The formation of mutually rewarding partnerships is a key element of SGX Pharmaceuticals' strategy. We actively seek partners with whom we can collaborate to develop and commercialize our pipeline of innovative pre-clinical and clinical cancer therapy candidates. In addition, through discovery collaborations we can apply our FAST™ technology to seek to provide partners with novel lead compounds in any therapy area.

Our partnering strategy at SGX Pharmaceuticals includes:

• Collaborative development and commercialization of drug candidates in oncology
• Collaborative identification and development of novel lead compounds using our FAST™ drug discovery platform
• Access Agreements for use of our SGX-CAT beamline facility

At SGX Pharmaceuticals we work closely with our partners to develop strong, synergistic alliances that leverage each team's capabilities, commitment and drive to develop life-changing therapies for patients. It is a testament to both our partners and our employees that we have achieved measurable successes in a number of our partnerships and that we have expanded the scope of many of our collaborations.

Our partners include:

• Cystic Fibrosis Foundation Therapeutics, Inc.

  In July 2005, we entered into a three-year drug discovery collaboration with Cystic Fibrosis Foundation Therapeutics, the drug discovery and development arm of the Cystic Fibrosis Foundation. Under the collaboration, we will apply our FAST™ lead generation technology with the objective of generating novel small molecule therapies that function as "correctors" of the F508 form of the Cystic Fibrosis Transmembrane Regulator, or CFTR. Over the term of the collaboration, CFFT may provide over $15 million in upfront, technology access and research payments to SGX Pharmaceuticals. CFFT will be responsible for product development and SGX Pharmaceuticals will be eligible for clinical development milestones and royalties on product sales.

• Eli Lilly & Company

  In April 2003, we entered into a research and technology collaboration with Lilly, which was extended for an additional three years in April 2005. Within the research collaboration, we apply our target to structure technology to key Lilly drug targets to determine their three-dimensional structures. Our researchers subsequently generate data on Lilly compounds that bind to the drug targets, providing input for their lead generation and optimization efforts. In parallel with the first two years of the research collaboration, we conducted a comprehensive program of technology transfer involving installation of components of our technology in a high-throughput structural biology facility for Lilly, which includes SGX-LIMS.

  SGX-LIMS is our Laboratory Information Management System, which includes software for bioinformatics and crystallography, modular automation systems, and process technology that we developed for protein engineering, crystallization and structure determination [SGX-LIMS].

  In December 2003, we also expanded our research collaboration and technology agreement with Lilly to provide Lilly with long-term access to our beamline facility at the Advanced Photon Source in Argonne, Illinois, to support Lilly drug discovery programs. Under the terms of the agreement, we generate crystal structure data on Lilly drug targets and compounds. Expansion of the collaboration between the two companies to include a strategic beamline access arrangement was the result of the significant progress we made under the research and technology transfer collaboration.

• NIH Protein Structure Initiative

  In July 2005, we received a $48.5 million National Institutes of Health Cooperative Agreement Award from the National Institute of General Medical Sciences, or NIGMS. The award is part of the NIH Protein Structure Initiative, which aims to facilitate discovery of three dimensional structures of proteins to help reveal their role in disease and aid in the design of new medicines. The award provides five years of renewed funding for a consortium administered by SGX Pharmaceuticals. We anticipate retaining approximately 50% of the funding under the award, with the remainder being distributed to academic collaborators.

• Novartis Institutes for Biomedical Research, Inc.

  In March 2006, we entered into a License and Collaboration Agreement with Novartis Institutes for Biomedical Research, Inc.("Novartis"), focused on the development and commercialization of BCR-ABL inhibitors for the treatment of Chronic Myelogenous Leukemia (CML). Under the agreement, the parties will collaborate to develop one or more BCR-ABL inhibitors, and Novartis will have exclusive worldwide rights to such compounds, subject to our co-commercialization option in the United States and Canada. We have also granted Novartis rights to include certain compounds that we do not pursue under the collaboration in Novartis' screening library, and we will be entitled to receive royalties on sales of products based on those compounds.

In addition, we have established service arrangements for access to our beamline facility, SGX-CAT with Lilly, Millennium Pharmaceuticals, Inc., Exelixis, Inc. and F. Hoffmann La Roche Ltd. and Biogen Idec Inc. Under the terms of these agreements we generate crystal structure data on partner drug targets and compounds.