VIA Pharmaceuticals (VIAP) 10-Q 2009 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2009

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 0-27264

VIA Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation or organization) 33-0687976
(I.R.S. Employer
Identification No.)

750 Battery Street, Suite 330
San Francisco, CA 94111
(Address of principal executive offices)

(415) 283-2200
(Registrant’s telephone number, including area code)

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

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o     No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company þ

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No þ

     As of May 8, 2009, there were 20,648,476 shares of common stock, par value $0.001 per share, outstanding.

VIA PHARMACEUTICALS, INC.

	Page No.
PART I. — FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Unaudited Condensed Balance Sheets as of March 31, 2009 and December 31, 2008		1
Unaudited Condensed Statements of Operations for the Three Month Periods Ended March 31, 2009 and 2008, and for the Period from June 14, 2004 (date of inception) to March 31, 2009		2
Unaudited Condensed Statements of Cash Flows for the Three Month Periods Ended March 31, 2009 and 2008, and for the Period from June 14, 2004 (date of inception) to March 31, 2009		3
Notes to the Unaudited Condensed Financial Statements		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 4T. Controls and Procedures		33
PART II. — OTHER INFORMATION		34
Item 1A. Risk Factors		34
Item 6. Exhibits		37
SIGNATURE		39
EXHIBITS
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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PART I. — FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED BALANCE SHEETS

	March 31,			December 31,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	2,360,432		$	4,064,545
Prepaid expenses and other current assets		201,153			604,080
Total current assets		2,561,585			4,668,625
Property and equipment-net		259,635			291,804
Other non-current assets		40,374			40,374
Total	$	2,861,594		$	5,000,803
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	479,434		$	753,824
Accrued expenses and other liabilities		2,617,424			2,652,458
Interest payable — affiliate		16,439			—
Notes payable — affiliate — net of discount of $803,265		1,196,735			—
Total current liabilities		4,310,032			3,406,282
Deferred rent		33,533			30,637
Total liabilities		4,343,565			3,436,919
Commitments and contingencies
Stockholders’ equity (deficit):
Common stock, $0.001 par value-200,000,000 shares authorized at March 31, 2009 and December 31, 2008; 20,648,476 and 20,592,718 shares issued and outstanding at March 31, 2009 and December 31, 2008, respectively		20,648			20,593
Preferred stock Series A, $0.001 par value-5,000,000shares authorized at March 31, 2009 and December 31, 2008; 0 shares issued and outstanding at March 31, 2009 and December 31, 2008		—			—
Convertible preferred stock Series C, $0.001 par value-17,000 shares authorized at March 31, 2009 and December 31, 2008; 2,000 shares issued and outstanding at March 31, 2009 and December 31, 2008; liquidation preference of $2,000,000		2			2
Additional paid-in capital		63,425,758			62,169,530
Deficit accumulated in the development stage		(64,928,379	)		(60,626,241	)
Total stockholders’ equity (deficit)		(1,481,971	)		1,563,884
Total	$	2,861,594		$	5,000,803

See notes to the unaudited condensed financial statements.

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VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

							Period From
							June 14, 2004
							(Date of
	Three Months Ended						Inception) to
	March 31,			March 31,			March 31,
	2009			2008			2009
Revenue	$	—		$	—		$	—
Operating expenses:
Research and development		2,134,756			3,318,162			36,985,719
General and administration		2,064,020			2,664,957			23,911,753
Merger transaction costs		—			—			3,824,090
Total operating expenses		4,198,776			5,983,119			64,721,562
Operating loss		(4,198,776	)		(5,983,119	)		(64,721,562	)
Other income (expense):
Interest income		—			102,754			914,628
Interest expense		(113,217	)		(120	)		(1,118,310	)
Other income (expense)-net		9,855			(28,739	)		(3,135	)
Total other income (expense)		(103,362	)		73,895			(206,817	)
Net Loss	$	(4,302,138	)	$	(5,909,224	)	$	(64,928,379	)
Loss per share of common stock-basic and diluted	$	(0.22	)	$	(0.30	)
Weighted average shares outstanding-basic and diluted		19,717,184			19,532,057

See notes to the unaudited condensed financial statements.

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VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

							Period From
							June 14, 2004
							(Date of
	Three Months Ended						Inception) to
	March 31,			March 31,			March 31,
	2009			2008			2009
Cash flows from operating activities:
Net loss	$	(4,302,138	)	$	(5,909,224	)	$	(64,928,379	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		34,925			39,752			428,438
Amortization of discount on notes payable — affiliate		96,779			—			96,779
Loss on disposal of property and equipment		—			—			4,163
Change in unrealized gain on foreign currency hedge		—			(481	)		—
Stock compensation expense		354,567			412,972			3,046,994
Deferred rent		2,896			(1,194	)		33,533
Changes in assets and liabilities:
Prepaid expenses and other assets		402,927			(66,106	)		(266,527	)
Accounts payable		(274,391	)		52,012			475,944
Accrued expenses and other liabilities		(35,034	)		260,169			2,717,425
Interest payable — affiliate		16,439			—			1,009,161
Net cash used in operating activities		(3,703,030	)		(5,212,100	)		(57,382,469	)
Cash flows from investing activities:
Purchase of property and equipment		(2,756	)		(5,110	)		(650,776	)
Cash provided in the Merger		—			—			11,147,160
Capitalized merger transaction costs		—			—			(350,069	)
Net cash provided by (used in) investing activities		(2,756	)		(5,110	)		10,146,315
Cash flows from financing activities:
Proceeds from convertible promissory notes — affiliate		—			—			24,425,000
Proceeds from notes payable — affiliate		2,000,000			—			2,000,000
Capital lease payments		—			(744	)		(11,973	)
Issuance of common stock		—			—			23,141,360
Exercise of stock options for the issuance of common stock		1,673			—			47,999
Repurchase and retirement of common stock		—			—			(5,800	)
Net cash provided by (used in) financing activities		2,001,673			(744	)		49,596,586
Increase (decrease) in cash and cash equivalents		(1,704,113	)		(5,217,954	)		2,360,432
Cash and cash equivalents-beginning of period		4,064,545			23,098,764			—
Cash and cash equivalents-end of period	$	2,360,432		$	17,880,810		$	2,360,432
Supplemental disclosure of noncash activities:
Issuance of warrant and related discount on notes payable — affiliate	$	900,044		$	—		$	900,044
Interest on convertible debt converted to notes payable — affiliate	$	—		$	—		$	992,722
Conversion of notes to preferred stock Series A	$	—		$	—		$	25,517,722
Accrued compensation converted to notes payable	$	—		$	—		$	100,000
Stock issuance for license acquisition	$	—		$	—		$	1,000
Supplemental disclosure of cash flow information:
Interest paid	$	—		$	72		$	7,856
Taxes paid	$	1,716		$	3,470		$	41,165

See notes to the unaudited condensed financial statements.

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VIA PHARMACEUTICALS, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. ORGANIZATION

     Overview—VIA Pharmaceuticals, Inc. (“VIA,” the “Company,” “we,” “our,” or “us”), incorporated in Delaware in June 2004 and headquartered in San Francisco, California, is a development stage biotechnology company focused on the development of compounds for the treatment of cardiovascular and metabolic disease. The Company is building a pipeline of small molecule drugs that target the underlying causes of cardiovascular and metabolic disease, including vascular inflammation, high cholesterol, high triglycerides and insulin sensitization/diabetes. During 2005, the Company in-licensed a small molecule compound, VIA-2291, which targets an unmet medical need of reducing inflammation in the blood vessel wall, an underlying cause of atherosclerosis and its complications, including heart attack and stroke. Atherosclerosis, depending on its severity and the location of the artery it affects, may result in major adverse cardiovascular events (“MACE”), such as heart attack and stroke. During 2006, the Company initiated two Phase II clinical trials of VIA-2291 in patients undergoing a carotid endarterectomy (“CEA”), and in patients at risk for acute coronary syndrome (“ACS”). During 2007, the Company initiated a third Phase II clinical trial where ACS patients will undergo Positron Emission Tomography with flurodeoxyglucose tracer (“FDG-PET”), a non-invasive imaging technique to measure the effect of treatment of VIA-2291 on vascular inflammation. Effective during the first quarter of 2009, the Company licensed from Hoffman-LaRoche Inc. and Hoffmann-LaRoche Ltd. (collectively “Roche”) the exclusive worldwide rights to two sets of compounds. The first license is for Roche’s thyroid hormone receptor beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche’s preclinical diacylglycerol acyl transferease 1 metabolic disorders program.

     Through March 31, 2009, the Company has been primarily engaged in developing initial procedures and product technology, recruiting personnel, screening and in-licensing of target compounds, clinical trial activity, and raising capital. To fund operations, VIA has been raising cash through debt, a merger and equity financings. The Company is organized and operates as one operating segment.

     Unless otherwise specified, as used throughout these condensed financial statements, the “Company,” “we,” “us,” and “our” refers to the business of the combined company after the merger (the “Merger”) with Corautus Genetics Inc. (“Corautus”) on June 5, 2007 and the business of privately-held VIA Pharmaceuticals, Inc. prior to the Merger. Unless specifically noted otherwise, as used throughout these unaudited condensed financial statements, “Corautus Genetics Inc.” or “Corautus” refers to the business of Corautus prior to the Merger.

     Going Concern—From inception, the Company has incurred expenses in research and development activities without generating any revenues to offset those expenses and the Company does not expect to generate revenues in the near future. The Company has incurred losses and negative cash flow from operating activities from inception, and as of March 31, 2009, the Company had an accumulated net deficit of approximately $64.9 million. Until the Company can establish profitable operations to finance its cash requirements, the Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to raise substantial additional capital through public or private equity or debt financings, the establishment of credit or other funding facilities, collaborative or other strategic arrangements with corporate sources or other sources of financing, the availability of which cannot be assured. On June 5, 2007, the Company raised $11.1 million through the Merger with Corautus to cover existing obligations and provide operating cash flows. In July 2007, the Company entered into a securities purchase agreement that provided for issuance of 10,288,065 shares of common stock for approximately $25.0 million in gross proceeds. As of March 31, 2009, the Company had approximately $2.4 million in cash and cash equivalents. In March 2009, the Company entered into a loan with its principal stockholder and one of its affiliates (the “Lenders”) whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million. The Company secured the loan with all of its assets, including the Company’s intellectual property. On March 12, 2009, the Company borrowed an initial amount of $2.0 million. Subject to the Lenders’ approval, the Company may borrow in the aggregate up to an additional $8.0 million at subsequent closings pursuant to the terms of the loan. Management believes that, under normal continuing operations, the total amount of cash available under this loan, if borrowed, will enable the Company to meet its current obligations through the third quarter of 2009. Borrowings subsequent to the initial $2.0 million borrowing are at the discretion of the Lenders. Management does not believe that existing cash resources will be sufficient to enable the Company to meet its ongoing

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working capital requirements for the next twelve months and the Company will need to raise substantial additional funding in the near term to meet its working capital requirements. As a result, there are substantial doubts that the Company will be able to continue as a going concern and, therefore, may be unable to realize its assets and discharge its liabilities in the normal course of business. The unaudited condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classifications of liabilities that may be necessary should the entity be unable to continue as a going concern.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation— The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, in accordance with the instructions to Form 10-Q of Regulations S-X, with Statement of Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting by Development Stage Enterprises”and assume the Company will continue as a going concern. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The condensed financial statements have been prepared on the same basis as the annual financial statements as discussed below. The financial information for the three months ended March 31, 2009 and 2008 is unaudited but includes all adjustments (consisting of only normal recurring adjustments), which the Company considers necessary for a fair presentation of the results of operations for those periods. Interim results are not necessarily indicative of results for the full fiscal year.

     The condensed financial statements and related disclosures have been prepared with the presumption that users of the condensed financial statements have read or have access to the audited financial statements of the preceding fiscal year. Accordingly, these condensed financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2008 on Form 10-K filed by the Company with the Securities and Exchange Commission (“SEC”) on March 27, 2009.

     On March 21, 2006, the Company formed VIA Pharma UK Limited, a private corporation, in the United Kingdom to enable clinical trial activities in Europe. VIA Pharma UK Limited did not engage in operations from June 14, 2004 (date of inception) to March 31, 2009. The Company has a wholly-owned subsidiary Vascular Genetics Inc. (“VGI”) that was involved in Corautus clinical trials. VGI has not been active since the Corautus clinical trials ceased in 2006.

     Use of Estimates—The preparation of financial statements in conformity with GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in our condensed financial statements and accompanying notes. Actual results could differ materially from those estimates.

     Cash and Cash Equivalents—Cash equivalents are included with cash and consist of short term, highly liquid investments with original maturities of three months or less.

     Property and Equipment—Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, ranging from three to five years. Computers, lab and office equipment have estimated useful lives of three years; office furniture and equipment have estimated useful lives of five years; and leasehold improvements are amortized using the straight-line method over the shorter of the useful lives or the lease term.

     Long-Lived Assets—Long-lived assets include property and equipment and certain purchased licensed patent rights that are included in other assets in the balance sheet. The Company reviews long-lived assets, including property and equipment, for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In December 2008, the Company wrote-off $21,000 in certain unamortized purchased licensed patent rights in anticipation of terminating the related purchase contract in 2009. Through March 31, 2009, there have been no other such impairments.

     Research and Development Expenses—Research and development (“R&D”) expenses are charged to operations as incurred in accordance with SFAS No. 2,“Accounting for Research and Development Costs.”R&D expenses include salaries, contractor and consultant fees; external clinical trial expenses performed by contract research organizations (“CROs”) and contracted investigators, licensing fees and facility allocations. In addition, the Company funds R&D at third-party research institutions under agreements that

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are generally cancelable at the Company’s option. Research costs typically consist of applied research, preclinical and toxicology work. Pharmaceutical manufacturing development costs consist of product formulation, chemical analysis and the transfer and scale-up of manufacturing at our contract manufacturers. Clinical costs include the costs of Phase II clinical trials. These costs, along with the manufacturing scale-up costs, are a significant component of R&D expenses.

     The Company accrues costs for clinical trial activities performed by CROs and other third parties based upon the estimated amount of work completed on each study as provided by the vendors. These estimates may or may not match the actual services performed by the organizations as determined by patient enrollment levels and related activities. The Company monitors patient enrollment levels and related activities using available information; however, if the Company underestimates activity levels associated with various studies at a given point in time, the Company could record significant R&D expenses in future periods when the actual activity level becomes known. The Company charges all such costs to R&D expenses.

     Fair Value of Financial and Derivative Instruments—The Company values its financial instruments, if any, according to the provisions of SFAS No. 157, “Fair Value Measurement”(“SFAS 157”) with respect to its financial assets and liabilities only. SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. SFAS 157 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

     In March 2009, the Company entered into a Note and Warrant Purchase Agreement (the “Loan Agreement”) with its principal stockholder and one of its affiliates, as more fully described in Note 6 to the Unaudited Condensed Financial Statements. At March 12, 2009, the Company valued and reported the freestanding warrant issued in connection with the financing of notes payable to affiliates as paid-in-capital in the Stockholders’ Equity (Deficit) section of the Company’s Balance Sheets under the Emerging Issues Task Force (“EITF”) Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”), SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), EITF Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock”(“EITF 07-5”), and Accounting Principles Board (“APB”) Opinion 14, “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”(“APB Opinion 14”). The Company estimated the fair value of the warrants at March 12, 2009, the issuance date, using the Black-Scholes pricing model methodology. This methodology requires significant judgments in the estimation of fair value based on certain assumptions, including the market value and the estimated volatility of the Company’s common stock, a risk-free interest rate applicable to the facts and circumstances of the transaction, and the estimated life of the warrant. The freestanding warrant is classified within level 3 of the fair value hierarchy.

     Changes in Level 3 Recurring Fair Value Measurements —The following is a rollforward of balance sheet amounts as of March 31, 2009 (including the change in fair value when applicable), for financial instruments classified as Level 3. When a determination is made to classify a financial instrument within Level 3, the determination is based upon the significance of the unobservable parameters to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable components, observable components (that is, components that are actively quoted and can be validated to external sources). Accordingly, the gains and losses in the table below include changes in fair value (when applicable) due in part to observable factors that are part of the methodology.

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	As of
	March 31, 2009
Fair value — December 31, 2008	$	—
Warrant (1)		900,044
Change in unrealized gains related to financial instruments at March 31, 2009 (2)		—
Fair value — March 31, 2009	$	900,044
Total unrealized gains (losses) (2)	$	—

(1)	The Warrant is included in additional paid in capital in the Stockholders’ Equity section of the Balance Sheet.
(2)	The Warrant is not revalued at the reporting date and does not result in gains and losses.

     Income Taxes—The Company accounts for income taxes using an asset and liability approach. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and operating loss and tax credit carryforwards measured by applying currently enacted tax laws. A valuation allowance is provided to reduce net deferred tax assets to an amount that is more likely than not to be realized. The amount of the valuation allowance is based on the Company’s best estimate of the recoverability of its deferred tax assets. In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48,“Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109”(“FIN No. 48”), which clarifies the accounting for uncertainty in tax positions. FIN No. 48 seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. In addition, FIN No. 48 provides guidance on de-recognition, classification, interest and penalties, and accounting in interim periods and requires expanded disclosure with respect to the uncertainty in income taxes. FIN No. 48 requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not to be sustained on audit, based on the technical merits of the position. The Company adopted the provisions of FIN No. 48 as of January 1, 2007.

     Segment Reporting—SFAS No. 131,“Disclosures About Segments of an Enterprise and Related Information", requires the use of a management approach in identifying segments of an enterprise. Management has determined that the Company operates in one business segment — scientific research and development activities.

     Earnings (Loss) Per Share of Common Stock—Basic earnings (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially dilutive shares of common stock equivalents outstanding during the period.

     The following table presents the calculation of basic and diluted net loss per common share for the three months ended March 31, 2009 and 2008:

	Three Months Ended
	March 31,			March 31,
	2009			2008
Net loss	$	(4,302,138	)	$	(5,909,224	)
Basic and diluted net loss per share:
Weighted-average shares of common stock outstanding		20,597,567			19,707,257
Less: Weighted-average shares of common stock subject to repurchase		(880,383	)		(175,200	)
Weighted-average shares used in computing basic net loss per share		19,717,184			19,532,057
Dilutive effect of common share equivalents		—			—
Weighted-average shares used in computing diluted net loss per share		19,717,184			19,532,057
Basic and diluted net loss per share	$	(0.22	)	$	(0.30	)

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     Diluted earnings (loss) per share of common stock reflects the potential dilution that could occur if options or warrants to purchase shares of common stock were exercised, or shares of preferred stock were converted into shares of common stock. The following table details potentially dilutive shares of common stock equivalents that have been excluded from diluted net loss per share for the three months ended March 31, 2009 and 2008 because their inclusion would be anti-dilutive:

	Years Ended
	March 31,		March 31,
	2009		2008
Common stock equivalents (in shares):
Shares of common stock subject to outstanding options		2,740,744		2,888,992
Shares of common stock subject to outstanding warrants		83,539,559		231,520
Shares of common stock subject to conversion from series C preferred stock		—		—
Total shares of common stock equivalents		86,280,303		3,120,512

     As described in Note 7 to the Unaudited Condensed Financial Statements, the number of shares of common stock into which Series C Preferred Stock will be converted will not be known until the date of conversion because the conversion factor is based on fair value of the Company’s common stock on the date the Series C Preferred Stock becomes convertible, June 13, 2010. Accordingly, we have not included any Series C Preferred Stock in the table above.

     Comprehensive Income (Loss)—Comprehensive income (loss) generally represents all changes in stockholders’ equity except those resulting from investments or contributions by stockholders. Amounts reported in other comprehensive income (loss) include derivative financial instruments designated and effective as hedges of underlying foreign currency denominated transactions.

     The following table presents the calculation of total comprehensive income (loss) for the three months ended March 31, 2009 and 2008:

	Three Months Ended
	March 31,			March 31,
	2009			2008
Net loss	$	(4,302,138	)	$	(5,909,224	)
Change in unrealized gain (loss) on foreign currency cash flow hedges		—			(481	)
Total comprehensive loss	$	(4,302,138	)	$	(5,909,705	)

     Derivative Instruments—From time to time, the Company uses derivatives to manage its market exposure to fluctuations in foreign currencies. The Company records these derivatives on the condensed balance sheet at fair value in accordance with SFAS No. 133. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and in the Company’s unaudited condensed statement of operations in the same period or periods during which the hedged transaction affects earnings. The gain or loss on the derivative instruments in excess of the cumulative change in the present value of future cash flows of the hedged transaction, if any, is recognized in the Company’s unaudited condensed statement of operations during the period of change. The Company does not use derivative instruments for speculative purposes.

     As of March 31, 2009, the Company does not have any outstanding forward foreign exchange contracts. All foreign currency purchased under forward foreign exchange contracts has been expended in the purchase of clinical trial services and, as a result, the Company does not have any outstanding unrealized gains or losses on forward foreign exchange contracts and also does not have any related accumulated other comprehensive income on the Company’s March 31, 2009 or December 31, 2008 Balance Sheets.

     The Company recorded net realized gains of $0 and $2,595 for the three months ended March 31, 2009 and 2008, respectively, and a net realized loss of $24,604 for the period from June 14, 2004 (date of inception) to March 31, 2009 on foreign exchange transactions that were consummated using foreign currency obtained in hedge transactions. The net gains and losses are included in other income (expense) in the condensed statement of operations. Of the $2,595 in net realized gains for the three months ended March 31, 2008, $472 were gains on forward foreign exchange contracts. We have incurred cumulative net losses on forward foreign

8

exchange contracts of $9,148 for the period June 14, 2004 (date of inception) to March 31, 2009. Net unrealized gains remaining in accumulated other comprehensive income (loss) was $0 at March 31, 2009 and December 31, 2008. The intrinsic value of the Company’s cash flow hedge contracts outstanding at March 31, 2009 and December 31, 2008 was $0.

     New Accounting Pronouncements—In June 2008, the FASB issued EITF Issue No. 07-5,“Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 provides guidance on determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. EITF 07-5 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company adopted EITF 07-5 and has determined that EITF 07-5 does not have an impact on its financial statements.

     In March 2008, the FASB issued SFAS No. 161,“Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133”(“SFAS No. 161”), which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on the Company’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for the Company beginning January 1, 2009. The Company has adopted SFAS No. 161 and has determined that SFAS No. 161 does not have an impact on its financial statements.

     In December 2007, the FASB issued EITF 07-1,“Accounting for Collaborative Agreements”(“EITF 07-1”). EITF 07-1 provides guidance regarding financial statement presentation and disclosure of collaborative arrangements, which includes arrangements entered into regarding development and commercialization of products. It requires certain transactions between collaborators to be recorded in the income statement on either a gross or net basis when certain characteristics exist in the collaborative relationship. EITF 07-1 became effective for the Company on January 1, 2009. The Company has adopted EITF 07-1 and has determined that EITF 07-1 does not have an impact on its financial statements.

     In December 2007, the FASB issued SFAS No. 141 (revised 2007),“Business Combinations”(“SFAS No. 141R”) and SFAS No. 160,“Non-controlling Interest In Consolidated Financial Statements,an amendment of Accounting Research Bulletin No. 51”(“SFAS No. 160”). SFAS No. 141R will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS No. 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. The Company adopted SFAS No. 141R and SFAS No. 160 and has determined that SFAS No. 141R and SFAS No. 160 do not have an impact on the Company’s current financial statements.

     In June 2007, the FASB ratified the consensus reached by the EITF on Issue No. 07-3,“Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities”(“EITF 07-3”). Pursuant to EITF 07-3, nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities should be deferred and capitalized. Such amounts should be recognized as an expense as the related goods are delivered or services are performed, or when the goods or services are no longer expected to be received. EITF 07-3 is effective for the Company beginning January 1, 2008, and is to be applied prospectively for contracts entered into on or after the effective date. The Company adopted EITF 07-3 and has determined that EITF 07-3 does not have an impact on the Company’s current financial statements.

     In April 2009, the FASB issued FASB Staff Position No. 107-1 and APB 28-1,“Interim Disclosures about Fair Value of Financial Instruments”(“FSP FAS 107-1 and APB 28-1”) which amends SFAS No. 107,“Disclosures about Fair Value of Financial Instruments”and APB Opinion No. 28,“Interim Financial Reporting,”to require disclosures about the fair value of financial instruments during interim reporting periods. The new disclosure requirements will be effective for interim reporting periods ending after June 15, 2009. The adoption of this staff position will result in additional quarterly disclosures only.

     In April 2009, the FASB issued FSP No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”), which provides further clarification for guidance provided by SFAS No. 157, regarding measurement of fair values of assets and liabilities when the market activity has significantly decreased and in identifying transactions that are not orderly. FSP FAS 157-4 will be effective for interim reporting periods ending after June 15, 2009. The adoption of this staff position is not expected to have a material impact on our financial results.

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3. STOCK-BASED COMPENSATION

     On January 1, 2006, the Company adopted the provisions of, and accounted for stock-based compensation in accordance with SFAS No. 123R,“Share-Based Payment”which replaced SFAS No. 123,“Accounting for Stock-Based Compensation”(“SFAS No. 123R”), which supersedes Accounting Principles Board Opinion No. 25,“Accounting for Stock Issued to Employees”.Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. The Company elected the modified-prospective method, under which prior periods are not revised for comparative purposes. The valuation provisions of SFAS No. 123R apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified. Estimated compensation for grants that were outstanding as of the effective date are now being recognized over the remaining service period using the compensation cost estimated for the SFAS No. 123 pro forma disclosures.

     The Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based awards under SFAS No. 123R. The determination of the fair value of stock-based awards on the date of grant using an option-pricing model is affected by the value of the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends.

     Prior to June 5, 2007, the Company was a privately-held company and its common stock was not publicly traded. The fair value of stock options granted from January 2006 through June 5, 2007 (date of completion of the Merger with Corautus), and related stock-based compensation expense, were determined based upon quoted stock prices of Corautus, the exchange ratio of shares in the Merger, and a private company 10% discount for grants prior to March 31, 2007, as this represented the best estimate of market value to use in measuring compensation. Subsequent to the Merger, the Company, now publicly held, uses the closing stock price of the Company’s common stock on the date the options are granted to determine the fair market value of each option. The Company revalues each non-employee option quarterly based on the closing stock price of the Company’s common stock on the last day of the quarter.

     The Company estimates the expected term of options granted by taking the average of the vesting term and the contractual term of the option. The Company estimates common stock price volatility using a hybrid approach of 28% actual historical volatility using a 1.7 year look back period of the Company’s common stock, blended with 72% of an average of selected peer group volatility. The Company will continue to incrementally increase the percent of actual historical volatility until historical data meets or exceeds the estimated term of the options. Prior to the three months ended March 31, 2009, the Company used peer group calculated volatility as the Company is a development stage company with limited stock price history from which to forecast stock price volatility. The risk-free interest rates used in the valuation model are based on U.S. Treasury issues with remaining terms similar to the expected term on the options. The Company does not anticipate paying any dividends in the foreseeable future and therefore used an expected dividend yield of zero.

     In March 2009, the Company calculated an annualized forfeiture rate of 2.63% using historical data. This rate was used to exclude future forfeitures in the three months ended March 31, 2009 calculation of stock-based compensation expense. The Company used an estimated forfeiture rate of 5.0% in the three months ended March 31, 2008 as there was not sufficient historical information available to establish a calculated forfeiture rate.

     The assumptions used to value option and restricted stock award grants for the three months ended March 31, 2009 and 2008 are as follows:

	Three Months Ended
	March 31, 2009			March 31, 2008
Expected life from grant date		6.08			2.5-6.08
Expected volatility		97	%		79	%
Risk free interest rate		1.67	%		2.48	%
Dividend yield		—			—

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     The following table summarizes stock-based compensation expense related to stock options and warrants under SFAS No. 123R for the three months ended March 31, 2009 and 2008 and for the period from June 14, 2004 (date of inception) to March 31, 2009, which was included in the unaudited condensed statements of operations in the following captions:

					Period from
					June 14, 2004
	Three Months Ended				(Date of Inception) to
	March 31,		March 31,		March 31,
	2009		2008		2009
Research and development expense	$	97,217	$	114,034	$	916,417
General and administrative expense		241,835		298,938		2,105,157
Total	$	339,052	$	412,972	$	3,021,574

     If all of the remaining non-vested and outstanding stock option awards that have been granted became vested, we would recognize approximately $2.7 million in compensation expense over a weighted average remaining period of 2.1 years. However, no compensation expense will be recognized for any stock option awards that do not vest.

     The following table summarizes stock-based compensation expense related to employee restricted stock awards under SFAS No. 123R for the three months ended March 31, 2009 and 2008 and for the period from June 14, 2004 (date of inception) to March 31, 2009, which was included in the unaudited condensed statements of operations in the following captions:

					Period from
					June 14, 2004
	Three Months Ended				(Date of Inception) to
	March 31,		March 31,		March 31,
	2009		2008		2009
Research and development expense	$	3,894	$	—	$	4,528
General and administrative expense		11,621				13,514
Total	$	15,515	$	—	$	18,042

     If all of the remaining non-vested restricted stock awards that have been granted became vested, we would recognize approximately $107,000 in compensation expense over a weighted average remaining period of 1.7 years. However, no compensation expense will be recognized for any restricted stock awards that do not vest.

4. RESEARCH AND DEVELOPMENT

     The Company’s research and development expenses include expenses related to the three VIA-2291 Phase II clinical trials and expenses incurred in connection with the Company’s preclinical studies. R&D expenses include salaries, contractor and consultant fees, external clinical trial expenses performed by CROs and contracted investigators, licensing fees and facility allocations. In addition, the Company funds R&D at third-party research institutions under agreements that are generally cancelable at the Company’s option. Research costs typically consist of applied research, preclinical and toxicology work. Pharmaceutical manufacturing development costs consist of product formulation, chemical analysis and the transfer and scale-up of manufacturing at our contract manufacturers. Clinical costs include the costs of Phase II clinical trials. These costs, along with the manufacturing scale-up costs, are a significant component of research and development expenses.

     The following reflects the breakdown of the Company’s research and development expenses generated internally versus externally for the three months ended March 31, 2009 and 2008, and for the period from June 14, 2004 (date of inception) to March 31, 2009:

					Period from
					June 14, 2004
	Three Months Ended				(date of inception) to
	March 31, 2009		March 31, 2008		March 31, 2009
Externally generated research and development expense	$	1,435,875	$	2,219,801	$	26,501,851
Internally generated research and development expense		698,881		1,098,361		10,483,868
Total	$	2,134,756	$	3,318,162	$	36,985,719

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     Externally generated research and development expenses consist primarily of the following:

					Period from
					June 14, 2004
	Three Months Ended				(date of inception) to
	March 31, 2009		March 31, 2008		March 31, 2009
In-licensing expenses	$	400,000	$	6,250	$	5,270,000
CRO and investigator expenses		530,754		1,456,290		10,189,978
Consulting expenses		269,129		312,598		5,567,667
Other		235,992		444,663		5,474,206
Total	$	1,435,875	$	2,219,801	$	26,501,851

     Internally generated research and development expenses consist primarily of the following:

					Period from
					June 14, 2004
	Three Months Ended				(date of inception) to
	March 31, 2009		March 31, 2008		March 31, 2009
Personnel and related expenses	$	482,576	$	769,880	$	7,296,530
Stock-based compensation expense		101,111		114,034		920,944
Travel and entertainment expense		38,785		108,885		1,024,155
Other		76,409		105,562		1,242,239
Total	$	698,881	$	1,098,361	$	10,483,868

5. PROPERTY AND EQUIPMENT

     Property and equipment — net, at March 31, 2009 and December 31, 2008 consisted of the following:

	March 31,			December 31,
	2009			2008
Property and equipment at cost:
Computer equipment and software	$	323,973		$	321,217
Furniture and fixtures		108,869			108,869
Office equipment		38,282			38,282
Leasehold improvements		129,740			129,740
Total property and equipment at cost		600,864			598,108
Less: accumulated depreciation		(341,229	)		(306,304	)
Total	$	259,635		$	291,804

     Depreciation expense on property and equipment was $34,925 and $39,427 in the three months ended March 31, 2009 and 2008, respectively, and $402,438 for the period from June 14, 2004 (date of inception) to March 31, 2009, and was included in the statements of operations. Of the $34,925 of depreciation expense in the three months ended March 31, 2009, $5,856 was included in research and development expenses and $29,069 was included in general and administrative expenses. Of the $39,427 of depreciation expense in the three months ended March 31, 2008, $9,866 was included in research and development expenses and $29,561 was included in general and administrative expenses. Of the $402,438 of depreciation expense for the period from June 14, 2004 (date of inception) to March 31, 2009, $115,492 was included in research and development expenses and $286,946 was included in general and administrative expenses.

6. FINANCING ARRANGEMENTS

     In March 2009, the Company entered into a loan (the “Loan Agreement”) with its principal stockholder and one of its affiliates (the “Lenders”) whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million, pursuant to the terms of promissory notes (collectively, the “Notes”) delivered under the Loan Agreement (the “Loan Transaction”).

     On March 12, 2009, the Company borrowed an initial amount of $2.0 million. Subject to the Lenders’ approval, the Company may borrow in the aggregate up to an additional $8.0 million at subsequent closings pursuant to the terms of the Loan Agreement and Notes. The Notes are secured by a first priority lien on all of the assets of the Company, including the Company’s intellectual property. Amounts borrowed under the Notes accrue interest at the rate of 15% per annum, which increases to 18% per annum

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following an event of default. Unless earlier paid in accordance with the terms of the Notes, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) September 14, 2009, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20.0 million (a “Financing”), and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity.

     Pursuant to the terms of the Loan Agreement, the Company issued to the Lenders warrants (the “Warrants”) to purchase an aggregate of up to 83,333,333 shares (the “Warrant Shares”) of common stock at $0.12 per share, which will become fully exerciseable to the extent that the entire $10.0 million is drawn. The number of Warrant Shares is equal to the $10.0 million maximum aggregate principal amount that may be borrowed under the Loan Agreement, divided by the $0.12 per share exercise price of the Warrants. The Warrant Shares vest based on the amount of borrowings under the Notes and the passage of time. Based on the $2.0 million borrowing at the initial closing, 8,333,333 Warrant Shares vested and are exerciseable immediately on the date of grant and 8,333,333 vested and are exerciseable on April 26, 2009 as the Company had met certain conditions provided for in the Warrant, including that the Company did not complete a $20.0 million financing, as defined in the Loan Agreement, within 45 days of the borrowing. At each subsequent closing, the Warrants will vest with respect to additional shares in proportion to the additional amount borrowed by the Company at the same coverage ratio as the initial closing and at the same vesting schedule, such that one-half of such additional shares will vest on the date of the subsequent closing and the remaining one-half of such shares will vest 45 days after such closing if certain conditions are met as provided for in the Warrants. The Warrant Shares, to the extent they are vested and exercisable, are exercisable at any time until March 12, 2014.

     At March 12, 2009, the fair value of the note and of the 16,666,666 warrant shares related to the $2.0 million borrowed under the Loan Agreement was $2.0 million and approximately $1.6 million, respectively. This resulted in the Company allocating the relative fair value of approximately $1.1 million of the $2 million in proceeds to the note and approximately $900,000 to the warrant. The Company has recorded the $900,000 freestanding warrant as permanent equity under EITF 00-19 and EITF 07-5.The $0.9 million discount on the note payable — affiliate is netted against the $2.0 million note and is being amortized to interest expense using the interest method from March 12, 2009 through September 14, 2009, the maturity date of the note payable. The Company reported $97,000 of interest expense from the amortization of the discount in the period from March 12, 2009 through March 31, 2009, which is included in the statement of operations for the period ended March 31, 2009. At March 31, 2009, the balance of notes payable net of discount was $1,196,735 and the unamortized discount was $803,265.

     The Company estimated the fair value of the warrant of approximately $1.6 million at March 12, 2009 using the Black-Scholes pricing model methodology with assumptions outlined below. The assumptions used to value the warrant at March 12, 2009 (date of inception) are:

	March 12, 2009
Expected life from grant date — in years		5.0
Expected volatility		116.79	%
Risk free interest rate		2.10	%
Dividend yield		—

7. EQUITY

     On June 5, 2007, following the Merger, the Certificate of Incorporation of Corautus became the Certificate of Incorporation of the Company, and the Company further amended and restated its Certificate of Incorporation to increase the number of authorized shares of common stock from 100,000,000 shares to 200,000,000 shares. The Certificate of Incorporation of the Company provides that the total number of authorized shares of preferred stock of the Company is 5,000,000 shares. Significant components of the Company’s stock are as follows:

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     Common Stock—The Company’s authorized common stock was 200,000,000 shares at March 31, 2009 and December 31, 2008. Common stockholders are entitled to dividends if and when declared by the Board of Directors, subject to preferred stockholder dividend rights. At March 31, 2009 and December 31, 2008, the Company had reserved the following shares of common stock for issuance:

	March 31,		December 31,
(In shares)	2009		2008
2007 Incentive Award Plan — outstanding and available to grant		3,326,296		2,882,054
Shares of common stock subject to outstanding warrants		83,539,559		207,479
Shares of common stock subject to conversion from series C preferred stock		—		—
Total shares of common stock equivalents		86,865,855		3,089,533

     As noted below, the number of shares of common stock into which Series C Preferred Stock will be converted will not be known until the date of conversion because the conversion factor is based on fair value of the Company’s common stock on the date the Series C Preferred Stock becomes convertible, June 13, 2010. Accordingly, we have not included any Series C Preferred Stock in the table above.

     Preferred Stock—The Company’s authorized Series A Preferred Stock was 5,000,000 shares at March 31, 2009 and December 31, 2008. There were no issued and outstanding shares of Series A Preferred Stock at March 31, 2009 and December 31, 2008.

     The Company’s authorized Series C Preferred Stock was 17,000 shares at March 31, 2009 and December 31, 2008. There were 2,000 shares of Series C Preferred Stock issued and outstanding as of March 31, 2009 and December 31, 2008. The Series C Preferred Stock is not entitled to receive dividends, has a liquidation preference amount of one thousand dollars ($1,000.00) per share, and has no voting rights, except as to the issuance of additional Series C Preferred Stock. Each share of Series C Preferred Stock becomes convertible into common stock on June 13, 2010. The Series C Preferred Stock is convertible into common stock in an amount equal to (a) the quotient of (i) the liquidation preference (adjusted for recapitalizations), divided by (ii) one hundred and ten percent (110%) of the per share “fair market value” (as defined in the Amended and Restated Certificate of Designation of Preferences and Rights of Series C Preferred Stock of the Company) of the Company’s common stock multiplied by (b) the number of shares of converted Series C Preferred Stock.

     2002 Stock Option Plans—In November 2002, the Corautus Board of Directors adopted the 2002 Stock Plan, which was approved by Corautus stockholders in February 2003 and was amended by Corautus stockholder approval in May 2004. Under the 2002 Stock Plan, the Board of Directors or a committee of the Board of Directors has the authority to grant options and rights to purchase common stock to officers, key employees, consultants and certain advisors to the Company. Options granted under the 2002 Stock Plan may be either incentive stock options or non-qualified stock options, as determined by the Board of Directors or a committee. The 2002 Stock Plan, as amended in May 2004, reserved an additional 233,333 shares for issuance under the 2002 Stock Plan plus (a) any shares of common stock which have been reserved but not issued under the 1999 Stock Plan, the 1995 Stock Plan and the 1995 Directors’ Option Plan as of the date of stockholder approval of the 2002 Stock Plan, (b) any shares of common stock returned to the 1999 Stock Plan, the 1995 Stock Plan and the 1995 Directors’ Option Plan as a result of the termination of options or repurchase of shares of common stock issued under those plans and (c) an annual increase on the first day of each year by the lesser of (i) 20,000 shares, (ii) the number of shares equal to two percent of the total outstanding common shares or (iii) a lesser amount determined by the Board of Directors. Generally, options are granted with vesting periods from one to two years and expire ten years from date of grant or three months after termination of employment or service, if sooner. Under the 2002 Stock Plan, the Company had 0 shares available for future grant as of December 31, 2007. In December 2007, the Company incorporated the outstanding options and shares available for grant into the 2007 Incentive Award Plan.

     2004 Stock Option Plans—In 2004, the Company’s Board of Directors adopted the 2004 Stock Plan. Under the 2004 Stock Plan, up to 427,479 shares of the Company’s common stock, in the form of both incentive and non-qualified stock options, may be granted to eligible employees, directors, and consultants. In September 2006, the Board authorized an increase of 743,442 shares to the 2004 Stock Plan for a total of 1,170,921 authorized shares available for grant from the 2004 Stock Plan. The 2004 Stock Plan provides that grants of incentive stock options will be made at no less than the estimated fair value of the Company’s common stock, as determined by the Board of Directors at the date of grant. If, at the time the Company grants an option, the holder owns more than ten percent of

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the total combined voting power of all the classes of stock of the Company, the option price shall be at least 110% of the fair value. Vesting and exercise provisions are determined by the Board of Directors at the time of grant. Option vesting ranges from immediate and full vesting to five year vesting (twenty percent of the shares one year after the options’ vesting commencement date and the remainder vesting ratably each month). Options granted under the 2004 Stock Plan have a maximum term of ten years. Options can only be exercised upon vesting, unless the option specifies that the shares can be early exercised. The Company retains the right to repurchase exercised and unvested shares. Under the 2004 Stock Plan, the Company had 0 shares available for future grant as of December 31, 2007. In December of 2007, the Company incorporated the outstanding options and shares available for grant into the 2007 Incentive Award Plan.

     2007 Incentive Award Plan—In December 2007, the Company’s Board of Directors adopted the 2007 Incentive Award Plan. The Company combined the 2002 and 2004 Stock Plan into the 2007 Incentive Award Plan, and added 2.0 million shares available for grant in the form of both incentive and non-qualified stock options which may be granted to eligible employees, directors, and consultants. Only employees are entitled to receive grants of incentive stock options. The 2007 Incentive Award Plan provides that grants of incentive stock options will be made at no less than the estimated fair market value of the Company’s common stock on the date of grant. If, at the time the Company grants an option, the holder owns more than ten percent of the total combined voting power of all the classes of stock of the Company, the option price shall be at least 110% of the fair value. Vesting and exercise provisions are determined by the Board of Directors at the time of grant. Option vesting ranges from immediate and full vesting to five year vesting (twenty percent of the shares one year after the options’ vesting commencement date and the remainder vesting ratably each month). Options granted under the 2007 Incentive Award Plan have a maximum term of ten years. Options can only be exercised upon vesting, unless the option specifies that the shares can be early exercised. The Company retains the right to repurchase exercised and unvested shares. Under the 2007 Incentive Award Plan, the Company had 585,552 and 74,127 shares available for future grant as of March 31, 2009 and December 31, 2008, respectively. Under the 2007 Incentive Award Plan, there is an annual “evergreen” provision which provides that the plan shares are increased by the lesser of 500,000 shares or 3% of total common shares outstanding at the Company’s year-end. Effective January 1, 2009 and 2008, the Company added an additional 500,000 shares to the plan pursuant to this provision of the plan.

     Restricted Stock—In December 2008, under the provisions of the 2007 Incentive Award Plan, the Company granted employees restricted stock awards for 852,750 shares of the Company’s common stock with a weighted-average fair value of $0.15 per share that vest monthly over a two year period, with acceleration of vesting in the event of a defined partnering transaction related to the development of VIA-2291. The Company recognized $15,515 in stock-based compensation expense during the three months ended March 31, 2009 and $18,042 in stock-based compensation expense from June 14, 2004 (date of inception) to March 31, 2009. As the restricted stock awards vest through 2010, the Company will recognize the related stock-based compensation expense over the vesting period. If all of the restricted stock awards fully vest, the Company will recognize approximately $61,496 and $58,969 in the years ended December 31, 2009 and 2010, respectively. However, no compensation expense will be recognized for stock awards that do not vest. Restricted stock awards are shares of common stock which are forfeited if the employee leaves the Company prior to vesting. These stock awards offer employees the opportunity to earn shares of our stock over time. In contrast, stock options give the employee the right to purchase stock at a set price.

     A summary of restricted stock activity from December 31, 2008 to March 31, 2009 follows:

				Weighted
				Average
				Grant Date
Restricted Stock Awards	Shares			Fair Value
Unvested at December 31, 2008		852,750		$	0.15
Granted		—			—
Vested		(106,591	)	$	0.15
Forfeited		—			—
Unvested at March 31, 2009		746,159		$	0.15

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     A summary of stock option award activity from December 31, 2008 to March 31, 2009 follows:

				Weighted
				Average
	Option Shares			Exercise
	Outstanding			Price
2007 Incentive Award Plan Options Outstanding — December 31, 2008		2,807,927		$	6.77
Granted		—		$	—
Exercised		(55,758	)	$	0.03
Canceled		(11,425	)	$	4.66
2007 Incentive Award Plan Options Outstanding — March 31, 2009		2,740,744		$	6.91

     As of March 31, 2009, a total of 229,955 shares of stock options were early exercised before the shares were vested pursuant to provisions of the share grants under the Plan, of which 71,326 shares remain unvested and subject to repurchase by the Company in the event of employee termination.

     The following table summarizes information concerning outstanding and exercisable options outstanding at March 31, 2009:

	Options Outstanding						Options Vested or Expected to Vest						Options Exercisable
			Average		Weighted		Number		Average		Weighted				Weighted
	Number of		Remaining		Average		Exercisable or		Remaining		Average				Average
	Options		Contractual		Exercise		Expected to		Contractual		Exercise		Number		Exercise
Range of Exercise Prices	Outstanding		Life (Years)		Price		Vest		Life (Years)		Price		Exercisable		Price
$0.03		183,565		6.16	$	0.03		183,503		6.16	$	0.03		182,016	$	0.03
$0.14		90,505		7.57	$	0.14		90,180		7.57	$	0.14		82,388	$	0.14
$0.15		50,000		9.72	$	0.15		50,000		9.72	$	0.15		50,000	$	0.15
$1.70		750		9.36	$	1.70		720		9.36	$	1.70		—	$	1.70
$2.19		35,000		9.22	$	2.19		33,600		9.22	$	2.19		—	$	2.19
$2.38		1,389,194		8.72	$	2.38		1,353,209		8.72	$	2.38		489,569	$	2.38
$2.90		235,000		8.79	$	2.90		228,342		8.79	$	2.90		68,541	$	2.90
$3.10		12,000		8.98	$	3.10		11,641		8.98	$	3.10		3,020	$	3.10
$3.48		391,430		8.34	$	3.48		381,974		8.34	$	3.48		155,032	$	3.48
$5.10		22,300		8.18	$	5.10		22,300		8.18	$	5.10		22,300	$	5.10
$5.55		18,586		8.18	$	5.55		18,586		8.18	$	5.55		18,586	$	5.55
$11.25-1023.75		312,414		5.65	$	42.36		312,414		5.65	$	42.36		312,414	$	42.36
		2,740,744		8.13	$	6.91		2,686,469		8.13	$	7.00		1,383,866	$	11.12

     No options were granted in the three months ended March 31, 2009. The total intrinsic value of stock options exercised was $1,115 and $0 for the three months ended March 31, 2009 and 2008, respectively.

     Warrants—additional paid-in capital—Pursuant to the terms of the Loan Agreement as more fully discussed in Note 6 to the Unaudited Condensed Financial Statements, the Company issued to the Lenders Warrants to purchase an aggregate of up to 83,333,333 shares of common stock at $0.12 per share, which will become fully exercisable to the extent that the entire $10.0 million is drawn. The number of Warrant Shares is equal to the $10.0 million maximum aggregate principal amount that may be borrowed under the Loan Agreement, divided by the $0.12 per share exercise price of the Warrants, which is fixed on the date of the Loan Agreement. The Warrant Shares vest based on the amount of borrowings under the Notes and the passage of time. Based on the $2.0 million borrowing at the initial closing, 8,333,333 Warrant Shares vested and are exerciseable immediately on the date of grant and 8,333,333 vested and are exerciseable on April 26, 2009 as the Company had met certain conditions provided for in the Warrant, including that the Company did not complete a $20.0 million financing, as defined in the Loan Agreement, within 45 days of the borrowing. At each subsequent closing, the Warrants will vest with respect to additional shares in proportion to the additional amount borrowed by the Company at the same coverage ratio as the initial closing and at the same vesting schedule, such that one-half of such additional shares will vest on the date of the subsequent closing and the remaining one-half of such shares will vest 45 days after such closing if certain conditions are met as provided for in the Warrants. The Warrant Shares, to the extent they are vested and exercisable, are exercisable at any time until March 12, 2014.

     As described more fully in Note 6 to the Unaudited Condensed Financial Statements, the Company computed the fair value of the

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16,666,666 warrant shares related to the initial borrowings under the Loan Agreement utilizing the Black-Scholes pricing model. In accordance with the provisions of EITF 00-19, EITF 07-5, and APB Opinion 14, the relative fair value assigned to the warrant of approximately $900,000 was recorded as permanent equity in additional paid-in capital in the Stockholders’ Equity section of the Balance Sheet.

     Warrants—The Company assumed obligations for certain warrants issued by Corautus in connection with previous financings and consulting engagements. As of March 31, 2009, outstanding warrants to purchase approximately 47,878 shares of common stock at exercise prices of $10.05-$120.96 will expire in 1 to 4 years.

     In July 2007 the Company granted warrants to its investor relations firm to purchase 18,586 shares of the Company’s common stock at a fixed purchase price of $3.95 per share. The warrants began vesting 30 days after the issuance date and vested over a twelve month contracted service period. The warrant expires July 31, 2017. Using the Black-Scholes pricing model, the Company valued the warrants at $19,296 as of March 31, 2009 using an expected life of 5.27 years, 3.49% risk free interest rate, 81% volatility rate and the fair market value of the grant on July 31, 2008 of $1.90 per share. The warrants are expensed as stock-based compensation expense over the vesting period in the statements of operations resulting in expense of $0 and $12,033 in the three months ended March 31, 2009 and 2008, respectively.

     In December 2007, the Company granted warrants to a management consultant to purchase 10,000 shares of the Company’s common stock at a fixed purchase price of $2.38 per share. The warrants were fully vested when granted and expire December 17, 2012. Using the Black-Scholes pricing model, the Company valued the warrants at $11,328 using an expected life of 2.5 years, a 3.49% risk-free interest rate, a 76% volatility rate and the fair market value at the grant date of $2.38 per share. The warrants are expensed as stock-based compensation expense over the vesting period in the condensed statements of operations. The warrants were fully expensed in 2007.

     In March 2008, the Company granted warrants to a financial communications and investor relations firm to purchase 125,000 shares of the Company’s common stock at a fixed purchase price of $3.00 per share. As of March 1, 2008, 25,000 shares immediately vested, 50,000 will vest immediately upon attaining a Share Price Goal (as defined in the warrant) of $5.00, 25,000 shares will vest immediately upon attaining a Share Price Goal of $7.50, and 25,000 shares will vest immediately upon attaining a Share Price Goal of $10.00. The warrant vesting period ends June 30, 2009 and the warrants expire August 31, 2013. Using the Black-Scholes pricing model, the Company valued the warrants at $38,855 as of March 31, 2009 using an expected life ranging from 2.75 to 3.25 years, a risk-free interest rate ranging from 2.0% to 2.48%, volatility ranging from 79% to 81%, and a fair market value ranging from $0.18 to $3.00 per share. The warrants are expensed as stock-based compensation expense over the service period in the condensed statement of operations resulting in expense of $0 and $49,395 in the three months ended March 31, 2009 and 2008, respectively.

8. RELATED PARTIES

     The Company terminated its licensing agreement with Leland Stanford Junior University (“Stanford”). The Company’s founding Chief Scientific Officer (“CSO”) was an affiliate of Stanford and is a stockholder of the Company. The Company paid consulting fees to the CSO of $3,000 and $30,000 in the three months ended March 31, 2009 and 2008, respectively. While the Company did not issue any stock options in the three months ended March 31, 2009, the Company did issue 10,000 and 42,300 stock options to the CSO in the years ended December 31, 2008 and 2007, respectively. Using the Black-Scholes pricing model, the Company valued the 2008 grants at $973 as of March 31, 2009 using an expected life of 5.0 years, a 1.520% risk free interest rate, an 81% volatility rate, and the grant date fair market value of $0.15 per share. The options were fully vested at the grant date and expire December 17, 2018. The options are expensed as stock-based compensation expense over the vesting period in the condensed statements of operations, resulting in no expense in the three months ended March 31, 2009 and 2008. Using the Black-Scholes pricing model, the Company valued the 2007 grants at $2,860 as of March 31, 2009 using an expected life of 6.02 years, a 1.67% risk free interest rate, a 97% volatility rate, and the fair market value on the most current option remeasurement date of $0.18 per share. The Company revalues each non-employee option quarterly based on the closing stock price of the Company’s common stock on the last day of the quarter. The options are expensed as stock-based compensation expense over the vesting period in the condensed statements of operations, resulting in expense of $530 and $6,254 in the three months ended March 31, 2009 and 2008, respectively.

     During 2006, the Company used the services of an employee of the Company’s primary investor to act as Chief Financial Officer

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(“CFO”) and granted 18,586 stock option shares to the acting CFO as compensation for services rendered. Using the Black-Scholes pricing model, the Company valued the options at $51,864 as of December 31, 2006 using an expected life of 5.30 years, a 2.48% risk-free interest rate, a 79% volatility rate and the fair market value on the last option measurement date of $2.90 per share. The Company revalues each non-employee option quarterly based on the closing stock price of the Company’s common stock on the last day of the quarter. The Company expensed the option as stock-based compensation expense over the vesting period in the statements of operations resulting in expense of $0 and $12,297 in the three months ended March 31, 2009 and 2008, respectively.

     The Company’s Chief Development Officer (“CDO”) is also an employee of the Company’s primary investor. The Company paid the CDO compensation in the amount of $15,000 and $92,500 in the three months ended March 31, 2009 and 2008, respectively, and granted 26,921 shares of stock options to the CDO in 2007. The Company did not grant any options to the CDO either in 2008 or in the first three months of 2009. Using the Black-Scholes pricing model, the Company valued the 2007 options at $95,284 as of March 31, 2009 using an expected life of from 5.27 to 6.02 years, a 4.20% to 4.639% risk-free interest rate, a 67% to 77% volatility rate and the grant date fair market values ranging from $3.48 to $5.89 per share. The options are expensed as stock-based compensation expense over the vesting period in the statements of operations resulting in expense of $2,880 and $2,582 in the three months ended March 31, 2009 and 2008, respectively.

9. COMMITMENTS

     Operating Leases— The Company leases its office facilities for various terms under long-term, non-cancelable operating lease agreements. The leases expire at various dates through 2013. The Company recognizes rent expense on a straight-line basis over the lease period, and accrues for rent expense incurred but not paid. Rent expense was $109,057 and $58,974 for the three months ended March 31, 2009 and 2008, respectively, and $1,114,792 for the period from June 14, 2004 (date of inception) to March 31, 2009.

     Future minimum lease payments under non-cancelable operating leases, including lease commitments entered into subsequent to March 31, 2009 are as follows:

	Amount
April through December 2009	$	323,256
2010		437,597
2011		445,777
2012		362,468
2013		139,742
Total minimum lease payments	$	1,708,840

     Operating lease obligations reflect contractual commitments for the Company’s office facilities for its headquarters in San Francisco, California and its clinical operations location in Princeton, New Jersey. In January 2008, the Company expanded and extended both leases to ensure adequate facilities for current activities. The San Francisco headquarter lease has been extended through May 2013 and has been expanded to a total of 8,180 square feet. The lease amendment resulted in an increase of approximately $1.5 million in future rent. The lease amendment to the Princeton, New Jersey facility extends the lease through April 2, 2012 and has been expanded to a total of 4,979 square feet. The lease amendment resulted in an increase of approximately $330,000 in future rent.

10. INCOME TAXES

     There is no income tax provision (benefit) for federal or state income taxes as the Company has incurred operating losses since inception. Deferred income taxes reflect the net tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

     Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The Company may have experienced a change of control which could result in a substantial reduction to the previously reported net operating losses at December 31, 2008; however, the Company has not performed a change of control study and therefore has not determined if such change has taken place and if such a change has occurred the related reduction to the net operating loss carryforwards. As of March

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31, 2009, the net operating loss carryforwards continue to be fully reserved and any reduction in such amounts as a result of this study would also reduce the related valuation allowances resulting in no net impact to the financial results of the Company.

     As of March 31, 2009, there have been no material changes to the Company’s uncertain tax positions disclosures as provided in Note 12 to the Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

11. EMPLOYEE BENEFIT PLANS

     The Company established a defined contribution plan qualified under Section 401(k) of the Internal Revenue Code. Employees of the Company are eligible to participate in the Company’s 401(k) plan. Employees participating in the plan are permitted to contribute up to the maximum amount allowable by law. Company contributions are discretionary and only safe-harbor contributions were made in 2009 and 2008. The Company made safe-harbor contributions to certain plan participants in the aggregate amount of $35,355 and $40,825 in the three months ended March 31, 2009 and 2008, respectively, and $90,479 for the period from June 14, 2004 (date of inception) to March 31, 2009.

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s financial statements and related notes appearing elsewhere in this Quarterly Report onForm 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The Company’s actual results may differ materially from those anticipated in these forward-looking statements as a result of risks and uncertainties that exist in our operations, development efforts and business environment, including but not limited to those set forth under the Section entitled “Risk Factors” in our Annual Report onForm 10-K for the year ended December 31, 2008 and elsewhere in this Quarterly Report onForm 10-Q and in other documents we file with the Securities and Exchange Commission. All forward-looking statements included in this report are based on information available to us as of the date hereof, and, unless required by law, we assume no obligation to update any such forward-looking statement.

Overview

     Background

     VIA Pharmaceuticals, Inc. incorporated in Delaware in June 2004 and headquartered in San Francisco, California, is a development stage biotechnology company focused on the development of compounds for the treatment of cardiovascular and metabolic disease. The Company is building a pipeline of small molecule drugs that target the underlying causes of cardiovascular and metabolic disease, including vascular inflammation, high cholesterol, high triglycerides and insulin sensitization/diabetes. During 2005, the Company in-licensed a small molecule compound, VIA-2291, which targets an unmet medical need of reducing inflammation in the blood vessel wall, an underlying cause of atherosclerosis and its complications, including heart attack and stroke. Atherosclerosis, depending on its severity and the location of the artery it affects, may result in major adverse cardiovascular events (“MACE”), such as heart attack and stroke. During 2006, the Company initiated two Phase II clinical trials of VIA-2291 in patients undergoing a carotid endarterectomy (“CEA”), and in patients at risk for acute coronary syndrome (“ACS”). During 2007, the Company initiated a third Phase II clinical trial where ACS patients will undergo Positron Emission Tomography with flurodeoxyglucose tracer (“FDG-PET”), a non-invasive imaging technique to measure the effect of treatment of VIA-2291 on vascular inflammation. Effective during the first quarter of 2009, the Company licensed from Hoffman-LaRoche Inc. and Hoffmann-LaRoche Ltd. (collectively “Roche”) the exclusive worldwide rights to two sets of compounds. The first license is for Roche’s thyroid hormone receptor beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche’s preclinical diacylglycerol acyl transferease 1 metabolic disorders program.

     Recent Developments

     On May 1, 2009, the Company announced results of a sub-study of the ACS Phase II clinical trial of VIA-2291 at the American Heart Association (“AHA”) Arteriosclerosis, Thrombosis and Vascular Biology Annual Conference 2009 in Washington D.C. The purpose of the sub-study was to evaluate the effect of VIA-2291 25mg, 50mg and 100mg doses relative to placebo from baseline in patients dosed with VIA-2291 for 24 weeks. After completion of the initial 12 weeks of dosing, more than 85 of the 191 total ACS patients continued on to receive an additional 12 weeks of dosing on top of current standard medical care and received a 64 slice multi-detector comlputed tomography (“MDCT”) scan at baseline and 24 weeks. Evaluable scans from patients treated with placebo showed significantly more evidence of new plaque lesions from VIA-2291 treated patients. MDCT scans of patients with low density plaques demonstrated statistically significant, lower plaque volumes in combined VIA treated groups compared to placebo. Together these results suggest that VIA-2291 may reduce the progression of unstable coronary plaques that lead to heart attacks and stroke.

     Description of Business

     The Company is a development stage biotechnology company focused on the development of compounds for the treatment of cardiovascular and metabolic disease. Specifically, the Company’s lead compound, VIA-2291, targets an unmet medical need of reducing inflammation in the blood vessel wall, which is an underlying cause of atherosclerosis and its complications. Atherosclerosis is a common cardiovascular disease that results from chronic inflammation and the build-up of plaque in arterial blood vessel walls. Plaque consists of inflammatory cells, cholesterol and cellular debris. Atherosclerosis, depending on its severity and the location of the artery it affects, may result in blockage in certain vessels and can also cause a rupture of inflamed plaque tissue, leading to major

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adverse cardiovascular events (“MACE”) such as heart attack and stroke. Heart attack and stroke are leading causes of death worldwide.

     The Company recently expanded its drug development pipeline with preclinical compounds that target additional underlying causes of cardiovascular and metabolic disease, including high cholesterol, high triglycerides and insulin sensitization/diabetes. The Company’s clinical development strategy integrates several technologies to provide clinical proof-of-concept as early as possible in the clinical development process. These technologies include the measurement of biomarkers (specific biochemicals in the body with a particular molecular feature that makes them useful for measuring the progress of a disease or the effects of treatment), medical imaging of the coronary and carotid vessel walls to evaluate the plaque characteristics, and atherosclerotic plaque bioassays (measurements of indicators of atherosclerotic plaque inflammation believed to promote MACE). Once the Company has established proof-of-concept, the Company plans to consider business collaborations with larger biotechnology or pharmaceutical companies for the late-stage clinical development and commercialization of its compounds.

     In March 2005, the Company entered into an exclusive license agreement (the “Stanford License”) with Leland Stanford Junior University (“Stanford”) to use a comprehensive gene expression database and analysis tool to identify novel, and prioritize known, molecular targets for the treatment of vascular inflammation and to study the impact of candidate therapeutic interventions on the molecular mechanisms underlying atherosclerosis (the “Stanford Platform”). One of the Company’s founders, Thomas Quertermous, M.D., who currently serves as chairman of the VIA Scientific Advisory Board, developed the Stanford Platform at Stanford during the course of a four-year, $30.0 million research study (the “Stanford Study”). The Stanford Study initially utilized human tissue samples made available from the Stanford heart transplant program to characterize human plaque at the level of gene expression and identify the inflammatory genes and pathways involved in the development of atherosclerosis and associated complications in humans. To develop the Stanford Platform, the Stanford Study performed similar experiments on vascular tissue samples from mice prone to developing atherosclerosis and identified genes and pathways associated with the development of atherosclerosis that mice and humans have in common (the “Overlap Genes”). The Stanford Platform allowed us to analyze the expression of the Overlap Genes following the administration of candidate drugs to atherosclerotic-prone mice, and thus provided a useful tool for studying the effects of therapeutic intervention in the development of cardiovascular disease. This platform also gave us useful insight into the molecular pathways that we believe to be most relevant to the cardiovascular disease process. In January 2009, the Company advised Stanford that it was terminating its exclusive license agreement effective February 14, 2009.

     In 2005, the Company identified 5-Lipoxygenase (“5LO”) as a key target of interest for treating atherosclerosis. 5LO is a key enzyme in the biosynthesis of leukotrienes, which are important mediators of inflammation and are involved in the development and progression of atherosclerosis. In addition, cardiovascular-related literature has also identified 5LO as a key target of interest for treating atherosclerosis and preventing heart attack and stroke. Following such identification, the Company identified a number of late-stage 5LO inhibitors that had been in clinical trials conducted by large biotechnology and pharmaceutical companies primarily for non-cardiovascular indications, including ABT-761, a compound developed by Abbott Laboratories (“Abbott”) for use in treatment of asthma. Abbott abandoned its ABT-761 clinical program in 1996 after the U.S. Food and Drug Administration (“FDA”) approved a similar Abbott compound for use in asthma patients. Abbott made no further developments to ABT-761 from 1996 to 2005. In August 2005, the Company entered into an exclusive, worldwide license agreement (the “Abbott License”) with Abbott to develop and commercialize ABT-761 for any indication. The Company subsequently renamed the compound VIA-2291.

     VIA-2291 is a potent, selective and reversible inhibitor of 5LO that the Company is developing as a once-daily, oral drug to treat inflammation in the blood vessel wall thereby leading to a reduction in MACE. In March 2006, the Company filed an Investigational New Drug (“IND”) application with the FDA outlining the Company’s Phase II clinical program, which initially consisted of two trials for VIA-2291. Each of these clinical trials was initiated during 2006 to study the safety and efficacy of VIA-2291 in patients with existing cardiovascular disease. Using biomarkers of inflammation, medical imaging techniques and bioassays of plaque, the Company is evaluating and determining VIA-2291’s ability to reduce vascular inflammation in atherosclerotic plaque. The Company enrolled 50 patients in a Phase II study of VIA-2291 at clinical sites in Italy for patients who had a CEA procedure. In addition, the Company enrolled 191 patients in a second Phase II study at 15 clinical sites in the United States and Canada for patients with ACS who experienced a recent heart attack. In order to further evaluate VIA-2291’s effect over a longer timeframe, a sub-study of patients in the ACS trial continued for an additional 12 weeks of treatment at the same dose followed by a 64 slice MDCT scan following up on the baseline MDCT scan that all patients received in the ACS trial.

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     In October 2007, the Company’s Data Safety Monitoring Board (“DSMB”) performed a review of both safety and efficacy data related to the Company’s CEA and ACS clinical trials to determine the progress in the clinical program and the patient safety of VIA-2291. Based on this review, the DSMB observed a continued acceptable safety profile and evidence of a consistent pharmacological effect of VIA-2291 as would be predicted given its proposed mechanism of action. The DSMB recommended the studies continue as planned.

     Following the results of the DSMB review, the Company began enrolling patients in a third Phase II clinical trial that utilizes FDG-PET, to measure the impact of VIA-2291 on reducing vascular inflammation in treated patients. The Company plans to enroll approximately 50 patients following an ACS event, such as heart attack or stroke, into a 24 week, randomized, double blind, placebo-controlled study. Endpoints in the study include reduction in plaque inflammation as measured with FDG-PET, as well as assessment of standard biomarker measurements of inflammation.

     As described under Part I, Item 1 “Business — ACS and CEA Clinical Trial Results,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, on November 9, 2008, the Company announced the results of its ACS and CEA Phase II clinical trials of its lead product candidate, VIA-2291, at the AHA 2008 Scientific Sessions conference in New Orleans, Louisiana (the “AHA Conference”). Enrollment of patients in the FDG-PET Phase II clinical trial is ongoing and results are expected in the second half of 2009.

     In January 2007, the Company expanded its product pipeline with the acquisition of certain patent applications, know-how and related assets (including, compounds and quantities of physical materials and reagents) related to a library of over 2,000 phosphodiesterase (“PDE”) inhibitor small molecule compounds (the “Neuro3D Compounds”) from Neuro3D, S.A., a French corporation (“Neuro3D”). The Company has focused preclinical research and development activities on identifying the compounds of highest interest for treatment of atherosclerotic-related inflammation. While the Company’s experts and advisors believe that inhibitors of certain classes of PDEs, in particular PDE4, may be novel targets for the treatment of inflammation related to atherosclerosis, preclinical research has not identified a lead compound appropriate for further development and all preclinical work on compounds has been terminated.

     In March 2007, the Company entered into an Option and License Agreement with Santen Pharmaceutical Co. Ltd., a Japanese pharmaceutical company (“Santen”), pursuant to which the Company paid Santen a $25,000 option fee to acquire an exclusive, twelve-month option to enter into a worldwide license agreement related to certain patent rights, know-how and related compounds held by Santen generally characterized as leukotriene A4 hydrolase inhibitors. During 2008, the Company concluded that it would not exercise the option agreement and terminated its relationship with Santen.

     In December 2008, the Company entered into two agreements with Roche to license, on an exclusive, worldwide basis, two sets of compounds. The first license is for Roche’s thyroid hormone receptor (“THR”) beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche’s preclinical diacylglycerol acyl transferease 1 (“DGAT1”) metabolic disorders program.

     To further expand its product candidate pipeline, the Company continues to engage in discussions regarding the purchase or license of additional preclinical or clinical compounds that it believes may be of interest in treating inflammation.

     Through March 31, 2009, the Company has been primarily engaged in developing initial procedures and product technology, recruiting personnel, screening and in-licensing of target compounds, clinical trial activity, and raising capital. The Company is organized and operates as one operating segment.

     The Company has incurred losses since inception as it has devoted substantially all of its resources to research and development, including early-stage clinical trials. As of March 31, 2009, the Company’s accumulated deficit was approximately $64.9 million. The Company expects to incur substantial and increasing losses for the next several years as it continues to expend substantial resources seeking to successfully research, develop, manufacture, obtain regulatory approval for, and commercialize its product candidates.

     The Company has not generated any revenues to date, and does not expect to generate any revenues from licensing, achievement of milestones or product sales until it is able to commercialize product candidates or execute a collaboration agreement. The Company

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cannot estimate the actual amounts necessary to successfully complete the successful development and commercialization of its product candidates or whether, or when, it may achieve profitability.

     Until the Company can establish profitable operations to finance its cash requirements, the Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to raise substantial additional capital through public or private equity or debt financings, the establishment of credit or other funding facilities, collaborative or other strategic arrangements with corporate sources or other sources of financing, the availability of which cannot be assured. The Company raised $11.1 million through a merger (the “Merger”) with Corautus Genetics Inc. (“Corautus”) that was consummated on June 5, 2007, to cover existing obligations and provide operating cash flows. On June 29, 2007, the Company entered into a securities purchase agreement that provided for issuance of 10,288,065 shares of common stock for approximately $25.0 million in gross proceeds. As of March 31, 2009, the Company had $2.4 million in cash on hand. As more fully described in Note 6 to the Unaudited Condensed Financial Statements, in March 2009, the Company entered into a loan with its principal stockholder and one of its affiliates (the “Lenders”) whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million. On March 12, 2009, the Company borrowed an initial amount of $2.0 million. Subject to the Lenders’ approval, the Company may borrow in the aggregate up to an additional $8.0 million at subsequent closings pursuant to the terms of the loan. The Company secured the loan with all of its assets, including the Company’s intellectual property. Management believes that, under normal continuing operations, the total amount of cash available under this loan, if borrowed, will enable the Company to meet its current obligations through the third quarter of 2009. Borrowings subsequent to the initial $2.0 million borrowing are at the discretion of the Lenders. Management does not believe that existing cash resources will be sufficient to enable the Company to meet its ongoing working capital requirements for the next twelve months and the Company will need to raise substantial additional funding in the near term to meet its working capital requirements. As a result, there are substantial doubts that the Company will be able to continue as a going concern and, therefore, may be unable to realize its assets and discharge its liabilities in the normal course of business. The unaudited condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classifications of liabilities that may be necessary should the entity be unable to continue as a going concern.

     The Company cannot guarantee to its stockholders that the Company’s efforts to raise additional private or public funding will be successful. If adequate funds are not available in the near term, the Company may be required to:

• terminate or delay clinical trials or studies of VIA-2291;

• terminate or delay the preclinical development of one or more of its other preclinical candidates;

• curtail its licensing activities that are designed to identify molecular targets and small molecules for treating cardiovascular disease;

• relinquish rights to product candidates, development programs, or discovery development programs that it may otherwise seek to develop or commercialize on its own; and

• delay, reduce the scope of, or eliminate one or more of its research and development programs, or ultimately cease operations.

     All outstanding principal and accrued interest under the loan are due on September 14, 2009, subject to certain repayment acceleration provisions, including, without limitation, upon completion of a financing with gross proceeds in excess of $20.0 million. The Company will need to be able to repay the loan when it becomes due, extend the terms of the loan or find alternative financing arrangements acceptable to the Company. There is no guarantee that the Company will be able to do so. Upon the occurrence of an event of default, the Lenders may terminate the loan, demand immediate payment of all amounts borrowed by the Company and take possession of all collateral securing the loan, which consists of all of our assets, including our intellectual property rights.

     Revenue

     The Company has not generated any revenue to date and does not expect to generate any revenue from licensing, achievement of milestones or product sales until the Company is able to commercialize product candidates or execute a collaboration arrangement.

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     Research and Development Expenses

     Since inception, the Company is focused on the development of compounds for the treatment of cardiovascular and metabolic disease. The Company has one compound, VIA-2291, in completed ACS and CEA Phase II clinical trials in North America and Europe, and ongoing in the FDG-PET Phase II clinical trial in North America. As described more fully above under “Recent Developments”, the Company reported results from a sub-study of its ACS Phase II clinical trial in May of 2009.

     Research and development (“R&D”) expense represented 51% and 55% of total operating expense for the three months ended March 31, 2009 and 2008, respectively, and 57% for the period from June 14, 2004 (date of inception) to March 31, 2009. The Company expenses research and development costs as incurred. Research and development expenses are those incurred in identifying, in-licensing, researching, developing and testing product candidates. These expenses primarily consist of the following:

• compensation of personnel associated with research and development activities, including consultants, investigators, and contract research organizations (“CROs”);

• in-licensing fees;

• laboratory supplies and materials;

• costs associated with the manufacture of product candidates for preclinical testing and clinical studies;

• preclinical costs, including toxicology and carcinogenicity studies;

• fees paid to professional service providers for independent monitoring and analysis of the Company’s clinical trials;

• depreciation and equipment; and

• allocated costs of facilities and infrastructure.

     The following reflects the breakdown of the Company’s research and development expenses generated internally versus externally for the three months ended March 31, 2009 and 2008, and for the period from June 14, 2004 (date of inception) to March 31, 2009:

					Period from
					June 14, 2004
	Three Months Ended				(date of inception) to
	March 31, 2009		March 31, 2008		March 31, 2009
Externally generated research and development expense	$	1,435,875	$	2,219,801	$	26,501,851
Internally generated research and development expense		698,881		1,098,361		10,483,868
Total	$	2,134,756	$	3,318,162	$	36,985,719

     Externally generated research and development expenses consist primarily of the following:

					Period from
					June 14, 2004
	Three Months Ended				(date of inception) to
	March 31, 2009		March 31, 2008		March 31, 2009
In-licensing expenses	$	400,000	$	6,250	$	5,270,000
CRO and investigator expenses		530,754		1,456,290		10,189,978
Consulting expenses		269,129		312,598		5,567,667
Other		235,992		444,663		5,474,206
Total	$	1,435,875	$	2,219,801	$	26,501,851

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     Internally generated research and development expenses consist primarily of the following:

					Period from
					June 14, 2004
	Three Months Ended				(date of inception) to
	March 31, 2009		March 31, 2008		March 31, 2009
Personnel and related expenses	$	482,576	$	769,880	$	7,296,530
Stock-based compensation expense		101,111		114,034		920,944
Travel and entertainment expense		38,785		108,885		1,024,155
Other		76,409		105,562		1,242,239
Total	$	698,881	$	1,098,361	$	10,483,868

     The Company does not presently segregate research and development expenses by project because our research is focused exclusively on atherosclerosis and cardiometabolic disease as a unitary field of study. Although the Company has a mix of preclinical and clinical research and development, these areas are combined and have not yet matured to the point where they are separate and distinct projects. The Company does not separately allocate the intellectual property, scientists and other resources dedicated to these efforts to individual projects as we are conducting our research on an integrated basis.

     The Company expects that research and development expenses will continue to be a significant expenditure for the foreseeable future. Clinical trial activity in the CEA and ACS Phase II clinical trials has decreased as a result of completing the studies, although expenditures for the ongoing FDG-PET trial remain significant. In addition, the Company anticipates the potential need to further expand activities as a result of assets recently licensed from Roche that will require significant spending on preclinical and clinical development. The ultimate level and timing of research and development spending is difficult to predict due to the uncertainty inherent in the timing and extent of progress in our research programs, and initiation and progress of clinical trials. In addition, the results from the Company’s preclinical and clinical research and development activities, as well as the results of trials of similar therapeutics under development by others, will influence the number, size and duration of planned and unplanned trials. As the Company’s research efforts mature, we will continue to review the direction of our research based on an assessment of the value of possible future compounds emerging from these efforts. Based on this continuing review, the Company expects to establish discrete research programs and evaluate the cost and potential for cash inflows from commercializing products, partnering with others in the biotechnology or pharmaceutical industry, or licensing the technologies associated with these programs to third parties.

     The Company believes that it is not possible at this stage to provide a meaningful estimate of the total cost to complete our ongoing projects and bring any proposed products to market. The potential use of compounds targeting vascular inflammation as a therapy is an emerging area, and it is not known what clinical trials will be required by the FDA in order to gain marketing approval. Costs to complete current or future development programs could vary substantially depending upon the projects selected for development, the number of clinical trials required and the number of patients needed for each study. It is possible that the completion of these studies could be delayed for a variety of reasons, including difficulties in enrolling patients, incomplete or inconsistent data from the preclinical or clinical trials, difficulties evaluating the trial results and delays in manufacturing. Any delay in completion of a trial would increase the cost of that trial, which would harm our results of operations. Due to these uncertainties, the Company cannot reasonably estimate the size, nature or timing of the costs to complete, or the amount or timing of the net cash inflows from our current activities. Until the Company obtains further relevant preclinical and clinical data, and progresses further through the FDA regulatory process, the Company will not be able to estimate our future expenses related to these programs or when, if ever, and to what extent we will receive cash inflows from resulting products. The Company reported results for the ACS and CEA Phase II clinical trials at the AHA Conference in November 2008 and reported results from the sub-study of its ACS Phase II clinical trial at the AHA Arteriosclerosis, Thrombosis and Vascular Biology Annual Conference 2009 in May of 2009. Enrollment of patients in the FDG-PET Phase II clinical trial is ongoing and results are expected in the second half of 2009.

     General and Administrative

     General and administrative expense consists primarily of salaries and other related costs for personnel in executive, finance, accounting, business development, information technology 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.

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     The Company has experienced increases in general and administrative expenses for investor relations and other activities associated with operating as a publicly-traded company, including costs incurred in connection with maintaining compliance with the Sarbanes-Oxley Act of 2002. These increases have included the hiring of additional personnel.

     Interest Income, Interest Expense and Other Expenses

     Interest income consists of interest earned on cash and cash equivalents. Interest expense consists primarily of interest due on secured notes payable and capital leases. Other expenses consist of net realized and unrealized gains and losses associated with foreign currency transactions, and unrealized gains and losses associated with the warrant obligation.

Results of Operations

Comparison of the three months ended March 31, 2009 and 2008

     The following table summarizes the Company’s results of operations with respect to the items set forth in such table for the three months ended March 31, 2009 and 2008 together with the change in such items in dollars and as a percentage:

	Three Months Ended
	March 31,		March 31,
	2009		2008			$ Change			% Change
Revenue	$	—	$	—		$	—			—
Research and development expense		2,134,756		3,318,162			(1,183,406	)		(36	)%
General and administrative expense		2,064,020		2,664,957			(600,937	)		(23	)%
Interest income		—		102,754			(102,754	)		—
Interest expense		113,217		120			113,097			—
Other income/(expense)		9,855		(28,739	)		38,594			134	%

     Revenue.The Company did not generate any revenue in the three months ended March 31, 2009 and 2008, respectively, and does not expect to generate any revenue from licensing, achievement of milestones or product sales until the Company is able to commercialize product candidates or execute a collaboration arrangement.

     Research and Development Expense.Research and development expense decreased 36%, or approximately $1.2 million, from $3.3 million for the three months ended March 31, 2008 to $2.1 million for the three months ended March 31, 2009. Clinical trial and preclinical related CRO and investigator clinical trial related expenses decreased by approximately $1.0 million from $1.5 million in the three months ended March 31, 2008 to $500,000 in the three months ended March 31, 2009; and data analysis and other R&D expenses decreased $200,000 from $400,000 in the three months ended March 31, 2008 to $200,000 in the three months ended March 31, 2009. These R&D and clinical trial related expenses decreased primarily because the of the completion of the ACS and CEA phase II clinical trials in the fourth quarter of 2008, net of an increase in the progress in the FDG-PET phase II clinical trial in Q1 2009. Employee related expenses including salary, benefits, stock-based compensation, travel and entertainment expense, information technology and facilities expenses, decreased $400,000 from $1.1 million in the three months ended March 31, 2008 to $700,000 in the three months ended March 31, 2009 primarily as a result of a decrease in headcount and a decrease in the amount of bonus expense in Q1 2009 versus Q1 2008. In-licensing expenses increased $400,000 from $0 in the three months ended March 31, 2008 to $400,000 in the three months ended March 31, 2009 due the in-license of two Roche compounds in the three months ended March 31, 2009. Consulting expenses were approximately $300,000 in each of the three months ended March 31, 2009 and 2008.

     General and Administrative Expense.General and administrative expense decreased 23%, or approximately $600,000, from $2.7 million for the three months ended March 31, 2008 to $2.1 million for the three months ended March 31, 2009. Employee related expenses, including salary and benefits, stock-based compensation and travel and entertainment expenses decreased $200,000 from $1.2 million in the three months ended March 31, 2008 to $1.0 million in the three months ended March 31, 2009, primarily due to a decrease in the amount of incentive compensation expense in Q1 2009 versus Q1 2008. Corporate general and administrative expenses decreased $300,000 from $1.2 million in the three months ended March 31, 2008 to $900,000 in the three months ended March 31, 2009 primarily due to a $300,000 decreases in audit and legal expense, $100,000 decrease in public company expenses primarily due to a significant decrease in investor relations expenses, offset by a $100,000 increase in facilities expenses primarily due to an increase in

26

rent related to the new leased property. Consulting expenses decreased $100,000 from $300,000 in the three months ended March 31, 2008 to $200,000 in the three months ended March 31, 2009 due primarily to the timing of business development services.

     Interest Income.Interest income decreased $103,000, from $103,000 in the three months ended March 31, 2008 to $0 in the three months ended March 31, 2009. The Company did not have any substantive excess cash reserves to invest in the first quarter of 2009.

     Interest Expense.Interest expense increased $113,000 from $0 in the three months ended March 31, 2008 to $100,000 in the three months ended March 31, 2009. The $113,000 in interest expense consisted of $16,000 in interest on the note payable — affiliate and $97,000 in interest expense incurred in the amortization of the discount on notes payable — affiliate.

     Other Income/(Expense).Other income/(expense) increased $39,000, from net losses on foreign exchange transactions of ($29,000) in the three months ended March 31, 2008 to net gains on foreign exchange gains of $10,000 in the three months ended March 31, 2009. The foreign exchange transactions were incurred primarily in connection with the CEA phase II clinical trial.

     Income Tax Expense.There is no income tax provision (benefit) for federal or state income taxes as the Company has incurred operating losses since inception and a full valuation allowance has also been in place since inception.

Liquidity and Capital Resources

     The Company does not have commercial products from which to generate cash resources. As a result, from June 14, 2004 (date of inception) the Company has financed its operations primarily through a series of issuances of secured convertible notes, the generation of interest income on the borrowed funds, the Merger with Corautus, a private placement through a public equities transaction, and debt. The Company expects to incur substantial and increasing losses for the next several years as it continues to expend substantial resources seeking to successfully research, develop, manufacture, obtain regulatory approval for, and commercialize its product candidates.

     The Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to raise substantial additional financing through public or private equity or debt financings, collaborative or other strategic arrangements with corporate sources or other sources of financing, until it is able to establish profitable operations. The Company received approximately $11.1 million in cash through the Merger with Corautus that was consummated on June 5, 2007, and the Company issued 10,288,065 shares of common stock for $25.0 million in gross proceeds in the private placement equity financing which closed in July and August of 2007.

     In March 2009, the Company entered into a loan with its principal stockholder and one of its affiliates whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million as more fully described in Note 6 to the Unaudited Condensed Financial Statements. The Company secured the loan with all of its assets, including the Company’s intellectual property. On March 12, 2009, the Company borrowed an initial amount of $2.0 million. Subject to the Lenders’ approval, the Company may borrow in the aggregate up to an additional $8.0 million at subsequent closings pursuant to the terms of the loan. Management believes that, under normal continuing operations, the total amount of cash available under this loan, if borrowed, will enable the Company to meet its current obligations through the third quarter of 2009. Borrowings subsequent to the initial $2.0 million borrowing are at the discretion of the Lenders. Management does not believe that existing cash resources will be sufficient to enable the Company to meet its ongoing working capital requirements for the next twelve months and the Company will need to raise substantial additional funding in the near term to meet its working capital requirements. As a result, there are substantial doubts that the Company will be able to continue as a going concern and, therefore, may be unable to realize its assets and discharge its liabilities in the normal course of business. Management is continuously exploring financing alternatives, including raising additional capital through private or public equity or debt financings, the establishment of credit or other funding facilities, entering into collaborative or other strategic arrangements with corporate sources or other sources of financing, which may include partnerships for product development and commercialization, merger, sale of assets or other similar transactions.

     Global market and economic conditions have been, and continue to be, disrupted and volatile, and, recently, such volatility has reached unprecedented levels. The Company cannot provide assurance that additional financing will be available in the near term when needed, particularly in light of the current economic environment and adverse conditions in the financial markets, or that, if

27

available, financing will be obtained on terms favorable to the Company or to the Company’s stockholders. Having insufficient funds may require the Company to delay, scale back, or eliminate some or all research and development programs, including clinical trial activities, or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than the Company would otherwise choose. Failure to obtain adequate financing in the near term will adversely affect the Company’s ability to operate as a going concern and may require the Company to cease operations. If the Company raises additional capital by issuing equity securities, its existing stockholders’ ownership will be diluted. In addition, to the extent the warrants granted to the Lenders to purchase an aggregate of 83,333,333 shares of common stock at an exercise price of $0.12 per share vest and are exercised by the Lenders, existing stockholders’ ownership in the Company will be significantly diluted. Any additional debt financing the Company enters into may involve covenants that restrict its operations. The loan with the Lenders includes restrictive covenants relating to the Company’s ability to incur additional indebtedness, make future acquisitions, consummate asset dispositions, grant liens and pledge assets, pay dividends or make other distributions, incur capital expenditures and make restricted payments. The Company may also be required to pledge all or substantially all of its assets, including intellectual property rights, as collateral to secure any debt obligations. The Company’s obligations under the loan are secured by all of the Company’s assets, including its intellectual property and any additional pledge of its assets would require the consent of the lenders. In addition, if the Company raises additional funds through collaborative or other strategic arrangements, the Company may be required to relinquish potentially valuable rights to its product candidates or grant licenses on terms that are not favorable to the Company.

     Prior to the Merger and the private placement, the Company issued secured convertible notes for a total of $24.4 million from June 14, 2004 (date of inception) to March 31, 2009 to finance its operations. All of the $24.4 million in secured convertible notes have been converted to equity as of March 31, 2009.

     The Company had $2.4 million in cash and cash equivalents at March 31, 2009 compared to $17.9 million as of March 31, 2008. During the twelve months ended March 31, 2009, the Company had cash inflows of $2.1 million and cash outflows of $17.6 million resulting in a net decrease in cash of $15.5 million. Cash inflows consisted of the $2.0 million in proceeds from the initial draw on the affiliate loan arrangement, and $100,000 in interest income. Cash outflows of $17.6 million consisted of $4.8 million in payments for payroll and related expenses, $6.3 million in payments for research and development related expenses, $1.9 million in payments to consultants for consulting services, $1.3 million in payments for legal services, $1.5 million in payments for corporate expenses, including audit fees, board fees, and public company expenses, and $1.8 million in payments for travel reimbursement, facilities and other office related expenses.

     The Company used $3.7 million and $5.2 million in net cash from operations in the three months ended March 31, 2009 and 2008, respectively, and $57.4 million for the period from June 14, 2004 (date of inception) to March 31, 2009. The $1.5 million decrease in the net cash used in operations resulted from an decrease of $1.6 million in net loss from $5.9 million in the three months ended March 31, 2008 to $4.3 million in the three months ended March 31, 2009, a $500,000 decrease in net assets, a $600,000 decrease in net liabilities; a $100,000 increase in amortization of the discount on notes payable; and a decrease of $100,000 in stock-based compensation expense. The decrease of $1.6 million in net loss was the result of a decrease of $1.2 million in research and development expenses and a decrease of $600,000 in general and administrative expenses, offset by an decrease of $100,000 in interest income and an increase of $100,000 in interest expense. For the period from June 14, 2004 (date of inception) to March 31, 2009, the Company used $57.4 million in operating activities primarily resulting from inception-to-date net losses of $64.9 million, net of $3.1 million in inception-to-date stock compensation expense, $500,000 in depreciation and amortization expense and other non-cash expenses, and a $3.9 million net increase in net assets and liabilities. The Company cannot be certain if, when or to what extent it will receive cash inflows from the commercialization of its product candidates. The Company expects its clinical, research and development expenses to be substantial and to increase over the next few years as it continues the advancement of its product development programs.

     The Company used $3,000 and $5,000 in net cash from investing activities in the three months ended March 31, 2009 and 2008, respectively, and obtained $10.2 million cash from investing activities for the period from June 14, 2004 (date of inception) to March 31, 2009. The Company used $3,000 and $5,000 in cash for capital expenditures in the three months ended March 31, 2009 and 2008, respectively. From June 14, 2004 (date of inception) to March 31, 2009, the Company received $11.1 million in cash from the Merger with Corautus, net of an additional $350,000 in capitalized Merger costs and $651,000 in capital expenditures.

     Net cash provided from financing activities increased by $2.0 million from $1,000 of cash used in the three months ended March 31, 2008 to $2.0 million of cash received in the three months ended March

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31, 2009. The increase of $2.0 million reflects the first draw on the note payable to an affiliate in the three months ended March 31, 2009. There were no debt or equity financings in 2008. From June 14, 2004 (date of inception) to March 31, 2009, the Company has received $49.6 million in net cash provided by financing activities. The $49.6 million of cash provided consists of $24.4 million of cash received through the issuance of secured convertible debt, $2.0 million from the issuance of notes payable to an affiliate, $23.1 million of net cash received through the equity financing completed in 2007, and $100,000 of cash received from the exercise of stock options.

Contractual Obligation and Commitments

     The following table describes the Company’s contractual obligations and commitments as of March 31, 2009:

	Payments Due by Period
			Less Than						After
	Total		1 Year		1-3 Years		4-5 Years		5 Years
Operating lease obligations (1)		1,708,840		431,462		887,465		389,913		—
Notes payable — affiliate (2)		2,000,000		2,000,000		—		—		—
Uncertain tax positions (3)		—		—		—		—		—
	$	3,708,840	$	2,431,462	$	887,465	$	389,913	$	—

(1)	Operating lease obligations reflect contractual commitments for the Company’s office facilities for its headquarters in San Francisco, California and its clinical operations location in Princeton, New Jersey. In January 2008, the Company expanded and extended both leases to ensure adequate facilities for current activities. The San Francisco headquarters lease has been extended through May 31, 2013 and has been expanded to a total of 8,180 square feet. The lease amendment resulted in an increase of approximately $1.5 million in future rent. The lease amendment to the Princeton, New Jersey facility extends the lease through April 2, 2012 and has been expanded to a total of 4,979 square feet. The lease amendment resulted in an increase of approximately $330,000 in future rent.
(2)	As more fully described in Note 6 to the Unaudited Condensed Financial Statements, in March 2009, the Company entered into a Note and Warrant Purchase Agreement (the “Loan Agreement”) with its principal stockholder and one of its affiliates (the “Lenders”) whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million, pursuant to the terms of promissory notes (collectively, the “Notes”) delivered under the Loan Agreement (the “Loan Transaction”). On March 12, 2009, the Company borrowed an initial amount of $2.0 million. Subject to the Lenders’ approval, the Company may borrow in the aggregate up to an additional $8.0 million at subsequent closings pursuant to the terms of the Loan Agreement and Notes. The Notes are secured by a first priority lien on all of the assets of the Company. Amounts borrowed under the Notes accrue interest at the rate of 15% per annum, which increases to 18% per annum following an event of default. Unless earlier paid in accordance with the terms of the Notes, all unpaid principal and accrued interest shall become fully due and payable on the earlier to occur of (i) September 14, 2009, (ii) the closing of a debt, equity or combined debt/equity financing resulting in gross proceeds or available credit to the Company of not less than $20.0 million (a “Financing”), and (iii) the closing of a transaction in which the Company sells, conveys, licenses or otherwise disposes of a majority of its assets or is acquired by way of a merger, consolidation, reorganization or other transaction or series of transactions pursuant to which stockholders of the Company prior to such acquisition own less than 50% of the voting interests in the surviving or resulting entity.
(3)	The Company adopted FIN 48 on the first day of its 2007 fiscal year. The amount of unrecognized tax benefits at December 31, 2008 was $274,000. This amount has been excluded from the contractual obligations table because a reasonably reliable estimate of the timing of future tax settlements cannot be determined.

Off-Balance Sheet Arrangements

     The Company has not engaged in any off-balance sheet arrangements.

Critical Accounting Policies

     The Company’s discussion and analysis of its financial condition and results of operations are based on its unaudited condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these unaudited condensed financial statements requires the Company to make estimates and

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judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of revenue and expenses during the reporting periods. Note 2 to the Unaudited Condensed Financial Statements includes a summary of the Company’s significant accounting policies and methods used in the preparation of the Company’s unaudited condensed financial statements. On an ongoing basis, the Company’s management evaluates its estimates and judgments, including those related to accrued expenses and the fair value of its common stock. The Company’s management bases its estimates on historical experience, known trends and events, and various other factors that it believes to be reasonable under the circumstances, which form its basis for management’s 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.

     The Company’s management believes the following accounting policies and estimates are most critical to aid in understanding and evaluating the Company’s reported financial results.

     A critical accounting policy is defined as one that is both material to the presentation of our unaudited condensed financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: 1) we are required to make assumptions about matters that are uncertain at the time of the estimate; and 2) different estimates we could reasonably use, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

     Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience, facts available to date, and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the unaudited condensed financial statements as soon as they became known. The estimates are subject to variability in the future due to external economic factors as well as the timing and cost of future events. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our unaudited condensed financial statements are fairly stated in accordance with GAAP, and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our unaudited condensed financial statements.

Research and Development Accruals

     As part of the process of preparing its unaudited condensed financial statements, the Company is required to estimate expenses that the Company believes it has incurred, but has not yet been billed for. This process involves identifying services and activities that have been performed by third party vendors on the Company’s behalf and estimating the level to which they have been performed and the associated cost incurred for such service as of each balance sheet date in its unaudited condensed financial statements. Examples of expenses for which the Company accrues include professional services, such as those provided by certain CROs and investigators in conjunction with clinical trials, and fees owed to contract manufacturers in conjunction with the manufacture of clinical trial materials. The Company makes these estimates based upon progress of activities related to contractual obligations and also information received from vendors.

     A substantial portion of the Company’s preclinical studies and all of the clinical trials have been performed by third-party CROs and other vendors. For preclinical studies, the significant factors used in estimating accruals include the percentage of work completed to date and contract milestones achieved. For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, duration of enrollment and percentage of work completed to date.

     The Company monitors patient enrollment levels and related activities to the extent possible through internal reviews, correspondence and status meetings with CROs, and review of contractual terms. The Company’s estimates are dependent on the timeliness and accuracy of data provided by our CROs and other vendors. If we have incomplete or inaccurate data, we may either underestimate or overestimate activity levels associated with various studies or trials at a given point in time. In this event, we could

30

record adjustments to research and development expenses in future periods when the actual activity level become known. No material adjustments to preclinical study and clinical trial expenses have been recognized to date.

Stock-based Compensation

     On January 1, 2006, the Company adopted the provisions of, and accounted for stock-based compensation in accordance with SFAS No. 123R,“Share-Based Payment”which replaced SFAS No. 123,“Accounting for Stock-Based Compensation”(“SFAS No. 123R”), which supersedes Accounting Principles Board Opinion No. 25,“Accounting for Stock Issued to Employees”.Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. The Company elected the modified-prospective method, under which prior periods are not revised for comparative purposes. The valuation provisions of SFAS No. 123R apply to new grants and to grants that were outstanding as of the effective date and are subsequently modified. Estimated compensation for grants that were outstanding as of the effective date are now being recognized over the remaining service period using the compensation cost estimated for the SFAS No. 123 pro forma disclosures.

     The Company uses the Black-Scholes option pricing model to estimate the fair value of stock-based awards under SFAS No. 123R. The determination of the fair value of stock-based awards on the date of grant using an option-pricing model is affected by the value of the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends.

     Prior to June 5, 2007, the Company was a privately-held company and its common stock was not publicly traded. The fair value of stock options granted from January 2006 through June 5, 2007 (date of completion of the Merger with Corautus), and related stock-based compensation expense, were determined based upon quoted stock prices of Corautus, the exchange ratio of shares in the Merger, and a private company 10% discount for grants prior to March 31, 2007, as this represented the best estimate of market value to use in measuring compensation. Subsequent to the Merger, the Company, now publicly held, uses the closing stock price of the Company’s common stock on the date the options are granted to determine the fair market value of each option. The Company revalues each non-employee option quarterly based on the closing stock price of the Company’s common stock on the last day of the quarter.

     The Company estimates the expected term of options granted by taking the average of the vesting term and the contractual term of the option. The Company estimates common stock price volatility using a hybrid approach of 28% actual historical volatility using a 1.7 year look back period of the Company’s common stock, blended with 72% of an average of selected peer group volatility. Prior to the three months ended March 31, 2009, the Company used peer group calculated volatility as the Company is a development stage company with limited stock price history from which to forecast stock price volatility. The risk-free interest rates used in the valuation model are based on U.S. Treasury issues with remaining terms similar to the expected term on the options. The Company does not anticipate paying any dividends in the foreseeable future and therefore used an expected dividend yield of zero.

     In March 2009, the Company calculated an annualized forfeiture rate of 2.63% using historical data. This rate was used to exclude future forfeitures in the three months ended March 31, 2009 calculation of stock-based compensation expense. The Company used an estimated a forfeiture rate of 5% in the three months ended March 31, 2008 as there was not sufficient historical information available to establish a calculated forfeiture rate.

     The assumptions used to value option and restricted stock award grants for the three months ended March 31, 2009 and 2008 are as follows:

	Three Months Ended
	March 31, 2009			March 31, 2008
Expected life from grant date		6.08			2.5-6.08
Expected volatility		97	%		79	%
Risk free interest rate		1.67	%		2.48	%
Dividend yield		—			—

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     The following table summarizes stock-based compensation expense related to stock options and warrants under SFAS No. 123R for the three months ended March 31, 2009 and 2008 and for the period from June 14, 2004 (date of inception) to March 31, 2009, which was included in the unaudited condensed statements of operations in the following captions:

					Period from
					June 14, 2004
	Three Months Ended				(Date of Inception) to
	March 31,		March 31,		March 31,
	2009		2008		2009
Research and development expense	$	97,217	$	114,034	$	916,417
General and administrative expense		241,835		298,938		2,105,157
Total	$	339,052	$	412,972	$	3,021,574

     If all of the remaining non-vested and outstanding stock option awards that have been granted became vested, we would recognize approximately $2.7 million in compensation expense over a weighted average remaining period of 2.1 years. However, no compensation expense will be recognized for any stock option awards that do not vest.

     The following table summarizes stock-based compensation expense related to employee restricted stock awards under SFAS No. 123R for the three months ended March 31, 2009 and 2008 and for the period from June 14, 2004 (date of inception) to March 31, 2009, which was included in the unaudited condensed statements of operations in the following captions:

					Period from
					June 14, 2004
	Three Months Ended				(Date of Inception) to
	March 31,		March 31,		March 31,
	2009		2008		2009
Research and development expense	$	3,894	$	—	$	4,528
General and administrative expense		11,621				13,514
Total	$	15,515	$	—	$	18,042

     If all of the remaining non-vested restricted stock awards that have been granted became vested, we would recognize approximately $107,000 in compensation expense over a weighted average remaining period of 1.7 years. However, no compensation expense will be recognized for any stock option awards that do not vest.

Forward-looking statements

     This Quarterly Report on Form 10-Q contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or to the Company’s future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company’s control and that could materially affect actual results, levels of activity, performance or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to:

• the Company’s ability to borrow additional amounts under the loan from the Lenders, which is subject to the discretion of the Lenders;

• the Company’s ability to obtain necessary financing in the near term, including amounts necessary to repay the loan from the Lenders by the September 14, 2009 maturity date (or earlier if certain repayment acceleration provisions are triggered);

• the Company’s ability to control its operating expenses;

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• the Company’s ability to comply with covenants included in the loan from the Lenders;

• the Company’s ability to maintain the listing of its common stock on NASDAQ;

• the Company’s ability to timely recruit and enroll patients for the FDG-PET clinical trial, as well as any future clinical trial;

• the Company’s failure to obtain sufficient data from enrolled patients that can be used to evaluate VIA-2291, thereby impairing the validity or statistical significance of its clinical trials;

• the Company’s ability to successfully complete its clinical trials of VIA-2291 on expected timetables and the outcomes of such clinical trials;

• complexities in designing and implementing current cardiovascular clinical trials using histological examinations, measurement of biomarkers, medical imaging, and atherosclerotic plaque bioassays;

• the results of the Company’s clinical trials, including without limitation, with respect to the safety and efficacy of VIA-2291;

• if the results of the ACS and CEA studies, upon further review, are revised, interpreted differently by regulatory authorities or negated by later stage clinical trials;

• the Company’s ability to obtain necessary FDA approvals, including to initiate future clinical trials of VIA-2291 (such as a Phase IIb trial or a Phase III registration trial);

• the Company’s ability to successfully commercialize VIA-2291;

• the Company’s ability to obtain and protect its intellectual property related to its product candidates;

• the Company’s potential for future growth and the development of its product pipeline, including the THR Beta Agonist candidate and the other compounds licensed from Roche;

• the Company’s ability to form and maintain collaborative relationships to develop and commercialize our product candidates;

• general economic and business conditions; and

• the other risks described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, as supplemented by the risks described under “Risk Factors” in Part II, Item IA of this Quarterly Report on Form 10-Q.

     All forward-looking statements attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of these statements in light of new information or future events.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosures. As of the end of the period covered by this quarterly report, an evaluation was carried out under the supervision and with the participation of the Company’s management,

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including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q, were effective at the reasonable assurance level to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in United States Securities and Exchange Commission rules and forms and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the management, including CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

     There have not been any changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

PART II. — OTHER INFORMATION

Item 1A. Risk Factors

The risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2008 are hereby supplemented to include the following:

Risks Related to the Company’s Business

The Company is at an early stage of development. The Company has never generated and may never generate revenues from commercial sales of its products and the Company may not have products to market for several years, if ever.

     Since its inception, the Company has dedicated substantially all its resources to the support and conduct of research and development of compounds for clinical trials, and specifically, toward the development of VIA-2291. Because none of the Company’s current or potential products have been finally approved by any regulatory authority, the Company currently has no products for commercial sale and has not generated any revenues to date. The Company does not expect to generate any revenues until it successfully partners its current or future programs with a large biotechnology or pharmaceutical partner or until it receives final regulatory approval and launches one of its products for sale.

     The Company is conducting three Phase II clinical trials for VIA-2291. The first Phase II clinical trial, the CEA study, completed enrollment in March 2008 and the last patient visit in July 2008. The second Phase II clinical trial, the ACS study, completed enrollment in May 2008 and the last patient visit in August 2008. Clinical data results from the CEA and ACS trials were presented at the American Heart Association Scientific Sessions 2008 conference on November 9, 2008, as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. To further evaluate VIA-2291’s effect over a longer timeframe, a sub-study of patients in the ACS trial continued for an additional twelve weeks of treatment at the same dose followed by a 64 slice MDCT scan (the “ACS MDCT sub-study”). Clinical data results from the ACS MDCT sub-study were presented at the American Heart Association Arteriosclerosis, Thrombosis and Vascular Biology Annual Conference 2009 on May 1, 2009 as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments” in Part I Item 2 above. The third Phase II clinical trial, the FDG-PET study, is currently enrolling ACS patients who experienced a recent heart attack, who will undergo treatment with a once-a-day 100 mg dose of VIA-2291 or placebo, and be imaged using non-invasive FDG-PET technology. The FDG-PET clinical trial will measure the impact of VIA-2291 on reducing vascular inflammation in treated patients. The Company anticipates results from the FDG-PET Phase II clinical trial in the second half of 2009.

     Based on the data reported from the CEA and ACS studies and the ACS MDCT sub-study, and subject to the receipt of substantial additional financing, the Company anticipates initiating future clinical development activities with respect to VIA-2291 and is currently evaluating various development alternatives. Such clinical development activities may include one or more additional clinical trials designed to further demonstrate that the drug can be safely administered following an acute coronary syndrome event and link the mechanism of action of VIA-2291 to improved cardiac outcomes. The Company is presently evaluating the design and

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strategy of additional clinical trials, which may take the form of a Phase IIb trial, a Phase III registration trial or some combination thereof. Any future trials will require regulatory approval. Substantial additional investment in future clinical trials will be required and will require significant time. The Company is also considering its partnering opportunities with large biotechnology or pharmaceutical companies in connection with its future clinical trials and development activities.

     The Company’s ability to generate product revenue will depend heavily on the successful development and regulatory approval of VIA-2291. Failure to obtain regulatory approval of VIA-2291 would have a material adverse effect on the Company’s business. The Company cannot guarantee that it will be successful in completing the remaining Phase II trial or any subsequent clinical trials initiated, or that it will be able to obtain the necessary financing to initiate and/or complete these clinical trials. The Company also cannot assure you that it will be able to successfully negotiate a strategic collaboration with a large biotechnology or pharmaceutical company with respect to VIA-2291. The Company’s revenues, if any, will be derived from products that the Company does not expect to be commercially available for several years, if at all. The development of VIA-2291 and other product candidates may be discontinued at any stage of the clinical trial programs and the Company may never generate revenue from any of its product candidates. Accordingly, there is no assurance that the Company will ever generate revenues.

Risk Related to the Securities Market and Ownership of the Company’s Common Stock

We may be unable to maintain our listing on the NASDAQ Capital Market. Failure to maintain our listing could adversely affect our business, and the liquidity of our common stock would be seriously limited.

     Our common stock is currently traded on the NASDAQ Capital Market. To maintain a listing on NASDAQ, the Company must maintain minimum listing standards, including quantitative requirements such as certain levels of stockholders’ equity, market capitalization, and continued listing bid price per share of common stock of $1.00 and qualitative requirements such as board and audit committee independence.

     On March 31, 2009, the Company was notified by the NASDAQ Listings Qualification Staff (the “Staff”) that it was not in compliance with NASDAQ Marketplace Rule 4310(c)(3), which requires that the Company maintain either: (i) stockholders’ equity of $2.5 million; (ii) market value of listed securities of $35 million; or (iii) net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years. The Company submitted a specific plan to achieve and sustain compliance with the $2.5 million stockholders’ equity standard, including the time frame for completion of the compliance plan. If the NASDAQ Staff determines that the Company’s plan does not adequately address the issue noted above, the NASDAQ Staff will provide written notice that the Company’s securities will be delisted. At that time, the Company may appeal the NASDAQ Staff’s determination to a NASDAQ Listing Qualifications Panel (the “Panel”), which would stay any further delisting action by NASDAQ pending a final decision by the Panel. There is no assurance that NASDAQ will grant the Company sufficient time to execute its plan to insure that it will maintain its NASDAQ listing. The Company’s common stock may ultimately be delisted from the NASDAQ Capital Market.

     In addition, NASDAQ’s continued listing standards for our common stock require, among other things, that we maintain a closing bid price for our common stock of at least $1.00. Our stock price has been extremely volatile and since October 2008 the bid price per share of common stock has closed below the $1.00 requirement. In response to the current volatility in the U.S. and world financial markets, NASDAQ temporarily suspended the enforcement of the minimum listing requirements for bid price per share and market value of publicly held shares, as of October 16, 2008. The temporary suspension has been extended until July 20, 2009. During the period of the temporary suspension, NASDAQ will not issue any new citations to companies for deficiencies in their bid price per share or their market value of publicly held shares. NASDAQ will continue to monitor securities for compliance during the temporary suspension. Determinations for any new bid price per share and market value of publicly held shares deficiencies will be made using bid prices and market value of publicly held shares starting July 20, 2009. Under the temporarily suspended NASDAQ requirements, if the bid price per share of common stock of the Company fails to meet the minimum listing requirements for a period of 30 consecutive business days, the Company will be notified promptly by NASDAQ and will have a period of 180 calendar days from such notification to achieve compliance. There can be no assurance that the bid price will close above $1.00 by July 20, 2009 when the minimum bid price requirements are reinstated, that the temporary suspension will be further extended or that the Company will be able to maintain the other quantitative and qualitative continued listing requirements of NASDAQ. The trading price of the Company’s common stock is likely to continue to be volatile and subject to wide fluctuations in price in response to various factors,

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many of which are beyond the Company’s control including, among other things, general and industry-specific economic conditions, recent and future financial market events, the Company’s need for substantial additional financing in the near term, lack of trading volume in the Company’s stock, the results of the Company’s clinical trials and concentration of stock ownership by the Company’s principal investor. These broad market and industry factors may seriously harm the market price of the Company’s common stock and cause the Company to not satisfy certain NASDAQ requirements, including the minimum continued listing bid price of $1.00 for its common stock if it is reinstated in July 2009.

     NASDAQ also requires companies to maintain certain qualitative listing standards including, among other things, independence requirements for boards of directors and audit committees. On March 23, 2009, the Company notified the Staff that Richard L. Anderson, an independent director and a member of the Company’s Audit Committee, Compensation Committee and Nominating and Governance Committee, passed away. As a result of Mr. Anderson’s death, the Company’s board of directors is no longer comprised of a majority of independent directors and the Company’s Audit Committee is no longer comprised of at least three independent directors, as required by NASDAQ Marketplace Rules 4350(c)(1) and 4350(d)(2)(A), respectively. In accordance with NASDAQ Marketplace Rules 4350(c)(1) and 4350(d)(4)(B), the Company has until September 17, 2009 (the “cure period”) to regain compliance with the NASDAQ listing standards. If the Company fails to appoint a director who satisfies the independence requirements of the NASDAQ Marketplace Rules, the Company’s common stock may be delisted from the NASDAQ Capital Market. There is no assurance that the Company will be able to identify and appoint a new director who satisfies the NASDAQ independence requirements prior to the expiration of the cure period.

     If the Company’s common stock is delisted from the NASDAQ Capital Market, the price of the Company’s common stock may decline and the liquidity of the common stock may be significantly reduced. Failure to maintain a NASDAQ Capital Market listing may negatively affect the Company’s ability to obtain necessary additional equity or debt financing on favorable terms or at all. In addition, if the Company is unable to maintain its listing on the NASDAQ Capital Market, the Company may seek to have its stock quoted on the FINRA’s OTC Bulletin Board, which is an inter-dealer, over-the-counter market that provides significantly less liquidity than the NASDAQ Capital Market, or in a non-NASDAQ over-the-counter market, such as the “pink sheets.” Quotes for stocks included on the OTC Bulletin Board/pink sheets are not as widely listed in the financial sections of newspapers as are those for the NASDAQ Capital Market. Therefore, prices for securities traded solely on the OTC Bulletin Board may be difficult to obtain and holders of the Company’s common stock may be unable to resell their securities at any price.

The Company’s stock price could decline significantly based on the results and timing of its clinical trials.

     The Company reported results from its CEA and ACS Phase II clinical trials on November 9, 2008 at the American Heart Association Scientific Sessions 2008 conference in New Orleans, Louisiana. Additionally, clinical trial results from the ACS MDCT sub-study were presented at the American Heart Association Arteriosclerosis, Thrombosis and Vascular Biology Annual Conference 2009 on May 1, 2009. The CEA and ACS clinical trial results, as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 and under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the ACS MDCT sub-study clinical trial results, as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments” in Part I Item 2 above, may not be viewed favorably by third parties, including investors, analysts and potential collaborators. In addition, the Company may not be successful in completing the FDG-PET clinical trial or commencing or completing further clinical trials to demonstrate the efficacy of VIA-2291 on the currently projected timetable, if at all. The Company anticipates results from the FDG-PET Phase II clinical trial in the second half of 2009. Biotechnology and pharmaceutical company stock prices have declined significantly when clinical trial results were unfavorable or perceived negatively, or when clinical trials were delayed or otherwise did not meet expectations. Failure to initiate or delays in the Company’s clinical trials of VIA-2291 or any of its other product candidates or unfavorable results or negative perceptions regarding the results of any such clinical trials, could cause the Company’s stock price to decline significantly.

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Item 6. Exhibits

Exhibit No.	Description
3.1	Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Form 10-K filed on March 22, 2005 and incorporated herein by reference)
3.2	Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Form 10-KSB filed on March 30, 2000 and incorporated herein by reference)
3.3	Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.3 to the Form 10-K filed on March 28, 2003 and incorporated herein by reference)
3.4	Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.4 to the Form 10-K filed on March 28, 2003 and incorporated herein by reference)
3.5	Certificate of Amendment to the Restated Certificate of Incorporation (filed as Exhibit 3.5 to the Form 10-K filed on March 28, 2003 and incorporated herein by reference)
3.6	Amended and Restated Certificate of Designation of Preferences and Rights of Series C Preferred Stock (filed as Annex H to the Form S-4/A filed on December 19, 2002 and incorporated herein by reference)
3.7	Certificate of Amendment to the Restated Certificate of Incorporation (Increase in Authorized Shares) (filed as Exhibit 3.7 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)
3.8	Certificate of Amendment to the Restated Certificate of Incorporation (Reverse Stock Split) (filed as Exhibit 3.8 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)
3.9	Certificate of Amendment to the Restated Certificate of Incorporation (Name Change) (filed as Exhibit 3.9 to the Form 10-Q filed on August 14, 2007 and incorporated herein by reference)
3.10	Fourth Amended and Restated Bylaws of VIA Pharmaceuticals, Inc. (filed as Exhibit 3.1 to the Form 8-K filed on April 17, 2008 and incorporated herein by reference)
4.1	Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV, L.P., dated March 12, 2009 (filed as Exhibit 4.1 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
4.2	Warrant to Purchase Common Stock of VIA Pharmaceuticals, Inc. issued to Bay City Capital Fund IV Co-Investment Fund, L.P., dated March 12, 2009 (filed as Exhibit 4.2 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
4.3	Second Amended and Restated Registration Rights Agreement, dated as of March 12, 2009, by and among VIA Pharmaceuticals, Inc. and the parties named therein (filed as Exhibit 4.3 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
10.1	Note and Warrant Purchase Agreement, dated as of March 12, 2009, by and among VIA Pharmaceuticals, Inc., Bay City Capital Fund IV, L.P. and Bay City Capital Fund IV Co-Investment Fund, L.P. (filed as Exhibit 10.1 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
10.2	Promissory Note, dated as of March 12, 2009, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV, L.P (filed as Exhibit 10.2 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
10.3	Promissory Note, dated as of March 12, 2009, by VIA Pharmaceuticals, Inc. and payable to Bay City Capital Fund IV

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Exhibit No.	Description
	Co-Investment Fund, L.P. (filed as Exhibit 10.3 to the Form 8-K filed on March 12, 2009 and incorporated herein by reference)
10.4	Consulting Agreement by and between VIA Pharmaceuticals, Inc. and Adeoye Olukotun, M.D., dated January 29, 2009 (filed as Exhibit 10.1 to the Form 8-K filed on February 3, 2009 and incorporated herein by reference)
31.1*	Principal Executive Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Principal Financial Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002)
32.2*	Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002)

* Filed herewith

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SIGNATURE

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

Date: May 13, 2009

VIA PHARMACEUTICALS, INC.
By:	/s/ James G. Stewart
	James G. Stewart
	Senior Vice President, Chief Financial Officer Duly Authorized Officer and Principal Financial Officer

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