1030339--3/16/2006--NANOGEN

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We have a history of net losses. We expect to continue to incur net losses and we may not achieve or maintain profitability. We will need additional capital in the future. If additional capital is not available, we may have to curtail or cease operations. If our products are not successfully developed or commercialized, we could be forced to curtail or cease operations. Lack of market acceptance of our products and technology would harm us. We may be unsuccessful in entering into other collaborative arrangements to develop and commercialize our products. In addition, disputes may arise over ownership rights to intellectual property, know-how or technologies developed with our collaborators. If our acquisitions are unsuccessful, our business may be harmed. We may not realize the benefits that we anticipate from our recent acquisitions of the rapid cardiac immunoassay test business of Spectral Diagnostics, of Epoch Biosciences, Inc. or of SynX Pharma Inc. or other acquisitions due to integration and other challenges. Changes in financial accounting standards related to stock option expenses are expected to have a significant effect on our reported results. Competing technologies may adversely affect us. The uncertainty of patent and proprietary technology protection may adversely affect us. Our products could infringe on the intellectual property rights of others, which may subject us to future litigation and cause us to be unable to license technology from third parties. We may continue to be involved in intellectual property litigation that may be costly, time-consuming and may impact our competitive position. The regulatory clearances and approvals required to manufacture, market and sell our products are uncertain, and our failure to comply with such clearances and approvals could have a material adverse effect on our company. The regulatory approval process for our products may be expensive, time-consuming and uncertain. If we are unable to manufacture products on a commercial scale, our business may suffer. Our dependence on suppliers for materials could impair our ability to manufacture our products. Lead times for obtaining materials and components for our products and the manufacturing and introduction of our products may vary significantly which could lead to excess inventory levels as well as shortages of critical components and products if our supply and demand forecasts are inaccurate. We currently rely on one manufacturer of our NanoChip 400 as well as our Workstation and other hardware products, and we will rely on another manufacturer for our some of point-of-care products, and such reliance may delay the manufacture and shipment of our products to customers. The number of our sales and marketing employees may not result in corresponding numbers of sales or placements of the NanoChip System, the sale of ASRs, point-of-care diagnostic products or other Nanogen products. Failure to expand our international sales as we intend would reduce our ability to become profitable. Our international sales and marketing efforts will also be subject to the risks associated with the imposition of legislation and regulations relating to the import or export of high technology products. We cannot predict whether tariffs or restrictions upon the importation or exportation of our products will be implemented by the United States or other countries. We may have significant product liability exposure. If we lose our key personnel or are unable to attract and retain additional personnel, we may not be able to pursue collaborations or develop our own products. Health care reform and restrictions on reimbursement may adversely affect our business. If ethical and other concerns surrounding the use of genetic information become widespread, we may have less demand for our products. We use hazardous materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly. Our stock price could continue to be highly volatile and our stockholders may not be able to resell their shares at or above the price they paid for them. Investor confidence and share value may be adversely impacted if our independent auditors are unable to provide us with the attestation of the adequacy of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Our anti-takeover provisions could discourage potential takeover attempts and make attempts by stockholders to change management more difficult. Our business is subject to changing regulation of corporate governance and public disclosure that has increased both our costs and the risk of noncompliance. We will be dependent upon our agreement with Applied Biosystems for a significant portion of our revenues for 2006 and future periods, and a reduction of sales under or early termination of this agreement would seriously harm our revenues and operating results and would likely cause our stock price to decline. Our relationship with Jurilab subjects us to numerous risk and uncertainties. Terrorist attacks, war, natural disasters and other catastrophic events may negatively impact aspects of our operations, revenue, costs and stock price.

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1030339--3/16/2006--NANOGEN_INC