1070698--3/16/2006--AXONYX

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{product, candidate, development}

{property, intellectual, protect}

{stock, price, share}

{product, liability, claim}

{competitive, industry, competition}

{tax, income, asset}

{product, market, service}

{financial, litigation, operation}

{control, financial, internal}

{acquisition, growth, future}

{personnel, key, retain}

Risks Related to Our Business We have had clinical trial failures on our lead compound. We are a defendant in a class action lawsuit and a shareholder derivative lawsuit which, if determined adversely, could have a material adverse affect on us. If we fail to continue to meet all applicable NASDAQ Market requirements and NASDAQ determines to delist our common stock, the delisting could adversely affect the market liquidity of our common stock and the market price of our common stock could decrease. We have a limited operating history. We have a large accumulated deficit and may never become profitable. We have no products available for sale and we may never be successful in developing products suitable for commercialization. The success of our business depends upon our ability to successfully in-license compounds and develop potential drug products. Our product candidates may not successfully complete clinical trials required for commercialization, and as a result our business may never achieve profitability. We cannot assure you that we will have future revenue or operating profits and you could lose your entire investment. If we fail to comply with the terms of our licensing agreements our licensors may terminate certain licenses to patent rights, causing us to lose valuable intellectual property assets. Third party co-ownership concerning certain of our in-licensed patent rights could affect any future decision to commercialize certain drug candidates. We do not currently have the capability to undertake manufacturing, marketing, or sales of any potential products and we have limited personnel to oversee out-sourced clinical testing and the regulatory approval process. We depend on contract research organizations to do much of our pre-clinical and all of our clinical testing, and we are substantially dependent on outside manufacturers to develop and manufacture drug product for our drug products. If we need additional funds, and if we are unable to raise them, we will have to curtail or cease operations. We are dependent on executive officers and non-employee scientific personnel. Our business could be harmed if we fail to protect our intellectual property. Potential litigation concerning patent rights could involve significant expenses and damage our business. Companies and universities that have licensed product candidates to us for clinical development and marketing are sophisticated competitors that could develop similar products to compete with our products. Despite the use of confidentiality agreements and/or proprietary rights agreements, which themselves may be of limited effectiveness, it may be difficult for us to protect our trade secrets. We might face intellectual property claims that may be costly to resolve and could divert management attention. Because we depend on third parties for the acquisition and development of drug candidates, we may not be able to successfully acquire additional drug candidates or commercialize or develop our current drug candidates. If our drug candidates do not achieve market acceptance, our business may never achieve profitability. The carrying value of our investment in OXIS International may face future impairment. Risks Related to Our Industry Potential technological changes in our field of business create considerable uncertainty. The markets in which we seek to participate are intensely competitive and many of our competitors are larger and have more experience than we do. We cannot assure you of FDA approval for our potential products and government regulation may impact our development plans. We are subject to extensive government regulation and may fail to receive regulatory approval that could prevent or delay the commercialization of our products, if any. Health care reform measures and third party reimbursement practices are uncertain and may adversely impact the commercialization of our products, if any. If product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit commercialization of our products. Generic Competition for Alzheimer s drugs currently on the market could materially impact our future operations. We do not pay cash dividends. There is only a limited trading market for our common stock and it is possible that you may not be able to sell your shares easily. The market price of our stock may be adversely affected by market volatility. The future issuance of common stock upon exercise of warrants and stock options may depress the price of our common stock.

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1070698--3/16/2006--AXONYX_INC