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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

For the year ended December 31, 2004

OR

For the transition period from              to             

Commission File Number: 000-50564

RENOVIS, INC.

(Exact name of registrant as specified in its charter)

(650) 266-1400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share

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

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates was $128,996,653 computed by reference to the last sales price of $9.16 as reported by the Nasdaq National Market System, as of the last business day of the Registrant’s most recently completed second fiscal quarter, June 30, 2004.

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of March 16, 2005 was 24,704,016.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after registrant’s fiscal year end December 31, 2004 are incorporated by reference into Part III of this report.

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RENOVIS, INC.

FORM 10-K — ANNUAL REPORT

FOR THE YEAR ENDED DECEMBER 31, 2004

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PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K, including the sections entitled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements.

Forward-looking statements include, but are not limited to, statements about:

Forward-looking statements also include, but are not limited to, expectations of future levels of research and development spending, general and administrative spending, levels of capital expenditures and operating results, sufficiency of our capital resources and our intention to seek revenue from product sales, upfront fees and milestone payments and royalties resulting from the license of our intellectual property. Further, there can be no assurance that the necessary regulatory approvals will be obtained, that we will be able to develop commercially viable products or that any of our programs will be partnered with pharmaceutical partners. These statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks and other factors include those listed under “Risk Factors” and elsewhere in this annual report and other risks detailed in our reports filed with the Securities and Exchange Commission. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We do not intend to update any of the forward-looking statements after the date of this report or to conform these statements to actual results.

Item 1. Business

Overview

Renovis is a biopharmaceutical company developing drugs to treat neurological diseases and disorders. The Company was incorporated in Delaware in January 2000. We currently focus our research and development programs in the areas of neuroprotection, pain and neuroinflammatory diseases. Our most advanced product candidate Cerovive^® (NXY-059), is a novel free radical trapping neuroprotectant in development for the treatment of acute ischemic stroke. In May 2003, our exclusive licensee, AstraZeneca AB, commenced two Phase III clinical trials (SAINT I and SAINT II) with Cerovive^® (NXY-059) to determine its effect on disability and neurological recovery in acute ischemic stroke patients. In December 2004, we announced that enrollment has been completed in one of the two Phase III trials (SAINT I). We expect to report top-line results from the SAINT I trial in coordination with AstraZeneca during the second quarter of 2005. AstraZeneca is also conducting a Phase II trial (CHANT) with Cerovive^® (NXY-059) to assess its safety and tolerability in patients

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with acute intracerebral hemorrhage. Patient enrollment in the second Phase III trial (SAINT II) and in the Phase II trial (CHANT) is proceeding consistent with AstraZeneca’s announced plan to seek regulatory approval for Cerovive^® (NXY-059) in 2006. In addition to Cerovive^® (NXY-059), we are independently conducting clinical trials of two novel chemical entities. REN-1654 is an oral drug candidate that we are testing in a Phase II clinical trial in sciatica, a neuropathic pain indication. We are also developing REN-850, an oral drug candidate for multiple sclerosis (MS) and other autoimmune diseases, which entered a Phase I clinical trial in February 2005. In July 2004, we announced our decision to discontinue efforts to commercialize REN-213, an intravenous drug candidate that we were developing for the treatment of acute post-operative pain. In March 2005, we announced our decision to discontinue development of REN-1654 in post-herpetic neuralgia (PHN). In addition to our clinical programs, we are conducting preclinical research and development activities in the areas of neuroprotection and pain to identify future product candidates for clinical development and we are evaluating other opportunities to apply our drug discovery capabilities in new program areas.

Our Product Pipeline

The following table summarizes our product candidates in clinical development and our research programs:

Cerovive^® (NXY-059)

Cerovive^® (NXY-059) is our novel free radical trapping neuroprotectant in development for the treatment of acute ischemic stroke. Stroke is the third leading cause of death in the United States and Western Europe and the most common cause of adult long-term disability in the United States. Cerovive^® (NXY-059) is a neuroprotectant which reduces infarct size and preserves brain function in experimental models of acute ischemic stroke. In May 2003, our exclusive licensee, AstraZeneca, commenced two Phase III clinical trials (SAINT I and SAINT II) with Cerovive^® (NXY-059) to determine its effect on disability and neurological recovery in acute ischemic stroke patients. In August 2004, AstraZeneca initiated a Phase II clinical trial (CHANT) with Cerovive^® (NXY-059) to assess its safety and tolerability in patients with acute intracerebral hemorrhage. In December 2004, we announced that patient enrollment in one of the two Phase III trials (SAINT I) had been completed. We expect to announce top-line results from this trial in coordination with AstraZeneca during the second quarter of 2005. Enrollment of patients in the SAINT II and CHANT trials is proceeding consistent with AstraZeneca’s previously announced plan to seek regulatory approval of Cerovive^® (NXY-059) in 2006. We believe that if Cerovive^® (NXY-059) demonstrates neuroprotective benefits in stroke patients, the drug candidate may also prove useful to treat a range of other brain injuries.

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Market Opportunity

Stroke is an acute medical condition involving the death of brain tissue caused by blockage or rupture of the blood vessels leading to or within the brain. There are two major types of strokes. According to the Foundation for Education and Research in Neurological Emergencies, ischemic strokes account for approximately 85% and hemorrhagic strokes account for approximately 15% of all strokes in the United States. Ischemic strokes are caused by a blockage, called an occlusion, within an artery leading to or within the brain, while hemorrhagic strokes are caused by the sudden rupture or bursting of such an artery. When either kind of stroke occurs, blood flow and the supply of oxygen to an area of the brain are interrupted, leading to death of brain tissue. Although initial damage to brain tissue occurs within the first hour, much of the damage occurs subsequently up to three days after the stroke.

Existing treatment options, called thrombolytics, focus on restoring blood flow in patients with acute ischemic stroke and must be administered no more than three hours after the stroke. For a thrombolytic, such as recombinant tissue plasminogen activator (tPA), to be administered safely, a patient must receive a computerized tomography (CT) scan within three hours of the onset of symptoms to verify that the stroke did not result from bleeding in the brain (a hemorrhagic stroke), a condition that would be worsened by administration of a thrombolytic. In addition, thrombolytics may induce brain hemorrhage in ischemic stroke patients. According to the American Heart Association, only 3% to 5% of stroke patients receive tPA for acute ischemic stroke, which we believe is due to the treatment restrictions associated with thrombolytics.

The only neuroprotectant drug approved for treatment of stroke patients is edaravone, which is approved only in Japan. Edaravone was approved by Japanese regulatory authorities based on positive results from a 252-patient Phase III trial. In its first full year on the market in Japan (2002-2003), edaravone achieved sales in excess of $275 million and was administered to more than 125,000 patients. However, following its approval and introduction to the market, edaravone was associated with infrequent serious adverse events, including deaths, in a number of patients with kidney dysfunction. Given these safety concerns, sales growth in Japan has fallen significantly, and we believe it is unlikely that this drug will be approved in the United States or Europe. Edaravone is a free radical scavenger (see below) that differs from Cerovive^® (NXY-059) in both structure and metabolism. Accordingly, we believe that the safety concerns with edaravone are not predictive of the safety of Cerovive^® (NXY-059).

According to the American Heart Association, the annual cost of stroke-related care in the United States exceeded $53 billion in 2004 and the average lifetime cost of ischemic stroke exceeds $140,000 per patient including inpatient care, rehabilitation and follow-up care. Based on figures reported by Datamonitor, a business information company, more than two million strokes occur each year in the world’s major industrialized countries, and, according to the American Heart Association, 700,000 of such strokes occur in the United States. The leading product for stroke is tPA, which, due to its treatment restrictions, is used to treat only 3% to 5% of stroke patients annually. According to data published by Frost & Sullivan, a marketing, consulting and training company, tPA accounts for approximately $200 million in annual sales. We believe a neuroprotectant drug capable of reducing stroke-related mortality and disability that can be administered safely within six hours after stroke would be used to treat a substantially broader population of stroke victims.

Scientific Overview

Cerovive^® (NXY-059), a novel compound of the nitrone class, is a neuroprotectant that binds to and inactivates (by scavenging or trapping) cell-damaging free radicals. Free radicals are toxic molecules that the body produces in response to tissue injury, in particular after a stroke. As a free radical trapping neuroprotectant, Cerovive^® (NXY-059) acts to neutralize the free radicals and protects brain cells from further damage and death.

An acute ischemic stroke causes the nerve cells (called neurons) in the immediate area, the core infarct, to be cut off from their much-needed supply of blood and oxygen. Without oxygen, these neurons die within

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minutes to hours. When neurons in the core infarct die, they release chemicals that set off a chain reaction called the “stroke cascade”. This chain reaction, which lasts for hours to days, endangers neurons in a much larger area surrounding the core infarct by creating an area of brain tissue for which the blood supply is compromised but not completely cut off. Tissue within this much larger area of the brain, called the penumbra, will also die over hours to days. As additional neurons die, the penumbra expands progressively outward from the initial infarct, and additional neurological damage occurs. As neurons in an area of the brain die, the abilities and function once controlled by those neurons are compromised or lost. This may include functions such as speech, movement and memory. Ultimately, the loss of brain tissue can result in death. A neuroprotectant drug that can halt the stroke cascade at a key step has the potential of preserving brain tissue in the penumbra and limiting the loss of neurological function.

Because the death of neurons and expansion of the penumbra occur over a period of many hours to several days, there are windows of opportunity (clinically called therapeutic windows) for intervening at key steps in the stroke cascade with various neuroprotectant drugs. An early step in this cascade is associated with “glutamate excitotoxicity”, a mechanism that provides a short therapeutic window, typically within the first 60 minutes after a stroke. This early step in the cascade leads to damage to mitochondria, the key structures within the neuron that regulate energy.

In a later stage in the cascade, the damaged mitochondria generate free radicals, which damage both the affected neuron and surrounding neurons, ultimately leading to the death of these neurons hours to days later. This free radical generation provides a longer and therefore more clinically relevant therapeutic window during the first 12 hours after stroke.

During the 1990s, a number of potential neuroprotectant drugs that block glutamate excitotoxicity were tested. In animal models of acute ischemic stroke, many of these drugs were effective in mitigating further damage caused by the stroke cascade when given within 30 minutes, and occasionally up to two hours, after stroke. However, when subsequently tested in human patients up to 12 hours after stroke, they did not demonstrate statistically significant efficacy. Thus, the therapeutic window to block glutamate excitotoxicity, the target of these drugs, was too short (less than two hours) to be clinically useful for a significant number of stroke patients. Moreover, some of these drugs had serious side effects, which required testing in human patients at doses lower than those levels that had demonstrated efficacy in preclinical animal models.

Given the history of clinical trials for stroke drugs that did not demonstrate efficacy, an industry/academic roundtable group was convened in the late 1990s to establish a stringent set of preclinical and clinical criteria designed to guide the successful development of neuroprotectant drugs. This group published the Stroke Therapy Academic Industry Roundtable criteria (the STAIR criteria) in 1999 in order to improve the selection process for a drug to enter pivotal human clinical trials. Based on our research and review of published data, we believe Cerovive^® (NXY-059) is the only stroke drug candidate that has met all of the STAIR criteria.

The Cerovive^® (NXY-059) Solution

Cerovive^® (NXY-059) binds to and inactivates (or traps) free radicals thereby protecting brain cells from damage caused by a stroke, but, unlike a thrombolytic, it does not restore blood flow. It has been shown to reduce infarct size and preserve brain function in animal models of stroke. The functional improvement seen in these models shows the potential to preserve functions such as speech, movement and memory in stroke patients. By trapping free radicals, Cerovive^® (NXY-059) targets a more clinically relevant therapeutic window than many drugs previously tested. Cerovive^® (NXY-059) may also have mechanisms of action that protect neurons beyond its function as a free radical trap. We believe that Cerovive^® (NXY-059) is positioned to be the first neuroprotectant drug marketed for stroke in the United States and Europe.

Cerovive^® (NXY-059) represents the first use of a class of compounds called nitrones to be developed in the clinic for stroke. Cerovive^® (NXY-059) demonstrates neuroprotective efficacy in both transient and permanent

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occlusion ischemic stroke models and hemorrhagic stroke models in rats, in permanent occlusion ischemic stroke models in monkeys and in another stroke model in rabbits. It has been shown to substantially lessen both motor and cognitive disability and to reduce infarct volume in monkeys when administered four hours after the onset of an ischemic stroke.

We believe that Cerovive^® (NXY-059) may have another therapeutic value for stroke patients as well. When blocked arteries are unblocked, either spontaneously or by a thrombolytic drug, a rapid increase in blood flow, called reperfusion, occurs resulting in further brain damage, called reperfusion injury. Much of the reperfusion injury involves a sudden increase in free radicals. Following many ischemic strokes, there is spontaneous unblocking of arteries (thrombolysis). About half of stroke patients spontaneously reperfuse within three to four days. We believe that the continuous intravenous administration of Cerovive^® (NXY-059) for 72 hours will continue to protect the brain of stroke patients against the damage that occurs from the production of free radicals during both spontaneous reperfusion and reperfusion induced by thrombolytic drugs. If Cerovive^® (NXY-059) receives marketing approval, we believe it may be used both as monotherapy as well as in combination with tPA and other thrombolytic (blood flow increasing) therapies that are currently being developed.

Prior Clinical Trials

A total of ten clinical trials have been performed with Cerovive^® (NXY-059), including two trials in subjects with acute ischemic or hemorrhagic stroke (184 subjects exposed to Cerovive^® (NXY-059)), seven in healthy subjects (286 subjects exposed to Cerovive^® (NXY-059)) and one in subjects with kidney impairment (24 subjects exposed to Cerovive^® (NXY-059)). Four double-blinded, placebo controlled trials have been performed in healthy volunteers to explore safety, tolerability, absorption, metabolism, distribution and excretion of Cerovive^® (NXY-059) administered intravenously (i.v.) for eight to 72 hours in increasing doses. The adverse events that occurred were not considered clinically significant and Cerovive^® (NXY-059) was hence judged to be well tolerated in healthy volunteers in these trials.

Two Phase IIa trials were performed to evaluate safety and tolerability of 72-hour infusions of Cerovive^® (NXY-059) in subjects with acute stroke. The first trial enrolled 135 subjects with ischemic stroke and fifteen subjects with hemorrhagic stroke. The second trial enrolled 135 subjects with symptoms of acute ischemic stroke. The study drug was initiated within 24 hours of symptom onset. Cerovive^® (NXY-059) was well tolerated with no concerns raised by the safety evaluation.

These Phase IIa clinical trials were primarily designed to examine the safety of Cerovive^® (NXY-059). In May 2003, AstraZeneca advanced Cerovive^® (NXY-059) into Phase III clinical trials. We believe Cerovive^® (NXY-059) is a strong Phase III product candidate based on the Phase II data, when combined with all of the other clinical safety data, the compelling efficacy shown in preclinical animal models in monkeys and rodents, and our belief, based on our research and review of published data, that Cerovive^® (NXY-059) is the only neuroprotectant drug candidate to have passed the STAIR criteria.

We believe that Cerovive^® (NXY-059) entered Phase III clinical trials with strong preclinical and clinical data on safety and efficacy. Our belief, based on our research and review of published data, is that Cerovive^® (NXY-059) is the only neuroprotectant that has met the STAIR criteria, and is the only drug candidate that has been shown to substantially decrease both motor and cognitive disability in primates when given four hours after stroke.

Current Clinical Trials

In May 2003, AstraZeneca initiated two multi-national, multi-center, randomized, double-blinded Phase III clinical trials to test Cerovive^® (NXY-059) versus a placebo. “Double-blinded” means neither the researcher nor the patient knows whether the patient has received the study drug or the placebo. “Randomized” means that

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patients are randomly assigned to receive the study drug treatment or the placebo. These two Stroke-Acute Ischemic-NXY Treatment trials (SAINT I and SAINT II) are parallel trials designed to include more than 1,500 subjects each. The first trial, SAINT I, was conducted primarily in Europe with participation from study centers located in other regions of the world. In December 2004, AstraZeneca completed enrollment of subjects in the SAINT I trial. We expect to report top-line results from the SAINT I trial in coordination with AstraZeneca during the second quarter of 2005. The second trial, SAINT II, is being conducted primarily in the United States and Canada and is planned to include more than 1,500 subjects at more than 200 sites. Patient recruitment in SAINT II is proceeding consistent with the goal announced by AstraZeneca to seek regulatory approval in 2006.

The Phase III trials are designed to determine the efficacy and evaluate the safety of Cerovive^® (NXY-059) when administered up to six hours after the onset of stroke symptoms. The drug candidate is being administered as a one-hour i.v. loading-dose infusion followed by a 71-hour i.v. maintenance dose. Phase III clinical trials are being conducted with similar study drug exposure and time window for which behavioral efficacy has been shown in primates. The mean time for the start of study drug administration for each trial in acute ischemic stroke, and for all centers within these trials, is four hours after the onset of symptoms. In addition to this time limitation, to be enrolled in the SAINT trials, patients must show symptoms of acute ischemic stroke with limb weakness and have had full functional independence before their stroke. The primary outcome will be measured three months after stroke by examining functional deficit (overall recovery and recovery of motor function) as measured by a standard disability scoring system called the modified Rankin Scale.

The SAINT I and SAINT II clinical trials were designed with several interim analyses. At each interim analysis, an independent data and safety monitoring board (IDMB) reviews patient data to evaluate the safety or efficacy of Cerovive^® (NXY-059). At such time, a decision can be made to either stop or continue the clinical trials. In October 2004, we announced that AstraZeneca would continue the Phase III SAINT trials with Cerovive^® (NXY-059) as planned based on a recommendation from the IDMB following its review of data on safety and stroke outcomes after a three-month follow-up period in 1,000 patients. The purpose of this analysis was to assess whether it would be futile (not meaningful) to continue the SAINT trials when looking at the degree of post-stroke disability experienced by patients who received study drug as compared to patients who received placebo, and to determine if there were safety concerns.

In August 2004, AstraZeneca initiated enrollment in the CHANT (Cerebral Hemorrhagic and NXY-059 Treatment) trial to assess the safety and tolerability of 72 hours i.v. infusion of Cerovive^® (NXY-059) in adult patients with acute intracerebral hemorrhage. This trial is planned to involve 600 subjects in approximately 150 centers in more than 20 countries. Patient recruitment in the CHANT trial is also proceeding consistent with the goal announced by AstraZeneca to seek regulatory approval of Cerovive^® (NXY-059) in 2006.

Commercialization

Renovis has licensed to AstraZeneca the rights to develop, market and sell Cerovive^® (NXY-059) worldwide. Pursuant to a license agreement, AstraZeneca made milestone payments totaling $4.5 million to Renovis in February 2003 when it received FDA approval to commence the Phase III clinical trials. AstraZeneca may be required to make additional milestone payments to Renovis in the future upon regulatory filings and marketing approvals of Cerovive^® (NXY-059) in the United States and other territories. Furthermore, Renovis is entitled to receive mid-teen percentage royalties on worldwide net sales of Cerovive^® (NXY-059). AstraZeneca has announced a goal to request regulatory approval of Cerovive^® (NXY-059) in 2006.

If Cerovive^® (NXY-059) meets its target product profile, we believe that it will be adopted rapidly by physicians in an area with a significant medical need due to the limitations of existing therapies and the severe nature of the disabilities suffered by many stroke patients. As one of the world’s leading pharmaceutical companies, AstraZeneca’s global regulatory, sales and marketing capabilities should allow it to drive rapid product adoption and use throughout the world. In addition, AstraZeneca is well positioned to potentially broaden the clinical uses and tests of the drug candidate in related indications involving brain injury.

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REN-1654

REN-1654 is an oral drug candidate that we are evaluating in a Phase II clinical trial for the treatment of sciatica, a specific type of neuropathic pain. Despite the wide assortment of prescription pain relievers already available, a number of specific types of neuropathic pain, including sciatica, remain inadequately treated. REN-1654 has been shown to decrease inflammatory signaling that we believe plays a significant role in the damage of nerve cells that frequently underlies sciatica and certain other forms of neuropathic pain.

Market Opportunity

Neuropathic pain is a form of pain that results from damage to nerves. The damage may result from a variety of causes, including illness, injury, and exposure to the toxic effects of chemotherapy drugs. Regardless of its original cause, neuropathic pain may persist for months or years after the original nerve damage occurs. We believe that an anti-inflammatory drug for the nervous system could be used following illness or injury to prevent the onset of, or reduce, many forms of neuropathic pain.

Conventional analgesics, or pain relievers, are frequently ineffective in treating sciatica and other forms of neuropathic pain. As a result, drugs originally developed as anti-depressants and anti-convulsants, are frequently prescribed for neuropathic pain. One of these drugs, gabapentin, was originally approved as an anti-convulsant for the treatment of epilepsy and later became approved for treatment of neuropathic pain. Based on figures reported by Pfizer, in 2004, sales of gabapentin exceeded $2.7 billion, a significant portion of which related to use of the drug to treat various forms of neuropathic pain. In September 2004, gabapentin became available to patients in generic form at a significantly reduced cost. However, gabapentin and other drugs currently prescribed for neuropathic pain are not effective in a high proportion of patients and, even where effective, frequently provide only modest pain relief at the expense of adverse side effects. Accordingly, there is a significant need for improved neuropathic pain therapies.

Scientific Overview

Inflammation in the nervous system is a common cause of multiple types of neuropathic pain. REN-1654 reduces inflammation in the nervous system by decreasing the release of tumor necrosis factor a (TNFa), a signaling molecule used by the immune system and certain cells in the nervous system. REN-1654 has also been shown to inhibit the release of other pro-inflammatory signaling molecules, or cytokines. During inflammation, TNFa is thought to play a key role both in directly causing an increase in pain signaling and in damaging nerves by increasing the inflammatory response.

The potential utility of TNFa inhibition as a strategy for treating certain types of neuropathic pain has been demonstrated in human studies. Drugs such as infliximab, which act by inhibiting TNFa, have demonstrated therapeutic potential in pilot studies of patients with sciatica. While cost and route of administration significantly limit the practical utility of these and other similar injectable drugs as treatments for neuropathic pain, they validate TNFa inhibition as a therapeutic strategy for common types of neuropathic pain, such as sciatica, that involve significant nerve inflammation.

The REN-1654 Solution

REN-1654 is an oral, small molecule drug candidate that we believe may be effective as a treatment for certain types of neuropathic pain in which nerve inflammation plays a significant role. REN-1654 penetrates into the nervous system effectively and has a half-life which facilitates once-daily dosing. It has been shown to inhibit the release of TNFa and other pro-inflammatory molecules by certain cell types. By decreasing the amount of TNFa in and around neurons, REN-1654 should reduce the nerve signaling and resulting pain promoted by TNFa and decrease the amount of inflammation which leads to nerve damage. REN-1654 has demonstrated efficacy in preclinical models of neuropathic pain involving inflammation.

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Clinical Trials

In twelve previous safety trials REN-1654 was orally administered in more than 340 subjects, establishing the safety of the drug candidate for further clinical development. We are currently conducting a multi-center, double-blinded, placebo-controlled Phase II clinical trial with REN-1654 to explore its effectiveness for treatment of sciatica, a neuropathic pain indication in which pro-inflammatory cytokines are believed to play a key role in development of the pain. The primary endpoint of this trial is the change in daily categorical pain ratings at baseline compared to the end of a three week treatment period. Patient enrollment is continuing in this trial. We currently plan to enroll 72 patients, all of whom developed leg pain associated with sciatica no more than 12 weeks prior to enrollment. We expect to report data from this study by the end of the third quarter of 2005. In March 2005, we announced our decision to discontinue development of REN-1654 in PHN following our review of results from a Phase II clinical trial that we conducted in this neuropathic pain indication. We do not believe that the results from the Phase II clinical trial with REN-1654 in PHN are predictive of the results that we expect to report from the ongoing Phase II trial with REN-1654 in sciatica patients.

Commercialization

Our current plan is to independently develop REN-1654 through at least Phase II trials. Thereafter, we may seek strategic partners in international markets and potentially the United States. We hold exclusive worldwide rights to patents covering REN-1654. We hold composition-of-matter and method-of-use patents which protect REN-1654 in the United States and other territories.

REN-850

REN-850 is an oral, small molecule drug candidate that we are evaluating in a Phase I clinical trial for the treatment of multiple sclerosis (MS) and potentially other autoimmune diseases. MS and many other autoimmune diseases remain inadequately treated.

Market Opportunity

Autoimmune diseases occur when the cells of the immune system inappropriately attack and damage normal tissues in an otherwise healthy patient. These diseases can involve many different organs and tissues in the body and include well-known and debilitating diseases such as rheumatoid arthritis and Crohn’s Disease, as well as MS. We believe that an oral drug that targets the immune response proximally in these diseases could be used to decrease the severity of the damage to normal tissue caused by the immune system, decrease disability in these patients and perhaps modify the course of the disease.

According to Visiongain, autoimmune diseases affect an estimated 5 to 8 percent of the US population (14 to 22 million people). MS is a chronic and often progressive disease that affects over 300,000 people in the US and strikes more than twice as many women as men. Patients are diagnosed with the disease most often between the ages of 20 and 50, in their peak earning and reproductive years. According to Espicom Business Intelligence, $3.3 billion was spent worldwide on drugs to treat MS during 2003. None of the existing therapeutics can halt the progression of MS, and there is a significant need for additional therapies that have different side effect and dosing profiles or slow the progression of the disease to a greater extent than provided by currently available drugs.

Scientific Overview

Multiple sclerosis is an autoimmune disease in which a patient’s immune system cells attack the myelin sheath surrounding portions of many nerve cells in the brain and spinal cord, leading to progressive disability over time. The immune system cells responsible for the damage, leukocytes, are thought to “traffic” or enter into the nervous system from the bloodstream, crossing into the nervous system in a highly regulated manner that relies upon the actions of multiple proteins, including signaling proteins called chemokines. The subsequent attack on the myelin sheath produces an inflammation that leads to scarring (sclerosis). This scarring eventually leads to loss of nerve function and nerve cell death.

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The REN-850 Solution

REN-850 is an oral, small molecule drug candidate that we believe may be effective as a disease-modifying treatment for MS, and possibly other autoimmune diseases. REN-850 acts by inhibiting leukocyte trafficking and modulates the cell migration driven by multiple chemokine receptors, thus acting proximally in the immune response cascade. Preclinical studies have also shown that oral administration of REN-850 significantly reduces severity of outcomes in multiple in vivo models of MS and rheumatoid arthritis.

Clinical Trials

In February 2005, we initiated a Phase I clinical trial to assess the safety, tolerability and pharmacokinetics of escalating single doses of REN-850 in approximately 45 healthy volunteers. We expect to complete this trial and commence a Phase Ib trial to test the safety, tolerability and pharmacokinetics of escalating multiple doses of REN-850 by the end of 2005.

Commercialization

Our current plan is to independently develop REN-850 through at least Phase I trials. Thereafter, we may seek strategic partners in international markets and potentially the United States. We hold exclusive worldwide rights to issued and pending patents covering pharmaceutical compositions, dosages and methods of use of REN-850 in the United States and other territories.

Research Programs

Our research is focused on developing new drugs to treat neurological diseases and disorders. According to data published by Espicom Business Intelligence, drugs that target central nervous system diseases and disorders represent the second largest sector of the worldwide drug market, accounting for more than $59 billion in worldwide drug sales in 2003. Our research in neurological diseases and disorders is currently focused in the areas of neuroprotection and pain. During 2003 and 2004 we were also conducting research in the area of neuroinflammatory diseases that resulted in the advancement of REN-850 into a Phase I clinical trial for MS and other autoimmune diseases in the first quarter of 2005. Our neurobiology expertise includes capabilities in assay development, screening, lead optimization and target identification and validation. Our medicinal chemistry expertise includes the use of state-of-the-art technologies to turn initial promising compounds generated by our neuroscientists into drug candidates. As part of our strategy for building a sustainable pipeline of product candidates we regularly evaluate opportunities to apply our drug discovery and development capabilities in new program areas and we expect to initiate new research programs in future periods.

Neuroprotection

Conditions in which the nervous system is physically injured (trauma), as well as conditions in which the blood supply is disrupted (stroke or ischemia), often lead to acute neurological damage. In such conditions, free radical generation plays a key role in generating damage to nervous system tissue above and beyond the damage directly caused by the physical injury or lack of oxygen and nutrients.

Next-Generation Cytoprotectant Program.    Compounds that reduce free radicals (e.g., free radical trapping agents such as Cerovive^® (NXY-059)) protect tissues against the damage caused by free radicals that occurs during trauma and stroke. Cerovive^® (NXY-059), the first nitrone-based neuroprotectant to be developed in the clinic for the indication of stroke, is administered via intravenous injection. We are developing next-generation orally active nitrone-based compounds for the treatment of trauma, stroke, neurodegeneration, myocardial infarction, renal disease and potentially other diseases and conditions in which ischemia is thought to play a key role.

Other Programs.    We have identified potential protein biotherapeutics that may facilitate nerve regrowth, repair and restoration of function following damage to the nervous system arising from spinal cord injury and other neurological diseases and disorders. We have entered into a collaboration with Genentech to pursue certain of these opportunities.

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Pain

Pain is often debilitating for patients and many types of pain are not effectively treated by existing drugs.

VR1 Antagonist Program.    Key mediators of pain signaling are ion channels, which regulate the flow of different ions (charged atoms) between the inside and outside of neurons. The transient receptor potential (TRP) ion channels constitute a large and diverse family, several of which are thought to mediate pain signaling and are attractive targets for drug discovery. The best known of these is the vanilloid receptor 1 (VR1).

We believe drugs that block VR1, preventing it from activating nerve cell signaling, could be effective, non-narcotic analgesics and could also be effective for treating non-neurological conditions such as urinary incontinence, irritable bowel syndrome and asthma. We have potential lead development candidates and expect to commence preclinical development of a lead candidate in 2005. To date, we retain all commercial rights to the VR1 antagonist program.

Strategy

Our goal is to become a leading biopharmaceutical company focused on discovering, developing and commercializing novel drugs to treat neurological diseases and disorders. The key elements of our strategy for achieving this goal are to:

Build a balanced portfolio of product candidates based on neurological diseases and disorders.    We believe that our scientific expertise is broadly applicable to a wide range of neurological diseases and disorders and that expanding our product portfolio will mitigate some of the risks associated with drug development. The development and commercialization of our most advanced product candidate, Cerovive^® (NXY-059), is the responsibility of our exclusive licensee AstraZeneca. We intend to advance REN-1654, REN-850 and our earlier stage product candidates toward commercialization as rapidly as practicable, while also seeking to acquire or in-license additional product candidates. We believe our scientific expertise enables us to effectively identify and capitalize on external product opportunities as evidenced by our acquisition of product candidates from Centaur. We also intend to undertake new discovery projects to identify novel product opportunities for internal development or collaboration.

Focus research and development efforts in market opportunities with large unmet medical needs.    Our drug discovery efforts generally target diseases that represent attractive commercial opportunities and that are underserved by available therapeutic alternatives. Shortcomings of currently available treatments may include limited efficacy, side effects or method of delivery. In particular, we believe that orally available drugs that treat disease with a high degree of specificity without these shortcomings will have strong commercial potential.

Develop orally available, small molecule drugs.    Our independent drug discovery and development efforts generally focus on orally available small molecule drugs. The major commercial advantage of small molecule product candidates such as REN-1654 and REN-850 is the potential for oral administration. In addition, small molecule drugs can be manufactured by conventional methods, resulting in lower manufacturing costs and higher margins than for other types of drugs, such as protein therapeutics.

Establish selective corporate collaborations to assist in the development and commercialization of our products while retaining significant commercial rights.    We leverage the development, regulatory and commercialization expertise of AstraZeneca to mitigate risk and accelerate the development of Cerovive^® (NXY-059). We intend to selectively form additional corporate collaborations to further leverage our internal resources to undertake projects that are beyond our resources while retaining significant economic rights to our products. Such projects include establishing a broad-based sales capability and completing large and costly clinical trials.

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Strategic Alliances

AstraZeneca

Our agreement with AstraZeneca grants them exclusive worldwide rights to develop, manufacture and market Cerovive^® (NXY-059). Under the agreement, we are entitled to receive future milestone payments upon occurrence of each of the following events: filing of a marketing authorization application with European or Japanese regulatory authorities, approval of such marketing authorization application, filing of a new drug application (NDA) with the FDA and approval of such NDA. We are also entitled to mid-teen percentage royalties on worldwide net sales of Cerovive^® (NXY-059). AstraZeneca has responsibility for all aspects of clinical development under the agreement, including all costs. The agreement also establishes AstraZeneca’s and our rights and obligations involving defined product opportunities that may arise in the future from our nitrone chemical platform.

If we identify any nitrone-based drug candidate similar to Cerovive^® (NXY-059) (i.e., that functions as a specific type of free radical trap) as a development candidate for stroke or stroke pain, traumatic brain injury or certain types of dementia, AstraZeneca may be entitled to license the compound from us on the terms and conditions of the Cerovive^® (NXY-059) agreement. If we identify a compound of the same type in the areas of neurodegenerative diseases or psychiatric disorders outside the areas identified above, which we choose to partner with a third party, we are obligated to notify AstraZeneca and consider in good faith any interest it may have in such partnership opportunity. If we commercialize a compound (i.e., that functions as a specific type of free radical trap) with a third party in the areas of neurodegenerative diseases or psychiatric disorders, we may be required to pay AstraZeneca a low single-digit percentage royalty on worldwide net sales of that product.

Our agreement with AstraZeneca expires on the later of fifteen years after the first commercial sale of a licensed product, or the expiration of applicable patents, on a country-by-country basis. Additionally, AstraZeneca can terminate the agreement either in whole or in part, without cause, upon 12 months notice.

Genentech

In December 2003, we entered into a collaborative research, development and license agreement with Genentech for the discovery and development of drugs that inhibit pathological or tumor angiogenesis and promote nerve re-growth following nervous system injury. Under the terms of the agreement, Genentech paid us an upfront license and technology access fee of $5.25 million in January 2004 and made a $3.0 million equity purchase concurrent with our initial public offering. In addition, we are eligible to receive future milestone and royalty payments on therapeutic products emerging from the collaboration that are developed and commercialized by Genentech. In exchange, Genentech obtained exclusive worldwide rights to research, develop, manufacture and commercialize protein-based therapeutics and other drug compositions for the treatment of cancer and other diseases in which mechanisms underlying new blood vessel growth play a significant role. Under the collaboration, we will be responsible for evaluating protein biotherapeutic candidates in preclinical models of spinal cord injury. Unless Genentech exercises certain rights and makes additional payments to us, we will have the right to develop and commercialize products arising from the collaboration that are specifically useful for the treatment of central and peripheral nervous system diseases and conditions. We are required to make royalty payments, and in certain cases milestone payments, to Genentech on therapeutic products that we develop and commercialize under the collaboration.

Intellectual Property

Patents, Trade Secrets and Licenses

The following factors are important to our success:

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We actively seek, when appropriate, protection for our products, technologies and proprietary information through U.S. and foreign patents. In addition, we rely upon trade secrets and contractual arrangements to protect our proprietary information.

As of December 31, 2004, we owned more than 35 U.S. patents, 40 U.S. patent applications, 70 foreign patents and 120 foreign patent applications related to our technologies, compounds and their applications in pharmaceutical development or their use as pharmaceuticals. In particular, we own patents and patent applications which materially relate to our ability to develop and commercialize our product candidates, REN-1654 and REN-850. As of December 31, 2004, we have licensed, from institutions such as the Oklahoma Medical Research Foundation (OMRF), the University of Kentucky Research Foundation (UKRF), the Regents of the University of California (the Regents) and others, the exclusive rights to more than 30 U.S. patents, 20 U.S. patent applications, 100 foreign patents and 40 foreign patent applications related to our technologies, compounds and their applications in pharmaceutical development or their use as pharmaceuticals. We face the risk that one or more of the above patent applications may be denied. We also face the risk that our issued patents may be challenged or circumvented or may otherwise not provide protection for any commercially viable products we develop. We also note that U.S. patents and patent applications may be subject to interference proceedings and U.S. patents may be subject to reexamination proceedings in the U.S. Patent and Trademark Office (and foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent office), which proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, reexamination and opposition proceedings may be costly. In the event that we seek to enforce any of our owned or exclusively licensed patents against an infringing party, it is likely that the party defending the claim will seek to invalidate the patents we assert, which, if successful, would result in the entire loss of our patent or the relevant portion of our patent and not just with respect to that particular infringer. Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations.

In addition, our ability to assert our patents against a potential infringer depends on our ability to detect the infringement in the first instance. Many countries, including certain European countries, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties in some circumstances (for example, the patent owner has failed to “work” the invention in that country, or the third party has patented improvements). In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent. Compulsory licensing of life saving drugs is also becoming increasingly popular in developing countries either through direct legislation or international initiatives. Such compulsory licenses could be extended to include some of our product candidates, which could limit our potential revenue opportunities. Moreover, the legal systems of certain countries, particularly certain developing countries, do not favor the aggressive enforcement of patent and other intellectual property protection which makes it difficult to stop infringement.

Our success will also depend in part upon our not infringing patents issued to others. If our product candidates are found to infringe the patents of others, our development, manufacture and sale of such potential products could be severely restricted or prohibited. In this regard, we have received correspondence from a third party alleging that we infringe certain patents held by the third party. We do not believe there is a reasonable basis for this action claiming that we are infringing any valid and enforceable patents of such third party. To date, we have not been subject to any infringement actions. Although we do not believe that these patents seriously harm our ability to develop and commercialize our products, we cannot be certain of this. It is likely that in the future we will encounter other similar situations which will require us to determine whether we need to license a technology or face the risk of defending an infringement claim.

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Patent litigation can involve complex factual and legal questions and its outcome is uncertain. Any claim relating to infringement of patents that is successfully asserted against us may require us to pay substantial damages. Even if we were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. Furthermore, as a result of a patent infringement suit brought against us or our strategic partners or licensees, we or our strategic partners or licensees may be forced to stop or delay developing, manufacturing or selling potential products that are claimed to infringe a third party’s intellectual property unless that party grants us or our strategic partners or licensees rights to use its intellectual property. In such cases, we may be required to obtain licenses to patents or proprietary rights of others in order to continue to commercialize our products. However, we may not be able to obtain any licenses required under any patents or proprietary rights of third parties on acceptable terms, or at all. Even if our strategic partners, licensees or we were able to obtain rights to the third party’s intellectual property, these rights may be non-exclusive, thereby giving our competitors access to the same intellectual property. Ultimately, we may be unable to commercialize some of our potential products or may have to cease some of our business operations as a result of patent infringement claims, which could severely harm our business.

Much of our technology and many of our processes depend upon the knowledge, experience and skills of our scientific and technical personnel. To protect rights to our proprietary know-how and technology, we generally require all employees, contractors, consultants, advisors, visiting scientists and collaborators as well as potential collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential information. The agreements with employees and consultants also require disclosure and assignment to us of ideas, developments, discoveries and inventions. These agreements may not effectively prevent disclosure of our confidential information or provide meaningful protection for our confidential information.

Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual property rights or personnel.

We also use as advisors and consultants individuals who are currently employed by universities. Most of these individuals are parties to agreements pursuant to which some of the work product created by these individuals belongs to their respective universities. While we and these individuals try to maintain records which make it clear that the work these individuals do for us is not subject to their agreements with universities, it is always possible that a university will assert an ownership claim to the work of one or more of these individuals.

OMRF and UKRF.    We hold the exclusive, worldwide license to specified intellectual property related to Cerovive^® (NXY-059) owned by OMRF and UKRF pursuant to a license agreement entered into in July 1992. In consideration for this technology license, we are obligated to pay OMRF and UKRF low-single digit royalties on any future net sales of products relating to our license, subject to a minimum annual royalty payment of $25,000 through the year the FDA first approves an NDA and $100,000 annually thereafter. The license agreement terminates upon the later of the expiration of the last of any patent rights to licensed products that are developed under the agreement or 15 years from the effective date of the agreement. We may terminate the license agreement for any reason following six months written notice to OMRF and UKRF.

OMRF.    We hold the exclusive, worldwide license to specified intellectual property related to nitrones that are potential therapeutics owned by OMRF pursuant to a license agreement entered into in January 1998. In consideration for this technology license, we are obligated to pay OMRF royalties on any future net sales of products relating to our license, subject to minimum annual royalty payments of $10,000. In addition, we are obligated to pay OMRF milestone payments if we reach certain regulatory milestones. The license agreement terminates upon the later of the expiration of the last to expire of any patent rights to licensed products that are

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developed under the agreement or 15 years from the effective date of the agreement. We may terminate the license agreement for any reason following six months written notice to OMRF.

The Regents of the University of California.    We hold two exclusive, worldwide licenses to specified intellectual property related to targets and potential protein biotherapeutics relevant for inhibition of tumor angiogenesis and other pathological diseases and for nerve regeneration and repair that is a necessary component of our corporate collaboration with Genentech. We licensed this intellectual property from the Regents pursuant to license agreements entered into in June 2001 and November 2002, respectively, each as amended in December 2003. In consideration for these technology licenses, we paid license fees to the Regents. We are required to make additional annual payments on the November 2002 license. We are also obligated to pay the Regents royalties on any future net sales relating to our licenses subject to specified minimum annual royalty payments of $25,000 for products developed under the June 2001 license and $50,000 for products developed under the November 2002 license. In addition, we are obligated to make payments to the Regents based on meeting certain regulatory and clinical milestones. The June 2001 license automatically terminates upon the date of expiration of the last to expire patent under the license. The November 2002 license automatically terminates on or after December 31, 2018.

Cutanix.    Pursuant to an agreement with us, as amended in September 2002, Cutanix received the right to exclusively develop and commercialize certain Renovis compounds for use in the fields of dermatology and cosmetics and other skin care applications. In July 2004, we amended our agreement with Cutanix to obtain all rights to certain of these compounds for Renovis in exchange for a one-time payment, which we made to Cutanix immediately following execution of the amendment.

Government Regulation

The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical products. These agencies and other federal, state and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion of our products.

The process required by the FDA before product candidates may be marketed in the United States generally involves the following:

The testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any new approvals for our products will be granted on a timely basis, if at all.

Prior to commencing the first clinical trial with a product candidate, we must submit an IND to the FDA. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions about the conduct of the clinical trial. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Our submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development, and the FDA must grant

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permission for each clinical trial to start and continue. Further, an independent institutional review board for each medical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial before it commences at that center. Regulatory authorities or an institutional review board or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.

For purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap.

The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase IV studies may be made a condition to be satisfied after a drug receives approval. The results of Phase IV studies can confirm the effectiveness of a product candidate and can provide important safety information to augment the FDA’s voluntary adverse drug reaction reporting system.

The results of product development, preclinical studies and clinical trials are submitted to the FDA as part of an NDA, or as part of an NDA supplement. The FDA may deny approval of an NDA or NDA supplement if the applicable regulatory criteria are not satisfied, or it may require additional clinical data and/or an additional pivotal Phase III clinical trial. Even if such data are submitted, the FDA may ultimately decide that the NDA or NDA supplement does not satisfy the criteria for approval. Once issued, the FDA may withdraw product approval if ongoing regulatory standards are not met or if safety problems occur after the product reaches the market. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products which have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs.

Satisfaction of FDA requirements or similar requirements of state, local and foreign regulatory agencies typically takes several years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease. Typically, if a drug product is intended to treat a chronic disease, as is the case with some of the product candidates we are developing, safety and efficacy data must be gathered over an extended period of time, which can range from six months to three years or more. Government regulation may delay or prevent marketing of product candidates or new diseases for a considerable period of time and impose costly procedures upon our activities. The FDA or any other regulatory agency may not grant approvals for new indications for our product candidates on a timely basis, if at all. Success in early stage clinical trials does not ensure success in later stage clinical trials. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. Even if a product candidate receives regulatory approval, the approval may be significantly limited to specific disease states, patient populations and dosages. Further, even after regulatory approval is obtained, later discovery of

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previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market. Delays in obtaining, or failures to obtain, additional regulatory approvals for Cerovive^® (NXY-059) REN-1654 or REN-850 would harm our business. In addition, we cannot predict what adverse governmental regulations may arise from future U.S. or foreign governmental action.

Any products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including record-keeping requirements and reporting of adverse experiences with the drug. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with good manufacturing practices, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. We cannot be certain that we or our present or future suppliers will be able to comply with the good manufacturing practices regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution, or withdraw approval of the NDA for that drug.

The FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available drugs for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use.

The FDA’s policies may change and additional government regulations may be enacted which could prevent or delay regulatory approval of our product candidates or approval of new diseases for our product candidates. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.

Competition

We compete in the segment of the pharmaceutical market that treats neurological diseases and disorders, which is highly competitive. We face significant competition from most pharmaceutical companies as well as biotechnology companies that are also researching and selling products designed to treat neurological diseases and disorders. Many of our competitors have significantly greater financial, manufacturing, marketing and product development resources than we do. Large pharmaceutical companies, in particular, have extensive experience in clinical testing and in obtaining regulatory approvals for drugs. These companies also have significantly greater research capabilities than we do. In addition, many universities and private and public research institutes are active in neurological research, some in direct competition with us. We also must compete with these organizations to recruit scientists and clinical development personnel.

We believe that our ability to successfully compete will depend on, among other things:

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Cerovive^® (NXY-059).    We believe that Cerovive^® (NXY-059), if approved and commercialized, would not face direct competition from products currently available to stroke victims. Moreover, we believe existing thrombolytic drugs such as tPA will be complementary to Cerovive^® (NXY-059). A number of organizations are conducting clinical trials of neuroprotectant drug candidates which, if approved and commercialized, would compete with Cerovive^® (NXY-059). Competitors include Yamanouchi Pharmaceutical Co., Ltd., Merck & Co., Ono Pharmaceutical Co., Ltd., Indevus Pharmaceuticals Inc., IVAX Corporation, Vertex Pharmaceuticals Incorporated and D-Pharm Ltd.

REN-1654.    If REN-1654 is approved and commercialized, it will face significant competition from currently marketed products commonly used to treat neuropathic pain and sciatica. The primary competition in the market for neuropathic pain is gabapentin, which is marketed by Pfizer under the brand name “Neurontin” and in generic form by other large pharmaceutical companies. Competitors working on new treatments for neuropathic pain include NeurogesX, Inc., Novartis AG, CeNeS Pharmaceuticals plc, Xenoport, Inc. and AstraZeneca. In addition to competition from medications used for the treatment of neuropathic pain, REN-1654 would face additional competition from other medications commonly used for the treatment of sciatica. Examples include over-the-counter analgesics, such as acetaminophen and non-steroidal anti-inflammatory drugs, such as aspirin, ibuprofen or naproxen as well as prescription anti-inflammatory drugs, such as muscle relaxants, opioids, and corticosteroid injections.

REN-850.    If REN-850 is approved and commercialized, it will face significant competition from currently marketed products for the treatment of multiple sclerosis including the beta interferons, Avonex marketed by Biogen Idec (Biogen), Betaseron marketed by Schering AG, and Rebif marketed by Serono SA with Pfizer; and the non-interferon, immunomodulator Copaxone marketed by Teva Pharmaceuticals Industries, Ltd. REN-850 may also face competition from Tysabri, a monoclonal antibody developed by Biogen and Elan Corporation plc (Elan) that received accelerated approval from the FDA in November 2004 because it was shown to have a significant impact on disability, disease progression and rate of clinical relapses. In February 2005, Biogen and Elan halted sales of Tysabri pending an investigation of potential safety issues. If Biogen and Elan resume sales of Tysabri following the investigation, the drug could represent significant competition for REN-850. In 2003, sales of marketed products for MS exceeded $3.3 billion. All currently marketed treatments for MS are injectables but competitors are developing other treatments, including oral product candidates. Competitors include Biogen, Elan, Schering AG, Serono SA, Teva Pharmaceuticals, Sanofi-Aventis, Active Biotech and Novartis.

Employees

As of December 31, 2004, we had 93 full-time employees, including 35 Ph.D.s and M.D.s. In addition, we have contracted with consultants that we estimate are the equivalent of approximately 5 additional full-time employees, the majority of whom are engaged in clinical development activities, and 5 temporary employees that we estimate are the equivalent of 1.5 full-time employees. We believe our relations with our employees are good.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) are available on our Internet website as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the Securities and Exchange Commission. Our website address is www.renovis.com.

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RISK FACTORS

An investment in our common stock is very risky. You should carefully consider the risks described below, together with all of the other information in this report, before making a decision to invest in our common stock. If any of the following risks actually occur, our business, financial condition, results of operations and growth prospects could be adversely affected. In this case, the trading price of our common stock could decline and you may lose all or part of your investment in our common stock. Additional risks and uncertainties, not presently known to us, or that we presently deem as immaterial, may also adversely affect our business. If any of these additional risks and uncertainties occurs, the trading price of our common stock could decline, and you might lose all or part of your investment.

Risks Related to Our Company

Clinical trials may fail to demonstrate the safety and efficacy of our product candidates, which could prevent or significantly delay their regulatory approval.

Our future success is dependent upon, among other factors, our ability to develop working products and our ability to successfully complete clinical trials. All of our potential products currently are in research, preclinical development or clinical testing, and commercialization of those products will not occur for at least the next several years, if at all. All of our products will require extensive additional research and development prior to any commercial introduction. There can be no assurance that any of our research and development and clinical trial efforts will result in viable new products. In July 2004, we announced our decision to discontinue efforts to commercialize REN-213, an intravenous drug candidate we were developing for the treatment of acute post-operative pain. In March 2005, we announced our decision to discontinue efforts to develop REN-1654 for the treatment of post-herpetic neuralgia (PHN). Any failure or substantial delay in completing clinical trials for our product candidates, including Cerovive^® (NXY-059), REN-1654 and REN-850 may severely harm our business. Before obtaining regulatory approval for the sale of any of our potential products or potential products of our current and future strategic partners and licensees, we and our strategic partners or licensees must subject these product candidates to extensive preclinical and clinical testing to demonstrate their safety and efficacy in humans. The success of this preclinical and clinical testing is critical to achieving our product development goals. If our product development efforts are unsuccessful, we will not obtain regulatory approval for them, we will not generate sales from them, and our business and results of operations would be adversely affected.

Clinical trials are expensive, time-consuming and typically take years to complete. In connection with clinical trials, we face the risks that:

The results in early phases of clinical testing are based upon limited numbers of patients and a limited follow-up period and our success may not be indicative of results in a large number of patients or long-term efficacy. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late stage clinical trials even after achieving promising results in early stage development. The results from the Phase II clinical trials for Cerovive^® (NXY-059) may not be predictive of results obtained in the Phase III clinical trials and the results from the Phase I and IIa clinical trials for REN-1654 may not be predictive of results obtained in the Phase IIb clinical trials. The results from the preclinical studies with REN-850 may not be

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predictive of results obtained in clinical trials with the drug candidate. If a larger population of patients does not experience positive results, or if these results do not have a lasting effect, our products may not receive approval from the FDA. Failure to demonstrate the safety and effectiveness of our products in larger patient populations could have a material adverse effect on our business that would cause our stock price to decline significantly.

Failure to enroll patients for clinical trials may cause delays in developing our product candidates.

We may encounter delays or rejections if we, our strategic partners or licensees are unable to enroll enough patients to complete clinical trials. Patient enrollment depends on many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites and the eligibility criteria for the trial. Moreover, when one product candidate is evaluated in multiple clinical trials simultaneously, patient enrollment in ongoing trials can be adversely effected by negative results from completed trials. At various times, Cerovive^® (NXY-059) and REN-1654 have each been involved in multiple clinical trials that were enrolling patients simultaneously. In March 2005 we announced our decision to discontinue development of REN-1654 for PHN because our Phase II trial in PHN patients did not reach statistical significance in its primary endpoint. This announcement could adversely effect enrollment of patients in our ongoing Phase II clinical trial with REN-1654 in sciatica patients. We have previously experienced delays in enrollment of the Phase II clinical trials with REN-1654. These delays have resulted in increased costs. Any such delays in planned patient enrollment in the future may result in further increased costs and delays, which could harm our ability to develop products.

The independent clinical investigators and contract research organizations that we and our strategic partners or licensees rely upon to conduct clinical trials may not be diligent, careful or timely, and may make mistakes in the conduct of our trials.

We depend on independent clinical investigators and contract research organizations (CROs) to conduct our clinical trials under their agreements with us or, in the case of Cerovive^® (NXY-059), with AstraZeneca. We are not employing these investigators, and we cannot control the amount or timing of resources that they devote to our programs. Our contracts with these investigators involve fixed fees. If the costs of performing the clinical trials exceed estimates, these investigators may fail to devote sufficient time and resources to our drug development programs, fail to enroll patients as rapidly as expected, or otherwise fail to perform in a satisfactory manner, regulatory approval and our introductions of new products will be delayed. We contract with CROs for execution of our clinical trials for our product candidates other than Cerovive^® (NXY-059). Failure of the CROs to meet their obligations could adversely affect clinical development of our product candidates. Moreover, these independent investigators and CROs may also have relationships with other commercial entities, some of which may compete with us. If independent investigators and CROs assist our competitors, it could harm our competitive position.

We depend on our licensee, AstraZeneca, for the completion of the Cerovive^® (NXY-059) clinical program and for the commercialization of Cerovive^® (NXY-059).

Under our exclusive license agreement with AstraZeneca, AstraZeneca is responsible for all aspects of clinical development of Cerovive^®. If Cerovive^® (NXY-059) receives regulatory approval, AstraZeneca will be responsible for marketing and sales of the commercial product. Because AstraZeneca is responsible for these functions, we have no control over the development schedule or, if Cerovive^® (NXY-059) receives regulatory approval, the marketing plan for Cerovive^® (NXY-059). If the clinical trials for Cerovive (NXY-059) are not successful, Cerovive^® (NXY-059) will not be commercialized. Moreover, if AstraZeneca elects to terminate the clinical program for Cerovive^® (NXY-059), the rights to develop and market Cerovive^® (NXY-059) will revert to us. If these rights revert to us, we will have to fund the clinical programs for Cerovive^® (NXY-059) on our own, seek a strategic partner or licensee for clinical development or abandon Cerovive^® (NXY-059).

Our reliance on AstraZeneca poses a number of risks, including the following:

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If any of these risks materialize, it could delay the development schedule for Cerovive^® (NXY-059) and impair its commercialization.

If we or our strategic partners or licensees fail to obtain U.S. regulatory approvals for product candidates under development, including our lead product candidate, Cerovive^® (NXY-059), REN-1654, and REN-850 we will not be able to generate revenue in the U.S. market from the commercialization of product candidates.

We must receive FDA approval for each of our product candidates before we can commercialize or sell that product candidate in the United States, and AstraZeneca, our licensee for Cerovive^® (NXY-059), must receive regulatory approval for Cerovive^® (NXY-059) and commercialize or sell Cerovive^® (NXY-059) before we will receive royalties. The FDA can limit or deny their approval for many reasons, including:

Failure to obtain FDA approval or any delay or setback in obtaining such approval could:

Any such failures or delays in the regulatory approval process for any of our product candidates would delay or diminish our receipt of product revenues, if any, and would materially adversely affect our business, financial condition and results of operations.

Even if we obtain FDA approval, our product candidate may not be approved for all indications that we request, which could limit the uses of our product and adversely impact our potential royalties and product sales. If FDA approval of a product is granted, such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-marketing follow-up studies. As to any product for which marketing approval is obtained, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping related to the product will be subject to extensive regulatory requirements. The subsequent discovery of previously unknown problems with the product may result in restrictions on the product, including withdrawal of the product from the market. We may be slow to adapt, or we may never adapt, to changes in existing requirements or adoption of new requirements or policies.

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If we fail to comply with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

If we or our strategic partners or licensees fail to obtain regulatory approvals in other countries for product candidates under development, we will not be able to generate revenue in such countries from the commercialization of product candidates.

In order to market our products outside of the United States, we and our strategic partners and licensees must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries may include all of the risks detailed above regarding FDA approval in the United States. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others. Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such approval could have the same adverse effects detailed above regarding FDA approval in the United States, including the risk that our product candidate may not be approved for all indications that we request, which could limit the uses of our product and adversely impact our potential royalties and product sales and that such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-marketing follow-up studies.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Even if our product candidates are approved and commercialized, competitive products may impede market acceptance of our products.

REN-1654 and REN-850 are intended to compete directly with existing drugs. Hospitals, physicians or patients may conclude that our potential products are less safe or effective or otherwise less attractive than these existing drugs. Even if approved and commercialized, Cerovive^® (NXY-059) may fail to achieve market acceptance with hospitals, physicians or patients. Similarly, hospitals, physicians or patients may continue to use existing drugs in preference to REN-1654 and REN-850. If our products do not receive market acceptance for any reason, our revenue potential could be diminished which would materially adversely affect our business, financial condition and results of operations.

Further, our competitors may develop new products that could be more effective or less costly, or that may seem more cost-effective, than our products. For example, although we believe that Cerovive^® (NXY-059) would not face direct competition from products currently available to stroke victims, a number of organizations are conducting clinical trials of neuroprotectant drug candidates which, if approved and commercialized, would compete with Cerovive^® (NXY-059). Competitors developing such products include Yamanouchi Pharmaceutical Co. Ltd., Ono Pharmaceutical Co., Ltd., Merck & Company, IVAX Pharmaceuticals, Inc., Vertex Pharmaceuticals Incorporated and D-Pharm Ltd. If REN-1654 is approved and commercialized, it will face significant competition from currently marketed products commonly used to treat neuropathic pain and sciatica. The primary competition in the market for neuropathic pain is gabapentin, which is marketed by Pfizer under the brand name “Neurontin” and in generic form by other large pharmaceutical companies. Competitors working on new treatments for neuropathic pain include NeurogesX, Inc., Novartis AG, CeNeS Pharmaceuticals plc, Xenoport, Inc. and AstraZeneca. In addition to competition from medications used for the treatment of neuropathic pain, REN-1654 would face additional competition from other medications commonly used for the treatment of sciatica. Examples include over-the-counter analgesics, such as acetaminophen and non-steroidal anti-inflammatory drugs, such as aspirin, ibuprofen or naproxen as well as prescription anti-inflammatory drugs, such as muscle relaxants, opioids, and corticosteroid injections.

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If REN-850 is approved and commercialized, it will face significant competition from currently marketed products for the treatment of multiple sclerosis (MS) including the beta interferons, Avonex marketed by Biogen Idec, Betaseron marketed by Schering AG, and Rebif marketed by Serono SA with Pfizer; the non-interferon, immunomodulator Copaxone marketed by Teva Pharmaceuticals Industries, Ltd.; and the recently approved Tysabri marketed by Biogen Idec and Elan Corporation. The newest product Tysabri, a monoclonal antibody that is administered intravenously once-a-month, received accelerated approval from the FDA in November 2004 because it has been shown to have a significant impact on disability, disease progression and rate of clinical relapses. In use as a combination therapy with Avonex, Tysabri significantly reduced the frequency of relapses. As noted above, Tysabri was withdrawn from the market in February 2005 due to safety concerns. If it is reintroduced at a future date, it could offer significant competition to REN-850. In addition to existing drugs, REN-850 could also face competition new treatments under development for MS including combination therapies and new oral product candidates. Competitors pursuing new product candidates for MS include Biogen Idec, Elan Pharmaceuticals, Schering AG, Serono SA, Teva Pharmaceuticals, Sanofi-Aventis, Active Biotech and Novartis.

Most of our competitors have substantially greater capital resources, research and development staffs, facilities and experience in conducting clinical trials and obtaining regulatory approvals, as well as in manufacturing and marketing pharmaceutical products. As a result, they may achieve product commercialization or patent protection earlier than we can, if at all. Hospitals, physicians, patients or the medical community in general may not accept and use any products that we may develop.

We have no experience selling, marketing or distributing products and no internal capability to do so.

If we receive regulatory approval to commence commercial sales of any of our product candidates other than Cerovive^® (NXY-059), we will have to establish a sales and marketing organization with appropriate technical expertise and supporting distribution capability. At present, we have no sales or marketing personnel. Factors that may inhibit our efforts to commercialize our products without strategic partners or licensees include:

As an alternative to establishing our own sales and marketing organization, we may engage a pharmaceutical or other healthcare company with an existing distribution system and direct sales organization to assist us. We may not be able to successfully establish sales and distribution capabilities either on our own or in collaboration with third parties or gain market acceptance for our products. To the extent we enter co-promotion or other licensing arrangements, any revenues we receive will depend on the efforts of third parties and we may not succeed.

If third-party manufacturers of our products fail to devote sufficient time and resources to our concerns, or if their performance is substandard, our clinical trials and product introductions may be delayed and our costs may rise.

We have no manufacturing facilities, and we have no experience in the commercial manufacturing of drugs and no experience in designing drug manufacturing processes. We have contracted with third-party manufacturers to produce, in collaboration with us, our product candidates for clinical trials. We intend to rely on third-party contract manufacturers to manufacture, supply, store and distribute any resulting products.

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While we have not experienced problems with our third party manufacturers to date, our reliance on these third-party manufacturers exposes us to the following risks, any of which could delay or prevent the completion of our clinical trials, the approval of our product candidates by the FDA or other regulatory agencies, or the commercialization of our products, result in higher costs, or deprive us of potential product revenues:

Drug manufacturers are subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies to ensure strict compliance with cGMPs, other government regulations and corresponding foreign standards. We are not aware of any violations by our third-party manufacturers of any of these regulations or standards. While we are obligated to audit the performance of third-party contractors, we do not have control over our third-party manufacturers’ compliance with these regulations and standards. Failure by our third-party manufacturers or us to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of the government to grant premarket approval of drugs, delays, suspension or withdrawal of approvals, seizures or recalls of product, operating restrictions and criminal prosecutions.

We may not be able to manufacture our product candidates in commercial quantities, which would prevent us from commercializing our product candidates.

To date, our product candidates have been manufactured in small quantities for preclinical and clinical trials. If any of these product candidates are approved by the FDA or other regulatory agencies for commercial sale, we will need to manufacture them in larger quantities. We may not be able to successfully increase the manufacturing capacity, whether in collaboration with third party manufacturers or on our own, for any of our product candidates in a timely or economic manner, or at all. Significant scale-up of manufacturing may require additional validation studies, which the FDA must review and approve. If we are unable to successfully increase the manufacturing capacity for a product candidate, the regulatory approval or commercial launch of that product candidate may be delayed or there may be a shortage in supply. Our product candidates require precise, high quality manufacturing. Our failure to achieve and maintain these high manufacturing standards, including the incidence of manufacturing errors, could result in patient injury or death, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously hurt our business.

If we are unable to retain and recruit qualified scientists or if any of our key executives, key employees or key consultants discontinues his or her employment or consulting relationship with us, it may delay our development efforts.

We are highly dependent on the key members of our management and scientific staff, especially our chief executive officer, Corey Goodman, Ph.D. The loss of any of our key employees or key consultants could impede the achievement of our development objectives. Furthermore, recruiting and retaining qualified scientific personnel to perform research and development work in the future is critical to our success. We may be unable to attract and retain personnel on acceptable terms given the competition among biotechnology, pharmaceutical and health care companies, universities and non-profit research institutions for experienced scientists. We maintain “key man” insurance on Dr. Goodman. We do not maintain “key man” insurance policies on any of our other officers or employees. All of our employees are employed “at will” and, therefore, each employee may leave our employment at any time.

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We have a history of losses and we may never achieve sustained profitability.

Since our inception, we have incurred significant net losses, including net losses of $39.9 million and $41.9 million for the years ended December 31, 2004 and 2003, respectively. As of December 31, 2004, our cumulative net loss was $122.0 million. We have not yet completed the development, including obtaining regulatory approvals, of any of our product candidates and, consequently, have not generated revenues from the sale of products and do not expect to do so for at least the next several years. Even if we succeed in developing and commercializing one or more of our product candidates, we expect to incur substantial losses for the foreseeable future. The development and sale of our products will require completion of clinical trials and significant additional research and development activities. We expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future as we:

We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures. We will need to generate significant revenues to achieve profitability. Our ability to generate revenues and achieve profitability depends on successful completion of clinical trials, our additional research and development efforts, our ability to successfully commercially introduce our products, market acceptance of our products, the competitive position of our products and the other risk factors set forth in this report. We may not be able to generate these revenues, and we may never achieve profitability. Our failure to achieve profitability could negatively impact the market price of our common stock. Even if we do become profitable, we may not be able to sustain or increase profitability on a quarterly or annual basis.

If we cannot raise additional capital on acceptable terms, we may be unable to complete planned clinical trials, obtain regulatory approvals or commercialize our product candidates.

We believe that existing cash reserves will fund our planned activities through at least the next 24 months. However, we will require substantial future capital in order to continue to conduct the research and development, clinical and regulatory activities necessary to bring our product candidates to market and to establish commercial manufacturing, sales and marketing capabilities. During the year ended December 31, 2004, our net cash used in operating activities was $25.2 million and we had capital expenditures of $2.2 million for the same period. Our future capital requirements depend on many factors, including:

We intend to seek additional funding through strategic collaborations. We face intense competition from many other companies in the pharmaceutical and biotechnology industry for corporate collaborations, as well as

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for establishing relationships with academic and research institutions and for obtaining licenses to proprietary technology. If we are unable to attract and retain corporate partners to develop, introduce and market our products, our business may be materially and adversely affected. Our strategy and any reliance on corporate partners, if we are able to establish such collaborative relationships, are subject to additional risks. Our partners may not devote sufficient resources to the development, introduction and marketing of our products or may not pursue further development and commercialization of products resulting from collaborations with us. If a corporate partner elects to terminate its relationship with us, our ability to develop, introduce and market our products may be significantly impaired and we may be forced to discontinue the product altogether. We may not be able to negotiate alternative corporate partnership agreements on acceptable terms, if at all. The failure of any future collaboration efforts could have a material adverse effect on our ability to develop, introduce and market our products and, consequently, could have a material adverse effect on our business, results of operations and financial condition.

In addition to strategic collaborations, we may seek funding through private or public sales of our securities or by licensing all or a portion of our technology. This funding may significantly dilute existing stockholders or may limit our rights to our technology.

We may not be able to obtain additional funding on reasonable terms, or at all. If we cannot obtain adequate funds, we may:

Risks Related to Our Industry

Claims that we infringe a third-party’s intellectual property may give rise to burdensome litigation, result in potential liability for damages or stop our development and commercialization efforts.

Third parties may assert patent or other intellectual property infringement claims against us or our strategic partners or licensees with respect to technologies used in our potential products. While we have conducted patent searches to determine whether the technologies used in our products infringe patents held by third parties, we expect that numerous patent applications are currently pending and may be filed in the future for technologies generally related to our technologies, including many patent applications that remain confidential after filing. Due to these factors and the inherent uncertainty in conducting patent searches, we may violate third-party patent rights that we have not yet identified.

U.S. and foreign patents have been issued to third parties in the same fields as some of our product candidates. There may also be patent applications filed by these or other parties in the United States and various foreign jurisdictions that are in the same fields as some of our product candidates. These patent applications, if issued, could subject us to infringement actions. Although we have received communications from a third party alleging that we infringe certain patents held by the third party, we do not believe there is a reasonable basis for an action claiming that we are infringing any valid and enforceable patents of such third party. To date we have not been subject to any infringement actions.

The owners or licensees of these and other patents may file one or more infringement actions against us. Patent litigation can involve complex factual and legal questions and its outcome is uncertain. Any claim relating to infringement of patents that is successfully asserted against us may cause us to pay substantial damages. Even

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if we were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations. Furthermore, as a result of a patent infringement suit brought against us or our strategic partners or licensees, we or our strategic partners or licensees may be forced to stop or delay developing, manufacturing or selling potential products, including Cerovive^® (NXY-059), REN-1654 and REN-850 that are claimed to infringe a third party’s intellectual property unless that party grants us or our strategic partners or licensees rights to use its intellectual property. In such cases, we may be required to obtain licenses to patents or proprietary rights of others in order to continue to commercialize our products. However, we may not be able to obtain any licenses required under any patents or proprietary rights of third parties on acceptable terms, or at all. Even if our strategic partners, licensees or we were able to obtain rights to the third party’s intellectual property, these rights may be non-exclusive, thereby giving our competitors access to the same intellectual property. Ultimately, we may be unable to commercialize some of our potential products or may have to discontinue development of a product candidate, such as Cerovive^® (NXY-059), REN-1654 and REN-850, or cease some of our business operations as a result of patent infringement claims, which could severely harm our business.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain product candidates, which could severely harm our business.

If we are unable to protect our intellectual property rights, our competitors may develop and market products with similar features that may reduce demand for our potential products.

The following factors are important to our success:

We will be able to protect our intellectual property rights in patents and trade secrets from unauthorized use by third parties only to the extent that such intellectual property rights are covered by valid and enforceable patents or are effectively maintained as trade secrets.

We try to protect our proprietary position by filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. Because the patent position of biotechnology and pharmaceutical companies involves complex legal and factual questions, the issuance, scope and enforceability of patents cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. U.S. patents and patent applications may also be subject to interference proceedings and U.S. patents may be subject to reexamination proceedings in the U.S. Patent and Trademark Office (and foreign patents may be subject to opposition or comparable proceedings in the corresponding foreign patent office), which proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such interference, reexamination and opposition proceedings may be costly. Thus, any

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patents that we own or license from others may not provide any protection against competitors. Our pending patent applications, those we may file in the future, or those we may license from third parties, may not result in patents being issued. If issued, they may not provide us with proprietary protection or competitive advantages against competitors with similar technology. Furthermore, others may independently develop similar technologies or duplicate any technology that we have developed. We rely on third-party payment services for the payment of foreign patent annuities and other fees. Non-payment or delay in payment of such fees, whether intentional or unintentional, may result in loss of patents or patent rights important to our business. Many countries, including certain countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties (for example, the patent owner has failed to “work” the invention in that country, or the third party has patented improvements). In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent. Compulsory licensing of life saving drugs is also becoming increasingly popular in developing countries either through direct legislation or international initiatives. Such compulsory licenses could be extended to include some of our product candidates, which could limit our potential revenue opportunities. Moreover, the legal systems of certain countries, particularly certain developing countries, do not favor the aggressive enforcement of patent and other intellectual property protection which makes it difficult to stop infringement.

In addition, our ability to enforce our patent rights depends on our ability to detect infringement. It is difficult to detect infringers who do not advertise the compounds that are used in their products. Any litigation to enforce or defend our patent rights, even if we were to prevail, could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations.

We also rely on trade secrets, know-how and technology, which are not protected by patents, to maintain our competitive position. We try to protect this information by entering into confidentiality agreements with parties that have access to it, such as our strategic partners, collaborators, employees and consultants. Any of these parties may breach these agreements and disclose our confidential information or our competitors might learn of the information in some other way. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor, our business, financial condition and results of operations could be materially adversely affected.

Governmental and third-party payors may impose sales and pharmaceutical pricing restrictions or controls on our potential products that could limit our future product revenues and adversely affect profitability.

The commercial success of our potential products is substantially dependent on whether third-party reimbursement is available for the ordering of our products by the medical profession for use by their patients. Medicare, Medicaid, health maintenance organizations and other third-party payors may not cover or provide adequate payment for our potential products. They may not view our potential products as cost-effective and reimbursement may not be available to consumers or may not be sufficient to allow our potential products to be marketed on a competitive basis. Likewise, legislative or regulatory efforts to control or reduce health care costs or reform government health care programs could result in lower prices or rejection of our potential products. Changes in reimbursement policies or health care cost containment initiatives that limit or restrict reimbursement for our products may cause our revenue to decline.

Competition in the biotechnology and pharmaceutical industries is intense, and if we fail to compete effectively our financial results will suffer.

Our business is characterized by extensive research efforts, rapid developments and intense competition. Our competitors may have or may develop superior technologies or approaches to the development of competing products, which may provide them with competitive advantages. Our potential products may not compete successfully. We believe that successful competition in our industry depends on product efficacy, safety, reliability, availability, timing, scope of regulatory approval, acceptance and price, among other things. Important

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factors to our success also include speed in developing product candidates, completing clinical development and laboratory testing, obtaining regulatory approvals and manufacturing and selling commercial quantities of potential products to the market.

We expect competition to increase as technological advances are made and commercial applications broaden. In commercializing our initial product candidates and any additional product candidates, we will face substantial competition from pharmaceutical, biotechnology and other companies, universities and research institutions.

Many of our competitors have substantially greater capital resources, research and development staffs, facilities and experience in conducting clinical trials and obtaining regulatory approvals, as well as in manufacturing and marketing pharmaceutical products. Many of our competitors may achieve product commercialization or patent protection earlier than we achieve commercialization or patent protection, if at all. Furthermore, we believe that some of our competitors have used, and may continue to use, litigation to gain a competitive advantage.

Rapid technological change could make our products obsolete.

Biopharmaceutical technologies have undergone rapid and significant change and we expect that they will continue to do so. Any compounds, products or processes that we develop may become obsolete or uneconomical before we recover any expenses incurred in connection with their development. Rapid technological change could make our products obsolete or uneconomical.

We face potential product liability exposure far in excess of our limited insurance coverage.

The use of any of our product candidates in clinical trials, and the sale of any approved products, may expose us to product liability claims. These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling our products. We have obtained limited product liability insurance coverage for our clinical trials in the amount of $5,000,000 per occurrence and $5,000,000 in the aggregate. However, our insurance may not reimburse us or may not be sufficient to reimburse us for expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing approval for any of our product candidates in development, we intend to expand our insurance coverage to include the sale of commercial products, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing. On occasion, juries have awarded large judgments in class action lawsuits based on drugs that had unanticipated side effects. In addition, the pharmaceutical and biotechnology industries, in general, have been subject to significant medical malpractice litigation. A successful product liability claim or series of claims brought against us would decrease our cash reserves and could cause our stock price to fall.

Our activities involve hazardous materials and we may be liable for any resulting contamination or injuries.

Our research activities involve the use of hazardous materials. We cannot eliminate the risk of accidental contamination or injury from these materials. If an accident occurs, we may be liable for any resulting damages, which may decrease our cash reserves and could cause our stock price to fall.

If we are unable to complete our assessment as to the adequacy of our internal control over financial reporting within the required time periods as required by Section 404 of the Sarbanes-Oxley Act of 2002, or in the course of such assessments identify and report material weaknesses in our controls, our investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission adopted rules requiring public companies to include a report of management on the company’s internal controls

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over financial reporting in their Annual Reports on Form 10-K. This report is required to contain an assessment by management of the effectiveness of the company’s internal controls over financial reporting. We are required to comply with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002 in our December 31, 2005 Form 10-K. In addition, the independent registered public accounting firm auditing a public company’s financial statements must attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting. Although we intend to diligently and vigorously review our internal controls over financial reporting in order to ensure compliance with the Section 404 requirements if our independent registered public accounting firm are not satisfied with our internal controls over financial reporting or the level at which these control are documented, designed, operated or reviewed, or if our independent auditors interpret the requirements, rules or regulations differently from us, then they may decline to attest to management’s assessment or may issue a report that is qualified or has a scope limitation. We anticipate expending significant resources in developing the necessary documentation and testing procedures required by Section 404, however there is a significant risk that we will not comply with all of the requirements imposed by Section 404. In addition, the very limited size of our organization could lead to conditions that could be considered material weaknesses, such as those related to segregation of duties that is possible in larger organizations but significantly more difficult in smaller organizations. Also, controls related to our general information technology infrastructure may not be as comprehensive as in the case of a larger organization with more sophisticated capabilities and more extensive resources. It is not clear how such circumstances should be interpreted in the context of an assessment of internal controls over financial reporting. If we fail to implement required new or improved controls, we may be unable to comply with the requirements of Section 404 in a timely manner. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline or could limit our ability to obtain additional financing.

Risks Related to Our Common Stock

We expect that our stock price will fluctuate significantly.

Prior to our initial public offering, you could not buy or sell our common stock publicly. An active public market for our common stock may not develop or be sustained. The stock market, particularly in recent years, has experienced significant volatility particularly with respect to pharmaceutical and biotechnology stocks. The volatility of pharmaceutical and biotechnology stocks often does not relate to the operating performance of the companies represented by the stock. Factors that could cause this volatility in the market price of our common stock include:

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These and other external factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management.

Future sales of common stock by our existing stockholders may cause our stock price to fall.

The market price of our common stock could decline as a result of sales by our existing stockholders of shares of common stock in the market, or the perception that these sales could occur. These sales might also make it more difficult for us to sell equity securities at a time and price that we deem appropriate.

Our directors and management exercise significant control over our company.

As of December 31, 2004 our directors and executive officers and their affiliates collectively control approximately 33% of our outstanding common stock. These stockholders, if they act together, can influence our management and affairs and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company and might affect the market price of our common stock.

Provisions of Delaware law or our charter documents and stockholder rights plan could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for you to change management.

Provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. This is because these provisions may prevent or frustrate attempts by stockholders to replace or remove our current management.

These provisions include:

As a result, these provisions and others available under Delaware law could limit the price that investors are willing to pay in the future for shares of our common stock.

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In addition, in March 2005, we adopted a stockholder rights plan. Although the rights plan will not prevent a takeover, it is intended to encourage anyone seeking to acquire our company to negotiate with our board prior to attempting a takeover by potentially significantly diluting an acquirer’s ownership interest in our outstanding capital stock. The existence of the rights plan may also discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock.

We have never paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.

We have paid no cash dividends on any of our classes of capital stock to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our businesses. In addition, the terms of existing debts preclude us from paying these dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Item 2. Properties

On September 1, 2003, we commenced a lease on 60,235 square feet of office and laboratory space in South San Francisco, California. The space rented under this lease will increase to 70,235 total square feet on May 1, 2006. The lease expires on August 31, 2009, although we have an option to extend the lease until August 31, 2012. We also lease 15,500 square feet of office and laboratory space at another location in South San Francisco. This lease expires on September 30, 2005. On October 31, 2003, we entered into a sublease for our former office and laboratory space in South San Francisco. We believe that our current facility is adequate for our needs.

Item 3. Legal Proceedings

We are not currently a party to any material legal proceedings. We may from time to time become a party to various legal proceedings arising in the ordinary course of business.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of the security holders during the fourth quarter of 2004.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock has been traded on the Nasdaq National Market since February 5, 2004 under the symbol RNVS. Prior to such time, there was no public market for our common stock. The following table sets forth the range of the high and low intraday prices by quarter as reported by the NASDAQ National Market:

As of March 16, 2005, there were approximately 416 holders of record of our common stock. This number does not include the number of persons whose shares are in nominee or in “street name” accounts through brokers.

Dividend Policy

We have never declared or paid cash dividends on our capital stock. We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. We are prohibited from paying dividends, other than dividends payable solely in common stock, by the covenants contained in loan agreements with GATX Ventures, Inc. and Transamerica Commercial Finance Corporation.

Securities Authorized For Issuance Under Equity Compensation Plans

The information required by this Item concerning the Company’s equity compensation plans is discussed in Note 13 to the financial statements contained in Part II Item 8 of this annual report.

Use of Proceeds From Registered Securities

Our Registration Statement on Form S-1 (Reg. No. 333-109806) in connection with our initial public offering was declared effective by the SEC on February 4, 2004. We completed our initial public offering on February 10, 2004 for gross proceeds of $75,900,000. The Company paid the underwriters a commission of $5,313,000 and incurred offering expenses of $2,187,000. After deducting the underwriters’ commission and the offering expenses, the Company received net proceeds of $68,400,000.

No payments for such expenses were made directly or indirectly to (i) any of our directors, officers or their associates, (ii) any person(s) owning 10% or more of any class of our equity securities or (iii) any of our affiliates.

The net proceeds have been invested into investment grade securities and money market accounts.

We are using, and intend to continue to use, these proceeds for general corporate purposes, including clinical trials, research and development expenses, general and administrative expenses and manufacturing expenses.

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Issuer Purchases of Equity Securities

The following table shows our repurchases of common stock during 2004:

None of the repurchases of common stock noted above were made pursuant to a publicly announced plan. The shares repurchased were related to the early exercise of options that had not yet vested upon termination of the purchaser’s employment or services. The repurchase price was at the exercise price paid by the option holder.

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Item 6. Selected Financial Data

You should read the following selected financial data together with our financial statements and related notes appearing in Part II Item 8 of this report and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section appearing in Part II Item 7 of this report. The historical results are not necessarily indicative of results of any future periods.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth above under the caption “Business – Risk Factors.” You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements for the year ended December 31, 2004 and the related notes appearing in Part II Item 8 of this report.

Overview

We are a biopharmaceutical company developing drugs to treat neurological diseases and disorders. We were incorporated in Delaware in January 2000. We currently focus our research and development programs in the areas of neuroprotection, pain and neuroinflammatory diseases. Our most advanced product candidate Cerovive^® (NXY-059), is a novel free radical trapping neuroprotectant in development for the treatment of acute ischemic stroke. In May 2003, our exclusive licensee, AstraZeneca, commenced two Phase III clinical trials (SAINT I and II) with Cerovive^® (NXY-059) to determine its effect on disability and neurological recovery in acute ischemic stroke patients. In August 2004, AstraZeneca initiated a Phase II trial (CHANT) to assess safety and tolerability of Cerovive^® (NXY-059) in patients with acute intracerebral hemorrhage. In December 2004, we announced that patient enrollment in the SAINT I trial, one of the two Phase III trials with Cerovive^® (NXY-059), had been completed. We expect to announce top-line results from the SAINT I trial in coordination with AstraZeneca during the second quarter of 2005. Enrollment of patients in the SAINT II and CHANT trials with Cerovive^® (NXY-059) is proceeding consistent with AstraZeneca’s announced goal of seeking regulatory approval in 2006. AstraZeneca is responsible for funding and conducting all of the clinical trials with Cerovive^® (NXY-059).

In addition to Cerovive^® (NXY-059), we are independently conducting clinical trials with two other product candidates. REN-1654, an oral drug candidate for neuropathic pain, is currently in a Phase II clinical trial for sciatica that we began in 2004 and REN-850, an oral drug candidate for multiple sclerosis, is currently in a Phase Ia clinical trial that we commenced in February 2005. In July 2004, we announced our decision to discontinue efforts to commercialize REN-213, an intravenous drug candidate that we were developing for the treatment of acute post-operative pain. In March 2005, we announced our decision to discontinue development of REN-1654 in post-herpetic neuralgia (PHN). In addition to our clinical programs, we are conducting preclinical research and development activities in the areas of neuroprotection and pain to identify future product candidates for clinical development. Previously, we were also conducting research in the area of neuroinflammation which led to the advancement of REN-850 into clinical development. As of December 31, 2004, we had an accumulated deficit of $122.0 million.

We expect to incur substantial and increasing losses for the next several years as we:

In addition, we may acquire or in-license technology and products and may also acquire or invest in businesses that are complementary to our own.

We have a limited history of operations. Since our inception we have generated all of our revenues from agreements with corporate partners. During 2003, we recorded $4.5 million in contract revenue related to milestone payments that we received from AstraZeneca following their receipt of regulatory approval to commence Phase III trials for Cerovive^® (NXY-059). Upon achievement of certain future milestones involving the filing and approval of marketing applications in the U.S. and E.U. or Japan, AstraZeneca is obligated to make additional payments to us totaling up to $7.5 million. Upon commercialization of Cerovive^® (NXY-059), we are entitled to receive mid-teen percentage royalties on worldwide net sales from AstraZeneca.

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On December 31, 2003 we entered into a collaborative research, development and license agreement with Genentech under which we received an upfront payment of $5.25 million. We have deferred the upfront payment and are recognizing it as contract revenue on a straight-line basis over the estimated research period of two years. Accordingly, we recognized $2.6 million related to this agreement during the year ended December 31, 2004. We expect to recognize the remaining deferred revenue, $2.6 million, as contract revenue during 2005. The agreement with Genentech also provides for future milestones and royalties in connection with the development and commercialization of products that may arise from the collaboration. We have had no other income since inception other than interest income from short-term investments.

In contrast to Cerovive^® (NXY-059),which is licensed to AstraZeneca, we hold worldwide rights to commercialize REN-1654 and REN-850. If either or both of these product candidates receives regulatory approval we may choose to market and sell the product candidate ourselves or with a partner in exchange for upfront fees, milestones and royalties on future sales, if any. We currently contract with outside firms to manufacture REN-1654 and REN-850 and have no plans to establish internal manufacturing capability.

As of December 31, 2004, we had approximately $87.0 million in cash, cash equivalents and short-term investments. We anticipate that our current cash, cash equivalents and short-term investments will enable us to maintain our currently planned operations for at least another 24 months. However, changes to our current operating plan may require us to consume our capital resources significantly sooner than we expect.

Acquisition

In December 2002, we acquired the pharmaceutical assets and intellectual property of Centaur Pharmaceuticals, Inc. (Centaur) in a transaction accounted for as an acquisition of assets. In connection with this asset acquisition, we paid Centaur cash of $1.3 million and 13.6 million shares of our Series D preferred stock (which converted into 3,022,220 shares of common stock upon the consummation of our initial public offering) valued at approximately $27.2 million. In addition, we incurred acquisition costs of $0.8 million.

Revenues

To date, all of our revenue has been earned under agreements with AstraZeneca and Genentech. We do not expect to generate revenue from product sales or royalties until at least 2007, if at all. We seek to generate revenue from a combination of product sales, upfront fees and milestone payments in connection with collaborative or strategic relationships, and royalties resulting from the license of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of milestone payments we may receive from our collaborative or strategic relationships, as well as those we may receive upon the sale of our products, to the extent any are successfully commercialized. Revenue derived from collaborative and strategic relationships helps us fund our operations and may increase in the future if we are successful in achieving milestones in our existing collaborations, licensing our technology and establishing new collaborations or strategic relationships. If we are unsuccessful in these goals, our revenues will decline and we may be required to limit our research and development, clinical trial, manufacturing and marketing efforts.

Research and Development Expenses

Our research and development (R&D) expenses consist primarily of costs associated with research, preclinical development and clinical trials involving product opportunities in the areas of neuroprotection, pain and neuroinflammatory diseases. We do not incur research and development costs for Cerovive (NXY-059), which is licensed to AstraZeneca.

The expenses we incur in connection with our research, preclinical and clinical development consist primarily of:

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R&D costs, including some upfront fees and milestones paid to collaborators, are expensed as incurred. The timing of upfront fees and milestone payments in the future may cause variability in our future R&D expenses.

Prior to our acquisition of pharmaceutical assets from Centaur in December 2002, we had incurred research and development expenses of approximately $20.8 million to assemble a team of neurobiologists and establish specialized capabilities in assay development, screening, lead optimization, target identification and target validation, which we used to pursue early stage research in the areas of neuroprotection and pain. We are unable to estimate the portion of costs incurred that are allocable to the individual research activities we have conducted because we do not segregate costs among early-stage research programs for both management and external reporting. Moreover, given the early stage nature of these projects and the subsequent integration of intellectual property and product opportunities that we acquired from Centaur, we are unable to reasonably estimate the cost or timeline required to generate cash inflows from our research efforts.

During the twelve months ended December 31, 2004 and 2003, we incurred research and development expenses of $30.7 million and $20.4 million, respectively. The total R&D costs related to individual research activities are as follows (in millions):

Our clinical development efforts during 2004 were focused exclusively on initiating and conducting multiple Phase II clinical trials with REN-1654 and REN-213. As described above, we discontinued clinical development activities involving REN-213 during 2004. In March 2005, we announced our decision to discontinue development of REN-1654 in PHN while continuing a Phase II clinical trial in sciatica. Our preclinical R&D activities during 2004 included toxicology and efficacy studies of various development candidates in preclinical models of pain and neuroinflammatory disease as well as formulation and manufacturing of drug supply for these studies. The preclinical R&D amount of $20.4 million was expended primarily on employee costs, supplies and materials and infrastructure related to neurobiology, chemistry, cell biology and related functions associated with our earlier stage research in the areas of neuroprotection, pain and neuroinflammatory diseases.

Our preclinical and clinical development expenses during 2003 were primarily related to activities required to advance REN-1654 and REN-213 to IND filings with the FDA and into clinical trials that commenced in the second half of 2003 and the first quarter of 2004, respectively. The preclinical R&D amount of $14.9 million was expended primarily on employee costs, supplies and materials and infrastructure related to neurobiology, chemistry and related functions associated with our earlier stage research in the areas of neuroprotection, pain and neuroinflammatory diseases.

Development timelines and costs are difficult to estimate and may vary significantly for each product candidate and from quarter to quarter. The process of seeking regulatory approvals, and the subsequent compliance with applicable regulations, require the expenditure of substantial resources.

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General and Administrative Expenses

General and administrative expenses consist primarily of compensation for employees in executive and operational functions, including finance, human resources and business development. Other significant costs include facilities costs and professional fees for accounting and legal services, including legal services associated with obtaining and maintaining patents. We anticipate incurring increases in general and administrative expenses, such as increased costs for compliance with certain sections of the Sarbanes-Oxley Act of 2002, insurance and investor relations associated with operating as a publicly-traded company. These increases will also likely include the hiring of additional personnel.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. We review our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included in this report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

Revenue under our collaborative agreements is recognized based on the performance requirements of the agreement. Amounts received under such arrangements consist of upfront license fees and include periodic milestone payments upon the achievement of certain events. Upfront payments which are subject to future performance requirements are recorded as deferred revenue and are amortized over the performance period. The performance period is estimated at the inception of the arrangement and is periodically reevaluated. The reevaluation of the performance period may shorten or lengthen the period during which the deferred revenue is recognized which would result in an acceleration or delay of expected revenue recognition. Payments received related to substantive, at-risk milestones are recognized upon achievement of the scientific or regulatory event specified in the underlying agreement.

Stock Compensation

We account for employee stock options using the intrinsic-value method in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, Financial Accounting Standards Board (FASB) Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB No. 25, and related interpretations and have adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation and SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure.

The preparation of the financial statement footnotes requires us to estimate the fair value of stock options granted to employees. While fair value may be readily determinable for awards of stock, market quotes are not available for long-term, nontransferable stock options because these instruments are not traded. We currently use the Black-Scholes option-pricing model to estimate the fair value of employee stock options. However, the Black-Scholes model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including but not limited to stock price volatility. Because our stock options have characteristics significantly different from those of traded options, and changes to the assumptions used in the Black-Scholes model may materially affect the fair value estimate, in management’s opinion, the existing models do not provide a reliable single measure of the fair value of our employee stock options. We are currently evaluating our option

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valuation methodologies and assumptions in light of SFAS No. 123R, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their values beginning July 1, 2005.

Acquired In-Process Research and Development

Acquired in-process research and development relates primarily to purchased in-licensed technology, intellectual property and know-how. We evaluate the stage of development of acquired projects, taking into account the level of effort, time and estimated cost associated with further developing the in-process technology and producing a commercial product. The nature of the remaining efforts for completion of acquired in-process research and development projects generally include completion of clinical trials, completion of manufacturing validation, interpretation of clinical and preclinical data and obtaining marketing approval from the FDA and other regulatory bodies, the cost, length and success of which are extremely difficult to determine. Numerous risks and uncertainties exist with timely completion of development projects, including clinical trial results, manufacturing process development results, and ongoing feedback from regulatory authorities, including obtaining marketing approval. In addition, acquired products under development may never be successfully commercialized due to the uncertainties associated with the pricing of new pharmaceuticals, the cost of sales to produce these products in a commercial setting, changes in the reimbursement environment or the introduction of new competitive products. As a result of the uncertainties noted above, we expense such acquired in-process research and development projects when incurred.

Clinical Study Activities and Other Expenses from Third-Party Contract Research Organizations

Some of our research and development, including certain clinical study activity, is conducted by various third parties, including contract research organizations, which may also provide contractually defined administration and management services. We recognize expenses for these contracted activities based upon a variety of factors, including actual and estimated patient enrollment rates, clinical site initiation activities, labor hours and other activity based factors. On a regular basis, our estimates of these costs are reconciled to actual invoices from the service providers, and adjustments are made accordingly.

Results of Operations

Comparison of the Twelve Months Ended December 31, 2004, 2003 and 2002

Revenue.    Revenue for the year ended December 31, 2004 was $2.6 million compared with $4.5 million for the twelve months ended December 31, 2003. We had no revenue for the twelve months ended December 31, 2002. The 2004 revenue resulted from a collaboration agreement which we entered into with Genentech at the end of 2003. Under this agreement with Genentech we received an upfront payment of $5.25 million that we are recognizing as contract revenue on a straight-line basis over the two-year estimated research period of the agreement. The 2003 revenue represented $4.5 million in milestone payments we earned from AstraZeneca upon commencement of the Phase III clinical trials with Cerovive^® (NXY-059).

Research and Development Expenses

Total research and development expenses and dollar and percentage change as compared to the prior year are as follows (dollar amounts are in thousands):

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The increase in R&D expense in 2004 over 2003 was primarily due to increased product development activities. We advanced REN-1654 and REN-213 into phase II clinical trials during the second half of 2003 and the first quarter of 2004, respectively, and conducted multiple Phase II clinical trials with both product candidates during most of 2004. Also in 2004, we conducted preclinical studies with REN-850 to support filing an IND and advancing the drug candidate into a Phase I clinical trial that commenced in the first quarter of 2005. In addition, we made new investments in expanding our research programs in the areas of neuroprotection and pain during 2004. Specific increases included the following:

These increases were partially offset by a decrease in manufacturing expense of $0.7 million in 2004. In 2004 our manufacturing effort was limited to production of REN-850 for preclinical studies and Phase I clinical trials that we initiated in February 2005. In 2003 we incurred greater manufacturing expenses as we contracted with outside parties to manufacture drug supplies for our Phase II clinical trials with REN-1654 and REN-213.

The increase in R&D expense in 2003 over 2002 was primarily due to factors related to the expansion of our preclinical development activity in 2003 to advance REN-1654 and REN-213 into clinical trials and the establishment of new research programs in the areas of pain and neuroinflammatory diseases to capitalize on intellectual property purchased from Centaur in December 2002. Specific increases included the following:

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Excluded from research and development expenses for the twelve months ended December 31, 2004 and 2003 was $3.2 million and $1.4 million, respectively, of employee stock-based compensation which is reported under a separate caption (see further discussion below under “Amortization of Employee Stock-based Compensation”). There was no employee stock-based compensation for the twelve months ended December 31, 2002.

The table below summarizes the current status of our drug candidates:

We estimate that typical Phase I clinical trials will take 6 to 12 months to complete, Phase II clinical trials are expected to last approximately 12 to 24 months and Phase III clinical trials are expected to last approximately 24 to 48 months. However, the length of clinical trials varies substantially based upon factors such as the intended use of the clinical product and the ability to enroll appropriate patients. Additionally, clinical trials of our drug candidates may fail to demonstrate safety and clinically significant efficacy which would prevent or significantly delay regulatory approval.

We expect research and development expenses to continue to increase in future periods as we continue to advance existing drug candidates into later stages of clinical trials and move preclinical products into clinical trials. However, we currently do not have estimates of total costs to reach regulatory approval for each drug candidate or in the aggregate as our drug candidates are subject to an uncertain and lengthy regulatory process which may not result in obtaining the necessary regulatory approval.

General and Administrative Expenses

Total general and administrative (G&A) expenses and dollar and percentage change as compared to the prior year are as follows (dollar amounts are in thousands):

The increase in G&A expense in 2004 over 2003 is primarily due to investments in protecting intellectual property generated from our preclinical research programs and establishing administrative capabilities and infrastructure appropriate for a public company. Specific increases included the following:

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The increase in G&A expense in 2003 over 2002 is primarily due to the following factors:

Excluded from general and administrative expenses for the twelve months ended December 31, 2004 and 2003 was $1.4 million and $0.5 million, respectively, of employee stock-based compensation which is reported under a separate caption (see further discussion below under “Amortization of Employee Stock-based Compensation”). There was no employee stock-based compensation for the twelve months ended December 31, 2002.

We expect G&A expenses to increase in the future reflecting increased support activities associated with advancing existing drug candidates into later stages of clinical trials and advancing preclinical products into clinical trials and expenses associated with increased corporate governance regulation principally associated with the Sarbanes-Oxley Act of 2002.

Amortization of Employee Stock-based Compensation.    In connection with the grant of stock options to employees and directors, we recorded deferred stock compensation of $17.3 million representing the difference between the deemed fair value of the common stock and the option exercise price at the date of grant. We recorded this amount as a component of stockholders’ equity (net capital deficiency) and are amortizing the amount, on a straight-line basis, as a non-cash charge to operations over the vesting period of the options. We recorded amortization of employee stock-based compensation of $4.6 million and $1.9 million for the twelve months ended December 31, 2004 and 2003, respectively. There was no deferred stock compensation or related employee stock-based amortization for the twelve months ended December 31, 2002.

As of December 31, 2004, we had $9.2 million of deferred stock compensation and we anticipate recording the remaining amortization of deferred stock compensation expense of approximately $3.9 million, $3.2 million, and $2.1 million for the years ending December 31, 2005, 2006 and 2007, respectively.

Purchased In-Process Research and Development.

Total purchased in-process research and development expense and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are in thousands):

In connection with the acquisition of pharmaceutical assets and intellectual property from Centaur in December 2002, and the related purchase price allocation, we recorded an expense of $8.9 million in the fourth quarter of 2002, representing the write-off of the estimated fair value of acquired in-process research and development that had not reached technological feasibility and had no alternative future use. In the second

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quarter of 2003 we recorded an additional expense of $17.3 million upon the commencement of Phase III clinical trials for Cerovive^® (NXY-059) by AstraZeneca, which triggered a contingent payment of additional shares of our Series D preferred stock to Centaur. The principal technology acquired as part of the Centaur acquisition related to Cerovive^® (NXY-059) and REN-1654 that were in the process of being developed. The fair value of each of the in-process research and development projects was based on an income approach that attempts to estimate the future cash flows from the technology based on its successful development, net of tax.

In 2004 there was no purchased in-process R&D expense.

Interest Income.

Total interest income and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are in thousands):

The increase in 2004 over 2003 in interest income was primarily attributable to higher cash and investment balances due to our initial public offering completed in early February 2004. The decrease in 2003 as compared to 2002 was due to lower average cash and investment balances and lower prevailing interest rates during 2003 when compared to 2002.

Interest Expense.

Total interest expense and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are in thousands):

The decrease in interest expense for 2004 was primarily due to the lower aggregate interest rates on our debt balances (related to the purchase of equipment and leasehold improvements). The decrease in interest expense for 2003 was primarily due to our lower average debt balances during the 2003 period compared to the 2002 period.

2005 Financial Guidance

We expect our operating expenses to increase as we continue to advance existing drug candidates into later stages of clinical trials and move preclinical products into clinical trials.

For the year ending December 31, 2005, the Company presently anticipates:

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Liquidity and Capital Resources

To date, we have funded our operations primarily through the sale of equity securities as well as through equipment and leasehold improvement financing. As of December 31, 2004, we had received approximately $168.9 million from the sale of equity securities. In February 2004, we received approximately $71.4 million from our initial public offering of common stock and concurrent private placement with Genentech. In addition, as of December 31, 2004, we had financed through loans the purchase of equipment and leasehold improvements totaling approximately $10.1 million, of which $3.6 million was outstanding at that date. These obligations are secured by the purchased equipment and leasehold improvements, bear interest at rates ranging from approximately 8.8% to 11.66% and are due in monthly installments through December 2008.

As of December 31, 2004, we had $87.0 million in cash, cash equivalents and short-term investments as compared to $41.4 million as of December 31, 2003, an increase of $45.6 million. This increase resulted primarily from the net proceeds of $71.4 million from our initial public offering and concurrent private placement with Genentech, partially offset by cash used in operating activities and principal payments on notes. Net cash used in operating activities amounted to $25.2 million for the twelve months ended December 31, 2004, primarily reflecting the net loss occurring for this period of $39.9 million, partially offset by non-cash charges for depreciation and amortization of $2.9 million, amortization of deferred stock compensation of $4.6 million and other non cash charges related to equity issuance of $1.4 million. Net cash used in investing activities (excluding net proceeds from purchases, sales and maturities of short-term investments) for the twelve months ended December 31, 2004 amounted to $44.2 million. Net cash provided by financing activities amounted to $73.3 million for the twelve months ended December 31, 2004, primarily reflecting the net proceeds received from our initial public offering and proceeds from additional credit facilities, offset by principal payments on credit facilities.

As of December 31, 2003, we had $41.4 million in cash, cash equivalents and short-term investments as compared to $17.4 million as of December 31, 2002, an increase of $24.0 million. This increase resulted primarily from the net proceeds of $44.7 million from the sale of Series E preferred stock, partially offset by our operating loss and principal payments on notes. Net cash used in operating activities amounted to $17.7 million for the twelve months ended December 31, 2003, primarily reflecting the net loss occurring for this period of $41.9 million, partially offset by non-cash charges for depreciation and amortization of $2.6 million, write-off of acquired in-process research and development purchased with preferred stock ($17.3 million), impairment of leasehold improvements ($1.0 million) and amortization of deferred stock compensation of $1.9 million. Net cash used in investing activities (excluding net proceeds from purchases, sales and maturities of short-term investments) for the twelve months ended December 31, 2003 amounted to $29.1 million. Net cash provided by financing activities amounted to $43.8 million for the twelve months ended December 31, 2003, primarily reflecting the net proceeds received from the sale of Series E preferred stock and proceeds from additional credit facilities, offset by principal payments on credit facilities.

The following summarizes our long-term contractual obligations as of December 31, 2004:

We have entered into a variety of license agreements relating to our research and development efforts, most of which relate to product candidates in the early stage of preclinical development. We have a cancelable license agreement relating to our product candidate in clinical trials, Cerovive^® (NXY-059). Under this agreement, we could be required to pay $25,000 annually in minimum royalty payments through NDA approval and $100,000 annually in minimum royalty payments after NDA approval. Additionally, low-single digit royalties are payable on net product sales.

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Our future capital uses and requirements depend on numerous forward-looking factors. These factors include but are not limited to the following:

Based upon our current operating plan we believe that our cash and cash equivalents as of December 31, 2004 will be sufficient to meet our projected operating requirements for at least the next 24 months.

Until we can generate significant cash from our operations, we expect to continue to fund our operations with existing cash resources. We may be required to seek additional sources of funding to complete development and commercialization of our products. If we need to raise funds in the future, we may be required to raise those funds through public or private financings, strategic relationships or other arrangements. We cannot assure you that the funding, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders; and debt financing, if available, may involve restrictive covenants. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategy.

We did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. Therefore, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships. We do not have relationships or transactions with persons or entities that derive benefits from their non-independent relationship with us or our related parties.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R, Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123R supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach in SFAS No.123R is similar to the approach described in SFAS No. 123. However, SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

SFAS No. 123R must be adopted no later than July 1, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. We expect to adopt SFAS No. 123R on July 1, 2005, the beginning of our third quarter.

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SFAS No. 123R permits public companies to adopt its requirements using one of two methods:

(1) A “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS No. 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS No. 123 for all awards granted to employees prior to the effective date of SFAS No. 123R that remain unvested on the effective date.

(2) A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS No. 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

The Company plans to adopt SFAS No. 123R using the modified-prospective method.

As permitted by SFAS No. 123, the Company currently accounts for share-based payments to employees using APB No. Opinion 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS No. 123R’s fair value method will have a significant impact on our result of operations, although it will have no impact on our overall financial position. The impact of adoption of SFAS No. 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future and the valuation model we ultimately select. We are currently evaluating option valuation methodologies and assumptions in light of SFAS No. 123R related to employee stock options. However, had we adopted SFAS No. 123R in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net loss and net loss per share in Note 1 to our financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because the majority of our investments are in short-term marketable securities. Due to the nature of our short-term investments, we believe that we are not subject to any material market risk exposure. We do not have any foreign currency or other derivative financial instruments.

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Item 8. Financial Statements and Supplementary Data

RENOVIS, INC.

INDEX TO FINANCIAL STATEMENTS

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Renovis, Inc.

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

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

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

/s/ Ernst & Young LLP

Palo Alto, California

February 11, 2005

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RENOVIS, INC.

BALANCE SHEETS

(in thousands, except share and per share data)