Alexza Pharmaceuticals (ALXA) DEF 14A Definitive proxy

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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Exchange Act of 1934

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Alexza Pharmaceuticals, Inc.

(Name of Registrant as Specified In Its Charter)

Not Applicable
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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ALEXZA PHARMACEUTICALS, INC.

2091 Stierlin Court

Mountain View, California 94043

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On May 7, 2009

Dear Stockholder:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Alexza Pharmaceuticals, Inc., a Delaware corporation (the “Company” or “Alexza”), will be held on Thursday, May 7, 2009, at 1:30 p.m. local time at the offices of the Company, 2023 Stierlin Court, Mountain View, California 94043 for the following purposes:

1. To elect the eight nominees for director named herein, each to serve until the 2010 Annual Meeting of Stockholders and until his or her successor has been elected and qualified or until his or her earlier death, resignation or removal. The Company’s Board of Directors intends to present the following nominees for election as directors:

Thomas B. King
Hal V. Barron, M.D., FACC
Samuel D. Colella
Alan D. Frazier Deepika R. Pakianathan, Ph.D.
J. Leighton Read, M.D.
Gordon Ringold, Ph.D.
Isaac Stein

2. To ratify the selection by the Audit and Ethics Committee of the Board of Directors of Ernst & Young LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2009.

3. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

These business items are more fully described in the Proxy Statement accompanying this Notice.

The Board of Directors has fixed the close of business on March 16, 2009 as the record date for identifying those stockholders entitled to notice of, and to vote at, the annual meeting and any adjournment or postponement thereof. Only stockholders of record at the close of business on that day may vote at the annual meeting or any adjournment thereof. In accordance with Delaware law, for ten days prior to the annual meeting of stockholders, a list of stockholders will be available for inspection in the office of the Corporate Secretary, Alexza Pharmaceuticals, Inc., 2091 Stierlin Court, Mountain View, California, 94043. The list of stockholders will also be available at the annual meeting.

By Order of the Board of Directors

August J. Moretti

Secretary

Mountain View, California

March 27, 2009

Pursuant to the Internet proxy rules promulgated by the Securities and Exchange Commission, Alexza has elected to provide access to its proxy materials over the Internet. Accordingly, stockholders of record at the close of business on March 16, 2009 will receive a Notice of Internet Availability of Proxy Materials and may vote at the Annual Meeting and any adjournment or postponement thereof. Alexza expects to mail the Notice of Internet Availability of Proxy Materials on or about March 27, 2009.

All stockholders are cordially invited to attend the annual meeting in person. Whether or not you expect to attend the annual meeting, please vote, as instructed in the Notice of Internet Availability of Proxy Materials, via the Internet or the telephone, as promptly as possible in order to ensure your representation at the annual meeting. Alternatively, you may follow the procedures outlined in the Notice of Internet Availability of Proxy Materials to request a paper proxy card to submit your vote by mail. Even if you have voted by proxy, you may still vote in person if you attend the annual meeting. Please note, however, that if your shares are held of record by a broker, bank or other agent and you wish to vote at the annual meeting, you must obtain a proxy issued in your name from that record holder.

TABLE OF CONTENTS

ALEXZA PHARMACEUTICALS, INC.

2091 Stierlin Court

Mountain View, California 94043

PROXY STATEMENT
FOR THE 2009 ANNUAL MEETING OF STOCKHOLDERS
May 7, 2009

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

What is the Notice of Internet Availability of Proxy Materials?

In accordance with rules and regulations adopted by the Securities and Exchange Commission (the “SEC”), instead of mailing a printed copy of our proxy materials to all stockholders entitled to vote at the annual meeting, we are furnishing the proxy materials to our stockholders over the Internet. If you received a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) by mail, you will not receive a printed copy of the proxy materials. Instead, the Notice of Internet Availability will instruct you as to how you may access and review the proxy materials and submit your vote via the Internet. If you received a Notice of Internet Availability by mail and would like to receive a printed copy of the proxy materials, please follow the instructions for requesting such materials included in the Notice of Internet Availability.

We intend to mail the Notice of Internet Availability on or about March 27, 2009 to all stockholders of record entitled to vote at the annual meeting. On the date of mailing of the Notice of Internet Availability, all stockholders and beneficial owners will have the ability to access all of our proxy materials on a website referred to in the Notice of Internet Availability. These proxy materials will be available free of charge.

Why am I being provided access to these materials?

We have provided you access to these proxy materials because the Board of Directors of Alexza Pharmaceuticals, Inc. (sometimes referred to as the “Company” or “Alexza”) is soliciting your proxy to vote at the 2009 Annual Meeting of Stockholders including at any adjournments or postponements of the meeting. You are invited to attend the annual meeting to vote on the proposals described in this proxy statement. However, you do not need to attend the annual meeting to vote your shares. Instead, you may simply vote, as instructed below and in the Notice of Internet Availability of Proxy Materials, via the Internet or the telephone. Alternatively, you may follow the procedures outlined in the Notice of Internet Availability to request a paper proxy card to submit your vote by mail.

How do I attend the annual meeting?

The meeting will be held on Thursday, May 7, 2009, at 1:30 p.m. local time at the offices of the Company, 2023 Stierlin Court, Mountain View, California 94043.Directions to the annual meeting may be found atwww.alexza.com. Information on how to vote in person at the annual meeting is discussed below.

Who can vote at the annual meeting?

Only stockholders of record at the close of business on March 16, 2009 will be entitled to vote at the annual meeting. On this record date, there were 32,973,951 shares of common stock outstanding and entitled to vote.

Stockholder of Record: Shares Registered in Your Name

If on March 16, 2009 your shares were registered directly in your name with the Company’s transfer agent, Mellon Investor Services, LLC, then you are a stockholder of record. As a stockholder of record, you may vote in person at the meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge you to vote, as instructed below and in the Notice of Internet Availability, via the Internet or the telephone, as promptly as possible to ensure your vote is counted. Alternatively, you may follow the procedures outlined in the Notice of Internet Availability to request a paper proxy card to submit your vote by mail.

Beneficial Owner: Shares Registered in the Name of a Broker or Bank

If on March 16, 2009 your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and the Notice of Internet Availability is being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the annual meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the meeting unless you request and obtain a valid proxy from your broker or other agent.

What am I voting on?

There are two matters scheduled for a vote:

•  Election of eight directors; and

•  Ratification of the selection by the Audit and Ethics Committee of the Board of Directors of Ernst & Young LLP as the independent registered public accounting firm for the Company for its fiscal year ending December 31, 2009.

What if another matter is properly brought before the meeting?

The Board of Directors knows of no other matters that will be presented for consideration at the annual meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the proxy to vote on those matters in accordance with their best judgment.

How do I vote?

You may either vote “For” all the nominees to the Board of Directors or you may “Withhold” your vote for any nominee you specify. For the other matter to be voted on, you may vote “For” or “Against” or abstain from voting. The procedures for voting are as follows:

Stockholder of Record: Shares Registered in Your Name

If you are a stockholder of record, you may vote in person at the annual meeting, vote by proxy on the Internet, vote by proxy over the telephone, or vote by proxy via the mail. Whether or not you plan to attend the annual meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the annual meeting and vote in person even if you have already voted by proxy.

•  In Person:  To vote in person, come to the annual meeting and we will give you a ballot when you arrive.

•  Internet:  To vote on the Internet, go towww.proxyvote.comto complete an electronic proxy card . You will be asked to provide the control number from the Notice of Internet Availability. Your vote must be received by 11:59 p.m. Eastern time, on May 6, 2009 to be counted.

•  Telephone:  To vote over the telephone, dial toll-free1-800-690-6903 using a touch-tone phone and follow the recorded instructions. You will be asked to provide the control number from the Notice of Internet Availability. Your vote must be received by 11:59 p.m. Eastern time, on May 6, 2009 to be counted.

•  Mail:  To vote by mail, you must request a paper proxy card by following the instructions on the Notice of Internet Availability. Once you receive the paper proxy card, complete, sign and date the proxy card where indicated and return it promptly in the prepaid envelope that will be included with the paper proxy card. If we receive your signed proxy card before the annual meeting, we will vote your shares as you direct.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a Notice of Internet Availability and voting instructions from that organization rather than from the Company. You may vote by proxy by following the instructions from your broker, bank or other agent included with

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the Notice of Internet Availability. To vote in person at the annual meeting, you must obtain a valid proxy from your broker, bank or other agent.

We provide Internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.

How many votes do I have?

On each matter to be voted upon, you have one vote for each share of common stock you own as of March 16, 2009.

What if I submit a proxy via the Internet, by telephone or by mail but do not make specific choices?

If you submit a proxy via the Internet, by telephone or by mail without making voting selections, your shares will be voted “For” the election of all eight nominees for director and “For” ratification of the selection of Ernst & Young LLP. If any other matter is properly presented at the annual meeting, your proxy holder (one of the individuals named on your proxy card) will vote your shares using his best judgment.

Who is paying for this proxy solicitation?

We will pay for the entire cost of soliciting proxies. In addition, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

What does it mean if I receive more than one Notice of Internet Availability or set of proxy materials?

If you receive more than one Notice of Internet Availability or set of proxy materials, your shares are registered in more than one name or are registered in different accounts. Please follow the voting instructions on each Notice of Internet Availability or voting instruction card that you receive to ensure that all of your shares are voted.

Can I change my vote after submitting my proxy?

Yes. You can revoke your proxy at any time before the final vote at the annual meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:

•  You may submit another properly completed proxy card with a later date.

•  You may grant a subsequent proxy by telephone or through the Internet.

•  You may send a timely written notice that you are revoking your proxy to the Company’s Corporate Secretary at 2091 Stierlin Court, Mountain View, CA 94043.

•  You may attend the annual meeting and vote in person. Simply attending the annual meeting will not, by itself, revoke your proxy.

Your most current proxy card or telephone or Internet proxy is the one that will be counted.

If your shares are held by your broker, bank or other agent, you should follow the instructions provided by your broker, bank or other agent.

When are stockholder proposals due for next year’s annual meeting?

To be considered for inclusion in next year’s proxy materials, your proposal must be submitted in writing by November 24, 2009, to Corporate Secretary, 2091 Stierlin Court, Mountain View, CA 94043. If you wish to submit a

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proposal that is not to be included in next year’s proxy materials or nominate a director, you must do so not later than the close of business on February 6, 2010 nor earlier than the close of business on January 7, 2010.

How are votes counted?

Votes will be counted by the inspector of election appointed for the meeting, who will separately count “For” and “Withhold” and, with respect to proposals other than the election of directors, “Against” votes, abstentions and broker non-votes. Abstentions will be counted towards the vote total for each proposal, and will have the same effect as “Against” votes. Broker non-votes have no effect and will not be counted towards the vote total for any proposal.

What are “broker non-votes”?

Broker non-votes occur when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters.

How many votes are needed to approve each proposal?

•  For the election of directors, the eight nominees receiving the most “For” votes (from the holders of votes of shares present in person or represented by proxy and entitled to vote on the election of directors) will be elected. Only votes “For” or “Withheld” will affect the outcome.

•  To be approved, Proposal No. 2, the ratification of Ernst & Young LLP as the independent registered public accounting firm for the Company for its fiscal year ending December 31, 2009, must receive “For” votes from the holders of a majority of shares present and entitled to vote either in person or by proxy. If you “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have no effect.

What is the quorum requirement?

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding a majority of the outstanding shares are present at the meeting in person or represented by proxy. On the record date, there were 32,973,951 outstanding and entitled to vote. Thus, the holders of at least 16,486,976 shares must be present in person or represented by proxy at the meeting or by proxy to have a quorum.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other agent) or if you vote in person at the meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares present at the meeting in person or represented by proxy may adjourn the meeting to another date.

How can I find out the results of the voting at the annual meeting?

Preliminary voting results will be announced at the annual meeting. Final voting results will be published in the Company’s quarterly report onForm 10-Q for the second quarter of 2009.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ALEXZA SINCE THE DATE OF THIS PROXY STATEMENT.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

At the Annual Meeting of Stockholders, stockholders will elect members of the Company’s Board of Directors (the “Board”) to hold office until the 2010 Annual Meeting of Stockholders and until their respective successors have been elected and qualified or until any such director’s earlier death, resignation or removal. There are eight nominees for election this year. Each such nominee is currently a director of the Company, and each such nominee was previously elected by the stockholders.

Directors are elected by a plurality (excess of votes cast over opposing nominees) of the votes present in person or represented by proxy and entitled to vote. If properly submitted, shares represented by proxy will be voted for the election of the eight nominees recommended by the Board unless the proxy is marked in such a manner as to withhold authority so to vote. If any nominee for any reason is unable to serve or for good cause will not serve, the proxies may be voted for such substitute nominee as the proxy holders may determine. Each person nominated for election has agreed to serve if elected, and the Company has no reason to believe that any nominee will be unable to serve.

Current Directors and Nominees

The names of the nominees and certain information about them, including their ages as of March 16, 2009, are set forth below:

		Position Held with		Director
Name of Nominee	Age	Company	Committees	Since
Thomas B. King	54	Director, President and Chief Executive Officer		2003
Hal V. Barron, M.D., FACC	46	Director	Compensation	2007
Samuel D. Colella	69	Director	Compensation (Chair), Corporate Governance and Nominating	2002
Alan D. Frazier	57	Director	Audit and Ethics (Chair)	2002
Deepika R. Pakianathan, Ph.D.	44	Director	Compensation	2004
J. Leighton Read, M.D.	58	Director	Audit and Ethics	2004
Gordon Ringold, Ph.D.	58	Director	Compensation	2001
Isaac Stein	62	Director (Lead)	Audit and Ethics, Corporate Governance and Nominating (Chair)	2001

Thomas B. Kinghas served as our President, Chief Executive Officer and a member of our Board since June 2003. From September 2002 to April 2003, Mr. King served as President, Chief Executive Officer and a member of the board of directors of Cognetix, Inc., a biopharmaceutical development company. From January 1994 to February 2001, Mr. King held various senior executive positions, including President and Chief Executive Officer from January 1997 to October 2000, and was a member of the board of directors at Anesta Corporation, a publicly traded pharmaceutical company, until it was acquired by Cephalon, Inc., a publicly traded biopharmaceutical company. Mr. King is a member of the board of directors of Achaogen, Inc., a private biotechnology company. Mr. King received an M.B.A. from the University of Kansas and a B.A. in chemistry from McPherson College.

Hal V. Barron, M.D., FACChas served as a member of our Board since December 2007. Since December 2003, Dr. Barron has served as Senior Vice President of Development and as Chief Medical Officer since March 2004 at Genentech, Inc., a biotechnology company. Dr. Barron joined Genentech in 1996 as a clinical scientist and in 2002 he was promoted to Vice President of Medical Affairs. Dr. Barron’s academic positions include Associate Adjunct Professor of Epidemiology and Biostatistics and Associate Clinical Professor of Medicine/Cardiology at the University of California, San Francisco. Dr. Barron received his B.S. in physics from Washington University in

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St. Louis, his M.D. from Yale University and completed his training in medicine and cardiology at the University of California San Francisco.

Samuel D. Colellahas served as a member of our Board since September 2002. In 1999, Mr. Colella co-founded Versant Ventures, a venture capital firm, and has served as a managing member since its formation. Prior to founding Versant Ventures, Mr. Colella has served as general partner of Institutional Venture Partners, a venture capital firm, since 1984. Mr. Colella is a member of the board of directors of Genomic Health, Inc., a publicly traded molecular diagnostics company, Jazz Pharmaceuticals, Inc., a publicly traded pharmaceutical medicine company, and various private companies. Mr. Colella received an M.B.A. from Stanford University and a B.S. in business and engineering from the University of Pittsburgh.

Alan D. Frazierhas served as a member of our Board since September 2002. In 1991, Mr. Frazier founded Frazier Healthcare Ventures, a venture capital firm, and has served as the managing principal since its inception. From 1983 to 1991, Mr. Frazier served as Executive Vice President, Chief Financial Officer and Treasurer of Immunex Corporation, a publicly traded biopharmaceutical company. From 1980 to 1983, Mr. Frazier was a principal in the audit department of Arthur Young & Company, which is now Ernst & Young LLP. Mr. Frazier is a member of the board of directors of Cadence Pharmaceuticals, Inc., a publicly traded pharmaceutical company, and various privately held biopharmaceutical companies. Mr. Frazier received a B.A. in economics from the University of Washington.

Deepika R. Pakianathan, Ph.D. has served as a member of our Board since November 2004. Since 2001, Dr. Pakianathan has served as a general partner at Delphi Ventures, a venture capital firm focusing on healthcare investments. From 1998 to 2001, Dr. Pakianathan was a senior biotechnology banker at JPMorgan. Prior to joining JP Morgan, Dr. Pakianathan was a research analyst at Genesis Merchant Group, a private investment partnership, from 1997 to 1998 and a post-doctoral scientist at Genentech, Inc. from 1993 to 1997. Dr. Pakianathan is a director of various private healthcare companies. Dr. Pakianathan received a Ph.D. in immunology and an M.S. in biology from Wake Forest University, and an M.Sc. in biophysics and a B.Sc from the University of Bombay.

J. Leighton Read, M.D. has served as a member of our Board since November 2004. Since 2001, Dr. Read has served as a general partner in three funds at Alloy Ventures, a venture capital firm. Dr. Read founded Aviron, a biopharmaceutical company, and served as its Chief Executive Officer until 1999. In 1989, Dr. Read co-founded Affymax NV, a biopharmaceutical company. Dr. Read is a member of the board of directors of various private companies. Dr. Read has received several awards for co-inventing the technology underlying the Affymetrix GeneChip. Dr. Read received an M.D. from the University of Texas Health Science Center at San Antonio and a B.S. in psychology and biology from Rice University.

Gordon Ringold, Ph.D. has served as a member of our Board since June 2001. Since March 2000, Dr. Ringold has served as Chairman and Chief Executive Officer of Alavita, Inc. From March 1995 to February 2000, Dr. Ringold served as Chief Executive Officer and Scientific Director of Affymax Research Institute where he managed the development of novel technologies to accelerate the pace of drug discovery. Dr. Ringold is also a member of the board of directors of Maxygen, Inc., a publicly traded biopharmaceutical company, and Oxonica plc, a publicly traded nanotechnology company. Dr. Ringold received a Ph.D. in microbiology from University of California, San Francisco in the laboratory of Dr. Harold Varmus before joining the Stanford University School of Medicine, Department of Pharmacology. Dr. Ringold also received a B.S. in biology from the University of California, Santa Cruz.

Isaac Steinhas served as a member of our Board since June 2001. Since November 1982, Mr. Stein has been President of Waverley Associates, Inc., a private investment firm. He is also the emeritus Chairman of the Board of Trustees of Stanford University and is the Chairman of the board of directors of Maxygen, Inc. Mr. Stein is also a director of American Balanced Fund, Inc., International Growth and Income Fund, Inc., and The Income Fund of America, Inc. (part of the American Funds family of mutual funds). Mr. Stein received an M.B.A. and J.D. from Stanford University and a B.A. in mathematical economics from Colgate University.

Our officers are appointed by and serve at the discretion of our Board. There are no family relationships between our directors and officers.

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Required Vote

The eight nominees receiving the highest number of affirmative votes of the shares present or represented and entitled to be voted for them will be elected as directors.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR”
EACH OF THE NOMINEES LISTED ABOVE.

INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Independence of the Board of Directors

As required under the Nasdaq Global Market (“Nasdaq”) listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. The Board consults with the Company’s counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of the Nasdaq, as in effect from time to time.

Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his or her family members, and the Company, its senior management and its independent registered public accounting firm, the Board has affirmatively determined that the following seven directors are independent directors within the meaning of the applicable Nasdaq listing standards: Dr. Barron, Mr. Colella, Mr. Frazier, Dr. Pakianathan, Dr. Read, Dr. Ringold, and Mr. Stein. In making this determination, the Board found that none of these directors or nominees for director had a material or other disqualifying relationship with the Company. Mr. King, the Company’s President and Chief Executive Officer, is not an independent director by virtue of his employment with the Company.

Meetings of the Board of Directors

The Board met five times during 2008 and acted by unanimous written consent three times. All directors attended more than 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by all committees of the Board on which they served, held during the portion of the fiscal year for which they were directors or committee members, respectively.

As required under applicable Nasdaq listing standards, in fiscal 2008, the Company’s independent directors met five times in regularly scheduled executive sessions at which only independent directors were present. The Lead Director presided over such sessions.

Information Regarding Committees of the Board of Directors

Standing committees of the Board include an Audit and Ethics Committee, a Compensation Committee and a Corporate Governance and Nominating Committee. Below is a description of each committee of the Board. Each of the committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities. The Board has determined that each member of each committee meets the applicable Nasdaq rules and regulations regarding “independence” and that each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to the Company.

Audit and Ethics Committee

The Audit and Ethics Committee represents the Board in discharging its responsibilities relating to the accounting, reporting, and financial practices of the Company, and has general responsibility for surveillance of internal controls and accounting and audit activities of the Company. Specifically, the Audit and Ethics Committee (i) is directly responsible for the appointment, compensation and oversight of the Company’s independent registered public accounting firm; (ii) reviews, prior to publication, the Company’s annual financial statements with management and the Company’s independent registered public accounting firm; (iii) reviews with the Company’s independent registered public accounting firm the scope, procedures and timing of the annual audits;

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(iv) reviews the Company’s accounting and financial reporting principles and practices; (v) reviews the adequacy and effectiveness of the Company’s internal accounting controls; (vi) reviews the scope of other auditing services to be performed by the independent registered public accounting firm; (vii) reviews the independence and effectiveness of the Company’s independent registered public accounting firm and their significant relationships with the Company; (viii) reviews the adequacy of the Company’s accounting and financial personnel resources; (ix) reviews the Audit and Ethics Committee charter on an annual basis; (x) reviews with management and the Company’s independent registered public accounting firm quarterly financial results, and the results of any significant matters identified as a result of the independent registered public accounting firm’s review procedures, prior to filing anyForm 10-Q; and (xi) reviews any other matters relative to the audit of the Company’s accounts and the preparation of its financial statements that the Audit and Ethics Committee deems appropriate.

During 2008, the Company’s Audit and Ethics Committee met four times. The Audit and Ethics Committee was comprised of Alan D. Frazier (Chair), J. Leighton Read, M.D. and Isaac Stein. The Audit and Ethics Committee is a separately designated standing audit committee established in accordance with section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Frazier joined the Audit and Ethics Committee and became its Chair upon its formation on September 20, 2002. The Board has determined that Mr. Frazier is an “audit committee financial expert” as defined under the Exchange Act. The Board has determined that all members of the Audit and Ethics Committee are “independent” as defined under the Exchange Act and the listing standards of Nasdaq.

The Board has adopted an Audit and Ethics Committee Charter, which is available on our website at www.alexza.com in the “Investor Relations — Corporate Governance” section.

Report of the Audit and Ethics Committee of the Board of Directors*

The Audit and Ethics Committee reviews the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the consolidated financial statements and the reporting process, including the system of internal controls.

The Audit and Ethics Committee has reviewed and discussed the audited consolidated financial statements for the fiscal year ended December 31, 2008 with management of the Company. The Audit and Ethics Committee has discussed significant accounting policies applied by the Company in its consolidated financial statements, as well as alternative treatments. Management represented to the Audit and Ethics Committee that the Company’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the Audit and Ethics Committee has reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm. The Audit and Ethics Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 114, The Auditor’s Communication with Those Charged with Governance,as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T.

In addition, the Audit and Ethics Committee has discussed with the independent registered public accounting firm the accountant’s independence from the Company and its management, including the matters in the written disclosures required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the audit committee concerning independence. The Audit and Ethics Committee has received the letter from the independent registered public accounting firm required therein. The Audit and Ethics Committee has also considered whether the independent registered public accounting firm’s provision of non-audit services to the Company is compatible with the auditors’ independence.

The Audit and Ethics Committee has concluded that the independent registered public accounting firm is independent from the Company and its management.

      * The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any of the Company’s filings under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

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The Audit and Ethics Committee reviewed and discussed Company policies with respect to risk assessment and risk management.

The Audit and Ethics Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans for their audit. The Audit and Ethics Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, the evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.

In reliance on the reviews and discussions referred to above, the Audit and Ethics Committee recommended to the Board that, and the Board has approved, the audited consolidated financial statements be included in the Company’s Annual Report onForm 10-K for the year ended December 31, 2008. The Board has also approved, subject to stockholder ratification, the Audit and Ethics Committee’s selection of the Company’s independent registered public accounting firm.

AUDIT AND ETHICS COMMITTEE

Alan D. Frazier (Chair)

J. Leighton Read, M.D.

Isaac Stein

Compensation Committee

The Compensation Committee acts on behalf of the Board to review, recommend for adoption and oversee the Company’s compensation strategy, policies, plans and programs, including:

•  establishment of corporate goals and objectives relevant to the compensation of the Company’s executive officers, the weighting of corporate and individual performance relating to compensation and evaluation ofperformance in light of these stated objectives;

•  review and recommendation to the Board for approval of the compensation and other terms of employment or service of the Company’s President and Chief Executive Officer and the other executive officers including all forms of salary paid to executive officers of the Company and the grant of all forms of bonus and stock compensation provided to executive officers of the Company; and

•  administration ofthe Company’s equity compensation plans and other similar plans and programs.

Commencing in 2007, the Compensation Committee also began to review with management the Company’s Compensation Discussion and Analysis and to consider whether to recommend that it be included inproxy statements and other filings.

The Compensation Committee is appointed by our Board and consists entirely of directors who are “outside directors” for purposes of Section 162(m) of the Internal Revenue Code, “non-employee directors” for purposes ofRule 16b-3 under the Exchange Act and “independent directors” for purposes of the Nasdaq listing standards. Our Compensation Committee is comprised of Samuel D. Colella (Chair), Hal Barron, M.D., FACC., Deepika R. Pakianathan, Ph.D. and Gordon Ringold, Ph.D. During 2008, the Company’s Compensation Committee met four times.

The Compensation Committee reviews and recommends to our Board an executive officer compensation program intended to link compensation with our compensation philosophy. The Compensation Committee annually reviews our executive officers’ compensation to determine whether it provides adequate incentives. The Compensation Committee’s most recent review occurred in December 2008. The Board has adopted a Compensation Committee Charter, which is available on our website at www.alexza.com in the “Investor Relations — Corporate Governance” section.

For more information about our Compensation Committee and our compensation program, see the section of this proxy statement entitled “Compensation Discussion and Analysis.”

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Corporate Governance and Nominating Committee

Isaac Stein (Chair) and Samuel D. Colella are the current members of the Company’s Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee met four times during 2008. Other members of the Board are invited and often attend such meetings. The Board has determined that all members of the Corporate Governance and Nominating Committee are “independent” as defined under the Exchange Act and the listing standards of Nasdaq.

The Corporate Governance and Nominating Committee makes recommendations to the Board as to the appropriate size of the Board or any Board committee and reviews the qualifications of candidates for the Board (including those proposed by stockholders) and makes recommendations to the Board on potential Board members (whether created by vacancies or as part of the annual election cycle). The Corporate Governance and Nominating Committee is responsible for identifying and evaluating nominees for director and for recommending to the Board a slate of nominees for election at the Annual Meeting.

In evaluating the suitability of individuals for Board membership or continued Board membership, the Corporate Governance and Nominating Committee takes into account many factors, including whether the individual meets requirements for independence; the individual’s general understanding of the various disciplines relevant to the success of a publicly-traded pharmaceutical company; the individual’s understanding of the Company’s business; the individual’s professional expertise and educational background; and other factors that promote diversity of views and experience. The Corporate Governance and Nominating Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending a group of directors that can best achieve success for the Company and represent stockholder interests through the exercise of sound judgment, using its diversity of experience. In determining whether to recommend a director for re-election, the Corporate Governance and Nominating Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board. The Corporate Governance and Nominating Committee has not established any specific minimum qualification standards for nominees to the Board, although from time to time the Corporate Governance and Nominating Committee may identify certain skills or attributes (e.g., financial experience or product commercialization experience) as being particularly desirable to help meet specific Board needs that have arisen.

In identifying potential candidates for Board membership, the Corporate Governance and Nominating Committee relies on suggestions and recommendations from the Board, stockholders, management and others. The Corporate Governance and Nominating Committee does not distinguish between nominees recommended by stockholders and other nominees.

From time to time, the Corporate Governance and Nominating Committee may also retain search firms to assist it in identifying potential candidates for director, gathering information about the background and experience of such candidates and acting as an intermediary with such candidates. Stockholders wishing to suggest candidates to the Corporate Governance and Nominating Committee for consideration as directors must timely submit a written notice to the Corporate Secretary of the Company, whose address is 2091 Stierlin Court, Mountain View, CA 94043. The Company’s Bylaws, as amended (the “Bylaws”), set forth the procedures a stockholder must follow to nominate directors. For a stockholder to nominate a candidate for director at the 2010 Annual Meeting of Stockholders, notice of the nomination must be received by the Company prior to February 6, 2010. The notice must include all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including the consent of the nominee to be named in the proxy statement as a nominee and to serve as a director if elected). The Corporate Governance and Nominating Committee will consider any nominee properly presented by a stockholder, and will make a recommendation to the Board. After full consideration by the Board, the stockholder presenting the nomination will be notified of the Board’s conclusion. Copies of the Company’s Bylaws may be obtained by writing to the Corporate Secretary at the above address.

In addition, the Corporate Governance and Nominating Committee establishes procedures for the oversight and evaluation of the Board and management and considers conflicts of interest involving executive officers or Board members. Stockholders wishing to submit recommendations for our 2010 Annual Meeting should submit their proposals to the Corporate Governance and Nominating Committee, in care of our Corporate Secretary in

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accordance with the time limitations, procedures and requirements described in the Section entitled “Stockholder Proposals” below.

The Board has adopted a Corporate Governance and Nominating Committee Charter, which is available on our website at www.alexza.com in the “Investor Relations — Corporate Governance” section.

Stockholder Communications With the Board

Stockholders and other interested parties may contact any member (or all members) of the Board (including, without limitation, the non-management directors as a group), any Board committee or any Chair of any such committee by U.S. mail. To communicate with the Board, any individual director or any group or committee of directors, correspondence should be addressed to the Board or any such individual director or group or committee of directors by either name or title. Such correspondence should be sentc/o Corporate Secretary, Alexza Pharmaceuticals, Inc., 2091 Stierlin Court, Mountain View, CA 94043.

All communications received as set forth in the preceding paragraph will be opened by the Corporate Secretary for the sole purpose of determining whether the contents represent a message to the Company’s directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the Corporate Secretary will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the communication is addressed.

Director Attendance at Annual Meeting

The Company encourages all directors to attend each annual meeting of stockholders. In furtherance of this policy and to maximize the attendance of directors at annual meetings, the Company generally schedules annual meetings of stockholders on the same day, and in the same location, as a regularly scheduled meeting of the Board. Drs. Barron, Read, and Ringold and Mr. Stein of our board of directors attended the 2008 Annual Meeting of Stockholders.

Compensation Committee Interlock and Insider Participation

For the fiscal year ended December 31, 2008, members of the Company’s Compensation Committee consisted of Samuel D. Colella (Chair), Hal Barron, M.D., FACC, Deepika R. Pakianathan, Ph.D. and Gordon Ringold, Ph.D., none of whom is currently, or has ever been at any time since the Company’s formation, one of the Company’s officers or employees. In addition, none of our executive officers has served as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board or Compensation Committee.

Code of Conduct

The Company has adopted the Alexza Pharmaceuticals, Inc. Code of Business Conduct for Employees, Executive Officers and Directors (the “Code of Conduct”), which applies to all directors and employees, including executive officers, including, without limitation, the Company’s principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. The Code of Conduct is filed as an exhibit on the Company’s Annual Report onForm 10-K for the year ended December 31, 2008.

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PROPOSAL NO. 2

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit and Ethics Committee has selected Ernst & Young LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2009. The Company is submitting the Audit and Ethics Committee’s selection of independent registered public accounting firm for ratification by the stockholders at the 2009 Annual Meeting of Stockholders. Ernst & Young LLP has audited the Company’s consolidated financial statements since inception. The Company expects that representatives of Ernst & Young LLP will be present at the 2009 annual meeting, will have an opportunity to make a statement if they wish and will be available to respond to appropriate questions.

Required Vote

Neither the Company’s Bylaws nor any other governing document or law requires that the stockholders ratify the selection of Ernst &Young LLP as the Company’s independent registered public accounting firm. However, the Company is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders do not ratify the selection, the Audit and Ethics Committee will reconsider whether or not to retain Ernst & Young LLP. Even if the selection is ratified, the Audit and Ethics Committee in its discretion may change the appointment at any time during the year if the Audit and Ethics Committee determines that such a change would be in the best interests of the Company and its stockholders.

If a quorum is present and voting, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the annual meeting on the proposal will be required to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2009.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THIS PROPOSAL.

Principal Accountant Fees and Services

In connection with the audit of the 2008 financial statements, the Company entered into an engagement agreement with Ernst & Young LLP which sets forth the terms by which Ernst & Young LLP will perform audit services for the Company. That agreement is subject to alternative dispute resolution procedures.

The following table presents aggregate fees billed for professional audit services rendered by Ernst & Young LLP for the audit of our annual consolidated financial statements for the years ended December 31, 2008 and December 31, 2007, and aggregate fees billed for other services rendered by Ernst & Young LLP during those periods.

	2008		2007
Audit fees(1)	$	642,289	$	710,998
Tax fees(2)		231,903		39,375
All other fees(3)		1,500		1,325
Total	$	875,692	$	751,698

(1) Audit fees consisted of professional services rendered by Ernst & Young LLP for the integrated audits of our annual consolidated financial statements, including the audit of the consolidated financial statements for the years ended December 31, 2008 and 2007 and the audit of internal control over financial reporting as of December 31, 2008 and 2007. For the years ended December 31, 2008 and 2007, the audit fees also include review of unaudited interim consolidated financial statements included in our quarterly reports on Form10-Q, consultation regarding financial accounting and reporting standards billed as audit services, as well as assistance with and review of our Registration Statement filings onForm S-3 andForm S-8 filed with the SEC.

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(2)	For the year ended December 31, 2008, tax fees primarily included income tax return preparation fees and international tax planning fees. For the year ended December 31, 2007, tax fees primarily included income tax preparation fees.
(3)	Other fees consist of subscription fees paid for access to Ernst & Young’s Accounting & Auditing Research Tool and tax planning consultation.

Pre-approval Policies and Procedures

Consistent with SEC policies regarding auditor independence, the Audit and Ethics Committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the Audit and Ethics Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm.

Prior to engagement of the independent registered public accounting firm for the next year’s audit, management will discuss with the Audit and Ethics Committee the services expected to be rendered by the independent registered public accounting firm during that year for each of four categories of services.

1. Audit servicesinclude audit work performed in the preparation of financial statements and internal control over financial reporting, as well as work that generally only the independent registered public accounting firm can reasonably be expected to provide, including consultation regarding the proper application of financial accountingand/or reporting standards.

2. Audit related servicesare for assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions and special procedures required to meet certain regulatory requirements.

3. Tax servicesinclude all services performed by the independent registered public accounting firm’s tax personnel, except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, tax advice and tax return preparation. The Company retains its independent registered public accounting firm for corporate income tax return preparation.

4. Other servicesinclude those associated with services not captured in the other categories. The Company generally does not request such services from the independent registered public accounting firm.

Prior to engagement, the Audit and Ethics Committee pre-approves all audit and permissible non-audit services to be provided by its independent registered public accounting firm.

The Audit and Ethics Committee pre-approved all audit related, tax and other services rendered in 2008 and did not rely on the waiver of pre-approval requirement provided by paragraph (C)(7)(i)(C) ofRule 2-01 ofRegulation S-X promulgated under the Exchange Act.

The Company discloses all approved non-audit engagements during a quarter in the appropriate quarterly report onForm 10-Q or Annual Report onForm 10-K.

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EXECUTIVE OFFICERS

Our executive officers and key employees as of March 27, 2009, are as follows:

Name	Age		Position
Thomas B. King		54	President, Chief Executive Officer and Director
James V. Cassella, Ph.D.		54	Senior Vice President, Research and Development
August J. Moretti		58	Senior Vice President, Chief Financial Officer and Secretary
Michael J. Simms		47	Senior Vice President, Operations and Manufacturing
Anthony G. Tebbutt		61	Senior Vice President, Corporate Strategy & Business Development
Joseph L. Baker		54	Vice President, Commercial Manufacturing
Anthony Clarke, Ph.D.		53	Vice President, International Development Operations
Robert S. Fishman, M.D., F.C.C.P.		47	Vice President, Clinical Operations
Emily Lee Kelley, SPHR		51	Vice President, Human Resources
Christopher Kurtz		42	Vice President, Global Supply Chain and Sustainment Engineering
Peter D. Noymer, Ph.D.		42	Vice President, Product Research & Development
Carlos A. Parra		56	Vice President, Quality
Jeffrey S. Williams		44	Vice President, Technology Outlicensing

Thomas B. King.  See Mr. King’s biography in Proposal Number 1 — Election of Directors.

James V. Cassella, Ph.D. has served as our Senior Vice President, Research and Development since June 2004. From April 1989 to April 2004, Dr. Cassella held various management positions at Neurogen Corporation, a publicly traded biotechnology company, including Senior Vice President of Clinical Research and Development from January 2003 to June 2004. Prior to Neurogen, Dr. Cassella was Assistant Professor of Neuroscience at Oberlin College. Dr. Cassella received a Ph.D. in physiological psychology from Dartmouth College, completed a postdoctoral fellowship in the Department of Psychiatry at the Yale University School of Medicine and received a B.A. in psychology from the University of New Haven.

August J. Morettihas served as our Senior Vice President and Chief Financial Officer since February 2005 and as our Secretary since December 2005. From August 2004 to February 2005, Mr. Moretti was our part time Chief Financial Officer. From January 2001 to January 2005, Mr. Moretti served as Chief Financial Officer and General Counsel at Alavita, Inc. (formerly known as SurroMed, Inc.), a biotechnology company. From January 1982 to December 2000, Mr. Moretti was a member of Heller Ehrman White & McAuliffe LLP, an international law firm. Mr. Moretti received a J.D. from Harvard Law School and a B.A. in economics from Princeton University.

Michael J. Simmshas served as our Senior Vice President, Operations and Manufacturing since February 2008. From May 2007 to February 2008 Mr. Simms served as Senior Vice President, Manufacturing Operations and from June 2004 to May 2007 served as Vice President, Manufacturing of Nektar Therapeutics, a publicly traded biopharmaceutical company. From August 2002 to June 2004, Mr. Simms worked as an independent consultant to develop manufacturing strategies and business plans for various early stage and small commercial stage companies. Prior to this, Mr. Simms held executive level positions at various life science companies. Mr. Simms holds an M.B.A from Pepperdine University and a B.S. in Chemical Engineering from the University of Missouri-Rolla.

Anthony G. Tebbutthas served as our Senior Vice President, Corporate Strategy and Business Development since March 2007. Mr. Tebbutt’s employment with the Company will be ending on May 31, 2009. From September 1996 to October 2006, Mr. Tebbutt served as Senior Vice President and President at UCB, SA (Belgium), a pharmaceutical company, and from 1983 to 1995 Mr. Tebbut served in various Vice President positions in New Product Planning and Marketing for Syntex Laboratories, a publicly traded pharmaceutical company. Prior to

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Syntex, Mr. Tebbutt was also Marketing Manager for Eli Lilly Canada, Inc. from 1974 to 1983. Mr. Tebbutt holds an M.B.A. from Stanford Graduate School of Business and a B.S. from Santa Clara University.

Joseph L. Bakerhas served as our Vice President, Commercial Manufacturing since June 2008 and as our Vice President, Commercial Manufacturing and Global Supply Chain from November 2006 to June 2008. From 1999 to 2006, Mr. Baker was General Manager for Watson Laboratories, Inc., a subsidiary of Watson Pharmaceuticals, Inc., a publicly traded specialty pharmaceutical company, where he was responsible for all activities for the Salt Lake City manufacturing facility. He was previously Director, Oral Product R&D and Director, Operations Technical Services for Theratech, Inc., a publicly traded medical device company, from 1995 to 1999. Prior to Watson Laboratories and Theratech, Mr. Baker held various management and technical positions with Lohmann Therapy Systems from 1993 to 1995 and Lederle Laboratories from 1974 to 1993. Mr. Baker holds an undergraduate degree in Natural Sciences, with a concentration in chemistry, from Thomas A. Edison College.

Anthony Clarke, Ph.D. has served as Alexza’s Vice President, International Development Operations since May 2008. From 2005 until he joined Alexza, Dr. Clarke was Vice President, Clinical Development for Amarin Corporation, a biopharmaceutical company, based in the United Kingdom. Previously, Dr. Clarke held positions as Director, Clinical Development and Independent Consultant for Curidium Medica plc, a medical diagnostic technology company, from 2004 to 2005, and before that he was Senior Director, Worldwide Pain Management / Clinical & Regulatory Affairs for Cephalon, Inc., a publicly traded biopharmaceutical company, from 2000 to 2004. Prior to Cephalon, Dr. Clarke held various regulatory and clinical positions with Anesta UK Ltd., a subsidiary of Anesta Corporation, a publicly traded pharmaceutical company, from 1999 to 2000 and Scherer DDS, a division of RP Scherer, a publicly traded drug delivery company, from 1994 to 1999. Dr. Clarke holds a Bachelors of Science in Pharmacology from University of Sunderland and a Ph.D. in Psychopharmacology from University of London.

Robert S. Fishman, M.D., F.C.C.P. has served as our Vice President, Clinical Development since May 2008, and served as our Vice President, Medical Affairs from September 2007 to May 2008. Prior to Alexza, Dr. Fishman served as Senior Vice President, Clinical Development for Anthera Pharmaceuticals, Inc., a privately held pharmaceutical company, from 2005 to 2007. Previously, he was Vice President, Scientific Affairs for Aerogen, Inc., a publicly traded specialty pharmaceutical company, where he served in various capacities from 1998 to 2005. Prior to Aerogen, Dr. Fishman was Director of Clinical Affairs for Heartport, Inc., a publicly traded medical device company, from 1995 to 1998. Dr. Fishman was Assistant Professor of Medicine, Pulmonary and Critical Care Medicine, at Stanford University School of Medicine from 1993 to 1995. He completed a fellowship in pulmonary and critical care medicine at Massachusetts General Hospital from 1989 to 1992. Dr. Fishman holds an M.D. from Stanford University School of Medicine and an A.B. in biology from Harvard University.

Emily Lee Kelley, SPHRhas served as our Vice President, Human Resources since October 2002. From October 2001 to October 2002, Ms. Kelley provided human resources consulting services to us and Versicor, Inc., a majority owned subsidiary of Sepracor Inc., a publicly traded pharmaceutical company. From 1995 to 2001, Ms. Kelley served as Vice President of Human Resources, Finance and Operations at Affymax Research Institute, a pharmaceutical company, and oversaw human resource matters for Maxygen, Inc., a publicly traded biotechnology company. Ms. Kelley received a B.S. in organizational behavior and industrial relations from the University of California, Berkeley.

Christopher Kurtzhas served as our Vice President, Global Supply Chain and Sustainment Engineering since June 2008. Mr. Kurtz was most recently Vice President of Research and Development and Director, Pharmaceutical Manufacturing and Development for Novo Nordisk Delivery Technologies, a pharmaceutical company, from June 2006 to May 2008. Prior to his tenure at Novo, he held positions as Senior Director, Process Engineering for ALZA Corporation, a division of Johnson and Johnson, a pharmaceutical and medical systems company, from January 2006 to June 2006. He was previously Director, Operations Engineering and Director Manufacturing Engineering for Nektar Therapeutics, a publicly traded biopharmaceutical company, from 2001 to 2006 and also held previous positions at PowderJect Pharmaceuticals, PLC, Monsanto, Inc., Hauser Chemical Research, and spent 6 years in the US Navy Submarine Force. Mr. Kurtz holds a Bachelor of Science degree in Chemical Engineering with a Chemistry Minor from University of Colorado at Boulder.

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Peter D. Noymer, Ph.D. has served as our Vice President, Product Research and Development since January 2009. Dr. Noymer served as our Senior Director, Product Research & Development from January 2008 to January 2009 and as our Senior Director, Product Design & Development from August 2006 to January 2008. From September 1999 to July 2006, Dr. Noymer held various management positions at Aradigm Corporation, a publicly traded specialty pharmaceutical company, most recently Director, Systems Engineering. Prior to Aradigm, Dr. Noymer held an appointment as Visiting Assistant Professor at Carnegie Mellon University, as well as various engineering positions at General Electric, a publicly traded company. Dr. Noymer received M.S. and Ph.D. degrees in mechanical engineering from M.I.T., and a B.S. degree in mechanical & aerospace engineering from Princeton University.

Carlos A. Parrahas served as our Vice President, Quality since May 2008. From February 2007 to April 2008, Mr. Parra was Vice President, Operations and Quality and from June 2002 to February 2007 was Vice President, Quality at Telik, Inc., a publicly traded biopharmaceutical company. Prior to his tenure at Telik, he was Principal Partner at West Coast Associates, a consulting firm, from January 1996 to June 2002. Before founding West Coast Associates, his experience in Quality positions spanned 20 years with both small and large pharmaceutical and biotechnology companies including Somatogen, Syntex Research, Genentech, Abbott Laboratories and American Hospital Supply Corporation. Mr. Parra holds a B.S. in Microbiology with a minor in Engineering from University of Texas at El Paso.

Jeffrey S. Williamshas served as our Vice President, Technology Outlicensing since March 2009 and from May 2008 to March 2009 served as our President, Alexza Singapore Pte. Ltd. Mr. Williams served as the Chief Business Officer for CoNCERT Pharmaceuticals, Inc., a private biotechnology company, from December 2007 to May 2008 on a full-time basis and from May 2008 to August 2008 in a part-time capacity. Mr. Williams served as our Senior Vice President, Operations and Manufacturing from March 2007 to November 2007 and as our Senior Vice President, Corporate and Business Development from March 2004 to March 2007. From September 2001 to February 2004, Mr. Williams served as Vice President, Corporate Development at Scion Pharmaceuticals, Inc., a biopharmaceutical company. From March 2001 to August 2001, Mr. Williams served as Vice President, Corporate Development and Strategy at EmerGen, Inc., a biopharmaceutical company. From December 1996 to February 2001, Mr. Williams held various executive positions at Anesta Corporation, a publicly traded pharmaceutical company. Mr. Williams received an M.S. in management from the M.I.T. Sloan School of Management and a B.A. in economics from Brigham Young University.

Our officers are appointed by and serve at the discretion of our Board. There are no family relationships between our directors and officers.

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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of our common stock as of February 28, 2009 by (i) each stockholder that is known by us to beneficially own more than 5% of the common stock, (ii) each of our named executive officers named in the Summary Compensation Table, (iii) each director and nominee for director and (iv) all executive officers and directors as a group.

Percentage of ownership is based upon 32,973,951 shares outstanding as of February 28, 2009. Beneficial ownership is calculated based upon SEC requirements. All shares of common stock subject to options, restricted stock units, or warrants currently exercisable or exercisable within 60 days after February 28, 2009 are deemed to be outstanding for the purpose of computing the percentage of ownership of the person holding such options, restricted stock units, or warrants, but are not deemed to be outstanding for computing the percentage of ownership of any other person. Unless otherwise indicated below, each stockholder named in the table has sole or shared voting and investment power with respect to all shares beneficially owned, subject to applicable community property laws. Unless otherwise indicated in the footnotes to the table, the address of each individual listed in the table isc/o Alexza Pharmaceuticals, Inc., 2091 Stierlin Court, Mountain View, CA 94043.

			Shares
			Issuable
			Pursuant
			to Options
			Exercisable		Percentage
	Number of		Within 60		of Shares
	Shares		Days of		Beneficially
Beneficial Owner	Outstanding		February 28, 2009		Owned(1)
5% Stockholders
Zesiger Capital Group LLC(2)		2,521,240		—		7.65	%
Entities affiliated with Abingworth Bioventures(3)		2,228,105		—		6.76	%
Entities affiliated with Frazier Healthcare Ventures(4)		2,183,127		—		6.62	%
Entities affiliated with Versant Ventures(5)		2,183,128		—		6.62	%
Alejandro C. Zaffaroni, Ph.D.(6)		2,110,033		—		6.40	%
Named Executive Officers and Directors
Thomas B. King(7)		123,475		594,772		2.14	%
James V. Cassella		9,504		205,038			*
August J. Moretti		12,219		197,484			*
Anthony G. Tebbutt(8)		3,983		110,262			*
Michael J. Simms		3,709		64,036			*
Hal V. Barron, M.D., FACC		—		8,333			*
Samuel D. Colella(5)		2,183,128		23,696		6.69	%
Alan D. Frazier(4)		2,183,127		23,696		6.69	%
Deepika R. Pakianathan, Ph.D.(9)		990,678		23,696		3.07	%
J. Leighton Read, M.D.(10)		1,353,950		23,696		4.17	%
Gordon Ringold, Ph.D.(11)		107,555		23,696			*
Isaac Stein(12)		117,653		23,696			*
All directors and executive officers as a group (12 persons)(13)		7,088,981		1,322,101		24.52	%

*	Less than 1% of our outstanding common stock.
(1)	This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G filed with the SEC.
(2)	Based solely upon a Schedule 13G filed with the SEC on February 10, 2009. These shares represent the combined holdings by Zesiger Capital Group LLC acting as an investment adviser to its clients. Zesiger Capital Group LLC disclaims beneficial ownership of all of the shares held in discretionary accounts in which

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	it manages. The address for the Zesiger Capital Group LLC is 320 Park Avenue, 30th Floor, New York, NY 10022.
(3)	Based solely upon a Schedule 13G filed with the SEC on February 13, 2009. Includes 1,444,529 shares held by Abingworth Bioventures IV LP, 12,383 shares held by Abingworth Bioventures IV Executives LP, 422,193 shares held by Abingworth Bioventures V LP and 349,000 shares held by Abingworth Bioequities Master Fund LTD. The address for the Abingworth Entities is Princess House, 38 Jermyn Street, London, England SW1Y 6DN.
(4)	Includes 583,931 shares held by Frazier Healthcare III, L.P., 1,586,752 shares held by Frazier Healthcare IV, L.P., 4,390 shares held by Frazier Affiliates III, L.P. and 8,054 shares held by Frazier Affiliates IV, L.P. Mr. Frazier is the president and controlling stockholder of Frazier and Company, Inc., the managing director of FHM III, LLC, which is the general partner of Frazier Healthcare III, L.P. and Frazier Affiliates III, L.P., and he shares voting and investment power over the shares held by these entities. He is also a managing member of FHM IV, LLC, which is the general partner of FHM IV, LP, which is the general partner of Frazier Healthcare IV, L.P. and Frazier Affiliates IV, L.P., and he shares voting and investment power over the shares held by those entities. He disclaims beneficial ownership of the shares held by these entities, except to the extent of his proportionate pecuniary interest therein. The address for all entities and individuals affiliated with Frazier Healthcare Ventures is Two Union Square, Suite 3200, 601 Union Street, Seattle, WA 98101.
(5)	Includes 2,153,442 shares held by Versant Venture Capital II, L.P., 10,440 shares held by Versant AffiliatesFund II-A, L.P. and 19,246 shares held by Versant Side Fund II, L.P. (together the “Versant Funds”). Mr. Colella is a managing member of Versant Ventures II, LLC, which is the general partner of each of the Versant Funds, and he shares voting and investment power over the shares held by these entities. He disclaims beneficial ownership of the shares held by these entities, except to the extent of his proportionate pecuniary interest therein. The address for all entities and individuals affiliated with Versant Ventures is 3000 Sand Hill Road, Building 4, Ste. 210, Menlo Park, CA 94025.
(6)	Based solely upon a Schedule 13G filed with the SEC on February 12, 2009. Includes 1,831,626 shares held by the Zaffaroni Revocable Trust u/t/d 1/24/86, of which Dr. Zaffaroni and his wife are trustees; 269,090 shares held by the Zaffaroni Partners, L.P., of which Dr. Zaffaroni is a general partner and limited partner, and an aggregate of 9,317 shares held by certain Alejandro Zaffaroni Retirement Trusts, of which Dr. Zaffaroni is trustee. Dr. Zaffaroni disclaims beneficial ownership of the shares held by these entities, except to the extent of his proportionate pecuniary interest therein. Dr. Zaffaroni’s address is 2600 El Camino Real, Suite 401, Palo Alto, CA 94306.
(7)	Includes 116,107 shares held by the Thomas and Beth King 2000 Family Trust, of which Mr. King and his spouse are trustees.
(8)	Mr. Tebbutt’s employment with Alexza will be ending on May 31, 2009.
(9)	Includes 979,880 shares held by Delphi Ventures VI, L.P. and 9,798 shares held by Delphi BioInvestments VI, L.P. (together, the “Delphi Funds”). Dr. Pakianathan is a managing member of Delphi Management Partners VI, LLC, which is the general partner of each of the Delphi Funds, and she shares voting and investment power over the shares held by these entities. She disclaims beneficial ownership of the shares held by these entities, except to the extent of her proportionate pecuniary interest therein. The address for all entities and individuals affiliated with Delphi Ventures is 3000 Sand Hill Road, Building 1, Ste. 135, Menlo Park, CA 94025.
(10)	Includes 35,594 shares held by Alloy Partners 2002, L.P. and 1,318,356 shares held by Alloy Ventures 2002, L.P. (together, the “Alloy Funds”). Dr. Read is a managing member of Alloy Ventures 2002, LLC, which is the general partner of each of the Alloy Funds, and he shares voting and investment power over the shares held by these entities. He disclaims beneficial ownership of the shares held by these entities, except to the extent of his proportionate pecuniary interest therein. The address for all entities and individuals affiliated with Alloy Ventures is 400 Hamilton Avenue, 4th Floor, Palo Alto, CA 94301.
(11)	Includes 9,276 shares held by the Gordon Ringold and Tanya Zurucki 1999 Reversible Trust, of which Dr. Ringold and his spouse are trustees and 7,000 shares held by the Vivian Robb Trust, of which Dr. Ringold is trustee.

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(12)	Includes 117,653 shares held by The Stein 1995 Revocable Trust, of which Mr. Stein and his spouse are trustees.
(13)	See notes (4), (5) and (7) and through (12).

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16 of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our common stock to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms that they file.

To the Company’s knowledge, based solely upon its review of the copies of such forms furnished to it and written representations from the executive officers and directors that no other reports were required, the Company believes that all Section 16(a) filing requirements were met during 2008.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview of Compensation Program and Philosophy

Our executive officer compensation program is intended to meet four principal objectives: (1) attract, reward and retain individuals with the skills we believe are necessary for us to achieve our goals in the competitive market in which we operate our business; (2) motivate employees to stretch their capabilities and individual contributions to achieve and exceed company objectives; (3) provide equity compensation to align actions and decisions with stockholder value creation; and (4) create a direct link between the Company’s performance, individual contribution and rewards. To meet these objectives, we have adopted the following overriding philosophy:

•  We will pay base cash compensation and equity compensation that is competitive with the practices of other comparable pharmaceutical and biotechnology companies; and

•  We will pay for performance by:

•  setting aggressive performance goals for our executive officers rewarded through a short-term incentive bonus program that is based upon achievement of these goals; and

•  providing significant long-term incentives in the form of stock options and restricted stock units, in order to align the interests of our officers with those of our stockholders and to retain the leadership ability necessary to increase long-term stockholder value.

Our executive compensation program is overseen and administered by our Compensation Committee. The above philosophy guides our Compensation Committee in assessing the proper allocation between long-term compensation, current cash compensation, and short-term bonus compensation. Other considerations include our business objectives, its fiduciary and corporate responsibilities (including internal equity considerations and affordability, particularly in light of our cash resources and requirements), competitive practices and trends, and regulatory requirements. Our Compensation Committee has not adopted any specific policies for allocating compensation between long-term and current compensation, between cash and non-cash compensation, or among other different forms of compensation although the2009-2010 Performance Based Incentive Program is designed to preserve the Company’s cash. Our Compensation Committee believes it is more relevant to tailor each executive officer’s compensation to reward and retain such executive officer. Commensurate with our philosophy of linking executive officer compensation and corporate performance, our Compensation Committee believes that a greater component of compensation for executive officers relative to other employees should be performance-based.

In determining the particular elements of compensation that will be used to implement our overall compensation philosophy, the Compensation Committee takes into consideration a number of factors related to our performance, such as financial measures, financing goals, corporate development milestones, clinical trial milestones, and the achievement of other business objectives, as well as competitive practices among our peer group.

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Based on this philosophy, we have an executive officer compensation program that consists of cash and equity awards with short and long-term components and fixed and contingent components, in proportions we believe are appropriate to incentivize, motivate, reward and retain our executive officers, align actions and decisions with stockholder value creation, and create a direct link between the Company’s performance, individual contribution and rewards. We believe our executive officer compensation program fairly compensates our executive officers with respect to the value created for our stockholders and is competitive in our industry.

Components of Compensation

Our executive officer compensation program consists of three principal components:

•  Base Salary.  Salary for each of our executive officers was based principally on an assessment of the executive officer’s current salary against individual performance and contribution to our overall strategic goals as well as comparable salaries at similar companies.

•  Bonus.  Annual cash and equity incentive bonuses are awarded to executive officers based on the achievement of individual and company-wide performance objectives as a percent of base salary as well as bonuses for similar positions at similar companies.

•  Long-Term Incentive Compensation.  Long-term incentive awards, comprised of stock option grants and restricted stock units, are designed to link incentive compensation to our long-term performance and to align our executive officers’ interests with our stockholders’ interest.

We have selected these components because each is considered useful and necessary to meet one or more of the principal objectives of our compensation policy. For instance, base salary and bonus target percentage are set with the goal of attracting and retaining employees and adequately compensating and rewarding them for the services they perform. Our equity programs are geared toward providing incentives and rewards for the achievement of long-term business objectives and retaining key talent. We believe that these elements of compensation, when combined, are effective, and will continue to be effective, in achieving the objectives of our compensation program.

We have change of control agreements with each of our executive officers that provide for severance benefits and for the acceleration of then unvested stock options in the event of termination in connection with a change of control. These agreements are discussed below under the section entitled “Severance and Change of Control Benefits.”

The Compensation Committee reviewed the compensation program for 2008 and 2009, including each of the above elements. In setting compensation levels for a particular executive, the Committee takes into consideration the proposed compensation package as a whole and each element individually, as well as their expected future contributions to our business.

Role of Our Compensation Committee and Executives in Establishing Compensation

Our compensation program for our executive officers is overseen and administered by our Compensation Committee, which is comprised entirely of independent directors. The Compensation Committee acts on behalf of the Board to review, recommend for adoption and oversee the Company’s compensation strategy, policies, plans and programs, including:

•  establishment of corporate goals and objectives relevant to the compensation of the Company’s executive officers, the weighting of corporate and individual performance relating to compensation, and evaluation ofperformance in light of these stated objectives;

•  review and recommendation to the Board for approval of the compensation and other terms of employment or service of the Company’s President and Chief Executive Officer and the other executive officers including all forms of salary paid to executive officers of the Company and the grant of all forms of bonus and equity compensation provided to executive officers of the Company; and

•  administration ofthe Company’s equity compensation plans and other similar plans and programs.

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The Compensation Committee does not necessarily increase or reduce compensation from one component of compensation based on payments from other components of compensation. The Compensation Committee instead recommends to our Board what it believes to be the appropriate compensation level for each compensation component in light of the Company’s compensation philosophy and based in part on its view of equity and consistency, individual performance and other information it deems relevant, such as executive and employee compensation surveys and databases. The Compensation Committee also reviews compensation paid to executive officers of what it believes to be similarly situated companies.

The Compensation Committee annually reviews our executive officers’ compensation to determine whether it provides adequate incentives. The Compensation Committee’s most recent review occurred in December 2008.

The Compensation Committee meetings typically have included, for all or a portion of each meeting, the committee members and President and Chief Executive Officer, Thomas B. King. For compensation decisions, including decisions regarding the grant of long-term incentive compensation relating to executive officers (other than for Mr. King), the Compensation Committee considers, but is not bound by, the recommendations of Mr. King. Decisions with respect to the compensation of Mr. King are made in executive sessions of the Compensation Committee not attended by Mr. King. The Compensation Committee discusses Mr. King’s compensation package with him, but makes decisions with respect to Mr. King’s compensation without him present. The Compensation Committee has the ultimate authority to recommend items to the Board with respect to the compensation of our executive officers.

The Compensation Committee has delegated to Mr. King the authority to grant long-term incentive awards to employees below the level of vice president under guidelines set by the Compensation Committee, which guidelines set ranges and maximum grant amounts based on the employee’s position and role within the Company. All such option grants are then ratified by the Board. The Compensation Committee also has authorized Mr. King to make salary adjustments for all employees other than for executive officers under guidelines approved by the Compensation Committee. The Compensation Committee has not delegated any of its authority with respect to the compensation of our executive officers.

Compensation Consultant

The Compensation Committee has the authority to engage its own independent advisors to assist in carrying out its responsibility and has done so. In 2006, following our transition from a private to a public company, the Compensation Committee retained a compensation consulting firm, Compensia, to provide recommendations with respect to the bonus and long-term incentive compensation elements of compensation appropriate for similarly situated companies. The report provided by Compensia included base salaries, bonuses and equity compensation and financial data. The Compensation Committee used this report to help it in establishing its compensation philosophy and policies.

In its capacity as an independent compensation consultant on executive compensation, the representatives from Compensia reported to the Compensation Committee rather than to management, although such representatives did meet with management for purposes of gathering information on proposals that management made to the Compensation Committee. Compensia has not provided any other services to us and received compensation only with respect to the services provided to the Compensation Committee in 2006. The Compensation Committee is free to hire additional consultants at any time.

Benchmarking

Our Compensation Committee believes it is important to consider the compensation paid by comparable pharmaceutical and biotechnology companies, particularly those located in the San Francisco Bay Area when making compensation decisions. In determining each officer’s target total annual cash compensation (salary and bonuses) for fiscal year 2008 and 2009 the Compensation Committee reviewed similar compensation information from a group of 24 companies. The most recent review occurred from August through December of 2008. The peer

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group consisted of publicly held pharmaceutical and biotechnology companies located in the San Francisco Bay Area with which we compete for executive talent and consisted of the following companies:

•  Affymax, Inc.

•  Anesiva, Inc.

•  Cell Genesys, Inc

•  Cepheid

•  Cerus Corporation

•  Cytokinetics, Inc.

•  Depomed, Inc.

•  Durect Corporation

•  Dynavax Technologies Corporation

•  Genitope Corporation

•  Genomic Health, Inc.

•  InterMune, Inc.

•  Jazz Pharmaceuticals, Inc.

•  Maxygen, Inc.

•  Novacea, Inc., recently merged with Transcept Pharmaceuticals, Inc.

•  Nuvelo, Inc, recently merged with ARCA Biopharma, Inc.

•  Onyx Pharmaceuticals, Inc.

•  Renovis, Inc.

•  Rigel Pharmaceuticals, Inc.

•  Sunesis Pharmaceuticals, Inc.

•  Telik, Inc.

•  Tercica, Inc.

•  Theravance, Inc.

•  XenoPort, Inc.

Data on the compensation practices of the above-mentioned peer group generally was gathered through various Radford Biotechnology Compensation Reports, including certain custom reports, and review of the publicly available filings of these companies, including their respective proxy statements filed with the Securities and Exchange Commission. Peer group data is gathered with respect to base salary, bonus targets, actual payouts, total cash compensation and stock options awards.

In 2008 and 2009, the Compensation Committee sought to set base salaries of its Senior Vice Presidents at approximately the 50th percentile of our peer group of companies and set target bonuses such that when combined with other compensation, such total compensation was at approximately the 60^th — 75^th percentile of total cash compensation of our peer group of companies. The Compensation Committee sought to set Mr. King’s base salary at approximately the 50^th percentile of our peer group of companies and set his target bonuses such that when combined with other compensation, his total compensation was at approximately the 60th percentile of total cash compensation of our peer group of companies. We believe that the opportunity for a higher comparable bonus is consistent with our compensation philosophy in that the bonus is tied to achievement of corporate and individual goals. In addition, the Compensation Committee considers input from other sources, including members of our Board, in determining salary, bonus and long-term incentive compensation.

This comparative compensation information described above is just one of several analytic tools that are used by the Compensation Committee in setting executive compensation. Such information is used solely as a point of reference for measurement and not as a determinative factor. The Compensation Committee also considers internal pay equity and the individual performance of executive officers, as well as general economic factors including the cost of living.

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Cash and Long-Term Incentive Compensation

Through 2008, our executive officer compensation program consisted of three principal components: (1) base salary; (2) annual bonus, paid in a combination of cash and equity incentive components; and (3) long-term incentive compensation. Beginning in 2009, we combined the annual cash and equity incentive bonuses and long-term incentive compensation into one program, the2009-2010 Performance Based Incentive Program. We also provide our executive officers with certain change of control benefits. Finally, we offer our executive officers participation (with all other eligible employees) in our 401(k) Plan, Employee Stock Purchase Plan, and certain other benefits available generally to our employees.

Base Salary

In setting or adjusting base salaries for 2008 and 2009, the Compensation Committee assessed each Senior Vice President’s current salary against a number of factors including contribution to our strategic goals, individual performance, pay level compared to other executive officers, base salary compared to those of similar positions at comparable companies, as well as general economic factors including the Company’s current cash needs and the cost of living. Increases in the base salaries of executive officers are made in consideration of the total salary increases approved by our Compensation Committee for the entire company and targets the base salaries for our Senior Vice Presidents and our President and Chief Executive Officer to approximately the 50^th percentile of our peer group of companies. The Compensation Committee also considered the recommendation of Mr. King in setting or adjusting base salaries for our other executive officers. Generally, executive salaries are adjusted effective January 1^st of each year.

The 2008 annualized salaries for Messrs. King, Tebbutt, Moretti, and Simms and Dr. Casella were; $455,000, $320,500, $320,500, $315,000 and $320,500, respectively. In December 2008, management recommended to the Compensation Committee that in light of the Company’s cash needs and the difficult financial markets, that the Company not implement a Company-wide increase in employee salaries for 2009, and instead only implement raises on an individualized basis, primarily for promotions. In February 2009, our Compensation Committee approved an increase in the base salary of Mr. Simms’ by approximately 1.75% to $320,500. The Compensation Committee approved this increase to bring Mr. Simms’ salary in line with our other Senior Vice Presidents. No other officer received an increase in base salary. On February 25, 2009, the Board of Directors, upon the recommendation by the Compensation Committee, also approved the2009-2010 Performance Based Incentive Program. The2009-2010 Performance Based Incentive Program provides the executive officers the ability to earn cash, restricted stock units and stock options in lieu of, among other items, a 2009 merit increase, the historical bonus program and annual mid-yeartop-up stock option grants. The Compensation Committee approved2009-2010 Performance Based Incentive Program in an effort to preserve the Company’s cash while providing alternative incentives to retain key staff and remain competitive compared to prior year programs. See “Compensation Discussion and Analysis — Annual Cash and Equity Incentive Bonuses” for a description of the terms of the2009-2010 Performance Based Incentive Program.

No additional material changes are expected to be made to the base salary levels of our executives until our annual executive performance reviews are conducted in the fourth quarter of 2009. We believe that, given the industry in which we operate, the current financial markets, and the corporate culture we have created, our compensation levels for 2009 are generally sufficient to retain our existing executive officers.

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Annual Cash and Equity Incentive Bonuses

2008 Performance Bonus Program

In April 2008, the Board adopted the 2008 Performance Bonus Program, as recommended and approved by the Compensation Committee. The purpose of the 2008 Performance Bonus Program was to promote the interests of the Company and its stockholders by rewarding company executives and employees based upon the level of achievement of specified corporate, departmental and individual performance goals. The 2008 Performance Bonus Program applied to all employees who commenced employment on or before July 1, 2008 and were employed at December 31, 2008. Employees employed more than six months, but less than one year, were eligible to receive a pro-rated bonus payout.

The 2008 Performance Bonus Program established a target bonus for each employee, including each executive officer, of between 10% and 60% of annual base salary with the President and Chief Executive Officer’s target bonus set at 60% of base salary and each executive officer’s target bonus set at 45% of base salary. Target bonuses, as a percentage of potential total cash compensation, increased with employment level within the Company. Based on a recommendation from the Compensation Committee, the Board decided to set target bonuses for our Senior Vice Presidents and President and Chief Executive Officer such that when combined with other compensation, such total compensation was at approximately at the 60^th — 75^th percentile and 60^th percentile, respectively, of total compensation of executive officers of our peer group. Our Compensation Committee recommended a higher percentile for the incentive bonus than the base salary because it believed the thresholds for achieving bonus payout were difficult, and because it believed our stockholders interests would be served if management was properly motivated to achieve their performance goals.

Under the 2008 Performance Bonus Program, each employee could achieve up to 125% of their target bonus for performance in excess of target levels. The Board believed it was appropriate to provide for this range of possible bonus performance payout, based upon setting aggressive goals and successful goal achievement, to enable us to attract and retain key personnel and to motivate our employees to meet our business goals.

Payment of actual bonus amounts under the 2008 Performance Bonus Program depended on the level of achievement of certain corporate, departmental and individual performance goals, categorized into Individual Performance and Key Goal Accomplishment components.

For an employee’s Individual Performance component, the ratio between corporate and departmental/individual performance goals was based on an employee’s employment level within the Company. In connection with the adoption of the 2008 Performance Bonus Program corporate goals were finalized and approved by the Board, and individual performance plans were established for each employee. The following table summaries this ratio between corporate and departmental/individual performance goals based on employment level within in the Company for the Individual Performance allocation.

	Individual Performance Goal
	Allocation
	Overall			Departmental/
Employment Level	Corporate Goals			Individual Goals
CEO		100	%		0	%
Officer		80	%		20	%
Director		60	%		40	%
Manager		40	%		60	%
Individual		20	%		80	%

Additionally, each employee’s potential bonus payout was a function of the Key Goal Accomplishment component, 80% of which was based on the actual achievement of specified corporate performance goals set forth in the 2008 Performance Bonus Program (collectively, the “2008 Key Goals”) and 20% of which was left to the Board’s discretion. There were four primary categories of 2008 Key Goals, each consisting of a specified subset of corporate goals: (i) goals related to the execution of the AZ-004 development plans (55%); (ii) goals related to the execution of the product development pipeline plans (20%); (iii) goals related to the achievement of certain financial goals (20%); and (iv) goals related to human resources and organizational development (20%). Using the

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same philosophy toward aggressive goal setting as with the overall 2008 Corporate Goals, a possible payout of the Key Goal Accomplishment component was greater than 100%. If less than 70% of the Key Goals were accomplished, the Key Goal Accomplishment component would have been 0 and there would have been no employee payout under the 2008 Performance Bonus Program.

As with the 2006 Performance Bonus Program and the 2007 Performance Bonus Program, when establishing the applicable corporate performance goals for the 2008 Performance Bonus Program, the Board sought to set aggressive performance goals based on the Company’s overall objectives for the year with the understanding that such goals were ambitious and would likely not all be achieved. The Board’s goal when setting the 2008 Key Goals was to create a tangible list of goals that were consistent with the Company’s overall objectives and that would motivate employees to stretch their capabilities and individual contributions. Over the past two years, the Company has achieved corporate performance in excess of the target level but has not achieved the maximum corporate performance level. The corporate performance levels resulted in the payout percentage for the 2006 Performance Bonus Program being approximately 80% of the participant’s target bonus opportunity. In 2007, the corporate performance levels resulted in a payout percentage that was approximately 86% of the participant’s target bonus opportunity. In general, the Board sought to set the target and maximum levels under the 2008 Performance Bonus Program such that the relative difficulty of achieving the target level was consistent with the previous two years.

Under the terms of the 2008 Performance Bonus Program, the Company’s management team, the Compensation Committee and the Board retained the discretion to (i) increase, reduce or eliminate the cash and stock option bonuses that otherwise might be payable to all employees or any individual based on actual performance as compared to pre-established goals, and (ii) structure future or additional bonus and equity incentives in a manner that they believe will appropriately motivate and reward the Company’s employees, including the Company’s executive officers.

On December 18, 2008, after the Board reviewed the Company’s fiscal year 2008 results measured against the 2008 Key Goals, the Board determined that 100% of the 2008 Key Goals were achieved in 2008. However, due to the deterioration in the price of the Company’s stock price during 2008 and in light of the Company’s current cash needs, the Compensation Committee recommended, and the Board decided to pay, none of the remaining 20% of the target bonus related to corporate performance goals reserved for Board discretion. As a result, all employees were eligible to receive approximately 80% of the portion of their target bonus that was related to the achievement of corporate goals.

During November and December 2008 the Company’s management evaluated each individual employee’s (other than Mr. King’s) achievement of his or her applicable departmental and individual goals. Following such evaluation, the Board approved the recommendations by management of the target bonus related to the achievement of corporate, departmental and individual goals that should be paid to each employee.

Pursuant to the terms of the 2008 Performance Bonus Program, each individual employee’s bonus was then calculated by using the above variables, and the calculated bonus payouts were allocated between cash and stock option components. Initially the 2008 Performance Bonus Program provided that the calculated bonus payout would be allocated between cash and stock option components as follows:

	Total Calculated
	Performance Bonus
	Cash			Stock Option
Employment Level	Allocation			Allocation
CEO		70	%		30	%
Officer		70	%		30	%
Director		80	%		20	%
Manager		90	%		10	%
Individual		100	%		0	%

In December 2008, however, in an effort to conserve cash, the Board determined that for certain employees, a reduction in the portion of the bonus payout allocated to cash and a corresponding increase in the portion of the bonus payout allocated to stock option awards would be incorporated into the 2008 Performance Bonus Program.

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Specifically, for the Company’s executive officers, a 40% reduction in the cash portion of the bonus was made, thus reducing the percentage of cash payable from 70% to 42% of the total value of the bonus. The revised specific allocations between cash and stock option components were as follows:

	Total Calculated
	Performance Bonus
	Cash			Stock Option
Employment Level	Allocation			Allocation
CEO		42	%		58	%
Officer		42	%		58	%
Director		60	%		40	%
Manager		81	%		19	%
Individual		100	%		0	%

Based on the above determinations, on January 22, 2009 the Board approved specific cash bonus payments and the issuance of stock options to purchase shares of our common stock. The specific cash and equity awards of stock options granted under the 2008 Performance Bonus Program to each of the Company’s executive officers were as follows:

			2008 Year-End
	2008 Cash		Option
Executive Officer	Bonus ($)		Grant Shares
Thomas B. King President and Chief Executive Officer	$	87,142		57,877
James V. Cassella, Ph.D.  Senior Vice President, Research and Development	$	48,944		32,508
August J. Moretti Senior Vice President, Chief Financial Officer and Secretary	$	47,006		31,220
Anthony G. Tebbutt(1) Senior Vice President, Corporate Strategy & Business Development	$	46,037		30,576
Michael J. Simms Senior Vice President, Operations & Manufacturing	$	39,130		25,989

(1) Mr. Tebbutt’s employment with Alexza will be ending on May 31, 2009.

Stock option awards under the 2008 Performance Bonus Program were valued with a Black Scholes calculation of the option award value of an option with an exercise price of $3.13 per share, the closing price of a share of our common stock on January 2, 2009, the first business date in 2009 following the approval of the 2008 Performance Bonus Program achievement by the Board. Actual stock option awards were priced at $2.81 per share, the closing price of a share of our common stock on January 22, 2009 the date the Board granted such options pursuant to the terms of the 2008 Performance Bonus Program. These options vest in two instalments: 50% on January 2, 2009 and 50% on January 2, 2010 (subject to acceleration in accordance with the terms of Sections 10(c) and (d) of our 2005 Equity Incentive Plan).

2009-2010 Performance Based Incentive Program

In February 2009, the Board adopted the2009-2010 Performance Based Incentive Program (the “Performance Program”), as recommended and approved by the Compensation Committee, for the Company’s employees, including its executive officers. The Performance Program is a two-year incentive program that is intended to motivate and retain the Company’s employees. The Performance Program was adopted in lieu of the Company’s annual performance bonus programs that it had previously used in 2006, 2007 and 2008, a 2009 annual salary merit increase and annual mid-yeartop-up stock option grants typically granted to employees with more than 24 months

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of service. The Performance Program was adopted to encourage Company employees to focus on two key deliverables for the next 24 months, and to allow the Company to conserve cash resources by utilizing equity compensation as a major component of the Performance Program.

The Performance Program establishes a two-year target value amount (“TVA”) for each employee, including each executive officer, generally based upon such employee’s current base salary, past bonus targets, past average company salary merit raises and an incentive multiplier. The annual target bonus as a percentage of salary for each employee, including each executive officer, is between 10% and 60% per year with the President and Chief Executive Officer’s target bonus set at 60% of base salary and each executive officer’s target bonus set at 45% of base salary. The annual merit increase portion of the payout is based on past company average merit raises and is targeted at 5% per employee per year. The incentive multiplier is based an employee’s employment level and is set at between 10% and 30% with the President and Chief Executive Officer’s incentive multiplier set at 30% and each executive officer’s target bonus set at 20%. The resulting estimated TVA over the two year period is outlined by level in the following table:

							Combined
	Annual			Annual			Two Year
	Target Bonus			Target Merit Raise			Target Payout						Total TVA
	as a			as a			as a						as a
	Percentage of			Percentage of			Percentage of			Incentive			Percent of
Employment Level	Salary			Salary			Salary			Multiplier			Salary
CEO		60	%		5	%		130	%		30	%		169	%
Officer		45	%		5	%		100	%		20	%		120	%
Director		25	%		5	%		60	%		15	%		69	%
Manager		17.5	%		5	%		45	%		10	%		50	%
Individual		10	%		5	%		30	%		10	%		33	%

Based on a recommendation from the Compensation Committee, the Board decided to set target bonuses for our Senior Vice Presidents and President and Chief Executive Officer such that when combined with other compensation, the total compensation would be in approximately the 60th — 75th percentile and 60th percentile, respectively, of total compensation of executive officers of our peer group. Our Compensation Committee recommended a higher percentile for the incentive bonus than the base salary because it believed the thresholds for achieving bonus payout were difficult, because it believed our stockholders interests would be served if management was properly motivated to achieve their performance goals, and because this practice is consistent with Bay Area companies in our benchmark company group.

Payouts under the Performance Program are contingent upon the achievement of two specified corporate milestones related to the submission of a New Drug Application (the “AZ-004 NDA”) for the AZ-004 (Staccatoloxapine) product candidate (the “First Milestone”) and the approval of the AZ-004 NDA (the “Second Milestone” and together with the First Milestone, the “Milestones”). Under the terms of the Performance Program, approximately 33% of each employee’s TVA is tied to the achievement of the First Milestone and the remaining approximately 67% of such employee’s TVA is tied to the achievement of the Second Milestone.

Payouts under the Performance Program, if any, are comprised of cash, restricted stock units and stock option awards, and are calculated in accordance with a formula that takes into account each employee’s TVA and personal performance rating, which can range from 70% to 125%, at the time the Company achieves an applicable Milestone. To conserve cash, the Performance Program provides that the first 70% of any TVA payout will be paid with restricted stock units and stock option awards. The specific allocation between cash, restricted stock units and stock option awards are based on employment level as outlined in the following table:

				Restricted			Stock
				Stock			Option
Employment Level	Cash %			Units			Awards
Officers		30	%		40	%		30	%
Non-officers		30	%		70	%		0	%

Under the terms of the Performance Program, the restricted stock units and stock option awards associated with the First Milestone were granted on February 24, 2009, with such restricted stock units vesting 100% upon the

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achievement of the First Milestone and such stock option awards vesting 50% upon the achievement of the First Milestone and 50% on the first anniversary of the achievement of the First Milestone. The restricted stock units and stock option awards granted pursuant to the Performance Program were granted under and in accordance with the terms and conditions of the Company’s 2005 Equity Incentive Plan. All of the stock option awards are (10) year options to purchase shares of our common stock, have an exercise price of $2.10 per share (the closing price of our common stock on February, 24, 2009, the date of grant) and are intended to be incentive stock options for tax purposes. The following chart sets forth the restricted stock unit and stock option award issuances made to the Company’s executive officers under the Performance Program:

	Restricted		Stock Option
Executive Officer	Stock Units		Awards
Thomas B. King President and Chief Executive Officer		48,822		54,535
James V. Cassella, Ph.D. Senior Vice President, Research and Development		24,419		27,277
August J. Moretti Senior Vice President, Chief Financial Officer and Secretary		24,419		27,277
Michael J. Simms Senior Vice President, Operations & Manufacturing		24,419		27,277

The remaining portion of the restricted stock units and stock option awards payable pursuant to the Performance Program will be granted upon the achievement of the First Milestone, with such restricted sock units vesting 100% upon the achievement of the Second Milestone and such stock option awards vesting 50% upon the achievement of the Second Milestone and 50% upon the first anniversary of the achievement of the Second Milestone.

In order to be eligible for participation in the Performance Program, an employee must be a current employee and in good standing with the Company on the date an applicable Milestone is achieved. Stock option awards are valued based on a Black Scholes fair value calculation of the stock option award on the date the Board grants such stock option awards and restricted stock units are valued based on the closing price of a share of the Company’s Common Stock on the date the Board grants such restricted stock units.

The Company expects that cash and stock awards actually payable for 2009 and 2010, if any, will be calculated in the manner set forth above and will vary depending on the extent to which the Company achieves the specified Milestones and the attainment of individual performance ratings. In addition, the Company’s management team, the Compensation Committee and the Board of Directors retain the discretion to (i) increase, reduce, or eliminate the cash and stock awards that otherwise might be payable to all employees or any individual based on actual performance as compared to the pre-established Milestones, and (ii) structure future or additional bonus and equity incentives in a manner that they believe will appropriately motivate and reward the Company’s employees, including the Company’s executive officers.

Long-Term Incentive Compensation

We believe that providing a portion of our total compensation package in stock options and restricted stock units aligns the incentives of our executive officers with the interests of our stockholders by creating an incentive for our executive officers to maximize stockholder value. The equity compensation program also is designed to encourage our officers to remain employed with us. We target the value of our equity awards so that that when combined with other compensation, such total compensation is at approximately at the 50^th — 75^th percentile of total compensation of executive officers of our peer group

At present, our long-term compensation program consists solely of the grant of stock options and restricted stock units subject to vesting conditions. We grant stock awards to our executive officers through the 2005 Equity Incentive Plan. The 2005 Equity Incentive Plan was established to provide our employees with an opportunity to

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participate, along with our other stockholders, in our long-term performance and was designed to reward our employees for their hard work and commitment to the long term success and growth of the Company. These stock awards are intended to produce significant value for each employee, including executives, if our performance is outstanding and if the employee has an extended tenure. The authority to make equity grants to executive officers rests with our Compensation Committee (subject to ratification by the Board). As noted above, our Compensation Committee also considers the recommendations of Mr. King in determining stock option and restricted stock unit grant recommendations for other executive officers. Mr. King has the authority to make equity grants to non-officer employees, which are subsequently reviewed and ratified by the Board of Directors.

The Compensation Committee has not granted, nor does it intend in the future to grant, equity compensation awards to executives in anticipation of the release of material nonpublic information that is likely to result in changes to the price of our common stock. Similarly, the Compensation Committee has not timed, nor does it intend in the future to time, the release of material nonpublic information based on equity award grant dates. Also, because equity compensation awards typically vest over a four-year period, the value to recipients of any immediate increase in the price of our stock following a grant will be attenuated.

Under the 2005 Equity Incentive Plan, initial grants of stock options are made to eligible employees, including executive officers, in connection with their commencement of employment. All initial grants have four-year vesting, with the first 25% vesting after one year of service and the remainder of the options vesting ratably on a monthly basis thereafter over three additional years. The number of shares subject to an initial grant is determined based on a variety of factors, including market data collected regarding the equity grant ranges for the peer companies listed above, Radford surveys of all US-based biotechnology companies, and our goal to award grants so that that when combined with other compensation, such total compensation is at approximately at the 50^th — 75^th percentile of total compensation of executive officers of our peer group. As noted above, our Compensation Committee also considers the recommendations of Mr. King in determining stock option grant recommendations for other executive officers.

Through 2008, we also had a policy of issuing additional options to employees, including executive officers, who have been employed with the Company for at least two years. These options were also subject to four year vesting, with the first 25% vesting after one year from the date of grant and the remainder of the options vesting ratably on a monthly basis thereafter over three additional years. In considering and recommending stock option grants for our executive officers under this policy, our Compensation Committee considered individual performance, overall contribution, equity, officer retention and any other unvested stock options held by such executive officer. The Committee also considered market data collected regarding the equity grant ranges for the peer companies listed above, Radford surveys of all US-based biotechnology companies, and our goal to award grants so that that when combined with other compensation, such total compensation is at approximately at the 50^th — 75^th percentile of total compensation of executive officers of our peer group. As noted above, our Compensation Committee also considered the recommendations of Mr. King in determining stock option grant recommendations for other executive officers. For 2009 and 2010, the Company will not issue these additional options, but will instead award option and restricted stock units pursuant to the2009-2010 Performance Based Incentive Program described above under “Compensation Discussion and Analysis — Annual Cash and Equity Incentive Bonuses.”

All option grants made prior to our initial public offering on March 8, 2006 were made at what our Board assessed as the estimated fair value of our common stock at the date the options were granted. In light of the expected completion of our initial public offering the Board reassessed the fair market value on the date of each of these grants. As a result of this retrospective analysis, we determined that the fair value of our common stock on a fully-diluted basis steadily increased from $2.04 per share at January 20, 2005, to $9.90 per share at December 7, 2005, even though our options were granted between the range of $1.10 to $6.88 per share on those dates. For more information on this retrospective analysis, please see“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Stock-Based Compensation”in the Company’s 2008 Annual Report onForm 10-K. Since our initial public offering, we have made option grants based on the closing market value of our stock as reported on the Nasdaq Global Market on the date of grant. The value of the shares subject to our 2008 option grants to executive officers is reflected in the“Summary Compensation Table”and“Grants of Plan-Based Awards”tables below.

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In 2008, Mr. King received an option to purchase 155,000 shares of common stock at an exercise price of $4.35 subject to four year vesting. Mr. Moretti and Dr. Cassella each received an option to purchase 55,000 shares of common stock at an exercise price of $4.35 subject to four year vesting. Mr. Tebbutt and Mr. Simms had not been employed for two years at the time of the grants and, accordingly, did not receive an option grant.

Severance and Change of Control Benefits.

Each of our executive officers has entered into an agreement which provides for severance benefits and for the acceleration of then unvested stock options in the event of termination in connection with a change of control. Pursuant to the terms of the agreements, if the executive’s employment is terminated without cause or terminated by the executive for good reason within three months before or 12 months following a change of control, and the executive agrees to sign a general release of claims in favor of the Company, then the executive is entitled to the following benefits:

•  acceleration of vesting of all of the executive’s outstanding unvested options to purchase common stock and accelerated lapsing of any right of repurchase on the executive’s restricted stock;

•  payment in a lump sum of the executive’s annual base salary plus the greater of the bonus paid for the latest completed fiscal year and the target bonus for the year in which the notification of the executive’s termination of employment occurs; and

•  payment in a lump sum of an amount equal to the amount of the executive’s out of pocket costs to continue group health insurance benefits under COBRA for 18 months.

On December 18, 2008, the Board approved certain amendments to such agreements, primarily to bring the agreements in compliance with Section 409A of the Internal Revenue Code. The amendments did not materially alter or otherwise increase benefits our executive officers would be eligible to receive upon termination in connection with a change of control.

If and to the extent that any payments in the context of a change of control are made to our executives who are party to these change of control agreements and the payments are equal to or exceed three times the average of that executive’s annualW-2 compensation for the five years preceding the change of control, the payments or benefits exceeding the five-year average will be subject to the excise tax imposed by Section 4999 and the non deductibility provisions imposed by Section 280G of the Internal Revenue Code. In such circumstances, we will make agross-up payment to the executive to compensate the executive for all taxes imposed under Section 4999 and any related income taxes imposed under the Internal Revenue Code and state and local authorities for thegross-up payment, and we will not be permitted to deduct from our taxes the amount in excess of the five-year average of the compensation paid to the executive. For purposes of the change of control agreements, a change of control includes a sale of substantially all of our assets; a merger or consolidation in which we are not the surviving corporation if immediately thereafter our stockholders immediately prior thereto do not beneficially own more than 50% of the combined outstanding voting power of the surviving entity or more than 50% of the combined outstanding voting power of its parent, in each case in substantially the same proportions as their ownership of our outstanding voting securities immediately prior to such transaction; a reverse merger in which we are the surviving corporation but our outstanding shares of common stock immediately preceding the merger are converted by virtue of the merger into other property if immediately after the merger our stockholders immediately prior thereto do not own more than 50% of the combined outstanding voting power of the surviving entity or more than 50% of the combined outstanding voting power of its parent, in each case in substantially the same proportions as their ownership of our outstanding voting securities immediately prior to such transaction; or any transaction or series of related transactions in which our stockholders own less than 50% of voting power in the surviving corporation, other than transactions in which our primary purpose for selling stock is to raise capital for our operations and activities.

In our industry, there is a high level of merger and acquisition activity, and the executives of companies engaged in merger and acquisition activity are often terminated or have their responsibilities reduced upon the change of control. We provide these benefits to ensure that, in the event of a change of control, our executives will not have any personal incentive to resist a change of control that is approved by our Board and stockholders and will be incentivized to remain with us through, and to facilitate, the closing of any such transaction. We believe this

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benefit is comparable to such severance benefits provided by companies in our industry and is appropriate and necessary to retain the individuals with the skills we believe are necessary for us to achieve our goals.

Mr. Tebbutt’s employment with the Company will be ending as of May 31, 2009. Mr. Tebbutt will remain as a consultant to the Company until January 31, 2010. In connection with Mr. Tebbutt’s planned departure, the Company has agreed to pay Mr. Tebbutt certain severance benefits, including a lump sum payment equal to $263,472 payable on May 31, 2009. In addition, the Company has agreed (i) to reimburse, if requested, Mr. Tebbutt for medical, dental, vision and Employee Assistance Plan insurance premiums for the period between June 1, 2009 and January 31, 2010, which payments are not expected to exceed $1,000, (ii) to continue the vesting on Mr. Tebbutt’s outstanding options until January 31, 2010, and (iii) to provide, if requested, outplacement/career transition consulting services, which payments are not expected to exceed $12,000. As a consultant to the Company, Mr. Tebbutt will be paid $300 an hour for any services provided upon the request of the Company.

Other Benefits

Our executive officers are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, group life and disability insurance, employee stock purchase plan and our 401(k) plan, in each case on the same basis as our other employees.

Perquisites

Messrs. King and Tebbutt and Dr. Cassella were residing outside the San Francisco Bay Area at the time of their recruitment by the company. In connection with Mr. King and Dr. Cassella’s respective moves to the San Francisco Bay Area, we provided them with housing loans (which were repaid in December 2005, prior to the filing of our registration statement in connection with our initial public offering) and monthly housing supplements more fully described at“Indebtedness of Management and Related Agreements.”Mr. Tebbutt received moving allowances and a monthly housing supplement. These amounts are reflected in the Summary Compensation Table, the value for these perquisites aggregated to $176,592 for our named executive officers during 2008. We do not consider such arrangements to be a standard component of executive officer compensation.

Evolution of our Compensation Strategy

Our compensation strategy is necessarily tied to our stage of development. Accordingly, the specific direction, emphasis and components of our executive officer compensation program continue to evolve in parallel with the evolution of our business strategy. Our Compensation Discussion and Analysis will, in the future, reflect these evolutionary changes. For example, in 2009 in light of the Company’s current cash needs and the difficult financial markets, we adopted the2009-2010 Performance Based Incentive Program to allow the Company to conserve cash resources by utilizing equity compensation as a major component of the program.

Accounting and Tax Considerations

Effective January 1, 2006, we adopted the fair value recognition provisions of FASB Statement No. 123 (revised 2004),Share-Based Payment, or SFAS 123R. Under SFAS 123R, we are required to estimate and record an expense for each award of equity compensation over the vesting period of the award. Until we achieve sustained profitability, the availability to us of a tax deduction for compensation expense is not material to our financial position. We structure cash incentive bonus compensation so that it is taxable to our employees at the time it becomes available to them.

Section 162(m) of the Internal Revenue Code of 1986 limits us to a deduction for federal income tax purposes of up to $1 million of compensation paid to certain named executive officers in a taxable year. Compensation above $1 million may be deducted if it is “performance-based compensation.” Stock option awards under the 2005 Equity Incentive Plan, to the extent our Board or the committee of our Board granting such stock awards is composed solely of “outside directors,” are performance-based compensation within the meaning of Section 162(m) and, as such, are fully deductible. To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, our Compensation Committee has not adopted a policy requiring all compensation to be

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deductible. Our Compensation Committee intends to continue to evaluate the effects of the compensation limits of Section 162(m) and to grant compensation awards in the future in a manner consistent with the best interests of our company and our stockholders.

Summary

Through the compensation arrangements described above, a significant portion of our executive officer compensation program is contingent upon individual and company-wide performance, and realization of benefits by our executive officers is closely linked to increases in long-term stockholder value. We remain committed to this philosophy of pay-for-performance, recognizing that the competitive market for talented executive officers and the volatility of our business may result in highly variable compensation during any given annual period.

Summary Compensation Table

The following table sets forth for the fiscal years ended December 31, 2006, 2007 and 2008, respectively, the compensation awarded to or paid, or earned by, our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated employees for the year ended 2008. We refer to these persons as our “Named Executive Officers.”

							Non-Equity
							Incentive Plan		All Other
			Salary		Option Awards		Compensation		Compensation			Total
Name and Principal Position	Year		($)		($)(1)		($)(2)		($)			($)
Thomas B. King		2008		455,000		420,689		87,142		24,806	(3)		987,637
President & Chief Executive Officer and		2007		380,000		211,403		94,014		88,909	(3)		774,326
Director		2006		352,619		39,234		102,200		50,073	(3)		544,129
Anthony G. Tebbut(4)		2008		320,500		314,239		46,037		76,069	(3)		756,845
Senior Vice President, Corporate Strategy &		2007		245,336		266,011		48,800		159,218	(5)		719,365
Business Development
James V. Cassella, Ph.D.		2008		320,500		246,397		48,944		75,717	(3)		691,559
Senior Vice President		2007		303,750		164,461		59,840		24,078	(3)		552,129
Research & Development		2006		288,750		81,736		56,595		36,500	(3)		463,581
August J. Moretti		2008		320,500		261,522		47,006		—			629,028
Senior Vice President		2007		303,750		182,295		59,840		—			545,885
Chief Financial Officer and Secretary		2006		288,750		133,186		56,595		—			478,531
Michael J. Simms(6)		2008		266,538		158,830		39,130		50,000	(7)		514,499
Senior Vice President, Operations and Manufacturing

(1)	For options issued prior to January 1, 2006, amounts were calculated utilizing the provisions of Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees,” and for options issued after January 1, 2006, amounts were calculated utilizing the provisions of Statement of Financial Accounting Standards, or SFAS, No. 123R, “Share-based Payments.” Pursuant to SEC Rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting. See Note 2 of the consolidated financial statements in our Annual Report for the year ended December 31, 2008 regarding assumptions underlying the valuation of equity awards.
(2)	Represents cash bonuses earned under the 2008 Performance Bonus Program and 2007 Performance Bonus Program in the year set forth in table and paid in the following year. See “Compensation Discussion and Analysis — Cash and Long-Term Incentive Compensation” for a description of the terms of the 2008 Performance Bonus Program.
(3)	Represents monthly housing supplement payments provided to the respective officer. See “Certain Relationships and Related Transactions and Director Independence” for further discussion.
(4)	Mr. Tebbutt joined the Company on March 12, 2007. Mr. Tebbutt’s employment with the Company will be ending on May 31, 2009.

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(5)	Represents the reimbursement of $139,104 of relocation expenses and $20,114 of monthly housing supplements payments. See “Certain Relationships and Related Transactions and Director Independence” for further discussion.
(6)	Mr. Simms joined the Company on February 25, 2008.
(7)	Represents a sign-on bonus paid to Mr. Simms upon the start of his employment with the Company.

2008 Grants of Plan-Based Awards Table

The following table sets forth information with respect to our stock options granted during the fiscal year ended December 31, 2008 to each of the Named Executive Officers. Options were incentive and nonqualified stock options granted under our 2005 Equity Incentive Plan. All options were granted at an exercise price equal to the fair market value of our common stock on the date of grant. The option vesting will accelerate in full in certain circumstances after a change of control.

											All Other					Grant
											Option					Date
			Estimated Possible				Estimated Possible				Awards:		Exercise			Fair
			Payouts Under Non-				Payouts Under				Number of		or Base			Value of
			Equity Incentive Plan				Equity Incentive				Securities		Price of			Stock and
			Award(1)				Plan Awards(1)				Underlying		Option			Option
	Grant		Target		Maximum		Target		Maximum		Options		Awards			Awards
Name	Date		($)		($)		($)		($)		(#)		($/Share)			($)(2)
Thomas B. King				114,660		143,325		158,340		197,925		—		—			—
		01/04/2008		—		—		—		—		7,378		7.50	(3)	$	31,825
		07/09/2008		—		—		—		—		155,000		4.35			393,018
James Cassella, Ph.D.				60,575		75,718		83,651		104,563		—		—			—
		01/04/2008		—		—		—		—		4,696		7.50	(3)		20,256
		07/09/2008		—		—		—		—		55,000		4.35			139,458
August J. Moretti				60,575		75,718		83,651		104,563		—		—			—
		01/04/2008		—		—		—		—		4,696		7.50	(3)		20,256
		07/09/2008		—		—		—		—		55,000		4.35			139,458
Anthony G. Tebbutt				60,575		75,718		83,651		104,563		—		—			—
		01/04/2008		—		—		—		—		3,830		7.50	(3)		16,521
Michael J. Simms				50,376		62,970		69,566		86,958		—		—			—
		02/25/2008		—		—		—		—		175,000		6.24	(4)		622,493

(1)	These columns sets forth the target and maximum amounts of each Named Executive Officer’s annual cash and equity incentive bonus awards for the year ended December 31, 2008 under our 2008 Performance Bonus Program. There are no minimum threshold amounts. Bonuses are paid out in a combination of 42% cash and 58% in stock options to purchase Alexza common stock. Stock option awards under the 2008 Performance Bonus Program will be valued with a Black Scholes calculation of the option award value of an option with an exercise price equal to the closing price of a share of our common stock on the first business date in 2009 following the approval of the 2008 Performance Bonus Program achievement by the Board. For more information, see “Compensation Discussion and Analysis — Cash and Long-Term Incentive Compensation” for a description of the terms of the 2008 Performance Bonus Program and the actual awards earned by the Named Executive Officers for the year ended December 31, 2008.
(2)	Represents the grant date fair value of each award determined in accordance with FAS 123R.
(3)	Represents a stock option grant earned in 2007 under the 2007 Performance Bonus Program and granted in 2008.
(4)	Represents a stock option grant issued to Mr. Simms upon his beginning employment with the Company.

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2008 Outstanding Equity Awards Value at Fiscal Year-End Table

The following table includes certain information with respect to the value of all unexercised options previously awarded to our Named Executive Officers during the fiscal year ended December 31, 2008. The number of securities underlying unexercised options at December 31, 2008 include options granted under our shareholder approved equity incentive plans.

	Option Awards
	Number of
	Securities		Number of
	Underlying		Securities
	Unexercised		Underlying		Option
	Options		Unexercised		Exercise			Option
	Exercisable		Options		Price			Expiration
Name	(#)		Unexercisable		($)			Date
Thomas B. King		272,728		—		8.00	(1)		7/30/2013
		123,756		30,940		1.10	(1)		12/15/2014
		21,697		5,425		8.00	(1)		12/15/2014
		47,250		33,750		7.20	(1)		8/29/2016
		5,159		—		11.70	(2)		1/4/2017
		46,041		83,959		8.89	(1)		7/24/2017
		3,689		3,689		7.50	(2)		1/4/2018
		—		155,000		4.35	(1)		7/9/2018
Anthony G. Tebbutt		76,562		98,438		9.27	(1)		3/12/2017
		1,915		1,915		7.50	(2)		1/4/2018
James V. Cassella, Ph.D.		109,090		—		8.00	(1)		7/8/2014
		10,847		16,272		1.38	(1)		9/1/2015
		3,185		—		6.88	(1)		12/7/2015
		6,606		9,911		8.00	(1)		9/1/2015
		22,750		16,250		7.20	(1)		8/29/2016
		2,856		—		11.70	(2)		1/04/2017
		15,937		29,063		8.89	(1)		7/24/2017
		2,348		2,348		7.50	(2)		1/4/2018
		—		55,000		4.35	(1)		7/9/2018
August J. Moretti		17,728		—		1.10	(1)		10/28/2014
		87,613		5,114		1.38	(1)		4/14/2015
		18,181		—		6.88	(1)		12/7/2015
		22,750		16,250		7.20	(1)		8/29/2016
		2,856		—		11.70	(2)		1/04/2017
		15,937		29,063		8.89	(1)		7/24/2017
		2,348		2,348		7.50	(2)		1/4/2018
		—		55,000		4.35	(1)		7/9/2018
Michael J. Simms		—		175,000		6.24	(1)		2/25/2018

(1)	Stock option award vests 25% upon the first anniversary of the option’s grant date and the remaining 75% in equal monthly installments over the next thirty six months, subject to the grantee’s continued employment with Alexza through such vesting dates.
(2)	Stock option award vests 50% on the date of grant and 50% on the one year anniversary of the grant date, subject to the grantee’s continued employment with Alexza through such vesting dates.

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Option Exercises and Stock Vested

The following table includes certain information with respect to the options exercised by our Named Executive Officers during the fiscal year ended December 31, 2008.

	Option Awards
	Number of Shares		Value Realized on
Name	Acquired on Exercise		Exercise ($)
Thomas B. King		—		—
Anthony G. Tebbutt		—		—
James V. Cassella, Ph.D.		—		—
August J. Moretti		10,000	$	61,500
Michael J. Simms		—		—

2008 Director Compensation Table

The following table provides compensation information for the one year period ended December 31, 2008 for each member of our Board:

	Fees Earned or		Option
	Paid in Cash		Awards		Total
Name	($)		($)(2)		($)
Thomas B. King(1)		—		—		—
Hal V. Barron, M.D., FACC		46,500		31,763		78,263
Samuel D. Colella		48,500		49,061		97,561
Alan D. Frazier		49,500		49,061		98,561
Deepika R. Pakianathan, Ph.D.		42,000		49,061		91,061
J. Leighton Read, M.D.		46,000		49,061		95,061
Gordon Ringold, Ph.D.		45,000		49,061		94,061
Isaac Stein		53,000		49,061		102,061

(1)	See Summary Compensation Table for disclosure related to Thomas B. King, who is also one of our Named Executive Officers.
(2)	Amounts calculated utilizing the provisions of Statement of Financial Accounting Standards, or SFAS, No. 123R, “Share-based Payments.” See Note 2 of the consolidated financial statements in our Annual Report on Form 10K for the year ended December 31, 2008 regarding assumptions underlying valuation of equity awards. The full grant date fair value of the annual awards to each director in 2008, computed in accordance with SFAS 123R, is $19,057. Dr. Barron was not eligible for a stock option grant in 2008 as Dr. Barron joined the Board in December 2007, at which time he received a stock option grant to purchase 25,000 shares of our common stock.
	At fiscal year end each director, excluding Mr. King and Dr. Barron, has options to purchase 31,250 of our common stock. Dr. Barron has an option to purchase 25,000 shares of our common stock. See “Executive Compensation — Summary Compensation Table” for disclosure of Mr. King’s equity awards.

In 2008, nonemployee directors were paid a retainer of $30,000 per year (the “Retainer Fee”). Each nonemployee director also received a meeting fee of $2,500 for each regularly scheduled Board meeting attended in person ($500 for meetings attended by video or telephone conference) and $1,000 for each committee meeting attended in person ($500 for meetings attended by video or telephone conference) (the “Participation Fees”). In addition, the lead director and the Chair of the Audit and Ethics Committee received an additional retainer of $5,000 per year and the Chair of our Compensation Committee and the Corporate Governance and Nominating Committee each received an additional retainer of $2,500 per year (the “Chair Fees” and collectively with the Retainer Fee and

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Participation Fees, the “Director Fees”). No additional amounts were payable for committee participation or special assignments.

For fiscal year 2009, instead of being paid the Director Fees described above, nonemployee directors were instead granted the following restricted stock units (“RSU’s”) under the Company’s 2005 Equity Incentive Plan:

	Restricted
	Stock Units
Name	(#)
Hal V. Barron, M.D., FACC		16,014
Samuel D. Colella		16,904
Alan D. Frazier		17,794
Deepika R. Pakianathan, Ph.D.		16,014
J. Leighton Read, M.D.		16,014
Gordon Ringold, Ph.D.		16,014
Isaac Stein		18,683

The RSU’s were granted on January 22, 2009. The number of RSU’s granted to each nonemployee director was determined by taking the sum of the Retainer Fee, Chair Fees and average Participation Fees paid to each such nonemployee director in 2008 divided by $2.81, the closing price of a share of our common stock on January 22, 2009 the date the Board granted such RSU’s. The RSU’s will vest on January 22, 2010. No additional amounts are currently payable for committee participation or special assignments.

Nonemployee directors also receive nondiscretionary, automatic grants of options to purchase 25,000 shares of our common stock upon joining our Board and nondiscretionary, automatic grants of options to purchase 6,250 shares of our common stock each year pursuant to our 2005 Nonemployee Directors Stock Option Plan. Both the initial grants and the subsequent grants vest ratably over four years on a monthly basis, provided the director continues as a member of our Board. Upon a change of control, each option granted to a nonemployee director will vest in full immediately and automatically.

2008 Potential Payments Upon Termination or Change of Control

The amount of compensation and benefits payable to each of our Named Executive Officers in various termination situations has been estimated in the tables below. The actual amount of compensation and benefits payable in any termination event can only be determined at the time of the termination of our Named Executive Officer’s employment with us.

	Change of Control							No Change of Control
			Equity		HealthCare					Equity		Health Care
	Salary		Acceleration		Benefits			Salary		Acceleration		Benefits
Name	($)(1)		($)(2)		($)(3)			($)		($)		($)
Thomas B. King		728,000		96,266		21,345			—		—		—
Anthony G. Tebbutt		448,700		394		—	(4)		—		—		—
James V. Cassella, Ph.D.		448,700		40,842		21,345			—		—		—
August J. Moretti		448,700		20,682		21,345			—		—		—
Michael J. Simms		441,000		7,197		25,068			—		—		—

(1)	Includes one year salary plus the 2008 target bonus.
(2)	Value of the stock options, as computed using the Black-Scholes valuation model, assuming all options were fully vested as of December 31, 2008.
(3)	Includes a lump sum payment for 18 months of continued healthcare coverage.
(4)	Mr. Tebbutt has opted out of Alexza’s health care coverage.

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Each of our executive officers has a provision for severance benefits and for the acceleration of the nonvested stock options in the event of termination in connection with a change of control. Pursuant to the terms of the agreements, if the executive’s employment is terminated without cause or terminated by the executive for good reason within three months before or 12 months following a change of control, and the executive agrees to sign a general release of claims in favor of the Company, then the executive is entitled to the following benefits:

•  acceleration of vesting of all of the executive’s outstanding unvested options to purchase common stock and accelerated lapsing of any right of repurchase on executive’s restricted stock;

•  payment in a lump sum of the executive’s annual base salary plus the greater of the bonus paid for the latest completed fiscal year and the target bonus for the year in which the notification of the executive’s termination of employment occurs; and

•  payment in a lump sum of an amount equal to the amount of the executive’s out of pocket costs to continue group health insurance benefits under COBRA for 18 months.

On December 18, 2008, the Board approved certain amendments to such agreements, primarily to bring the agreements in compliance with Section 409A of the Internal Revenue Code. The amendments did not materially alter or otherwise increase benefits our executive officers would be eligible to receive upon termination in connection with a change of control.

If and to the extent that any payments in the context of a change of control are made to our executives who are party to these change of control agreements and the payments are equal to or exceed three times the average of that executive’s annualW-2 compensation for the five years preceding the change of control, the payments or benefits exceeding the five-year average will be subject to the excise tax imposed by Section 4999 and the non deductibility provisions imposed by Section 280G of the Internal Revenue Code. In such circumstances, we will make agross-up payment to the executive to compensate the executive for all taxes imposed under Section 4999 and any related income taxes imposed under the Internal Revenue Code and state and local authorities for thegross-up payment, and we will not be permitted to deduct from our taxes the amount in excess of the five-year average of the compensation paid to the executive. For purposes of the change of control agreements, a change of control includes a sale of substantially all of our assets; a merger or consolidation in which we are not the surviving corporation if immediately thereafter our stockholders immediately prior thereto do not beneficially own more than 50% of the combined outstanding voting power of the surviving entity or more than 50% of the combined outstanding voting power of its parent, in each case in substantially the same proportions as their ownership of our outstanding voting securities immediately prior to such transaction; a reverse merger in which we are the surviving corporation but our outstanding shares of common stock immediately preceding the merger are converted by virtue of the merger into other property if immediately after the merger our stockholders immediately prior thereto do not own more than 50% of the combined outstanding voting power of the surviving entity or more than 50% of the combined outstanding voting power of its parent, in each case in substantially the same proportions as their ownership of our outstanding voting securities immediately prior to such transaction; or any transaction or series of related transactions in which our stockholders own less than 50% of voting power in the surviving corporation, other than transactions in which our primary purpose for selling stock is to raise capital for our operations and activities.

In our industry, there is a high level of merger and acquisition activity, and the executives of companies engaged in merger and acquisition activity are often terminated or have their responsibilities reduced upon the change of control. We provide these benefits to ensure that, in the event of a change of control, our executives will not have any personal incentive to resist a change of control that is approved by our Board of Directors and stockholders and will be incentivized to remain with us through, and to facilitate, the closing of any such transaction. We believe this benefit is comparable to such severance benefits provided by companies in our industry.

Mr. Tebbutt’s employment with the Company will be ending as of May 31, 2009. Mr. Tebbutt will remain as a consultant to the Company until January 31, 2010. In connection with Mr. Tebbutt’s planned departure, the Company has agreed to pay Mr. Tebbutt certain severance benefits, including a lump sum payment equal to $263,472 payable on May 31, 2009. In addition, the Company has agreed (i) to reimburse, if requested, Mr. Tebbutt for medical, dental, vision and Employee Assistance Plan insurance premiums for the period between June 1, 2009 and January 31, 2010, which payments are not expected to exceed $1,000, (ii) to continue the vesting on

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Mr. Tebbutt’s outstanding options until January 31, 2010, and (iii) to provide, if requested, outplacement/career transition consulting services, which payments are not expected to exceed $12,000. As a consultant to the Company, Mr. Tebbutt will be paid $300 an hour for any services provided upon the request of the Company.

Compensation Committee Report*(

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis for 2008 contained in this proxy statement. Based on the review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated into our Annual Report onForm 10-K for the fiscal year ended December 31, 2008.

This report is submitted by the Compensation Committee.

COMPENSATION COMMITTEE

Samuel D. Colella (Chair)

Hal V. Barron, M.D., FACC

Deepika R. Pakianathan, Ph.D.

Gordon Ringold, Ph.D.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE

Indebtedness of Management and Related Agreements

In 2003, in connection with his commencement of employment and relocation to the San Francisco Bay Area, we entered into a loan agreement with Thomas B. King, our President and Chief Executive Officer. Pursuant to the terms of this agreement, we loaned Mr. King $1.2 million for the purchase of a principal residence. This note was secured by Mr. King’s residence and was interest free. In December 2005, immediately prior to the filing of the registration statement for our initial public offering, we extinguished the note and agreed to pay the taxes incurred as a result of such extinguishment on Mr. King’s behalf, a total of $2,068,966. In March 2006, in return for the loan extinguishment and the payment of associated taxes, we increased the aggregate exercise price of options to purchase common stock held by Mr. King by $2,068,966. In connection with Mr. King’s employment, we also agreed to pay Mr. King a monthly housing supplement, net of taxes, during his employment with us of $5,000 for the first year after his move to the Bay Area, $4,000 for the second year, $3,000 for the third year, $2,000 for the fourth year and $1,000 for the fifth year. Mr. King began to receive his monthly housing supplement in August 2003 and received such payments through August 2008. From August 2003 through December 2005, we did not compute the tax withholdings correctly on Mr. King’s monthly housing supplement, resulting in an underpayment of taxes on behalf of Mr. King by us. In 2007, we paid Mr. King an additional $58,688 in monthly housing supplements to correct for the underpayment.

In 2004, in connection with his commencement of employment and relocation to the San Francisco Bay Area, we entered into a loan agreement with James V. Cassella, Ph.D., our Senior Vice President, Research and Development. Pursuant to this agreement, we loaned Dr. Cassella $500,000 for the purchase of a principal residence. This loan was secured by Dr. Cassella’s residence and was interest free. In December 2005, immediately prior to the filing of the registration statement for our initial public offering, we extinguished the note and agreed to pay the taxes incurred as a result of such extinguishment on Dr. Cassella’s behalf, a total of $862,069. In March 2006, in return for the loan extinguishment and the payment of associated taxes, we increased the aggregate exercise

(     * The material in this report is not “soliciting material,” is furnished to, but not deemed “filed” with, the Commission and is not deemed to be incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, other than the Company’s Annual Report onForm 10-K, where it shall be deemed to be “furnished,” whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

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price of options to purchase common stock held by Dr. Cassella by $862,069. In connection with Dr. Cassella’s employment, we agreed to pay Dr. Cassella a monthly housing supplement, net of taxes, during his employment with us of $4,000 for the first year after his move to the Bay Area, $3,000 for the second year, $2,000 for the third year and $1,000 for the fourth year. Dr. Cassella began to receive his monthly housing supplement in January 2005. In December 2007, we revised Dr. Cassella’s monthly housing supplement payment, net of taxes, to $4,000 for the first year of the amended term beginning January 1, 2008, $3,000 for the second year, and $2,000 for the third year.

In 2007, in connection with his commencement of employment and relocation to the San Francisco Bay Area, we agreed to reimburse Anthony Tebbutt, our Senior Vice President, Corporate Strategy and Business Development, for certain expenses related to his relocation to the Bay Area in the amount of $139,104 and to provide and to pay a monthly housing supplement, net of taxes, during his employment with us of $4,000 for three years after his move to the Bay Area. Mr. Tebbutt began to receive his monthly housing supplement in October 2007. Mr. Tebbutt’s employment with the Company will end on May 31, 2009.

The Company has entered into indemnity agreements with certain officers and directors which provide, among other things, that the Company will indemnify such officer or director, under the circumstances and to the extent provided for therein, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of the Company, and otherwise to the fullest extent permitted under Delaware law and the Company’s Restated Certificate of Incorporation and Bylaws.

Policies and Procedures for Review of Related Party Transactions

In 2007, we adopted a written Related-Person Transactions Policy that sets forth our policies and procedures regarding the identification, review, consideration and approval or ratification of “related-persons transactions.” For purposes of our policy only, a “related-person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any “related person” are participants involving an amount that exceeds $25,000. Transactions involving compensation for services provided to us as an employee, director, consultant or similar capacity by a related person are not covered by this policy. A related person is any executive officer, director, or more than 5% stockholder, including any of their immediate family members, and any entity owned or controlled by such persons.

Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding the proposed related-person transaction to the Audit and Ethics Committee (or, where Audit and Ethics Committee approval would be inappropriate, to another independent body of the Board) for consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction and whether any alternative transactions were available. To identify related-person transactions in advance, we rely on information supplied by our executive officers and directors. In considering related-person transactions, the Audit and Ethics Committee takes into account the relevant available facts and circumstances including, but not limited to(a) the risks, costs and benefits to us, (b) the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated, (c) the terms of the transaction, (d) the availability of other sources for comparable services or products and (e) the terms available to or from, as the case may be, unrelated third parties or to or from employees generally. In the event a director has an interest in the proposed transaction, the director must recuse himself or herself form the deliberations and approval. The policy requires that, in determining whether to approve, ratify or reject a related-person transaction, the Audit and Ethics Committee look at, in light of known circumstances, whether the transaction is in, or is not inconsistent with, the best interests of the us and our stockholders, as the Audit and Ethics Committee determines in the good faith exercise of its discretion.

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COMPARISON OF 34 MONTH TOTAL RETURN*

The graph below matches our cumulative34-month total stockholder return on common stock with the cumulative total returns of the NASDAQ Composite index and the NASDAQ Biotechnology index. The graph tracks the performance of a $100 investment in our common stock and in each of the indexes (with the reinvestment of all dividends) from March 8, 2006 to December 31, 2008.

*$100 invested on3/8/06 in stock or2/28/06 in index-including reinvestment of dividends.
Fiscal year ending December 31.

	3/06		3/06		4/06		5/06		6/06		7/06		8/06		9/06		10/06		11/06		12/06
Alexza Pharmaceuticals, Inc.		100.00		114.57		105.76		95.89		86.13		86.02		82.26		94.48		95.53		98.24		133.84
NASDAQ Composite		100.00		103.01		102.60		96.37		96.22		93.05		97.23		100.36		105.32		108.32		108.02
NASDAQ Biotechnology		100.00		98.20		92.38		88.94		87.91		89.65		90.12		91.86		97.37		96.26		94.20

	1/07		2/07		3/07		4/07		5/07		6/07		7/07		8/07		9/07		10/07		11/07		12/07
Alexza Pharmaceuticals, Inc.		113.40		117.74		151.12		126.79		113.75		97.18		103.17		96.47		101.76		95.65		102.94		95.06
NASDAQ Composite		110.14		108.07		108.51		112.53		116.21		116.16		113.73		115.55		121.05		127.81		118.63		117.94
NASDAQ Biotechnology		96.95		93.84		91.09		99.09		97.89		95.26		93.87		95.40		100.90		105.22		102.08		95.78

	1/08		2/08		3/08		4/08		5/08		6/08		7/08		8/08		9/08		10/08		11/08		12/08
Alexza Pharmaceuticals, Inc.		74.03		74.27		80.85		77.91		60.16		46.30		69.10		62.40		58.05		33.49		21.15		37.25
NASDAQ Composite		106.01		101.38		101.36		107.48		112.34		102.39		102.33		103.73		90.86		74.50		66.70		68.71
NASDAQ Biotechnology		93.87		92.59		92.73		93.37		95.40		93.80		106.52		103.51		97.28		88.73		82.50		88.44

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

   * The information included under the heading “Comparison of 34 Month Total Return” in this proxy statement shall not be deemed to be “soliciting material” or subject to Regulation 14A or 14C, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act.

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STOCKHOLDER PROPOSALS

The deadline for submitting a stockholder proposal for inclusion in the Company’s proxy statement and form of proxy for the Company’s 2010 Annual Meeting of Stockholders pursuant to Exchange ActRule 14a-8 is November 24, 2009. Stockholders are also advised to review the Company’s Bylaws, which contain additional requirements with respect to advance notice of stockholder proposals and director nominations including a requirement that the Company receive notice of any proposal or nomination at least 120 days before the first anniversary of the 2009 Annual Meeting of Stockholders. The Company’s Bylaws may be obtained by writing to our Corporate Secretary at 2091 Stierlin Court, Mountain View, CA 94043.

HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Notices of Internet Availability or other proxy materials, as applicable, with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability or other proxy materials, as applicable, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

This year, a number of brokers with account holders who are Alexza stockholders will be “householding” our proxy materials. A single Notice of Internet Availability will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent.

If, at any time, you no longer wish to participate in “householding” and would prefer to receive a s Notice of Internet Availability or other proxy materials, as applicable, please notify your broker or the Company. We will promptly deliver a separate copy of the Notice of Internet Availability or other proxy materials, as applicable, at no charge to any stockholder who sends a written request to Alexza Pharmaceuticals, Inc., Attention Corporate Secretary, 2091 Stierlin Court, Mountain View, CA 94043 or calls the Corporate Secretary at(650) 944-7000, and requests a separate copy. Stockholders who currently receive multiple copies of the Notice of Internet Availability or other proxy materials, as applicable, at their addresses and would like to request “householding” of their communications should contact their brokers.

OTHER BUSINESS

The Board does not presently intend to bring any other business before the annual meeting, and, so far as is known to the Board, no matters are to be brought before the annual meeting except as specified in the Notice of the Meeting. As to any business that may properly come before the annual meeting, however, it is intended that proxies, in the form enclosed, will be voted in respect thereof in accordance with the judgment of the persons voting such proxies.

By Order of the Board of Directors

August J. Moretti

Secretary

March 27, 2009

The Company’s 2008 Annual Report onForm 10-K is available without charge upon request. Any such request should be addressed to the Corporate Secretary, Alexza Pharmaceuticals, Inc., 2091 Stierlin Court, Mountain View, CA 94043. The request must include a representation by the stockholder that as of March 16, 2009, the stockholder was entitled to vote at the annual meeting.

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VOTE BY INTERNET — www.proxyvote.comUse the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.ALEXZA PHARMACEUTICALS, INC.2023 STIERLIN COURTELECTRONIC DELIVERY OF FUTURE PROXY MATERIALSMOUNTAIN VIEW, CA 94043If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.VOTE BY PHONE — 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:ALEPH 1KEEP THIS PORTION FOR YOUR RECORDSTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.DETACH AND RETURN THIS PORTION ONLYALEXZA PHARMACEUTICALS, INC.To withhold authority to vote for any individual For Withhold For All nominee(s), mark “For All Except” and write the All All Except number(s) of the nominee(s) on the line below.THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” PROPOSALS 1 AND 2.00 0Vote on DirectorsPROPOSAL 1: To elect the eight nominees for director named below, each to serve until the 2010 Annual Meeting of Stockholders and until his or her successor has been duly elected and qualified or until his or her earlier death, resignation or removal.Nominees:01) Thomas B. King05) Deepika R. Pakianathan, Ph.D. 02) Hal V. Barron, M.D., FACC 06) J. Leighton Read, M.D. 03) Samuel D. Colella07) Gordon Ringold, Ph.D. 04) Alan D. Frazier08) Isaac SteinVote on ProposalFor Against AbstainPROPOSAL 2: To ratify the selection by the Audit and Ethics Committee of the Board of Directors of Ernst & Young LLP as the0 0 0 independent registered public accounting firm of the Company for its fiscal year ending December 31, 2009.(NOTE: Please sign exactly as your name(s) appear(s) hereon. All holders must sign. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. If a corporation, please sign in full corporate name by authorized officer. If a partnership, please sign in partnership name by authorized person.)Signature [PLEASE SIGN WITHIN BOX]DateSignature (Joint Owners)Date

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Notice and Proxy Statement, Annual Report and Form 10-K are available at www.proxyvote.com.T(FOLD AND DETACH HERE)TALEPH 2ALEXZA PHARMACEUTICALS, INC.PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERSTO BE HELD ON MAY 7, 2009The undersigned hereby appoints Thomas B. King and August J. Moretti, and each of them, as attorneys and proxies of the undersigned, with full power of substitution, to vote all of the shares of stock of Alexza Pharmaceuticals, Inc. (the “Company”) which the undersigned may be entitled to vote at the Annual Meeting of Stockholders of the Company to be held at the Company’s offices, 2023 Stierlin Court, Mountain View, California 94043 on Thursday, May 7, 2009 at 1:30 p.m. local time and at any and all postponements, continuations and adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other matters that may properly come before the meeting.UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.