887023--3/13/2006--ENCYSIVE_PHARMACEUTICALS

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Endothelin antagonists as a class may generate liver and fetal abnormalities. We may experience significant fluctuations in our operating results. We face substantial competition that may result in others developing and commercializing products more successfully than we do. Historically, we have been dependent on third parties to fund, market and develop our products, including Argatroban. If Revotar, our former majority-owned German subsidiary, is unable to obtain additional funding, bimosiamose may not be commercialized. Use of our net operating losses for reducing our income tax expenses may be limited. We may not be able to pay principal or interest on our outstanding convertible notes. Risks Relating To Clinical and Regulatory Matters The regulatory approval process is costly and lengthy and we may not be able to successfully obtain all required regulatory approvals. Legislative or regulatory changes may adversely impact our business. Our clinical trials could take longer to complete and cost more than we expect, which may result in our development plans being significantly delayed. Even if we obtain marketing approval, our products will be subject to ongoing regulatory oversight, which may affect the success of our products. Risks Related To Ongoing Operations We are dependent on qualified personnel. The hazardous material we use in our research and development could result in significant liabilities, which may exceed our insurance coverage. We may be sued for product liability, which may prevent or interfere with the development or commercialization of our products. Our corporate compliance program cannot guarantee that we are in compliance with all potentially applicable regulations. Risks Relating to Product Manufacturing, Distribution and Sales We have very limited manufacturing, marketing and sales experience. We cannot assure you that the raw materials necessary for the manufacture of our products will be available in sufficient quantities or at a reasonable cost. We are dependent on a single supplier of Argatroban. We are dependent on a single supplier of Thelin . We will be dependent on third parties to distribute Thelin Our products, even if approved by the FDA or foreign regulatory agencies, may not be accepted by health care providers, insurers or patients. The successful commercialization of our products is dependent on pharmaceutical pricing and third-party reimbursement. Risks Relating to Intellectual Property We may not be able to protect proprietary information and obtain patent protection. We rely on our license of Argatroban from Mitsubishi and termination of that license would result in the loss of significant rights. If we are unable to keep our trade secrets confidential, our technology and information may be used by others to compete against us. Failure to avoid infringement of others intellectual property rights could impair our ability to manufacture and market our products. Risks Related to Our Common Stock Our stock price is volatile. Issuance of shares in connection with financing transactions or under stock plans will dilute current stockholders. The number of shares of our common stock eligible for future sale could adversely affect the market price of our stock. We do not intend to pay cash dividends on our common stock in the foreseeable future. Certain anti-takeover provisions in our certificate of incorporation and Delaware law, our rights plan, and severance provisions of our employment agreements, may deter or prevent a change in control of our company and result in the entrenchment of management, even if that change would be beneficial to our stockholders.

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887023--3/13/2006--ENCYSIVE_PHARMACEUTICALS_INC