1043914--3/16/2006--GENE_LOGIC

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Risks Related to Our Genomics Division To generate revenue growth and sustain profitability, we must retain existing and obtain additional customers for our Genomics Division and develop new and improved services. Our genomics and toxicogenomics databases require continual upgrading and expansion, which may be difficult or expensive. The genomics industry is competitive and evolving rapidly, and our Genomics Division may become obsolete or fail to be sufficiently useful. The sales cycle for our Genomics Division is lengthy; we may spend considerable resources on unsuccessful sales efforts or may not be able to complete deals on the schedule we anticipate. We rely on microarrays and other products supplied by Affymetrix to build the underlying genomics and toxicogenomics data of our databases and to provide our microarray data generation and analysis services. Risks Related to our Preclinical Division The results of operations of our Preclinical Division will be adversely affected if we cannot obtain additional contracts to generate greater revenue from existing and new customers. The sales cycle for our Genomics Division is lengthy; we may spend considerable resources on unsuccessful sales efforts or may not be able to complete deals on the schedule we anticipate. We rely on microarrays and other products supplied by Affymetrix to build the underlying genomics and toxicogenomics data of our databases and to provide our microarray data generation and analysis services. Risks Related to our Preclinical Division The results of operations of our Preclinical Division will be adversely affected if we cannot obtain additional contracts to generate greater revenue from existing and new customers. Failure to grow our Preclinical Division or the absence of viable strategic alternatives for this business could result in continuing material losses. Failure to provide quality studies could result in a loss of or inability to obtain additional business for our Preclinical Division. Failure to comply with existing regulations could result in a loss of revenue or increased costs from our Preclinical Division. Failure to grow our Preclinical Division or the absence of viable strategic alternatives for this business could result in continuing material losses. Failure to provide quality studies could result in a loss of or inability to obtain additional business for our Preclinical Division. Failure to comply with existing regulations could result in a loss of revenue or increased costs from our Preclinical Division. Continuing negative performance of our Preclinical Division could affect the value of goodwill and creates risk to our results of operations. Our results of operations may suffer if studies conducted by our Preclinical Division are delayed or reduced in scope, performed improperly or terminated or if contracts are not priced properly. We rely on third parties to supply us with animals. Preclinical research services may expose us to liability and related risks. Actions of animal rights extremists may affect our business. Continuing negative performance of our Preclinical Division could affect the value of goodwill and creates risk to our results of operations. Our results of operations may suffer if studies conducted by our Preclinical Division are delayed or reduced in scope, performed improperly or terminated or if contracts are not priced properly. We rely on third parties to supply us with animals. Preclinical research services may expose us to liability and related risks. Actions of animal rights extremists may affect our business. Risks Related to Our Drug Repositioning Division The development of the repositioning technologies for our Drug Repositioning Division creates risks and uncertainties. Even if we successfully develop the repositioning technologies for our Drug Repositioning Division, these technologies may be quickly replaced, thereby making our current approach obsolete, or others may acquire or develop the same or similar technologies which could create competition for our services and, ultimately, could cause material risk of financial losses. We may be required to invest significant resources in identifying alternative uses for our partners compounds and we may not realize significant revenue from successfully repositioned drug candidates based on our work. Risks Related to Our Drug Repositioning Division The development of the repositioning technologies for our Drug Repositioning Division creates risks and uncertainties. Even if we successfully develop the repositioning technologies for our Drug Repositioning Division, these technologies may be quickly replaced, thereby making our current approach obsolete, or others may acquire or develop the same or similar technologies which could create competition for our services and, ultimately, could cause material risk of financial losses. We may be required to invest significant resources in identifying alternative uses for our partners compounds and we may not realize significant revenue from successfully repositioned drug candidates based on our work. Our approach to drug repositioning may not yield sufficient new indications and thus measurable successes to gain wide-spread market acceptance. The sales cycle for our Drug Repositioning Division is lengthy; we may spend considerable resources on unsuccessful sales efforts or may not be able to complete deals on the schedule we anticipate. We have a history of operating losses that are likely to continue for some time. Our revenue is derived primarily from, and is subject to risks faced by, the pharmaceutical and biotechnology industries in the United States, Japan, Europe and other foreign countries; our revenue is also subject to foreign currency risk. Our approach to drug repositioning may not yield sufficient new indications and thus measurable successes to gain wide-spread market acceptance. The sales cycle for our Drug Repositioning Division is lengthy; we may spend considerable resources on unsuccessful sales efforts or may not be able to complete deals on the schedule we anticipate. We have a history of operating losses that are likely to continue for some time. Our revenue is derived primarily from, and is subject to risks faced by, the pharmaceutical and biotechnology industries in the United States, Japan, Europe and other foreign countries; our revenue is also subject to foreign currency risk. Certain investments made by the Company may fluctuate in value and may create an adverse impact on our financial performance; the value of certain of our intangibles and long-term investments creates risk to our financial performance. We may not be able to obtain adequate patent protection for new technologies and methods required for achieving our business objectives. Certain investments made by the Company may fluctuate in value and may create an adverse impact on our financial performance; the value of certain of our intangibles and long-term investments creates risk to our financial performance. We may not be able to obtain adequate patent protection for new technologies and methods required for achieving our business objectives.

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1043914--3/16/2006--GENE_LOGIC_INC