity and Waiver. If any portion of this Agreement is held invalid or inoperative, then so far as is reasonable and possible the remainder of this Agreement shall be deemed valid and operative, and, to the greatest extent legally possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The failure by either party to enforce against the other any term or provision of this Agreement shall not be deemed to be a waiver of such party’s right to enforce against the other party the same or any other such term or provision in the future.

8.5. Governing Law and Venue. This Agreement shall, in all respects, be governed, construed, applied, and enforced in accordance with the laws of the state of Utah and venue and jurisdiction in any action involving, relating to or arising from this Agreement shall lie solely and exclusively with the courts in the County of Salt Lake, State of Utah.

8.6. Survival. The provisions of this Agreement and the obligations of the parties not fully performed at the Closing shall survive the Closing for one year and shall not be deemed to be merged into or waived by the instruments of Closing. Any claim for performance of an obligation after Closing shall be barred and shall lapse unless a claim is made in writing, with a description of the claim made, on or before the first anniversary of Closing.

8.7. No Third Party Beneficiary. This Agreement is not intended to give or confer any benefits, rights, privileges, claims, actions, or remedies to any person or entity as a third party beneficiary, decree, or otherwise.

8.8. Entirety and Amendments. This Agreement embodies the entire agreement between the parties and supersedes all prior agreements and understandings relating to the Property. This Agreement may be amended or supplemented only in writing by a non-electronic instrument executed by the party against whom enforcement is sought. For the avoidance of doubt, copies of signed instruments that are electronically transmitted constitute a writing for this purpose.

8.9. Time of the Essence. Time is of the essence in the performance of this Agreement.

8.10. Time. All times, whenever specified herein, shall be local time in San Diego, California.

8.11. Confidentiality. Subject to Section 8.12, (i) the parties agree to keep all negotiations and the terms of this Agreement confidential, and shall not disclose such terms to any person, without the prior written approval of the other party, and (ii) Purchaser agrees that the books, records and other information relating to the Property reviewed by or delivered to Purchaser as well as the results from all studies, tests and inspections conducted on the Real Property by Purchaser or its representatives are confidential information under this Agreement and shall not be disclosed nor used by Purchaser except in furtherance of completing the transactions contemplated by this Agreement. The confidentiality obligations set out in clause (i) of this Section 8.11 shall survive the Closing, and clauses (i) and (ii) of this Section 8.11 shall survive any termination of this Agreement, but the confidentiality obligations set forth in clause (ii) of this Section 8.11 shall not survive the Closing.

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8.12. Press Release. Until the Closing, neither Seller nor Purchaser will release or cause or permit to be released any press notices, or publicity (oral or written) or advertising promotion relating to, or otherwise announce or disclose or cause or permit to be announced or disclosed, in any manner whatsoever, the terms, conditions or substance of this Agreement without first obtaining the written consent of the other party except those disclosures that are required by law, including the federal securities laws, applicable stock exchange requirements or contractual obligation (in which case notice shall be timely provided to the other party of such requirement and disclosure). The foregoing shall not preclude either party from discussing the substance or any relevant details of such transactions with any of its attorneys, accountants, professional consultants, lenders, partners, investors, or any prospective lender, partner or investor, as the case may be, or prevent either party hereto, from complying with laws, rules, regulations and court orders, including without limitation, governmental regulatory, disclosure, tax and reporting requirements, or from making disclosures in the ordinary course of its due diligence inspections and contacts with third parties related thereto. Notwithstanding the foregoing, any party to this transaction (and each employee, agent or representative of the foregoing) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to them relating to such tax treatment and tax structure except to the extent maintaining such confidentiality is necessary to comply with any applicable federal or state securities laws. The authorization in the preceding sentence is not intended to permit disclosure of any other information unrelated to the tax treatment and tax structure of the transaction including (without limitation) (i) any portion of the transaction documents or related materials to the extent not related to the tax treatment or tax structure of the transaction, (ii) the existence or status of any negotiations unrelated to the tax issues, or (iii) any other term or detail not relevant to the tax treatment or the tax structure of the transaction.

8.13. Attorneys’ Fees. Should either party employ attorneys to enforce any of the provisions hereof, the non-prevailing party agrees to pay the prevailing party all reasonable costs, charges, and expenses, including reasonable attorneys’ fees, expended or incurred by the prevailing party in connection therewith, whether incurred prior to, during or subsequent to any bankruptcy, receivership, reorganization, appellate, or other legal proceeding.

8.14. Notices. All notices required or permitted hereunder shall be in writing and shall be served on the parties at the addresses set forth in Exhibit G. Any such notices shall be either (i) sent by overnight delivery using a nationally recognized overnight courier, in which case notice shall be deemed delivered one business day after deposit with such courier, (ii) sent by facsimile on a business day, in which case notice shall be deemed delivered upon transmission of such notice with confirmed receipt by the sender’s machine, or (iii) sent by personal delivery, in which case notice shall be deemed delivered upon receipt or refusal of delivery. A party’s address may be changed by written notice to the other party; provided, however, that no notice of a change of address shall be effective until actual receipt of such notice. Copies of notices are for informational purposes only, and a failure to give or receive copies of any notice shall not be deemed a failure to give notice. The attorney for a party has the authority to send notices on behalf of such party.

8.15. Construction. The parties acknowledge that the parties and their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.

8.16. Remedies Cumulative. Except as expressly provided to the contrary in this Agreement, the remedies provided in this Agreement shall be cumulative and shall not preclude the assertion or exercise of any other rights or remedies available by law, in equity or otherwise.

8.17. Calculation of Time Periods. Unless otherwise specified, in computing any period of time described herein, the day of the act or event after which the designated period of time begins to run is not to be included and the last day of the period so computed is to be included, unless such last day is a Saturday, Sunday or legal holiday for national banks in the location where the Property is located, in which event the period shall run until the end of the next day which is neither a Saturday, Sunday, or legal holiday. The last day of any period of time described herein and the time during any day by which an event must occur shall be deemed to end at 5 p.m.

8.18. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of such counterparts shall constitute one agreement. To facilitate execution of this Agreement, the parties may execute and exchange by telephone facsimile counterparts of the signature pages.

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8.19. Further Assurances. In addition to the acts and deeds recited herein and contemplated to be performed, executed or delivered by either party at Closing, each party agrees to perform, execute and deliver, on or after the Closing any further actions, documents, and will obtain such consents, as may be reasonably necessary or as may be reasonably requested to fully effectuate the purposes, terms and conditions of this Agreement or to further perfect the conveyance, transfer and assignment of the Property to Purchaser.

8.20. Approval. To the extent any approval or consent shall be required in this Agreement such approval or consent shall not be unreasonably withheld, unless the terms of and conditions of such approval or consent are to the sole discretion of such party.

8.21. Environmental Release by Purchaser. Without limiting any provision in this Agreement, Purchaser, for itself and any of its successors and assigns and their affiliates, hereby irrevocably and absolutely waives its right to recover from, and forever releases and discharges, and covenants not to file or otherwise pursue any legal action (whether based on contract, statutory rights, common law or otherwise) against Seller or any members, partners, employees, representatives, officers, directors, agents, property management company, affiliated or related entities of Seller or Seller’s property management company with respect to any and all suits, actions, proceedings, investigations, demands, claims, liabilities, obligations, fines, penalties, liens, judgments, losses, injuries, damages, settlement expenses or costs of whatever kind or nature, whether direct or indirect, known or unknown, contingent or otherwise (including any action or proceeding brought or threatened or ordered by any governmental authority), including, without limitation, attorneys’ and experts’ fees and expenses, and investigation and remediation costs that may arise on account of or in any way be connected with the Property or any portion thereof including, without limitation, the physical, environmental and structural condition of the Property or any law or regulation applicable thereto, or any other matter relating to the use, presence or discharge of Hazardous Materials on, under, in, above or about the Property. For purposes of this Agreement, the term “Hazardous Materials” means any substance, chemical, compound, product, solid, gas, liquid, waste, byproduct, pollutant, contaminant or other material that is hazardous, toxic, ignitable, corrosive, carcinogenic or otherwise presents a risk of danger to human, plant or animal life or the environment or that is defined, determined or identified as such in any federal, state or local law, rule or regulation (whether now existing or hereafter enacted or promulgated) and any judicial or administrative order or judgment, in each case relating to the protection of human health, safety and/or the environment, including, but not limited to, any materials, wastes or substances that are included within the definition of (A) “hazardous waste” in the federal Recourse Conservation and Recovery Act; (B) “hazardous substances” in the federal Comprehensive Environmental Response, Compensation and Liability Act; (C) “pollutants” in the federal Clean Water Act; (D) “toxic substances” in the federal Toxic Substances Control Act; (E) “oil or hazardous materials” in the laws or regulations of any state or commonwealth, and (F) any substance, material, waste, pollutant or contaminant listed or defined as hazardous or toxic under any Environmental Law. The term “Environmental Laws” includes without limitation the Resource Conservation and Recovery Act and the Comprehensive Environmental Response Compensation and Liability Act and other federal laws governing the environment as in effect on the date of this Agreement, together with their implementing regulations, guidelines, rules or orders as of the date of this Agreement, and all state, regional, county, municipal and other local laws, regulations, ordinances, rules or orders that are equivalent or similar to the federal laws recited above or that purport to regulate Hazardous Materials. The provisions of this Section 8.21 shall survive the Closing or any termination of this Agreement.

8.22. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[Signature Page Follows]

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

SELLER: BMR-383 COLOROW DRIVE LLC, a Delaware limited liability company		PURCHASER: NPS PHARMACEUTICALS, INC., a Delaware corporation
By	/S/ GARY A. KREITZLER	By	N. ANTHONY COLES
	Name: Gary A. Kreitzler Title: Executive V.P.		Name: N. Anthony Coles Title: Chief Executive Officer and President

[SIGNATURE PAGE: 383 COLOROW DRIVE PURCHASE AND SALE AGREEMENT]

Escrow Agent has executed this Agreement in order to confirm that Escrow Agent shall act as escrowee with respect to and hold in escrow the Earnest Money and the interest earned thereon, and shall disburse the Earnest Money and the interest earned thereon, pursuant to the provisions of Exhibit B hereof.

ESCROW AGENT: LANDAMERICA COMMERCIAL SERVICES
By	/s/ Janine Hudson

	Name: Janine Hudson
	Title: Commercial Escrow Officer
Dated:	May 9, 2007

AGREEMENT OF PURCHASE AND SALE

[383 Colorow Drive, Salt Lake City, Utah]

EXHIBITS

Exhibit A	Legal Description of Land
Exhibit B	Earnest Money Escrow Provisions
Exhibit C	Ground Lessor Consent
Exhibit D	Deed
Exhibit E	Bill of Sale and Assignment of Ground Lease
Exhibit F	NPS Lease Termination
Exhibit G	Notice Addresses
Exhibit H	Permitted Exceptions

EXHIBIT A

LEGAL DESCRIPTION OF LAND

Property located on the University Of Utah at Research Park.

Three parcels of land located within the Southeast Quarter Of Section 3, Township 1 South, Range 1 East, Salt Lake Base And Meridian, described as follows:

Leasehold estate:

Beginning at a point South 65º11’09” East 66.35 feet and North 54º38’21” East 190.000 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet, and North 54º38’21” East 190.000 feet From the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 54º42’57” West 573.288 feet; thence North 35º21’39” West 61.714 feet; thence North 54º38’21” East 589.38 feet; thence South 35º21’40” East 602.601 feet; thence South 54º38’21” West 399.379 feet to the point of beginning.

Non-exclusive easements for purposes of access and landscaping to run concurrently with the Lease:

Beginning at a point South 65º11’09” East 66.35 feet from the existing street monument at Tabby Lane and Colorow Drive, said Point of Beginning also being a record West 1970.16 feet and North 1931.31 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35º21’39” West 540.887 feet; thence South 54º42’57” East 573.288 feet; thence South 54º38’21” West 190.000 feet to the point of beginning, and

Beginning at a point South 65º11’09” East 66.35 feet and North 54º38’21” East 589.379 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet and North 54º38’21” East 589.379 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35º21’40” West 602.601 feet; thence South 46º58’28” East 615.196 feet; thence South 54º38’21” West 123.845 feet to the point of beginning

The following is shown for informational purposes only: Tax Parcel No. 16-03-400-002-2007 and 16-03-400-002-6007

The basis of bearing for this parcel is the record bearing of North 35º21’39” West along the center line of Colorow Drive between the existing street monuments at Tabby Lane and Wakara Drive.

[EXHIBIT A]

EXHIBIT B

EARNEST MONEY ESCROW PROVISIONS

1. Investment and Use of Funds. The Escrow Agent shall invest the Earnest Money in government insured interest-bearing accounts satisfactory to Purchaser, shall not commingle the Earnest Money with any funds of the Escrow Agent or others, and shall promptly provide Purchaser and Seller with confirmation of the investments made. If the Closing under this Agreement occurs, the Escrow Agent shall deliver the Earnest Money to, or upon the instructions of, Seller on the Closing Date.

2. Interpleader. Seller and Purchaser mutually agree that in the event of any controversy regarding the Earnest Money, unless mutual written instructions are received by the Escrow Agent directing the Earnest Money’s disposition, the Escrow Agent shall not take any action, but instead shall await the disposition of any proceeding relating to the Earnest Money or, at the Escrow Agent’s option, the Escrow Agent may interplead all parties and deposit the Earnest Money with a court of competent jurisdiction in which event the Escrow Agent may recover all of its court costs and reasonable attorneys’ fees. Seller or Purchaser, whichever loses in any such interpleader action, shall be solely obligated to pay such costs and fees of the Escrow Agent, as well as the reasonable attorneys’ fees of the prevailing party in accordance with the other provisions of this Agreement.

3. Delivery. Except as otherwise expressly provided herein, upon not less than three (3) business days’ prior written notice to the Escrow Agent and the other party, Escrow Agent shall deliver the Earnest Money to the party requesting the same; provided, however, that if the other party shall, within said three (3) business day period, deliver to the requesting party and the Escrow Agent a written notice that it disputes the claim to the Earnest Money, Escrow Agent shall retain the Earnest Money until it receives written instructions executed by both Seller and Purchaser as to the disposition and disbursement of the Earnest Money, or until ordered by final court order, decree or judgment, which is not subject to appeal, to deliver the Earnest Money to a particular party, in which event the Earnest Money shall be delivered in accordance with such notice, instruction, order, decree or judgment.

4. Liability of Escrow Agent. The parties acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and for their convenience, that the Escrow Agent shall not be deemed to be the agent of either of the parties, and that the Escrow Agent shall not be liable to either of the parties for any action or omission on its part taken or made in good faith, and not in disregard of this Agreement, but shall be liable for its negligent acts and for any loss, cost or expense incurred by Seller or Purchaser resulting from the Escrow Agent’s mistake of law respecting the Escrow Agent’s scope or nature of its duties. Seller and Purchaser shall jointly and severally indemnify and hold the Escrow Agent harmless from and against all costs, claims and expenses, including reasonable attorneys’ fees, incurred in connection with the performance of the Escrow Agent’s duties hereunder, except with respect to actions or omissions taken or made by the Escrow Agent in bad faith, in disregard of this Agreement or involving negligence on the part of the Escrow Agent.

[EXHIBIT B]

EXHIBIT C

GROUND LESSOR CONSENT

ESTOPPEL CERTIFICATE

To: BMR – 383 Colorow Drive LLC

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128

Attention: General Counsel

NPS Pharmaceuticals, Inc.

383 Colorow Drive

Salt Lake City, Utah 84108

Attn: Office of General Counsel

LandAmerica Commercial Services

750 B. Street, #3000

San Diego, California 92101

Attn:                                         

Re: Property Address: 383 Colorow Drive, Salt Lake City, Utah (the “Property”)

BMR-383 Colorow Drive LLC limited liability company (“Lessee”) has entered into that certain Agreement for Purchase and Sale (“Purchase Agreement”), dated May 9, 2007 by and between Lessee and NPS Pharmaceuticals, Inc., a Delaware corporation (the “Purchaser”) whereby Purchaser shall acquire a fee interest in the Property.

With the knowledge and understanding that Purchaser will be relying on the statements contained herein in acquiring the Property, as of the date hereof, The University of Utah (“Ground Lessor”) hereby certifies to Purchaser as follows:

1. Ground Lessor is the lessor at the Property under that certain Ground Lease (the “Lease”) dated December 10, 2003 by and between Ground Lessor and Lessee; the Lease has not been cancelled, modified, extended or amended and there are no other agreements, written or oral, affecting or relating to Ground Lessor’s lease of the Land as described on Exhibit 1 attached hereto (the “Land”), together with all improvements and fixtures located on the Land (the “Improvements”).

2. The Lease was assigned to Lessee by Purchaser on December 20, 2005 as part of a sales-leaseback transaction. The Lease, subject to any rights of extension, terminates on December 9, 2043.

3. Base rent is currently payable in the amount of $15,400 per month.

4. Lessee is not currently paying estimated payments of additional rent.

5. To the best of Ground Lessor’s knowledge, Lessee has not assigned the Lease and has sublet the Land and the Improvements only to Purchaser.

6. The Lease is in full force and effect, free from default and free from any event which could become a default under the Lease and Ground Lessor has no claims against the Lessee, and there are no disputes with the Lessee.

7. Ground Lessor has received no notice of prior sale, transfer or assignment, hypothecation or pledge of the Lease or of the rents payable thereunder.

8. In connection with the consummation of the Purchase Agreement, Ground Lessor hereby consents to the assignment of Lessee’s rights under the Lease to Purchaser.

[EXHIBIT C]

The undersigned has executed this Estoppel Certificate with the knowledge and understanding that Purchaser is acquiring the Property in reliance on this Estoppel Certificate and that the undersigned will be bound by this Estoppel Certificate. The statements contained herein may be relied upon by Lessee, Purchaser and LandAmerica Commercial Services, and any mortgagee of the Property and their respective successors and assigns.

Dated the      day of                     .

By
	Name:
	Title:

[EXHIBIT C]

EXHIBIT 1 OF

GROUND LESSOR CONSENT ESTOPPEL CERTIFICATE

LEGAL DESCRIPTION OF LAND

Property located on the University Of Utah at Research Park.

Three parcels of land located within the Southeast Quarter Of Section 3, Township 1 South, Range 1 East, Salt Lake Base And Meridian, described as follows:

Leasehold estate:

Beginning at a point South 65º11’09” East 66.35 feet and North 54º38’21” East 190.000 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet, and North 54º38’21” East 190.000 feet From the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 54º42’57” West 573.288 feet; thence North 35º21’39” West 61.714 feet; thence North 54º38’21” East 589.38 feet; thence South 35º21’40” East 602.601 feet; thence South 54º38’21” West 399.379 feet to the point of beginning.

Non-exclusive easements for purposes of access and landscaping to run concurrently with the Lease:

Beginning at a point South 65º11’09” East 66.35 feet from the existing street monument at Tabby Lane and Colorow Drive, said Point of Beginning also being a record West 1970.16 feet and North 1931.31 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35º21’39” West 540.887 feet; thence South 54º42’57” East 573.288 feet; thence South 54º38’21” West 190.000 feet to the point of beginning, and

Beginning at a point South 65º11’09” East 66.35 feet and North 54º38’21” East 589.379 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet and North 54º38’21” East 589.379 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35º21’40” West 602.601 feet; thence South 46º58’28” East 615.196 feet; thence South 54º38’21” West 123.845 feet to the point of beginning

The following is shown for informational purposes only: Tax Parcel No. 16-03-400-002-2007 and 16-03-400-002-6007

The basis of bearing for this parcel is the record bearing of North 35º21’39” West along the center line of Colorow Drive between the existing street monuments at Tabby Lane and Wakara Drive.

[EXHIBIT C]

EXHIBIT D

FORM OF DEED

When recorded, return to

(and send tax notices to):

NPS Pharmaceuticals, Inc.

Attn: Morgan Brown

383 Colorow Drive

Salt Lake City, Utah 84108

Tax Parcel ID No.: ___________________

SPECIAL WARRANTY DEED

For Ten Dollars ($10.00) and other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, BMR-383 COLOROW DRIVE LLC, a Delaware limited liability company (“Grantor”), whose address is 17140 Bernardo Center Drive, Suite 222, San Diego, California 92128, hereby sells, conveys, and warrants against all claiming by, through, or under, Grantor to, NPS PHARMACEUTICALS, INC., a Delaware corporation, whose address is 383 Colorow Drive, Salt Lake City, Utah, 84108, all of Grantor’s right, title and interest (if any) in and to the improvements and fixtures located on the following described land located in Salt Lake County, Utah, to wit:

Property located on the University Of Utah at Research Park.

Three parcels of land located within the Southeast Quarter Of Section 3, Township 1 South, Range 1 East, Salt Lake Base And Meridian, described as follows:

Leasehold estate:

Beginning at a point South 65º11’09” East 66.35 feet and North 54º38’21” East 190.000 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet, and North 54º38’21” East 190.000 feet From the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 54º42’57” West 573.288 feet; thence North 35º21’39” West 61.714 feet; thence North 54º38’21” East 589.38 feet; thence South 35º21’40” East 602.601 feet; thence South 54º38’21” West 399.379 feet to the point of beginning.

Non-exclusive easements for purposes of access and landscaping to run concurrently with the Lease:

Beginning at a point South 65º11’09” East 66.35 feet from the existing street monument at Tabby Lane and Colorow Drive, said Point of Beginning also being a record West 1970.16 feet and North 1931.31 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35º21’39” West 540.887 feet; thence South 54º42’57” East 573.288 feet; thence South 54º38’21” West 190.000 feet to the point of beginning, and

Beginning at a point South 65º11’09” East 66.35 feet and North 54º38’21” East 589.379 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet and North 54º38’21” East 589.379 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35º21’40” West 602.601 feet; thence South 46º58’28” East 615.196 feet; thence South 54º38’21” West 123.845 feet to the point of beginning

The following is shown for informational purposes only: Tax Parcel No. 16-03-400-002-2007 and 16-03-400-002-6007

The basis of bearing for this parcel is the record bearing of North 35º21’39” West along the center line of Colorow Drive between the existing street monuments at Tabby Lane and Wakara Drive.

[EXHIBIT D]

Grantor has executed this Special Warranty Deed in favor of Grantee effective this              day of                     , 2007.

GRANTOR:	BMR-383 COLOROW DRIVE LLC, a Delaware limited liability company
	By
		Name:
		Title:

State of California)

County of San Diego)

On the              day of                                 , 2007, before me                                              , Notary Public, personally appeared                             , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity on behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal

NOTARY PUBLIC

My Commission Expires:

[Seal]

[EXHIBIT D]

EXHIBIT E

BILL OF SALE AND ASSIGNMENT OF GROUND LEASE

This instrument is executed and delivered as of the              day of                 , 2007 (“Assignment”) pursuant to that certain Agreement of Purchase and Sale (“Agreement”) dated                     , 2007, by and between BMR-383 Colorow Drive LLC, a Delaware limited liability company (“Seller”), and NPS Pharmaceuticals, Inc., a Delaware corporation (“Purchaser”), covering an approximately 93,650 rentable square foot, three-story, laboratory and office building located at 383 Colorow Drive, Salt Lake City, Utah 84108 (the “Building”) and Seller’s leasehold interest in the land as described on Exhibit A attached hereto (the “Land”) pursuant to that certain Ground Lease (as defined below), together with all improvements and fixtures located on the Land (the “Improvements” and, collectively with the Building and the Land, the “Real Property”), except for those items listed in Section 1.1(c) of the Agreement and Section 1(b) below, the ownership of which will be retained by Seller.

1. Sale of Personalty. For good and valuable consideration, Seller hereby sells, transfers, sets over and conveys to Purchaser the following:

(a) Intangible Property. The following property to the extent assignable: All, right, title and interest of Seller, if any, in and to: (1) all intangible personal property now or hereafter used exclusively in connection with the operation, ownership, maintenance, management, or occupancy of the Real Property; (2) the plans and specifications for the Improvements; (3) warranties, indemnities, applications, permits, approvals and licenses pertaining to the Real Property; and (4) insurance proceeds and condemnation awards or claims thereto to the extent provided in the Agreement.

(b) Improvements. The following property to the extent assignable: All, right, title and interest of Seller, if any, in and to all Improvements and fixtures located on the Land.

2. Assignment of Leases. For good and valuable consideration, Seller hereby assigns, transfers, sets over and conveys to Purchaser, and Purchaser hereby accepts the following as of the Closing Date (as defined in the Agreement): all of Seller’s right, title and interest in and to that certain Ground Lease dated December 10, 2003 between Seller, as lessee, and the University of Utah, as ground lessor (the “Ground Lease”) covering the Land and the Improvements, as set forth on Exhibit B attached hereto, and, subject to the terms and conditions of the Agreement, Purchaser hereby assumes all of the lessee’s obligations under the Ground Lease arising from and after the Closing Date.

3. Indemnification. Seller shall defend, indemnify and hold harmless Purchaser from and against any liability, damages, causes of action, expenses, and attorneys’ fees incurred by Purchaser by reason of the failure of Seller to fulfill, perform, discharge, and observe its obligations with respect to the Ground Lease arising prior to the Closing Date. Purchaser shall defend, indemnify and hold harmless Seller from and against any liability, damages, causes of action, expenses, and attorneys’ fees incurred by Seller by reason of the failure of Purchaser to fulfill, perform, discharge, and observe its obligations with respect to the Ground Lease arising on or after the Closing Date.

4. Successors and Assigns. This Assignment is binding upon, and shall inure to the benefit of Seller and Purchaser and their respective heirs, legal representatives, successors and assigns.

5. Counterparts. This Assignment may be executed in counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. To facilitate execution of this Assignment, the parties may execute and exchange by telephone facsimile counterparts of the signature pages.

6. Governing Law. This Assignment shall be governed by, interpreted under, and construed and enforceable in accordance with, the laws of the State of Utah.

7. Attorneys’ Fees. Should either party employ attorneys to enforce any of the provisions hereof, the non-prevailing party agrees to pay the prevailing party all reasonable costs, charges, and expenses, including reasonable attorneys’ fees, expended or incurred by the prevailing party in connection therewith.

[EXHIBIT E]

IN WITNESS WHEREOF, the undersigned have caused this Bill of Sale and Assignment of Leases and Contracts to be executed as of the date written above.

SELLER:		PURCHASER:
BMR-383 COLOROW DRIVE LLC, a Delaware limited liability company		NPS PHARMACEUTICALS, INC., a Delaware corporation
By		By
	Name:		Name:
	Title:		Title:

[EXHIBIT E]

EXHIBIT F

TERMINATION OF LEASE AGREEMENT

THIS TERMINATION OF LEASE AGREEMENT (the “Termination”) is made and entered into as of May     , 2007 (the “Effective Date”), by and between BMR-383 Colorow Drive LLC, a Delaware limited liability company, whose address is 17140 Bernardo Center Drive, Suite 222, San Diego, California 92128, Attn: General Counsel/Real Estate (the “Landlord”), and NPS Pharmaceuticals, Inc., a Delaware corporation, whose address is 383 Colorow Drive, Salt Lake City, Utah 84108, Attn: Morgan Brown (the “Tenant”). This Termination is entered into with reference to the following facts:

A. On December 22, 2005, Landlord and Tenant entered into that certain Lease Agreement (the “Agreement”), affecting the real property described on Exhibit 1 (the “Premises”).

B. The parties now desire to terminate the Agreement.

NOW THEREFORE the parties agree and give notice as follows.

1. Termination. The parties hereby terminate the Agreement. The Agreement is hereby declared to be of absolutely no force or effect. Each party hereby releases, cancels, annuls, rescinds, discharges, disclaims, waives and releases any and all rights and benefits it may have under the Agreement, and unconditionally releases the other party to the Agreement from any and all obligations under the Agreement, except Landlord does not release Tenant from its indemnity obligations set forth in Section 9.1 of the Agreement (“Tenant’s Indemnity Obligations”), which shall survive the termination of the Agreement. All obligations of all parties under the Agreement have been performed in full or waived, except for Tenant’s Indemnity Obligations.

2. Security Deposit. Security Deposit. Pursuant to the Agreement of Purchase and Sale between the parties hereto and dated as of May 9, 2007 (the “Agreement of Purchase and Sale”), the Tenant receives a credit against the Purchase Price (as defined in the Agreement of Purchase and Sale) in an amount equal to the amount of the security deposit, less any unpaid monetary obligations under the Agreement which accrued prior to the closing of the Agreement of Purchase and Sale, including any outstanding rent. As such, the parties agree that the Landlord shall retain the security deposit in the amount of $300,000, and the Tenant shall not have any claim thereto, except as set out in this paragraph 2.

3. No Constructive Notice. Neither the Agreement nor this Termination shall be deemed to give any person constructive notice of any facts or circumstances whatsoever.

4. Further Assurances. Each party agrees to execute any further documentation that any title insurance company shall require in order to further evidence the termination of the Agreement or to enable any title insurance company to issue policy(ies) of title insurance without any reference whatsoever to the Agreement or the rights of any party thereunder.

5. No Conditions. This Termination is absolutely unconditional.

6. Parties. This Termination shall bind and benefit the parties and their successors and assigns, and may be relied upon by any title insurance company and any prospective purchaser, lessee, or mortgagee of the Premises or any interest therein.

[Signature page follows]

[EXHIBIT F]

IN WITNESS WHEREOF, the parties hereto have executed this Termination of Lease Agreement, as of the Effective Date.

LANDLORD:		TENANT:
BMR-383 COLOROW DRIVE LLC, a Delaware limited liability company		NPS PHARMACEUTICALS, INC., a Delaware corporation
By		By
	Name:		Name:
	Title:		Title:

[EXHIBIT F]

EXHIBIT 1 OF

TERMINATION OF LEASE AGREEMENT

LEGAL DESCRIPTION OF LAND

Property located on the University Of Utah at Research Park.

Three parcels of land located within the Southeast Quarter Of Section 3, Township 1 South, Range 1 East, Salt Lake Base And Meridian, described as follows:

Leasehold estate:

Beginning at a point South 65º11’09” East 66.35 feet and North 54º38’21” East 190.000 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet, and North 54º38’21” East 190.000 feet From the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 54º42’57” West 573.288 feet; thence North 35º21’39” West 61.714 feet; thence North 54º38’21” East 589.38 feet; thence South 35º21’40” East 602.601 feet; thence South 54º38’21” West 399.379 feet to the point of beginning.

Non-exclusive easements for purposes of access and landscaping to run concurrently with the Lease:

Beginning at a point South 65º11’09” East 66.35 feet from the existing street monument at Tabby Lane and Colorow Drive, said Point of Beginning also being a record West 1970.16 feet and North 1931.31 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35º21’39” West 540.887 feet; thence South 54º42’57” East 573.288 feet; thence South 54º38’21” West 190.000 feet to the point of beginning, and

Beginning at a point South 65º11’09” East 66.35 feet and North 54º38’21” East 589.379 feet from the existing street monument at Tabby Lane and Colorow Drive, said point of beginning also being a record West 1970.16 feet, North 1931.31 feet and North 54º38’21” East 589.379 feet from the Southeast Corner of Section 3, Township 1 South, Range 1 East, Salt Lake Base and Meridian; and running thence North 35º21’40” West 602.601 feet; thence South 46º58’28” East 615.196 feet; thence South 54º38’21” West 123.845 feet to the point of beginning

The following is shown for informational purposes only: Tax Parcel No. 16-03-400-002-2007 and 16-03-400-002-6007

The basis of bearing for this parcel is the record bearing of North 35º21’39” West along the center line of Colorow Drive between the existing street monuments at Tabby Lane and Wakara Drive.

[EXHIBIT F]

EXHIBIT G

NOTICE ADDRESSES

To Purchaser at: NPS Pharmaceuticals, Inc. Attn: Morgan Brown 383 Colorow Drive Salt Lake City, Utah 84108 Telephone:       (801) 583-4939 Facsimile:         (801) 583-4961 Email: mbrown@npsp.com	To Seller at: BMR-383 Colorow Drive LLC Attn: General Counsel 17140 Bernardo Center Drive, Suite 222 San Diego, CA 92128 Telephone:       858.485.9840 Facsimile:         858.485.9843 E-mail: Kevin.Simonsen@biomedrealty.com
with a copy to: Office of General Counsel NPS Pharmaceuticals, Inc. 383 Colorow Drive Salt Lake City, Utah 84108 Telephone:       (801) 583-4939 Facsimile:         (801) 583-4961]	with a copy to: Latham & Watkins Attn: Finance Department Notice (BioMed–383 Colorow Drive – SJL) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone:       619-236-1234 Facsimile:         619-696-7419

[EXHIBIT G]

EXHIBIT H

PERMITTED EXCEPTIONS

1. Any facts, rights, interest, or claims which are not shown by the public records but which could be ascertained by an inspection of the land or which may be asserted by persons in possession, or claiming to be in possession, thereof.

2. Easements, liens, encumbrances, or claims thereof, which are not shown by the public records.

3. Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land, and that is not shown by the Public Records.

4. Any lien, or right to a lien, for services, labor, or material heretofore or hereafter furnished, imposed by law and not shown by the public records.

5. Unpatented mining claims, (b) reservations or exceptions in patents or in Acts authorizing the issuance thereof; (c) water rights, claims or title to water, whether or not the matters excepted under (a), (b), or (c) are shown by the public records.

6. Taxes or special assessments which are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the public records. Proceedings by a public agency, which may result in taxes or assessments, or notices of such proceedings, whether or not shown by the records of such agency or by the public records.

7. Any Service, installation, connection, maintenance or construction charges for sewer, water, electricity or garbage collection or disposal or other utilities unless shown as an existing lien by the public records.

8. Defects, liens, encumbrances, adverse claims or other matters, if any, created, first appearing in the public records or attaching subsequent to the effective date hereof but prior to the date the proposed insured acquires of record for value the estate or interest or mortgage thereon covered by this Commitment.

9. Taxes for the year 2007 are now a lien, but not yet due.

Tax ID No. 16-03-400-002-2007 (2006 taxes were paid in the amount of $167,419.62) Based on the valuation of improvements;

Tax ID No. 16-03-400-002-6007 (2006 taxes were paid in the amount of $39,602.28.) Based on privilege tax

10. Said property is included within the boundaries of Salt Lake City, and is subject to the charges and assessments thereof. (Phone No. 483-6900)

11. The Exceptions Reservations, Reversions, Covenants, Conditions, Limitations, Provisions, Right, Rights-of-way and Easements recited in the certain Land Patent:

Grantor: The United States of America

Patentee: The University of Utah

Dated: October 18, 1968

Recorded: November 19, 1968

[EXHIBIT H]

12. EASEMENT AND CONDITIONS CONTAINED THEREIN:

Tilled: “Department of the Army Easement for Right of Way Pipe Line”

Grantor: The Secretary of the Army

Grantee: Mountain Fuel Supply Company

Purpose: gas pipe line, and incidental purposes

Dated: July 11, 1957

Recorded: February 25, 1992

Entry No.: 5203999

Rook/Page: 6414/1485

13. Deed of Easement and Right of Way AND CONDITIONS CONTAINED THEREIN:

Grantor: The University of Utah

Grantee: Mountain Fuel Supply Company

Purpose: gas pipe line, and incidental purposes

Dated: June 14, 1996

Recorded: June 14, 1996

Entry No.: 6383493

Book/Page: 7423/0210

14. That certain Abstract of Findings and Order dated February 19, 2004, and recorded February 25, 2004, as Entry No. 8986829, in Book 8949. at page 5439, of County Records

15. Failure to comply the terms and conditions of the lease as shown in Schedule A.

16. Terms and conditions of that certain Covenants, Conditions, Restrictions And/Or Easements. Except Those Based On Race, Color. Creed, National Origin, Religion, Sex Handicap Or Familial Status, unless and only to the extent that said covenants (a) is exempt under Chapter 42, Section 3607 Of The United States Code or (b) relates to handicap but does not discriminate against handicap persons contained in instrument entitled “University of Utah Research Park Protective Covenants” as referenced in the unrecorded Lease Agreement as shown in Schedule A

17 INTENTIONALLY OMITTED.

18. Any rights, interests, or claims which may exist or arise by reason of the following fact(s) shown on a survey plat entitled “NPS Pharmaceuticals Building”, dated December 16, 2005, as revised December 21, 2005, prepared by Stantec Consulting Inc., Evan J. Wood, LS No. 183395

a. Gas pipe line across the Northeasterly portion,

b. Water pipe line across the Northeasterly portion,

c. Trail and Monument Area in Easterly portion of the property.

19. Rights of tenants as tenants only.

20. Rights or claims of parties in possession.

[EXHIBIT H]

21. The Company specifically excepts any and all matters pending against any lessee or tenant, being on or off record, including but not limited to, bankruptcies, judgment liens, Federal and State Tax Liens, etc., and makes no certification as to the checking of judgments, tax liens, or other encumbrances created by any lessee or tenant.

[EXHIBIT H]

EX-10.2

Exhibit 10.2

AGREEMENT OF PURCHASE AND SALE

IN CONSIDERATION OF the payment by the Purchaser to the Vendor of the Purchase Price herein set out and the representations, conditions and requirements to be fulfilled and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, TRANSGLOBE PROPERTY MANAGEMENT SERVICES LTD. IN TRUST (the “Purchaser”) hereby agrees to purchase from the Vendor, and NPS ALLELIX CORP. (the “Vendor”) agrees to sell to the Purchaser, the lands municipally known as 6850 Goreway Drive, Mississauga, Ontario and legally described in Schedule “A” (the “Lands”) and the two-storey office building consisting of approximately 85,795 square feet and the other buildings, structures, erections, improvements and appurtenances located on, in or under the Lands (collectively, the “Building”, and together with the Lands and the Chattels, the “Property”), on the terms and subject to the conditions of this Agreement.

1. Purchase Price

Subject to adjustment in accordance with Section 4, the purchase price for the Property shall be $4,800,000.00 (the “Purchase Price”) plus applicable taxes. The Purchase Price shall be allocated between the Lands and Building and the Chattels as follows:

Lands and Building	$	4,750,000.00
Chattels	$	50,000.00
Total	$	4,800,000.00

2. Method of Payment

The Purchase Price shall be payable as follows:

(a) within one Business Day following the date of execution and delivery of this Agreement by both parties, the Purchaser shall submit a cheque in the amount of $100,000 to the Vendor’s solicitors to be held by them, in trust, as hereinafter described; and

(b) the balance of the Purchase Price on Closing to the Vendor by certified cheque, subject to the adjustments made pursuant to Section 4.

The Vendor’s solicitors shall invest the deposit (as set out in (a) above) in an interest-bearing term deposit or bank account. The interest earned thereon shall, in the event this transaction is completed, be paid to the Purchaser following the Closing Date. If this transaction is not completed other than solely by reason of the default of the Purchaser, the deposit, together with all accrued interest thereon, shall be returned to the Purchaser forthwith without deduction. If this Agreement is not completed solely by reason of the default of the Purchaser, the Vendor shall be entitled to receive the deposit in addition to and without prejudice to all rights and damages available to the Vendor at law or in equity.

3. Closing

The closing of the purchase and sale of the Property shall occur on the day that is 14 days after the waiving of the conditions in Section 7 hereof, or such other date as may be mutually agreed upon between the Vendor and Purchaser (“Closing” or “Closing Date”).

4. Adjustments

Adjustments to the balance due on Closing shall be made as of the Closing Date for taxes, rates and charges, water and assessment rates, utilities, fuel costs and any other items ordinarily adjusted in this type of transaction. The day of Closing shall be for the Purchaser’s account, both as to income and expenses. The statement of adjustments for Closing is to be prepared by the Vendor and shall be delivered by it to the Purchaser at least five business days prior to Closing and shall have annexed thereto all reasonable details of the calculations used by the Vendor to arrive at credits and debits. The parties shall deliver mutual undertakings to re-adjust on the Closing Date in respect of those items specified

to be re-adjusted in this Section 4 and for the re-adjustment of any errors, omissions or changes in the statement of adjustments delivered on the Closing Date.

5. Realty Tax Appeals

The Vendor may (but shall not be obligated to) continue any appeals with respect to any realty taxes or assessments for periods prior to the 2007 taxation year. If the Vendor elects not to continue to pursue any such appeal, the Purchaser may (but shall not be obligated to) assume carriage thereof. If the Vendor has not, prior to the Closing Date, commenced an appeal for any such taxation year, the Purchaser may do so after Closing at its own expense if permitted by applicable law, provided that any increase in realty taxes resulting from appeals assumed or commenced by the Purchaser pursuant to this Section 5 shall, as between the Vendor and the Purchaser, be solely for the Purchaser’s account. The party having carriage of any such appeal or reassessment of realty taxes shall advise the other party of the status of any such appeal or reassessment as developments occur or upon request. No such appeal or reassessment shall be settled or compromised by the party having carriage without the prior consent of the other party, such consent not to be unreasonably withheld or delayed, if the other party would be adversely affected in any way by the outcome of the appeal or reassessment. The Vendor and the Purchaser shall jointly direct the City of Mississauga to pay any refunds or other amounts arising from any such appeals or reassessments of realty taxes for calendar years prior to 2007 to the Vendor.

6. Vendor’s Warranties and Covenants

The Vendor hereby covenants, warrants and agrees with the Purchaser and acknowledges that the Purchaser is relying upon such covenants, warranties and agreements, that:

(a) until the Closing Date, the Vendor shall maintain the Property and the Building in the same condition that exists as of the date of acceptance of this Agreement, reasonable wear and tear excluded;

(b) on Closing, there shall be no contracts and/or agreements with respect to the Property to be assumed by the Purchaser;

(c) the Vendor shall pay any and all outstanding tax arrears and penalties to the Closing Date on or before the Closing Date;

(d) there shall be no tenancy agreements respecting the Property, and the Purchaser shall be given vacant possession on the Closing Date; and

(e) the Vendor has full right, title and authority to transfer title to all the chattels at the Property shown in Schedule “B” attached hereto (the “Chattels”).

Save and except as expressly set out herein, the Purchaser acknowledges that it is purchasing the Property on an “as is, where is” basis and without any express or implied agreement, representation or warranty of any kind whatsoever as to the title, condition, area, suitability for development, physical, characteristics, profitability, use or zoning, the existence of latent defects (provided the Vendor has no prior knowledge of same), any environmental matter or as to the accuracy, currency or completeness for any information or documentation supplied or to be supplied in connection with the Property.

7. Purchaser’s Conditions

It is understood and agreed that this Agreement shall be conditional until 30 days following the date of execution and delivery of this Agreement by both parties (the “Conditional Period”) upon the following, which are included for the sole benefit of the Purchaser, and may be waived by it in whole or in part:

(a) the Purchaser satisfying itself as to the condition of the Property and the improvements located thereon and to conduct such searches or investigations as the Purchaser may require (specifically excluding invasive testing, except with the prior written consent of the Vendor). The Purchaser may have access to the Property upon reasonable notice to the Vendor for the purposes of investigating the condition of the Property, obtaining appraisals for financing and quotes for work to be completed after Closing,

provided such investigations and inspections do not unreasonably interfere with the occupants of and operations upon the Property. The Purchaser shall promptly repair at its sole cost and expense any damage to the Property caused by such tests, investigations and inspections and shall use its best efforts to minimize disruption to the occupants of and operations upon the Property;

(b) the Purchaser satisfying itself as to the financial information relating to the Property, including all income and expenses relating to the Property;

(c) the Purchaser, in its sole discretion, obtaining satisfactory financing; and

(d) the Purchaser, in its sole discretion, satisfying itself as to all Permitted Encumbrances.

If the Purchaser is not satisfied with the results of its inspections, or any of the items set out in this Section 7, the Purchaser may by written notice to the Vendor or its solicitors, within the Conditional Period terminate this agreement and the deposit shall be returned to the Purchaser with interest accrued thereon. If the Purchaser is satisfied with the results of its inspections, it shall provide written notice waiving these conditions prior to 5:00 p.m. (Toronto time) on the last day of the Conditional Period. In the event that such notice is not received by the Vendor or the Vendor’s solicitors within the time stipulated above, the conditions shall be deemed not to have been satisfied and this Agreement shall be null and void and the deposit with accrued interest shall be forthwith returned to the Purchaser without deduction, and the parties shall be released from all of its liabilities and obligations under this Agreement.

8. Governmental Authorizations and Access

The Vendor covenants and agrees as follows:

(a) from and after execution and delivery of this Agreement by both parties, the Vendor shall sign such directions, authorizations and consents, at no charge or cost to the Purchaser, as may be required by any governmental authorities to release any information on compliance matters that such authorities have on file to the Purchaser, together with a copy to the Vendor’s Solicitors. Such directions, authorization and consents shall not permit any inspections of the Property; and

(b) upon waiving of the conditions set out in Section 7, the Purchaser and its agents and consultants shall be entitled to enter upon the Property upon reasonable prior written notice to the Vendor with architects, tradesmen and prospective tenants for the purposes of drafting plans for any changes to the Property to be made after the Closing Date, provided such inspections do not unreasonably interfere with the occupants of the Property or cause disruption to the occupants of and operations upon the Property.

9. Title Search

Provided that on the Closing Date, title to the Property shall be good and marketable in fee simple, free from all encumbrances, save and except for the instruments registered against title to the Property as of the date hereof and listed in Schedule “C” (the “Permitted Encumbrances”) and other items disclosed to the Purchaser pursuant to this Agreement or any easements or agreements for public utilities required for the supply of utilities to the Property registered or unregistered against title, provided the same have been complied with in all material respects. If, by the last day of the Conditional Period, any valid objection to title is made in writing to the Vendor, and the Vendor is unable or unwilling to remove, remedy or satisfy these objections to title and in the event that the Purchaser will not waive them, this Agreement, notwithstanding any intermediate acts or negotiations in respect of such objections, shall be at an end and all moneys, including the deposit and interest accrued thereon, shall forthwith be returned to the Purchaser without deduction, abatement or set-off whatsoever. Except as may be otherwise contemplated by this Agreement, the Purchaser shall not call for the production of any title deed, abstract or other evidence of title to the Property, except such as are in the possession or control of the Vendor. The Purchaser shall be allowed until 6:00 p.m. on the next day after the Conditional Period to examine the title to the Property and to satisfy itself with respect to the matters referred to above and make requisitions to the Vendor’s solicitors, but except for any valid requisition made prior to such time, the Purchaser shall be deemed conclusively to have accepted the title of the Vendor to the Property. The Vendor agrees to discharge at its own expense all liens, charges and mortgages affecting the Property on or before the Closing Date other than the Permitted Encumbrances.

10. Immediate Deliveries

The Vendor agrees to provide, or make available for inspection, to the Purchaser within five business days following the date of execution and delivery of this Agreement by both parties, the following documents, to the extent such documents are within the Vendor’s possession or control:

(a) copies of any existing service and mechanical contracts and all other agreements in its possession relating to the Property, all of which are cancellable and will be cancelled by the Vendor on Closing;

(b) copy of the most recent plan of survey of the Property;

(c) copy of the lease dated January 9, 2001 (the “City Lease”) between The Corporation of the City of Mississauga, as landlord, and the Vendor, as tenant, with respect to lands to the south of the Lands that are used for the purpose of parking motor vehicles as more particularly set out in the City Lease;

(d) information with respect to expenses of the Property for 2006 and 2007 to date; and

(e) copies of all utility bills and tax bills for the Property for 2006 and 2007 to date.

All such documents and copies received by the Purchaser, together with any information derived therefrom, shall be held by it in strict confidence. If for any reason this transaction is not completed, all such materials, copies thereof and notices in respect thereof shall be forthwith returned to the Vendor.

11. Closing Arrangements

(a) The Vendor and the Purchaser acknowledge that the electronic registration system (hereinafter referred to as the “Teraview Electronic Registration System” or “TERS”) is operative on a mandatory basis in the Land Titles Office where the Property is located and accordingly, the following provisions shall prevail, namely:

(i) The Purchaser’s solicitors and the Vendor’s solicitors shall each be obliged to be authorized TERS users and in good standing with the Law Society of Upper Canada, and they are hereby authorized by the parties hereto to enter into a document registration agreement in the form adopted by the Joint LSUC-CBAO Committee on Electronic Registration of Title Documents on March 29, 2004 or any successor version thereto (the “Document Registration Agreement” or “DRA”), together with the additional requirement that the registering solicitor shall also be obliged to provide the non-registering solicitor with a copy of the registration report printed by TERS upon the registration of the electronic documents, as evidence of the registration thereof, within one business day of the Closing Date. It is understood and agreed that the DRA shall outline or establish the procedures and timing for completing this transaction electronically, and shall be executed by both the Vendor’s solicitors and the Purchaser’s solicitors and exchanged by courier or facsimile transmission between said solicitors (such that each solicitor has a photocopy or telefaxed copy of the DRA duly executed by both solicitors) by no later than two business days before the Closing Date.

(ii) The delivery and exchange of closing documents and the balance of the Purchase Price, and the release thereof to the Vendor and the Purchaser, as the case may be:

(A) shall not occur contemporaneously with the registration of the transfer/deed of the Property and other documents, if any, to be registered electronically; and

(B) shall be governed by the DRA, pursuant to which the solicitor receiving any closing documents, or the balance of the Purchase Price, will be required to hold same in escrow, and will not be entitled to release same except in strict accordance with the provisions of the DRA.

(iii) Each of the parties hereto agrees that the delivery of any of the closing documents not intended or required to be registered on title to the Property shall, unless the parties otherwise agree or unless otherwise provided for herein, be by way of delivery of originally signed copies thereof on the Closing Date to the other party.

(iv) Notwithstanding anything contained in this Agreement or in the DRA to the contrary, it is expressly understood and agreed by the parties hereto that an effective tender shall be deemed to have been validly made by either party (in this paragraph called the “Tendering Party”) upon the other party (in this paragraph called the “Receiving Party”) when the solicitor for the Tendering Party has:

(A) delivered all applicable closing documents and/or the balance of the Purchase Price to the Receiving Party’s solicitor in accordance with the provisions of this Agreement and the DRA;

(B) advised the solicitor for the Receiving Party, in writing, that the Tendering Party is ready, willing and able to complete the transaction in accordance with the terms and provisions of this Agreement; and

(C) has completed all steps required by TERS in order to complete this transaction that can be performed or undertaken by the Tendering Party’s solicitor without the cooperation or participation of the Receiving Party’s solicitor, and specifically when the Tendering Party’s solicitor has electronically “signed” the transfer/deed and any other closing document, if any, to be registered electronically for completeness and granted “access” to the Receiving Party’s solicitor (but without the Tendering Party’s solicitor releasing same for registration by the Receiving Party’s solicitor).

(b) On Closing, the Vendor shall deliver to the Purchaser the following:

(i) vacant possession of the Building;

(ii) all keys to the Building in the possession of the Vendor;

(iii) an assignment of all warranties and guarantees in favour of the Vendor, from third parties, if any, to the extent the same are assignable with respect to the Building or the Chattels;

(iv) a bill of sale for all of the Chattels listed in Schedule “B” hereto;

(v) an executed transfer/deed of land in registerable form;

(vi) a certificate of a senior officer of the Vendor to the effect that at the Closing Date the Vendor is not a non-resident of Canada within the meaning of Section 116 of the Income Tax Act (Canada);

(vii) a statutory declaration of an officer of the Vendor that to the best of its knowledge and belief, all accounts for labour and material concerning the Property are fully paid for and that no one has the right to file a lien under the Construction Lien Act (Ontario) against the Property;

(viii) the plans and specifications, structural drawings, mechanical and structural inspection reports to the extent within the Vendor’s possession.

(ix) an undertaking to re-adjust all items in the statement of adjustments, if necessary;

(x) a certificate of the Vendor disclosing its GST registration number;

(xi) an assignment and assumption agreement with respect to the City Lease, subject to obtaining the prior written consent of the City of Mississauga to such assignment as provided in the City Lease; and

(xii) such other documentation as may reasonably be requested by the Purchaser’s solicitors.

(c) On Closing, the Purchaser shall:

(i) pay the balance of the Purchase Price as stipulated in this Agreement;

(ii) deliver an undertaking to re-adjust all items set out in the statement of adjustments, if necessary, and forthwith;

(iii) deliver a statutory declaration from an officer of the Purchaser stating that the Purchaser is registered pursuant to subdivision (d) of Division V of Part IX of the Excise Tax Act (Canada), disclosing its registration number and stating that the Purchaser is purchasing the Property as principal and not as agent for any other party, and undertaking that it will remit directly to the Receiver General of Canada the goods and services tax payable and file the prescribed form pursuant to Section 228(4) of the Excise Tax Act (Canada) in connection with the purchase of the Lands and Building described in this Agreement and indemnify and save harmless the Vendor with respect to goods and services tax exigible in connection with the purchase of the Lands and Building described in this Agreement;

(iv) deliver an assignment and assumption agreement with respect to the City Lease, subject to obtaining the prior written consent of the City of Mississauga to such assignment as provided in the City Lease; and

(v) deliver such other documentation as may reasonably be requested by the Vendor’s solicitors.

(d) Subject to Section 11(a), it is a condition of Closing that all matters of payment, execution and delivery of documents by each party to the other and the acceptance for registration of the appropriate documents in the appropriate offices of public record shall be deemed to be concurrent requirements and it is specifically agreed that nothing will be complete at the Closing until everything required as a condition precedent at the Closing has been paid, executed and delivered and until all documents have been accepted for registration.

(e) The Purchase Price for the Property is exclusive of any applicable taxes set out in this paragraph. The Purchaser shall be responsible for paying, in addition to the Purchase Price, any land transfer tax, retail sales tax, similar taxes and registration fees payable in connection with the transfer of the Property to the Purchaser. The Purchaser shall pay to the Vendor on Closing any applicable goods and services tax exigible in connection with the purchase and sale of the Chattels. The Purchaser shall pay any applicable provincial sales taxes directly to the relevant governmental authority and shall indemnify and save harmless the Vendor with respect to the payment of same. The Vendor shall be responsible for registration fees payable in connection with the registration of discharges of any encumbrances or other claims or interests that are not Permitted Encumbrances. Each party shall pay its own legal fees with respect to this transaction.

12. Non-Registration

The Purchaser agrees that it shall not, at any time, register or permit or cause to be registered on the title to the Property, this Agreement or notice, transfer or assignment thereof or a caution relating thereto and that such registration shall permit the Vendor, at its sole option, to terminate this Agreement and make it absolutely null and void.

13. Risk

The Property shall remain at the risk of the Vendor until Closing.

14. Time of Essence

Time shall in all respects be of the essence hereof, provided that the time for so doing or completing of any matter provided for herein may be extended or abridged only by an agreement in writing signed by both the Vendor and the Purchaser or their respective solicitors. Except as expressly set out in this Agreement, the computation of any period of time referred to in this Agreement shall exclude the first day and include the last day of such period. If the time limited for the performance or completion of any matter under this Agreement expires or falls on a day that is not a business day, the time so limited shall extend to the next following business day.

15. Tender

Any tender of documents or money hereunder may be made upon the Vendor or the Purchaser or their respective solicitors on the day for completion of this Agreement. Money may be tendered by bank draft on a Canadian Schedule “A” Chartered Bank.

16. Complete Agreement

This Agreement and the Schedules attached hereto shall constitute the entire agreement between the Purchaser and the Vendor and there is no representation, warranty, collateral agreement or condition affecting this Agreement or the Property or supported hereby, other than as expressed herein in writing. This Agreement shall be read with all changes for gender or number required by the context. The words “completion” and “closing”, as the case may be, when used in such context shall refer to the Closing of the transaction herein contemplated.

17. Severability

If any provision contained in this Agreement or its application to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or the application of such provision to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected, and each provision of this Agreement shall be separately valid and enforceable to the fullest extent permitted by law.

18. Governing Law

This Agreement has been made in the Province of Ontario and for purposes hereof shall be construed in accordance with and governed by the laws of the Province of Ontario as an agreement made and entered into herein and to be wholly performed therein.

19. Planning Act

This Agreement is subject to compliance with Section 50 of the Planning Act (Ontario).

20. Lawyers as Agents

The solicitors acting for the Purchaser and the Vendor are hereby authorized on behalf of their respective clients to give or receive any moneys, notices, approvals, waivers or other documentation in connection with the transaction contemplated herein or to agree to any variation of the provisions hereof.

21. Further Assurances

Each party shall co-operate with and take such action as may be reasonably requested by the other party in order to carry out the provisions, purposes and intent of this Agreement.

22. Successors and Assigns

This Agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and permitted assigns, and shall be enforceable only by such successors and permitted assigns that have succeeded or which have received such assignment in the manner permitted by this Agreement.

23. Notices

Any notice, request, consent, acceptance, waiver or other communication required or permitted to be given under this Agreement (a “Notice”) shall be in writing and shall be deemed to have been sufficiently given or served for all purposes on the date of delivery if it is delivered by a recognized courier service or sent by facsimile to the parties at the applicable address set forth below:

(a) in the case of the Vendor addressed to it at:

NPS Allelix Corp.

c/o NPS Pharmaceuticals, Inc.

383 Colorow Drive

Salt Lake City, UT 84108

U.S.A.

Attention:         Bill Phifer

Fax:                  (801) 583-4961

with a copy to:

Blake, Cassels & Graydon LLP

Barristers & Solicitors

Box 25, Commerce Court West

199 Bay Street

Toronto, Ontario M5L 1A9

Attention:         John D. Hutmacher

Fax:                  (416) 863-2653

(b) in the case of the Purchaser addressed to it at:

TransGlobe Property Management Services Ltd.

5310 Explorer Drive

Mississauga, Ontario L4W 5H8

Attention:         Daniel Drimmer

Fax:                  (416) 234-8445

with a copy to:

Bloom Lanys Professional Corp.

2171 Avenue Road

Suite 200

Toronto, Ontario M5M 4B4

Attention:         Barbara Lanys

Fax:                  (416) 485-6054

By giving to the other party at least seven days’ Notice, any party may, at any time and from time to time, change its address for delivery or communication for the purposes of this Section.

24. Right to Assign

The Purchaser shall have the right, following payment of the deposit in Section 2, to assign its rights and obligations under this Agreement upon written notice to the Vendor, provided such assignee is an “affiliate” of the Purchaser (as that term is defined in the Ontario Business Corporations Act) and upon such assignment being made and written notice thereof being given to the Vendor or the Vendor’s solicitors, it is understood and agreed that the Purchaser shall be

relieved of any and all covenants, obligations and/or liabilities herein contained and the Vendor agrees to complete the transaction of purchase and sale herein with the said assignee as if the assignee were the Purchaser originally named herein and there shall be no personal liability upon the Purchaser herein.

25. Commissions

The parties agree and acknowledge that the Vendor and the Purchaser are represented by CB Richard Ellis Ltd. in connection with this transaction and the Vendor shall be solely responsible for payment of any agents’ fees or commissions payable to CB Richard Ellis Ltd.

26. Counterparts

This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument. Counterparts may be executed either in original or faxed form and the parties adopt any signatures received by a receiving fax machine as original signatures of the parties; provided, however, that any party providing its signature in such manner shall promptly forward to the other party an original of the signed copy of this Agreement which was so faxed.

27. Time for Acceptance

This Agreement shall be irrevocable by the Purchaser until 5:00 p.m. (Toronto time) on May 9, 2007, after which time, if not accepted, this Agreement shall be null and void and of no further force and effect.

IN WITNESS WHEREOF the parties have executed this Agreement.

Date of execution:	TRANSGLOBE PROPERTY MANAGEMENT
May 9, 2007		SERVICES LTD., IN TRUST
		By:	/S/ BARBARA LANYS
		Name:	Barbara Lanys
		Title:	Authorized Signing Officer
		I have authority to bind the Corporation.
Date of execution:	NPS ALLELIX CORP.
May 9, 2007
		By:	/S/ N. ANTHONY COLES
		Name:	N. Anthony Coles
		Title:	Chief Executive Officer and President
		I have authority to bind the Corporation.

SCHEDULE “A”

Lands

PIN 13260-0063(LT), being Part of Block E, Plan 919, designated as Parts 1 and 2 on Reference Plan 43R-8770, City of Mississauga.

SCHEDULE “B”

LIST OF CHATTELS

List of Chattels and Furniture: (chattels to be listed by Vendor)

•

•

•

All chattels currently in the Building shall remain in the Building.

SCHEDULE “C”

PERMITTED ENCUMBRANCES

1. Instrument No. TT120053 registered on June 15, 1959, being a notice of airport zoning regulations.

2. Instrument No. TT144298 registered on March 13, 1962, being a notice of airport zoning regulations.

3. Instrument No. VS164274 registered on March 9, 1971, being a joint venture agreement between Markborough Properties Limited and S. & A. Strasser Limited (provided same has not expired or terminated).

4. Instrument No. VS184410 registered on September 17, 1971, being a by-law exempting the Property from part-lot control.

5. Instrument No. LT2057426 registered on March 27, 2000, being a notice of airport zoning regulations.

EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, N. Anthony Coles, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NPS Pharmaceuticals, Inc.;

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

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

4. The registrant’s other certifying officer 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 the 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 quarterly report is being prepared;

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

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

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

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

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

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

Date: May 9, 2007	/S/ N. ANTHONY COLES
	N. Anthony Coles,
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, Gerard J. Michel, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NPS Pharmaceuticals, Inc.;

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

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

4. The registrant’s other certifying officer 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 quarterly report is being prepared;

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

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

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

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

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

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

Date: May 9, 2007	/s/ GERARD J. MICHEL
	Gerard J. Michel,
	Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we the undersigned Chief Executive Officer and Chief Financial Officer of NPS Pharmaceuticals, Inc. certify that, to our knowledge, the Quarterly Report of NPS Pharmaceuticals, Inc. on Form 10-Q for the fiscal quarter ended March 31, 2007 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects, the financial condition and results of operations of NPS Pharmaceuticals, Inc.

Date: May 9, 2007	/s/ N. ANTHONY COLES
	N. Anthony Coles,
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: May 9, 2007	/s/ GERARD J. MICHEL
	Gerard J. Michel,
	Chief Financial Officer (Principal Financial and Accounting Officer)

The foregoing certification is being furnished solely 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) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to NPS Pharmaceuticals, Inc. and will be retained by NPS Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.