Cautionary Note Regarding Forward-Looking Statements

The Securities and Exchange Commission, referred to herein as the SEC, encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. Certain statements that we may make from time to time, including, without limitation, statements contained in this Quarterly Report on Form 10-Q, referred to herein as the Quarterly Report, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this Quarterly Report, and they may also be made a part of this Quarterly Report by reference to other documents filed with the SEC, which is known as "incorporation by reference."

Words such as "may," "anticipate," "estimate," "expects," "projects," "intends," "plans," "believes" and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management's present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, among other things:

† our ability to enter into and maintain food, ingredient and pharmaceutical and biotechnology collaborations;

† our need for additional capital to fund the current level of our research and development programs, our inability to further identify, develop and achieve commercial success for new products and technologies;

† our ability to protect our proprietary technologies, including our newly discovered sweetener enhancers;

† the possibility of delays in the research and development necessary to select drug development candidates and delays in clinical trials;

† challenges that we may face relating to the introduction of compounds that we may discover as food ingredients;

† patent-infringement claims;

† the risk that clinical trials may not result in marketable products;

† the risk that we may be unable to successfully finance and secure regulatory approval of and market our drug candidates;

† the levels and timing of payments under future collaborative agreement;

† uncertainties about our ability to obtain new corporate collaborations and acquire new technologies on satisfactory terms, if at all;

† the development of competing diagnostic and therapeutic products;

† risks of new, changing and competitive technologies and regulations in the United States and internationally; and

† other factors discussed under the heading Item 1A "Risk Factors" in this Quarterly Report.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report or in any document incorporated by reference might not occur. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this Quarterly Report or the date of the document incorporated by reference in this Quarterly Report. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. All subsequent forward-looking statements attributable to Redpoint, or to any person authorized to act on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

Overview

Redpoint Bio is a development stage biotechnology company leveraging recent discoveries in the molecular biology of taste to discover and develop novel taste modulators for the food and beverage industries. Our food and beverage program is focused on identifying novel flavor modifiers that improve the taste of existing ingredients, enabling the development of better-tasting, less costly, and more healthful foods and beverages. We believe that our unique understanding of the biology of taste and its relationship to metabolic processes, satiety, and diabetes impact both the development of healthier foods and, potentially, new approaches to the treatment of diabetes and obesity. Our research in diabetes and obesity stems from the observation that taste signaling in the gastrointestinal tract is involved in important hormone secretion processes enabling us to leverage our research on lingual taste modulation to important therapeutic applications.

Since its inception in 1995, Redpoint has incurred losses and negative cash flows from operations, and such losses have continued subsequent to June 30, 2009. As of June 30, 2009, Redpoint had an accumulated deficit of $47.1 million and anticipates incurring additional losses for the foreseeable future. We expect to spend significant resources over the next several years to enhance our technologies and to fund research and development of our pipeline of potential products. We have not yet developed any products that are commercially available.

Through June 30, 2009, our revenue has come solely from corporate collaborations, license agreements, and government grants. In order to achieve profitability, we must continue to develop products and technologies that can be commercialized by us or through existing and future collaborations.

On March 12, 2007, we completed the first closing of our private placement of shares of common stock and warrants to purchase shares of common stock raising approximately $17.2 million of net proceeds. On April 6, 2007, we completed the final closing of the private placement raising an additional $11.4 million of net proceeds, bringing the total private placement net proceeds to $28.6 million.

In March 2007, we entered into a Joint Research and Development and License Agreement with Givaudan Schweiz AG for the development and commercialization of compounds that enhance sweetness or savory sensation, as well as compounds that block or desensitize bitter taste for use in the food and beverage industry. Under the terms of the agreement, Redpoint and Givaudan were collaborating exclusively with each other to discover and develop compounds that act primarily through the modulation of the TRPm5 channel. In consideration of the Company's agreement to conduct research and develop compounds and grant exclusive licenses and other rights to Givaudan, Redpoint received an upfront payment of $1.3 million and Givaudan provided research funding to the Company over the term of the Agreement. Givaudan terminated the Agreement, effective as of May 1, 2009, and Givaudan reserved its rights under the Agreement with respect to certain collaboration compounds. Givaudan cited the fact that certain collaboration objectives had not been achieved during the collaboration as its reasoning for terminating the Agreement. Through June 30, 2009, including the upfront fee, we received $6.9 million in research and development funding.

In December 2007, we entered into a one year research agreement with The Coca-Cola Company, referred to herein as Coca-Cola, for the development of certain technology for use in soft drinks and other non-alcoholic beverages. In consideration of our agreement to conduct research for the development of certain technology and grant exclusive licenses and other rights, Coca-Cola paid us approximately $0.9 million. The agreement expired by its terms in December of 2008.

Our continued research and development efforts have led us to certain advances within our taste technology platform, including our recent announcement concerning the identification of RP44, an all-natural sweetness enhancer, we are also beginning to understand how our technology platform plays a role in treating metabolic disorders such as diabetes and obesity. However, since December 2007, we have not entered into any new funded corporate collaborations other than an expanded feasibility agreement with Schering Corporation, a subsidiary of Schering-Plough Corporation, in the area of taste science research for pharmaceutical applications. However, we are currently not pursuing our research program in this area. Redpoint was also unable to renew its one year research agreement with Coca-Cola and our agreement with Givaudan ended on May 1, 2009. Furthermore, we recognize the current difficult financing environment that has significantly impacted the biotechnology sector and required the Company to seek ways to conserve cash. Consequently, in February 2009, we announced a restructuring which reduced our workforce by approximately 33%. In May 2009, we further reduced our work force to bring our number of employees to 14 and we may need to make further reductions in our expenses. We are currently not pursuing our research program aimed at suppressing the bitterness of oral medicines. In addition, in November 2008, the Company retained Burrill & Company to advise us on strategic alternatives.

In June 2009, we announced that we had identified an all-natural sweetness enhancer, RP44. Taste tests conducted by an independent research laboratory demonstrate that RP44 enables the reduction of up to 25% of the caloric sweeteners in product prototypes, while maintaining the taste quality of the fully sweetened product. As a result, RP44 has the potential to reduce overall ingredient costs for manufacturers while creating a healthier product for consumers due to lower calorie content. RP44 has demonstrated enhancement results with several common sweeteners including sucrose (sugar), fructose and high-fructose corn syrup.

As a result of these studies, we initiated development activities for RP44. We intend to develop RP44 through the GRAS (Generally Recognized as Safe) determination/notification process. The GRAS process involves extensive testing to ensure safety in use and usually requires 12-18 months to complete. RP44 is intended to be used in relatively small quantities in concert with nutritive sweeteners. It acts by amplifying the sweetness intensity thereby reducing the amount of nutritive sweetener required, while retaining the desirable temporal characteristics and "clean sweet taste" associated with sugar. We have filed patent applications relating to RP44.

Our initial programs focused on modulation of the TRPm5 ion channel, a key signaling element in taste sensation, in order to discover novel compounds that modulate the taste of food, beverage, and pharmaceutical products. We also believe that the TRPm5 ion channel may be an attractive target for the identification and development of a new diabetes or obesity therapeutic compound. A growing body of scientific research suggests that the taste pathways that we have been investigating are also found as part of a nutrient-sensing system located in the gastrointestinal tract. This could lead to potential opportunities for the discovery of new diabetes or obesity therapeutics. We have recently initiated a program designed to leverage the research we have already conducted on taste modulators to further explore this opportunity.

Revenue

To date, our revenue has come solely from corporate collaborations, licensing agreements and government grants. Since our inception, we have undertaken research projects for which we were the recipient of several Small Business Innovative Research, or SBIR, Awards. The SBIR Awards were sponsored by the National Institutes of Health. The last SBIR related research project was completed in 2004.

To leverage our technology, in March 2007, we entered into the Givaudan Agreement where we were collaborating exclusively with each other to discover and develop Enhancer Compounds and Bitter Blocker Compounds that act primarily through the modulation of the TRPm5 channel. The agreement with Givaudan was terminated by Givaudan on May 1, 2009. Also, in December 2007, we entered into a one year research agreement with Coca-Cola for the development of certain technology for use in soft drinks and other non-alcoholic beverages. The agreement with Coca-Cola expired by its terms in December 2008. In November 2008, we announced that we had signed a feasibility agreement with Schering Corporation, a subsidiary of Schering-Plough Corporation, in the area of taste science research for pharmaceutical applications. However, as a result of our restructurings, we are currently not pursuing our research program in this area.

We may also partner with other major ingredient suppliers, or food and beverage companies, to develop and commercialize taste enhancers that act through a variety of other newly discovered mechanisms of taste sensation in exchange for technology access fees, research funding, product development milestones, and product royalties. We are also seeking collaborations with major pharmaceutical companies for the further development and optimization of our compounds for therapeutic applications in diabetes and obesity.

Any failure to maintain or establish licensing or collaboration arrangements on favorable terms could adversely affect our business prospects, financial condition or ability to develop and commercialize our product candidates.

Research and Development

Our research and development expenses consist primarily of internal costs associated with our taste modulator and diabetes/obesity research programs as well as amounts paid to third parties to conduct research on our behalf. Our internal research and development costs are comprised of salaries and related benefits, facilities and depreciation on laboratory equipment, compound acquisition costs and research supplies. We charge research and development costs to operations as incurred.

General and Administrative

Our general and administrative expenses consist primarily of salaries and related benefit expenses for business development, financial, legal and other administrative functions. In addition, we incur external costs for professional fees for legal, patent and accounting services.

Results of Operations

Three months ended June 30, 2009 compared to three months ended June 30, 2008

Research and Grant Revenue. For the three months ended June 30, 2009, we recorded revenue of $0.8 million related to our Givaudan Agreement, which began on March 27, 2007, for the development and commercialization of compounds that enhance sweetness or savory sensation as well as compounds that block or desensitize bitter taste for use in the food and beverage industry.

The revenues from Givaudan include $0.6 million attributable to the upfront fee which was originally being recognized as revenue over the initial 3.5 year term of the agreement and $0.2 million of research funding. Givaudan terminated the Agreement, effective as of May 1, 2009. As of May 1, 2009, the remaining unamortized portion of the upfront payment was approximately $0.6 million and was recognized as revenue upon termination. For the three months ended June 30, 2008, we recorded revenue of $1.0 million, which included $0.7 million related to our Givaudan Agreement, including $0.1 million attributable to the upfront fee and $0.6 million of research funding. The remaining $0.3 million of revenue related to our Coca-Cola Agreement, which began on December 13, 2007 for the development of certain technology for use in soft drinks and non-alcoholic beverages and which expired by its terms in December 2008. As of June 30, 2009, the Company does not have any current sources of revenue.

Research and Development Expenses. Our research and development expenses were $1.5 million for the three months ended June 30, 2009 compared to $2.2 million for the three months ended June 30, 2008. The decrease in expenses was primarily attributable to reductions in workforce as a result of the corporate restructurings the Company undertook in February and May of 2009. As a result of the restructurings, we are currently not pursuing our research program aimed at suppressing the bitterness of oral medicines. Our research and development expenses consist primarily of internal costs associated with our taste modulator and diabetes research programs as well as amounts paid to third parties to conduct research on our behalf. Our internal research and development costs are comprised of salaries and related benefits, facilities and depreciation on laboratory equipment, compound acquisition costs and research supplies.

General and Administrative Expenses. Our general and administrative expenses were $1.4 million for the three months ended June 30, 2009 compared to $1.6 million for the three months ended June 30, 2008. During the three months ended June 30, 2009, we recognized costs associated with our restructuring of approximately $0.2 million which was offset by reduced expenditures associated with investor relations and other professional fees.

Interest Income. Interest income was less than $0.1 million for the three months ended June 30, 2009 compared to $0.1 million during the three months ended June 30, 2008. The decrease was the result of decreasing cash and investment balances.

Interest Expense. Interest expense was less than $0.1 million for the three months ended June 30, 2009 and June 30, 2008. In September 2008, we entered into a Loan and Security Agreement in which we are authorized to borrow up to $2.0 million for the purchase of certain equipment, a portion of the proceeds which may be used for general corporate working capital purposes. As of June 30, 2009, we have borrowed approximately $1.6 million pursuant to the Loan and Security Agreement.

Six months ended June 30, 2009 compared to the six months ended June 30, 2008

Research and Grant Revenue. For the six months ended June 30, 2009, we recorded revenue of $1.9 million, which included $1.7 million related to our Givaudan Agreement, which began on March 27, 2007 for the development and commercialization of compounds that enhance sweetness or savory sensation as well as compounds that block or desensitize bitter taste for use in the food and beverage industry. The revenues from Givaudan include $0.7 million attributable to the upfront fee which was originally being recognized as revenue over the initial 3.5 year term of the agreement and $1.0 million of research funding. Givaudan terminated the Givaudan Agreement, effective as of May 1, 2009. As of May 1, 2009, the remaining unamortized portion of the upfront payment was approximately $0.6 million and was recognized as revenue upon termination. The remaining $0.2 million of revenue was from other agreements including a feasibility research program we conducted with Schering-Plough Corporation in the area of taste science research for pharmaceutical applications. During the six months ended June 30, 2008, we recorded revenue of $1.9 million, which included $1.4 million related to our Givaudan Agreement including $0.2 million attributable to the upfront fee which was being recognized as revenue over the initial 3.5 year term of the agreement and $1.2 million of research funding. The remaining $0.5 million of revenue was primarily related to our Coca-Cola Agreement, which began on December 13, 2007, for the development of certain technology for use in non-alcoholic beverages which expired by its terms in December 2008.

Research and Development Expenses. Our research and development expenses were $3.4 million for the six months ended June 30, 2009 compared to $4.2 million for the six months ended June 30, 2008. The decrease in expenses was primarily attributable to reductions in workforce as a result of the corporate restructurings the Company undertook in February and May of 2009. As a result of the restructurings, we are currently not pursuing our research program aimed at suppressing the bitterness of oral medicines. Our research and development expenses consist primarily of internal costs associated with our taste modulator and diabetes research programs as well as amounts paid to third parties to conduct research on our behalf. Our internal research and development costs are comprised of salaries and related benefits, facilities, and depreciation of laboratory equipment, compound acquisition costs and research supplies.

General and Administrative Expenses. Our general and administrative expenses were $3.0 million for the six months ended June 30, 2009 compared to $3.2 million for the six months ended June 30, 2008. During the six months ended June 30, 2009, we recognized costs associated with our restructuring of approximately $0.5 million which was offset by reduced expenditures associated with patent, investor relations and other professional fees.

Interest Income. Interest income was $0.1 million for the six months ended June 30, 2009 compared to $0.4 million duringthe six months ended June 30, 2008. The decrease was primarily the result of decreasing cash and investment balances.

Interest Expense. Interest expense was $0.1 for the six months ended June 30, 2009 and was less than $0.1 million for the sixmonths ended June 30, 2008.

Liquidity and Capital Resources

At June 30, 2009, we had cash, cash equivalents and marketable securities of approximately $10.0 million and working capital of approximately $8.3 million. Since inception, we have used $34.0 million of cash to fund our operating activities and $3.4 million for capital expenditures. Through June 30, 2009, we have funded substantially all of our operations and capital expenditures through private placements of equity and convertible debt securities totaling $45.8 million, cash received from corporate collaborations totaling $10.4 million, government grants totaling $1.8 million, and capital equipment financing totaling $3.6 million.

In September 2008, we entered into a Loan and Security Agreement in which we are authorized to borrow up to $2.0 million for the purchase of certain equipment, a portion of the proceeds which may be used for general corporate working capital purposes. As of June 30, 2009, we have borrowed approximately $1.6 million pursuant to the Loan and Security Agreement, of which approximately $1.0 million was for equipment previously purchased and approximately $0.6 million was for general working capital.

On March 12, 2007, we completed the first closing of our Private Placement of shares of common stock and warrants to purchase shares of common stock raising approximately $17.2 million of net proceeds. On April 6, 2007 we completed the final closing of our Private Placement raising an additional $11.4 million of net proceeds, bringing the total private placement net proceeds to $28.6 million.

Our continued research and development efforts have led us to certain advances within our taste technology platform, including our recent announcement concerning the identification of RP44, an all-natural sweetness enhancer, and we are beginning to understand how our technology platform plays a role in treating metabolic disorders such as diabetes and obesity. However, since December 2007, we have not entered into any new funded corporate collaborations other than an expanded feasibility agreement with Schering Corporation, a subsidiary of Schering-Plough Corporation, in the area of taste science research for pharmaceutical applications. However, we are currently not pursuing our research program in this area. Redpoint was also unable to renew its one year research agreement with The Coca-Cola Company and our agreement with Givaudan ended on May 1, 2009. Givaudan cited the fact that certain collaboration objectives had not been achieved during the collaboration as its reasoning for terminating the agreement. Furthermore, we recognize the current difficult financing environment that has significantly impacted the biotechnology sector and required the Company to seek ways to conserve cash. Consequently, in February 2009, we announced a restructuring which reduced our workforce by approximately 33%. In May 2009, we further reduced our workforce to bring our number of employees to 14, and we may need to make further reductions in our expenses. We are currently not pursuing our research program aimed at suppressing the bitterness of oral medicines. In addition, in November 2008, the Company retained Burrill & Company to advise us on strategic alternatives. We believe that our current capital resources should be sufficient to meet our operating and capital requirements at least through September 2010.

We expect that substantially all of our cash-inflows for the foreseeable future will come from future corporate collaborations, future license agreements and interest earned on marketable securities. There can be no assurance that we will enter into any future corporate collaborations or future license agreements. We are subject to those risks associated with any biotechnology company that has substantial expenditures for research and development. There can be no assurance that our research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, we operate in an environment of rapid technological change and we are largely dependent on the services of our employees and consultants. The stock market in general has recently experienced large price and volume fluctuations and the market price of our common stock has experienced significant volatility. For us to fund our operations and to commercially develop our products, additional equity and/or debt financing will be required. There is no assurance that such financing will be available to us as needed and as a result, we may need to pursue other strategic alternatives.

Summary of Contractual Obligations



The following table summarizes our obligations to make future payments under our
current contractual obligations as of June 30, 2009:



                                        Payments Due by Period
                      Total        2009       2010-2011     2012-2013    Thereafter
Operating leases   $ 6,712,000   $ 444,000   $ 1,673,000   $ 1,698,000   $ 2,897,000
Long-term debt       1,389,000     241,000       796,000       352,000             -
License payments       275,000      25,000        50,000        50,000       150,000
                   $ 8,376,000   $ 710,000   $ 2,519,000   $ 2,100,000   $ 3,047,000

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and reported amount of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our judgments and estimates, including those related to revenue recognition, long-lived assets, accrued liabilities, share-based payments and income taxes. We base our judgment and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying . . .