10-K

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

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
OR
o	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 000-50439

NITROMED, INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	22-3159793 (IRS Employer Identification No.)
125 Spring Street, Lexington, Massachusetts (Address of principal executive offices)	02421 (Zip Code)
Registrant's telephone number, including area code: (781) 266-4000

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
(Title of class)

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

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES o    NO ý.

        The aggregate market value of the registrant's common stock held by nonaffiliates of the registrant was approximately $68,263,373, based on the price at which the registrant's common stock was last sold on June 30, 2004.

        As of March 7, 2005, there were 30,258,187 shares of the registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

        Specified portions of the registrant's proxy statement for the annual meeting of stockholders to be held on May 16, 2005, which are to be filed pursuant to Regulation 14A within 120 days after the end of the registrant's fiscal year ended December 31, 2004 are incorporated by reference into Item 5 of Part II and Part III of this report.

NITROMED, INC.

ANNUAL REPORT

ON FORM 10-K

INDEX

			PAGE
PART I
	Item 1.	Business	1
	Item 2.	Properties	34
	Item 3.	Legal Proceedings	34
	Item 4.	Submission of Matters to a Vote of Security Holders	34
PART II
	Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	35
	Item 6.	Selected Financial Data	36
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	37
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	46
	Item 8.	Financial Statements and Supplementary Data	47
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	73
	Item 9A.	Controls and Procedures	73
	Item 9B.	Other Information	73
PART III
	Item 10.	Directors and Executive Officers of the Registrant	73
	Item 11.	Executive Compensation	74
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	74
	Item 13.	Certain Relationships and Related Transactions	74
	Item 14.	Principal Accountant Fees and Services	74
PART IV
	Item 15.	Exhibits and Financial Statement Schedules	74
SIGNATURES			75

PART I

This annual report on Form 10-K contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of NitroMed to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of revenue, expenses, earnings or losses from operations, or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning product research, development and commercialization timelines; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include risks that are described in "Business—Factors That May Affect Future Results" and elsewhere in this annual report and that are otherwise described from time to time in our Securities and Exchange Commission reports filed after this report.

The forward-looking statements included in this annual report represent our estimates as of the date of this annual report. We specifically disclaim any obligation to update these forward-looking statements in the future. These forward-looking statements should not be relied upon as representing our estimates or views as of any date subsequent to the date of this annual report.

ITEM 1. BUSINESS

Overview

        NitroMed is an emerging pharmaceutical company with substantial expertise and intellectual property in nitric oxide-based drug development which was incorporated in Delaware in 1992. Our goal is to become a leading, multi-product pharmaceutical company by developing innovative nitric oxide products and by building on our BiDil development experience and commercialization infrastructure to identify and market additional products for cardiovascular and metabolic diseases. We are developing our lead nitric oxide-enhancing drug candidate, BiDil, to treat African Americans diagnosed with heart failure. We recently concluded a phase III confirmatory clinical trial of BiDil, the results of which were presented at the annual meeting of the American Heart Association on November 8, 2004. Data from this trial presented at the American Heart Association annual meeting in November 2004, and published in the New England Journal of Medicine the same week, showed that African American patients with heart failure experienced a 43% improvement in survival after taking BiDil in addition to standard heart failure therapy, as compared to patients in a placebo group who received only standard heart failure therapy. The trial was halted in July 2004 due to significant survival benefits seen with BiDil. On December 23, 2004, we resubmitted a new drug application for BiDil to the Food and Drug Administration, or FDA. On February 3, 2005, the FDA accepted our new drug application resubmission as a complete class 2 resubmission, which means that under the Prescription Drug User Fee Act, FDA review of our resubmission is expected to be completed within six months of the date the resubmission was received, or June 23, 2005.

        We plan to directly market BiDil, if approved, to physicians who treat African Americans with heart failure. Accordingly, we have hired a senior vice president of sales and marketing, a vice president of marketing, three regional sales directors and twenty-one district sales managers. In addition, we recently entered into an agreement with Publicis Selling Solutions Inc., or Publicis, pursuant to which Publicis has employed a specialized field sales force of 195 representatives exclusively dedicated to the sale of our products. In addition, on February 16, 2005, we entered into a supply agreement with Schwarz Pharma Manufacturing, Inc., or Schwarz Pharma, pursuant to which we have engaged Schwarz Pharma to exclusively manufacture and supply BiDil. We expect to have available by the end of the first quarter of 2005 both the sales force and the quantities of finished product required to support the subsequent launch of BiDil, subject to FDA approval.

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        We are also applying our nitric oxide technology to develop novel pharmaceuticals, as well as safer and more effective versions of existing drugs, to target significant diseases and major commercial markets. Our nitric oxide development strategy involves the internal development of proprietary nitric oxide-enhancing drug candidates, such as BiDil, the co-development of nitric oxide-enhancing drugs with partners and the out-licensing of our nitric oxide-enhancing technology in exchange for potential milestone payments and royalties on sales. We have entered into corporate collaboration agreements with Boston Scientific Corporation, or Boston Scientific, to jointly develop nitric oxide-enhanced paclitaxel-coated stents, and with Merck Frosst Canada & Co., a Merck & Co. Inc. subsidiary, or Merck, to jointly develop nitric oxide-enhancing COX-2 inhibitors. The Boston Scientific collaboration is ongoing at the pre-clinical stage. On September 30, 2004, Merck voluntarily withdrew its marketed COX-2 inhibitor, Vioxx®, from worldwide markets and halted the phase II trial of our lead candidate in nitric oxide-enhancing COX-2 inhibitors. As a result, we agreed with Merck to terminate this collaboration in November 2004, and we have retained all rights to our technology in the field of nitric oxide-enhancing COX-2 inhibitors.

Our Nitric Oxide-Enhancing Medicines

        Nitric oxide is a naturally-occurring compound that is synthesized in cells to regulate a broad range of cellular reactions. Many disease states are associated with a deficiency in nitric oxide and might benefit from nitric oxide-enhancing medicines. For example, depleted levels of nitric oxide have been implicated in diseases such as heart failure, pulmonary hypertension and sexual dysfunction. Additionally, nitric oxide-enhancing medicines have been shown to reduce side effects associated with a variety of medications, including a broad range of anti-inflammatory medications. We generally choose drugs for nitric oxide enhancement from among those marketed medicines whose safety and efficacy we believe can be improved by increased nitric oxide levels in the body.

        We seek to produce our next generation nitric oxide-enhancing drug candidates by combining an existing, marketed medicine with a nitric oxide donor, which is a molecule capable of increasing nitric oxide levels in the body. The nitric oxide donor and the existing medicine can be combined together through either a chemical linkage to potentially create a proprietary new chemical entity or through the direct mixing of the medicine and the nitric oxide donor to potentially create a patentable new use and dosage form. We believe that the probability of clinical success for our next generation drug candidates is increased because regulatory approvals have already been achieved for the existing medicines that we are seeking to improve. We also believe that the commercial risk associated with these drug candidates is mitigated because many of these existing medicines have already generated significant sales in their markets. We have generated significant intellectual property rights for our nitric oxide technology and compounds to protect our interests and support our discovery and development of additional product candidates.

BiDil—treatment for heart failure in African Americans

        Heart failure, or end-stage cardiovascular disease, affects approximately five million Americans. There is no cure for this disease, and more than 50% of patients who have this disease die within five years of diagnosis. Studies indicate that African Americans suffer a disproportionate incidence of cardiovascular disease with respect to heart failure, and that they are more likely to die from it at a younger age. This dramatic ethnic difference in health outcomes has been attributed to a variety of factors, including access to medical care, management of heart failure and socioeconomic factors. Recent analyses of heart failure clinical trials, however, show that the mortality rate and the hospitalization rate for African Americans is significantly higher than for non-African Americans, even after adjustment for such factors. Based on data from the U.S. census bureau and the Centers for Disease Control, we estimate that approximately 750,000 African Americans have been diagnosed with heart failure, and we expect this number to grow to approximately 900,000 persons by 2010.

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        Our lead product candidate, BiDil, is an orally-administered nitric oxide-enhancing medicine. BiDil is a fixed dose combination of two drugs, isosorbide dinitrate and hydralazine. Isosorbide dinitrate is a nitric oxide donor. Hydralazine is an antioxidant and vasodilator agent, which means it protects the nitric oxide formed by isosorbide dinitrate and dilates blood vessels. Through these properties, BiDil is intended to provide a number of beneficial effects for African American heart failure patients, including increasing levels of nitric oxide in the body. Because heart failure is a chronic disease, we expect that, if approved, BiDil, like other medicines taken for chronic heart disease, will be taken for the duration of the patient's life.

        The African American Heart Failure Trial was a double-blind, placebo controlled study, meaning that neither the patients nor the investigators were informed during the trial which patients were receiving placebo, which is a pill that looks the same as the drug but has no active ingredients. The trial, which was co-sponsored by the Association of Black Cardiologists and enrolled 1,050 patients at 169 sites in the United States, was halted in July 2004 on the unanimous recommendation of the independent Data and Safety Monitoring Board and the steering committee for the trial due to the significant survival benefit seen in patients taking the drug. BiDil is also the subject of a new drug application previously filed with the FDA. The previously-filed new drug application received a non-approvable letter after it failed to satisfy statistical significance requirements in analyses of the effectiveness in the general heart failure population. Our work in the field of nitric oxide-enhancing medicines led us to believe that BiDil may enhance nitric oxide levels in the body and protect nitric oxide after it is formed. A retrospective analysis of the African American patients in the prior BiDil clinical studies suggested that BiDil might preferentially reduce mortality and hospitalization and improve quality of life in African Americans. We therefore obtained the rights to the previously submitted new drug application and supplemented it with the results of these ethnicity-based analyses. In response to this data, we received a letter from the FDA stating that, in addition to the data already submitted to the agency, a clearly positive, prospective clinical trial of BiDil in African Americans with heart failure could, together with the satisfaction of other conditions, including the FDA's approval of our manufacturing processes and marketing materials, provide a basis for the approval of BiDil.

        The results of the BiDil trial were presented at the annual meeting of the American Heart Association on November 8, 2004. The trial enrolled a total of 1,050 African American patients who had New York Heart Association class III or IV heart failure with dilated ventricles, constituting moderately severe and severe levels of heart failure. The primary end point for the trial was a composite score made up of weighted values for death from any cause, a first hospitalization for heart failure, and change in the quality of life. The study was halted early owing to a significantly higher mortality rate in the placebo group than in the group given BiDil. A 10.2 percent death rate was shown in the placebo group compared to a 6.2 percent death rate in the BiDil group, P=0.02, which represents a two in one hundred probability that the result is due to chance, and where P is a generally accepted measure of statistical significance. The mean composite score for the primary endpoint was significantly better in the group given BiDil than in the placebo group, P=0.01, as were its individual components: a 43 percent reduction in the rate of death from any cause, P=0.01, a 33 percent relative reduction in the rate of first hospitalization for heart failure, P=0.001, and a statistically significant improvement in quality of life, P=0.02, measured by the Minnesota Living with Heart Failure questionnaire. Adverse events reported in the trial included symptoms of headache and dizziness, which were significantly more frequent in the group given BiDil, and exacerbations of congestive heart failure (both moderate and severe), which were significantly more frequent in the placebo group. Based upon these results, on December 23, 2004, we resubmitted a new drug application for BiDil to the FDA. On February 3, 2005, the FDA accepted our new drug application resubmission as a complete class 2 resubmission, which means that under the Prescription Drug User Fee Act, FDA review of our resubmission is expected to be completed within six months of the date the resubmission was received, or June 23, 2005.

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Corporate Collaborations

Nitric Oxide Stents for the Treatment of Restenosis.

        Balloon angioplasty is a procedure to widen blocked arteries that have resulted from certain conditions such as high cholesterol. It is increasingly common during angioplasty to place a stent, or mesh medical device, into the diseased artery to help maintain the artery width and prevent its re-closure, or restenosis. Several cardiovascular device companies are developing and commercializing stents coated with chemotherapeutic agents or other therapeutic agents designed to help reduce the risk of restenosis. We have demonstrated that a stent coated with a nitric oxide donor can significantly reduce restenosis in a variety of animal studies.

        In November 2001, we entered into a research, development and license agreement with Boston Scientific pursuant to which we granted Boston Scientific an exclusive worldwide license to develop and commercialize nitric oxide-enhanced restenosis products. In December 2003, we agreed to extend the research collaboration to develop nitric oxide-enhanced paclitaxel-coated stents until December 31, 2005.

Nitric Oxide-Enhancing COX-2 Inhibitors for the Treatment of Pain and Inflammation.

        COX-2 inhibitors are a class of medicines that are effective in treating pain and inflammation. Inflammation is caused by the body's local response to injury and is part of the healing mechanism. However, the body sometimes overcompensates to cause acute and chronic problems of pain, swelling and loss of function. COX-2 inhibitors are prescribed for conditions such as arthritis, mild to moderate pain, migraine and fever. We have created several series of proprietary nitric oxide-enhancing COX-2 inhibitors that we believe could improve the safety and efficacy of this drug class. COX-2 inhibitors have demonstrated decreased gastrointestinal side effects compared to aspirin and other commonly prescribed non-steroidal, anti-inflammatory drugs. In our laboratories, nitric oxide has been shown in animal studies to further decrease the gastrointestinal side effects of COX-2 inhibitors when combined with low-dose aspirin.

        In December 2002, we entered into an exclusive, worldwide research collaboration and licensing agreement that granted Merck marketing and sales rights to our technology for nitric oxide-enhancing COX-2 inhibitors. The research portion of the agreement was for three years ending in December 2005. On September 30, 2004, Merck voluntarily withdrew its marketed COX-2 inhibitor, Vioxx, from worldwide markets and halted the phase II trial of our lead candidate in nitric oxide-enhancing COX-2 inhibitors, which was composed of a derivative of rofecoxib, the active ingredient in Vioxx. In November 2004, we agreed with Merck to terminate the collaboration agreement. Merck paid us a lump sum of $1.8 million, representing the full amount of the research funding owed to us for 2005, but is not required to provide us with any further funding. We retain all rights to our technology in the field of nitric oxide-enhancing COX-2 inhibitors and intend to evaluate the continued development of this technology in collaboration with other potential partners.

Internal Development Programs

        We are utilizing our nitric oxide expertise and proprietary position to develop product candidates for a variety of additional medical conditions. The following table highlights those classes of nitric oxide-enhancing medicines where we have created, or are seeking to create, intellectual property rights and where we believe we may offer a clinical benefit compared to existing FDA-approved medicines. Our efforts in these areas primarily consist of discovery-stage research primarily directed to establishing

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our intellectual property position. In the table below, NSAID refers to non-steroidal anti-inflammatory drug and PDE refers to phosphodiesterase.

Product Candidate and Therapeutic Area		Potential Clinical Benefit
Nitric Oxide-Enhancing NSAID's
•	Pain, inflammation, cancer and central nervous system diseases	•	Improved gastrointestinal tolerance; accelerated ulcer healing; reduced kidney damage and hypertension
Nitric Oxide-Enhancing PDE Inhibitors
•	Asthma	•	Increased airway circulation; reduced lung inflammation and decreased sensitivity to airborne allergens
•	Male erectile dysfunction	•	Increased response rate; rapid onset of action
•	Pulmonary hypertension	•	Increased efficacy; longer duration of action
•	Chronic obstructive airway disease	•	Increased airway circulation
Nitric Oxide-Enhancing Cardiovascular Medicines
•	Hypertension	•	Reduction of endothelial dysfunction
•	Heart failure	•	Improvement of blood pressure control
Nitric Oxide-Enhancing Gastrointestinal Protectants
•	Peptic ulcer	•	Improved efficacy; faster onset of action
Nitric Oxide-Enhancing Arginines
•	Kidney failure	•	Improved sodium and water balance

Our Strategy

        Our goal is to become a leading, multi-product pharmaceutical company by developing additional innovative nitric oxide products and by building on our BiDil development experience and commercialization infrastructure to identify and market additional products for cardiovascular and metabolic diseases. Key elements of our strategy include:

        Successfully commercializing BiDil.    We are developing an internal marketing and sales infrastructure to promote BiDil for the treatment of heart failure in African Americans. Based on the number of physicians serving the African American heart failure market, we believe we can successfully promote BiDil with 195 sales representatives. Because BiDil, if approved, will be the only heart failure treatment specifically indicated to treat African Americans with heart failure, we believe that we will be able to achieve significant penetration in this population.

        Successfully leveraging our BiDil sales force.    Our sales force will target high prescribing physicians who treat African Americans with cardiovascular and metabolic diseases. We believe the African American community is an underserved patient population and suffers a disproportionate incidence of cardiovascular and other diseases. We believe that we can in-license or otherwise acquire rights to drugs and drug candidates to serve this population.

        Capitalizing on our clinical development expertise.    We believe the experience we gained in designing and executing our BiDil clinical trial program makes us an attractive clinical development partner for companies developing product candidates in the cardiovascular field.

        Focusing our internal development projects and corporate collaborations on nitric oxide-enhancing versions of existing medicines.    We believe that many pharmaceutical companies have currently marketed drugs and products that can benefit from the therapeutic attributes and the potential patent

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protection of our nitric oxide-enhancing technology. We are currently conducting research and development on several drug classes and have consolidated an intellectual property position from which we believe we can generate significant value. We intend to continue to enter into collaborations with leading health care companies where our product candidates will benefit from the marketing reach, clinical expertise and technology of the partner. Our research and development collaboration with Boston Scientific for drug-coated stents is an example of our ability to enter into collaborations with leading companies.

        Continuing to protect and enhance our product-specific and nitric oxide intellectual property rights and capabilities.    Because of its critical role in our on-going product development efforts, we intend to aggressively pursue the protection of our intellectual property. In order to protect and expand our current intellectual property position, we intend to invest significantly in nitric oxide-related research and development efforts, including attracting and retaining highly talented and experienced personnel.

BiDil Commercialization Plan

        We are establishing a marketing organization and sales force to launch and commercialize BiDil, if approved, to physicians who treat African Americans diagnosed with heart failure. We have hired a senior vice president of sales and marketing, a vice president of marketing, three regional sales directors and twenty-one district sales managers in order to manage a 195-person sales team. We have entered into an agreement with Publicis pursuant to which Publicis has employed and is training a specialized sales force of 195 sales representatives focused on cardiologists and primary care physicians located in those geographic areas that we believe constitute approximately 90% of the African American heart failure market in the United States. Under this agreement, we have the right to hire some or all of the Publicis representatives directly at any time upon the payment to Publicis of an agreed upon fee. Under a separate agreement, Publicis has agreed to recruit, hire and train eight account executives who will assist us in gaining formulary access for BiDil, if approved, and to hire ten medical science liaisons to report into our clinical/regulatory group. We also intend to support our sales with other professionals who are intended to help meet the specific medical needs of our physician audience.

        We have engaged Schwarz Pharma under a five-year exclusive manufacturing and supply agreement solely for the three times daily immediate release dosage formulation of our BiDil product candidate. Under the supply agreement, we will have the right to engage a backup manufacturer. We order bulk materials from the same suppliers that were used for the clinical trial batches of BiDil: hydralazine from Flavine, the U.S. representative of Sumitomo, and isosorbide dinitrate from EMS-Dottikon, and have them delivered directly to Schwarz Pharma for manufacturing. We expect to have available by the end of the first quarter of 2005 both the sales force and quantities of finished product required to support the subsequent launch of BiDil, subject to FDA approval.

Corporate Collaborations

        As part of our strategy to accelerate our product development efforts, we have established collaborations with Boston Scientific in the area of nitric oxide-enhanced paclitaxel-coated stents to reduce restenosis and with Merck in the area of nitric oxide-enhancing COX-2 inhibitors for use in the treatment of various diseases. In November 2004, we agreed to terminate our collaboration with Merck. These collaborations were designed to provide us with capital and research, development and marketing capabilities. We intend to pursue other collaborations as appropriate. Since inception, all of our revenue has been derived from our collaborations with third parties. For the fiscal year ended December 31, 2004, our collaborations with Boston Scientific and Merck accounted for all of our $16.5 million of revenue.

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Boston Scientific Agreement

        In November 2001, we entered into a research, development and license agreement with Boston Scientific in the field of restenosis. We granted Boston Scientific an exclusive worldwide license to develop and commercialize nitric oxide-enhanced cardiovascular stents. We also granted to Boston Scientific a right of first refusal to obtain an exclusive license under our nitric oxide technologies to commercialize products for restenosis, which right of first refusal is for a period of three years after the end of the research term. In December 2003, we agreed to extend the agreement to continue the research and development collaboration through December 2005.

        Boston Scientific made an up-front license payment of $1.5 million to us in 2001, and made an additional payment of $3.0 million in December 2003 in connection with the extension of the research and development collaboration. In the event that specified research, development and commercialization milestones are achieved, Boston Scientific is obligated to make milestone payments to us. Boston Scientific also is obligated to pay royalties to us on the sale of any products resulting from the collaboration. Boston Scientific made a $3.5 million equity investment in our stock in 2001. In August 2003, in connection with a private placement, Boston Scientific made an additional $500,000 equity investment in our stock.

        Boston Scientific has the right to terminate our research program at any time upon 30 days' written notice. Boston Scientific may also terminate the agreement at any time upon 60 days' written notice in the event of an uncured material breach by us, in which event Boston Scientific may elect whether the licenses we have granted shall continue in effect. Unless earlier terminated, the agreement will remain in effect until the expiration of the obligation of Boston Scientific to pay royalties under the agreement. Boston Scientific also has a right of first refusal with respect to other nitric oxide-releasing compounds we may develop for delivery through the use of implantable medical devices or via specialty catheters.

Merck Agreement

        In December 2002, we entered into a research, development and license agreement with Merck to jointly develop pharmaceutical products containing nitric oxide-enhancing COX-2 inhibitors. Under the terms of the agreement, we granted Merck an exclusive worldwide, royalty-bearing license to develop, make and sell nitric oxide-enhancing COX-2 inhibitors for use in the treatment or prevention of various diseases, conditions or disorders.

        Merck paid an up-front license fee of $10.0 million under the agreement and also made research and development payments over the three-year term of the research program totaling $7.2 million. In 2003, Merck made two payments, each of $5.0 million, for achieving the first two milestones.

        On September 30, 2004, Merck halted the phase II trial of our lead candidate in nitric oxide-enhancing COX-2 inhibitors. This lead nitric-oxide candidate is composed of a derivative of rofecoxib. Rofecoxib is the active ingredient in Vioxx, a COX-2 inhibitor which Merck voluntarily withdrew from worldwide markets on September 30, 2004. In November 2004, we agreed with Merck to terminate the collaboration agreement. Merck paid us a lump sum of $1.8 million, representing the full amount of the research funding owed to us for 2005, but is not required to provide us with any further funding. We retain all rights to our technology in the field of nitric oxide-enhancing COX-2 inhibitors, and intend to evaluate the continued development of this technology in collaboration with other potential partners.

Nitric Oxide's Role in Cellular Function and Disease

        In the 1980s, nitric oxide was identified as a significant molecule that regulates a wide range of important cellular functions. Professor Robert R. Furchgott, a member of our scientific advisory board,

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and two other individuals were awarded the 1998 Nobel Prize in Physiology and Medicine for this discovery.

        Recent research has shown that nitric oxide also plays important biochemical and physiological roles in many diseases or medical conditions, including the following:

        Cardiovascular Disease.    The formation of nitric oxide in the cells that line the inner walls of blood vessels, referred to as the endothelium, has been found to play a crucial role in maintaining the dilation of the blood vessels, a process essential for the regulation of blood pressure. Nitric oxide produced by the endothelium also inhibits the clumping of platelets, which are cells in the blood that promote clotting, and the adhesion of platelets and white blood cells to the blood vessels' inner walls, thereby significantly reducing the obstruction of blood vessels that is associated with blood clots and stroke. Numerous other cardiovascular actions of nitric oxide have been reported, including maintaining sufficient blood flow to the heart muscle and regulation of the contraction of the heart muscle. Cardiovascular diseases associated with nitric oxide imbalance include atherosclerosis, high cholesterol levels, high blood pressure, pulmonary hypertension and heart failure.

        Gastrointestinal and Inflammatory Disease.    Nitric oxide is capable of influencing many of the biochemical and physiological reactions that are key to preventing or repairing injury to the gastrointestinal tract, such as stimulating mucus secretion from the mucus membrane lining the stomach and intestines and regulating the blood flow feeding the wall of the gastrointestinal tract and the mucus membrane. Nitric oxide can control inflammatory cell activation and is active on other chemical mediators in the inflammatory process. Gastrointestinal diseases in which nitric oxide has potential beneficial actions include NSAID-induced gastric injury, inflammatory bowel disease, and peptic ulcer.

        Central Nervous System Disorders.    Nitric oxide is also synthesized in nerve cells, or neurons, of the central nervous system, where it performs many physiological functions, including the formation of memory and the modulation of pain. Nitric oxide-based therapies for diseases such as epilepsy, stroke, neuroinflammatory disorders and trauma may be able to provide protection to neurons.

        Sexual Dysfunction.    In the peripheral nervous system, nitric oxide is now known to play a role in regulating some forms of vasodilation and certain gastrointestinal, respiratory and genito-urinary functions. For example, male penile erection is dependent upon nitric oxide-relaxation of genital smooth muscles, and drugs like Viagra enhance the nitric oxide-signaling pathway.

        Respiratory Disease.    Nitric oxide inhalation reduces pulmonary hypertension and improves oxygenation, the absorption of oxygen by the lungs. In inflammatory pulmonary diseases, such as asthma and chronic obstructive pulmonary disease, nitric oxide has potential to promote airway dilation and reduce inflammation, thus reducing airway sensitivity to airborne irritants and allergens.

Research and Development

        As of December 31, 2004, our research and development group consisted of 41 employees, representing 18 biologists, 11 medicinal chemists, 6 persons engaged in clinical development and 6 persons engaged in patent and other research and development-related functions. Our research and development group is focusing on the continuous improvement of our core technology, the development of new materials and platforms, complementary products and new initiatives aimed at leveraging our core technology in new market areas.

        During the years ended December 31, 2004, 2003 and 2002, we estimate that our total company-sponsored research and development expenses were $23.0 million, $15.1 million, $14.7 million, respectively, and that our collaborator-sponsored research and development expenses were $5.0 million, $3.8 million, $1.4 million, respectively.

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Proprietary Rights and Licensing

        Our policy is to prosecute and enforce our patents and proprietary technology. We intend to continue to file United States and foreign patent applications to protect technology, inventions and improvements that are considered important to the development of our business. We will be able to protect our proprietary technologies from unauthorized use by third parties only to the extent that our proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets.

        As of December 31, 2004, we have 81 issued U.S. patents and 48 pending U.S. patent applications. We also have 48 issued patents and 121 pending patent applications in certain major industrial countries, including Canada, the major European market countries, Australia and Japan. Our issued U.S. and foreign patents expire on various dates between 2007 and 2024.

        BiDil.    We have three U.S. patents, one expiring in 2007 and the other two in 2020, and one Canadian patent expiring in 2008, which relate to co-administration of the components of BiDil. The first U.S. patent and the Canadian patent cover methods for reducing mortality associated with chronic congestive heart failure. The second U.S. patent covers methods for reducing mortality associated with chronic congestive heart failure, for improving the quality of life, for improving oxygen consumption or improving exercise tolerance in African American patients. The third U.S. patent covers additional claims to specific indications and dosing ranges for the treatment of heart failure and other conditions in African American patients. In addition, we have filed seven additional U.S. patent applications and corresponding foreign patent applications that could provide additional patent protection for BiDil. We have not filed any patent applications outside of the United States and Canada for BiDil, as pertains to the patent expiring in 2007. We have filed applications claiming priority relative to the patents expiring in 2020 in Canada and Europe.

        Nitric Oxide Stents.    We have six U.S. patents expiring on dates between 2013 and 2018 which cover the coating of medical devices with nitric oxide compounds, prevention of adverse effects associated with the use of a medical device, treatment of a damaged vessel or treatment of a damaged vascular surface in a patient by administration of a nitric oxide compound. We have four pending U.S. patent applications which, if issued, will have expiration dates between 2021 and 2023 and which cover the composition of matter of specific nitric oxide donors or nitric oxide-linked compounds and their methods of use for the treatment of restenosis. We have filed additional patent applications worldwide, have been issued one Australian patent that expires in 2014 and have one issued European patent which expires in 2014.

        Nitric Oxide-Enhancing COX-2 Inhibitors and Nitric Oxide-Enhancing NSAID's for Inflammation.    We have three issued and six pending U.S. patent applications, which, if issued, will have expiration dates between 2020 and 2023 and which disclose and claim novel nitric oxide-enhancing COX-2 inhibitors. These applications also disclose kits and methods of use for the treatment of pain, inflammation and fever, gastrointestinal disorders, disorders resulting from elevated levels of COX-2 inhibitors, for reducing renal and respiratory toxicity, for facilitating wound healing and for improving the cardiovascular profile of COX-2 inhibitors. We have also filed additional foreign patent applications relating to this technology. We have three U.S. patents expiring in 2015, two U.S. patents expiring in 2018, and one patent application which, if issued, will expire in 2018, which cover different compositions of matter and methods of use for the treatment of pain, inflammation, fever and gastrointestinal disorders with novel nitric oxide-enhancing NSAID's. One pending patent application, which, if issued, will expire in 2023, discloses specific composition of matter and methods of use for the treatment of pain, inflammation and gastrointestinal disorders of novel nitric oxide-enhancing NSAID's.

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        We have filed additional patent applications worldwide and have been issued four Australian patents, three of which expire in 2016 and one in 2019, and one issued Canadian patent, which expires in 2016.

        Other Development Programs.    We also have a U.S. patent and a pending U.S. patent application, both of which expire in 2019, which disclose the methods of use of N-hydroxyguanidine compounds in the treatment of renal failure. We have also filed additional foreign patent applications covering this technology.

License and Royalty Agreements

        Dr. Jay N. Cohn.    In January 1999, as subsequently amended, we entered into a collaboration and license agreement with Dr. Jay N. Cohn. Under the agreement, Dr. Cohn licensed to us exclusive worldwide royalty-bearing rights to technology and inventions owned or controlled by Dr. Cohn and that relate to BiDil for the treatment of cardiovascular disease. We have agreed to make milestone payments to Dr. Cohn upon FDA approval and upon first commercial sale of products, if any, arising out of the agreement. The agreement imposes upon us an obligation to use reasonable best efforts to develop and, upon receipt of regulatory approval, manufacture, market and commercialize products based upon the licensed rights. If we fail to meet this obligation, Dr. Cohn has the right to terminate the agreement and the license granted to us under the agreement. Dr. Cohn also has the right to terminate the agreement if we materially breach the agreement and fail to remedy the breach within 30 days. We have the right to terminate the agreement at any time upon 30 days' prior written notice. Unless earlier terminated, the agreement continues in perpetuity. Pursuant to the agreement, Dr. Cohn was appointed to our scientific advisory board, entered into a consulting agreement with us and was granted an option to purchase 10,000 shares of our common stock.

        The Brigham and Women's Hospital.    In August 1992, as subsequently amended, we entered into a research and license agreement with The Brigham and Women's Hospital, Inc., or BWH. Under the agreement, we sponsored a research program at BWH for a period of approximately two years relating to the diagnostic, therapeutic and prophylactic use of nitric oxide and related compounds. Under the agreement, in exchange for our sponsored research funding, BWH granted us exclusive worldwide royalty-bearing rights to technology and inventions owned at the effective time of, or developed in the course of, the sponsored research program. We are applying the patents, patent applications and other intellectual property rights licensed to us by the BWH in our nitric oxide stent program. The agreement imposes on us due diligence obligations with respect to the research, development and commercialization of products based upon the licensed rights. If we fail to meet these obligations, then upon written notice the license will become non-exclusive. BWH has the right to terminate the agreement if we materially breach the agreement and fail to remedy the breach within 60 days.

        Boston University.    In June 1993, as subsequently amended, we entered into a research and license agreement with the Trustees of Boston University, or BU. Under the agreement, we have agreed to sponsor a multi-year research program at BU in the area of nitric oxide-enhancing medicines. Under the agreement, in exchange for our sponsored research funding, BU has granted us exclusive worldwide royalty-bearing rights to technology and inventions owned by BU and/or for the principal investigator named in the research proposal at the effective time of, or developed in the course of, the sponsored research program. We have agreed to pay royalties to BU on all products sold or distributed by us or our affiliates which incorporate or utilize inventions, material or information specified in the agreement. The agreement imposes on us due diligence obligations with respect to the development and commercialization of products based upon the licensed rights. If we fail to meet these obligations, then upon notice by BU, the parties are required to enter into good faith negotiations, and if the parties cannot reach resolution, the license will become non-exclusive without the right to sublicense. BU has the right to terminate the agreement if we materially breach the agreement and fail to remedy

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the breach within 60 days. We may terminate funding of any sponsored research program on three months' prior written notice.

        FoxKiser.    In April 2001, we entered into an agreement with the law firm of FoxKiser LLC under which FoxKiser agreed to provide strategic counsel, including assistance in seeking FDA approval of BiDil. We and FoxKiser agreed that the fees owed by us to FoxKiser, including consulting services, would be deferred by us and would be paid in full within 45 days after the date on which we received written FDA approval, if any, for the first BiDil product. In further consideration for FoxKiser's services, we also agreed to pay FoxKiser a royalty on the sale of BiDil by us or a third-party licensee. Our obligation to make royalty payments to FoxKiser on BiDil ends six months after the date of market introduction of an FDA-approved generic version of BiDil. The agreement continues in effect in perpetuity, unless either we or FoxKiser terminates the agreement in the event of a material breach by the other party that remains uncured for 60 days and unless renegotiation of the agreement is triggered by its terms in the event that we enter into a license or other business arrangement with a third party on terms that impose certain limitations on the royalties payable to us on sales of BiDil.

        Dr. John D. Folts.    In March 1995, as amended in November 1996 and December 1998, we entered into an agreement with Dr. John D. Folts, a member of our scientific advisory board, pursuant to which Dr. Folts assigned to us his rights to any pending patent applications and issued patents relating to the use of nitric oxide adducts in exchange for a royalty on any products, methods or services sold or distributed by us or our licensees that are covered by the assigned patents. These patents cover technologies being used in our nitric oxide-coated stent development programs with Boston Scientific.

Trademarks, Trade Secrets and Other Proprietary Information

        We also currently own the following U.S. trademarks:

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BiDil®;



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NitroMed®;



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NitRx®; and



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NitroMed "N" logo.

        In addition, we depend upon trade secrets, know-how and continuing technological improvements to develop and maintain our competitive position. To maintain the confidentiality of trade secrets and proprietary information, we require our employees, scientific advisors, consultants and collaborators, upon commencement of a relationship with us, to execute confidentiality agreements and, in the case of parties other than our research and development collaborators, to agree to assign their inventions to us. These agreements are designed to protect our proprietary information and to grant us ownership of technologies that are developed in connection with their relationship with us. These agreements may not, however, provide protection for our trade secrets in the event of unauthorized disclosure of such information.

Competition

        We and our corporate collaborators face intense competition from a wide range of pharmaceutical and life science companies, as well as academic and research institutions and government agencies. These competitors include organizations that are pursuing the same or similar technologies to those which constitute our technology platform and organizations that are developing and commercializing pharmaceutical products that are competitive with our product candidates.

        We believe that competition for our BiDil product candidate and other nitric oxide-enhancing cardiovascular medicines that we and our corporate collaborators may develop will initially come from companies currently marketing and selling therapeutics to treat heart failure in the general population.

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These competitors include GlaxoSmithKline, plc, Merck & Co., Inc., Pfizer Inc. and AstraZeneca plc. In the field of stents, we believe that competition will come from Cordis Corporation, a Johnson & Johnson Company, Guidant Corporation and Medtronic, Inc.

        We also face competition from other companies that are active in or entering into the area of nitric oxide-based therapeutics. We are aware of six companies working in the area of nitric-oxide therapeutics: Angiogenix, Inc., GB Therapeutics, NicOx S.A., OxoN Medica, RenoPharm and Vasopharm BIOTECH GmbH.

        We intend to compete with these companies on the basis of our intellectual property portfolio, the expertise of our scientific personnel and our nitric oxide technologies. Principal competitive factors in our industry include:

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improved patient outcomes;



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cost-effectiveness;



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acceptance by physicians and other health care providers;



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the quality and breadth of an organization's technology;



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the skill of an organization's employees and its ability to recruit and retain skilled employees;



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an organization's intellectual property protection;



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development, sales and marketing capabilities; and



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the availability of substantial capital resources to fund development and commercialization activities.

        Many of the companies competing against us have financial and other resources substantially greater than our own. In addition, many of our competitors have significantly greater experience in testing pharmaceutical and other therapeutic products, obtaining FDA and other regulatory approvals of products for use in health care, and marketing and selling those products. Accordingly, our competitors may succeed more rapidly than we will in obtaining FDA approval for products and achieving widespread market acceptance. If we obtain necessary regulatory approval and commence significant commercial sales of our products, we will also be competing with respect to manufacturing efficiency and marketing capabilities, areas in which we have limited or no experience.

Regulatory Matters

FDA Requirements for New Drug Compounds

        The research, testing, manufacture and marketing of drug products are extensively regulated by numerous governmental authorities in the United States and other countries. In the United States, drugs are subject to rigorous regulation by the FDA. The Federal Food, Drug, and Cosmetic Act, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, labeling, promotion and marketing and distribution of pharmaceutical products. Failure to comply with applicable regulatory requirements may subject a company to a variety of enforcement actions, including:

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product seizures;



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voluntary or mandatory recalls;



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voluntary or mandatory patient or physician notification;



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withdrawal of product approvals;



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restrictions on, or prohibitions against, marketing our products;

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fines;



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restrictions on importation of our products;



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injunctions;



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debarment;



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civil and criminal penalties; and



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suspension of review, refusal to approve pending applications.

        The steps ordinarily required before a new pharmaceutical product may be marketed in the United States include pre-clinical laboratory tests, animal tests and formulation studies, the submission to the FDA of a notice of claimed investigational exemption or an investigational new drug application, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and efficacy of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements typically takes several years, and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease. Government regulation may delay or prevent marketing of potential candidates for a considerable period of time and impose costly procedures upon a manufacturer's activities. Success in early stage clinical trials does not assure success in later stage clinical trials. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Even if a product receives regulatory approval, later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market.

        Pre-clinical tests include laboratory evaluation of product chemistry and formulation, as well as animal trials to assess the potential safety and efficacy of the product. The conduct of the pre-clinical tests and formulation of compounds for testing must comply with federal regulations and requirements. The results of pre-clinical testing are submitted to the FDA as part of an investigational new drug application.

        A 30-day waiting period after the filing of each investigational new drug application is required prior to the commencement of clinical testing in humans. If the FDA has not commented on or questioned the investigational new drug application within this 30-day period, clinical trials may begin. If the FDA has comments or questions, the questions must be answered to the satisfaction of the FDA before initial clinical testing can begin. In addition, the FDA may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization and then only under terms authorized by the FDA. In some instances, the investigational new drug application process can result in substantial delay and expense.

        Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted in compliance with federal regulations and requirements, under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. subjects must be submitted to the FDA as part of the investigational new drug application. The study protocol and informed consent information for patients in clinical trials must be submitted to institutional review boards for approval.

        Clinical trials to support new drug applications for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In phase I, the initial introduction of the drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics and pharmacological actions and safety, including side effects associated with increasing doses. Phase II usually involves trials in a limited patient population, to determine dosage tolerance and optimum

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dosage, identify possible adverse effects and safety risks, and provide preliminary support for the efficacy of the drug in the indication being studied.

        If a compound demonstrates evidence of effectiveness and an acceptable safety profile in phase II evaluations, phase III trials are undertaken to further evaluate clinical efficacy and to further test for safety within an expanded patient population, typically at geographically dispersed clinical trial sites. Phase I, phase II or phase III testing of any product candidate may not be completed successfully within any specified time period, if at all.

        After successful completion of the required clinical testing, generally a new drug application is prepared and submitted to the FDA. FDA approval of the new drug application is required before marketing of the product may begin in the United States. The new drug application must include the results of extensive clinical and other testing and a compilation of data relating to the product's pharmacology, chemistry, manufacture, and controls. The cost of preparing and submitting a new drug application is substantial. Under Federal law, the submission of new drug applications are additionally subject to substantial application user fees, currently exceeding $500,000, and the manufacturer and/or sponsor under an approved application are also subject to annual product and establishment user fees, currently exceeding $30,000 per product and $200,000 per establishment. These fees are typically increased annually.

        The FDA has 60 days from its receipt of an new drug application to determine whether the application will be accepted for filing based on the agency's threshold determination that the new drug application is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review of the new drug application. Under federal law, the FDA has agreed to certain performance goals in the review of new drug applications. Most such applications for non-priority drug products are reviewed within ten months. The review process is often significantly extended by FDA requests for additional information or clarification regarding information already provided in the submission. The FDA may also refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee.

        If FDA evaluations of the new drug application and the manufacturing facilities are favorable, the FDA may issue an approval letter, or, in some cases, an approvable letter followed by an approval letter. An approvable letter generally contains a statement of specific conditions that must be met in order to secure final approval of the new drug application. If and when those conditions have been met to the FDA's satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. As a condition of new drug application approval, the FDA may require post approval testing and surveillance to monitor the drug's safety or efficacy and may impose other conditions, including labeling restrictions which can materially impact the potential market and profitability of the drug. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing. On July 20, 2004, the FDA issued a proposed rule that would replace not approvable and approvable letters with complete response letters. Complete response letters would describe all specific deficiencies in an new drug application but would not characterize the application as approvable or not.

        Once the new drug application is approved, a product will be subject to certain post-approval requirements, including requirements for adverse event reporting and submission of periodic reports and/or supplemental new drug applications for approval of changes to the originally approved prescribing information, product formulation, and manufacturing and testing requirements. Following approval, drug products are required to be manufactured and tested for compliance with new drug

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application and/or compendial specifications prior to release for commercial distributions. The manufacture and testing must be performed in approved manufacturing and testing sites complying with current Good Manufacturing Practice requirements and subject to FDA inspection authority.

        Approved drug products must be promoted in a manner which is consistent with their terms and conditions of approval. In addition, the FDA requires substantiation of any claims of superiority of one product over another including, in many cases, requirements that such claims be proven by adequate and well controlled head-to-head clinical trials. To the extent that market acceptance of our product candidates may depend on their superiority over existing therapies, any restriction on our ability to advertise or otherwise promote claims of superiority, or requirements to conduct additional expensive clinical trials to provide proof of such claims, could negatively affect the sales of our products and/or our expenses.

        If the FDA's evaluation of the new drug application submission or manufacturing facilities is not favorable, the FDA may refuse to approve the new drug application or issue a not approvable letter.

        A not approvable letter outlines the deficiencies in the submission and often requires additional testing or information in order for the FDA to reconsider the application. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. With limited exceptions, the FDA may withhold approval of a new drug application regardless of prior advice it may have provided or commitments it may have made to the sponsor.

        Once a new drug application is approved, the product covered thereby becomes a "listed drug" which can, in turn, be cited by potential competitors in support of approval of an abbreviated new drug application. An abbreviated new drug application provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically equivalent to the listed drug. There is no requirement, other than the requirement for bioequivalence testing, for an abbreviated new drug application applicant to conduct or submit results of pre-clinical or clinical tests to prove the safety or efficacy of its drug product. Drugs approved in this way are commonly referred to as "generic equivalents" to the listed drug, are listed as such by the FDA, and can often be substituted by pharmacists under prescriptions written for the original listed drug.

        Federal law provides for a period of three years of exclusivity following approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage, dosage form, route of administration or combination, or for a new use, the approval of which was required to be supported by new clinical trials conducted by or for the sponsor. During this three year period, the FDA cannot grant effective approval of an abbreviated new drug application based on that listed drug. Federal law also provides a period of five years following approval of a drug containing no previously approved active ingredients, during which abbreviated new drug applications for generic versions of those drugs cannot be submitted unless the submission accompanies a challenge to a listed patent, in which case the submission may be made four years following the original product approval. Additionally, in the event that the sponsor of the listed drug has properly informed the FDA of patents covering its listed drug, applicants submitting an abbreviated new drug application referencing that drug are required to certify whether they intend to market their generic products prior to expiration of those patents. If an abbreviated new drug application applicant certifies that it believes all listed patents are invalid or not infringed, it is required to provide notice of its filing to the new drug application sponsor and the patent holder. If the patent holder then initiates a suit for patent infringement against the abbreviated new drug application sponsor within 45 days of receipt of the notice, the FDA cannot grant effective approval of the abbreviated new drug application until either 30 months has passed or there has been an appellate court decision holding that the patents in question are invalid or not infringed. If the abbreviated new drug application applicant certifies that it does not intend to market its generic

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product before some or all listed patents on the listed drug expire, then the FDA cannot grant effective approval of the abbreviated new drug application until those patents expire. The first abbreviated new drug applicant(s) submitting substantially complete applications certifying that all listed patents for a particular product are invalid or not infringed may qualify for a period of 180 days against other generics after a final court decision of invalidity or non-infringement or after its begins marketing its product, whichever occurs first, during which subsequently submitted abbreviated new drug applications cannot be granted effective approval.

        From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of drug products. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency or the courts in ways that may significantly affect our business and our products candidates. It is impossible to predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations changed, or what the impact of such changes, if any, may be.

FDA Requirements For Medical Devices

        Drugs that are incorporated into medical devices, such as drug-eluting stents, are potentially subject to regulatory requirements applicable to medical devices as well as those applicable to drugs. For review purposes, applications for approval of drug-eluting stents have been assigned by the FDA primarily to the FDA Center for Devices and Radiological Health, which consults with the FDA Center for Drug Evaluation and Research on issues relating to the drug component of the product. The FDA has recently established an Office of Combination Products within the office of the FDA Commissioner and has published revised regulations implementing statutory requirements directed at ensuring prompt and consistent regulation of drug/device combination products. However, because of the limited experience with combination product review, the manner in which review procedures and requirements may be modified and applied in the future to similar or different types of products is unpredictable. This uncertainty, and the complexity inherent in the testing and review of combination drug/device products, may lead to significant delays and additional costs in the process of developing and seeking approval to market such products.

        Medical devices are regulated by the FDA according to their classification. The FDA classifies a medical device into one of three categories based on the device's risk, the disease condition it is intended to treat, prevent or diagnose, and what is known about the device. The three categories are as follows:

        Class I devices are generally lower risk products for which sufficient information exists establishing that general regulatory controls provide reasonable assurance of safety and efficacy. Most class I devices are exempt from the requirement for premarket notification under section 510(k) of the Federal Food, Drug, and Cosmetic Act. FDA clearance of a premarket notification is necessary prior to marketing a non-exempt class I device in the United States.

        Class II devices are devices for which general regulatory controls are insufficient to provide reasonable assurance of safety and efficacy and for which there is sufficient information to establish special controls, such as guidance documents or performance standards, to provide a reasonable assurance of safety and efficacy. Clearance of 510(k) notification is necessary prior to marketing a non-exempt class II device in the United States.

        Class III devices are devices for which there is insufficient information demonstrating that general and special controls will provide a reasonable assurance of safety and efficacy. Typical class III devices are life-sustaining, life-supporting or implantable devices, or devices posing substantial risk. Unless a device is a preamendments device that is not subject to a regulation requiring a premarket approval application, the FDA generally must approve a premarket approval application prior to the marketing of a class III device in the United States. Under current law and regulations, we expect that

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drug-eluting stents will be treated as class III devices, to the extent that they are regulated as devices, and that approval of a device premarket approval application will be required to obtain authorization to market such products.

        The premarket approval application process is expensive and uncertain and includes the imposition at the time of submission of a significant device user fee. A premarket approval application must be supported by valid scientific evidence, which typically includes extensive data, including pre-clinical data and clinical data from well-controlled or partially controlled clinical trials, to demonstrate the safety and efficacy of the device. Product and manufacturing and controls specifications and information must also be provided. The FDA may refuse to accept a premarket approval application for filing and often will require additional clinical trial data or other information before approval. Obtaining approval can take several years, and approval may be conditioned on, among other things, the conduct of postmarket clinical studies or surveillance. Reduced device user fees also apply to most premarket approval supplements. Any subsequent change to an approved device that affects the safety or effectiveness of the device will require approval of a supplemental premarket approval application. We cannot be sure that approval of a premarket approval application or premarket approval application supplement will be granted on a timely basis, if at all, or that the FDA's approval process will not involve costs and delays that will adversely affect our, and/or our corporate collaborator's, ability to commercialize our products. In the case of a combination drug/device product such as a drug-eluting stent, the need for consultation with drug reviewers and the potential application of drug standards as well as device standards to different aspects of the product, its manufacturing process, and the associated FDA review processes may significantly increase the complexity, costs and potential delays involved in obtaining marketing approval.

        Whether or not a product is required to be approved before marketing, we must comply with strict FDA requirements applicable to devices, including quality system requirements pertaining to all aspects of our product design and manufacturing process, such as requirements for packaging, labeling, record keeping, including complaint files, and corrective and preventive action related to product or process deficiencies. The FDA enforces its quality system requirements through periodic inspections of medical device manufacturing facilities. In addition, medical device reports must be submitted to the FDA to report device-related deaths or serious injuries, and malfunctions, the recurrence of which would likely cause serious injury or death. Medical device reports can result in agency action such as inspection, recalls, and patient/physician notifications, and are often the basis for agency enforcement actions. Because the reports are publicly available, they can also become the basis for private tort suits, including class actions and unfavorable publicity.

        As with drugs, the promotion of medical devices is regulated by the FDA, and violations of FDA policies and regulations with respect to promotional activities may result in significant administrative and court sanctions.

Foreign Regulation of Medical Devices and New Drug Compounds

        Approval of a product by comparable regulatory authorities may be necessary in foreign countries prior to the commencement of marketing of the product in those countries, whether or not FDA approval has been obtained. The approval procedure varies among countries and can involve requirements for additional testing. The time required may differ from that required for FDA approval. Although there are some procedures for unified filings for some European countries with the sponsorship of the country which first granted marketing approval, in general each country has its own procedures and requirements, many of which are time consuming and expensive. Thus, there can be substantial delays in obtaining required approvals from foreign regulatory authorities after the relevant applications are filed.

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        In Europe, marketing authorizations may be submitted at a centralized, a decentralized or a national level. The centralized procedure is mandatory for the approval of biotechnology products and provides for the grant of a single marketing authorization which is valid in all European Union member states. As of January 1995, a mutual recognition procedure is available at the request of the applicant for all medicinal products which are not subject to the centralized procedure. We will choose the appropriate route of European regulatory filing to accomplish the most rapid regulatory approvals. However, our chosen regulatory strategy may not secure regulatory approvals on a timely basis or at all.

Hazardous Materials

        Our research and development processes involve the controlled use of hazardous materials, chemicals and radioactive materials and produce waste products. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products. We do not expect the cost of complying with these laws and regulations to be material.

Scientific Advisors

        We seek advice from a number of leading scientists and physicians on scientific and medical matters. Our scientific advisory board is chaired by our founder and member of our board of directors, Joseph Loscalzo, M.D., Ph.D., and meets regularly to assess:

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our research and development programs;



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the design and implementation of our clinical programs;



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our patent and publication strategies;



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market opportunities from a clinical perspective;



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new technologies relevant to our research and development programs; and



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specific scientific and technical issues relevant to our business.

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        The current members of our scientific advisory board are:

Name	Position/Institutional Affiliation
Joseph Loscalzo, M.D., Ph.D.	Chairman, Department of Medicine, Boston University School of Medicine; Physician in Chief, Boston Medical Center; member, NitroMed board of directors
Jay N. Cohn, M.D.	Professor of Medicine, Cardiovascular Division, University of Minnesota Medical School
Martin Feelisch, Ph.D.	Professor of Medicine, Boston University School of Medicine
John D. Folts, Ph.D.	Director, Coronary Thrombosis Research and Prevention Laboratory, Department of Medicine, University of Wisconsin-Madison and Professor of Medicine and Nutritional Science, University of Wisconsin School of Medicine
Robert F. Furchgott, Ph.D.	Professor of Pharmacology, Medical University of South Carolina and Nobel Laureate for his work on nitric oxide
Michael A. Marletta, Ph.D.	Professor of Biochemistry and Molecular Biology, University of California, Berkeley
Kevin McIntyre, M.D., J.D.	Associate Clinical Professor of Medicine, Harvard Medical School
Ínigo Saenz de Tejada, M.D.	President, Fundación para la Investigación y el Desarrollo en Andrología, Madrid, Spain

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Employees

        As of December 31, 2004, we had 80 full-time employees, 29 of whom were engaged in sales and marketing, 41 of whom were engaged in research and development and 10 of whom were engaged in management, administration and finance. Of our employees, 26 hold M.D. or Ph.D. degrees. None of our employees are represented by a labor union or covered by a collective bargaining agreement, nor have we experienced work stoppages. We believe that relations with our employees are good.

Factors That May Affect Future Results

        You should carefully consider the following risk factors, in addition to other information included in this annual report, in evaluating NitroMed and our business. If any of the following risks occur, our business, financial condition and operating results could be materially adversely affected.

Risks Relating to our Business

Because we have a history of losses and our future profitability is uncertain, our common stock is a highly speculative investment.

        We have experienced significant operating losses since our inception in 1992. For the year ended December 31, 2004, we had a net loss of $29.8 million. As of December 31, 2004, we had an accumulated deficit of approximately $136.6 million. We expect that we will continue to incur substantial losses and that our cumulative losses will increase as our research, development and commercialization efforts expand. We expect that the losses that we incur will fluctuate from quarter to quarter and that these fluctuations may be substantial. To date, we have not recorded any revenue from the sale of products, and we will not be able to do so unless and until one of our product candidates completes clinical trials and receives regulatory approval. BiDil is our only product candidate that has advanced into late-stage clinical trials, and we do not anticipate receiving revenues from BiDil until at least 2005, if ever. All of our other product candidates are in research or pre-clinical development, will require significant additional testing prior to submission of any regulatory applications and, as such, are not expected to be commercially available for many years, if at all.

        A large portion of our expenses is fixed, including expenses related to facilities, equipment and personnel. In addition, we expect to spend significant amounts to fund research, development and commercialization of our product candidates and to enhance our core technologies. As a result, we expect that our operating expenses will continue to increase significantly in the near term and, consequently, we will need to generate significant revenue to achieve profitability. At the present time we are unable to estimate the level of revenues, if any, that we will realize from the commercialization of our product candidates, including BiDil. We are therefore unable to estimate when we will achieve profitability, if at all. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable could depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations.

We are heavily dependent on obtaining regulatory approval for and successfully commercializing BiDil, our most advanced drug candidate.

        Our financial, operational and management resources are primarily dedicated to our most advanced drug candidate, BiDil, which has not been approved by the FDA. In July 2004, we halted our phase III confirmatory clinical trial of BiDil on the recommendation of the independent Data and Safety Monitoring Board and the trial's steering committee due to a significant survival benefit seen in African American patients taking the drug. The FDA accepted our new drug application resubmission in early February 2005 as a complete class 2 resubmission. Under the Prescription Drug User Fee Act, FDA review of our class 2 resubmission is expected to be completed by June 23, 2005. We will need to

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receive FDA approval of our resubmitted new drug application before we can market and sell BiDil in the United States. We cannot predict whether or when we may receive FDA approval of BiDil. In particular, while we expect to have available by the end of first quarter of 2005 the sales force and quantities of finished product required to support the launch of BiDil, we do not expect that the FDA will act on our application by that time. Even if we obtain FDA approval, we may not be able to launch BiDil prior to the end of 2005, if at all.

        Our BiDil clinical trial was performed exclusively on subjects who are self-identified as African American. To our knowledge, the FDA has never approved a drug product for use in a particular ethnic population. The FDA's receptiveness to drugs that are approved and marketed on the basis of different ethnicity-based therapeutic outcomes is untested and may be adversely affected by contrary scientific or public health evidence or political or legal factors. For example, scientific evidence could emerge that suggests that there is no physiological basis to support pharmaceutical development of drugs based upon ethnicity. Moreover, others may express the view that ethnicity is only a sociological concept and, accordingly, there is not a valid basis for the commercialization of medicines based on ethnicity. These factors or others may significantly delay FDA approval of our BiDil application beyond the time normally required for the FDA to act and could prevent us from obtaining FDA approval of BiDil.

        If we fail to achieve regulatory approval or market acceptance of BiDil, our near-term ability to generate product revenue, our reputation and our ability to raise additional capital will be materially impaired, and the value of an investment in our stock will decline.

We will require substantial additional funds and, if additional capital is not available, we may need to limit, scale back or cease our operations.

        We have used and will continue to require substantial funds to conduct research and development, including pre-clinical testing and clinical trials of our product candidates, and to market and manufacture any products that are approved for commercial sale. For example, we estimate that we will incur significant expenses during 2005 as we develop sales and marketing capabilities and prepare for the anticipated 2005 launch of BiDil, assuming FDA approval. Moreover, we may incur significant additional expenditures to conduct pre-clinical testing of our early-stage development programs. Because the successful development of these programs is uncertain, we are unable to estimate the actual funds we will require to complete research and development of our product candidates and commercialization of our products. We believe that our existing cash and marketable securities will be sufficient to support our current operating plan for at least the next eighteen months.

        However, our future capital requirements, and the period in which we expect our current cash to support our operations, may vary from what we expect due to a number of factors, including the following:

•

the time and costs involved in obtaining regulatory approvals for BiDil and our other product candidates;



•

the costs of manufacturing, distributing, marketing and selling BiDil, if and when approved by regulatory authorities;



•

the timing, receipt and amount of milestone and other payments, if any, from collaborators;



•

the timing, receipt and amount of sales and royalties, if any, from our product candidates;



•

the resources required to successfully complete our clinical trials;



•

continued progress in our research and development programs, as well as the magnitude of these programs;



•

the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims;

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•

costs related to acquiring and/or in-licensing new technologies; and



•

our ability to establish and maintain additional collaborative arrangements.

        We may be required to seek additional funding in the future and may do so through collaborative arrangements and public or private financings. Additional financing may not be available to us on acceptable terms, or at all. In addition, the terms of the financing may adversely affect the holdings or the rights of our stockholders. For example, if we raise additional funds by issuing equity securities, further dilution to our then-existing stockholders will result. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our research or development programs. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our technologies, product candidates or products which we would otherwise pursue on our own.

If we do not successfully market and sell BiDil or our other product candidates, either directly or through third parties, our future revenue will be limited.

        We currently have limited sales, marketing and distribution experience. If BiDil is approved, we intend to launch and market BiDil in North America ourselves, using a contract sales force, and, in the future, we may also seek to market other products ourselves which are not already subject to marketing agreements where we believe the target physician market can be effectively reached by the sales force we intend to establish directly or by contract. In order to develop or contract for sales and marketing capabilities, we will have to invest significant amounts of money and management resources. Because we minimized these expenditures prior to obtaining the results of our BiDil clinical trial, we may have insufficient time to build our sales and marketing capabilities in advance of BiDil's potential launch. Moreover, if the approval of BiDil is delayed substantially, or BiDil is not approved, we will have incurred significant unrecoverable expenses.

        For BiDil and any other product candidates for which we decide to perform the sales, marketing and distribution functions ourselves or through a third party, we could face a number of additional risks, including:

•

we may not be able to attract, build and retain or contract for a significant and qualified marketing or sales force;



•

the cost of establishing or contracting for a marketing and sales force may not be justifiable in light of the revenues generated by any particular product or combination of products; and



•

our direct sales and marketing efforts may not be successful.

        For products with larger target physician markets, we plan to rely significantly on sales, marketing and distribution arrangements with third parties. For example, we plan to rely on our existing collaboration for the commercialization of stents coated with nitric oxide-releasing compounds if development is successful and such products are approved by the FDA. We may have to enter into additional marketing arrangements in the future. We may not be able to successfully enter into sales, marketing and/or distribution agreements with any other third parties in the future, on terms which are favorable to us, if at all. In addition, we may have limited or no control over the sales, marketing and distribution activities of these third parties. Our future revenues for any products for which we rely on third-party sales, marketing and distribution support will depend heavily on the success of the efforts of these third parties.

If our third-party contract sales organization does not devote sufficient resources to our BiDil project, our ability to achieve near-term revenue could be harmed.

        We have entered into an agreement with Publicis, a contract sales organization, pursuant to which, on our behalf, Publicis has employed and is training a specialty sales force of 195 sales representatives

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to sell BiDil to our target prescriber markets. Under a separate agreement, Publicis has agreed to recruit, hire and train eight account executives who will assist us in gaining formulary access for BiDil, if approved, and to hire ten medical science liaisons to report into the Clinical/Regulatory group. If BiDil is approved, our near-term revenue for BiDil, if any, will depend heavily upon the success and efforts of Publicis. If Publicis does not devote the resources, time and training required to establish an effective and qualified sales force, our ability to achieve revenue from sales of BiDil will be harmed.

Physicians, payors and patients may not be receptive to BiDil or our other product candidates, if approved, which could prevent us from achieving and maintaining profitability.

        BiDil and the other product candidates that we are developing are based upon technologies or therapeutic approaches that are not currently in the marketplace. Assuming we receive FDA approval, we plan to market BiDil only in the United States. Key participants in the U.S. pharmaceutical marketplace, such as physicians, payors and patients, may not accept a product intended to improve therapeutic results based on ethnicity. As a result, it may be more difficult for us to convince the medical community and third-party payors and patients to accept and use our products. Our business is substantially dependent on market acceptance of BiDil. If we are unable to launch and commercialize BiDil, we will not generate revenue, and our stock price may decline.

        Other factors that we believe will materially affect market acceptance of BiDil and our other product candidates under development include:

•

the timing of our receipt of any marketing approvals, the terms of any approval (including labeling requirements and/or limitations), and the countries in which approvals are obtained, if any;



•

the safety, efficacy and ease of administration of BiDil;



•

the success of our physician education programs; and



•

the availability of government and third-party payor reimbursement.

The application of our nitric oxide technology is unproven in humans and, as a result, we may not be able to successfully develop and commercialize any products based upon this technology.

        A component of our strategy is to seek to improve existing medicines with our proprietary nitric oxide technology. Our product candidates include nitric oxide enhancements of existing drugs. Thus, we are modifying compounds whose chemical and pharmacological profiles are well-documented and understood. However, many of our potential product candidates are new molecules with chemical and pharmacological profiles that differ from that of the existing drugs. These compounds may not demonstrate in patients the chemical and pharmacological properties ascribed to them in laboratory studies, and they may interact with human biological systems in unforeseen, ineffective or harmful ways. In addition, it is possible that existing drugs or newly-discovered drugs may not benefit from the application of our nitric oxide technology. If we are not able to successfully develop and commercialize drugs based upon our technological approaches, we will not generate revenue based on these drugs, and the value of our stock will decline.

If our clinical trials for any product candidates we advance into clinical testing are not successful, we may not be able to successfully develop and commercialize our products.

        In order to obtain regulatory approvals for the commercial sale of our product candidates, we or our collaborators will be required to complete extensive clinical trials in humans to demonstrate the safety and efficacy of our product candidates. We may not be able to obtain authority from the FDA or other regulatory agencies to commence or complete these clinical trials. If permitted, such clinical testing may not prove that our drug candidates are safe and effective to the extent necessary to permit

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us to obtain marketing approvals from regulatory authorities. Moreover, positive results demonstrated in pre-clinical studies and clinical trials that we complete may not be indicative of results obtained in future clinical trials. Furthermore, we, one of our collaborators, institutional review boards or regulatory agencies may suspend clinical trials at any time if it is believed that the subjects or patients participating in such trials are being exposed to unacceptable health risks. Adverse or inconclusive clinical trial results concerning any of our drug candidates could require us to conduct additional clinical trials, result in increased costs and significantly delay the filing for marketing approval for those drug candidates with the FDA or result in a filing for a narrower indication than was originally sought or result in a decision to discontinue development of those drug candidates.

        The successful completion of our clinical trials will depend on, among other things, the rate of patient enrollment. Patient enrollment is a function of many factors, including the size of the patient population, the nature of the clinical protocol, the availability of alternative treatments, the proximity of patients to clinical sites and the eligibility criteria for the study. We may be unable to enroll the number of patients we need to complete a trial on a timely basis. Moreover, delays in planned patient enrollment for clinical trials may cause us to incur increased costs and delay commercialization.

        We have relied on academic institutions or clinical research organizations to supervise or monitor some or all aspects of our BiDil trial, and we expect to rely on academic institutions and clinical research organizations for other product candidates we advance into clinical testing. Accordingly, we have less control over the timing and other aspects of these clinical trials than if we conducted them entirely on our own.

        As a result of these factors, we or third parties on whom we rely may not successfully begin or complete our clinical trials in the time periods we have forecasted, if at all. Moreover, if we incur costs and delays in our programs or if we do not successfully develop and commercialize our products, our stock price could decline.

If we and our partners do not obtain and maintain the regulatory approvals required to market and sell BiDil and our other product candidates, then our business will be unsuccessful, and the market price of our stock will substantially decline.

        We and our partners will not be able to market any of our products in the United States, Europe or in any other country without marketing approval from the FDA or equivalent foreign regulatory agency. The regulatory process to obtain market approval for a new drug or medical device takes many years and requires expenditures of substantial resources. We have had only limited experience in preparing applications and obtaining regulatory approvals.

        If we do not receive required regulatory approval or clearance to market BiDil or any of our other product candidates, we will not be able to develop and commercialize these products, which will affect our ability to achieve profitability and cause the value of our common stock to substantially decline.

If we, our third-party manufacturers or our service providers fail to comply with applicable laws and regulations, we or they could be subject to enforcement actions, which could affect our ability to market and sell our products and harm our reputation.

        If we or our third-party manufacturers or service providers fail to comply with applicable federal, state or foreign laws or regulations, we could be subject to enforcement actions which could affect our ability to develop, market and sell our products successfully and could harm our reputation and lead to less acceptance of our products by the market. These enforcement actions include:

•

product seizures;



•

voluntary or mandatory recalls;



•

voluntary or mandatory patient or physician notification;

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•

withdrawal of product approvals;



•

restrictions on, or prohibitions against, marketing our products;



•

fines;



•

restrictions on importation of our products;



•

injunctions;



•

debarment;



•

civil and criminal penalties; and



•

suspension of review of, or refusal to approve, pending applications.

Assuming BiDil is approved for commercial sale, if the third-party manufacturer of BiDil encounters delays or difficulties in production, we may not be able to meet demand for the product, and we may lose potential revenue.

        We do not manufacture BiDil and have no plans to do so. We have engaged Schwarz Pharma Manufacturing, Inc. under a five-year exclusive manufacture and supply agreement solely for the three times daily immediate release dosage formulation of our BiDil product candidate. Under the supply agreement, we will have the right to engage a backup manufacturer. The terms of the supply agreement provide that it may be terminated by either us or Schwarz Pharma under specified circumstances, including a material breach of the supply agreement by either party, the occurrence of a payment default by us, our material impairment of the manufacturing licenses we have granted to Schwarz Pharma or a failure of Schwarz Pharma to supply conforming products. In addition, either party may terminate the supply agreement in the event the FDA takes any action, the result of which is to permanently prohibit the manufacture, sale or use of the product. Schwarz Pharma may not perform as agreed or may terminate its engagement with us, which would adversely impact our ability to produce and sell BiDil. If we are unable to maintain a commercially reasonable manufacturing agreement for the production of BiDil, if approved, with Schwarz Pharma, we may not be able to successfully develop and commercialize BiDil and our stock price will decline.

        Furthermore, Schwarz Pharma, may encounter difficulties in production. These problems may include:

•

difficulties with production costs and yields;



•

quality control and assurance;



•

shortages of qualified personnel;



•

compliance with strictly enforced federal, state and foreign regulations; and



•

lack of capital funding.

        The number of third-party manufacturers with the manufacturing and regulatory expertise and facilities necessary to manufacture finished drug products for us on a commercial scale is limited, and it would take a significant amount of time to arrange, qualify, and receive necessary regulatory approval for alternative arrangements. We may not be able to contract for manufacturing on acceptable terms, if at all.

        Any of these factors could increase our costs and result in our being unable to effectively commercialize BiDil. Furthermore, if Schwarz Pharma or any other third-party manufacturer of BiDil fails to deliver the required commercial quantities of finished product on a timely basis and at commercially reasonable prices, we may be unable to meet the demand for our product, and we may lose potential revenues.

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The development and commercialization of our product candidates may be terminated or delayed, and the cost of development and commercialization may increase, if third parties on whom we rely to manufacture our products do not fulfill their obligations.

        We do not manufacture any of our other product candidates and have no current plan to develop any capacity to do so in the future. In order to continue to develop products, apply for regulatory approvals and commercialize our products, we plan to rely on third parties for the production of clinical and commercial quantities of our product candidates. We will depend upon these third parties to perform their obligations in a timely manner and in accordance with applicable laws and regulations. To the extent that third-party manufacturers with whom we contract fail to perform their obligations in accordance with applicable laws and regulations, we may be adversely affected in a number of ways, including:

•

we may not be able to initiate or continue clinical trials of our product candidates;



•

we may be delayed in submitting applications for regulatory approvals for our product candidates;



•

we may be required to cease distribution and/or recall some or all batches of our products; and



•

we may not be able to meet commercial demands for our products or achieve profitability.

We rely on a single source supplier for one of the two active ingredients in BiDil, and the loss of this supplier could prevent us from selling BiDil, which would materially harm our business.

        We rely on Sumitomo for our supply of hydralazine, one of the two active ingredients in BiDil. Sumitomo is currently the only supplier of hydralazine worldwide. We do not have any agreement with Sumitomo regarding the supply of hydralazine. If Sumitomo stops manufacturing or is unable to manufacture hydralazine, or if we are unable to procure hydralazine from Sumitomo on commercially favorable terms, we may be unable to continue to sell BiDil on commercially viable terms, if at all. Furthermore, because Sumitomo is currently the sole supplier of hydralazine, Sumitomo has unilateral control over the price of hydralazine. Any increase in the price for hydralazine may reduce our gross margins.

The termination of our collaboration agreement with Merck, resulting from Merck's recent decision to withdraw its COX-2 inhibitor, Vioxx, from worldwide markets, will result in the loss of potential milestone and royalty based revenue from the collaboration and may indicate that the development of nitric oxide-enhancing COX-2 inhibitors is not viable.

        In December 2002, we entered into an exclusive, worldwide research, collaboration and licensing agreement with Merck pursuant to which we granted Merck marketing and sales rights to our technology for nitric oxide-enhancing COX-2 inhibitors. On September 30, 2004, Merck halted the phase II trial of our lead candidate in nitric oxide-enhancing COX-2 inhibitors. This lead nitric oxide candidate is composed of a derivative of rofecoxib. Rofecoxib is the active ingredient in Vioxx, a COX-2 inhibitor which Merck voluntarily withdrew from worldwide markets on September 30, 2004. We have agreed with Merck to terminate our collaboration agreement, which will result in the loss of any potential milestone or royalty revenue from the sale of products that may have resulted from the collaboration as well as any research and development funding that we may have received beyond the end of the initial research term in December 2005. If the FDA imposes additional regulatory burdens for the approval of new COX-2 inhibitors, if COX-2 inhibitors continue to pose safety concerns, or if the market for COX-2 inhibitors contracts, then we may lose any investment made in the development of, and any potential revenue that may have resulted from, the development, sale or licensing of nitric oxide-enhancing COX-2 inhibitors.

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We currently depend on collaborative partners for a significant portion of our revenues and to develop, conduct clinical trials with, obtain regulatory approvals for, and manufacture, market and sell some of our product candidates, and these collaborations may not be successful.

        We are relying on Boston Scientific to fund the development of and to commercialize nitric oxide-enhancing stents using our technology to prevent the re-closure of arteries, or restenosis, following balloon angioplasty, a treatment to widen blocked arteries. In addition, Merck has funded the development of products based upon our nitric oxide-enhancing COX-2 inhibitor technologies. All of our $16.5 million of revenues for 2004 were derived from licensing, research and development and milestone payments paid to us by Boston Scientific and Merck. We and Merck terminated our collaboration on nitric oxide-enhancing COX-2 inhibitor technologies. Please see "Risk Factors—The termination of our collaboration agreement with Merck, stemming from Merck's recent decision to withdraw its COX-2 inhibitor, Vioxx, from worldwide markets, will result in the loss of potential milestone and royalty based revenue from the collaboration and may indicate that the development of nitric oxide-enhancing COX-2 inhibitors is not viable." for additional risks relating to our agreement with Merck.

        Our agreement with Boston Scientific provides us research and development funding for our nitric oxide-enhancing stent program, and additional payments due to us under the collaboration agreement are generally based on the achievement of specific development and commercialization milestones that may not be met. The agreement with Boston Scientific can be terminated at any time upon 30 days' prior written notice. We are also entitled to royalty payments that are based on the sales of products developed and marketed through the collaboration. These future royalty payments may not materialize or may be less than expected if the related product candidates are not successfully developed or marketed, or if we or our collaborator is forced to license intellectual property from third parties. Accordingly, we cannot predict with certainty whether this collaboration will continue to generate revenues for us and if so, for how long. The loss of the Boston Scientific collaboration could decrease our revenues. We intend to enter into collaborative agreements with other parties in the future relating to other product candidates, and we are likely to have similar risks with regard to any such future collaborations.

        In addition, our existing collaboration and any future collaborative arrangements that we seek to enter into with third parties may not be scientifically or commercially successful. Factors that may affect the success of our collaborations include the following:

•

our collaborators may be pursuing alternative technologies or developing alternative product candidates, either on their own or in collaboration with others, that may be competitive with the product candidate on which they are collaborating with us and which could affect their commitment to our collaboration;



•

reductions in marketing or sales efforts or a discontinuation of marketing or sales of our products by our collaborators would reduce our revenues, which will be based on a percentage of net sales by the collaborator;



•

our collaborators may terminate their collaborations with us, which could make it difficult for us to attract new collaborators or adversely affect how we are perceived in the business and financial communities; and



•

our collaborators may pursue higher-priority programs or change the focus of their development programs, which could affect the collaborators' commitment to us.

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Our failure to successfully acquire, develop and market additional drug candidates or approved drugs would impair our ability to grow.

        As part of our strategy, we intend to acquire, develop and market additional drugs and drug candidates for cardiovascular and metabolic diseases. The success of this strategy depends upon our ability to identify, select and acquire appropriate pharmaceutical drug candidates and drugs.

        Any drug candidate we license or acquire may require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All drug candidates are prone to the risks of failure inherent in pharmaceutical product development, including the possibility that the drug candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot guarantee that any drugs that we develop or acquire that are approved will be manufactured or produced economically, successfully commercialized or widely accepted in the marketplace.

        Proposing, negotiating and implementing an economically viable acquisition of a drug or drug candidate is a lengthy and complex process. Other companies, including those with substantially greater financial, marketing and sales resources, may compete with us for the acquisition of product candidates and approved products. We may not be able to acquire the rights to additional drug candidates and approved drugs on terms that we find acceptable, if at all.

Risks Relating to our Intellectual Property Rights

Our patent protection for BiDil, which is a combination of two generic drugs, is limited, and we may be subject to generic substitution or competition and resulting pricing pressure.

        We have no composition of matter patent covering our lead product candidate, BiDil, which we intend to market for the treatment of heart failure in African Americans. BiDil is a fixed-dose combination of two generic drugs, isosorbide dinitrate and hydralazine, which are approved and separately marketed, in dosages similar to those we include in BiDil, for indications other than heart failure, at prices below the prices we expect to charge for BiDil. We have three issued method-of-use patents, one of which covers the use of the combination of isosorbide dinitrate and hydralazine to reduce the incidence of mortality associated with chronic congestive heart failure, expiring in 2007, and the others covering the treatment of heart failure in black patients, expiring in 2020. As a practical matter, we may not be able to enforce these method-of-use patents to prevent physicians from prescribing isosorbide dinitrate and hydralazine separately for the treatment of heart failure in African Americans, even though neither drug is approved for such use.

        Other factors may also adversely affect our patent protection for BiDil. The combination therapy of isosorbide dinitrate and hydralazine for use in heart failure was developed through lengthy, publicly-sponsored clinical trials conducted during the 1980s, prior to the filing of the patent application that resulted in the 2007 patent. The U.S. Patent and Trademark Office, or U.S. patent office, considered published reports on these clinical trials and concluded that they did not constitute prior art that would prevent the issuance of the 2007 patent. The U.S. patent office also considered the question of whether the 2007 patent constituted prior art with respect to the 2020 patents, but determined that the claims of the 2020 patents were non-obvious and patentable. A court considering the validity of the 2007 or 2020 patents with respect to questions of prior art might be presented with other alleged prior art or might reach conclusions different from those reached by the U.S. patent office. If the 2007 or 2020 patents were to be invalidated or if physicians were to prescribe isosorbide dinitrate and hydralazine separately for heart failure in African Americans, our BiDil revenue could be significantly reduced, we could fail to recover the cost of developing BiDil and BiDil might not be a viable product.

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If we are not able to obtain and enforce patent protection for our discoveries, our ability to develop and commercialize our product candidates will be harmed, and we may not be able to operate our business profitably.

        Our success depends, in part, on our ability to protect proprietary methods and technologies that we develop under the patent and other intellectual property laws of the United States and other countries, in order to prevent others from using our inventions and proprietary information. Because certain United States patent applications are confidential until patents issue, such as applications filed prior to November 29, 2000 or applications filed after such date which will not be filed in foreign countries, third parties may have filed patent applications for technology covered by our pending patent applications without our being aware of those applications, and our patent applications may not have priority over any patent applications of others.

        Our strategy depends on our ability to rapidly identify and seek patent protection for our discoveries. This process is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Despite our efforts to protect our proprietary rights, unauthorized parties may be able to obtain and use information that we regard as proprietary. The mere issuance of a patent does not guarantee that it is valid or enforceable, so even if we obtain patents, they may not be valid or enforceable against third parties.

        The issued patents and patent applications for our product candidates and nitric oxide technology include claims with respect to both the composition of specific drugs or compounds and specific methods of using these drugs or compounds in therapeutic areas. In some cases, like BiDil, our only patent protection is with respect to the method of using a drug or compound, and we do not have patent claims covering the underlying composition of the drug or compound. Method-of-use patents may provide less protection for our product candidates because it may be more difficult to prove direct infringement against a pharmaceutical manufacturer or distributor once they have gained approval for an alternative indication. In addition, if any other company gains FDA approval for an indication separate from the one we are pursuing and markets a drug that we expect to market under the protection of a method-of-use patent, physicians will be able to prescribe that drug for use in the indication for which we have obtained approval, even though the drug is not approved for such indication. As a practical matter, we may not be able to enforce our method-of-use patents against physicians prescribing drugs for such off-label use. Off-label use and any resulting off-label sales could make it more difficult to obtain the price we would otherwise wish to achieve for, or to successfully commercialize, our product. In addition, in those situations where we have only method-of-use patent coverage for a product candidate, it may be more difficult to find a pharmaceutical company partner to license or support development of our product candidate.

        Our pending patent applications may not result in issued patents. The patent position of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complex legal and factual considerations. The standards which the U.S. patent office and its foreign counterparts use to grant patents are not always applied predictably or uniformly and can change. There is also no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical or biotechnology patents. Accordingly, we do not know the degree of future protection for our proprietary rights or the breadth of claims allowed in any patents issued to us or to others.

        We also rely on trade secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business and financial condition could be materially adversely affected.

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If we become involved in patent litigation or other proceedings to enforce our patent rights, we would incur substantial costs and expenses, substantial liability for damages or be required to stop our product development and commercialization efforts.

        A third party may sue us for infringing on its patent rights. Likewise, we may need to resort to litigation to enforce a patent issued to us or to determine the scope and validity of third-party proprietary rights. The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be substantial, and the litigation would divert our management's efforts. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, our strategy of providing nitric oxide-enhancing versions of existing medicines could lead to more patent litigation as the markets for these existing medicines are very large and competitive. Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue our operations.

        For example, we have filed an opposition in the European Patent Office, or EPO, to revoke NicOx S.A.'s European Patent No. 904 110, which we refer to as EP '110. This patent is directed to the use of organic compounds containing a nitrate group or inorganic compounds containing a nitric oxide group to reduce the toxicity caused by certain drugs, including non-steroidal anti-inflammatory drugs, or NSAID's. The basis for our opposition, in part, is that the claims in EP '110 are anticipated and therefore invalid if they are construed to cover a single compound chemically linked to a nitrate. While we believe that the claims in EP '110 will be invalidated, or be narrowed, we cannot predict with certainty the outcome of the opposition. If the EPO finds that there are valid claims in EP '110 that cover compounds chemically linked to nitrates, we may be adversely affected in our ability to market our product candidates for reducing gastrointestinal toxicity without first obtaining a license from NicOx, which may not be available on favorable terms, if at all. We do not know whether NicOx has filed claims of similar scope to the EP '110 patent in the United States.

        If any parties are able to successfully claim that our creation or use of proprietary technologies infringes upon their intellectual property rights, we might be forced to pay damages, potentially including treble damages, if we are found to have willfully infringed on such parties' patent rights. In addition to any damages we might have to pay, a court could require us to stop the infringing activity or obtain a license on unfavorable terms. Moreover, any legal action against us or our partners claiming damages and seeking to enjoin commercial activities relating to the affected products and processes could, in addition to subjecting us to potential liability for damages, require us or our partners to obtain a license in order to continue to manufacture or market the affected products and processes. Any license required under any patent may not be made available on commercially-acceptable terms, if at all. In addition, some licenses may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent, we may be unable to effectively market some of our technology and product candidates, which could limit our ability to generate revenues or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations. In addition, a number of our collaborations provide that royalties payable to us for licenses to our intellectual property may be offset by amounts paid by our collaboration partners to third parties who have competing or superior intellectual property positions in the relevant fields, which could result in significant reductions in our revenues from products developed through collaborations.

We in-license a significant portion of our principal proprietary technologies, and if we fail to comply with our obligations under any of the related agreements, we could lose license rights that are necessary to developing BiDil and our other product candidates.

        We are a party to a number of licenses that give us rights to third-party intellectual property that is necessary for our business. In particular, we have obtained the exclusive right to develop and

30

commercialize BiDil pursuant to a license agreement with Dr. Jay N. Cohn, and some of our intellectual property rights relating to nitric oxide compounds have been obtained pursuant to license agreements with the Brigham and Women's Hospital and Boston University. We expect to enter into additional licenses in the future. These licenses impose various development, commercialization, funding, royalty, diligence, and other obligations on us. If we breach these obligations, the licensor may have the right to terminate the license or render the license non-exclusive, which would result in us being unable to develop, manufacture and sell products that are covered by the licensed technology.

Risks Relating to our Industry

We face significant competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

        The pharmaceutical and medical device industries are highly competitive and characterized by rapid and significant technological change. Our principal competitors in the markets we have targeted, including cardiovascular disease, are large, multinational pharmaceutical and medical device companies that have substantially greater financial and other resources than we do and are conducting extensive research and development activities on technologies and product candidates similar to or competitive with ours.

        There are a number of companies currently marketing and selling products to treat heart failure in the general population that will compete with BiDil, if it is approved. These include GlaxoSmithKline, plc, which currently markets Coreg, Merck & Co., Inc., which currently markets Vasotec, Pfizer, Inc., which currently markets Inspra, and Astra Zeneca, plc, which currently markets Toprol XL.

        We also face competition from other pharmaceutical companies seeking to develop drugs using nitric oxide technology. For example, we are aware of at least six companies working in the area of nitric oxide based therapeutics. These companies are: Angiogenix Inc., GB Therapeutics, NicOx S.A., OxoN Medica, RenoPharm, and Vasopharm BIOTECH GmbH.

        Many of our competitors are more experienced than we are in drug development and commercialization, obtaining regulatory approvals and product marketing and manufacturing. As a result, our competitors may develop and commercialize pharmaceutical products before we do. In addition, our competitors may develop and commercialize products that render our products obsolete or non-competitive or that block or delay approval of our products as a result of patent or non-patent exclusivity.

We may be exposed to product liability claims and may not be able to obtain or maintain adequate product liability insurance.

        Our business exposes us to the risk of product liability claims that is inherent in the manufacturing, testing, and marketing of human therapeutic products. Our clinical trial liability insurance is subject to deductibles and coverage limitations. We do not currently have any commercial product liability insurance. We may not be able to obtain or maintain insurance on acceptable terms, or at all. Moreover, any insurance that we do obtain may not provide adequate protection against potential liabilities.

If third-party payors do not reimburse customers for BiDil or any of our product candidates that are approved for marketing, they might not be used or purchased, and our revenues and profits might be adversely affected.

        Our revenues and profits depend heavily upon the availability of coverage and reimbursement for the use of BiDil, and any of our product candidates that are approved for marketing, from third-party

31

healthcare and state and federal government payors, both in the United States and in foreign markets. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor's determination that use of a product is:

•

safe, effective and medically necessary;



•

appropriate for the specific patient;



•

cost-effective; and



•

neither experimental nor investigational.

        Since reimbursement approval for a product is required from third-party and government payors, seeking this approval, particularly when seeking approval for a preferred form of reimbursement over other competitive products, is a time-consuming and costly process. Third-party payors may require cost-benefit analysis data from us in order to demonstrate the cost-effectiveness of any product we might bring to market. For any individual third-party payor, we may not be able to provide data sufficient to gain reimbursement on a similar or preferred basis to competitive products or at all. Once reimbursement at an agreed level is approved by a third-party payor, we may lose that reimbursement entirely or we may lose the similar or better reimbursement we receive compared to competitive products. As reimbursement is often approved for a period of time, this risk is greater at the end of the time period, if any, for which the reimbursement was approved.

Risks Relating to our Common Stock

Our stock price is subject to fluctuation, which may cause an investment in our stock to suffer a decline in value.

        The market price of our common stock may fluctuate significantly in response to factors that are beyond our control. The stock market in general has recently experienced extreme price and volume fluctuations. The market prices of securities of pharmaceutical, biotechnology and other life sciences companies have been extremely volatile, and have experienced fluctuations that often have been unrelated or disproportionate to the operating performance of these companies. For example, our stock price could be adversely affected if product candidates by others that utilize nitric oxide technology are not successful in clinical testing, fail to achieve regulatory approval or are not accepted in the marketplace, even though these failures may not be related to our product candidates or technology. These broad market fluctuations could result in extreme fluctuations in the price of our common stock, which could cause a decline in the value of our common stock.

We may incur significant costs and suffer management distraction and reputational damage from class action litigation and regulatory or government investigations and actions due to trading in our common stock.

        Our stock price has been, and is likely to continue to be, volatile. Our stock price may fluctuate for many reasons, including as a result of public announcements regarding the progress of our development and marketing efforts, the addition or departure of key personnel, variations in our quarterly operating results and changes in market valuations of pharmaceutical, biotechnology or other life sciences companies. When the market price of a company's stock is volatile, holders of that company's stock may bring securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit was without merit, we could incur substantial costs defending the lawsuit.

        On July 20, 2004, the Market Regulation Department of the National Association of Securities Dealers, Inc., or NASD, advised us that it initiated a review of trading activity in our common stock surrounding our July 19, 2004 announcement that we had halted our phase III confirmatory clinical

32

trial of BiDil due to the significant survival benefit seen with BiDil. The NASD is reviewing, among other things, information on relationships between our officers, directors and service providers and individuals and institutions who may have traded in our common stock prior to the July 19, 2004 announcement. We have cooperated with this review and have identified certain persons on the list provided to us by the NASD as having a relationship with our chief executive officer and others at NitroMed. We have established a special committee of our board of directors to oversee our response to this review.

        The Securities and Exchange Commission, or SEC, or other securities regulators may investigate trading activity of insiders and others around events that result in stock price volatility, such as our July 19, 2004 announcement, and we may incur substantial costs in connection with any such government investigation or related action. A stockholder lawsuit, SEC or other investigation or action could also damage our reputation or that of our officers or directors and divert their time and attention away from management of NitroMed.

Substantially all of our outstanding common stock may be sold into the market at any time. This could cause the market price of our common stock to drop significantly.

        Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. As of December 31, 2004, we had outstanding 30,123,905 shares of common stock. Substantially all of these shares may also be resold in the public market at any time. In addition, we have a significant number of shares that are subject to outstanding options. The exercise of these options and the subsequent sale of the underlying common stock could cause a further decline in our stock price. These sales also might make it difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Insiders have substantial control over us and could delay or prevent a change in corporate control.

        As of December 31, 2004, our directors, executive officers and principal stockholders, together with their affiliates, own, in the aggregate, approximately 48% of our outstanding common stock. As a result, these stockholders, if acting together, may have the ability to determine the outcome of matters submitted to our stockholders for approval, including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these persons, if acting together, may have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership may harm the market price of our common stock by:

•

delaying, deferring or preventing a change in control of our company;



•

impeding a merger, consolidation, takeover or other business combination involving our company; or



•

discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company.

Provisions in our charter documents and under Delaware law may prevent or frustrate attempts by stockholders to change current management and hinder efforts to acquire a controlling interest in our company.

        Provisions of our restated certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions

33

may prevent or frustrate attempts by stockholders to replace or remove our current management. These provisions include:

•

a prohibition on stockholder action through written consent;



•

a requirement that special meetings of stockholders be called only by a majority of the board of directors, the chairman of the board or the chief executive officer;



•

advance notice requirements for stockholder proposals and nominations;



•

limitations on the ability of stockholders to amend, alter or repeal our certificate of incorporation or bylaws; and



•

the authority of the board of directors to issue preferred stock with such terms as the board of directors may determine.

        In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally defined as a person or entity which together with its affiliates owns or within the last three years has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Section 203 may discourage, delay or prevent a change in control of our company.

ITEM 2. PROPERTIES

        We lease a facility that contains approximately 52,000 square feet of laboratory and office space in Lexington, Massachusetts. The lease has a term ending in 2014. We believe that our current facilities are adequate for our needs for the foreseeable future and that, should it be needed, suitable additional space will be available to accommodate expansion of our operations on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

        We are currently not a party to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of security holders of our company, through solicitations of proxies or otherwise, during the quarter ended December 31, 2004.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a)    Market Price of and Dividends on NitroMed's Common Stock and Related Stockholder Matters.

        Our common stock is traded on the NASDAQ National Market under the symbol "NTMD". Trading of our common stock commenced following our initial public offering on November 6, 2003. The following table sets forth the high and low sale prices per share of our common stock as reported on the NASDAQ National Market for the periods indicated.

		Common Stock Price
		High		Low
Fiscal year ended December 31, 2004
	First quarter	$	9.65	$	6.90
	Second quarter	$	8.15	$	5.75
	Third quarter	$	25.78	$	5.70
	Fourth quarter	$	27.30	$	19.14
Fiscal year ended December 31, 2003
	Fourth quarter (from November 6 to December 31)	$	11.55	$	6.90

        On March 7, 2005, the reported last sale price of our common stock on the NASDAQ National Market was $20.45 per share, and we had approximately 58 holders of record of our common stock.

        We have never paid or declared any cash dividends on our common stock. We currently intend to retain earnings, if any, to finance the growth and development of our business, and we do not expect to pay any cash dividends on our common stock in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors.

(b)    Recent Sales of Unregistered Securities; Uses of Proceeds From Registered Securities

Recent Sales of Unregistered Securities

        None.

Use of Proceeds from Registered Securities

        On November 10, 2003, we completed an initial public offering of 6,000,000 shares of our common stock at a price to the public of $11.00 per share. The offer and sale of all of the shares in the initial public offering were registered under the Securities Act of 1933, as amended, pursuant to a registration statement on Form S-1 (File No. 333-108104), which was declared effective by the Securities and Exchange Commission on November 5, 2003. Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Pacific Growth Equities were the managing underwriters of the initial public offering. The offering commenced on November 5, 2003 and did not terminate until after the sale of all of the securities registered in the Registration Statement. As part of the initial public offering, we granted these underwriters an over-allotment option to purchase up to an additional 900,000 shares of our common stock from us. The underwriters did not exercise the over-allotment option. There were no selling stockholders in the offering.

        The aggregate price of the offering amount registered on our behalf was $66.0 million. In connection with the offering, we paid approximately $4.6 million in underwriting discounts and commissions to the underwriters and incurred an estimated $1.3 million in other offering expenses. None of the underwriting discounts and commissions or offering expenses were incurred or paid to directors or officers of ours or their associates or to persons owning 10 percent or more of our common stock or to any affiliates of ours. After deducting the underwriting discounts and commissions and offering expenses, we received net proceeds from the offering of approximately $60.1 million.

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ITEM 6. SELECTED FINANCIAL DATA

        You should read carefully the financial statements included in this report, including the notes to the financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The selected financial data in this section are not intended to replace the financial statements.

        We derived the statement of operations data for the years ended December 31, 2004, 2003 and 2002 and the balance sheet data as of December 31, 2004 and 2003 from our audited financial statements, which are included elsewhere in this report. We derived the statement of operations data for the years ended December 31, 2001 and 2000 and the balance sheet data as of December 31, 2002, 2001 and 2000 from our audited financial statements which are not included herein. Historical results are not necessarily indicative of future results. See the notes to the financial statements for an explanation of the method used to determine the number of shares used in computing basic and diluted net loss per common share.

		Year Ended December 31,
		2004			2003			2002			2001			2000
		(in thousands, except per share data)
Statement of Operations Data:
Research and development revenues		$	16,458		$	12,775		$	750		$	250		$	2,125
Operating expenses:
	Research and development		27,995			18,907			16,133			10,214			8,043
	General and administrative		19,591			3,114			2,531			2,362			2,048
Total operating expenses			47,586			22,021			18,664			12,576			10,091
Loss from operations			(31,128	)		(9,246	)		(17,914	)		(12,326	)		(7,966	)
Other income, net			1,355			477			572			697			535
Net loss			(29,773	)		(8,769	)		(17,342	)		(11,629	)		(7,431	)
Deemed dividends related to beneficial conversion features of redeemable convertible preferred stock			—			(19,357	)		—			—			—
Accretion of dividends and redemption value			—			(2,794	)		(2,697	)		(1,662	)		(157	)
Net loss attributable to common stockholders		$	(29,773	)	$	(30,920	)	$	(20,039	)	$	(13,291	)	$	(7,588	)
Net loss per common share:
Basic and diluted		$	(1.14	)	$	(6.95	)	$	(20.66	)	$	(17.91	)	$	(14.05	)
Weighted average basic and diluted common shares outstanding			26,152			4,447			970			742			540

	As of December 31,
	2004			2003			2002			2001			2000
	(in thousands)
Balance Sheet Data:
Cash, cash equivalents and marketable securities	$	142,367		$	97,088		$	11,843		$	28,331		$	4,559
Working capital		133,238			87,938			15,838			25,401			2,266
Total assets		149,357			99,170			22,492			29,809			5,507
Long-term debt		—			—			22			64			353
Redeemable convertible preferred stock		—			—			82,884			80,187			44,277
Accumulated deficit		(136,619	)		(106,846	)		(75,926	)		(55,887	)		(42,596	)
Total stockholders' equity (deficit)	$	137,012		$	81,799		$	(73,353	)	$	(54,275	)	$	(41,493	)

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

        We are an emerging pharmaceutical company that discovers, develops and seeks to commercialize proprietary pharmaceuticals. We have devoted substantially all of our efforts towards the research and development of our product candidates. Since our inception, we have had no revenue from product sales and have funded our operations through the sale of equity securities, debt financings, license fees, research and development funding and milestone payments from our collaborative partners. We have never been profitable and have incurred an accumulated deficit of $136.6 million as of December 31, 2004.

        Research, development and commercialization expenses relating to our product candidates and to enhancing our core technologies will continue to increase in the near term and may vary significantly from our current estimates. In particular, we expect to incur increased costs during the first quarter of 2005 as we seek regulatory approval for BiDil, our lead product in development for the treatment of African Americans diagnosed with heart failure. BiDil is an orally administered nitric oxide-enhancing medicine, which combines isosorbide dinitrate and hydralazine. We recently concluded a phase III confirmatory clinical trial of BiDil which was designed to evaluate the efficacy of BiDil, when taken daily in addition to current heart failure therapies. The trial demonstrated that African American patients with heart failure experienced a 43% improvement in survival after taking BiDil in addition to standard heart failure therapies, as compared to patients in a placebo group who received only standard heart failure therapies. In July 2004, following the recommendation of the independent Data and Safety Monitoring Board and the clinical trial's steering committee, we halted this clinical trial because of the significant survival benefit seen in the preliminary trial results for patients taking the drug. On December 23, 2004, we resubmitted a new drug application for BiDil to the FDA. On February 3, 2005, the FDA accepted our new drug application resubmission as a complete class 2 resubmission, which means that under the Prescription Drug User Fee Act, FDA review of our resubmission is expected to be completed within six months of the date the resubmission was received, or June 23, 2005.

        General and administrative costs will increase as we prepare for the potential commercialization of BiDil in 2005. As a result of our decision to halt the BiDil trial and resubmit a new drug application to the FDA earlier than initially planned, we expect to incur operating expenses in excess of our previous estimates relating to the development of our sales and marketing capabilities, pre-launch related expenses and manufacturing costs in connection with the procurement of commercial supplies of BiDil. In addition, we currently estimate that our existing cash and marketable securities will be sufficient to support our operating plan, including increased operating expenses in preparation for the potential launch of BiDil, for at least the next eighteen months.

        We will need to generate significant revenues to achieve profitability. At the present time we are unable to estimate the level of revenues, if any, that we will realize from the commercialization of our product candidates, including BiDil. We are therefore unable to estimate when we will achieve profitability, if at all.

        On July 20, 2004, the Market Regulation Department of the National Association of Securities Dealers, Inc. advised us that it initiated a review of trading activity in our common stock surrounding our July 19, 2004 announcement that we had halted our phase III confirmatory clinical trial of BiDil due to the significant survival benefit seen with BiDil. The NASD is reviewing, among other things, information on relationships between our officers, directors and service providers and individuals and institutions who may have traded in our common stock prior to the July 19, 2004 announcement. We have cooperated with this review and have identified certain persons on the list provided to us by the NASD as having a relationship with our chief executive officer and others at NitroMed. We have established a special committee of our board of directors to oversee our response to this review.

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Financial Operations Overview

        Revenue.    We have not generated any revenue from product sales since our inception and do not expect to generate any revenue from the sale of products until 2005. All of our revenue to date has been derived from license fees, research and development payments and milestone payments that we have received from our corporate collaborators. In future years, we will seek to generate revenue from a combination of product sales, up-front fees and milestone payments in connection with collaborative or strategic relationships, and royalties resulting from the license of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of research and development, milestone and other payments received under our collaborative or strategic relationships and related continuing obligations, and the amount and timing of payments we receive upon the sale of our products, to the extent any are successfully commercialized.

        Research and Development.    Research and development expense consists of expenses incurred in identifying, developing and testing product candidates. These expenses consist primarily of salaries and related expenses for personnel, fees paid to professional service providers for independent monitoring and analysis of our clinical trials, costs of contract research and manufacturing, costs of facilities and the legal costs of pursuing patent protection of our intellectual property. We expense research and development costs, including patent-related costs, as incurred.

        The following summarizes our primary research and development programs. We have not provided program costs since inception because prior to 2000 we did not track and accumulate cost information by research program.

•

BiDil.  From May 2001 to July 2004, we enrolled 1,050 patients at 169 clinical sites in the United States in our phase III confirmatory clinical trial for BiDil. We halted the trial in July 2004 due to a significant survival benefit in the preliminary data for patients taking BiDil. We resubmitted a new drug application for BiDil to the FDA in December 2004 and the FDA accepted such resubmission on February 3, 2005. We expect to incur significant additional expenditures for BiDil as we apply for regulatory approval, expand our operations, hire additional personnel and, if FDA approval is obtained, seek to launch BiDil in 2005. We estimate that the total direct cost for this trial will be at least $43.0 million. However, the actual total cost of the clinical trial, including any costs associated with the ongoing monitoring of patients and any costs incident to our expected launch of the drug, depends on a number of factors, including potential unanticipated delays in the FDA's review of our new drug application resubmission and other uncertainties relating to the regulatory approval process. We do not anticipate receiving revenue from BiDil until 2005, if ever. Our failure to commercialize BiDil on a timely basis would have a material adverse effect on our business, financial position and results of operations.



•

Nitric Oxide Stents.  We are currently working with Boston Scientific to develop stents coated with a bio-compatible polymer that is capable of releasing nitric oxide. This program is in pre-clinical development. We expect that additional expenditures will be required to conduct pre-clinical testing and, if such pre-clinical testing is successful, to apply for and conduct clinical trials. Because this program is in pre-clinical development, the successful development of products based upon this program is highly uncertain. As such, we are unable to estimate the cost to complete the research and development phase, nor are we able to estimate the timing of bringing potential candidates to market and, therefore, when material cash inflows from milestones and royalties could commence. Our failure, or our partner's failure, to commercialize products based upon this program on a timely basis could have a material adverse effect on our business, financial position and results of operations.



•

Nitric Oxide-Enhancing COX-2 Inhibitors.  We established a collaboration with Merck to screen proprietary nitric oxide-enhanced COX-2 inhibitors in advance of clinical testing as analgesic and anti-inflammatory agents and in other specified disease areas. These agents are intended to be second-generation COX-2 inhibitors. On September 30, 2004, Merck halted the phase II trial of

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our lead candidate in nitric oxide-enhancing COX-2 inhibitors. In November 2004, we agreed with Merck to terminate the collaboration agreement. Merck paid us a lump sum of $1.8 million, representing the full amount of the research funding owed to us for 2005 and is not required to provide us with any further funding. We retain all rights to our technology in the field of nitric oxide-enhancing COX-2 inhibitors and intend to evaluate the continued development of this technology in collaboration with other potential partners. Significant additional expenditures will be required to conduct pre-clinical testing and to apply for and conduct clinical trials. Because these agents are in pre-clinical development, their successful development is highly uncertain. As such, we are unable to estimate the cost to complete the research and development phase, nor are we able to estimate the timing of bringing potential candidates to market and, therefore, when material cash inflows from milestones and royalties could commence. Our failure, or any future partner's failure, to commercialize these product candidates under development on a timely basis could have a material adverse effect on our business, financial condition and results of operations.

•

Other Discovery Research.  We are also currently utilizing our nitric oxide expertise to develop products for additional medical conditions. Our efforts in these areas consist of discovery-stage research primarily directed to establishing our intellectual property position. We expect that additional expenditures will be required to conduct pre-clinical testing and, if such pre-clinical testing is successful, to apply for and conduct clinical trials for any such programs. Because these programs are in pre-clinical development, the successful development of products based upon these programs is highly uncertain. As such, we are unable to estimate the cost to complete research and development, nor are we able to estimate the timing of bringing potential product candidates to market and, therefore, when material cash inflows from milestones and royalties could commence.

        General and Administrative.    General and administrative expense consists primarily of salaries and other related costs for personnel in executive, finance, investor relations, accounting, business development, sales and marketing, and human resource functions. Other costs include facility costs not otherwise included in research and development expense and professional fees for legal and accounting services.

        We have incurred, and will continue to incur, increased general and administrative expense for investor relations and other activities associated with operating as a publicly-traded company. These increases will include the hiring of additional personnel. We intend to continue to incur increased internal and external business development costs to support our various product development efforts, which can vary from period to period. During 2005, we also anticipate incurring significant increased expenses in connection with the potential commercial introduction of BiDil.

        Non Operating Income (Expense).    Interest income includes interest earned on our cash, cash equivalents and marketable securities. Rental income was derived from a sublease of a portion of our facilities in 2003.

        Boston Scientific Collaboration.    In November 2001, we entered into a development and license agreement with Boston Scientific to develop cardiovascular stents coated with nitric oxide-releasing compounds. We have granted Boston Scientific an exclusive worldwide license to develop and commercialize products for restenosis incorporating two nitric oxide-releasing compounds. In consideration of this license, Boston Scientific made an upfront non-refundable license payment of $1.5 million, which is being recognized over the estimated time period of our contractual obligation to provide research and development services. In the event that specified research, development and commercialization milestones are achieved, Boston Scientific is obligated to make milestone payments to us. Boston Scientific is also obligated to pay royalties to us on the sale of any products resulting from the collaboration. In December 2003, we agreed to extend the research and development collaboration through December 2005, and we received an additional $3.0 million, which is being

39

recognized ratably over the research and development collaboration term. Boston Scientific made a $3.5 million equity investment in our stock in 2001 and made an additional $500,000 equity investment in our stock in August 2003.

        Merck Collaboration.    In December 2002, we entered into an exclusive, worldwide research, collaboration and licensing agreement that granted Merck marketing and sales rights for nitric oxide-enhancing COX-2 inhibitors. The research portion of the agreement was for three years and could have been extended by mutual agreement. In 2003, we received an upfront non-refundable license payment of $10.0 million and two payments, each of $5.0 million, for achieving the first two milestones. The license fee revenue and the revenue from the first $5.0 million milestone payment were being recognized over the contractual term of the research and development program, which was to end December 31, 2005. The revenue from the second $5.0 million payment was recognized in the fourth quarter of 2003, the period in which Merck achieved the milestone. On September 30, 2004, Merck halted the phase II trial of our lead candidate in nitric oxide-enhancing COX-2 inhibitors. This lead nitric oxide candidate is composed of a derivative of rofecoxib. Rofecoxib is the active ingredient in Vioxx, a COX-2 inhibitor which Merck voluntarily withdrew from worldwide markets on September 30, 2004. In November 2004, we agreed with Merck to terminate the collaboration agreement. Merck paid us a lump sum of $1.8 million, representing the full amount of the research funding owed to us for 2005. However, we will not receive any commercialization milestones or royalty payments from Merck. As a result of the termination of this agreement, we accelerated the recognition of deferred license revenue of $5.3 million in the fourth quarter of 2004, and we recognized the lump sum payment of $1.8 million as revenue in the fourth quarter of 2004.

Results of Operations

Years Ended December 31, 2004, 2003 and 2002

        Revenue.    Revenue for the year ended December 31, 2004 was $16.5 million, compared to $12.8 million in 2003 and $750,000 in 2002. The $3.7 million, or 29% increase in revenue in 2004 compared to 2003 is primarily attributable to our collaboration agreement with Merck, which was terminated in November 2004. In 2004 we recognized $14.9 million in revenue under this agreement, which included all amounts previously deferred. Due to the termination of this collaboration agreement, we no longer have any future performance obligations, and accordingly, we recognized previously deferred license revenue of $5.3 million. In addition, we recognized $1.8 million that was originally scheduled to be paid to us during 2005 for research and development funding, but was instead paid to us in 2004 when the agreement was terminated. We also recognized an additional $1.2 million in revenue for 2004 over 2003 relating to the December 2003 extension of our agreement with Boston Scientific. Revenue for the year ended December 31, 2003 was $12.8 million, compared to $750,000 in 2002. The $12.0 million, or 1603% increase in revenue in 2003 compared to 2002 was attributable to our collaboration agreement with Merck, which we entered into in December 2002. During 2003 we received $15.0 million of payments from Merck that were deferred and were to be recognized as revenue ratably over the contractual research and development term. In addition we recognized revenue in 2003 for a $5.0 million milestone when Merck advanced a lead nitric-oxide enhancing COX-2 inhibitor into human testing and $3.0 million of research and development funding.

        Research and Development.    Research and development expense for the year ended December 31, 2004 was $28.0 million, compared to $18.9 million in 2003 and $16.1 million in 2002. The $9.1 million, or 48% increase in research and development expenses in 2004 compared with 2003, is primarily the result of an additional $2.8 million of expenses associated with the BiDil trial, including costs associated with the halt of the trial, ongoing clinical trial-related expenses, and the preparation and resubmission of a new drug application with the FDA. We also incurred increased research and development expenses in 2004 of $2.0 million related to compensation-related expenses due to additional headcount and non-cash stock-based compensation related expense; $1.2 million related to preparation of contract

40

manufacturing capabilities relating to the potential BiDil product line; $1.0 million pertaining to milestone payments under a collaboration and license agreement for BiDil; increased outside consulting costs of $0.8 million; and additional supplies costs of $0.2 million. Research and development expense for the year ended December 31, 2003 was $18.9 million, compared to $16.1 million in 2002. The $2.8 million, or 17% increase in research and development expenses in 2003 compared with 2002, was primarily the result of an additional $1.2 million of expenses associated with the BiDil trial, reflecting the addition of new sites and additional patients and an additional $1.1 million of compensation-related expenses due to additional headcount and non-cash stock-based compensation related expenses.

        The following table summarizes the primary components of our research and development expense for our principal research and development programs for the fiscal years ended December 31, 2004, 2003 and 2002.

	December 31,
Research and Development Program
	2004		2003		2002
BiDil	$	20,000,000	$	11,751,000	$	10,531,000
Nitric oxide-enhancing COX-2 inhibitors		2,500,000		2,358,000		2,372,000
Nitric oxide stents		2,500,000		1,447,000		1,401,000
Other		2,995,000		3,351,000		1,829,000
Total research and development expense	$	27,995,000	$	18,907,000	$	16,133,000

        General and Administrative.    General and administrative expense for the year ended December 31, 2004 was $19.6 million, compared to $3.1 million in 2003 and $2.5 million in 2002. The $16.5 million, or 529% increase in general and administrative expense in 2004 compared to 2003 was primarily due to $10.2 million for the preparation for the potential launch of BiDil, including costs relating to the hiring of contract sales personnel; hiring of sales and marketing management personnel; public relations services; and advertising and promotion services. We also incurred higher general and administrative expense in 2004 due to increased costs of $1.9 million associated with the accrual of business development and milestone payment expenses pertaining to the approval process for BiDil; $1.2 million pertaining to additional legal and consulting expenses; $1.0 million related to the hiring of executive management and additional administrative personnel; an increase in insurance costs of $.7 million due to operating as a public company; and higher infrastructure related growth of $.7 million, including moving to a new facility. General and administrative expense for the year ended December 31, 2003 was $3.1 million, compared to $2.5 million in 2002. The $583,000, or 23% increase in general and administrative expenses in 2003 compared to 2002 was primarily due to the fact that during the year ended December 31, 2003, we incurred additional costs in connection with evaluating and developing plans to commercialize BiDil of $479,000 and public company reporting related costs of $148,000.

        Non-Operating Income (Expense).    Non-operating income (expense) increased to $1.4 million in 2004 compared to $477,000 in 2003 and $572,000 in 2002. The $878,000, or 184% increase in non-operating income (expense) in 2004 compared to 2003 was primarily related to higher average fund balances available for investment and higher interest rates due to investing in longer maturity securities. The $95,000, or 17% decrease in non-operating income (expense) in 2003 compared to 2002 was primarily related to lower rental income due to our sublease agreement ending at our previous facility.

Liquidity and Capital Resources

        We have financed our operations since inception through the sale of equity, debt and payments from collaborative partners for licenses, research and development and achievement of milestones. As of December 31, 2004, we have received net proceeds of $242.0 million from the issuance of equity securities, primarily as the result of the sale of $99.1 of our redeemable convertible preferred stock; net proceeds of $60.1 million from our initial public offering in November 2003; and net proceeds of

41

$81.8 million from our follow-on public offering in December 2004, which is described below. At December 31, 2004, we had $142.4 million in cash, cash equivalents and marketable securities.

        In December 2004, we closed a follow-on public offering of our common stock at a price to the public of $24.46 per share. We sold an aggregate of 3,579,476 shares of our common stock resulting in gross proceeds of $87.6 million. In connection with the offering we paid approximately $5.3 million in underwriting discounts and commissions and incurred $.5 million in other offering expenses. After deducting the underwriting discounts and commissions and offering expenses, we received net proceeds from the offering of approximately $81.8 million.

        In November 2003, we closed our initial public offering of our common stock at a price to the public of $11.00 per share. We sold 6,000,000 shares of our common stock resulting in gross proceeds of $66.0 million. In connection with the offering, we paid approximately $4.6 million in underwriting discounts and commissions and incurred $1.3 million in other offering expenses. After deducting the underwriting discounts and commissions and offering expenses, we received net proceeds from the offering of approximately $60.1 million.

        In August 2003, we sold 2,776,347 shares of our series E redeemable convertible preferred stock for net proceeds of $19.9 million to existing preferred stockholders. These shares contained a beneficial conversion feature based on the fair value of our common stock at the date of such sale compared to the series E redeemable convertible preferred stock share price. The total value of the beneficial conversion feature of approximately $8.3 million was recognized as a dividend in the three month period ended September 30, 2003. In addition, we recognized a dividend of approximately $11.0 million in the three month period ended December 31, 2003 as a result of an increase to the conversion ratio of the series E redeemable convertible preferred stock in connection with our initial public offering in November 2003.

        During the year ended December 31, 2004, operating activities used cash of $33.8 million primarily due to a net loss of $29.8 million, a decrease in deferred revenue of $12.9 million, and an increase in prepaid and other current assets of $1.9 million, offset by adjustments for non-cash charges for stock-based compensation and depreciation and amortization of $2.9 million and an increase in accounts payable and accrued expenses of $7.9 million. The decrease in deferred revenue was partially due to the termination of the collaboration agreement with Merck resulting in the recognition of $5.3 million of deferred license revenue.

        During the year ended December 31, 2004, investing activities used cash of $80.7 million due to the net purchase of marketable securities of $77.3 million and purchases of computer and lab equipment of $2.7 million due to an increase in personnel and the build-out for our new facility. We expect to invest approximately $2.0 to $2.5 million for capital expenditures in 2005, principally related to the purchase of laboratory equipment and computer equipment to support headcount growth.

        During the year ended December 31, 2004, financing activities provided cash of $82.8 million primarily as a result of the sale of common stock in a follow-on public offering which yielded net proceeds of $81.8 million.

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        The following table summarizes our contractual obligations at December 31, 2004 and the effects such obligations are expected to have on our liquidity and cash flows in future periods.

Payments Due by Period

Contractual Obligations	Total		Less than one year		1-3 years		3-5 years		More than five years
Operating lease obligation	$	14,968,000	$	1,089,000	$	2,930,000	$	3,071,000	$	7,878,000
Purchase obligations(1)	$	67,083,000	$	33,954,000	$	33,129,000	$	—	$	—
Total contractual cash obligations	$	82,051,000	$	35,043,000	$	36,059,000	$	3,071,000	$	7,878,000

(1)

On October 3, 2004, we entered into an agreement with Publicis, a contract sales organization, pursuant to which, on our behalf, Publicis has employed and is training a specialty sales force of 195 sales representatives to sell BiDil to our target prescriber markets, assuming BiDil is approved by the FDA. The agreement is for a term of 24 months, with our option to continue the agreement beyond this term. Estimated year one costs are $31,592,000, excluding one-time start-up costs, and year two costs are projected at $33,129,000. We have the right to terminate this agreement upon 90 days written notice to Publicis. If we terminate this agreement during months one through twelve of the term of the agreement, we are required to pay a termination fee in the amount of $1.0 million. If we terminate this agreement during months thirteen through eighteen, the termination fee will be $750,000. If we terminate the agreement after month eighteen, no termination fee will be assessed. On November 3, 2004, we entered into a purchase order for hydralazine with Flavine, the U.S. representative of Sumitomo. $2,362,000 remains outstanding on the purchase order as of December 31, 2004.

        We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operations, including increases in spending for our BiDil clinical program, for at least eighteen months from the date of this report. However, we may require significant additional funds earlier than we currently expect to obtain regulatory approvals necessary to launch BiDil, and to develop our other product candidates.

        We may seek additional funding through collaborative arrangements and public or private financings. Additional funding may not be available to us on acceptable terms or at all. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. For example, if we raise additional funds by issuing equity securities, further dilution to our existing stockholders may result. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or more of our research or development programs. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our technologies, product candidates, or products which we would otherwise pursue on our own.

        Even if we are able to raise additional funds in a timely manner, our future capital requirements may vary from what we expect and will depend on many factors, including the following:

•

the costs of launching BiDil, if and when it is approved by regulatory authorities;



•

the timing, receipt, and amount of milestone and other payments, if any, from collaborators;



•

the timing, receipt, and amount of sales and royalties, if any, from our potential product candidates;



•

the resources required to successfully complete our clinical trials;



•

the time and costs involved in obtaining regulatory approvals;



•

continued progress in our research and development programs, as well as the magnitude of these programs;



•

the cost of manufacturing, marketing and sales activities;



•

the costs involved in preparing, filing, prosecuting, maintaining, and enforcing patent claims;



•

the cost of obtaining and maintaining licenses to use patented technologies; and



•

our ability to establish and maintain additional collaborative arrangements.

43

Critical Accounting Policies and Estimates

        Our discussion and analysis of our financial condition and results of operations are based on our 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 and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue, accrued expenses and the factors used to determine the fair value assigned to our stock options. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the 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 our more significant judgments and estimates used in the preparation of our consolidated financial statements.

        Revenue.    We record revenue on an accrual basis as it is earned and when amounts are considered collectible. Revenues received in advance of performance obligations or in cases where we have a continuing obligation to perform services, are deferred and recognized over the contractual or estimated performance period. Revenues from milestone payments that represent the culmination of a separate earnings process are recorded when the milestone is achieved. Contract revenues are recorded as the services are performed. When we are required to defer revenue, the period over which such revenue should be recognized is subject to estimates by management and may change over the course of the collaborative agreement.

        Accrued Expenses.    As part of the process of preparing financial statements, we are required to estimate accrued expenses. This process involves identifying services which have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for such service as of each balance sheet date in our financial statements. Examples of estimated expenses for which we accrue include contract service fees such as amounts paid to clinical monitors, data management organizations and investigators in conjunction with clinical trials, fees paid to contract manufacturers in conjunction with the production of clinical materials, marketing service fees and professional service fees, such as lawyers and accountants. In connection with such service fees, our estimates are most affected by our understanding of the status and timing of services provided relative to the actual levels of services incurred by such service providers. The majority of our service providers invoice us monthly in arrears for services performed. In the event that we do not identify certain costs, which have begun to be incurred, or we under- or over-estimate the level of services performed or the costs of such services, our reported expenses for such period would be too low or too high. The date on which certain services commence, the level of services performed on or before a given date and the cost of such services are often determined based on subjective judgments. We make these judgments based upon the facts and circumstances known to us in accordance with generally accepted accounting principles.

        Stock-Based Compensation.    We have elected to follow Accounting Principles Board, or APB, Opinion No. 25, "Accounting for Stock Issued to Employees," or APB 25, and related interpretations, in accounting for our stock-based compensation plans, rather than the alternative fair value method provided for under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," or FAS 123. In 2003 and 2002, certain grants of stock options were made at exercise prices less than the fair value of our common stock and, as a result, we recorded deferred stock compensation expense. In the notes to our financial statements, we provide pro forma disclosures in accordance with FAS 123. We account for transactions in which services are received from

44

non-employees in exchange for equity instruments based on the fair value of such services received or of the equity instruments issued, whichever is more reliably measured, in accordance with FAS 123 and the Emerging Issues Task Force, or EITF, Issue 96-18, "Accounting for Equity Instruments that Are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services," or EITF 96-18.

        Accounting for equity instruments granted or sold by us under APB 25, FAS 123 and EITF 96-18 requires fair value estimates of the equity instrument granted or sold. If our estimates of the fair value of these equity instruments are too high or too low, our expenses may be over or under stated. For equity instruments granted or sold in exchange for the receipt of goods or services, we estimate the fair value of the equity instruments based upon consideration of factors which we deem to be relevant at that time. Because shares of our common stock were not publicly traded prior to the commencement of our public offering on November 5, 2003, market factors historically considered in valuing stock and stock option grants include comparative values of public companies discounted for the risk and limited liquidity provided for in the shares we are issuing, pricing of private sales of our redeemable convertible preferred stock, prior valuations of stock grants and the effect of events that have occurred between the time of such grants, economic trends, and the comparative rights and preferences of the security being granted compared to the rights and preferences of our other outstanding equity.

        Prior to our initial public offering, the fair value of our common stock was determined by our board of directors contemporaneously with the grant. In the absence of a public trading market for our common stock, our board of directors considered numerous objective and subjective factors in determining the fair value of our common stock. At the time of option grants and other stock issuances, our board of directors considered the liquidation preferences, dividend rights, voting control and anti-dilution protection attributable to our then-outstanding redeemable convertible preferred stock, the status of private and public financial markets, valuations of comparable private and public companies, the likelihood of achieving a liquidity event such as an initial public offering, our existing financial resources, our anticipated continuing operating losses and increased spending levels required to complete our clinical trials, dilution to common stockholders from anticipated future financings and a general assessment of future business risks.

Inflation

        We believe the effects of inflation generally do not have a material adverse impact on our operations or financial condition.

Off-Balance Sheet Arrangements

        We do not have any material off-balance sheet arrangements.

Recently Issued Accounting Pronouncement

        On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards, or SFAS, No. 123 (revised 2004), referred to as FAS 123R, "Share-Based Payment," which is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation." FAS 123R supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," or APB 25, and amends SFAS No. 95, "Statement of Cash Flows." Generally, the approach in FAS 123R is similar to the approach described in SFAS 123, detailed below. However, FAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations based on their fair values at the date of grant. Pro forma disclosure is no longer an alternative. FAS 123R must be adopted in fiscal periods beginning after June 15, 2005. Early adoption will be permitted in periods in which financial statements have not

45

yet been issued. We expect to adopt FAS 123R on July 1, 2005, the commencement of our third quarter of fiscal 2005.

        FAS 123R permits public companies to adopt its requirements using one of two methods. A "modified prospective" method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of FAS 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of FAS 123R that remain unvested on the effective date. A "modified retrospective" method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption. We have yet to determine which method to use in adopting FAS 123R.

        As permitted by SFAS 123, we currently account for share-based payments to employees using APB 25's intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. Accordingly, the adoption of FAS 123R's fair value method may have a significant impact on our result of operations, although it will have no impact on our overall financial position. The impact of adoption of FAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted FAS 123R in prior periods, the impact of that standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma net loss and net loss per share in Note 2 to our financial statements. We are currently evaluating the impact of the adoption of FAS 123R on our financial position and results of operations, including the valuation methods and support for the assumptions that underlie the valuation of the awards.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We are exposed to market risk related to changes in interest rates. Our current investment policy is to maintain an investment portfolio consisting mainly of U.S. money market and high-grade corporate and U.S. government-related securities, directly or through managed funds, with maturities of two years or less. Our cash is deposited in and invested through highly rated financial institutions in North America. Our marketable securities are subject to interest rate risk and will fall in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 10% from levels at December 31, 2004, we estimate that the fair value of our investment portfolio would decline by an immaterial amount. We have the ability to hold our fixed income investments until maturity, and therefore we do not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investments.

46

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm	48
Financial Statements:
Balance Sheets as of December 31, 2004 and 2003	49
Statements of Operations for the Years Ended December 31, 2004, 2003, and 2002	50
Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) for the Years Ended December 31, 2004, 2003, and 2002	51
Statements of Cash Flows for the Years Ended December 31, 2004, 2003, and 2002	54
Notes to Financial Statements	55

47

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
NitroMed, Inc.

        We have audited the accompanying balance sheets of NitroMed, Inc. as of December 31, 2004 and 2003, and the related statements of operations, redeemable convertible preferred stock and stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NitroMed, Inc. at December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Boston, Massachusetts
February 9, 2005

48

NITROMED, INC.

BALANCE SHEETS

(in thousands, except par value amounts)

			December 31,
			2004			2003
ASSETS
Current Assets:
Cash and cash equivalents			$	35,882		$	67,614
Marketable securities				106,485			29,474
Prepaid expenses and other current assets				3,216			1,296
	Total current assets			145,583			98,384
Property and equipment, net				2,963			686
Other assets				811			100
	Total assets		$	149,357		$	99,170
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable			$	—		$	22
Accounts payable				2,662			832
Accrued expenses				8,091			2,067
Deferred revenue				1,592			7,525
	Total current liabilities			12,345			10,446
Deferred revenue, long term				—			6,925
	Total liabilities			12,345			17,371
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; no shares issued or outstanding				—			—
Common stock, $.01 par value; authorized 65,000 shares; issued and outstanding 30,124 shares and 25,601 shares as of December 31, 2004 and 2003, respectively				301			256
Additional paid-in capital				275,727			191,604
Deferred stock compensation				(2,095	)		(3,240	)
Accumulated deficit				(136,619	)		(106,846	)
Accumulated other comprehensive income (loss)				(302	)		25
	Total stockholders' equity			137,012			81,799
		Total liabilities and stockholders' equity	$	149,357		$	99,170

The accompanying notes are an integral part of the financial statements.

49

NITROMED, INC.

STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

			Year Ended December 31,
			2004			2003			2002
Research and development revenues			$	16,458		$	12,775		$	750
Operating expenses:
	Research and development			27,995			18,907			16,133
	General and administrative			19,591			3,114			2,531
		Total operating expenses		47,586			22,021			18,664
Loss from operations				(31,128	)		(9,246	)		(17,914	)
Non-operating income (expense):
	Interest expense			(1	)		(4	)		(10	)
	Interest income			1,336			399			387
	Rental and miscellaneous income			20			82			195
				1,355			477			572
Net loss				(29,773	)		(8,769	)		(17,342	)
Deemed dividends related to beneficial conversion features of redeemable convertible preferred stock				—			(19,357	)		—
Dividends and accretion to redemption value of redeemable convertible preferred stock				—			(2,794	)		(2,697	)
Net loss attributable to common stockholders			$	(29,773	)	$	(30,920	)	$	(20,039	)
Basic and diluted net loss attributable to common stockholders per common share			$	(1.14	)	$	(6.95	)	$	(20.66	)
Shares used in computing basic and diluted net loss attributable to common stockholders per common share				26,152			4,447			970

The accompanying notes are an integral part of the financial statements.

50

NITROMED, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except per share amounts)

									Note Receivable from Stock Purchase Agreement
	Redeemable Convertible Preferred Stock
				Common Stock														Accumulated Other Comprehensive Income (Loss)
							Additional Paid-in Capital					Deferred Stock Compensation			Accumulated Deficit					Total Stockholders' Equity (Deficit)
	Shares	Amount		Shares	Par Value
Balance at December 31, 2001	30,770	$	80,187	963	$	10	$	1,854	$	(252	)				$	(55,887	)	$	—	$	(54,275	)
Exercise of stock options				22		—		23													23
Compensation expense associated with and forgiveness of note receivable from stock purchase agreement								392		252											644
Deferred stock compensation expense associated with stock options								566				$	(566	)							—
Amortization of deferred stock compensation													39								39
Compensation expense associated with options issued to non-employees and performance options issued to employees								255													255
Accretion of Series E dividends			2,473													(2,473	)				(2,473	)
Accretion of preferred stock to redemption value			224													(224	)				(224	)
Net loss																(17,342	)				(17,342	)
Balance at December 31, 2002	30,770	$	82,884	985	$	10	$	3,090	$	—		$	(527	)	$	(75,926	)	$	—	$	(73,353	)

The accompanying notes are an integral part of the financial statements.

51

NITROMED, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except per share amounts)

											Note Receivable from Stock Purchase Agreement
	Redeemable Convertible Preferred Stock
						Common Stock													Accumulated Other Comprehensive Income (Loss)
									Additional Paid-in Capital				Deferred Stock Compensation			Accumulated Deficit					Total Stockholders' Equity (Deficit)
	Shares		Amount			Shares	Par Value
Balance at December 31, 2002	30,770		$	82,884		985	$	10	$	3,090	$	—	$	(527	)	$	(75,926	)	$	—	$	(73,353	)
Exercise of stock options						217		2		131												133
Deferred stock compensation expense associated with stock options										3,317				(3,317	)							—
Amortization of deferred stock compensation														604								604
Compensation expense associated with options issued to non-employees and performance options issued to employees										303												303
Accretion of Series E dividends				2,469													(2,469	)				(2,469	)
Accretion of preferred stock to redemption value				325													(325	)				(325	)
Beneficial conversion features of Series E										19,320							(19,320	)				—
Beneficial conversion features of Series F										37							(37	)				—
Issuance of Series E preferred stock in August 2003 at $7.20 per share for cash (net of issuance costs of $100)	2,776			19,900
Issuance of common stock from initial public offering ("IPO") (net of issuance costs of $5,928)						6,000		60		60,012												60,072
Conversion of preferred stock to common stock at IPO	(33,546	)		(105,578	)	18,399		184		105,394												105,578
Unrealized gains on cash equivalents and marketable securities																				25		25
Net loss																	(8,769	)				(8,769	)
Comprehensive loss																						(8,744	)
Balance at December 31, 2003	—		$	—		25,601	$	256	$	191,604	$	—	$	(3,240	)	$	(106,846	)	$	25	$	81,799

The accompanying notes are an integral part of the financial statements.

52

NITROMED, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except per share amounts)

										Note Receivable from Stock Purchase Agreement
	Redeemable Convertible Preferred Stock
				Common Stock														Accumulated Other Comprehensive Income (Loss)
							Additional Paid-in Capital					Deferred Stock Compensation			Accumulated Deficit						Total Stockholders' Equity (Deficit)
	Shares	Amount		Shares	Par Value
Balance at December 31, 2003	—	$	—	25,601	$	256	$	191,604		$	—	$	(3,240	)	$	(106,846	)	$	25		$	81,799
Exercise of stock options				676		7		871														878
Exercise of warrants				237		2		(2	)													—
Amortization of deferred stock compensation													982									982
Compensation expense associated with options issued to non-employees and performance options issued to employees								1,540														1,540
Issuance of stock under employee stock purchase plan				30		—		155														155
Issuance of common stock from public offering (net of issuance costs of $5,796)				3,580		36		81,722														81,758
Cancellation of compensatory stock options								(163	)				163									—
Unrealized losses on marketable securities																			(327	)		(327	)
Net loss																(29,773	)					(29,773	)
Comprehensive loss																						(30,100	)
Balance at December 31, 2004	—	$	—	30,124	$	301	$	275,727		$	—	$	(2,095	)	$	(136,619	)	$	(302	)	$	(137,012	)

The accompanying notes are an integral part of the financial statements.

53

NITROMED, INC.

STATEMENTS OF CASH FLOWS

(in thousands)

					Year Ended December 31,
					2004			2003			2002
Cash flows from operating activities:
	Net loss				$	(29,773	)	$	(8,769	)	$	(17,342	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation and amortization				421			251			219
		Forgiveness of note receivable from stock purchase agreement				—			—			252
		Stock-based compensation expense				2,522			907			686
		Changes in operating assets and liabilities:
			Prepaid expenses and other current assets			(1,920	)		8,971			636
			Accounts payable and accrued expenses			7,854			627			103
			Deferred revenue			(12,858	)		3,825			(750	)
				Net cash (used in) provided by operating activities		(33,754	)		5,812			(16,196	)
Cash flows from investing activities:
	Purchases of marketable securities					(131,410	)		(37,562	)		(11,041	)
	Sales of marketable securities					54,072			14,796			12,017
	Capital expenditures					(2,698	)		(655	)		(26	)
	Other assets					(711	)		—			—
			Net cash (used in) provided by investing activities			(80,747	)		(23,421	)		950
Cash flows from financing activities:
	Net proceeds from sale of common stock in public offering					81,758			60,072			—
	Proceeds from employee stock plans					1,033			133			23
	Principal payments on notes payable					(22	)		(42	)		(289	)
	Net proceeds from sale of redeemable convertible preferred stock					—			19,900			—
			Net cash provided by (used in) financing activities			82,769			80,063			(266	)
Net (decrease) increase in cash and cash equivalents						(31,732	)		62,454			(15,512	)
Cash and cash equivalents, beginning balance						67,614			5,160			20,672
Cash and cash equivalents, ending balance					$	35,882		$	67,614		$	5,160
Supplemental disclosure:
Cash paid during the year for interest					$	1		$	4		$	10

The accompanying notes are an integral part of the financial statements.

54

NITROMED, INC.

NOTES TO FINANCIAL STATEMENTS

(all tabular amounts in thousands except per share amounts)

1. The Company

        NitroMed is an emerging pharmaceutical company focused on the research, development and commercialization of proprietary pharmaceuticals based on the therapeutic benefits of nitric oxide. The Company is currently developing it's lead nitric oxide-enhancing drug candidate, BiDil, to treat African Americans diagnosed with heart failure. The Company's goal is to become a leading, multi-product pharmaceutical company by developing additional innovative nitric oxide products and by building on the Company's BiDil development experience and infrastructure to identify and market additional products for cardiovascular and metabolic diseases for the African American population.

2. Summary of Significant Accounting Policies

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Concentrations of Credit Risk

        The financial instruments that potentially subject the Company to a concentration of credit risk primarily consist of cash, cash equivalents and marketable securities. The majority of the Company's cash and cash equivalents and marketable securities are maintained with well-known, established financial institutions.

Cash Equivalents and Marketable Securities

        Cash equivalents are short-term, highly liquid investments with maturities of three months or less at the time of acquisition. Investments with maturities in excess of three months at the time of acquisition are classified as marketable securities and designated as available-for-sale. Cash equivalents consist of institutional money market funds. Available-for-sale securities are carried at fair market value, as reported by the custodian, and unrealized gains and losses are reported as a separate component of accumulated other comprehensive income within stockholders' equity. Realized gains and losses were not material for the years ended December 31, 2004, 2003 and 2002.

Fair Value of Financial Instruments

        Financial instruments mainly consist of cash and cash equivalents and marketable securities. The carrying amounts of these instruments approximate their fair values.

Property and Equipment

        Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives, which range between three to five years. Leasehold improvements are amortized based upon the lesser of the term of the lease or the useful life of the asset. The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable and recognizes an impairment

55

loss when the estimated undiscounted cash flows are less than the carrying value of the asset. The asset is written down to its fair value determined by either a quoted market price or by a discounted cash flow technique.

Research and Development Expenses

        Research and development expenses primarily consist of salaries and related expenses for personnel, fees paid to consultants and outside service providers and materials used in clinical trials and research and development. The Company charges research and development expenses, including costs associated with acquiring patents, to operations as incurred.

        The Company enters into contracts with professional service providers to conduct clinical trials and related services. These professional service providers render services over an extended period of time, generally one to three years. Typically, the Company enters into two types of vendor contracts, patient-based or time-based. Under a patient-based contract, the Company first determines an appropriate per patient cost using critical factors contained within the contract, which include the estimated number of patients, the cost assigned to each patient based on a patient's number of visits and the total dollar value of the contract. The Company then records expense based upon the total number of patients enrolled during the period and the status of each patient. Under a time based contract, using critical factors contained within the contract such as the stated duration of the contract and the timing of services provided, the Company records the contractual expense for each service provided ratably over the period during which the Company estimates the service will be performed. On a monthly basis, the Company reviews both the timetable of services to be rendered and the timing of services actually received based on regular communications with its vendors in order to gauge the reasonableness of its estimates. Based upon this review, revisions may be made to the forecasted timetable or the extent of services performed, or both, in order to reflect the Company's most current estimate of the contract.

Revenue Recognition

        Revenue is deemed earned when all of the following have occurred: all obligations of the Company relating to the revenue have been met and the earnings process is complete; the monies received or receivable are not refundable irrespective of research results; and there are neither future obligations or milestones to be met by the Company with respect to such revenue. The Company recognizes revenue from nonrefundable, up-front licenses and related payments, not specifically tied to a separate earnings process, ratably over the period that the Company is obligated to participate on a continuing and substantial basis in the research and development activities outlined in each contract. When payments are specifically tied to a separate earnings process, revenue is recognized when the specific performance obligation associated with the payment has been satisfied. Performance obligations typically consist of contracted services or development milestones. Revenue from services performed under collaborative research agreements is recognized as reimbursable costs are incurred. Revenue from significant milestones in the development lifecycle of the related technology, including initiation of clinical trials or filing for and obtaining approvals with regulatory agencies are considered earned when the payor acknowledges the milestone achievement, which is generally by payment of amounts due.

56

Stock-Based Compensation

        The Company has elected to account for its stock-based compensation plans under the intrinsic value method pursuant to Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related Interpretations, rather than the alternative fair value accounting provided under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (FAS 123). In accordance with EITF 96-18, Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Connection with Selling, Goods or Services (EITF 96-18), the Company records compensation expense equal to the fair value of the option granted to non-employees over the vesting period, which is generally the period of service.

        FAS 123 requires pro forma information regarding net loss and net loss per share as if the Company had accounted for its stock-based awards to employees under the fair value method of FAS 123. The fair value of the Company's stock options used to compute pro forma net loss is the estimated fair value at the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	December 31,
	2004	2003	2002
Risk-free interest rate	3.6%	2.8%	3.5%
Expected volatility	94%	80%	80%
Expected lives	4 years	4 years	4 years
Expected dividend	—	—	—

        The per-share, weighted-average grant date fair value of options granted during the years ended December 31, 2004, 2003 and 2002 were $9.66, $6.49 and $3.28, respectively.

        For purposes of pro forma disclosures, the estimated fair value of the options is amortized over the option vesting period. Had compensation expense for the Company's stock-based compensation plans been determined based on the fair value at the grant dates for awards under those plans

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consistent with the method of FAS 123, the Company's net loss and net loss per share would have been as follows:

		Years Ended December 31,
		2004			2003			2002
Net loss attributable to common stockholders as reported		$	(29,773	)	$	(30,920	)	$	(20,039	)
Add: Stock-based employee compensation expense included in reported net loss			1,512			722			522
Deduct: Stock-based employee compensation expense determined under fair value based method			(2,645	)		(850	)		(319	)
	FAS 123 Pro forma net loss	$	(30,906	)	$	(31,048	)	$	(19,836	)
Basic and diluted net loss per share
	As reported	$	(1.14	)	$	(6.95	)	$	(20.66	)
	FAS 123 Pro forma	$	(1.18	)	$	(6.98	)	$	(20.45	)

Accumulated Other Comprehensive Income (Loss)

        The Company presents comprehensive income (loss) in accordance with Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. Accumulated other comprehensive income is comprised entirely of unrealized gains and losses on available-for-sale marketable securities.

Income Taxes

        Deferred tax assets and liabilities are determined based on differences between the financial reporting and income tax bases of assets and liabilities, as well as net operating loss carryforwards and tax credits, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to reflect the uncertainty associated with their ultimate realization.

Net Loss Per Share

        Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock and the dilutive potential common stock equivalents then outstanding. Potential common stock equivalents consist of stock options, warrants and redeemable convertible preferred stock. Since the Company has a net loss for all periods presented, the effect of all potentially dilutive securities is antidilutive. Accordingly, basic and diluted net loss per share is the same.

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Segment Information

        During the three years ended December 31, 2004, the Company operated in one reportable business segment, developing nitric oxide enhancing medicines, under the management approach of Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information.

New Accounting Standard

        On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004) ("FAS 123R"), Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. FAS 123R supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach in FAS 123R is similar to the approach described in SFAS 123, detailed below. However, FAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values at the date of grant. Pro forma disclosure is no longer an alternative. FAS 123R must be adopted in fiscal periods beginning after June 15, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. The Company expects to adopt FAS 123R on July 1, 2005, the commencement of its third quarter of fiscal 2005.

        FAS 123R permits public companies to adopt its requirements using one of two methods. A "modified prospective" method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of FAS 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of FAS 123R that remain unvested on the effective date. A "modified retrospective" method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption. The Company has yet to determine which method to use in adopting FAS 123R.

        As permitted by SFAS 123, the Company currently accounts for share-based payments to employees using APB 25's intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of FAS 123R's fair value method may have a significant impact on the Company's result of operations, although it will have no impact on the Company's overall financial position. The impact of adoption of FAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted FAS 123R in prior periods, the impact of that standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma net loss and net loss per share in Note 2 to these financial statements. The Company is currently evaluating the impact of the adoption of FAS 123R on its financial position and results of operations, including the valuation methods and support for the assumptions that underlie the valuation of the awards.

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3. Cash Equivalents and Marketable Securities

        The following is a summary of the fair market value of available-for-sale money market funds and marketable securities the Company held at December 31, 2004 and 2003:

December 31, 2004		Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses			Estimated Fair Value
Cash and money market funds		$	35,882	—		—		$	35,882
Commercial paper			11,962	—		—			11,962
U.S. Government agencies
	Due in one year or less		5,905	—	$	(28	)		5,877
	Due in one to three years		7,759	—		(82	)		7,677
Asset-backed securities
	Due in one to three years		8,243	—		(31	)		8,212
Taxable auction securities
	Due in one to three years		50,200	—		—			50,200
Corporate notes
	Due in one year or less		9,384	—		(38	)		9,346
	Due in one to three years		13,334	—		(123	)		13,211
Total			142,669	—		(302	)		142,367
Less amounts classified as cash and cash equivalents			35,882	—		—			35,882
Total marketable securities		$	106,787	—	$	(302	)	$	106,485

December 31, 2003		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Cash and money market funds		$	7,893		—		—		$	7,893
Commercial paper			58,712	$	9		—			58,721
U.S. Government agencies
	Due in one year or less		7,150		3		—			7,153
Asset-backed securities
	Due in one year or less		2,262		—		—			2,262
	Due in one to three years		5,596		12		—			5,608
Corporate notes
	Due in one year or less		12,866		2	$	(6	)		12,862
	Due in one to three years		2,584		5		—			2,589
Total			97,063		31		(6	)		97,088
Less amounts classified as cash and cash equivalents			67,605		9		—			67,614
Total marketable securities		$	29,458	$	22	$	(6	)	$	29,474

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4. Note Receivable from Stock Purchase Agreement

        On December 31, 1997, the Company executed a $252,000 loan to an officer that was used to purchase 350,000 shares of restricted common stock of the Company at a purchase price of $0.72 per share. These shares were granted under the Company's 1993 Equity Incentive Plan. The loan was due and payable in full in September 2002, bore interest at a rate of 6.02% per annum (which interest was forgiven) and was secured, pursuant to the terms of a Pledge Agreement, by the restricted shares. Twenty percent of the shares vested at the date of issuance and an additional 20% of the shares vested annually each September. Based on the terms of the arrangement, the award was required to be accounted for as variable compensation. Accordingly, the Company recorded noncash stock compensation charges for the year ended December 31, 2002 of $392,000. In addition, during September 2002, the Company forgave the loan and recorded an additional noncash compensation charge of $252,000 for the year ended December 31, 2002.

5. Property and Equipment

        Property and equipment consist of the following:

	December 31,
	2004			2003
Laboratory furniture, fixtures and equipment	$	2,538		$	1,021
Office furniture, fixtures and equipment		1,144			438
Leasehold improvements		362			940
		4,044			2,399
Less accumulated depreciation and amortization		(1,081	)		(1,713	)
	$	2,963		$	686

6. Accrued Expenses

        Accrued expenses consist of the following:

	December 31,
	2004		2003
Clinical trial and related costs	$	4,611	$	865
Sales and marketing		1,722		—
Compensation, relocation and related benefits		861		759
Other		897		443
	$	8,091	$	2,067

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7. Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)

Redeemable Convertible Preferred Stock

Public Offerings

        On November 10, 2003, the Company completed its initial public offering and sold 6,000,000 shares of common stock for $11.00 per share for net proceeds of approximately $60.1 million. In connection with the initial public offering all of the outstanding shares of the Company's redeemable convertible preferred stock (Series A, B, C, D, E and F), including accrued but unpaid Series E dividends of $6.4 million, converted into 18,398,496 shares of the Company's common stock based upon the conversion ratios then applicable.

        On December 20, 2004, the Company closed a second public offering and sold 3,579,476 shares of common stock, including the underwriters' over-allotment of 331,598 shares, for $24.46 per share for net proceeds of approximately $81.8 million.

Series E and F

        On August 1, 2003, the Company completed the sale of 2,776,347 shares of Series E redeemable convertible preferred stock for net proceeds of $19.9 million. These shares automatically converted to common stock upon the closing of the Company's initial public offering of common stock on November 10, 2003. These shares contained a beneficial conversion feature based on the fair value of the common stock into which the shares were convertible. In accordance with EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, the value of such beneficial conversion feature of approximately $8.3 million was recognized as a deemed dividend in the three month period ended September 30, 2003.

        The Series F conversion ratio provided for additional shares of common stock when the Company issued equity securities, as defined, for consideration of less than $14 per share, the purchase price of Series F. As a result of the above sale of these Series E shares, the Series F conversion ratio was increased from 1:1 to 1:1.073364. The adjustment to the Series F conversion ratio is a beneficial conversion feature. In accordance with EITF 00-27, Application of Issue 98-5 to Certain Convertible Instruments, the value of such beneficial conversion feature of approximately $37,000 was recognized as a deemed dividend in the three month period ended September 30, 2003.

        Subsequent to the August 2003 sale of the Series E shares, the Series E stockholders and the Company agreed to increase the Series E conversion ratio from 1:1 to 1:1.1526 in consideration of the Series E stockholders waiving their rights to certain anti-dilution provisions. The adjustment to the conversion ratio, which was contingent on the initial public offering, is a beneficial conversion feature. In accordance with EITF 00-27, the value of the Series E beneficial conversion feature of approximately $11.0 million was recognized as a deemed dividend in the period of issuance, which occurred in the fourth quarter of 2003 as a result of the initial public offering. In addition, the conversion of the Series E shares in the initial public offering caused the accrued but unpaid Series E dividends of approximately $6.4 million to become payable through the issuance of 513,033 shares of common stock at the time of the initial public offering.

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Undesignated Preferred and Common Stock

        On August 18 2003, the Board of Directors approved an Amendment to Certificate of Incorporation, which became effective on November 5, 2003 and increased the Company's authorized shares of common stock to 35,000,000. On August 18, 2003, the Board of Directors also approved a Restated Certificate of Incorporation, which became effective upon the consummation of the initial public offering on November 10, 2003 and increased the Company's authorized shares of common stock to 65,000,000 and authorized 5,000,000 shares of undesignated preferred stock, issuable in one or more series designated from time to time by the Board of Directors.

Stock Purchase Warrants

        At December 31, 2004 and 2003, there were stock purchase warrants outstanding to purchase 13,861 and 151,347 shares, respectively, of the Company's common stock at exercise prices of $.01 to $.08 per share, which expire in 2005 through 2007. In addition, stock purchase warrants to purchase 123,749 shares of common stock at an exercise price of $4.00 per share were outstanding at December 31, 2003 and were exercised during 2004.

Stock Option Plans

        The Company's Restated 1993 Equity Incentive Plan (the "1993 plan") provides for the grant of incentive stock options, nonstatutory stock options and restricted stock awards to purchase up to 2,288,200 shares of common stock. Officers, employees, directors, consultants and advisors of the Company are eligible to be granted options under the 1993 plan at a price not less than 100% (110% in the case of incentive stock options granted to 10% or greater stockholders) of the fair market value of such stock, as determined by the Board of Directors, at the time the option is granted. In May 2003, the Company's stockholders approved the 2003 Stock Incentive Plan (the "2003 plan), under which 800,000 shares of common stock were authorized for issuance. In October 2003, the stockholders approved an amended and restated plan which provided, among other things, for an increase of shares authorized for issuance under the 2003 plan to 2,500,000.

        While the Company may grant options to employees, which become exercisable at different times or within different periods, the Company generally has granted options to employees that are exercisable in annual installments of 25% each on the first four anniversary dates of the grant.

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        Information with respect to activity under the Plans is as follows:

Stock Option Activity		Number of Options		Weighted-Average Exercise Price Per Share
Balance at December 31, 2001		2,148		$	1.16
	Options granted	241			2.00
	Options canceled	(226	)		1.74
	Options exercised	(22	)		1.04
Balance at December 31, 2002		2,141			1.19
	Options granted	978			5.30
	Options canceled	(3	)		1.95
	Options exercised	(217	)		0.61
Balance at December 31, 2003		2,899			2.62
	Options granted	1,129			13.94
	Options canceled	(105	)		6.86
	Options exercised	(676	)		1.30
Balance at December 31, 2004		3,247		$	6.70

        The following table summarizes information about options outstanding at December 31, 2004:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (In years)	Number of Shares	Weighted- Average Exercise Price
$0.08–$2.47	1,676	$	1.46	5.3	1,157	$	1.25
$4.94–$7.41	196		6.40	9.5	—		—
$7.42–$9.88	736		7.88	8.9	120		8.03
$9.89–$12.35	125		10.21	9.5	—		—
$17.29–$19.76	229		18.97	9.7	—		—
$19.77–$22.23	55		20.77	9.7	—		—
$22.24–$24.70	230		23.80	9.8	—		—
	3,247	$	6.70	7.2	1,277	$	1.89

        There were 1,526,761 and 1,531,468 options exercisable at December 31, 2003 and 2002, respectively. At December 31, 2004, the Company had 514,297 options available for future grant.

        During 1999 and 2000, the Company granted 75,100 and 100,000 performance-based options, respectively, with an exercise price of $1.30 to certain employees, which allow for acceleration of the vesting period upon the occurrence of certain defined events. Of the 100,000 options granted, 5,000 options were forfeited in 2002. Based on the terms of the arrangements, the awards are required to be accounted for as variable, and compensation expense is measured as the difference between the fair market value of the Company's common stock at the reporting period date and the exercise price of

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the award. Compensation expense is recognized over the vesting period and totaled $529,000, $118,000 and $91,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

        Since 1999, the Company granted a total of 181,000 stock options to nonemployees at a weighted-average exercise price of $2.24 per share, of which 168,750 remained outstanding at December 31, 2004. The Company has applied the recognition provisions of FAS 123 and EITF 96-18 related to these stock options and utilized the Black-Scholes option pricing model to determine the fair value of these stock options at each reporting date. In connection with these awards, the Company recognized compensation expense of $1,011,000, $185,000 and $164,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

        During 2003 and 2002, the Company granted 413,250 and 241,000 options, respectively, to employees at exercise prices below the fair value of the Company's common stock. The weighted average exercise price of these options is $2.00 per share. The Company recorded deferred stock compensation expense related to these grants of $3,317,000 and $566,000 for the years ended December 31, 2003 and 2002, respectively. These amounts are being recognized as stock-based compensation expense ratably over the vesting period of four years. Included in the results of operations for the years ended December 31, 2004, 2003 and 2002 is compensation expense of $982,000, $604,000 and $39,000, respectively.

Employee Stock Purchase Plan

        On August 18, 2003, the Board of Directors adopted the 2003 Employee Stock Purchase Plan (the "Stock Purchase Plan"), which provides for the sale of up to 75,000 shares of common stock to participating employees. Under the Stock Purchase Plan, eligible employees may purchase common stock at a price per share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each offering period. Participation in the offering is limited to 10% of the employee's compensation or $25,000 in any calendar year. The first offering period began on January 1, 2004 and ended on June 30, 2004, with 12,219 shares being purchased. The second offering period began on July 1, 2004 and ended on December 31, 2004, with 18,123 shares being purchased. At December 31, 2004, there were 44,658 shares available for grant under the Stock Purchase Plan.

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8. Net Loss per Share

        The following table sets forth the computation of basic and diluted net loss per share for the respective periods.

	Year Ended December 31,
	2004			2003			2002
Basic and Diluted:
Net loss	$	(29,773	)	$	(8,769	)	$	(17,342	)
Deemed dividends related to beneficial conversion features of redeemable convertible preferred stock		—			(19,357	)		—
Dividends and accretion to redemption value of redeemable convertible preferred stock prior to conversion		—			(2,794	)		(2,697	)
Net loss attributable to common stockholders	$	(29,773	)	$	(30,920	)	$	(20,039	)
Weighted average common shares used to compute net loss per share		26,152			4,447			970
Basic and diluted net loss per share	$	(1.14	)	$	(6.95	)	$	(20.66	)

        Options to purchase 3,246,631, 2,898,584 and 2,141,401 shares of common stock for the years ended December 31, 2004, 2003 and 2002, respectively, and warrants to purchase 13,861, 275,096 and 275,096 shares of common stock for the years ended December 31, 2004, 2003 and 2002, respectively, have been excluded from the computation of net loss per share as their effects would have been antidilutive.

9. Operating Lease

        The Company leased its previous research facilities under an operating lease that expired on September 30, 2004. The lease required payment of real estate taxes and other common area maintenance expenses. Under the lease, a security deposit of $100,000 was required to be held in escrow for the life of the lease. Annual rent expense was $532,000 for 2004 and $580,000 for 2003 and 2002. The Company sub-leased a portion of its premises and recognized rental income of $82,000 and $195,000 in 2003 and 2002, respectively. The sublease agreement ended in 2003.

        On January 30, 2004, the Company executed a lease for approximately 52,000 square feet of laboratory and office space in Lexington, Massachusetts. The rent obligation for the building commenced on August 7, 2004, which was 30 days after the date the Company commenced occupancy of the building. The lease is for a term of ten years with options that permit renewals for additional five-year periods. The Company has the option to terminate the lease at the end of the fifth year for a fee of $4.2 million. The expected minimum rental commitments under the lease agreement are $1,089,000, $1,425,000, $1,505,000, $1,505,000, and $1,566,000 for each year in the five calendar year period ending December 31, 2009, respectively, and $7.9 million in total for the remainder of the lease term. In addition to the minimum lease commitment, the lease agreement requires the Company to pay its pro rata share of property taxes and building operating expenses. Rent expense for 2004 under this lease was $610,000.

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10. Research, License and Consulting Agreements

        The Company has entered into various research, license and consulting agreements to support its research and development activities.

Johnson & Johnson Agreements

        Prior to 2001, the Company had two principal research and development collaboration agreements, both dated April 1997, in which the Company had licensed its technology to Johnson & Johnson and affiliates in return for initial license fees, reimbursement of qualified research expenditures and the purchase of 3.0 million shares of Series B for $3.0 million. The agreements contained provisions for future payments to the Company upon the achievement of certain research and development milestones and future royalties to the Company on sales of products developed under the agreements. One of the agreements with affiliates of Johnson & Johnson was terminated in April 2000, and the other agreement was terminated in September 2001.

        With respect to one of the Johnson & Johnson agreements noted above, during 2001, the Company reacquired the previously licensed technology in consideration of future payments totaling $4.5 million. The Company is required to make payments to Johnson & Johnson contingent upon the occurrence of the following events: a portion of up-front and milestone payments received in consideration for granting the rights to the technology; a percent of net sales revenue generated by the Company from product manufactured using the technology; and a percentage of royalty payments received based upon the sale of products derived from the technology. Payments are only required upon the occurrence of such events. Through December 31, 2004, the Company had paid $375,000 to Johnson & Johnson as a result of receiving payments for licensing the reacquired technology.

Boston Scientific Corporation Agreement

        In November 2001, the Company entered into a development and license agreement with Boston Scientific Corporation ("BSC") that granted a nonexclusive, nonroyalty bearing right and license in certain technology, which had been reacquired from Johnson & Johnson as noted above. In consideration of the license, the Company received a nonrefundable up-front license payment of $1.5 million. At the same time the Company sold to BSC 250,000 shares of Series F for $3.5 million. Under the agreement, the Company planned to deliver two drug compounds, as defined in the agreement, to BSC during the two year research term. Accordingly, the Company was recognizing the $1.5 million license fee as revenue ratably over the term of its contractual performance obligation. In January 2003, the Company informally agreed to an extension of the research term to May 2004. As a result, the Company extended the period of revenue recognition for the unrecognized portion of the license payment at December 31, 2002 to May 31, 2004. In December 2003 the Company executed an amendment to extend the research term to December 31, 2005 and received an additional $3.0 million. The Company is recognizing the $3.0 million extension fee and the remaining deferred revenue related to the nonrefundable license payment of $1.5 million over the extension period. For the years ended December 31, 2004, 2003 and 2002, the Company recognized revenue of $1,592,000, $442,000 and $750,000, respectively.

        In connection with the agreement, the Company may receive up to $8.3 million in milestone payments if certain development events are achieved by BSC. The Company may receive additional milestone payments for commercial success of any products derived from the licensed technology by

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BSC. The Company also has the right to receive milestone payments for any individual product that exceeds certain sales levels in any consecutive 12-month period. In addition, the Company may receive royalty payments on net sales of products derived from the licensed technology. The royalty term, which is on a country by country basis, related to each product derived by the licensed technology will generally be 12 years.

BiDil License Agreement

        In connection with its development program for BiDil, the Company's lead product candidate, the Company entered into an agreement to license certain technology from an individual who is on the Company's scientific advisory board. The Company also receives services from this individual in consideration of nominal payments and the grant of stock options. Upon achieving certain development events, the Company is required to make milestone payments of up to $1 million in the aggregate. In addition, upon commercial sale of products developed from the technology, the Company is required to make royalty payments on net sales, which will vary depending on sales volume. The royalty term expires upon the later of the expiration of the patent rights or ten years from the first commercial sale. The agreement may be terminated by the Company at any time. During the year ended December 31, 2004, the Company recorded charges of $1.0 million to research and development expense related to this agreement.

Merck Agreement

        In December of 2002, the Company executed a research collaboration and license agreement with Merck Frosst Canada & Co., a wholly-owned subsidiary of Merck & Co. ("Merck"), in which the Company granted an exclusive, worldwide, royalty-bearing license to certain existing technology and any technology, pertaining to the licensed technology, developed by the Company during a three-year period commencing January 1, 2003. In consideration of this license, the Company received $10 million in January of 2003. During the three-year period, the Company was obligated to perform certain research and development activities in consideration of quarterly fees totaling $7.2 million. The Company was recognizing the license fee as revenue ratably over the term of its contractual performance obligation of three years.

        In connection with this agreement, the Company could have received milestone payments associated with certain development and approval events and sales and marketing events. For the year ended December 31, 2003, the Company recognized revenue of $12.3 million related to $15.0 million of license and milestone payments that had been deferred and were being recognized as revenue ratably over the contractual research and development term, a $5.0 million milestone payment for advancing a lead nitric oxide enhancing COX-2 inhibitor into Phase I human testing and $3.0 million of research and development funding.

        In November 2004, the Company agreed with Merck to terminate the collaboration agreement. Merck paid the Company a lump sum of $1.8 million, representing the full amount of the research funding owed to the Company for 2005. The Company will not receive any commercialization milestones or royalty payments from Merck. As a result of the termination of this agreement, the Company accelerated the recognition of deferred license revenue of $5.3 million, and recognized the lump sum payment of $1.8 million as revenue in the fourth quarter of 2004. For the year ended

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December 31, 2004, the Company recognized revenue of $14.9 million under the collaboration agreement.

11. Income Taxes

        A reconciliation of federal statutory income tax provision to the Company's actual provision is as follows:

	Year Ended December 31,
	2004			2003			2002
Benefit at federal statutory tax rate	$	(10,123	)	$	(2,982	)	$	(5,896	)
Unbenefited operating losses		11,833			3,175			6,922
State taxes, net of federal benefit		(1,867	)		(550	)		(1,087	)
Non-deductible expenses		157			357			215
Other		—			—			(154	)
Income tax provision	$	—		$	—		$	—

        The significant components of the Company's deferred tax assets are as follows:

	December 31,
	2004			2003
Deferred tax assets:
Net operating loss carryforwards	$	20,724		$	11,292
Capitalized research costs, net of amortization		18,908			14,534
Tax credit carryforwards		5,807			4,791
Deferred revenue		641			4,369
Depreciation		409			288
Accrued expenses		1,600			202
Other		31			27
		48,120			35,503
Valuation allowance		(48,120	)		(35,503	)
Net deferred tax assets	$	—		$	—

        The Company has increased its valuation allowance by $12,617,000 in 2004 to provide a full valuation allowance for deferred tax assets since the realization of these benefits is not considered more likely than not. At December 31, 2004, the Company has unused net operating loss carryforwards of approximately $52,961,000 available to reduce federal taxable income expiring in 2010 through 2024 and $43,333,000 available to reduce state taxable income expiring in 2005 through 2009. The Company also has federal and state research tax credits of approximately $6,781,000 available to offset federal and state income taxes, both of which expire beginning in 2010. The net operating losses and tax credit carryforwards may be subject to the annual limitation provisions of Internal Revenue Code (IRC) Sections 382 and 383. No income tax payments were made in 2004, 2003 or 2002.

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12. Commitments and Contingencies

        In connection with its pursuit of obtaining FDA approval of BiDil, the Company contracted with a consulting firm for services related to the development approval process of BiDil. The agreement provides for payment of legal consulting fees if and when the Company receives written FDA approval of BiDil. In addition, the agreement requires the Company to pay royalties on sales of BiDil product. The royalty term ends six months from the date of market introduction of an FDA approved generic version of the BiDil product. During the year ended December 31, 2004 the Company recorded charges of approximately $1.9 million pertaining to fees and expenses related to this agreement. The Company has estimated that approximately $2.8 million in fees will be paid out under this arrangement at the time of FDA approval.

        An academic institution has asserted that patents and patent applications which relate to the nitric oxide stent program may require a license from such institution. It is the opinion of the Company's management and legal counsel that the disputed intellectual property has been validly licensed to, or is validly owned by, the Company. Accordingly, the accompanying financial statements do not include any provision related to this claim.

        On July 20, 2004, the Market Regulation Department of the National Association of Securities Dealers, Inc. ("NASD") advised the Company that it initiated a review of trading activity in the Company's common stock surrounding the Company's July 19, 2004 announcement that it had halted its phase III confirmatory clinical trial of BiDil due to the significant survival benefit seen with BiDil. The NASD is reviewing, among other things, information on relationships between the Company's officers, directors and service providers and individuals and institutions who may have traded in the Company's common stock prior to the July 19, 2004 announcement. The Company has cooperated with this review and has identified certain persons on the list provided to the Company by the NASD as having a relationship with the Company's chief executive officer and others at the Company. The Company has established a special committee of its board of directors to oversee the Company's response to this review. The Company is presently unable to predict the outcome of this matter or the timing of its resolution.

        The Company has engaged Schwarz Pharma under a five-year exclusive manufacturing and supply agreement solely for the three times daily immediate release dosage formulation of NitroMed's BiDil product candidate. Under the Supply Agreement, NitroMed will have the right to engage a backup manufacturer. The Company orders bulk materials from the same suppliers that were used for the clinical trial batches of BiDil: hydralazine from Flavine, the U.S. representative of Sumitomo, and isosorbide dinitrate from EMS-Dottikon, and has them delivered directly to Schwarz Pharma for manufacturing. In connection with the Company's procurement of hydralazine from Flavine, the Company placed an irrevocable purchase order for $3,150,000 in November 2004, 25% of which was paid prior to December 31, 2004 with the remaining 75% due upon shipment of the hydralazine.

        On October 3, 2004, the Company entered into an agreement with Publicis Selling Solutions, Inc. ("Publicis"), a contract sales organization, pursuant to which, on the Company's behalf, Publicis has employed and is training a specialty sales force of 195 sales representatives to sell BiDil to the Company's target prescriber markets. The agreement is for a term of 24 months, with a Company option to continue the agreement beyond this term. Estimated year one costs are $31,592,000, excluding one-time start-up costs, and year two costs are projected at $33,129,000. The Company has the right to terminate this agreement upon 90 days written notice to Publicis. If the Company

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terminates this agreement during months one through twelve of the term of the agreement, the Company is required to pay a termination fee in the amount of $1.0 million. If the Company terminates this agreement during months thirteen through eighteen, the termination fee will be $750,000. If the Company terminates the agreement after month eighteen, no termination fee will be assessed.

13. Retirement Plan

        The Company sponsors a 401(k) plan covering substantially all employees. The plan provides for salary deferral contributions by participants of up to 15% of eligible wages not to exceed Federal requirements. Those employees over 50 years old are permitted to contribute an additional $4,000 per year. The Company does not currently match employee contributions.

14. Related Party Transactions—Boston University

        Dr. Loscalzo, a member of the Company's board of directors, is the Chairman of the Department of Medicine at Boston University Medical School, Physician-in-Chief, Boston Medical Center and Director of the Whitaker Cardiovascular Institute at the Boston Medical Center. Dr. Loscalzo has served as a consultant to the Company since 1992 and as the chair of the Company's scientific advisory board since 1999. In October 2003, the Company entered into a consulting agreement with Dr. Loscalzo, as amended in April 2004, pursuant to which the Company agreed to pay Dr. Loscalzo an annual retainer of $55,000 for his services. The agreement is for a period of ten years, subject to the Company's right to terminate the agreement at any time on 30 days' notice. In 2004, the Company paid Dr. Loscalzo an aggregate of $74,750 in consulting fees and fees earned in conjunction with Dr. Loscalzo's service on the Company's board of directors.

        In June 1993, as amended in July 1997, January 1999 and December 2002, the Company entered into a research and license agreement with the Trustees of Boston University ("BU"). Under the agreement, the Company agreed to fund a multi-year research program under Dr. Loscalzo's direction at BU in the area of nitric oxide- enhancing medicines. The Company's funding is principally for laboratory equipment and supplies as well as a portion of the salary of Martin Feelish, Ph.D., a professor of medicine at BU and a member of the Company's scientific advisory board. The Company has also agreed to provide Dr. Feelish with access to the Company's research facilities at the BU School of Medicine. Under the agreement, in exchange for the Company's sponsored research funding, BU has granted the Company exclusive worldwide royalty-bearing rights to technology and inventions owned by BU at the effective time of, or developed in the course of, the sponsored research program. The Company has agreed to pay royalties to BU on all products sold or distributed by the Company or its affiliates that incorporate or utilize inventions, material or information specified in the agreement. In 2004, the Company made payments to BU in the amount of $221,500 pursuant to this agreement, excluding the lease payments described below.

        In May 2003, the Company entered into an oral agreement with BU pursuant to which the Company leases approximately 1,500 square feet of laboratory space from BU at its Evans Biomedical Research Center in Boston, Massachusetts. The lease has a term of three years, and the Company makes annual rental payments of $60,000 pursuant to the lease. As provided above, the Company has

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agreed to make this space available to Dr. Feelish of BU. In 2004, the Company made payments to BU under this agreement in the amount of $60,000.

15. Quarterly Results of Operations (Unaudited)

        The following table presents unaudited quarterly financial data of the Company.

	Year Ended December 31, 2004
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Net revenues	$	2,331		$	2,331		$	2,332		$	9,464
Net loss		(4,556	)		(4,700	)		(10,801	)		(9,716	)
Net loss available to common stockholders		(4,556	)		(4,700	)		(10,801	)		(9,716	)
Basic and diluted net loss available to common stockholders per share	$	(0.18	)	$	(0.18	)	$	(0.41	)	$	(0.36	)
Weighted average common shares used to compute net loss per share		25,601			25,696			26,187			27,115

	Year Ended December 31, 2003
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Net revenues	$	1,694		$	1,694		$	2,194		$	7,193
Net income (loss)		(3,187	)		(3,150	)		(3,411	)		979
Net loss available to common stockholders		(3,861	)		(3,825	)		(12,748	)		(10,486	)
Basic and diluted net loss available to common stockholders per share	$	(3.92	)	$	(3.88	)	$	(12.65	)	$	(0.71	)
Weighted average common shares used to compute net loss per share		985			985			1,008			14,697

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

        None.

ITEM 9A. CONTROLS AND PROCEDURES

        Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2004. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2004, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective.

        No change in our internal control over financial reporting occurred during the fiscal quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

        None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers

        Information regarding our directors and executive officers may be found under the captions "Election of Directors" and "Executive Officers" in the Proxy Statement for our 2005 Annual Meeting of Stockholders. Such information is incorporated herein by reference.

Audit Committee

        We have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Additional information regarding the Audit Committee may be found under the captions "Board of Directors Meetings and Committee Meetings" and "Report of the Audit Committee" in the Proxy Statement for our 2005 Annual Meeting of Stockholders. Such information is incorporated herein by reference.

Audit Committee Financial Expert

        The Board of Directors has determined that it has at least one "Audit Committee Financial Expert" (as defined by Item 401(h)(2) of Regulation S-K of the Exchange Act) on the Audit

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Committee of the Board of Directors, Davey S. Scoon. The Board of Directors has further determined that Mr. Scoon is "independent" from management within the meaning of Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.

Section 16(a) Beneficial Ownership Reporting Compliance

        Information regarding Section 16(a) Beneficial Ownership Reporting Compliance may be found under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement for our 2005 Annual Meeting of Stockholders. Such information is incorporated herein by reference.

Code of Ethics

        We have adopted a code of business conduct and ethics that applies to our directors, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) as well as our employees. A copy of our Code of Business Conduct and Ethics is attached as an exhibit to this Annual Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

        Information with respect to this item may be found under the captions "Directors' Compensation," "Compensation Committee Interlocks and Insider Participation," "Executive Compensation," and "Employment Agreements," in the Proxy Statement for our 2005 Annual Meeting of Stockholders. Such information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS

        Information with respect to this item may be found under the caption "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement for our 2005 Annual Meeting of Stockholders. Such information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Information with respect to this item may be found under the caption "Certain Relationships and Related Transactions" in the Proxy Statement for our 2005 Annual Meeting of Stockholders. Such information is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

        Information with respect to this item may be found under the caption "Audit Fees" in the Proxy Statement for our 2005 Annual Meeting of Stockholders. Such information is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

(1)  Financial Statements.

For a list of the financial information included herein, see "Index to Financial Statements" on page 47.

(a)

(2)  Financial Statement Schedules.

All schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or Notes thereto.

(a)

(3)  Exhibits. The list of Exhibits filed as a part of this Annual Report on Form 10-K are set forth on the Exhibit Index immediately preceding such Exhibits, and is incorporated herein by this reference.

        NitroMed®, NitRx®, BiDil® and NitroMed's logo "N" are trademarks of NitroMed, Inc. Other trademarks or service marks appearing in this Annual Report are the property of their respective holders.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned.

	NITROMED, INC.
Date: March 10, 2005	By:	/s/  MICHAEL D. LOBERG, PH.D. Michael D. Loberg, Ph.D. President and Chief Executive Officer

        Pursuant to the requirements of the Securities Act of 1933, this report has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  MICHAEL D. LOBERG, PH.D. Michael D. Loberg, Ph.D.	President and Chief Executive Officer and Director (Principal Executive Officer)	March 10, 2005
/s/  LAWRENCE E. BLOCH, M.D., J.D. Lawrence E. Bloch, M.D., J.D.	Chief Financial Officer, Chief Business Officer, Treasurer and Secretary (Principal Financial Officer)	March 10, 2005
/s/  JAMES G. HAM, III James G. Ham, III	Vice President of Finance (Principal Accounting Officer)	March 10, 2005
/s/  ROBERT S. COHEN Robert S. Cohen	Director	March 10, 2005
/s/  ZOLA HOROVITZ, PH.D. Zola Horovitz, Ph.D.	Director	March 10, 2005
/s/  ARGERIS KARABELAS, PH.D. Argeris Karabelas, Ph.D.	Director	March 10, 2005
/s/  MARK LESCHLY Mark Leschly	Director	March 10, 2005
/s/  JOHN W. LITTLECHILD John W. Littlechild	Director	March 10, 2005
/s/  JOSEPH LOSCALZO, M.D., PH.D. Joseph Loscalzo, M.D., Ph.D.	Director	March 10, 2005
/s/  DAVEY S. SCOON Davey S. Scoon	Director	March 10, 2005

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EXHIBIT INDEX

Exhibit No.		Description
	3.1(1)	Restated Certificate of Incorporation of the Company
	3.2(1)	Amended and Restated Bylaws of the Company
*	10.1(1)	Restated 1993 Equity Incentive Plan
*	10.2(1)	Amended and Restated 2003 Stock Incentive Plan
*	10.3(1)	2003 Employee Stock Purchase Plan
	10.4†(1)	Development and License Agreement between the Company and Boston Scientific Corporation dated November 20, 2001
	10.5†(1)	Research and License Agreement between the Company and Brigham and Women's Hospital, Inc. dated August 1, 1992, as amended November 22, 1996
	10.6†(1)	Collaboration and License Agreement between the Company and Professor Jay N. Cohn dated January 22, 1999, as amended January 29, 2001 and March 15, 2002
	10.7	Amendment No. 1 to Collaboration and License Agreement between the Company and Professor Jay N. Cohn dated August 10, 2000
	10.8†(1)	Research and License Agreement between the Company and Trustees of Boston University dated June 1, 1993, as amended January 1, 1999
	10.9†(1)	Agreement between the Company and FoxKiser dated April 26, 2001
	10.10†(1)	Agreement between the Company and John D. Folts dated March 13, 1995, as amended, November 22, 1996 and December 2, 1998
	10.11†(1)	Professional Service Agreement between the Company and MIMC, Inc. dated May 1, 2001, as amended
*	10.12(1)	Letter Agreement between the Company and Michael D. Loberg dated July 14, 1997
*	10.13(1)	Letter Agreement between the Company and Manual Worcel dated July 29, 1993
*	10.14(1)	Letter Agreement between the Company and L. Gordon Letts dated November 4, 1993
	10.15(1)	Fourth Amended and Restated Stockholders' Agreement among the Company and the stockholders named therein dated May 22, 2001, as amended November 20, 2001, May 12, 2003 and July 31, 2003
	10.16(1)	Form of Warrant to purchase shares of the Company's Common Stock, together with a schedule of warrant holders
	10.17(2)	Lease between the Company and PM Atlantic Lexington, LLC dated January 30, 2004
	10.18(2)	Letter Agreement between the Company, Boston University School of Medicine and Martin Feelisch, Ph.D. dated May 5, 2003
	10.19	Consulting Agreement between the Company and Joseph Loscalzo, M.D., Ph.D. dated October 27, 2003, as amended on April 1, 2004
	10.20†(3)	Professional Detailing Services Agreement between the Company and Publicis Selling Solutions, Inc. dated November 4, 2004

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	10.21(3)	Letter Agreement between the Company and Merck Frosst Canada & Co. dated November 8, 2004
*	10.22	Letter Agreement between the Company and James G. Ham, III dated September 3, 2004
*	10.23	Letter Agreement between the Company and Lawrence E. Bloch dated August 30, 2004
	10.24†	Supply Agreement between the Company and Schwarz Pharma Manufacturing, Inc. dated as of February 16, 2005
	10.25	Letter Agreement between the Company and Mark Pavao, dated June 30, 2004
*	10.26	Compensation of Named Executive Officers of the Company
*	10.27	Compensation Program for Non-Employee Directors of the Company
*	10.28	Form of Incentive Stock Option Agreement Granted Under Amended and Restated 2003 Stock Incentive Plan
*	10.29	Form of Nonstatutory Stock Option Agreement Granted Under Amended and Restated 2003 Stock Incentive Plan
	14.1(2)	Code of Business Conduct and Ethics
	21.1	Subsidiaries of the Company
	23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
	31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
	32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*

Management contract or compensation plan or arrangement required to be filed as an exhibit pursuant to Item 15(c) of Form 10-K

†

Confidential treatment requested as to certain portions, which portions have been filed separately with the Securities and Exchange Commission

(1)

Incorporated by reference to the exhibits to the Company's Registration Statement on Form S-1 (File No. 333-108104).

(2)

Incorporated by reference to the exhibits to the Company's Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-50439).

(3)

Incorporated by reference to the exhibits to the Company's Current Report on Form 8-K filed on November 8, 2004 (File No. 000-50439).

77

QuickLinks

NITROMED, INC. ANNUAL REPORT ON FORM 10-K
INDEX
PART I

ITEM 1. BUSINESS

Risks Relating to our Industry

ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
NITROMED, INC. BALANCE SHEETS (in thousands, except par value amounts)
NITROMED, INC. STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
NITROMED, INC. STATEMENTS OF CASH FLOWS (in thousands)
NITROMED, INC. NOTES TO FINANCIAL STATEMENTS (all tabular amounts in thousands except per share amounts)

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

SIGNATURES
EXHIBIT INDEX

EX-10.7

                                                                    Exhibit 10.7

                               AMENDMENT NO. 1 TO
                       COLLABORATION AND LICENSE AGREEMENT



       This Amendment No. 1, effective as of the last day entered below, amends
the Collaboration and License Agreement (the "Agreement"), dated January 22,
1999, between Professor Jay N. Cohn ("LICENSOR") and NITROMED, INC.
("NitroMed").

       In consideration of the terms and conditions set forth in the Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, LICENSEE and NitroMed agree as follows:

       1. EXHIBIT A of the Agreement is hereby amended to include the following
patent applications:

       U.S. Patent Application No. (to be assigned) and PCT Patent Application
(to be assigned), filed on or before September 8, 2000, entitled "Methods of
Treating and Preventing Congestive Heart Failure with Hydralazine Compounds and
Isosorbide Dinitrate or Isosorbide Mononitrate" (Jay N. Cohn and Peter Carson)

                                        By: /s/ JAY N. COHN
                                           -------------------------------------
                                           Jay N. Cohn

                                        Dated: 8-7-00
                                              ----------------------------------


                                        NITROMED, INC.

                                        By: /s/ MICHAEL D. LOBERG
                                           -------------------------------------
                                           Michael D. Loberg
                                           Chief Executive Officer

                                        Dated: 8/10/00
                                              ----------------------------------

EX-10.19

                                                                   Exhibit 10.19
                              CONSULTING AGREEMENT

     THIS CONSULTING AGREEMENT (the "Agreement"), made this 27th day of October,
2003, is entered into by NITROMED INC., a Delaware corporation having a
principal place of business at 12 Oak Park Drive, Bedford, MA 01730 (the
"Company"), and JOSEPH LOSCALZO, M.D., PH. D., Boston University of
Massachusetts, Boston Medical Center, 720 Harrison Avenue, Suite 402, Boston, MA
02118 (the "Consultant").

                                  INTRODUCTION

     The Company desires to retain the services of the Consultant and the
Consultant desires to perform certain services for the Company. In consideration
of the mutual covenants and promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, the parties agree as follows:

     1. SERVICES. The Consultant agrees to perform such consulting, advisory and
related services to and for the Company as may be reasonably requested from time
to time by the Company. These services include those required as a Chairman of
NitroMed's Scientific Advisory Board. During the Consultation Period (as defined
below), the Consultant shall not engage in any activity that has a conflict of
business interest with the Company, without prior disclosure to the Company.

     2. TERM.

        2.1 INITIAL TERM. The initial term of this Agreement is for ten (10)
calendar years shall commence on October 1, 2003, and shall expire on
September 30, 2013 (such period, as it may be extended, being referred to as
the "Consultation Period"), unless sooner terminated in accordance with the
provisions of Section 4.

        2.2 TERM EXTENSION. This Agreement may be extended for additional
periods of two (2) calendar years each if Company gives Consultant written
notice of such extension at least sixty (60) days prior to the expiration date
of the initial term. Company may not extend this Agreement more than five (5)
times. The terms and conditions of this Agreement shall remain the same during
each extension period.

     3. COMPENSATION.

        3.1 CONSULTING FEES. The Company shall pay to the Advisor an annual
advisory fee of $70,000.00, payable quarterly in arrears.

        3.2 BENEFITS. The Consultant shall not be entitled to any benefits,
coverages or privileges, including, without limitation, social security,
unemployment, medical or pension payments, made available to employees of the
Company.

        4. TERMINATION. The Company may, without prejudice to any right or
remedy it may have due to any failure of the Consultant to perform his
obligations under this Agreement,



terminate the Consultation Period upon 30 days' prior written notice to the
Consultant. Notwithstanding the foregoing, the Company may terminate the
Consultation Period, effective immediately upon receipt of written notice, if
the Consultant breaches or threatens to breach any provision of Section 6.

     5. COOPERATION. The Consultant shall use his best efforts in the
performance of his obligations under this Agreement. The Company shall provide
such access to its information and property as may be reasonably required in
order to permit the Consultant to perform his obligations hereunder. The
Consultant shall cooperate with the Company's personnel, shall not interfere
with the conduct of the Company's business and shall observe all rules,
regulations and security requirements of the Company concerning the safety of
persons and property.

     6. INVENTIONS AND PROPRIETARY INFORMATION.

        6.1 INVENTIONS.

            All inventions, discoveries, computer programs, data, technology,
designs, innovations and improvements (whether or not patentable and whether or
not copyrightable) ("Inventions") related to the business of the Company which
are made, conceived, reduced to practice, created, written, designed or
developed by the Consultant, solely or jointly with others and whether during
normal business hours or otherwise, during the Consultation Period or thereafter
if resulting or directly derived from Proprietary Information (as defined
below), shall be the sole property of the Trustees of Boston University (the
"University"). All Inventions related to the business of the Company and any and
all related patents, copyrights, trademarks, trade names, and other industrial
and intellectual property rights and applications therefore, in the United
States and elsewhere, shall be assigned to the University pursuant to the patent
policy of the University and the Research and License Agreement between the
University and NitroMed, Inc., effective June 1, 1993.

        6.2 PROPRIETARY INFORMATION.

            (a) The Consultant acknowledges that his relationship with the
Company is one of high trust and confidence and that in the course of his
service to the Company he will have access to and contact with Proprietary
Information. The Consultant agrees that he will not, during the Consultation
Period or at any time thereafter, disclose to others, or use for his benefit or
the benefit of others, any Proprietary Information or Invention.

            (b) For purposes of this Agreement, Proprietary Information shall
mean, by way of illustration and not limitation, all information (whether or not
patentable and whether or not copyrightable) owned, possessed or used by the
Company, including, without limitation, any Invention, formula, vendor
information, customer information, apparatus, equipment, trade secret, process,
research, report, technical data, know-how, computer program, software, software
documentation, hardware design, technology, marketing or business plan,
forecast, unpublished financial statement, budget, license, price, cost and
employee list that is communicated to, learned of, developed or otherwise
acquired by the Consultant in the course of his service as a consultant to the
Company.



            (c) The Consultant's obligations under this Section 6.2 shall not
apply to any information that (i) is or becomes known to the general public
under circumstances involving no breach by the Consultant or others of the terms
of this Section 6.2, (ii) is generally disclosed to third parties by the Company
without restriction on such third parties, or (iii) is approved for release by
the Company.

            (d) Upon termination of this Agreement or at any other time upon
request by the Company, the Consultant shall promptly deliver to the Company
copies of all related files, memoranda, data, reports, and other documents
relating to the projects funded by the Company.

            (e) The Consultant represents that his retention as a consultant
with the Company and his performance under this Agreement does not, and shall
not, breach any agreement that obligates him to keep in confidence any trade
secrets or confidential or proprietary information of his or of any other party
or to refrain from competing, directly or indirectly, with the business of any
other party. The Consultant shall not disclose to the Company any trade secrets
or confidential or proprietary information of any other party.

            (f) The Consultant acknowledges that the Company from time to time
may have agreements with other persons or with the United States Government, or
agencies thereof, that impose obligations or restrictions on the Company
regarding inventions made during the course of work under such agreements or
regarding the confidential nature of such work. The Consultant agrees to be
bound by all such obligations and restrictions that are known to him and to take
all action necessary to discharge the obligations of the Company under such
agreements.

        6.3 REMEDIES. The Consultant acknowledges that any breach of the
provisions of this Section 6 shall result in serious and irreparable injury to
the Company. The Consultant agrees that the Company shall be entitled to seek
both temporary and permanent injunctive relief.

     7. INDEPENDENT CONTRACTOR STATUS. The Consultant shall perform all services
under this Agreement as an "independent contractor" and not as an employee or
agent of the Company. The Consultant is not authorized to assume or create any
obligation or responsibility, express or implied, on behalf of, or in the name
of, the Company or to bind the Company in any manner.

     8. NOTICES. All notices required or permitted under this Agreement shall be
in writing and shall be deemed effective upon personal delivery or upon deposit
in the United States Post Office, by registered or certified mail, postage
prepaid, addressed to the other party at the address shown above, or at such
other address or addresses as either party shall designate to the other in
accordance with this Section 8.

     9. PRONOUNS. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.



     10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.

     11. AMENDMENT. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Consultant.

     12. GOVERNING LAW. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the Commonwealth of Massachusetts.

     13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and inure
to the benefit of, both parties and their respective successors and assigns,
including any corporation with which, or into which, the Company may be merged
or which may succeed to its assets or business, provided, however, that the
obligations of the Consultant are personal and shall not be assigned by him.

     14. MISCELLANEOUS.

        14.1 No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other right. A waiver or
consent given by the Company on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any right on any other
occasion.

        14.2 The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or substance
of any section of this Agreement.

        14.3 In the event that any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year set forth above.

                                            NITROMED INC.

                                            By: /s/ L. Gordon Letts
                                                ----------------------
                                                L. Gordon Letts, Ph.D.

                                            Title:   Senior VP R&D, CSO
JOSEPH LOSCALZO

By:  /s/ Joseph Loscalzo
     -------------------
     Joseph Loscalzo, M.D. Ph.D

Social Security No.:

xxx-xx-xxxx



                     AMENDMENT NO. 1 TO CONSULTING AGREEMENT

     This Amendment No. 1, effective as of the 1st day of April, 2004, amends
the Consulting Agreement (the "Agreement") dated October 27, 2003, between
NITROMED INC., a Delaware corporation having a principal place of business at
12 Oak Park Drive, Bedford, MA 01730 (the "Company"), and JOSEPH LOSCALZO,
M.D., PH.D., Boston University of Massachusetts, Boston Medical Center, 720
Harrison Avenue, Suite 402, Boston, MA 02118 (the "Consultant").

     In consideration of the terms and conditions set forth in the Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Consultant and the Company agree that Section 3.1
of the Agreement is hereby deleted and the following is inserted in lieu
thereof:

     "3.1 Consulting Fees. The Company shall pay to the Consultant an annual
advisory fee of $55,000.00, payable quarterly in arrears."

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year set forth above.

                                            NITROMED INC.



                                            By: /s/ L. Gordon Letts, Ph.D.
                                                --------------------------
                                                L. Gordon Letts, Ph.D.

                                            Title: Senior VP R&D, CSO

JOSEPH LOSCALZO

By:/s/ Joseph Loscalzo, M.D., Ph.D.
   --------------------------------
   Joseph Loscalzo, M.D., Ph.D.

Social Security No.: xxx-xx-xxxx

EX-10.22

                                                                   Exhibit 10.22
September 3, 2004

James G. Ham, III
31 Merion Place
Lawrenceville, New Jersey 08648

Dear Jim:

I would like to formally offer you the position of Vice President, Finance at
NitroMed reporting to the Chief Financial Officer and Chief Business Officer.

The terms of this offer are as follows:

Responsibilities:          You will be responsible for all controller-related
                           functions, including general accounting and auditing
                           financial control as well as financial
                           analysis/analytical support of all departments.

Base Salary:               $180,000 per year paid in 24 equal payments to be
                           reviewed annually.

Stock:                     You will be offered an option to purchase 40,000
                           shares of common stock in the Company. The price at
                           which the stock closes on your start date will be the
                           exercise price of these options. These options will
                           vest over four years in equal installments as long as
                           you remain in the employ of the Company.

Performance Bonus:         You may be entitled to receive a bonus under the
                           NitroMed bonus plan, which is discretionary and
                           based on milestones to be determined and mutually
                           agreed upon by the Chief Financial Officer/Chief
                           Business Officer and you. You will be entitled to
                           receive a minimum guaranteed first year bonus of
                           20% that will be prorated for the months remaining
                           between your date of hire and December 31, 2004.
                           Such bonus may be subject to an upward adjustment
                           in 2004, depending on performance.

Group Benefits:            You will receive comprehensive group health,
                           disability, accident and life insurance benefits or
                           such comparable benefits and protections the Company
                           is able to reasonably obtain from another plan.
                           You will be entitled to participate in and enjoy the
                           benefits of NitroMed's 401K retirement plan as well
                           as any other retirement and pension plan or plans
                           if and when instituted by the Company for the
                           benefit of its employees generally.



James G. Ham, III
September 3, 2004
Page Two


Leave:                     You will be entitled to illness and vacation days
                           consistent with the Company's standard policy. This
                           policy provides up to three weeks vacation per
                           calendar year accrued at a rate of 1.25 days per
                           month of employment and 20 days per calendar year
                           after five years of employment.

Relocation:                Subject to your continued employment the Company will
                           reimburse you Up to a sum not to exceed $30,000 for
                           moving your household contents, including buy and
                           sell side costs such as commissions and fees. You
                           will 12 months to exercise this relocation benefit.
                           You will also be entitled to six months of temporary
                           housing reimbursable at $3,000 per month. At your
                           request, the Company will pay directly all of the
                           deductible relocation and temporary housing expenses
                           for you.

Signing Bonus:             You will be entitled to receive a $20,000 signing
                           bonus payable on January 1st 2005 dependent on your
                           continued employment.

Severance:                 You will be eligible for six months of severance if
                           you are terminated for reasons other than for cause,
                           including corporate, reorganization, merger or
                           consolidation.

Agreements:                As a condition of employment, you will be required to
                           sign the Company's assignment of invention,
                           non-disclosure, and non-compete agreements.

The commencement date for this position is on or before September 13, 2004.
Please sign a copy of this letter and return it as acceptance of this offer by
September 9, 2004.

Jim, we look forward to working with you at NitroMed. It is my wish that this
position allows you to participate in the success of NitroMed and will both
enrich and enhance your career experience.

Sincerely,

/s/ Michael D. Loberg
- ---------------------
Michael D. Loberg

                                    Agreed and Accepted:


                                    /s/ James G. Ham, III
                                    ---------------------
                                    James G. Ham, III


                                    Dated: September 3, 2004
                                           -----------------

EX-10.23

                                                                   Exhibit 10.23
August 30, 2004

Lawrence E. Bloch
701 South Howard Avenue
Suite 106-389
Tampa, Florida  33606

Dear Larry:

I would like to formally offer you the position of Chief Financial Officer and
Chief Business Officer at NitroMed reporting to the President and Chief
Executive Officer.

The terms of this offer are as follows:

Responsibilities:          You will be responsible for all finance, business
                           development, information technology, facilities and
                           investor relations & public relations functions of
                           the Company.

Base Salary:               $265,000 per year paid in 24 equal payments to be
                           reviewed annually.

Stock:                     You will be offered an option to purchase 150,000
                           shares of common stock in the Company. The price at
                           which the stock closes on your start date will be
                           the exercise price of these options. You will be
                           offered an additional 60,000 options by year-end.
                           These options will vest over four years in equal
                           installments as long as you remain in the employ of
                           the Company. This four year vesting schedule will be
                           accelerated for these and all your options and any
                           other stock awards granted to you, if any, should
                           there be a change in control of the Company effective
                           immediately prior to the effectiveness of the
                           agreement for the change in control. For this
                           purpose, a change of control shall mean a transaction
                           (or a series of related transactions) resulting in
                           (1) a sale of all of the stock or substantially all
                           of the assets of the Company or (2) a corporate
                           merger, reorganization or consolidation of the
                           Company as a result of which the stockholders of the
                           Company prior to the transaction or transactions do
                           not own a majority of the stock of the successor or
                           surviving entity.

Performance Bonus:         You may be entitled to receive a bonus under the
                           NitroMed bonus plan, which is discretionary and based
                           on milestones to be determined and mutually agreed
                           upon by the Chief Executive Officer and you. You will
                           be entitled to receive a minimum guaranteed first
                           year bonus of 25% that will be prorated for the
                           months remaining between your date of hire and
                           December 31, 2004. Such bonus may be subject to an
                           upward adjustment in 2005, depending on performance.

Group Benefits:            You will receive comprehensive group health,
                           disability, accident and life insurance benefits or
                           such comparable benefits and protections the Company
                           is able to reasonably obtain from another plan. You
                           will be entitled to participate in and enjoy the
                           benefits of NitroMed's 401K retirement plan as well
                           as any other retirement and pension plan or plans



                           if and when instituted by the Company for the benefit
                           of its employees generally.

Leave:                     You will be entitled to illness days consistent with
                           the Company's standard policy and 20 vacation days
                           per calendar year.

Relocation:                Subject to your continued employment the Company will
                           reimburse you for moving your household contents,
                           from your Florida residence. You will have 12 months
                           to exercise this relocation benefit. You will also be
                           entitled to six months of temporary housing
                           reimbursable at $3,000 per month. At your request,
                           the Company will pay directly all of the relocation
                           and temporary housing expenses for you.

Severance:                 You will be provided twelve months of your base
                           salary as a severance benefit if you are terminated
                           for reasons other than for "cause." Solely for this
                           purpose, the term "cause" shall mean any one of the
                           following intentional acts or omissions by you: (1)
                           embezzlement or other material misappropriation of
                           property of the Company, a breach of the Company's
                           assignment of invention, non-disclosure, and
                           non-compete agreements, or another willful act of
                           misconduct with the intent to harm the Company or its
                           employees, directors, shareholders, or agents; or
                           (2) the willful failure to perform your duties or
                           adhere to the policies of the Company that is not
                           corrected after you have been provided 30 days'
                           written notice by the Chief Executive Officer of the
                           Company to correct such failure.

Outside Activities:        You will be encouraged to serve on up to two outside
                           boards, provided such service does not interfere with
                           your NitroMed duties.

Agreements:                As a condition of employment, you will be required to
                           sign the Company's assignment of invention,
                           non-disclosure, and non-compete agreements.

The commencement date for this position is September 13, 2004. Please sign a
copy of this letter and return it as acceptance of this offer by September 2,
2004.

Larry, we look forward to working with you at NitroMed. It is my wish that this
position allows you to participate in the success of NitroMed and will both
enrich and enhance your career experience.

Sincerely,

/s/ Michael D. Loberg
- ---------------------
Michael D. Loberg

                              Agreed and Accepted:


                              /s/ Lawrence E. Bloch
                              ---------------------
                              Lawrence E. Bloch

                              Dated: August 30, 2004

EX-10.24

          Confidential Materials omitted and filed separately with the
         Securities and Exchange Commission. Asterisks denote omissions.

                                                                   Exhibit 10.24


                                                                  EXECUTION COPY

                                SUPPLY AGREEMENT

     This Supply Agreement (this "AGREEMENT") is entered into on this 16th day
of February, 2005 (the "EFFECTIVE DATE"), by and between Schwarz Pharma
Manufacturing, Inc., an Indiana corporation, doing business at 1101 "C" Avenue
West, Seymour, Indiana 47274 ("SCHWARZ"), and NitroMed, Inc., a Delaware
corporation, with a principal place of business at 125 Spring Street, Lexington,
Massachusetts 02421 ("NITROMED"). Schwarz and NitroMed are sometimes referred to
herein together as "PARTIES" or individually as a "PARTY".

                                    RECITALS

     WHEREAS, NitroMed wishes to engage Schwarz to manufacture and supply the
Product (as defined below) to NitroMed subject to and in accordance with the
terms and conditions set forth in this Agreement, and Schwarz wishes to be so
engaged.

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

                                    ARTICLE I

                                   DEFINITIONS

     SECTION 1.1. As used herein, the following terms shall have the following
meanings:

     "ACT" shall mean the United States Food, Drug and Cosmetic Act (21
U.S.C.sections 301, et seq.) and the regulations promulgated thereunder, as each
may be amended from time to time.

     "AFFILIATES" shall mean, with respect to either Party, any person or entity
controlling, controlled by or under common control with such Party, with the
term "control" (and its derivatives) meaning the direct or indirect ownership of
fifty percent (50%) or more of the voting common stock or similar equity
ownership interest.

     "API" shall mean the active pharmaceutical ingredients isosorbide dinitrate
and hydralazine or either of such ingredients, as the context requires.

     "API SPECIFICATIONS" shall mean the specifications for the API as set forth
in Schedule II attached hereto, with such modifications as Schwarz and NitroMed
may agree upon from time to time in accordance with SECTION 3.5.

     "cGMP" shall mean current good manufacturing practices required by the Act.

     "CURRENT FORMULATIONS" means the dosage strength combinations of the
Product containing (a) 20 mg of isosorbide dinitrate and 37.5 mg of hydralazine
and (b) 40 mg of isosorbide dinitrate and 75 mg of hydralazine, in each case,
solely in the dosage forms and formulations manufactured by Schwarz hereunder.



     "DEVELOPMENT AGREEMENT" shall mean that certain Development Agreement,
dated as of February 28, 2001, between the Parties, as amended or otherwise
modified by the Parties from time to time.

     "FAILURE TO SUPPLY" shall mean that, during any twelve (12) month period
during the Term (which period shall be measured as set forth below), (i)
multiple instances of Inability to Supply have occurred and (ii) as a result of
such instances of Inability to Supply, the aggregate quantity of conforming
Product that Schwarz has supplied during such twelve (12) month period, either
on time or within the sixty (60) day cure period applicable to any Inability to
Supply, represents less than [**] percent ([**]%) of the aggregate quantity of
Product specified in Valid Purchase Orders submitted to Schwarz in accordance
with this Agreement for shipment during such twelve (12) month period. The
twelve (12) month period applicable to any determination of whether a Failure to
Supply has occurred shall commence upon the required delivery date specified in
the Valid Purchase Order to which the first applicable instance of Inability to
Supply relates.

     "FDA" shall mean the United States Food and Drug Administration.

     "FULL BATCH QUANTITY" shall mean, subject to the last sentence of
SECTION 2.5, a Product quantity of (i) in the case of the dosage strength
combination thereof containing 20 mg of isosorbide dinitrate and 37.5 mg of
hydralazine, [**] tablets, (ii) in the case of the dosage strength
combination thereof containing 40 mg of isosorbide dinitrate and 75 mg of
hydralazine,[**] tablets, and (iii) in the case of any other dosage strength
combination of the Product, the number of tablets mutually agreed upon by the
Parties.

     "INABILITY TO SUPPLY" shall mean, with respect to any Valid Purchase Order
submitted to Schwarz in accordance with the terms of this Agreement, that (i)
subject to the last sentence of SECTION 2.5, Schwarz has failed to supply at
least the aggregate quantity of conforming Product specified in such Valid
Purchase Order on or prior to the delivery date specified in such Valid Purchase
Order and (ii) Schwarz has failed to cure such failure within sixty (60) days
following Schwarz's receipt of written notice from NitroMed of such failure by
supplying, prior to the expiration of such sixty (60) day period, the quantity
of conforming Product which, together with the quantity theretofore supplied in
respect of such Valid Purchase Order, equals at least the aggregate quantity of
Product specified in such Valid Purchase Order.

     "LAUNCH DATE" shall mean the first date on which the Product is
commercially sold in the United States or any of its territories or possessions.

     "LICENSED RIGHTS" shall mean all (i) patents, know-how, trade secrets,
technology, specifications, methods of manufacturing, technical data and other
intellectual property rights owned by NitroMed or which NitroMed has the right
to use, and all of NitroMed's permits, licenses or other approvals, in each
case, which are necessary or useful in the manufacture of the Product, as
contemplated herein and (ii) any and all trademarks, service marks and trade
dress reflected in the Product or included in any labels or packaging for the
Product contemplated hereby or by the Product Specifications, the API
Specifications or the Quality Agreement.

                                       2


     "NDA" shall mean the New Drug Application filed with the FDA in respect of
the Product, including any amendment and any sNDA and all subsequent submissions
in respect of such New Drug Application, amendment, or sNDA.

     "PRODUCT" shall mean all dosage strengths and dosage forms of any
immediate-release pharmaceutical drug product for human use containing the
active ingredients isosorbide dinitrate and hydralazine and no other active
ingredient, including the product currently known as BiDil(R) in the dosage
strength combinations thereof containing (a) 20 mg of isosorbide dinitrate and
37.5 mg of hydralazine and (b) 40 mg of isosorbide dinitrate and 75 mg of
hydralazine; PROVIDED, HOWEVER, that the term "Product" shall not refer to any
extended-release version of any such pharmaceutical product.

     "PRODUCT SPECIFICATIONS" shall mean the specifications for the Product as
set forth in Schedule I attached hereto, with such modifications as Schwarz and
NitroMed may agree upon from time to time in accordance with SECTION 3.5.

     "REGULATORY AUTHORITY" means any national, supra-national, regional, state
or local regulatory agency, department, bureau, commission, council or other
governmental entity in the Territory having regulatory jurisdiction over the
Product, including, without limitation, the FDA.

     "TABLET EQUIVALENT" shall mean a Product quantity equivalent to one tablet
containing 20 mg of isosorbide dinitrate and 37.5 mg of hydralazine. For
example, a Product tablet containing 40 mg of isosorbide dinitrate and 75 mg of
hydralazine would constitute a quantity of Product equal to two Tablet
Equivalents.

     "TERRITORY" shall mean the entire world.

     "VALID PURCHASE ORDER" shall mean a purchase order which meets the
requirements of ARTICLE II.

     SECTION 1.2. OTHER DEFINED TERMS. The following terms are defined in the
Articles or other sections of the Agreement indicated below.

     Action................................................................10.1
     Aggrieved Party.......................................................10.1
     Agreement.........................................................preamble
     Detailed Product Forecast............................................2.3.2
     Due Date...............................................................4.3
     Effective Date....................................................preamble
     Initial Order........................................................2.4.4
     Forecast Commencement Date...........................................2.3.2
     Liabilities...........................................................10.1
     Long-Term Product Forecast...........................................2.3.1
     NitroMed..........................................................preamble
     NitroMed Indemnified Party............................................10.2
     NitroMed Proprietary Information ......................................9.1
     Party.............................................................preamble
     Proprietary Information................................................9.1


                                       3


     Quality Agreement......................................................3.1
     Requirements.........................................................2.2.1
     Schwarz...........................................................preamble
     Schwarz Indemnified Party.............................................10.3
     Schwarz Intellectual Property........................................6.5.2
     Schwarz Proprietary Information........................................9.1
     Term...................................................................7.1
     Using Party............................................................9.1

     Section 1.3. INTERPRETATION. Unless otherwise indicated to the contrary
herein by the context or use thereof (i) the words, "herein," "hereto," "hereof"
and words of similar import refer to this Agreement as a whole and not to any
particular Section or paragraph hereof, (ii) the word "including" means
"including, but not limited to", (iii) words importing the singular will also
include the plural, and vice versa, and (iv) any reference to any federal,
state, local, or foreign statute or law will be deemed also to refer to all
rules and regulations promulgated thereunder. References to $ will be references
to United States Dollars, and with respect to any contract, obligation,
liability, claim or document that is contemplated by this Agreement but
denominated in currency other than United States Dollars, the amounts described
in such contract, obligation, liability, claim or document will be deemed to be
converted into United States Dollars for purposes of this Agreement as of the
applicable date of determination.

                                   ARTICLE II

                                PURCHASE AND SALE

     SECTION 2.1. AGREEMENT TO SUPPLY; EXCLUSIVITY. Schwarz shall manufacture,
package and sell to NitroMed, all such quantities of the Product as NitroMed
shall order from Schwarz in accordance with the terms and conditions, and
subject to the limitations, set forth in this Agreement, including SECTION 2.3
hereof. Subject to NitroMed meeting its obligations under SECTION 2.2, Schwarz
shall not manufacture the Product for any third party during the Term.

     SECTION 2.2. AGREEMENT TO PURCHASE; EXCLUSIVITY.

     SECTION 2.2.1. Subject to the terms and conditions of this Agreement
(including SECTION 2.7 hereof), (i) NitroMed agrees to purchase exclusively from
Schwarz NitroMed's entire commercial and clinical requirements of the Product
for use, distribution, sale or resale in the Territory (hereinafter referred to
as NitroMed's "REQUIREMENTS") and (ii) NitroMed shall not manufacture itself or
purchase or procure from any other manufacturer or source, including any of its
Affiliates, partners or any other parties with which any of them has entered
into any collaboration arrangement regarding the Product, any of its
Requirements of the Product.

     SECTION 2.2.2. Anything to the contrary notwithstanding, for purposes of
this Agreement, NitroMed's Requirements shall be deemed to include all of the
following parties' requirements of the Product for use, distribution, sale and
resale in the Territory: NitroMed and its Affiliates and partners and any other
party with whom any of them has entered into any collaboration arrangement
involving the Product. NitroMed shall not avoid its purchase


                                       4


obligations under this Agreement by purchasing or selling Product indirectly
through distributors, co-promotion partners, licensees or similar purchasing or
selling arrangements.

     Section 2.3. FORECASTS.

     SECTION 2.3.1. No later than January 15th of each calendar year during the
Term, NitroMed shall provide Schwarz with a forecast (a "LONG-TERM PRODUCT
FORECAST") setting forth NitroMed's estimate of its Requirements of Product for
each of the three (3) years following the date of such forecast, which shall in
all cases represent a good faith estimate of its actual demand for the Product
based on market conditions and NitroMed's need for a reasonable safety stock.
The initial Long-Term Product Forecast is attached hereto as EXHIBIT A.

     SECTION 2.3.2. On the Effective Date and thereafter at least ninety (90)
days prior to the commencement of each calendar quarter (with respect to the
forecast for the period then commencing, the "FORECAST COMMENCEMENT QUARTER")
during the Term, NitroMed shall provide Schwarz with a written estimate of
NitroMed's requirements for each dosage strength and package size of the Product
during the four (4) calendar quarters commencing with the Forecast Commencement
Quarter, delineated by month (a "DETAILED PRODUCT FORECAST"). NitroMed's
forecasted requirements for the first three (3) months of each Detailed Product
Forecast provided hereunder shall be firm and binding upon NitroMed and each
Detailed Product Forecast shall be accompanied by a Valid Purchase Order for the
quantities of Product specified for such three-month period in such Detailed
Product Forecast. The remaining portion of each Detailed Product Forecast shall
be firm, subject to the permissible variances set forth in SECTION 2.3.3. If
NitroMed fails to timely provide any updated Detailed Product Forecast, the
Detailed Product Forecast last provided by NitroMed shall be deemed to be
NitroMed's Detailed Product Forecast for the next succeeding four (4) quarter
period. NitroMed's initial Detailed Product Forecast, covering the period from
April 1, 2005 through March 31, 2006 together with a valid purchase order for
the period April 1, 2005 through June 30, 2005, is attached hereto as EXHIBIT B.


     SECTION 2.3.3. Each subsequent Detailed Product Forecast may be updated to
modify the amounts estimated in the previous Detailed Product Forecast for the
periods of time in question subject to the following limitations:

          (a) The volume specified for the first calendar quarter covered by
     such subsequent Detailed Product Forecast shall not be increased or
     decreased by more than [**] percent ([**]%) from the volume specified for
     such quarter in the prior Detailed Product Forecast without Schwarz's
     consent;

          (b) The volume specified for the second calendar quarter covered by
     such subsequent Detailed Product Forecast shall not be increased or
     decreased by more than [**] percent ([**]%) from the volume specified for
     such quarter in the prior Detailed Product Forecast without Schwarz's
     consent; and

          (c) The volume specified for the third calendar quarter covered by
     such subsequent Detailed Product Forecast shall not be increased or
     decreased by more than [**] percent ([**]%) from the volume specified for
     such quarter in the prior Detailed Product Forecast without Schwarz's
     consent.


                                       5


If so requested by NitroMed in a Valid Purchase Order relating to any period
covered by a Detailed Product Forecast, Schwarz may, but shall in no way be
obligated to, supply quantities of Product in excess of the quantity forecast
for such period.

     SECTION 2.3.4. All Detailed Product Forecasts submitted hereunder shall be
prepared by NitroMed in good faith and shall in all cases represent a good faith
estimate of actual demand for the Product based on market conditions and
Nitromed's need for a reasonable safety stock.

     Section 2.4. PURCHASE ORDERS.

     SECTION 2.4.1. In accordance with the terms of this Agreement, NitroMed
will initiate orders for the Product by submitting written purchase orders to
Schwarz at the following address, using the form of purchase order attached
hereto as EXHIBIT C:

                    Schwarz Pharma Manufacturing, Inc.
                    Attention: Distributor Sales Coordinator,
                               Materials Management Department
                    1101 "C" Avenue West
                    Seymour, IN  47274
                    Fax:  (812) 523-1887

     SECTION 2.4.2. Each purchase order submitted by NitroMed shall specify a
required delivery date not less than ninety (90) days after the date of such
purchase order. Schwarz will provide written confirmation of each purchase order
within ten (10) days after receipt thereof; PROVIDED, HOWEVER, that Schwarz
shall have no obligation to accept or confirm any purchase order that is
inconsistent with the terms of this Agreement.

     SECTION 2.4.3. All purchase orders shall be governed exclusively by the
terms of this Agreement. Any term or condition in any purchase order,
confirmation, invoice or other document furnished by Schwarz or NitroMed that is
in any way inconsistent with the terms and conditions of this Agreement shall be
null and void, unless specifically and mutually agreed upon in a writing signed
by each Party.

     SECTION 2.4.4. NitroMed's binding initial purchase order (the "INITIAL
ORDER") covering the period from the Effective Date to March 31, 2005 is
attached hereto as EXHIBIT D. Anything to the contrary herein notwithstanding
the delivery dates for the Product covered by the Initial Order shall be as set
forth in the Initial Order; provided that NitroMed complies with its obligations
hereunder as necessary to enable Schwarz to comply with such delivery dates and,
provided further, that there is no regulatory impediment to complying with such
delivery dates.

     Section 2.5. FULL BATCH QUANTITIES. Unless otherwise mutually agreed upon
by the Parties, all Detailed Product Forecasts and purchase orders for Product
hereunder shall be for Full Batch Quantities. To the extent actual batch sizes
manufactured by Schwarz consist of more or less than the applicable number of
tablets specified in the definition of "Full Batch Quantity" due to variations
in yield within a reasonable variance to be identified in the Quality Agreement,
the quantities of actual Product units contemplated by the applicable purchase
orders will be automatically adjusted to reflect the actual batch sizes
manufactured by Schwarz.


                                       6


     SECTION 2.6. SHIPMENT. Product ordered by NitroMed hereunder will be
shipped to NitroMed FOB (Incoterms 2000) Schwarz's facility in Seymour, Indiana
via the carrier designated by NitroMed.

     SECTION 2.7. RIGHT TO COVER. In the event that an Inability to Supply has
occurred, NitroMed shall have the right, upon written notice to Schwarz, to
manufacture itself or procure from any Affiliate of NitroMed or any third party
up to, but not more than, the portion of the quantity of Product specified in
the Valid Purchase Order to which such Inability to Supply relates which Schwarz
has failed to supply.

                                   ARTICLE III

                                   MANUFACTURE

     SECTION 3.1. SPECIFICATIONS; QUALITY AGREEMENT. Not later than sixty (60)
days following the Effective Date, the Parties shall enter into a Pharmaceutical
Quality Agreement in form and substance reasonably acceptable to both Parties
(the "QUALITY AGREEMENT"). All Product supplied to NitroMed hereunder shall
conform to the Product Specifications and shall be manufactured in accordance
with the Quality Agreement and cGMP. Each shipment of Product hereunder shall be
accompanied by a certificate of analysis reflecting that such Product conforms
to the Product Specifications.

     SECTION 3.2. SUPPLY OF API. NitroMed shall supply to Schwarz without charge
(unless otherwise required herein) all API, conforming to the API
Specifications, which is required to manufacture Product hereunder. NitroMed
shall supply API which meets the API Specifications on dates and in amounts
necessary to allow Schwarz to supply Product to NitroMed consistent with the
Detailed Product Forecasts furnished by NitroMed in accordance with SECTION 2.3
and shall ensure that Schwarz is at all times in possession of sufficient API
which meets API Specifications to satisfy NitroMed's Requirements, as set forth
in the Detailed Product Forecasts in effect from time to time. Each shipment of
API to Schwarz hereunder shall be accompanied by a certificate of analysis
confirming that such API conforms to the API Specifications. Notwithstanding any
other provision of this Agreement, Schwarz shall not be liable for any failure
or delay to meet its obligations hereunder to the extent such failure or delay
is attributable to NitroMed's failure or delay to supply API which meets the API
Specifications on a timely basis. NitroMed shall be solely responsible for all
aspects of securing and maintaining API supply, including, without limitation,
obtaining FDA approval for any and all API suppliers and complying with all
relevant legal and regulatory requirements regarding API supply. Schwarz shall
provide quarterly inventory reports of the API held by Schwarz within five (5)
business days following the end of each calendar quarter. Schwarz and NitroMed
agree and acknowledge that a true and correct report of the inventory of the API
held by Schwarz as of the Effective Date is set forth in SCHEDULE 3.2. Title to
the API shall at all times remain with NitroMed and Schwarz shall not use the
API for any purpose other than performance of its obligations under this
Agreement. NitroMed shall at all times bear the risk of loss of API, except to
the extent that any loss is directly attributable to Schwarz not storing, or
otherwise handling, the API in accordance with this Agreement, the Quality
Agreement and cGMP.


                                       7


     SECTION 3.3. LABELS AND PACKAGING. All Product supplied to NitroMed
hereunder shall be packaged in accordance with the Product Specifications, the
Quality Agreement and cGMP. NitroMed will provide camera-ready artwork for the
Product labels and the content of all package inserts required in connection
with the Product to Schwarz or one or more third party vendors specified by
Schwarz at least forty-five (45) days prior to the first delivery date for the
Product requiring such labels and/or such inserts, as specified in NitroMed's
purchase orders. Subject to the foregoing, all labels and package inserts
required for the Product supplied by Schwarz hereunder shall be furnished by
Schwarz or a third party selected by Schwarz. All artwork and content provided
by NitroMed hereunder shall comply with all applicable regulatory requirements.

     SECTION 3.4. LICENSES. NitroMed hereby grants to Schwarz a fully paid-up,
royalty-free license or sub-license, as applicable, to use the Licensed Rights
solely in connection with Schwarz's performance of its obligations under this
Agreement.

     SECTION 3.5. CHANGES TO SPECIFICATIONS. Subject to the remaining provisions
of this SECTION 3.5, the API Specifications and the Product Specifications may
be changed from time to time (i) if required by applicable U.S. laws or the FDA
or (ii) upon the request of either Party and with the consent of the other
Party. The following provisions shall apply to changes in the API Specifications
or the Product Specifications:

          (a) The Party seeking the change(s) shall promptly advise the other
     Party in writing of any such change(s) to the Product Specifications or the
     API Specifications, and Schwarz shall promptly advise NitroMed as to any
     scheduling, price or other adjustments that may result from such change(s),
     if any.

          (b) In the event of a change of the nature described in CLAUSE (i)
     above, the Party seeking the change shall notify the other Party in writing
     promptly upon being informed of or identifying the potential need for such
     change and shall consult with the other Party on an ongoing basis regarding
     such change, including the need for such potential change and the
     appropriate way to address the issue giving rise to such potential change.

          (c) Each Party shall use its commercially reasonable efforts to
     implement any required or agreed-upon changes to the Product Specifications
     or the API Specifications, as applicable, as soon as practicable after the
     nature of the change is determined and, if applicable, the applicable Party
     has consented to the change; PROVIDED, HOWEVER, that in no event shall any
     change be implemented until such time as such change has been approved by
     the FDA.

          (d) NitroMed shall be responsible for, and shall promptly reimburse
     Schwarz for, all reasonable costs and expenses incurred by or on behalf of
     Schwarz or its supply contractors in connection with the implementation of
     changes to the Product Specifications or the API Specifications that are
     mandatory or are requested by NitroMed. Additionally, if any changes to the
     Product Specifications or the API Specifications result in an increase in
     Schwarz's manufacturing costs with respect to the


                                       8


     Product, the supply prices set forth on SCHEDULE 4.1 shall be adjusted to
     fully account for the amount of such increase.

     SECTION 3.6. CERTAIN EQUIPMENT. Each Party acknowledges that Schwarz is
currently using a certain roller-compactor (the "MACHINE") leased by NitroMed
from a third party. Schwarz shall have the right to continue to use the Machine
throughout the Term. Until such time as Schwarz assumes the lease applicable to
the Machine or purchases the Machine, as contemplated below, (i) NitroMed shall
be solely responsible for the cost of all required maintenance and repair of the
Machine and (ii) anything to the contrary notwithstanding, any failure by
Schwarz to meet its obligations hereunder shall be excused to the extent that
such failure is attributable to the malfunction or disrepair of the Machine,
provided that such malfunction or disrepair is not attributable to any negligent
or wrongful act or omission by Schwarz. Schwarz shall not use the Machine for
the production of any product other than the Product unless and until NitroMed
either sells the Machine to Schwarz or causes the lease covering the Machine to
be assigned to Schwarz or an alternative arrangement has been made, as
contemplated below. If so requested by Schwarz during the Term or upon the
expiration or termination of the Term, NitroMed shall either sell the Machine to
Schwarz for the then-current fair market value thereof or, if applicable, use
its reasonable best efforts to cause the lease covering the Machine to be
assigned to Schwarz, provided, however, that if such lease cannot be assigned to
Schwarz, the Parties shall agree upon alternative arrangements to permit Schwarz
to continue to use the Machine for products other than the Product.

                                   ARTICLE IV

                                PRICE AND PAYMENT

     SECTION 4.1. PRICE. Schwarz shall supply the Product at the prices set
forth on SCHEDULE 4.1 hereto, subject to SECTION 3.5(c) and SECTION 4.2;
PROVIDED, HOWEVER, that NitroMed shall have the option to purchase up to a total
of [**] tablets of the Product during the period beginning on the Effective Date
and ending on the date that is two (2) years following the Launch Date for a
price equal to $[**] per Tablet Equivalent, which option may be exercised by so
notifying Schwarz thereof in the purchase order(s) applicable to such Product.

     SECTION 4.2. PRICE ADJUSTMENTS FOR INCREASED DOSAGE STRENGTHS. In the event
that Schwarz supplies a dosage strength of the Product containing more than one
Tablet Equivalent of API to NitroMed, the price per tablet payable by NitroMed
to Schwarz shall be determined in accordance with the following formula:

                          [**] where:

                          P  =  [**];

                          X  =  [**];

                          Y  =  [**]; and

                          Z  =  [**].


                                       9


For example, if (i) NitroMed's [**] for a tablet containing one Tablet
Equivalent of API is $[**] and its [**] for a tablet containing two Tablet
Equivalents of API is $[**] and (ii) the [**] price payable to Schwarz hereunder
for a tablet containing one Tablet Equivalent of API is $[**], then the price
payable to Schwarz for a tablet containing two Tablet Equivalents of API would
be $[**]. The foregoing notwithstanding, in no event shall the per-tablet price
payable by NitroMed hereunder for any new dosage strength of the Product be less
than the applicable price set forth on SCHEDULE 4.1.

     Section 4.3. INVOICES AND PAYMENT. All invoices from Schwarz for services
rendered under the terms of this Agreement shall be payable within thirty (30)
days after receipt by NitroMed (the "DUE DATE").

     Section 4.4. LATE PAYMENTS. Any amounts not paid by NitroMed by the Due
Date shall be subject to interest beginning on the Due Date, up to and including
the date on which payment is received by Schwarz, at a rate equal to the lesser
of (a) one percent (1%) per month or (b) the highest rate permitted by
applicable law. In each case, applicable interest shall be calculated daily on
the basis of a 360-day year comprised of 30-day months.

     Section 4.5. TAXES. NitroMed shall pay all national, state, municipal or
other sales, use, excise, property or other similar taxes, tariffs or
assessments, assessed upon or levied against the sale of the Product (other than
taxes or charges imposed on Schwarz's income).

     Section 4.6. OUTSTANDING INVOICE. The Parties agree and acknowledge that
NitroMed is currently indebted to Schwarz for development activities performed
by Schwarz in connection with the Product, including as set forth on the
invoices attached hereto as EXHIBIT E, and that NitroMed shall pay such amounts
and any additional amounts owing to Schwarz from time to time pursuant to the
Development Agreement in accordance with the Development Agreement.

                                    ARTICLE V

                                     QUALITY

     SECTION 5.1. NON-CONFORMING GOODS.

     SECTION 5.1.1. No later than fifteen (15) business days from the date of
arrival of a Product shipment at NitroMed's facility, NitroMed shall examine
such shipment for patent damage, defects or shortage and may, at NitroMed's
option, analyze the Product using the methods of analysis set forth in the
Quality Agreement. If NitroMed determines within such 15-business-day period
that any portion of a Product shipment is not in conformity with the Product
Specifications, it shall promptly (and in no event more than ten (10) business
days following such determination) notify Schwarz of such determination, furnish
a sample of each allegedly non-conforming Product lot and provide reasonable
supporting evidence that the alleged damage, defect or shortage resulted from
processing and/or packaging of the Product by Schwarz and not from any
mishandling during shipment or as a result of non-conforming API supplied by
NitroMed. If, within ten (10) business days of Schwarz's receipt of any such
notice, Product sample(s) and reasonable supporting evidence, Schwarz does not
agree with NitroMed that such Product is non-conforming, the Parties will
arrange for the lot or lots in question to be tested by a


                                       10


mutually acceptable independent laboratory for conformity with the Product
Specifications, and the determination of such laboratory will be final and
binding upon the Parties. The cost of any such testing by an independent
laboratory shall be borne by the Party whose judgment as to the conformity of
any lot of the Product with the Product Specifications proves to be incorrect.
Any lots of the Product that are not in conformity with the Specifications
shall, at the request of Schwarz, be destroyed by NitroMed or returned to
Schwarz for destruction or reprocessing. The cost of destroying non-conforming
Product or returning non-conforming Product to Schwarz shall be borne by Schwarz
if such non-conformity is determined to be the result of processing and/or
packaging of such Product by Schwarz. For the avoidance of doubt, NitroMed shall
be obligated to pay in full for any rejected shipment of Product that is
subsequently found to be in conformity with the Product Specifications.

     SECTION 5.1.2. With respect to any Product determined to be not in
conformity with the Product Specifications at the time of shipment as a result
of processing and/or packaging by Schwarz, Schwarz shall, at Schwarz's option,
either (a) give NitroMed full credit or, at NitroMed's request, a full refund,
for such non-conforming Product or (b) furnish conforming replacement Product in
substitution of any Product which did not conform to the Product Specifications,
as soon as reasonably practicable and at no additional cost to NitroMed. Except
to the extent Schwarz may otherwise have an indemnification obligation pursuant
to SECTION 10.3 in respect of any Liability attributable to damages incurred by
third parties as a result of the use or ingestion of Product not in conformity
with the Product Specifications, Schwarz's sole obligation regarding Product
determined to be not in conformity with the Product Specifications as a result
of processing and/or packaging by Schwarz shall be the credit, refund or
replacement contemplated by the foregoing sentence and such credit, refund or
replacement shall be NitroMed's sole remedy in respect of such non-conforming
Product and any lost profits attributable thereto.

     SECTION 5.1.3. All claims against Schwarz with respect to any shipment of
the Product resulting from patent defects shall be deemed waived unless NitroMed
timely notifies Schwarz thereof in writing in accordance with SECTION 5.1.1. The
waiver contained in the immediately preceding sentence shall not apply to any
shipment of Product found not to meet the Product Specifications at the time of
delivery by virtue of a latent defect; PROVIDED, HOWEVER, that Schwarz shall
have no liability for any non-conforming Product that is reported to Schwarz (i)
later than ten (10) business days after the day on which NitroMed discovers or
should have discovered such latent defect or (ii) after the expiration date of
such Product.

     SECTION 5.1.4. Notwithstanding the foregoing, to the extent non-conformity
of any Product arises from NitroMed's storage and handling of the Product or the
failure of NitroMed to provide API meeting the API Specifications, Schwarz shall
have no liability to NitroMed on the basis of this Agreement or otherwise.
Without limiting the generality of the foregoing, in the situation described in
this SECTION 5.1.4, Schwarz shall have no obligation to replace such Product,
refund or credit any amount paid by NitroMed for such Product, or reimburse
NitroMed for the cost of the API used in such Product. In the situation
described in this SECTION 5.1.4, NitroMed shall replace non-conforming API with
API meeting the API Specifications free of charge upon Schwarz's request. If API
becomes unusable based on Schwarz's negligence, willful misconduct or failure to
comply with the terms of this Agreement, Schwarz shall purchase replacement API
at NitroMed's acquisition price.


                                       11


     SECTION 5.2. RECALL AND SEIZURE.

     SECTION 5.2.1. During the Term, the Parties shall keep each other promptly
and fully informed of any notification or other information, whether received
directly or indirectly, which might affect the marketability, safety or
effectiveness of the Product and/or which might necessitate a recall, or result
in the seizure, of any Product.

     SECTION 5.2.2. If NitroMed determines that a recall of Product may be
necessary, NitroMed shall promptly inform Schwarz of such determination. To the
extent that such potential recall relates to Product manufactured by Schwarz,
Schwarz shall use commercially reasonably efforts to assist NitroMed in
NitroMed's investigation to determine the cause and extent of the problem giving
rise to such potential recall. NitroMed shall perform any required recall of
Product.

     SECTION 5.2.3. In the event of any recall or seizure resulting primarily
from Schwarz's willful misconduct, grossly negligent act or omission, or breach
of any provision of this Agreement, Schwarz shall, at Schwarz's election,
either:

          (a) supply Product, without charge, to NitroMed, in an amount
     sufficient to replace the amount of the Product recalled or seized;

          (b) give credit to NitroMed against the purchase price of Product to
     be delivered to NitroMed in the future, in amounts equal to the purchase
     price paid by NitroMed for the Product so recalled or seized and all
     transportation costs and export or import duties incurred by NitroMed with
     respect to such recalled or seized Product; or

          (c) refund to NitroMed all amounts paid to Schwarz for the recalled or
     seized Product and reimburse NitroMed for all transportation costs and
     export or import duties incurred by NitroMed with respect to such recalled
     or seized Product.

     SECTION 5.2.4. Subject to SECTION 5.2.6, except to the extent that any
recall or seizure results primarily from Schwarz's willful misconduct, grossly
negligent act or omission, or breach of any provision of this Agreement,
NitroMed shall be solely responsible for the costs incurred by NitroMed relating
to any recall or seizure of the Product.

     SECTION 5.2.5. For purposes of this SECTION 5.2 "recall" means any recall
or withdrawal or other action by NitroMed or any Affiliate of NitroMed to
recover title to or possession of Product sold or shipped to third parties. For
purposes of this SECTION 5.2, "seizure" means any action by any government
agency to seize or destroy Product or permanently prevent release of Product.

     SECTION 5.2.6. Except to the extent Schwarz may otherwise have an
indemnification obligation pursuant to SECTION 10.3 in respect of any Liability
attributable to damages incurred by third parties as a result of the use or
ingestion of Product not in conformity with the Product Specifications,
Schwarz's sole obligation in connection with any recall or seizure shall be as
set forth in this SECTION 5.2 and the credit, refund or replacement contemplated
by SECTION 5.2.3 shall be NitroMed's sole remedy in respect of seized or
recalled Product and any lost profits attributable thereto.


                                       12


     SECTION 5.3. REPORTING; RESPONSE TO INQUIRIES.

     SECTION 5.3.1. During the Term, each Party shall notify the other Party
within two (2) business days of receipt of any inquiry, complaint, claim or
adverse reaction report regarding the Product (any of the foregoing, a
"Report"), including, without limitation, any inquiry or notice from the FDA or
any other Regulatory Authority regarding any alleged regulatory non-compliance
of the Product, which notice shall describe in reasonable detail all information
contained in the Report or otherwise known to the applicable Party regarding the
subject matter thereof and shall include copies of any documentation comprising
such Report.

     SECTION 5.3.2. With respect to any inquiry of the FDA or another applicable
Regulatory Authority in respect of Product manufactured by Schwarz, Schwarz
shall use its commercially reasonable efforts to (a) notify NitroMed of any such
inquiry directed to Schwarz, (b) respond fully and accurately to all such
inquiries directed to Schwarz, (c) assist NitroMed in responding to inquiries
directed to NitroMed, (d) provide the FDA or such other Regulatory Authority
with such information or data in Schwarz's possession as the FDA or such other
Regulatory Authority requests in connection with such inquiry or the Product,
and (e) consult with NitroMed regarding Schwarz's response to any such inquiry.

                                   ARTICLE VI

                              ADDITIONAL AGREEMENTS

     SECTION 6.1. COMPLIANCE WITH LAW. Schwarz and NitroMed shall each comply
with the laws, rules and regulations applicable to the manufacture, supply,
marketing and sale of the Product. Notwithstanding the foregoing, NitroMed shall
be solely responsible for, and shall bear all liability and expense relating to,
all legal and regulatory compliance required in connection with the use, sale,
distribution and marketing of the Product in all countries in the Territory.

     SECTION 6.2. RECORD RETENTION. Schwarz shall keep and maintain all
production, control, laboratory and other records in accordance with all
applicable laws, rules and regulations, including but not limited to, those
required to be maintained by cGMP. Subject to ARTICLE IX, Schwarz shall make
such records available to NitroMed and NitroMed's representatives upon
NitroMed's reasonable request, and to the representatives of any Regulatory
Authority. Schwarz shall furnish, or permit NitroMed or its representative to
make, copies of such records from time to time upon NitroMed's reasonable
request. NitroMed shall not disclose such copies to any third party without
Schwarz's prior written consent, which consent shall not unreasonably be
withheld.

     SECTION 6.3. INSPECTIONS. Subject to the terms of this SECTION 6.3,
NitroMed shall have the right to inspect such portions of Schwarz's
manufacturing facility as are relevant to the manufacture of the Product upon
fifteen (15) days' advance notice or on less notice if reasonably required in
order to timely respond to or comply with inquiries from or requirements imposed
by the FDA. Such inspections shall be performed during regular business hours,
conducted in such a manner as to minimize disruption to Schwarz's business
operations and limited to two (2) business days per inspection. All information
disclosed to or obtained by NitroMed in connection with any such inspection
shall be subject to the confidentiality provisions set forth in


                                       13


ARTICLE IX. Such information shall not be used for any purpose other than
evaluating Schwarz's compliance with its obligations under this Agreement and
responding to and complying with inquiries from or requirements imposed by the
FDA. Such inspections shall not occur more often than calendar year of the Term,
PROVIDED, HOWEVER, that, during the Term, NitroMed shall be permitted to inspect
more than once per calendar year in the event that (i) its first inspection
reveals material deficiencies in Schwarz's performance of its obligations
hereunder or (ii) additional inspections are required in order for NitroMed to
timely respond to or comply with inquiries from or requirements imposed by the
FDA; provided that any such additional inspections shall be no more numerous
than is reasonably necessary.

     SECTION 6.4. FDA FEES. NitroMed shall timely pay all establishment and
product fees assessed to NitroMed by the FDA in connection with the Product.

     SECTION 6.5. PROPRIETARY RIGHTS.

     SECTION 6.5.1. NITROMED PROPRIETARY RIGHTS. Schwarz acknowledges and agrees
that, subject to the license granted under this Agreement, all Licensed Rights
are and shall remain the exclusive property of NitroMed.

     SECTION 6.5.2. SCHWARZ PROPRIETARY RIGHTS. NitroMed acknowledges and agrees
that any and all patents, trade secrets, technology, know-how or other
intellectual property rights developed, owned or used by Schwarz prior to the
Effective Date of this Agreement or developed by Schwarz after the Effective
Date ("SCHWARZ INTELLECTUAL PROPERTY") are and shall remain the exclusive
property of Schwarz.

     SECTION 6.5.3. LICENSE GRANT. Without limiting NitroMed's obligations under
SECTION 2.2.1, Schwarz hereby grants to NitroMed a non-exclusive, fully paid-up,
perpetual license, with the right to grant sublicenses, to any intellectual
property that is owned by or licensed to (provided Schwarz has the right to
sublicense) Schwarz and that forms a part of the manufacturing technology and
manufacturing processes used to manufacture the Current Formulations and any
improvements to such intellectual property, provided such improvements form a
part of the manufacturing technology and manufacturing processes used to
manufacture the Current Formulations, solely for use in connection with (a) the
Product, (b) combination products containing active ingredient(s) contained in
the Product as well as other active ingredient(s) and (c) extended-release
products containing active ingredient(s) contained in the Product.

     SECTION 6.6. INSURANCE. Throughout the Term, each Party shall maintain
comprehensive general business liability insurance coverage, with minimum limits
of $10,000,000 per occurrence and $10,000,000 annual aggregate of all claims. In
addition, from and after NitroMed's commercial launch of the Product, during the
Term, each Party shall maintain product liability insurance coverage, with
minimum limits of $10,000,000 per occurrence and $10,000,000 annual aggregate of
all claims.


                                       14


                                   ARTICLE VII

                              TERM AND TERMINATION

     SECTION 7.1. TERM. This Agreement shall commence and be effective as of the
Effective Date and shall expire on the five (5) year anniversary of the
Effective Date, provided, HOWEVER, that this Agreement shall renew automatically
upon the expiration of the then-current Term for successive one (1) year terms
unless either Party provides written notice of termination at least six (6)
months prior to the expiration of the then-current Term. The initial term,
together with any extensions thereof is referred to herein as the "TERM".

     SECTION 7.2. TERMINATION BY EITHER PARTY.

     SECTION 7.2.1. MATERIAL BREACH. Except with respect to (i) payment defaults
by NitroMed, which shall be governed by SECTION 7.3.1 (ii) an impairment of the
licenses granted to Schwarz hereunder, which shall be governed by SECTION 7.3.2
and (iii) any failure or delay by Schwarz in supplying Product or Schwarz's
supply of non-conforming Product, which shall be governed by SECTIONS 2.7,
5.1.2, 5.2.3 and 7.4, if either Party shall at any time fail to discharge any of
its material obligations hereunder and fail to correct such default within sixty
(60) days after the other Party has given written notice to it thereof, or, if
such default is incapable of cure within such sixty (60) day period, fail to
commence good faith action to correct such default during such sixty (60) day
period, then the non-breaching Party shall have the right to terminate this
Agreement immediately upon notice to the breaching Party. This SECTION 7.2.1
shall not be exclusive and shall not be in lieu of any other remedies available
to a Party hereto for any breach hereunder on the part of the other Party.

     SECTION 7.2.2. REGULATORY ACTION. Either Party may terminate this Agreement
upon written notice to the other Party in the event the FDA takes any action the
result of which is to permanently prohibit the manufacture, sale, offer for sale
or use of the Product which may not be contested in good faith or remedied in
the ordinary course of business. Upon a termination pursuant to this SECTION
7.2.2, the Parties will attempt to affix responsibility for all costs associated
with outstanding or unfinished purchase orders between themselves; PROVIDED that
NitroMed shall reimburse Schwarz for Schwarz's costs associated with work in
progress and materials on hand.

     SECTION 7.2.3. BANKRUPTCY, INSOLVENCY, Etc. Either Party may terminate this
Agreement immediately upon written notice to the other Party if such other Party
(i) becomes or is adjudged insolvent, (ii) makes a general assignment for the
benefit of its creditors, (iii) commences under the laws of any jurisdiction any
proceeding involving its insolvency, bankruptcy, reorganization, adjustment of
debt, dissolution, liquidation or any other similar proceeding for the release
of financially distressed debtors, (iv) has a petition filed in bankruptcy for
or against it (which, in the case of any involuntary petition, is not stayed
within sixty (60) days of being filed against it), (v) goes into liquidation
(except for the purposes of a bona fide amalgamation or other reorganization) or
(vi) has a receiver appointed over all or a significant portion of the property
or assets of that other Party.

     SECTION 7.3. TERMINATION BY SCHWARZ.


                                       15


     SECTION 7.3.1. NONPAYMENT. In addition to any other remedies available to
it, Schwarz may terminate this Agreement immediately upon written notice to
NitroMed if, thirty (30) days after written notice from Schwarz, NitroMed fails
to pay in full any invoice that is past due.

     SECTION 7.3.2. IMPAIRMENT OF LICENSE. Schwarz may terminate this Agreement
upon termination of or material diminution of Schwarz's rights under any of the
licenses or sub-licenses granted by NitroMed hereunder which has the effect of
precluding or materially impairing Schwarz's ability to perform its obligations
hereunder or results in a material increase in the cost of such performance.

     SECTION 7.4. TERMINATION BY NITROMED. NitroMed may terminate this Agreement
immediately upon written notice to Schwarz upon the occurrence of a Failure to
Supply, provided that NitroMed's right to terminate this Agreement upon the
occurrence of a Failure to Supply must be exercised within ninety (90) days
after the end of the twelve (12) month period in which such Failure to Supply
has occurred.

     SECTION 7.5. SURVIVAL. The following provisions shall survive the
expiration or termination of this Agreement in accordance with their respective
terms: SECTIONS 5.1 through 5.3, 6.2, 6.5, 7.5, 7.6 and ARTICLES IV, IX, X and
XI.

     SECTION 7.6. EFFECT OF TERMINATION. Termination or expiration of this
Agreement, in whole or in part, shall be without prejudice to the right of
either Party to receive all payments accrued and unpaid at the effective date of
such termination or expiration, without prejudice to any remedy available to
either Party in respect of any previous breach of any of the representations,
warranties or covenants herein contained and without prejudice to any other
provisions hereof which expressly or necessarily call for performance after such
termination or expiration. Upon expiration or termination of this Agreement,
NitroMed shall have the option to purchase from Schwarz all residual inventories
of raw material (other than API supplied to Schwarz by NitroMed) contemplated by
Schwarz to be used for the Product that is usable by NitroMed at cost and all
finished packaged Product at the applicable then-current prices. Schwarz shall,
as soon as practicable following any such termination or expiration, return to
NitroMed any unused API previously supplied by NitroMed at NitroMed's sole cost
and in accordance with NitroMed's instructions.

                                  ARTICLE VIII

                         REPRESENTATIONS AND WARRANTIES

     Section 8.1. REPRESENTATIONS AND WARRANTIES OF SCHWARZ. Schwarz represents
and warrants to NitroMed as follows:

     SECTION 8.1.1. AUTHORITY; BINDING EFFECT; NO VIOLATION.

                (a) Schwarz is a corporation duly organized, validly existing
     and in good standing under the laws of the state of Indiana.


                                       16


                (b) Schwarz has the corporate power and authority necessary to
     enter into and be bound by the terms and conditions of this Agreement and
     to perform its obligations hereunder. All corporate action on the part of
     Schwarz necessary for Schwarz's authorization, execution and delivery of
     this Agreement and Schwarz's performance of all of its obligations
     hereunder has been taken.

                (c) This Agreement, when executed and delivered, will be the
     legal, valid and binding obligation of Schwarz, enforceable against Schwarz
     in accordance with its terms, except as such enforceability may be limited
     by applicable bankruptcy, insolvency, moratorium, reorganization, or
     similar laws as from time to time in effect, and neither the execution and
     delivery of this Agreement by Schwarz nor the performance of the
     obligations contemplated hereby will: (x) conflict with or result in any
     violation of or constitute a breach of any of the terms or provisions of,
     or result in the acceleration of any obligation under, or constitute a
     default under any provision of the Articles of Incorporation or By-laws or
     similar organizational document of Schwarz or any contract or any other
     obligation to which Schwarz is a party or under which it is subject or
     bound, or (y) violate any judgment, order, injunction, decree or award of
     any court, administrative agency, arbitrator or government body against, or
     affecting or binding upon, Schwarz or upon the securities, property or
     business of Schwarz, or (z) constitute a violation by Schwarz of any
     applicable law or regulation of any jurisdiction as such law or regulation
     relates to Schwarz or to the property or business of Schwarz.

     SECTION 8.1.2. PRODUCT QUALITY. All Product supplied hereunder shall
have been manufactured, processed, packaged and shipped in conformance with the
Quality Agreement and cGMP, and, at the time of shipment, shall conform to the
Product Specifications and shall not be adulterated or misbranded within the
meaning of the Act. All Product delivered pursuant to this Agreement shall be
delivered to NitroMed free and clear of any liens or encumbrances of any kind
imposed, or caused to be imposed, by Schwarz.

     SECTION 8.1.3. ABSENCE OF PROCEEDINGS. There are no pending or, to
Schwarz's knowledge, threatened, judicial, administrative or arbitral actions,
claims, suits or proceedings against Schwarz relating to the activities
contemplated by this Agreement or the Product, or that otherwise could
reasonably be expected to have a material adverse effect on Schwarz in
performing its obligations under this Agreement.

     SECTION 8.1.4. NONINFRINGEMENT OF THIRD PARTY RIGHTS. There is no pending
or, to Schwarz's knowledge, threatened proceeding, demand or claim against
Schwarz or its Affiliates asserting that any of the manufacturing technology and
manufacturing processes used by Schwarz to perform its obligations under this
Agreement, other than any of the foregoing which constitute Licensed Rights,
infringe or violate the rights of any third party and nothing has come to the
attention of Schwarz which has, or reasonably should have, led Schwarz to
believe that any of the manufacturing technology and manufacturing processes to
be used by Schwarz to perform its obligations under this Agreement will infringe
or violate any proprietary right of any third party.

     SECTION 8.2. LIMITED WARRANTIES. THE LIMITED REPRESENTATIONS AND WARRANTIES
SET FORTH IN SECTION 8.1 ARE SCHWARZ'S SOLE


                                       17


REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE PRODUCT OR ANY OTHER SUBJECT
MATTER HEREOF AND ARE GIVEN IN LIEU OF ANY AND ALL OTHER REPRESENTATIONS OR
WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY
IMPLIED WARRANTIES OF MERCHANTABILITY OR SUITABILITY FOR A PARTICULAR PURPOSE.
THE REMEDIES AFFORDED TO NITROMED FOR ANY BREACH OF REPRESENTATION OR WARRANTY
WILL BE LIMITED TO THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT, TO THE EXCLUSION
OF ANY AND ALL OTHER REMEDIES.

     SECTION 8.3. REPRESENTATIONS AND WARRANTIES OF NITROMED. NitroMed
represents and warrants to Schwarz as follows:

     SECTION 8.3.1. AUTHORITY; BINDING EFFECT; NO VIOLATION.

                (a) NitroMed is a corporation duly organized, validly existing
     and in good standing under the laws of the state of Delaware.

                (b) NitroMed has the corporate power and authority necessary to
     enter into and be bound by the terms and conditions of this Agreement and
     to perform its obligations hereunder. All corporate action on the part of
     NitroMed necessary for NitroMed's authorization, execution and delivery of
     this Agreement and NitroMed's performance of all of its obligations
     hereunder has been taken.

                (c) This Agreement, when executed and delivered, will be the
     legal, valid and binding obligation of NitroMed, enforceable against
     NitroMed in accordance with its terms, except as such enforceability may be
     limited by applicable bankruptcy, insolvency, moratorium, reorganization,
     or similar laws as from time to time in effect, and neither the execution
     and delivery of this Agreement by NitroMed nor the performance of the
     obligations contemplated hereby will: (x) conflict with or result in any
     violation of or constitute a breach of any of the terms or provisions of,
     or result in the acceleration of any obligation under, or constitute a
     default under any provision of the Articles of Incorporation or By-laws or
     similar organizational document of NitroMed or any contract or any other
     obligation to which NitroMed is a party or under which it is subject or
     bound, or (y) violate any judgment, order, injunction, decree or award of
     any court, administrative agency, arbitrator or government body against, or
     affecting or binding upon, NitroMed or upon the securities, property or
     business of NitroMed, or (z) constitute a violation by NitroMed of any
     applicable law or regulation of any jurisdiction as such law or regulation
     relates to NitroMed or to the property or business of NitroMed.

     SECTION 8.3.2. ABSENCE OF PROCEEDINGS. There are no pending or, to
NitroMed's knowledge, threatened judicial, administrative or arbitral actions,
claims, suits or proceedings against NitroMed relating to the activities
contemplated by this Agreement or the Product, or that otherwise could
reasonably be expected to have a material adverse effect on NitroMed in
performing its obligations under this Agreement.

     SECTION 8.3.3. API QUALITY. All API provided by or on behalf of NitroMed to
Schwarz and all methods of delivery of such API shall, at the time of shipment,
conform to all


                                       18


applicable laws and regulations and API Specifications. All API delivered
pursuant to this Agreement shall be delivered to Schwarz free and clear of any
liens or encumbrances of any kind imposed, or caused to be imposed, by NitroMed.

     SECTION 8.3.4. SPECIFICATIONS. The API Specifications and the Product
Specifications provided by NitroMed to Schwarz are and will be those included in
the NDA.

     SECTION 8.3.5. LICENSED RIGHTS. Except for proprietary rights relating to
the manufacturing technology and manufacturing processes used by Schwarz to
perform its obligations under this Agreement, the intellectual property rights
which NitroMed has licensed or sublicensed, as applicable, to Schwarz pursuant
to SECTION 3.4 hereof constitute all of the proprietary rights necessary to
enable Schwarz to manufacture each dosage strength of the Product and to engage
in all other activities as contemplated by this Agreement. NitroMed is the
lawful owner of, or has a valid license to use, the Licensed Rights. NitroMed
has the right to license or sublicense, as applicable, the Licensed Rights as
contemplated by this Agreement. There is no pending or, to NitroMed's knowledge,
threatened proceeding, demand or claim against NitroMed or its Affiliates
asserting that any of the Licensed Rights infringes or violates the rights of
any third party or that Schwarz, by practicing under the Licensed Rights in
performing its obligations hereunder, would violate any of the proprietary
rights of any third party, and nothing has come to the attention of NitroMed
which has, or reasonably should have, led NitroMed to believe that any of the
Licensed Rights infringes or violates any proprietary right of any third party.
NitroMed is not aware of and has not received any communication challenging the
ownership or use, or the validity or effectiveness of any of the Licensed
Rights.

     SECTION 8.4. LIMITED WARRANTIES. THE LIMITED REPRESENTATIONS AND WARRANTIES
SET FORTH IN SECTION 8.3 ARE NITROMED'S SOLE REPRESENTATIONS AND WARRANTIES WITH
RESPECT TO THE PRODUCT OR ANY OTHER SUBJECT MATTER HEREOF AND ARE GIVEN IN LIEU
OF ANY AND ALL OTHER REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
SUITABILITY FOR A PARTICULAR PURPOSE. THE REMEDIES AFFORDED TO SCHWARZ FOR ANY
BREACH OF REPRESENTATION OR WARRANTY WILL BE LIMITED TO THOSE EXPRESSLY SET
FORTH IN THIS AGREEMENT TO THE EXCLUSION OF ANY AND ALL OTHER REMEDIES.

                                   ARTICLE IX

                                 CONFIDENTIALITY

     SECTION 9.1. CONFIDENTIALITY. Schwarz shall treat as confidential all
information of NitroMed of which Schwarz becomes aware in connection with
performing its obligations under this Agreement (collectively, "NITROMED
PROPRIETARY INFORMATION"). Schwarz shall neither disclose NitroMed Proprietary
Information to any third party nor use NitroMed Proprietary Information for any
purpose other than as contemplated in this Agreement. NitroMed shall treat as
confidential all information of Schwarz of which NitroMed becomes aware in
connection with this Agreement (collectively, "SCHWARZ PROPRIETARY INFORMATION"
and, together with the NitroMed Proprietary Information, "PROPRIETARY
INFORMATION"). NitroMed shall neither disclose


                                       19


Schwarz Proprietary Information to any third party nor use Schwarz Proprietary
Information for any purpose other than as contemplated in this Agreement.

     Nothing contained herein will in any way restrict or impair either Party's
(the "USING PARTY") right to use, disclose or otherwise deal with any
Proprietary Information of the other Party which:

          (a) at the time of disclosure is known to the public or thereafter
     becomes known to the public by publication or otherwise through no fault of
     the Using Party;

          (b) the Using Party can establish was in its possession prior to the
     time of the disclosure and was not obtained directly or indirectly from the
     other Party;

          (c) is independently made available as a matter of right to the Using
     Party by a third party who is not thereby in violation of a confidential
     relationship with the other Party;

          (d) is developed by the Using Party independently of the Proprietary
     Information received from the other Party, and the Using Party can
     establish such development;

          (e) is information required to be disclosed by legal or regulatory
     process; provided, in each case, the Using Party timely informs the other
     Party and uses reasonable efforts to limit the disclosure and maintain
     confidentiality to the extent possible and permits the other Party to
     intervene and contest or attempt to limit the disclosure; or

          (f) is information that the Using Party reasonably determines should
     be disclosed to a Regulatory Authority.

     SECTION 9.2. PUBLICITY. Subject to SECTION 9.1, all publicity, press
releases and other announcements relating to this Agreement or the transactions
contemplated hereby shall be reviewed in advance by, and shall be subject to the
written approval of, both Parties. Notwithstanding the foregoing, each Party
shall be entitled to make such announcements relating to this Agreement as such
Party reasonably determines is required to comply with any law or regulation
requiring such announcements, including without limitation any rule or
regulation under the United States securities laws or any rule of a stock
exchange or the Nasdaq National Market requiring disclosure.

                                    ARTICLE X

                     INDEMNIFICATION; CONTROL OF LITIGATION

     SECTION 10.1. NOTICE AND ASSISTANCE. Each Party shall promptly notify the
other, in writing, if it learns of any litigation, claim, administrative or
criminal proceeding (collectively "ACTIONS"), asserted or threatened against
such Party (the "AGGRIEVED PARTY") for which such Party may be entitled to
indemnification hereunder from the other Party. With respect to any such Action,
the other Party shall, at no out-of-pocket expense to it except as otherwise
provided


                                       20


in this ARTICLE X, reasonably cooperate with and provide such reasonable
assistance to such Aggrieved Party as such Aggrieved Party may reasonably
request. Such reasonable assistance may include, without limitation, providing
copies of all relevant correspondence and other materials that the Aggrieved
Party may reasonably request; PROVIDED, HOWEVER, that any Proprietary
Information so provided shall be treated in accordance with the provisions of
ARTICLE IX hereof.

     SECTION 10.2. INDEMNIFICATION BY NITROMED. NitroMed shall indemnify, defend
and hold harmless Schwarz and its Affiliates and each of its and their
respective employees, officers, directors and agents (each, a "SCHWARZ
INDEMNIFIED PARTY") from and against any and all liability, loss, damage, cost,
and expense (including reasonable attorneys' fees) (collectively, "LIABILITIES")
which the Schwarz Indemnified Party may incur, suffer or be required to pay
resulting from or arising in connection with (a) the storage, distribution,
promotion, sale or use of any Product by NitroMed or any of NitroMed's
sublicensees, distributors, agents or other parties with which NitroMed has
entered into any collaboration regarding the Product, (b) the use of the Product
by any patient or other third party, (c) any withdrawal, recall or seizure of
the Product, that is not attributable primarily to a breach by Schwarz of this
Agreement, (d) except to the extent attributable to the Schwarz Intellectual
Property or Schwarz's practice thereof, infringement or contributory
infringement of any patent, trademark, copyright or other proprietary right of
any third party by virtue of the manufacture, distribution, promotion, sale or
use of the Product, (e) NitroMed's breach of its representations, warranties,
covenants or other obligations under this Agreement, or (f) gross negligence or
willful misconduct of NitroMed Indemnified Party, except to the extent any such
Liability arises out of the material breach, gross negligence or willful
misconduct of a Schwarz Indemnified Party.

     SECTION 10.3. INDEMNIFICATION BY SCHWARZ. Schwarz shall indemnify, defend
and hold harmless NitroMed and its Affiliates, and each of its and their
respective employees, officers, directors and agents (each, a "NITROMED
INDEMNIFIED PARTY") from and against any Liability which the NitroMed
Indemnified Party may incur, suffer or be required to pay resulting from or
arising in connection with (a) Schwarz's breach of its representations,
warranties, covenants or other obligations under this Agreement or (b) gross
negligence or willful misconduct of a Schwarz Indemnified Party, except to the
extent any such Liability arises out of the material breach, gross negligence or
willful misconduct of a NitroMed Indemnified Party.

     SECTION 10.4. FOR THE AVOIDANCE OF DOUBT, THE FOREGOING INDEMNIFICATION
PROVISIONS SHALL APPLY TO CLAIMS OF THE PARTIES HERETO, AS WELL AS THIRD PARTY
CLAIMS.

     SECTION 10.5. LIABILITY TO THIRD PARTIES. With respect to third party
Liabilities, the indemnifying Party shall have sole control over, and shall
assume all expense with respect to, the defense, settlement, adjustment or
compromise of any Action as to which this ARTICLE X requires it to indemnify the
other Party, provided that (a) the indemnifying Party shall use counsel
reasonably satisfactory to the Aggrieved Party, (b) the Aggrieved Party may, if
it so desires and at its own expense, participate in and employ counsel to
assist in the handling of such claim, (c) the Parties shall reasonably cooperate
in the sharing of pertinent information related to the Action, and (d) the
indemnifying Party shall obtain prior written approval of the Aggrieved Party,
which shall not be unreasonably withheld, before entering into any settlement,
adjustment


                                       21


or compromise of such Action, or ceasing to defend against such Action, if
pursuant thereto, or as a result thereof, injunctive or other non-monetary
relief would be imposed upon the Aggrieved Party or monetary relief would be
imposed upon the Aggrieved Party for which the Aggrieved Party is not
indemnified hereunder.

     SECTION 10.6. CONDITIONS TO INDEMNIFICATION. The obligations of an
indemnifying Party under SECTION 10.2 or SECTION 10.3 are conditioned upon the
delivery of written notice to the indemnifying Party of any potential Liability
promptly after the indemnified Party becomes aware of such potential Liability;
PROVIDED, that the failure of the indemnified Party to give such notice or any
delay thereof shall only affect the indemnified Party's right to indemnification
hereunder to the extent that such failure or delay impairs the indemnifying
Party's ability to defend or contest any Action relating to such Liability.

     SECTION 10.7. LIMITATION OF LIABILITY. SCHWARZ'S AND NITROMED'S LIABILITY
IN CONNECTION WITH THIS AGREEMENT AND THE SUBJECT MATTER HEREOF IS SUBJECT TO
THE FOLLOWING LIMITATIONS: (A) EXCEPT WITH RESPECT TO THE FRAUD, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF NITROMED OR SCHWARZ, THEIR RESPECTIVE
AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS AND EXCEPT TO THE EXTENT
ATTRIBUTABLE TO A THIRD PARTY CLAIM IN RESPECT OF WHICH A PARTY MAY OTHERWISE
HAVE AN INDEMNIFICATION OBLIGATION PURSUANT TO SECTION 10.2 OR SECTION 10.3, IN
NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY MULTIPLE,
SPECIAL, PUNITIVE, INDIRECT OR INCIDENTAL DAMAGES OF ANY NATURE; (B) IN NO EVENT
SHALL SCHWARZ'S AGGREGATE LIABILITY FOR ALL CLAIMS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE SUBJECT MATTER HEREOF EXCEED THE AMOUNTS PAID BY NITROMED
TO SCHWARZ PURSUANT TO THIS AGREEMENT PRIOR TO THE APPLICABLE DATE OF
DETERMINATION; (C) EXCEPT TO THE EXTENT SCHWARZ MAY OTHERWISE HAVE AN
INDEMNIFICATION OBLIGATION PURSUANT TO SECTION 10.3 IN RESPECT OF ANY CLAIMS
BASED UPON DAMAGES INCURRED BY INDIVIDUALS AS A RESULT OF THE USE OR INGESTION
OF NON-CONFORMING PRODUCT, NITROMED'S SOLE REMEDY FOR CLAIMS ATTRIBUTABLE TO
SCHWARZ'S SUPPLY OF NON-CONFORMING PRODUCT, INCLUDING ANY LOST PROFITS
ATTRIBUTABLE THERETO, SHALL BE AS SET FORTH IN SECTION 5.1.2 OR SECTION 5.2.3,
AS APPLICABLE; AND (D) NITROMED'S SOLE REMEDY FOR CLAIMS ATTRIBUTABLE TO
SCHWARZ'S FAILURE TO TIMELY SUPPLY ANY QUANTITY OF PRODUCT IN ACCORDANCE WITH
THE TERMS OF THIS AGREEMENT, INCLUDING ANY LOST PROFITS ATTRIBUTABLE THERETO,
SHALL BE AS SET FORTH IN SECTIONS 2.7 AND 7.4.

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

     SECTION 11.1. NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or facsimile and confirmed in writing, or
mailed first class, postage prepaid, by


                                       22


registered or certified mail, return receipt requested (mailed notices and
notices sent by facsimile shall be deemed to have been given on the date
received) as follows:

         If to NitroMed:

                  NitroMed, Inc.
                  125 Spring Street
                  Lexington, Massachusetts 02421
                  Attn:  President
                  Fax: (781) 274-8080

         If to Schwarz:

                  Schwarz Pharma Manufacturing, Inc.
                  1101 "C" Avenue West
                  Seymour, Indiana  47274
                  Attn:  Vice President - Manufacturing
                  Fax:  (812) 523-1887

         With a copy to:

                  Schwarz Pharma, Inc.
                  6140 West Executive Drive
                  Mequon, Wisconsin  53092
                  Attn:  General Counsel
                  Fax:  (262) 242-1641

or in any case to such other address or addresses as hereafter shall be
furnished as provided in this SECTION 11.1 by any Party hereto to the other
Party.

     SECTION 11.2. FORCE MAJEURE. The performance by either Party of any
covenant or obligation on its part to be performed hereunder, other than the
obligation of either Party to pay money to the other and NitroMed's exclusive
purchase obligations pursuant to SECTION 2.2 hereof, will be excused by reason
of strikes or other labor disturbances, riots, fires, accidents, wars, terrorist
activity, embargoes, delays of carriers, inability to obtain raw materials,
failure of power or natural resources of supply, acts, injunctions, or
restraints of government, or any other cause preventing such performance,
provided that such excuse will only be valid to the extent that cause is beyond
the reasonable control of the Party whose performance is affected thereby, and
provided that the affected Party will exert its reasonable best efforts to
eliminate any such cause(s), and resume performance of its obligations with all
reasonably possible speed. Notwithstanding the above, NitroMed shall retain its
rights pursuant to SECTION 2.7 hereof corresponding to an Inability to Supply
caused by a force majeure event as described in this SECTION 11.2 directly
affecting Schwarz's performance of its obligations under this Agreement.

     SECTION 11.3. CHOICE OF LAW; DISPUTE RESOLUTION. This Agreement shall be
construed in accordance with and governed by the internal laws of the State of
New York. Each Party shall attempt in good faith, and with notice to the other
Party, to reach a mutually acceptable


                                       23


resolution of any dispute arising under this Agreement. If no such resolution of
any dispute can be reached, the aggrieved Party shall notify the other Party in
writing of its desire to seek arbitration. Any dispute, controversy or claim
arising out of or in connection with this Agreement shall be determined and
settled by arbitration in New York, pursuant to the Rules of Arbitration then in
effect of the American Arbitration Association. Any award rendered shall be
final and conclusive upon the Parties, and a judgment thereon may be entered in
a court having competent jurisdiction. Any arbitration hereunder shall be (i)
submitted to an arbitration tribunal comprised of three (3) independent members
knowledgeable in the pharmaceutical industry, one of whom shall be selected by
Schwarz, one of whom shall be selected by NitroMed, and one of whom shall be
selected by the other two arbitrators; (ii) allow for the Parties to request
discovery pursuant to the rules then in effect under the Federal Rules of Civil
Procedure for a period not to exceed ninety (90) days; and (iii) require the
award to be accompanied by findings of fact and a statement of reasons for the
decision. Each Party shall bear its own costs and expenses, including attorney's
fees incurred in any dispute which is determined and/or settled by arbitration
pursuant to this Section. Except where clearly prevented by the area in dispute,
both Parties agree to continue performing their respective obligations under
this Agreement while the dispute is being resolved. Arbitration shall not
prevent any Party from seeking injunctive relief where such remedy is an
appropriate form of remedy under the circumstances.

     SECTION 11.4. WAIVER; REMEDIES. Any term or provision of this Agreement may
be waived at any time by the Party entitled to the benefit thereof by a written
instrument executed by such Party. No delay on the Part of any Party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any Party of any right, power or
privilege hereunder operate as a waiver of any other right, power or privilege
hereunder nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.

     SECTION 11.5. SEVERABILITY. The provisions of this Agreement are separate
and independent covenants, and it is agreed that the invalidity or
unenforceability of one or more of the provisions hereof shall not invalidate
any other provision hereof, and this Agreement shall thereafter continue in full
force and effect. In the event that any provision of this Agreement is found to
be too broad, invalid or unenforceable by any court of competent jurisdiction,
then such court shall have the authority to reform any such provisions as shall
be necessary to make the provisions valid and enforceable; PROVIDED, HOWEVER,
that if the provision is not capable of being reformed, then that invalid or
unenforceable provision shall be deemed deleted as though it had never existed.

     SECTION 11.6. INDEPENDENT CONTRACTORS. The Parties hereto are independent
contractors, and nothing contained in this Agreement shall be deemed to create
the relationship of partners, joint venturers, or of principal and agent,
franchisor and franchisee, or of any association or relationship between the
Parties other than as expressly provided in this Agreement. Schwarz acknowledges
that it does not have, and Schwarz shall not make representations to any third
party, either directly or indirectly, indicating that Schwarz has any authority
to act for or on behalf of NitroMed or to obligate NitroMed in any way
whatsoever. NitroMed acknowledges that it does not have, and it shall not make
any representations to any


                                       24


third party, either directly or indirectly, indicating that it has any authority
to act for or on behalf of Schwarz or to obligate Schwarz in any way whatsoever.

     SECTION 11.7. SUCCESSORS AND ASSIGNS; ASSIGNMENT. This Agreement shall be
binding upon and shall inure to the benefit of the Parties hereto and their
respective successors and permitted assigns; PROVIDED, HOWEVER, that neither
Party may assign any of its rights, duties or obligations hereunder without the
prior written consent of the other, which consent shall not be unreasonably
withheld, PROVIDED THAT, prior written consent shall not be required in
connection with an assignment to any Affiliate of the assigning Party or to a
third party that acquires substantially all of the assets or outstanding shares
of, or merges with, the assigning Party.

     SECTION 11.8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be considered an original and all of which
taken together shall constitute one instrument.

     SECTION 11.9. ENTIRE AGREEMENT. This Agreement, including all Exhibits and
Schedules attached hereto and the Quality Agreement, constitute the entire
understanding of the Parties with respect to the subject matter hereof, and
supersedes all prior contracts, agreements and understandings between the
Parties, including those certain Confidentiality Agreements between the Parties,
effective as of October 11, 1999 and September 14, 2004, respectively. The
Parties agree and acknowledge that the Development Agreement shall remain in
effect after the Effective Date in accordance with its terms; PROVIDED, HOWEVER,
that, in the event of any conflict between the terms of the Development
Agreement and the terms of this Agreement, the terms of this Agreement shall
prevail and be controlling.

     SECTION 11.10. AMENDMENT. This Agreement may be modified or amended only by
written agreement signed by both Parties.

     SECTION 11.11. CAPTIONS. All section titles or captions contained in this
Agreement, in any Schedule referred to herein or in any Exhibit annexed hereto,
and the table of contents, if any, to this Agreement are for convenience only,
shall not be deemed a part of this Agreement and shall not affect the meaning or
interpretation of this Agreement.

     SECTION 11.12. ATTACHMENTS. All Schedules, Exhibits and other attachments
to this Agreement are by this reference incorporated herein and made a part of
this Agreement.

     SECTION 11.13. EXPENSES. Except as otherwise set forth herein, all
expenses, including the fees, if any, incurred by any attorneys, accountants or
other consultants engaged by a Party in connection with this Agreement and the
transactions contemplated hereby, shall be paid by the Party incurring such
expenses.

                            [SIGNATURE PAGE FOLLOWS]


                                       25


     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first written above.



                                      SCHWARZ PHARMA MANUFACTURING, INC.


                                      By: /s/ Jonathan Taitt
                                          -----------------------------------
                                          Name:  Jonathan Taitt
                                          Title: Vice President - Treasurer


                                      NITROMED, INC.


                                      By: /s/ Michael D. Loberg
                                          -----------------------------------
                                          Name:  Michael D. Loberg
                                          Title:  Chief Executive Officer



                                       26


                                   SCHEDULE I


SCHWARZ PHARMA

                             PRODUCT SPECIFICATIONS

PROCEDURE: P-2732A-06                                                    Page 1
ITEM: BiDil(R)20(Isosorbide Dinitrate                           Effective Date:
   20mg/ Hydralazine HCI 37.5mg) Tablets                      November 30, 2004
ITEM CODE: 2732
CUSTOMER:  NitroMed, Inc.
USP/NF: No
SUPERSEDES: P-2732A-05; Effective Date: 11-09-04


          Confidential Materials omitted and filed separately with the
                       Securities and Exchange Commission.


                                       27


                                   Schedule II



SCHWARZ PHARMA

                           RAW MATERIAL SPECIFICATIONS

PROCEDURE: PRM-0342-01                                                   Page 1
ITEM: Diluted Isosorbide Dinitrate USP
  [ISDN/ Lactose Blend 200 Mesh (25/75)]                        Effective Date:
ITEM CODE: RM-0342                                             October 14, 2004
A/NDA:  Yes
SUPERSEDES:  PRM-0342-00;  Effective Date:  01-11-01


          Confidential Materials omitted and filed separately with the
                       Securities and Exchange Commission.



                                       28


                                  Schedule 3.2

                                  API INVENTORY



DESCRIPTION                          RM       SPMI LOT  MFG. LOT   QUANTITY(kg)
- -----------                          ----     --------  --------   ------------
                                                       
HYDRALAZINE HCL UCP                 [**]        [**]      [**]       [**]
                                                [**]      [**]       [**]
                                                [**]      [**]       [**]
                                                                   ------

TOTAL:                                                               [**]



DILUTED ISOSORBIDE DINITRATE        [**]        [**]      [**]       [**]
USP (ISDN)                                      [**]      [**]       [**]
                                                [**]      [**]       [**]
                                                [**]      [**]       [**]
                                                [**]      [**]       [**]
                                                [**]      [**]       [**]
                                                [**]      [**]       [**]
                                                                   ------


TOTAL:                                                               [**]



                                       29


Schedule 4.1

                                     PRICING

For Product tablets containing 20 mg of isosorbide dinitrate and 37.5 mg of
hydralazine:



PERIOD                                                          PER-TABLET PRICE
- ------                                                          ----------------
                                                             
From the Effective Date until the 2-year
 anniversary of the Launch Date                                            $[**]

From the 2-year anniversary of the Launch Date until the
 3-year anniversary of the Launch Date                                     $[**]

From the 3-year anniversary of the Launch Date until the
 end of the Term                                                           $[**]



                                       30


                                    EXHIBIT A

                           Long-Term Product Forecast


                    BIDIL(R) 37.5/20mg MANUFACTURING FORECAST



(000'S)                               Year 1           Year 2           Year 3
                                      ------           ------           ------
                                                               
Bottles (000's)
                                                        [**]             [**]
         180 count bottles             [**]
                                       [**]             [**]             [**]
         42 count bottles
                                       [**]             [**]             [**]
         Subtotal


Tabs (000's)
                                       [**]             [**]             [**]
         180 count bottles
                                       [**]             [**]             [**]
         42 count bottles
                                       [**]             [**]             [**]
         Subtotal




February 16, 2005



                                       31


                                    EXHIBIT B

                        INITIAL DETAILED PRODUCT FORECAST


                     BIDIL(R) 37.5mg MANUFACTURING FORECAST




(000'S)                                2Q05                   3Q05                  4Q05                   1Q06
                               ---------------------- --------------------- ---------------------- ----------------------

Bottles (000's)                APR     MAY     JUN    JUL    AUG     SEP    OCT     NOV     DEC    JAN     FEB    MAR
                               ---     ---     ---    ---    ---     ---    ---     ---     ---    ---     ---    ---
                                                                             
         180 count bottles     [**]    [**]    [**]   [**]   [**]    [**]   [**]    [**]    [**]   [**]    [**]   [**]
                               [**]    [**]    [**]   [**]   [**]    [**]   [**]    [**]    [**]   [**]    [**]   [**]
         42 count bottles
                               [**]    [**]    [**]   [**]   [**]    [**]   [**]    [**]    [**]   [**]    [**]   [**]
         Subtotal


Tabs (000's)
                               [**]    [**]    [**]   [**]   [**]    [**]   [**]    [**]    [**]   [**]    [**]   [**]
         180 count bottles
                               [**]    [**]    [**]   [**]   [**]    [**]   [**]    [**]    [**]   [**]    [**]   [**]
         42 count bottles
                               [**]    [**]    [**]   [**]   [**]    [**]   [**]    [**]    [**]   [**]    [**]   [**]
         Subtotal




(000'S)                               YEAR 1
                              --------------------------- -----------

Bottles (000's)                   3Q05    4Q05    1Q06    YEAR 1
                                  ----    ----    ----    ------
                                              

         180 count bottles        [**]    [**]    [**]    [**]

         42 count bottles         [**]    [**]    [**]    [**]

         Subtotal                 [**]    [**]    [**]    [**]

Tabs (000's)

         180 count bottles        [**]    [**]    [**]    [**]

         42 count bottles         [**]    [**]    [**]    [**]

         Subtotal                 [**]    [**]    [**]    [**]





February 16, 2005




                                    EXHIBIT C

                             FORM OF PURCHASE ORDER

                                                               TEL: 781-266-4000
                                                               FAX: 781-274-8080


                                     [LOGO]
PO #  20041001                   PURCHASE ORDER


                                                                        Date:


    Vendor:
                        Bill To:                       Ship To:
                              NitroMed, Inc.                NitroMed, Inc.
                              Attn: Accounts Payable   Attn:
    Attn:                     125 Spring Street             125 Spring Street
                              Lexington, MA 02421           Lexington, MA 02421
ph:
fax:



                                                         Terms:
                                                        Freight:
- --------------------------------------------------------------------------------------------------------
   QTY      UNITS   CATALOG #            DESCRIPTION            PRICE          EXTENDED         REQUIRED
                                                                                                  DATE
                                                                              











                                                        TOTAL



Buyer:
      ---------------------
          Beth Albridge
      781-266-4000, x 4114



                                       33



                                    EXHIBIT D

                             INITIAL PURCHASE ORDER


                                                               TEL: 781-266-4000
                                                               FAX: 781-274-8080

                                    [LOGO]
PO #  20041001                  PURCHASE ORDER


                                                                  Date: 02/16/05


 Vendor:

  Schwarz Pharma                                       Ship To:
1101 C Avenue West        Bill To:                           NitroMed, Inc.
Seymour, IN  47274            NitroMed, Inc.            Attn:
                              Attn: Accounts Payable         125 Spring Street
 Attn:  Barb Maschino         125 Spring Street              Lexington, MA 02421
                              Lexington, MA 02421
ph:  812-523-5458
fax: 812-523-5417



                                                                                                 Terms:
                                                                                                 Freight:

 QTY   UNITS   CATALOG #                                         DESCRIPTION                          PRICE  EXTENDED REQUIRED DATE
                                                                                                    

 [**] Tablets  Validation Batch 1  BiDil 37.5/20 ([**] Bottles x 180 Tablets) Production to begin      [**]      [**]
                                   October 1, 2004 and end in December 15, 2004 of all 3 lots.


 [**] Tablets  Validation Batch 1  BiDil 37.5/20 ([**] Bottles x 42 Tablets) Production to begin       [**]      [**]
                                   October 1, 2004 and end in December 15, 2004 of all 3 lots.


 [**] Tablets  Validation Batch 1  BiDil 37.5/20 ([**] Bottles x 180 Tablets) Production to begin      [**]      [**]
                                   October 1, 2004 and end in December 15, 2004 of all 3 lots.


 [**] Tablets  Validation Batch 1  BiDil 37.5/20 ([**] Bottles x 42 Tablets) Production to begin       [**]      [**]
                                   October 1, 2004 and end in December 15, 2004 of all 3 lots.


 [**] Tablets  Validation Batch 1  BiDil 37.5/20 ([**] Bottles x 180 Tablets) Production to begin      [**]      [**]
                                   October 1, 2004 and end in December 15, 2004 of all 3 lots.


 [**] Tablets  Validation Batch 1  BiDil 37.5/20 ([**] Bottles x 42 Tablets) Production to begin       [**]      [**]
                                   October 1, 2004 and end in December 15, 2004 of all 3 lots.


                                                                                                 TOTAL           [**]


Buyer: /s/ Beth Albridge
      --------------------
           Beth Albridge
      781-266-4000, x 4114


                                       34


                                    EXHIBIT E

                               OUTSTANDING INVOICE

SCHWARZ        SCHWARZ PHARMA MANUFACTURING, inc.   INVOICE NUMBER 01016223   SD
P H A R M A    101 C. Avenue West                   INVOICE DATE   1/27/05
               Seymour, IN 47274                    DUE DATE       2/26/05
                                                    PURCHASE ORDER SP01017
               FDA NO. 1519171                      PAGE NUMBER       1
               DEA NO RC 0208149


               PLEASE REMIT TO:

               SCHWARZ PHARMA MANUFACTURING, INC.
               1101 C. Avenue West
               SEYMOUR, IN 47274

SOLD TO: NITROMED, INC.
         125 SPRING STREET
         LEXINGTON, MA 02421


BILL TO: NITROMED, INC.                                  SHIP TO: N/A
         ATTN: ACCOUNTS PAYABLE
         125 SPRING STREET
         LEXINGTON, MA 02421



     CUSTOMER NUMBER           DEA NUMBER               TERMS                   ORDER NUMBER
        150404                                         Net 30                     1889624

QTY ORDERED  QTY SHIPPED   PRODUCT  DESCRIPTION    LOT #     LOT QUANTITY  UNIT NET  EXTENSION
                            CODE
                                                                
1            1            SPO1017   BIDIL project            1             [**]      [**]



                                                   INVOICE                           [**]
                                                   TOTAL
For Bidil
Tablets
Development
Project
from Sept.
- - Dec. 04.


                                       35


SCHWARZ PHARMA MFG                                                     INVOICE

                                                               DATE:  2/14/2005
1101 C Ave West                                                INVOICE #  21405
Seymour, IN 47274
Phone 812-523-5302
Fax 812-523-1887

BILL TO:                                             SHIP TO:
NitroMed, Inc.                                       Same
Attn: Accounts Payable
125 Spring Street
Lexington, MA 02421-7801

COMMENTS OR SPECIAL INSTRUCTIONS:



- ----------------------- --------------------- ---------------- ----------------- ------------------ ------------------
     SALESPERSON            P.O. NUMBER          SHIP DATE         SHIP VIA        F.O.B. POINT           TERMS
- ----------------------- --------------------- ---------------- ----------------- ------------------ ------------------
                                                                                     
      Sam Slater        per Michael Lovell                                                               Net 30
- ----------------------- --------------------- ---------------- ----------------- ------------------ ------------------



- ----------------------- -------------------------------------------------------- ------------------ ------------------
       QUANTITY                               DESCRIPTION                           UNIT PRICE           AMOUNT
- ----------------------- -------------------------------------------------------- ------------------ ------------------
- ----------------------- -------------------------------------------------------- ------------------ ------------------

          1             Bin Frame/Chute for Roller Compactor                             $    [**]           $   [**]

          1             Platform for Roller Compactor                                         [**]               [**]



                        ROLLER COMPACTOR


- ----------------------- ----------------------------------------------- --------------------------- ------------------
                                                                                          SUBTOTAL  $          [**]
                                                                                                    ------------------

                                                                                         SALES TAX
                                                                                                    ------------------

                                                                             SHIPPING AND HANDLING
                                                                                                    ------------------

                                                                                             TOTAL  $          [**]
                                                                                                    ------------------



Make all checks payable to Schwarz Pharma Manufacturing.
If you have any questions concerning this invoice, contact Ann Reed at
812-523-5302.


                                       36

EX-10.25

                                                                   Exhibit 10.25


June 30, 2004


Mark Pavao
2203 St. James Street
Philadelphia, Pennsylvania 19103

Dear Mark:

I would like to formally offer you the full-time position of Senior Vice
President of Marketing and Sales at NitroMed reporting to the President and
Chief Executive Officer and working in the field of NO-enhanced cardiovascular
medicines. The terms of this offer are as follows:

Responsibilities:   As Senior Vice President of Marketing and Sales, you will be
                    responsible for leading all the Company's marketing and
                    sales efforts, plus such other responsibilities as may be
                    assigned to you from time to time by the CEO.

Base Salary:        You will be paid $10,416.66 semi-monthly. Such salary may
                    be adjusted from time to time in accordance with normal
                    business practice at the sole discretion of the Company.

Sign-on Bonus:      You will receive a sign-on bonus in the amount of
                    $50,000 -- $25,000 paid on the first day of employment and
                    $25,000 paid on your one year anniversary date, assuming
                    that you are then employed by the Company.

Stock:              The Compensation Committee of the Company's Board of
                    Directors has agreed to grant you an option to purchase
                    125,000 shares of common stock of the Company upon your
                    commencement of employment. The closing price of the stock
                    on the date of grant will be the exercise price of these
                    options. These options will vest and become exercisable in
                    four equal annual installments beginning on the first
                    anniversary of your date of hire, subject to your continued
                    employment with the Company. This grant will be subject to
                    your execution and compliance with all terms of the
                    Company's standard incentive stock option agreement and to
                    all terms of the Company's Amended and Restated 2003 Stock
                    Incentive Plan, copy attached as Exhibit A.

Performance Bonus:  You may be entitled to receive a bonus under the NitroMed
                    bonus plan, which is discretionary and based on milestones
                    to be determined and mutually agreed upon by the CEO and
                    you. You will be entitled to receive a minimum guaranteed
                    first year bonus of 25% of your 2004 salary, payable in
                    part in December of 2004 prorated for the months remaining
                    between your date of hire and December 31, 2004, with the
                    balance to be paid in 2005. Such bonus shall be subject to
                    adjustment in 2005, depending on performance.




Group Benefits:     You will be eligible to receive comprehensive group health,
                    disability, accident and life insurance benefits or such
                    comparable benefits and protections the Company is able to
                    reasonably obtain from another plan. You will be entitled to
                    participate in and enjoy the benefits of NitroMed's 401K
                    retirement plan as well as any other retirement and pension
                    plan or plans if and when instituted by the Company for the
                    benefit of its employees generally, provided that you are
                    eligible under (and subject to all provisions of) the plan
                    documents governing those programs.


Sick and Vacation:  You will be entitled to sick days consistent with the
                    Company's standard policy and 20 vacation days per year, to
                    be taken at such times as may be approved by the CEO.

Relocation:         Subject to your continued employment, the Company will
                    reimburse you up to a sum not to exceed $100,000.00 for
                    moving your household contents, including buy and sell side
                    costs such as commissions and fees. You will have 12 months
                    to exercise this relocation benefit. During the first year
                    of your employment, the Company will also reimburse
                    reasonable expenses incurred by you on no more than two
                    occasions to come to Massachusetts for the purpose of
                    evaluating the purchase of a home and up to $3,000 per month
                    for three months of temporary living expenses.

Cost of Housing     Subject to your continued employment, the Company will
                    reimburse your mortgage costs in an amount of up to $2,500
                    per year for three Adjustment: years All relocation and
                    housing costs reimbursed by the Company shall be subject to
                    withholding and other applicable employment taxes.

Agreements:         As a condition of employment, you will be required to
                    execute a non-competition agreement related to nitric oxide
                    enhanced medicines, in the form attached as Exhibit B.

Severance:          You will be entitled to salary continuation upon termination
                    without cause for a period of one year.

No Conflicts:       You represent that you are not bound by any employment
                    contract, restrictive covenant or other restriction
                    preventing you from entering into employment with or
                    carrying out your responsibilities for the Company, or that
                    is in any way inconsistent with the terms of this letter. To
                    the extent you are bound only by non-disclosure and
                    non-solicitation obligations, you agree that you will adhere
                    to those restrictions.

Employment at Will: Nothing in this letter agreement shall be construed as an
                    agreement, either express or implied, to employ you for any
                    stated term, and shall in no way alter the Company's policy
                    of employment at will, under which both you and the Company
                    remain free to end the employment relationship, for any
                    reason, at any time, with or without cause or notice.
                    Similarly, except as explicitly set forth herein, nothing in
                    this letter agreement shall be construed as an agreement,
                    either express or implied, to pay you any compensation or
                    grant you any benefit beyond the end of your employment with
                    the Company.




If this letter correctly sets forth the terms under which you will be employed
by the Company, please sign the enclosed duplicate of this letter in the space
provided below and return it to Wanda Avril. The anticipated start date for this
position is on or before August 2, 2004. If we do not receive your acceptance,
this offer will be deemed revoked July 19, 2004.

On behalf of the NitroMed team and myself, let me say that we all very much look
forward to working alongside you. I know that together we will grow NitroMed and
BiDil.

Sincerely,

/s/ Michael D. Loberg
Michael D. Loberg
President and Chief Executive Officer


                                  The foregoing correctly sets forth the terms
                                  of my at-will employment with NitroMed, Inc.:


                                            /s/ Mark Pavao
                                            -----------------------------------
                                            Mark Pavao


                                            Dated:
                                                   ----------------------------

EX-10.26

                                                                  Exhibit 10.26


           COMPENSATION OF NAMED EXECUTIVE OFFICERS OF NITROMED, INC.

         As of March 10, 2005, the following sets forth the  compensation of the
named  executive  officers (as defined in Item  402(a)(3) of Regulation  S-K) of
NitroMed, Inc.:



                                                           CURRENT ANNUAL                            OTHER
EXECUTIVE OFFICER                                              SALARY            2004 BONUS      COMPENSATION(1)
                                                                                        

Michael D. Loberg, Ph.D.
         President and Chief Executive Officer                $332,470            $116,365             $1,032

Manuel Worcel, M.D.
         Chief Medical Officer                                $268,830            $104,844             $3,048

L. Gordon Letts, Ph.D.
         Chief Scientific Officer and Senior Vice
         President, Research and Development                  $248,636             $62,159             $1,025

Lawrence E. Bloch, M.D., J.D.
         Chief Financial Officer and Chief Business
         Officer                                              $265,000            $22,083               $72

James G. Ham, III
         Vice President of Finance                            $180,000            $12,000               $224

Mark H. Pavao
         Senior Vice President of Sales and Marketing         $250,000            $31,250               $120


(1) Amounts represent the payments of premiums on group term life insurance.


In addition, each of NitroMed, Inc.'s named executive officers is eligible to
participate in NitroMed's 2003 Amended and Restated Stock Incentive Plan and any
successor plan.

EX-10.27

                                                                  Exhibit 10.27



        COMPENSATION PROGRAM FOR NON-EMPLOYEE DIRECTORS OF NITROMED, INC.

         As of March 10, 2005, the following sets forth the compensation program
for non-employee directors of NitroMed, Inc.:

         -  each director is eligible to receive (i) an option to purchase
            20,000 shares of Common Stock upon initial election, such shares
            to vest in four equal installments on the first, second, third and
            fourth anniversaries of the date of grant, and (ii) an option to
            purchase 15,000 shares of Common Stock annually thereafter upon
            re-election at the annual meeting of stockholders, such shares to
            vest in full on the first anniversary of the date of grant;

        -   each director is eligible to receive a retainer of $6,000 per
            calendar quarter;

        -   the chairman of the board of directors is eligible to receive an
            additional retainer of $5,000 per calendar year;

        -   audit committee members are eligible to receive $2,000 per audit
            committee meeting and the chair of the audit committee is eligible
            to receive an additional $2,000 annually; and

        -   compensating committee and nominating and corporate governance
            committee members are eligible to receive $1,000 per committee
            meeting and the chairs of such committees are each eligible to
            receive an additional $1,000 annually.

EX-10.28

                                                                  Exhibit 10.28


                                 NITROMED, INC.

                        Incentive Stock Option Agreement
          Granted Under Amended and Restated 2003 Stock Incentive Plan

1.   GRANT OF OPTION.

     This agreement evidences the grant by NitroMed, Inc., a Delaware
corporation (the "Company"), on , 200[ ] (the "Grant Date") to [ ], an employee
of the Company (the "Participant"), of an option to purchase, in whole or in
part, on the terms provided herein and in the Company's Amended and Restated
2003 Stock Incentive Plan (the "Plan"), a total of [ ] shares (the "Shares") of
common stock, $.01 par value per share, of the Company ("Common Stock") at $[ ]
per Share. Unless earlier terminated, this option shall expire at 5:00 p.m.,
Eastern time, on [_______] (the "Final Exercise Date").

     It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.

2.   VESTING SCHEDULE.

     This option will become exercisable ("vest") as to    % of the original
number of Shares on the [first] anniversary of the Grant Date and as to an
additional    % of the original number of Shares at the end of each
successive [three-month]period following the first anniversary of the Grant
Date until the [fourth]anniversary of the Grant Date.

     The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all Shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.

3.   EXERCISE OF OPTION.

     (a) FORM OF EXERCISE. Each election to exercise this option shall be in
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share.

     (b) CONTINUOUS RELATIONSHIP WITH THE COMPANY REQUIRED. Except as otherwise
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the Grant Date, an employee or officer of, or consultant or
advisor to, the Company or any parent or subsidiary of the Company as defined in
Section 424(e) or (f) of the Code (an "Eligible Participant").



     (c) TERMINATION OF RELATIONSHIP WITH THE COMPANY. If the Participant ceases
to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), PROVIDED THAT this option shall be exercisable only to the extent that
the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the Final
Exercise Date, violates the non-competition or confidentiality provisions of any
employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.

     (d) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Participant dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of one
year following the date of death or disability of the Participant, by the
Participant (or in the case of death by an authorized transferee), PROVIDED THAT
this option shall be exercisable only to the extent that this option was
exercisable by the Participant on the date of his or her death or disability,
and further provided that this option shall not be exercisable after the Final
Exercise Date.

     (e) DISCHARGE FOR CAUSE. If the Participant, prior to the Final Exercise
Date, is discharged by the Company for "cause" (as defined below), the right to
exercise this option shall terminate immediately upon the effective date of such
discharge. "Cause" shall mean willful misconduct by the Participant or willful
failure by the Participant to perform his or her responsibilities to the Company
(including, without limitation, breach by the Participant of any provision of
any employment, consulting, advisory, nondisclosure, non-competition or other
similar agreement between the Participant and the Company), as determined by the
Company, which determination shall be conclusive. The Participant shall be
considered to have been discharged for "Cause" if the Company determines, within
30 days after the Participant's resignation, that discharge for cause was
warranted.

4.   COMPANY RIGHT OF FIRST REFUSAL.

     (a) NOTICE OF PROPOSED TRANSFER. If the Participant proposes to sell,
assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of
law or otherwise (collectively, "transfer") any Shares acquired upon exercise of
this option, then the Participant shall first give written notice of the
proposed transfer (the "Transfer Notice") to the Company. The Transfer Notice
shall name the proposed transferee and state the number of such Shares the
Participant proposes to transfer (the "Offered Shares"), the price per share and
all other material terms and conditions of the transfer.

     (b) COMPANY RIGHT TO PURCHASE. For 30 days following its receipt of such
Transfer Notice, the Company shall have the option to purchase all or part of
the Offered Shares at the price and upon the terms set forth in the Transfer
Notice. In the event the Company elects to purchase all or part of the Offered
Shares, it shall give written notice of such election to the Participant within
such 30-day period. Within 10 days after his receipt of such notice, the
Participant shall tender to the Company at its principal offices the certificate
or certificates

                                       2


representing the Offered Shares to be purchased by the Company, duly endorsed in
blank by the Participant or with duly endorsed stock powers attached thereto,
all in a form suitable for transfer of the Offered Shares to the Company.
Promptly following receipt of such certificate or certificates, the Company
shall deliver or mail to the Participant a check in payment of the purchase
price for such Offered Shares; PROVIDED THAT if the terms of payment set forth
in the Transfer Notice were other than cash against delivery, the Company may
pay for the Offered Shares on the same terms and conditions as were set forth in
the Transfer Notice; and PROVIDED FURTHER that any delay in making such payment
shall not invalidate the Company's exercise of its option to purchase the
Offered Shares.

     (c) SHARES NOT PURCHASED BY COMPANY. If the Company does not elect to
acquire all of the Offered Shares, the Participant may, within the 30-day period
following the expiration of the option granted to the Company under subsection
(b) above, transfer the Offered Shares which the Company has not elected to
acquire to the proposed transferee, PROVIDED THAT such transfer shall not be on
terms and conditions more favorable to the transferee than those contained in
the Transfer Notice. Notwithstanding any of the above, all Offered Shares
transferred pursuant to this Section 4 shall remain subject to the right of
first refusal set forth in this Section 4 and such transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Section 4.

     (d) CONSEQUENCES OF NON-DELIVERY. After the time at which the Offered
Shares are required to be delivered to the Company for transfer to the Company
pursuant to subsection (b) above, the Company shall not pay any dividend to the
Participant on account of such Offered Shares or permit the Participant to
exercise any of the privileges or rights of a stockholder with respect to such
Offered Shares, but shall, in so far as permitted by law, treat the Company as
the owner of such Offered Shares.

     (e) EXEMPT TRANSACTIONS. The following transactions shall be exempt from
the provisions of this Section 4:

          (1) any transfer of Shares to or for the benefit of any spouse, child
     or grandchild of the Participant, or to a trust for their benefit;

          (2) any transfer pursuant to an effective registration statement
     filed by the Company under the Securities Act of 1933, as amended (the
     "Securities Act"); and

          (3) the sale of all or substantially all of the shares of capital
     stock of the Company (including pursuant to a merger or consolidation);

PROVIDED, HOWEVER, that in the case of a transfer pursuant to clause (1) above,
such Shares shall remain subject to the right of first refusal set forth in this
Section 4 and such transferee shall, as a condition to such transfer, deliver to
the Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 4.

     (f) ASSIGNMENT OF COMPANY RIGHT. The Company may assign its rights to
purchase Offered Shares in any particular transaction under this Section 4 to
one or more persons or entities.

                                       3


     (g) TERMINATION. The provisions of this Section 4 shall terminate upon the
earlier of the following events:

          (1) the closing of the sale of shares of Common Stock in an
     underwritten public offering pursuant to an effective registration
     statement filed by the Company under the Securities Act; or

          (2) the sale of all or substantially all of the capital stock, assets
     or business of the Company, by merger, consolidation, sale of assets or
     otherwise (other than a merger or consolidation in which all or
     substantially all of the individuals and entities who were beneficial
     owners of the Common Stock immediately prior to such transaction
     beneficially own, directly or indirectly, more than 75% of the outstanding
     securities entitled to vote generally in the election of directors of the
     resulting, surviving or acquiring corporation in such transaction).

     (h) NO OBLIGATION TO RECOGNIZE INVALID TRANSFER. The Company shall not be
required (1) to transfer on its books any of the Shares which shall have been
sold or transferred in violation of any of the provisions set forth in this
Section 4, or (2) to treat as owner of such Shares or to pay dividends to any
transferee to whom any such Shares shall have been so sold or transferred.

     (i) LEGENDS. The certificate representing Shares shall bear a legend
substantially in the following form (in addition to, or in combination with, any
legend required by applicable federal and state securities laws and agreements
relating to the transfer of the Company securities):

         "The shares represented by this certificate are subject to a right of
         first refusal in favor of the Company, as provided in a certain stock
         option agreement with the Company."

5.   AGREEMENT IN CONNECTION WITH PUBLIC OFFERING.

     The Participant agrees, in connection with the initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.

6.   TAX MATTERS.

     (a) WITHHOLDING. No Shares will be issued pursuant to the exercise of this
option unless and until the Participant pays to the Company, or makes provision
satisfactory to the Company for payment of, any federal, state or local
withholding taxes required by law to be withheld in respect of this option.

                                       4


     (b) DISQUALIFYING DISPOSITION. If the Participant disposes of Shares
acquired upon exercise of this option within two years from the Grant Date or
one year after such Shares were acquired pursuant to exercise of this option,
the Participant shall notify the Company in writing of such disposition.

7.   NONTRANSFERABILITY OF OPTION.

     This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.

8.   PROVISIONS OF THE PLAN.

     This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.

     IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take effect
as a sealed instrument.

                                  NITROMED, INC.

Dated:                            By:
        ----------                     ----------------------------------------
                                       Name:
                                              ---------------------------------
                                       Title:
                                              ---------------------------------


                                       5


                            PARTICIPANT'S ACCEPTANCE

         The undersigned  hereby accepts the foregoing  option and agrees to the
terms and conditions thereof.  The undersigned hereby acknowledges  receipt of a
copy of the Company's Amended and Restated 2003 Stock Incentive Plan.

                                        PARTICIPANT:


                                        --------------------------

                                        Address:
                                                  ----------------

                                                  ----------------



                                       6

EX-10.29

                                                                  Exhibit 10.29


                                 NITROMED, INC.


                       Nonstatutory Stock Option Agreement
        Granted Under the Amended and Restated 2003 Stock Incentive Plan

1.   GRANT OF OPTION.

     This agreement evidences the grant by NitroMed, Inc., a Delaware
corporation (the "Company"), on , 200[ ] (the "Grant Date") to [ ], an
[employee], [consultant], [director] of the Company (the "Participant"), of an
option to purchase, in whole or in part, on the terms provided herein and in the
Company's Amended and Restated 2003 Stock Incentive Plan (the "Plan"), a total
of [ ] shares (the "Shares") of common stock, $.01 par value per share, of the
Company ("Common Stock") at $[ ] per Share. Unless earlier terminated, this
option shall expire at 5:00 p.m., Eastern time, on [_______] (the "Final
Exercise Date").

     It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.

2.   VESTING SCHEDULE.

     This option will become exercisable ("vest") as to    % of the original
number of Shares on the [first] anniversary of the Grant Date and as to an
additional    % of the original number of Shares at the end of each
successive [three-month]period following the first anniversary of the Grant
Date until the [fourth]anniversary of the Grant Date.

     The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all Shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.

3.   EXERCISE OF OPTION.

     (a) FORM OF EXERCISE. Each election to exercise this option shall be in
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share.

     (b) CONTINUOUS RELATIONSHIP WITH THE COMPANY REQUIRED. Except as otherwise
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the Grant Date, an employee or officer of, or consultant or
advisor to, the Company or any other entity the employees, officers,



directors, consultants, or advisors of which are eligible to receive option
grants under the Plan (an "Eligible Participant").

     (c) TERMINATION OF RELATIONSHIP WITH THE COMPANY. If the Participant ceases
to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), PROVIDED THAT this option shall be exercisable only to the extent that
the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the Final
Exercise Date, violates the non-competition or confidentiality provisions of any
employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon such violation.

     (d) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Participant dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of one
year following the date of death or disability of the Participant, by the
Participant (or in the case of death by an authorized transferee), PROVIDED THAT
this option shall be exercisable only to the extent that this option was
exercisable by the Participant on the date of his or her death or disability,
and further provided that this option shall not be exercisable after the Final
Exercise Date.

     (e) DISCHARGE FOR CAUSE. If the Participant, prior to the Final Exercise
Date, is discharged by the Company for "cause" (as defined below), the right to
exercise this option shall terminate immediately upon the effective date of such
discharge. "Cause" shall mean willful misconduct by the Participant or willful
failure by the Participant to perform his or her responsibilities to the Company
(including, without limitation, breach by the Participant of any provision of
any employment, consulting, advisory, nondisclosure, non-competition or other
similar agreement between the Participant and the Company), as determined by the
Company, which determination shall be conclusive. The Participant shall be
considered to have been discharged for "Cause" if the Company determines, within
30 days after the Participant's resignation, that discharge for cause was
warranted.

4.   COMPANY RIGHT OF FIRST REFUSAL.

     (a) NOTICE OF PROPOSED TRANSFER. If the Participant proposes to sell,
assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of
law or otherwise (collectively, "transfer") any Shares acquired upon exercise of
this option, then the Participant shall first give written notice of the
proposed transfer (the "Transfer Notice") to the Company. The Transfer Notice
shall name the proposed transferee and state the number of such Shares the
Participant proposes to transfer (the "Offered Shares"), the price per share and
all other material terms and conditions of the transfer.

     (b) COMPANY RIGHT TO PURCHASE. For 30 days following its receipt of such
Transfer Notice, the Company shall have the option to purchase all or part of
the Offered Shares at the price and upon the terms set forth in the Transfer
Notice. In the event the Company elects to

                                       2


purchase all or part of the Offered Shares, it shall give written notice of such
election to the Participant within such 30-day period. Within 10 days after his
receipt of such notice, the Participant shall tender to the Company at its
principal offices the certificate or certificates representing the Offered
Shares to be purchased by the Company, duly endorsed in blank by the Participant
or with duly endorsed stock powers attached thereto, all in a form suitable for
transfer of the Offered Shares to the Company. Promptly following receipt of
such certificate or certificates, the Company shall deliver or mail to the
Participant a check in payment of the purchase price for such Offered Shares;
PROVIDED THAT if the terms of payment set forth in the Transfer Notice were
other than cash against delivery, the Company may pay for the Offered Shares on
the same terms and conditions as were set forth in the Transfer Notice; and
PROVIDED FURTHER that any delay in making such payment shall not invalidate the
Company's exercise of its option to purchase the Offered Shares.

     (c) SHARES NOT PURCHASED BY COMPANY. If the Company does not elect to
acquire all of the Offered Shares, the Participant may, within the 30-day period
following the expiration of the option granted to the Company under subsection
(b) above, transfer the Offered Shares which the Company has not elected to
acquire to the proposed transferee, PROVIDED THAT such transfer shall not be on
terms and conditions more favorable to the transferee than those contained in
the Transfer Notice. Notwithstanding any of the above, all Offered Shares
transferred pursuant to this Section 4 shall remain subject to the right of
first refusal set forth in this Section 4 and such transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Section 4.

     (d) CONSEQUENCES OF NON-DELIVERY. After the time at which the Offered
Shares are required to be delivered to the Company for transfer to the Company
pursuant to subsection (b) above, the Company shall not pay any dividend to the
Participant on account of such Offered Shares or permit the Participant to
exercise any of the privileges or rights of a stockholder with respect to such
Offered Shares, but shall, in so far as permitted by law, treat the Company as
the owner of such Offered Shares.

     (e) EXEMPT TRANSACTIONS. The following transactions shall be exempt from
the provisions of this Section 4:

         (1) any transfer of Shares to or for the benefit of any spouse, child
     or grandchild of the Participant, or to a trust for their benefit;

         (2) any transfer pursuant to an effective registration statement filed
     by the Company under the Securities Act of 1933, as amended (the
     "Securities Act"); and

         (3) the sale of all or substantially all of the shares of capital stock
     of the Company (including pursuant to a merger or consolidation);

PROVIDED, HOWEVER, that in the case of a transfer pursuant to clause (1) above,
such Shares shall remain subject to the right of first refusal set forth in this
Section 4 and such transferee shall, as a condition to such transfer, deliver to
the Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 4.

                                       3


     (f) ASSIGNMENT OF COMPANY RIGHT. The Company may assign its rights to
purchase Offered Shares in any particular transaction under this Section 4 to
one or more persons or entities.

     (g) TERMINATION. The provisions of this Section 4 shall terminate upon the
earlier of the following events:

         (1) the closing of the sale of shares of Common Stock in an
     underwritten public offering pursuant to an effective registration
     statement filed by the Company under the Securities Act; or

         (2) the sale of all or substantially all of the capital stock, assets
     or business of the Company, by merger, consolidation, sale of assets or
     otherwise (other than a merger or consolidation in which all or
     substantially all of the individuals and entities who were beneficial
     owners of the Common Stock immediately prior to such transaction
     beneficially own, directly or indirectly, more than 75% of the outstanding
     securities entitled to vote generally in the election of directors of the
     resulting, surviving or acquiring corporation in such transaction).

     (h) NO OBLIGATION TO RECOGNIZE INVALID TRANSFER. The Company shall not be
required (1) to transfer on its books any of the Shares which shall have been
sold or transferred in violation of any of the provisions set forth in this
Section 4, or (2) to treat as owner of such Shares or to pay dividends to any
transferee to whom any such Shares shall have been so sold or transferred.

     (i) LEGENDS. The certificate representing Shares shall bear a legend
substantially in the following form (in addition to, or in combination with, any
legend required by applicable federal and state securities laws and agreements
relating to the transfer of the Company securities):

         "The shares represented by this certificate are subject to a
         right of first refusal in favor of the Company, as provided in
         a certain stock option agreement with the Company."

5.   AGREEMENT IN CONNECTION WITH PUBLIC OFFERING.

     The Participant agrees, in connection with the initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.

6.   WITHHOLDING.

                                       4


     No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.

7.   NONTRANSFERABILITY OF OPTION.

     This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.

8.   PROVISIONS OF THE PLAN.

     This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.

     IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take effect
as a sealed instrument.


                                     NITROMED, INC.


Dated:                               By:
       ---------                          -------------------------------------

                                          Name:
                                                 ------------------------------

                                          Title:
                                                 ------------------------------

                                       5


                            PARTICIPANT'S ACCEPTANCE

         The undersigned hereby accepts the foregoing  option and agrees to the
terms and conditions thereof.  The undersigned hereby acknowledges receipt of a
copy of the Company's Amended and Restated 2003 Stock Incentive Plan.

                                     PARTICIPANT:


                                     ----------------------------

                                      Address:
                                                -----------------

                                                -----------------


                                       6

EX-21.1

                                                                    Exhibit 21.1



                                 NitroMed, Inc.

                              List of Subsidiaries



NAME OF SUBSIDIARY                                JURISDICTION OF INCORPORATION
- ------------------                                -----------------------------
                                               
NitroMed Securities Corp.                         Massachusetts

EX-23.1

                                                                    Exhibit 23.1


            Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-111302) pertaining to the Amended and Restated 1993 Equity Incentive
Plan, the Amended and Restated 2003 Stock Incentive Plan, and the 2003 Employee
Stock Purchase Plan of NitroMed, Inc. of our report dated February 9, 2005, with
respect to the financial statements of NitroMed, Inc. included in the Annual
Report (Form 10-K) for the year ended December 31, 2004.



                                            /s/ Ernst & Young LLP


Boston, Massachusetts
March 8, 2005

EX-31.1

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EXHIBIT 31.1

CERTIFICATION

I, Michael D. Loberg, certify that:

1.

I have reviewed this report on Form 10-K of NitroMed, 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)) for the registrant and have:

a)

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

b)

[Not applicable];

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 reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

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

Dated: March 10, 2005 /s/  MICHAEL D. LOBERG, PH.D. Michael D. Loberg, Ph.D.
Chief Executive Officer and President
(Principal Executive Officer)

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EXHIBIT 31.1

EX-31.2

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EXHIBIT 31.2

CERTIFICATION

I, Lawrence E. Bloch, certify that:

1.

I have reviewed this report on Form 10-K of NitroMed, 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)) for the registrant and have:

a)

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

b)

[Not applicable];

c)

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

d)

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

5.

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

a)

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

b)

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

Dated: March 10, 2005 /s/  LAWRENCE E. BLOCH, M.D., J.D. Lawrence E. Bloch, M.D., J.D.
Chief Financial Officer, Chief Business Officer,
Treasurer and Secretary (Principal Financial Officer)

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EXHIBIT 31.2

EX-32.1

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EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of NitroMed, Inc. (the "Company") for the fiscal year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Michael D. Loberg, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 10, 2005 /s/  MICHAEL D. LOBERG, PH.D. Michael D. Loberg, Ph.D.
Chief Executive Officer and President

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EXHIBIT 32.1

EX-32.2

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EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of NitroMed, Inc. (the "Company") for the fiscal year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Lawrence E. Bloch, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 10, 2005 /s/  LAWRENCE E. BLOCH, M.D., J.D. Lawrence E. Bloch, M.D., J.D.
Chief Financial Officer, Chief Business Officer,
Treasurer and Secretary

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EXHIBIT 32.2