Forward Looking Statement

This report contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 which provides a "safe harbor" for these types of statements. To the extent statements in this report involve, without limitation, our expectations for growth, estimates of future revenue, expenses, profit, cash flow, balance sheet items or any other guidance on future periods, these statements are forward-looking statements. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, level of activity, performance or achievements expressed or implied by any forward-looking statement. These risks and uncertainties include those discussed herein under Part II, Item 1a. "Risk Factors" below. We assume no obligation to update any forward-looking statements. The Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Financial Statements and Notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2007.

Overview

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help provide the reader a clear and straightforward understanding "through the eyes of management" of our operations and present business conditions. When used in this management discussion, the terms "Nanogen," "Company," "we," "us," or "our" mean Nanogen, Inc. and its subsidiaries. MD&A is provided as a supplement to and should be read in conjunction with our annual report on Form 10-K, and our quarterly consolidated financial statements and the accompanying notes. This overview summarizes information within the MD&A, which includes the following sections:

• Summary-an executive summary of the significant business events that have occurred after January 1, 2008.

• Our Business-a general description of our business, our technologies and the actions we have taken to develop our business to help the reader better understand our objectives, areas of focus, various strategic investments, relationships and agreements we have entered into after January 1, 2008.

• Results of Operations-an analysis of our consolidated results of operations for the three months ended March 31, 2008 and March 31, 2007, as presented in our consolidated financial statements, to provide the reader information about trends and material changes in revenues and expenditures.

• Liquidity and Capital Resources-an analysis of our cash flow statement and financial position to help the reader understand our current and anticipated capital resource requirements and our ability generate the liquidity required to support our current and planned operations.

• Critical Accounting Policies and Estimates-an analysis of the judgmental accounting policies, estimates and assumptions we made while completing our consolidated financial statements, to provide the reader an understanding of how these decisions materially effected the results of operations.

Summary:

Subsequent to December 31, 2007, the following significant business developments occurred:

• On March 28, 2008 we entered into an agreement with DRT for DRT to purchase for $10 million all future royalties generated by Applied Biosystems ("ABI") under a license ABI has taken from us for use of the MGB technology (minor groove binder technology). This agreement revised certain terms in the original assignment of royalty interests to DRT which was entered into in September 2006 related to the same license agreement with Applied Biosystems, Inc. whereby we received $20 million for the assignment of royalty rights through December 31, 2011.

• On March 14, 2008 we announced that we entered into agreements with the holders of our 6.25% Convertible Notes due 2010 (the "Notes") issued on August 27, 2007 to restructure the indebtedness. In the restructuring, the Holders exchanged an aggregate of $12.9 million in principal amount of the Notes with the Company's 9.75% Senior Secured Convertible Notes due 2010 with an aggregate principal amount of $15.5 million. The 9.75% Senior Secured Convertible Notes are convertible initially into an aggregate of approximately 22,784,000 shares of common stock of the Company at an initial conversion price of $0.6803 per share. The terms of the 9.75% Senior Secured Convertible Notes provide for the mandatory payment of the principal in specified periodic installments as well upon certain asset disposition and financing transactions. An aggregate of $7.0 million will remain outstanding under the Notes, secured by a $7.0 million letter of credit. In connection with the restructuring, we granted a collateral agent on behalf of the holders of the 9.75% Senior Secured Convertible Notes a security interest in substantially all of the assets of the Company. Upon closing of the restructuring, the conversion price of the remaining Notes and the exercise prices of related warrants issued in the August 2007 debt financing were adjusted to $0.6803, and 11.7 million additional warrants were issued.

• On February 19, 2008 we entered into an employment agreement with Nicholas Venuto regarding the terms of Mr. Venuto's employment with us. Mr. Venuto was appointed the Vice President and Chief Financial Officer of the Company on December 14, 2007 with an effective date of February 29, 2008.

• In February 2008, we entered into a distribution and license agreement with Thermo Fisher, Inc. ("Fisher") under which we will provide certain distribution and technology access rights to Fisher. As part of the agreement, Fisher has agreed to fund a development program related to the development, manufacture and marketing of new molecular testing products on a cost incurred basis. Upon commercial launch of the new products, Fisher has agreed to certain minimum purchases over a six-year period.

Restatement of Previously Published Financial Statements

Following the filing of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2008, we determined that our previously published consolidated financial statements as of and for the three months ended March 31, 2008 required restatement to correct the understatement of the fair value of our warrant liability. This error occurred in the accounting related to the application of anti-dilution adjustment of such warrants as a result of the convertible debt restructuring transaction completed at end the first fiscal quarter of 2008. The impact of this error on our financial statements for the quarter ended March 31, 2008 was an understatement of non-cash loss on extinguishment of debt of $2.0 million. Please refer to Note 2 of the notes to the accompanying consolidated financial statements for a description and quantification of the associated restatement.

The consolidated financial statements as of and for the three months ended March 31, 2008 included this Quarterly Report on Form 10-Q/A reflect the adjustments described above. Investors should rely on the consolidated financial statements as of and for the three months ended March 31, 2008 in this Quarterly Report on Form 10-Q/A and not on the previously published consolidated financial statements for this period. A complete discussion of the restated financial data is included in Note 2 to our consolidated financial statements included in this report.

Our Business:

We are a diagnostics company with the mission to make the diagnosis, and treatment and monitoring of an individual's health easier and faster. We were founded on innovative research and technology development and have been in business since 1993. We have been publicly traded on NASDAQ (symbol: NGEN) since 1998.

During 2007, we significantly restructured our operations. In the fourth quarter of 2007, we decided to eliminate one of our three product lines, the micro array platform, and focus on products and technologies we acquired in the past four years. Although the micro array platform was technologically a success, the market for highly complex molecular testing has remained small and we can no longer support this product line as we wait for the market to grow.

While our consolidated revenue has been growing, we recognize the need to reduce our expenses in order to dramatically accelerate our path to profitability. By making the difficult decision to discontinue the micro array platform, we will be able to enhance financial performance and predictability. We expect that this restructuring will improve operational performance by at least $15 million in annual cash. Despite the loss of micro array revenue, we expect our 2008 revenues to significantly exceed our 2007 revenues.

In 2008 and beyond, we will continue to participate in two large and growing markets. The first is the molecular diagnostics market where we offer assays for real-time polymerase chain reaction ("PCR") applications. The second is the point-of-care ("POC") market where we offer rapid immunoassay tests for cardiac emergency care. Both are "ready markets" that our customers understand and participate in today, as opposed to the micro array market which was a new market that required significant education and training of potential customers. Products in the molecular diagnostics and POC markets were developed by us and incorporate proprietary technologies that improve product performance and competitiveness, and are supported by a strong patent portfolio.

We operate in the United States, Canada and Europe and have grown rapidly in the past four years through both internal development and acquisition.

Markets

We participate in two major in vitro diagnostic markets: the molecular diagnostic market and the point-of-care market. Molecular diagnostics is the analysis of DNA, RNA and proteins at the molecular level and is typically performed in clinical laboratories. This differs from the point-of-care market, where the diagnostic may be performed in "near patient" settings such as an emergency room or doctor's office. Within these two markets, we focus on infectious disease and cardiac testing.

Products

Our products, broken out by market, are summarized as follows:

Molecular Diagnostic Market

We sell real-time PCR molecular products in the molecular diagnostic market. These products accounted for approximately 75% of our total 2007 product revenues. We offer two real-time PCR molecular product lines:

• Q-PCR Alert™-we offer a comprehensive menu of real-time diagnostic kits that are in the TaqMan format, coupled with our proprietary MGB technology. "MGB" is an abbreviation for "minor groove binder" which is a small crescent-shaped molecule that fits into the minor groove of duplex DNA. These products are CE marked for In-Vitro Diagnostic (IVD) use and are sold in Italy via a contract sales force and in other European countries through a network of distributors. In Italy, sales are mostly made through government tenders, which are contracts that last for two to five years and cover multiple products.

• MGB Alertฎ-the real-time molecular products we sell in the US and Canada are sold as Analyte Specific Reagents (ASRs) or Research Use Only (RUO) products. Today, the products are sold either direct to an end user or through a distribution relationship with ThermoFisher. The MGB Probe Technology used in these reagents is proprietary and provides significant performance and economic advantages. These products are "platform independent" and are currently used by customers on multiple instrument platforms for lab developed tests.

The majority of our molecular diagnostic products target the detection of DNA or RNA associated with infectious diseases, with the largest medical application being for use in identifying viral infection in transplant and immunocompromised patients. There are additional tests for genetic conditions and oncology. Examples of the diseases tested for include: Cytomegalovirus, Epstein-Barr Virus, BK Virus, Herpes Simplex Virus, and Human Herpes Virus

Our proprietary real-time technology provides chemistry elements that offer distinct competitive advantages as well as reduced cost. These elements include the MGB molecule that increases binding and specificity of designs, modified bases that provide design alternatives for improved sequence detection and discrimination, and proprietary dyes and quenchers that improve overall system performance and reduce costs and royalty burdens. In total, the system permits the development of assays that can reduce the royalties normally paid by customers to other technology providers.

Our PCR product line is described as "real time" to distinguish it from traditional "end point" technology. Real time PCR is an advance over traditional end point technology as data provided with traditional PCR is available only at the end of the chain reaction. The key feature of real-time PCR is that DNA is quantified in "real time" as it accumulates after each amplification cycle in the chain reaction. As a result, real-time PCR provides fast, precise, and accurate results as the chain reaction is proceeding.

Point of Care Diagnostics

POC products account for approximately 15% of Nanogen's product revenues in 2007. This ratio is expected to increase in future years. Our point-of-care products currently include tests for two critical cardiac conditions, and we plan to add infectious disease assays in the future.

• Qualitative cardiac tests-these products are rapid test (less than 15 minutes) assays that are used in emergency care settings for the diagnosis of myocardial infarction. The products measure the presence of Troponin I, Myoglobin and CKMB versus predetermined cutoff levels and are visually read by the attending physician or nurse. There is also a handheld instrument that can be used to read and record the test results. The market for qualitative (yes/no) tests is flat or declining.

• Quantitative cardiac tests-our newest product is a rapid, quantitative measure of NT-proBNP for the diagnosis of congestive heart failure (CHF). The product is offered for use in plasma samples and the whole blood version is expected to come on to the market in 2008. This product addresses a large opportunity. The product target is licensed from Roche, produced by Princeton Biomeditech (PBM), and is FDA cleared. In the future, the cardiac menu will be extended to include quantitative tests for Troponin I and other cardiac markers. These quantitative tests are performed on a small, desktop reader that measures and reports the quantitative amounts of target proteins present in the patient sample.

• Infectious Disease-as part of a competitive contract awarded by the Center for Disease Control (the "CDC"); we are developing a pandemic influenza test that detects and differentiates the various strains of influenza including potential pandemic strains. This product will operate using our proprietary technology that we believe will provide significant improvements in sensitivity as well as the capability of detecting multiple protein markers in a single test system. The system will provide a rapid quantitative test using a small, desktop reader.

The Point of Care cardiac products are sold through distribution channels in the US, Canada and Europe using a small sales force to sell to and manage the distributors. The US distribution rights to the CHF product are exclusive to LifeSign, a PBM company. The influenza test will be marketed through HX Diagnostics.

We believe that the CDC point of care platform offers an opportunity to develop point of care assays not possible using existing technologies. The POC area is dominated by lateral flow solutions that lack sensitivity and are generally unable to produce tests that correlate results with those performed in the hospital laboratory. The CDC platform utilizes a synthetic DNA and a rare earth metal (europium) to produce a diagnostic platform that can be used at the point of patient care with results that show increased sensitivity and an ability to meet the correlation requirements of the central laboratory. This increased sensitivity, the ability to detect multiple simultaneous protein markers on the same test strip and the potential to meet CLIA wavier requirements presents an opportunity to develop new and far reaching point of care diagnostics. We expect to continue development of tests for this proprietary platform that will include additional infectious disease diagnostics as well as future cardiac tests. This technology platform is compatible with low cost manufacturing approaches and has the further economic advantage of a non-lateral flow design that reduces licensing and royalty costs.

Fluctuations:

We anticipate that our results of operations will fluctuate on a quarterly and annual basis and will be difficult to predict. The timing and degree of fluctuations will depend upon several factors, including those discussed under Part II, Item 1a "Risk Factors". In addition, the timing of orders from distributors and the mix of sales between our product lines could affect our results of operations. We cannot assure you that we will be able to achieve revenue growth on a quarterly or annual basis.

Results of Operations

For the quarters ended March 31, 2008 and 2007

Revenues

The following table summarizes our revenues for the quarter ended March 31, 2008
and 2007 (in thousands):



                                        For the three months ended
                                                March 31,
                                          2008              2007         Difference
    Product sales                    $         8,070    $       6,084   $      1,986
    License fee and royalty income             1,762            1,241            521
    Contracts and grants                         852            2,328         (1,476 )

    Total                            $        10,684    $       9,653   $      1,031

The future: We expect revenue to continue to increase significantly in 2008 as compared to 2007 despite the discontinuation of our micro array product line. The projected increases are primarily based on existing products, but also include the anticipated introduction of additional new products we intend to introduce in 2008.

The whole blood congestive heart failure test, which remains in development, will significantly expand the potential market and revenue generating capability of the product if cleared with the FDA.

• License fee and royalty revenue is generated by licensing our intellectual property rights to third parties. The majority of our license fee and royalty revenue was related to our royalty minimums under a licensing agreement with Applied Biosystems Inc. (Applied Biosystems) for the use of our MGB technology with their TaqMan ฎ 5'-nuclease real-time PCR. The increase in license fees and royalty revenues in the quarter ended March 2008 as compared to the same period in 2007 is primarily due to higher royalty revenues recognized related to ABI royalty interests, as well as higher royalty revenues recognized through real-time PCR licensing agreements.

The future: In March 2008, we entered into an agreement for DRT under which we sold to DRT, for $10 million, all future royalties generated under a license agreement with ABI. DRT also released Nanogen of its obligation to guarantee minimum royalty payments in exchange for the termination of sharing arrangements included in a previous agreement between Nanogen and DRT, which was reflected as a liability of $17.6 million in our December 31, 2007 balance sheet. We expect revenues to continue at approximately $1 million per quarter, slightly less than the recent run rate experienced under the contract. We anticipate the remainder of our license and royalty income to remain at levels similar to 2007.

In addition, with our growing intellectual property profile of 191 U.S. patents, we are continuing to evaluate royalty and licensing opportunities and we may choose to license other intellectual property in the future, if we believe the terms and conditions are acceptable.

• Contracts and grants revenue represent funding by various federal, state and private agencies earned through our research and development efforts awarded through contracts and grants. Contracts and grants revenue is recorded as the costs and expenses to perform the research are incurred, if the amount is reasonably commensurate with the effort expended and collection of the payment is reasonably assured. Under certain arrangements where funding is provided contractually on a scheduled basis, revenue is recorded ratably over the term of the arrangement. Payments received in advance under these arrangements are recorded as deferred revenue until the expenses are incurred. The decrease in contract and grant revenues in 2008 as compared to 2007 is primarily due to deferral of funding received for an influenza project that we anticipate recognizing in the second quarter of 2008.

The future: The recognition of revenue under contracts and grants may vary from quarter to quarter and may result in significant fluctuations in operating results from year to year depending on the timing and quantity of agreements and contracts. On December 4, 2006 we announced we were awarded a $4.5 million contract from the U.S. Centers for Disease Control and Prevention (CDC). This award was for the first two phases of a five-phase development project. If we are awarded all five phases, the award may total approximately $12.5 million over the next two to three years. As a result, our future contract and grant revenue will be significantly impacted by whether or not we are awarded the remaining phase of the CDC contract.

Cost and expenses

Cost of product sales (in thousands):

For the three months ended March 31, 2008 2007 Difference Cost of product sales $ 4,838 $ 4,830 $ 8

Cost of product sales relates to the expenses associated with manufacturing our products. These expenses include the materials, labor, and various overhead costs required to build our products. Included in our overhead expenses are charges for excess capacity as well as inventory impairment charges. Cost of product sales in 2008 as compared to the same period in 2007 is essentially consistent despite the growth in revenues. This is partially due to product mix,
i.e. a higher proportion of real-time PCR revenues with higher margins' and cost savings realized in the first quarter of 2008 resulting from the exit from the micro array business as compared to the same period in 2007.

The future. In 2008 we expect our cost of product sales to increase relative to the increase in product sales.

Research and development expenses (in thousands):

For the three months ended March 31, 2008 2007 Difference Research and development $ 4,186 $ 6,512 $ (2,326 )
• Research and development relates to the expenses associated with our efforts to develop molecular diagnostics products for commercialization and the expenses incurred while conducting reimbursable research and development under contractual agreements with various federal, state and private entities. The significant decrease in research and development costs in the first quarter of 2008 as compared to first quarter of 2007 is primarily due to deconsolidation of Jurilab in the second half of 2007, as well as our discontinuation of research and development costs related to the micro array business.

The future. As a part of our continual focus on narrowing our losses and working towards positive cash flows from operations, we plan to reduce costs in research and development expenditures that are not funded by contracts or grants.

Selling, general and administrative expenses (in thousands):

For the three months ended March 31, 2008 2007 Difference Selling, general and administrative $ 8,727 $ 8,853 $ (126 )
• Selling, general and administrative expenses relate to the costs associated with promoting and selling our products and the administrative costs required to support our company's operations. SG&A costs remained consistent with prior year levels despite growth in revenues. This was partially due to the savings resulting from exiting the micro array business.

The future. We expect that our selling, general and administrative expenditures on a percentage basis will trend lower than the increases in our revenue. We also anticipate our costs will further decline as we work to reduce expenses and further focus our business as a result of our exit of the micro array business.

Amortization of purchased intangible assets (in thousands):

                                                   For the three months ended
                                                            March 31,
                                                    2008                 2007                     Difference
Amortization of purchased intangible
assets                                         $          934        $         767               $        167

•    Amortization of purchased intangibles is our effort to match the benefits of the intellectual property
we have acquired with current period expenses.

The future. We expect this amortization expense to remain consistent at the level without the impairment charges. However, amortization expense may also be impacted by potential future business combinations.

Other income

The following table summarizes our other income for the three months ended March 31, 2008, and 2007 (in thousands):

                                                   For the three months ended
                                                            March 31,
                                                    2008                 2007                     Difference
                                                 (Restated)
Interest income                                $          336        $         538               $       (202 )
Interest expense                                       (1,910 )             (1,143 )                     (767 )
Other expense                                            (229 )                (28 )                     (201 )
Loss on extinguishment of debt                        (12,245 )                 -                     (12,245 )
. . .