The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The Company's actual results may differ materially from those anticipated in these forward-looking statements as a result of risks and uncertainties that exist in our operations, development efforts and business environment, including but not limited to those set forth under the Section entitled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2008 and elsewhere in this Quarterly Report on Form 10-Q and in other documents we file with the Securities and Exchange Commission. All forward-looking statements included in this report are based on information available to us as of the date hereof, and, unless required by law, we assume no obligation to update any such forward-looking statement. Management Overview
VIA Pharmaceuticals, Inc., incorporated in Delaware in June 2004 and headquartered in San Francisco, California, is a development stage biotechnology company focused on the development of compounds for the treatment of cardiovascular and metabolic disease. The Company is building a pipeline of small molecule drugs that target the underlying causes of cardiovascular and metabolic disease, including vascular inflammation, high cholesterol, high triglycerides and insulin sensitization/diabetes.
During 2005, the Company in-licensed a small molecule compound, VIA-2291, which targets an unmet medical need of reducing inflammation in plaque, an underlying cause of atherosclerosis and its complications, including heart attack and stroke. Atherosclerosis, depending on its severity and the location of the artery it affects, may result in major adverse cardiovascular events ("MACE"), such as heart attack and stroke. During 2006, the Company initiated two Phase II clinical trials of VIA-2291 in patients undergoing a carotid endarterectomy ("CEA"), and in patients at risk for acute coronary syndrome ("ACS"). During 2007, the Company initiated a third Phase II clinical trial where ACS patients undergo Positron Emission Tomography with flurodeoxyglucose tracer ("FDG-PET"), a non-invasive imaging technique to measure the effect of treatment of VIA-2291 on plaque inflammation.
On November 9, 2008, the Company announced the results of its ACS and CEA Phase II clinical trials of its lead product candidate, VIA-2291, at the American Heart Association ("AHA") 2008 Scientific Sessions conference in New Orleans, Louisiana (the "AHA Conference"). Enrollment of patients in the FDG-PET Phase II clinical trial is ongoing and results are expected in the second half of 2009.
On May 1, 2009, the Company announced results of a sub-study of the ACS Phase II clinical trial of VIA-2291 at the AHA Arteriosclerosis, Thrombosis and Vascular Biology Annual Conference 2009 in Washington D.C. The Company found that in 64 slice multi-detector computed tomography ("MDCT") scans of patients with low density plaques demonstrated statistically significant, lower plaque volumes in combined VIA treated groups compared to placebo. Together these results suggest that VIA-2291 may reduce the progression of unstable coronary plaques that lead to heart attacks and stroke.
The Company recently expanded its drug development pipeline. In January 2009, the Company licensed from Hoffman-LaRoche Inc. and Hoffmann-LaRoche Ltd. (collectively "Roche") the exclusive worldwide rights to two sets of compounds. The first license is for Roche's thyroid hormone receptor beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche's preclinical diacylglycerol acyltransferease 1 metabolic disorders program.
Background
In March 2005, the Company entered into an exclusive license agreement (the "Stanford License") with Leland Stanford Junior University ("Stanford") to use a comprehensive gene expression database and analysis tool to identify novel, and prioritize known, molecular targets for the treatment of vascular inflammation and to study the impact of candidate therapeutic interventions on the molecular mechanisms underlying atherosclerosis (the "Stanford Platform"). One of the Company's founders, Thomas Quertermous, M.D., who currently serves as chairman of the VIA Scientific Advisory Board, developed the Stanford Platform at Stanford during the course of a four-year, $30.0 million research study (the "Stanford Study"). The Stanford Study initially utilized human tissue samples made available from the Stanford heart transplant program to characterize human plaque at the level of gene expression and identify

the inflammatory genes and pathways involved in the development of atherosclerosis and associated complications in humans. To develop the Stanford Platform, the Stanford Study performed similar experiments on vascular tissue samples from mice prone to developing atherosclerosis and identified genes and pathways associated with the development of atherosclerosis that mice and humans have in common (the "Overlap Genes"). The Stanford Platform allowed us to analyze the expression of the Overlap Genes following the administration of candidate drugs to atherosclerotic-prone mice, and thus provided a useful tool for studying the effects of therapeutic intervention in the development of cardiovascular disease. This platform also gave us useful insight into the molecular pathways that we believe to be most relevant to the cardiovascular disease process. In January 2009, the Company advised Stanford that it was terminating its exclusive license agreement effective February 14, 2009.
In 2005, the Company identified 5-Lipoxygenase ("5LO") as a key target of interest for treating atherosclerosis. 5LO is a key enzyme in the biosynthesis of leukotrienes, which are important mediators of inflammation and are involved in the development and progression of atherosclerosis. In addition, cardiovascular-related literature has also identified 5LO as a key target of interest for treating atherosclerosis and preventing heart attack and stroke. Following such identification, the Company identified a number of late-stage 5LO inhibitors that had been in clinical trials conducted by large biotechnology and pharmaceutical companies primarily for non-cardiovascular indications, including ABT-761, a compound developed by Abbott Laboratories ("Abbott") for use in treatment of asthma. Abbott abandoned its ABT-761 clinical program in 1996 after the U.S. Food and Drug Administration ("FDA") approved a similar Abbott compound for use in asthma patients. Abbott made no further developments to ABT-761 from 1996 to 2005. In August 2005, the Company entered into an exclusive, worldwide license agreement (the "Abbott License") with Abbott to develop and commercialize ABT-761 for any indication. The Company subsequently renamed the compound VIA-2291.
VIA-2291 is a potent, selective and reversible inhibitor of 5LO that the Company is developing as a once-daily, oral drug to treat inflammation in plaque thereby leading to a reduction in MACE. In March 2006, the Company filed an Investigational New Drug ("IND") application with the FDA outlining the Company's Phase II clinical program, which initially consisted of two trials for VIA-2291. Each of these clinical trials was initiated during 2006 to study the safety and efficacy of VIA-2291 in patients with existing cardiovascular disease. Using biomarkers of inflammation, medical imaging techniques and bioassays of plaque, the Company is evaluating and determining VIA-2291's ability to reduce vascular inflammation in atherosclerotic plaque. The Company enrolled 50 patients in a Phase II study of VIA-2291 at clinical sites in Italy for patients who had a CEA procedure. In addition, the Company enrolled 191 patients in a second Phase II study at 15 clinical sites in the United States and Canada for patients with ACS who experienced a recent heart attack. In order to further evaluate VIA-2291's effect over a longer timeframe, a sub-study of patients in the ACS trial continued for an additional 12 weeks of treatment at the same dose followed by a 64 slice MDCT scan following up on the baseline MDCT scan that all patients received in the ACS trial.
In October 2007, the Company's Data Safety Monitoring Board ("DSMB") performed a review of both safety and efficacy data related to the Company's CEA and ACS clinical trials to determine the progress in the clinical program and the patient safety of VIA-2291. Based on this review, the DSMB observed a continued acceptable safety profile and evidence of a consistent pharmacological effect of VIA-2291 as would be predicted given its proposed mechanism of action. The DSMB recommended the studies continue as planned.
Following the results of the DSMB review, the Company began enrolling patients in a third Phase II clinical trial that utilizes FDG-PET, to measure the impact of VIA-2291 on reducing vascular inflammation in treated patients. The Company plans to enroll approximately 50 patients following an ACS event, such as heart attack or stroke, into a 24 week, randomized, double blind, placebo-controlled study. Endpoints in the study include reduction in plaque inflammation as measured with FDG-PET, as well as assessment of standard biomarker measurements of inflammation.
As described under Part I, Item 1 "Business - ACS and CEA Clinical Trial Results," in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, on November 9, 2008, the Company announced the results of its ACS and CEA Phase II clinical trials of its lead product candidate, VIA-2291, at the AHA Conference. Enrollment of patients in the FDG-PET Phase II clinical trial is ongoing and results are expected in the second half of 2009.
On May 1, 2009, the Company announced results of a sub-study of the ACS Phase II clinical trial of VIA-2291 at the AHA Arteriosclerosis, Thrombosis and Vascular Biology Annual Conference 2009 in Washington D.C. The purpose of the sub-study was to evaluate the effect of VIA-2291 25mg, 50mg and 100mg doses relative to placebo from baseline in patients dosed with VIA-2291 for 24 weeks. After completion of the initial 12 weeks of dosing, more than 85 of the 191 total ACS patients continued on to receive an additional 12 weeks of dosing on top of current standard medical care and received a 64 slice MDCT scan at baseline and 24 weeks.

Evaluable scans from patients treated with placebo showed significantly more evidence of new plaque lesions from VIA-2291 treated patients. MDCT scans of patients with low density plaques demonstrated statistically significant, lower plaque volumes in combined VIA treated groups compared to placebo. Together these results suggest that VIA-2291 may reduce the progression of unstable coronary plaques that lead to heart attacks and stroke.
In January 2007, the Company expanded its product pipeline with the acquisition of certain patent applications, know-how and related assets (including, compounds and quantities of physical materials and reagents) related to a library of over 2,000 phosphodiesterase ("PDE") inhibitor small molecule compounds (the "Neuro3D Compounds") from Neuro3D, S.A., a French corporation ("Neuro3D"). The Company has focused preclinical research and development activities on identifying the compounds of highest interest for treatment of atherosclerotic-related inflammation. While the Company's experts and advisors believe that inhibitors of certain classes of PDEs, in particular PDE4, may be novel targets for the treatment of inflammation related to atherosclerosis, preclinical research has not identified a lead compound appropriate for further development and all preclinical work on compounds has been terminated.
In March 2007, the Company entered into an Option and License Agreement with Santen Pharmaceutical Co. Ltd., a Japanese pharmaceutical company ("Santen"), pursuant to which the Company paid Santen a $25,000 option fee to acquire an exclusive, twelve-month option to enter into a worldwide license agreement related to certain patent rights, know-how and related compounds held by Santen generally characterized as leukotriene A4 hydrolase inhibitors. During 2008, the Company concluded that it would not exercise the option agreement and terminated its relationship with Santen.
The Company recently expanded its drug development pipeline with preclinical compounds that target additional underlying causes of cardiovascular and metabolic disease, including high cholesterol, high triglycerides and insulin sensitization/diabetes. In January 2009, the Company licensed from Roche the exclusive worldwide rights to two sets of compounds. The first license is for Roche's thyroid hormone receptor ("THR") beta agonist, a clinically ready candidate for the control of cholesterol, triglyceride levels and potential in insulin sensitization/diabetes. The second license is for multiple compounds from Roche's preclinical diacylglycerol acyltransferease 1 ("DGAT1") metabolic disorders program. The Company's clinical development strategy integrates several technologies to provide clinical proof-of-concept as early as possible in the clinical development process. These technologies include the measurement of biomarkers (specific biochemicals in the body with a particular molecular feature that makes them useful for measuring the progress of a disease or the effects of treatment), medical imaging of the coronary and carotid vessel walls to evaluate the plaque characteristics, and atherosclerotic plaque bioassays (measurements of indicators of atherosclerotic plaque inflammation believed to promote MACE). Once the Company has established proof-of-concept, the Company plans to consider business collaborations with larger biotechnology or pharmaceutical companies for the late-stage clinical development and commercialization of its compounds.
To further expand its product candidate pipeline, the Company continues to engage in discussions regarding the purchase or license of additional preclinical or clinical compounds that it believes may be of interest in treating cardiovascular and metabolic diseases.
Through June 30, 2009, the Company has been primarily engaged in developing initial procedures and product technology, recruiting personnel, screening and in-licensing of target compounds, clinical trial activity, and raising capital. The Company is organized and operates as one operating segment.
The Company has incurred losses since inception as it has devoted substantially all of its resources to research and development, including early-stage clinical trials. As of June 30, 2009, the Company's accumulated deficit was approximately $69.3 million. The Company expects to incur substantial and increasing losses for the next several years as it continues to expend substantial resources seeking to successfully research, develop, manufacture, obtain regulatory approval for, and commercialize its product candidates.
The Company has not generated any revenues to date, and does not expect to generate any revenues from licensing, achievement of milestones or product sales until it is able to commercialize product candidates or execute a collaboration agreement. The Company cannot estimate the actual amounts necessary to successfully complete the successful development and commercialization of its product candidates or whether, or when, it may achieve profitability.
Until the Company can establish profitable operations to finance its cash requirements, the Company's ability to meet its obligations in the ordinary course of business is dependent upon its ability to raise substantial additional capital through public or

private equity or debt financings, the establishment of credit or other funding facilities, collaborative or other strategic arrangements with corporate sources or other sources of financing, the availability of which cannot be assured. The Company raised $11.1 million through a merger (the "Merger") with Corautus Genetics Inc. ("Corautus") that was consummated on June 5, 2007, to cover existing obligations and provide operating cash flows. On June 29, 2007, the Company entered into a securities purchase agreement that provided for issuance of 10,288,065 shares of common stock for approximately $25.0 million in gross proceeds. As of June 30, 2009, the Company had $2.9 million in cash on hand. As more fully described in Note 6 to the Unaudited Condensed Financial Statements, in March 2009, the Company entered into a loan with its principal stockholder and one of its affiliates (the "Lenders") whereby the Lenders agreed to lend to the Company in the aggregate up to $10.0 million. On March 12, 2009, the Company borrowed an initial amount of $2.0 million, and during the three months ended June 30, 2009, the Company borrowed $2.0 million on May 19, 2009 and another $2.0 million on June 29, 2009. Subject to the Lenders' approval, the Company may borrow in the aggregate up to an additional $4.0 million at subsequent closings pursuant to the terms of the loan. The Company secured the loan with all of its assets, including the Company's intellectual property. Management believes that, under normal continuing operations, the total amount of cash available under this loan, if borrowed, will enable the Company to meet its current operating cash requirements through the third quarter of 2009. The Company's ability to draw the remaining $4.0 million of available future borrowings is at the discretion of the Lenders. Management does not believe that existing cash resources will be sufficient to enable the Company to meet its ongoing working capital requirements for the next twelve months and the Company will need to raise substantial additional funding in the near term to repay amounts owed under this loan, which are due September 14, 2009, and to meet its working capital requirements. As a result, there are substantial doubts that the Company will be able to continue as a going concern and, therefore, may be unable to realize its assets and discharge its liabilities in the normal course of business. The unaudited condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classifications of liabilities that may be necessary should the entity be unable to continue as a going concern.
The Company cannot guarantee to its stockholders that the Company's efforts to raise additional private or public funding will be successful. If adequate funds are not available in the near term, the Company may be required to:
• terminate or delay clinical trials or studies of VIA-2291;

• terminate or delay the preclinical development of one or more of its other preclinical candidates;

• curtail its licensing activities that are designed to identify molecular targets and small molecules for treating cardiovascular disease;

• relinquish rights to product candidates, development programs, or discovery development programs that it may otherwise seek to develop or commercialize on its own; and

• delay, reduce the scope of, or eliminate one or more of its research and development programs, or ultimately cease operations.

All outstanding principal and accrued interest under the loan are due on September 14, 2009, subject to certain repayment acceleration provisions, including, without limitation, upon completion of a financing with gross proceeds in excess of $20.0 million. The Company will need to be able to repay the loan when it becomes due, extend the terms of the loan or find alternative financing arrangements acceptable to the Company. There is no guarantee that the Company will be able to do so. Upon the occurrence of an event of default, the Lenders may terminate the loan, demand immediate payment of all amounts borrowed by the Company and take possession of all collateral securing the loan, which consists of all of our assets, including our intellectual property rights. Revenue
The Company has not generated any revenue to date and does not expect to generate any revenue from licensing, achievement of milestones or product sales until the Company is able to commercialize product candidates or execute a collaboration arrangement.
Research and Development Expenses
Since inception, the Company is focused on the development of compounds for the treatment of cardiovascular and metabolic disease. The Company has one compound, VIA-2291, in completed ACS and CEA Phase II clinical trials in North America and Europe, and ongoing in the FDG-PET Phase II clinical trial in North America. The Company recently reported results from a sub-study of its ACS Phase II clinical trial in May of 2009.

Research and development ("R&D") expense represented 47% and 60% of total operating expense for the three months ended June 30, 2009 and 2008, respectively, 49% and 57% for the six months ended June 30, 2009 and 2008, respectively, and 57% for the period from June 14, 2004 (date of inception) to June 30, 2009. The Company expenses research and development costs as incurred. Research and development expenses are those incurred in identifying, in-licensing, researching, developing and testing product candidates. These expenses primarily consist of the following:
• compensation of personnel associated with research and development activities, including consultants, investigators, and contract research organizations ("CROs");

• in-licensing fees;

• laboratory supplies and materials;

• costs associated with the manufacture of product candidates for preclinical testing and clinical studies;

• preclinical costs, including toxicology and carcinogenicity studies;

• fees paid to professional service providers for independent monitoring and analysis of the Company's clinical trials;

• depreciation and equipment; and

• allocated costs of facilities and infrastructure.

The following reflects the breakdown of the Company's research and development expenses generated internally versus externally for the three and six months ended June 30, 2009 and 2008, and for the period from inception (June 14, 2004) through June 30, 2009:

                                                                                                                                               Period from
                                                                                                                                              June 14, 2004
                                                       Three Months Ended                             Six Months Ended                    (date of inception) to
                                              June 30, 2009          June 30, 2008          June 30, 2009          June 30, 2008              June 30, 2009
Externally generated R&D expense             $       817,598        $     1,890,096        $     2,253,473        $     4,109,573        $             27,319,449
Internally generated R&D expense                     690,455              1,229,931              1,389,336              2,328,616                      11,174,323

Total                                        $     1,508,053        $     3,120,027        $     3,642,809        $     6,438,189        $             38,493,772

Externally generated research and development expenses consist primarily of the following:

                                                                                                                                                     Period from
                                                                                                                                                    June 14, 2004
                                                         Three Months Ended                               Six Months Ended                      (date of inception) to
                                                June 30, 2009           June 30, 2008           June 30, 2009           June 30, 2008               June 30, 2009
In-licensing expenses                          $             -         $         6,250         $       400,000         $        12,500         $              5,270,000
CRO and investigator expenses                          157,512               1,165,357                 688,266               2,621,647                       10,347,490
Consulting expenses                                    435,075                 392,868                 704,204                 705,467                        6,002,742
Other                                                  225,011                 325,621                 461,003                 769,959                        5,699,217

Total                                          $       817,598         $     1,890,096         $     2,253,473         $     4,109,573         $             27,319,449

Internally generated research and development expenses consist primarily of the following:

                                                                                                                                                     Period from
                                                                                                                                                    June 14, 2004
                                                         Three Months Ended                               Six Months Ended                      (date of inception) to
                                                June 30, 2009           June 30, 2008           June 30, 2009           June 30, 2008               June 30, 2009
Payroll and payroll related expenses           $       438,439         $       821,233         $       921,015         $     1,591,113         $              7,734,969
Stock-based compensation                               115,703                 134,206                 216,814                 248,239                        1,036,647
Travel and entertainment expenses                       66,231                  99,698                 105,016                 208,583                        1,090,386
Other                                                   70,082                 174,794                 146,491                 280,681                        1,312,321

Total                                          $       690,455         $     1,229,931         $     1,389,336         $     2,328,616         $             11,174,323

The Company does not presently segregate total research and development expenses by individual project because our research is focused on atherosclerosis and cardiometabolic disease as a unitary field of study. Although the Company has a mix of preclinical and clinical research and development, these areas are combined and have not yet matured to the point where they are separate and distinct projects. The Company does not separately allocate the intellectual property, scientists and other resources dedicated to these efforts to individual projects as we are conducting our research on an integrated basis. . . .