890465--3/14/2007--NPS_PHARMACEUTICALS

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Risks Related to Our Business We have a history of operating losses. We expect to incur net losses and we may never achieve or maintain profitability. We may require additional funds. If we do not receive regulatory approval to market PREOS in the United States in a timely manner, or at all, or if we obtain regulatory approval to market PREOS but the approved label is not competitive with then existing competitive products, our business will be materially harmed and our stock price may be adversely affected. We are entirely dependent on the efforts of Nycomed to market PREOTACT in Europe. If Nycomed does not devote adequate resources to the marketing of PREOTACT in Europe or if Nycomed is not successful in its efforts, sales of PREOTACT in Europe will be reduced, our profitability will be delayed and our stock price adversely affected. If we do not receive regulatory approval to market teduglutide in a timely manner, or at all, or if we obtain regulatory approval to market teduglutide but the approved label is not competitive with then existing competitive products, our business will be materially harmed and our stock price may be adversely affected. We may never develop any more commercial drugs or other products that generate revenues. We have limited capacity to conduct pre-clinical testing and clinical trials, and our dependence on contract research organizations could result in delays in and additional costs for our drug development efforts. Clinical trials are long, expensive and uncertain processes and the FDA may ultimately not approve any of our product candidates. We cannot assure you that data collected from preclinical and clinical trials of our product candidates will be sufficient to support approval by the FDA, the failure of which could delay our profitability and adversely affect our stock price. If we fail to maintain our existing or establish new collaborative relationships, or if our collaborators do not devote adequate resources to the development and commercialization of our licensed drug candidates, we may have to reduce our rate of product development and may not see products brought to market or be able to achieve profitability. Because we have never marketed, sold or distributed a product, we may be unable to successfully market and sell our products and generate revenues. Because of the uncertainty of pharmaceutical pricing, reimbursement and healthcare reform measures, we may be unable to sell our products profitably. As a result of intense competition and technological change in the pharmaceutical industry, the marketplace may not accept our products, and we may not be able to compete successfully against other companies in our industry and achieve profitability. We may be unable to obtain patents to protect our technologies from other companies with competitive products, and patents of other companies could prevent us from manufacturing, developing or marketing our products. Our products and product candidates may infringe the intellectual property rights of others, which could increase our costs and negatively affect our profitability. We are subject to extensive government regulations that may cause us to cancel or delay the introduction of our products to market. As a result of our 2007 and 2006 restructuring initiatives and the related reductions in our workforce, we have reallocated certain employment responsibilities and will be required to outsource certain corporate functions, which will render us more dependent on third-parties to perform these corporate functions. If we fail to attract and retain key employees, the development and commercialization of our products may be adversely affected. We are dependent upon key members of our management team who are employed at will and will be difficult to replace should they leave the company. If we are unable to retain members of our management team or if we are unable to attract and retain other highly qualified executives and employees in our industry, we may not be able to successfully implement our business strategy. We are involved in purported securities class action litigation and shareholder derivative litigation that could become expensive and divert management s attention from operating our business. If product liability claims are brought against us or we are unable to obtain or maintain product liability insurance, we may incur substantial liabilities that could reduce our financial resources. Our operations involve hazardous materials and we must comply with environmental laws and regulations, which can be expensive and restrict how we do business. Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. Risks Related to Our Common Stock and Notes Payable Our stock price has been and may continue to be volatile and an investment in our common stock could suffer a decline in value. Antitakeover provisions in our Certificate of Incorporation, Bylaws, stockholder rights plan and under Delaware law may discourage or prevent a change of control. Substantial future sales of our common stock by us or by our existing stockholders could cause our stock price to fall. Our cash flow may not be sufficient to cover interest payments on the 3% Convertible Notes due 2008 or to repay the notes at maturity. Conversion of the notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their notes. Royalty and milestone revenues received from Amgen on sales of cinacalcet HCl may not be sufficient to cover the interest and principal payments on the Secured 8.0% Notes due March 30, 2017. As a result, we would have to either make such payments out of available cash resources or risk forfeiture of certain royalty rights under the Amgen agreement.

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890465--3/14/2007--NPS_PHARMACEUTICALS_INC