UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2001
or
o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

(Mark One)


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-31261

AtheroGenics, Inc.

(Exact name of Registrant as specified in its charter)

Georgia		58-2108232
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
(State or other jurisdiction of		(I.R.S. Employer Identification Number)
8995 Westside Parkway, Alpharetta, Georgia 30004		(678) 336-2500
incorporation or organization)
(Address of principal executive offices, including zip code)		(Registrant’s telephone number, including area code)
8995 Westside Parkway,		(678) 336-2500
Alpharetta, Georgia 30009		(Registrant’s telephone number, including area code)
(Address of principal executive offices, including zip code)

Securities registered pursuant to Section 12(b) of the ~~Exchange~~ Act:

None

Securities registered pursuant to Section 12(g) of the ~~Exchange~~ Act:

Common Stock, No Par Value Common Stock Purchase Rights

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule ~~Common~~405 ~~Stock~~of ~~Purchase~~the ~~Rights~~Securities Act. Yes o No þ

Indicate by check mark ~~whether~~if the registrant ~~(1) filed~~ ~~all~~is ~~reports~~not required to befile ~~filed~~reports by pursuant to Section 13 or 15(d) of the ~~Securities Exchange~~ Act. ofYes ~~1934 during~~o ~~the~~No ~~preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes~~ þ ~~No o~~

Indicate by check mark ifwhether ~~disclosure~~the ~~of delinquent~~registrant: ~~filers~~(1) has infiled ~~response~~all reports required to ~~Item 405~~be offiled ~~Regulation~~by Section ~~S-K~~13 isor ~~not~~15(d) ~~contained~~of ~~herein,~~the ~~and~~Securities ~~will~~Exchange ~~not~~Act ~~be contained,~~of to1934 during the ~~best~~preceding of12 months ~~registrant’s~~(or for ~~knowledge,~~such ~~in definitive~~shorter ~~proxy~~period orthat ~~information~~the ~~statements~~registrant ~~incorporated~~was ~~by reference~~required to ~~Part III~~file ofsuch ~~this~~reports), ~~Form~~and (2) ~~10-K~~has ~~or any~~been ~~amendment~~subject to ~~this Form~~such filing requirements for the past 90 ~~10-K~~days. Yes o No þ

~~The~~ Indicate ~~aggregate~~by ~~market~~check ~~value~~mark ofwhether the ~~voting~~registrant ~~stock~~has submitted electronically and posted on its ~~held~~corporate byWeb ~~non-affiliates~~site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of ~~the~~Regulation S-T ~~registrant~~(§232.405 ~~based~~of onthis chapter) during the ~~last~~preceding ~~sale~~12 months ~~price~~(or for such ~~stock~~shorter onperiod that the ~~Nasdaq~~registrant ~~National~~was ~~Market~~required ~~at March 20,~~to ~~2002:~~submit ~~$95,404,999~~and post such files). Yes o No o

~~The~~ Indicate ~~number~~by ofcheck ~~shares~~mark ~~outstanding~~if disclosure of ~~each~~delinquent filers pursuant to Item 405 of ~~the~~Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s ~~classes~~knowledge, ofin definitive ~~common~~proxy ~~stock,~~or asinformation ofstatements ~~March~~incorporated by reference in Part ~~20,~~III of this Form 10-K ~~2002:~~or ~~27,898,873~~any ~~(one~~amendment ~~class)~~to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate market value of shares of voting stock held by nonaffiliates of the registrant, computed by reference to the closing price of $0.59 as reported on the Nasdaq Global Market as of the last business day of AtheroGenics’ most recently completed second fiscal quarter (June 30, 2008), was approximately $20,089,250. AtheroGenics has no nonvoting common equity.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No þ

The number of shares outstanding of the registrant’s common stock, as of April 30, 2009: 39,518,492.

Documents Incorporated by Reference:

Portions of the proxy statement filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 with respect to the 2002 Annual Meeting of Shareholders are incorporated herein by reference in Part III None.

~~TABLE~~ATHEROGENICS, OFINC FORM ~~CONTENTS~~10-K

PART I
Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for Registrant’s Common Equity and Related Shareholder Matters
	Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures on Market Risk
Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
PART IV
	Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
Form of Third Amended and Restated Bylaws
Promissory Note and Stock Pledge Agreement
Consent of Ernst & Young LLP.
Powers of Attorney

ATHEROGENICS, INC

FORM 10-K

INDEX

		Page
PART I
Item 1.	Business		2
Item 2.	Properties		22
Item 1A.	Risk Factors		3
Item 3.	Legal Proceedings		22
Item 1B.	Unresolved SEC Staff Comments		4
Item 4.	Submission of Matters to a Vote of Security Holders		22
Item 2.	Properties		4
Item 3.	Legal Proceedings		4
Item 4.	Submission of Matters to a Vote of Security Holders		4
PART II
Item 5.	Market for Registrant’s Common Equity, ~~and~~ Related Shareholder Matters and Issuer Purchases of Equity Securities		235
Item 6.	Selected Financial Data		245
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		255
Item 7A	Quantitative and Qualitative Disclosures About Market Risk		29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		10
Item 8.	Financial Statements and Supplementary Data		3010
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		4825
Item 9A(T).	Controls and Procedures		25
Item 9B.	Other Information		27
PART III
Item 10.	Directors, ~~and~~ Executive Officers ofand ~~the~~Corporate ~~Registrant~~Governance		4827
Item 11.	Executive Compensation		4828
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		4831
Item 13.	Certain Relationships and Related Transactions, and Director Independence		4833
Item 14.	Principal Accountant Fees and Services		34
PART IV
Item 14.	Exhibits, Financial Statement Schedules and Reports on Form 8-K		48
Item 15.	Exhibits and Financial Statement Schedules		35
Signatures			5137
EX-31.1
EX-32

EXPLANATORY NOTE

As previously disclosed, on September 2, 2008, AtheroGenics, Inc. (“we,” or “us”) announced that we would not repay our 4.5% Convertible Notes (the “2008 Notes”) due September 2, 2008. The failure to repay the 2008 Notes on maturity resulted in an event of default under the indenture governing the 2008 Notes and created an event of default under the indentures governing our 4.5% Convertible Notes due 2011 (the “2011 Notes”) and our 1.5% Convertible Notes due 2012 (the “2012 Notes”). On September 15, 2008 an involuntary petition under Chapter 7 of the United States Bankruptcy Code (the “Bankruptcy Code”) was filed against us by certain holders of our 2008 Notes in the United States Bankruptcy Court for the Northern District of Georgia (the “Bankruptcy Court”). On October 6, 2008, we consented to the bankruptcy filing and moved the Bankruptcy Court to convert the Chapter 7 case to a case under Chapter 11 of the Bankruptcy Code (the “Chapter 11 Proceeding”). On April 1, 2009, we sold substantially all of our non-cash assets to Crabtree Acquisition Co., LLC for $2 million as part of the Chapter 11 Proceeding (the “Asset Sale”).

We have filed a plan of liquidation with the Bankruptcy Court and, if this plan is approved by the Bankruptcy Court, we will distribute our cash and cash equivalents to our creditors. Once this distribution is completed, our corporate existence will be terminated and our shares of common stock will be cancelled. Under the priority scheme established by the Bankruptcy Code, our creditors are generally entitled to receive any distributions of our assets before our shareholders are entitled to receive any such proceeds. Since our cash and cash equivalents are significantly less than our prepetition liabilities, holders of our unsecured debt will receive substantially less than payment in full for their claims and our shareholders will receive no value for their shares of our common stock as part of the Chapter 11 Proceeding. The distribution and liquidation of AtheroGenics is expected to be completed in the third quarter of 2009.

As a result of the Asset Sale and the Chapter 11 Proceeding, we are not currently conducting any business activities nor will we do so in the future. Even though we sold substantially all of our non-cash assets in the Asset Sale and have no operations, we are nonetheless required to make certain filings, including this Annual Report on Form 10-K for the year ended December 31, 2008 (the “Form 10-K”), with the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, we are filing this Form 10-K solely to comply with SEC rules and nothing herein shall be construed to suggest or imply that the shares of our common stock have any value or that our shareholders will receive any value for their shares of our common stock as part of the Chapter 11 Proceeding.

PART I

Item 1. Business

Bankruptcy Proceeding ~~Overview~~

~~AtheroGenics~~As ispreviously adisclosed, ~~research-based~~on ~~pharmaceutical~~September 2, 2008, we announced that we would not repay our 2008 ~~company~~Notes ~~incorporated~~due inSeptember 2, 2008. The failure to repay the ~~State~~2008 ofNotes ~~Georgia~~on inmaturity ~~1993.~~resulted Wein ~~are~~an event ~~focused~~of ondefault under the ~~discovery,~~indenture ~~development~~governing the 2008 Notes and ~~commercialization~~created an event of ~~novel~~ ~~drugs~~default ~~for~~under the indentures ~~treatment~~governing ofour ~~chronic~~2011 ~~inflammatory~~Notes ~~diseases, such~~and asour ~~atherosclerosis,~~2012 ~~rheumatoid~~Notes. ~~arthritis~~On September 15, ~~organ~~2008 ~~transplant~~an involuntary ~~rejection~~petition ~~and~~under ~~asthma.~~Chapter 7 Weof ~~have~~the ~~developed~~Bankruptcy aCode ~~proprietary~~was ~~vascular~~filed against AtheroGenics by certain holders ~~protectant,~~of orour ~~v-protectant~~2008 Notes in the Bankruptcy Court. On October 6, ~~technology~~2008, ~~platform~~we consented to ~~discover~~the bankruptcy ~~drugs~~filing and moved the Bankruptcy Court to ~~treat~~convert ~~these~~the ~~types~~Chapter 7 ofcase ~~diseases.~~to ~~Based~~a oncase ~~our~~under Chapter 11 of ~~v-protectant~~the ~~technology~~Bankruptcy ~~platform~~Code. On April 1, 2009, we ~~have~~sold ~~advanced~~substantially ~~three~~all ~~drug~~of our non-cash assets to ~~candidates~~Crabtree ~~into~~Acquisition ~~clinical~~Co., ~~development~~LLC ~~and~~(the ~~are~~“Purchaser”) ~~pursuing~~for a$2 million ~~number of~~as ~~other~~part ~~preclinical~~of ~~programs~~the Chapter 11 Proceeding.

~~Our~~We ~~first~~have ~~v-protectants~~filed ~~are~~a ~~drug~~plan ~~candidates~~of ~~that block~~liquidation with the ~~production~~Bankruptcy ofCourt ~~proteins~~and, ~~that~~if ~~are~~this ~~necessary~~plan tois ~~initiate~~approved by the Bankruptcy Court, we will distribute our cash and ~~maintain~~cash ~~inflammation~~equivalents to our creditors. ~~For~~Once ~~example~~this distribution is completed, ~~one~~our corporate existence will be terminated and our shares of ~~these~~common stock ~~proteins~~will be cancelled. Under the priority scheme established by the Bankruptcy Code, our ~~VCAM-1,~~creditors ~~binds~~are generally entitled to ~~white~~receive ~~blood~~any ~~cells~~distributions ~~that~~of ~~accumulate~~our atassets ~~the~~before ~~site~~our shareholders ofare ~~inflammation~~entitled to receive any such proceeds. Since our cash and ~~directs~~cash ~~these~~equivalents ~~cells~~are significantly less than our prepetition liabilities, holders of our unsecured debt will receive substantially less than payment in full for their ~~migration~~claims ~~from the~~and ~~bloodstream~~our ~~into~~shareholders ~~the~~will ~~tissue.~~receive Weno ~~believe~~value ~~that~~for ~~v-protectants~~their ~~can~~shares ~~suppress~~of ~~chronic~~our ~~inflammation~~common bystock ~~blocking~~as ~~production~~part of ~~VCAM-1~~ ~~without~~the ~~undermining~~Chapter 11 ~~the~~Proceeding. ~~body’s~~The ~~ability~~distribution toand ~~protect~~liquidation ~~itself~~of ~~against~~AtheroGenics ~~infection~~is expected to be completed in the third quarter of 2009.

~~AGI-1067~~As isa ~~our~~result ~~v-protectant candidate that is most advanced in clinical development. AGI-1067 is designed to benefit patients with coronary artery disease, which is atherosclerosis~~ of the ~~blood~~Asset ~~vessels~~Sale ~~of the heart. Atherosclerosis is a common disease that results from inflammation~~ and the ~~buildup~~Chapter 11 ofProceeding, ~~plaque~~we inare ~~arterial~~not ~~blood~~currently ~~vessel~~conducting ~~walls.~~any Webusiness ~~recently~~activities ~~announced~~nor ~~positive~~will ~~findings~~we ofdo aso ~~Phase II clinical trial, CART-1 (Canadian Antioxidant Restenosis Trial), that assessed~~ in ~~305 patients~~ the ~~safety~~future. ~~and~~Even ~~effectiveness~~though ~~of AGI-1067~~we ~~for~~sold ~~the~~substantially ~~treatment~~all of our ~~post~~non-~~angioplasty~~cash ~~restenosis.~~assets ~~An analysis~~in of the ~~results~~Asset ~~indicated~~Sale ~~that~~and ~~six~~have ~~months~~no ~~after angioplasty~~operations, ~~the~~we ~~blood~~are ~~vessels~~nonetheless ofrequired ~~patients~~to ~~who received AGI-1067~~make ~~had~~certain ~~larger openings~~filings, ~~measured~~including asthis ~~luminal~~Form ~~diameters of their coronary arteries~~10-K, ~~than~~with ~~those who received placebo. CART-1 data also suggested that AGI-1067 may actually reverse~~ the ~~progression~~ ~~of atherosclerosis~~SEC. ~~In December 2001~~Accordingly, we ~~initiated~~are ~~a CART-2~~filing ~~Phase~~this ~~IIb~~Form ~~clinical trial for AGI~~10-~~1067. CART-2 is a~~K ~~500-patient~~solely ~~clinical~~to ~~trial,~~comply ~~which~~with ~~examines~~SEC ~~the~~rules ~~effect~~and ~~of 12 months~~nothing ofherein ~~AGI-1067~~shall ~~therapy~~be onconstrued ~~restenosis~~to ~~and atherosclerosis~~suggest ~~following~~or ~~angioplasty.~~imply Anthat ~~additional six-month~~the ~~Phase IIb~~shares ~~trial,~~of ~~called~~our ~~DART-1~~common ~~(Diabetes~~stock ~~Atherosclerosis and~~have ~~Restenosis~~any ~~Trial),~~value isor ~~being~~that ~~initiated~~our toshareholders ~~examine~~will ~~the~~receive ~~effects of~~any ~~AGI-1067~~value onfor ~~restenosis and atherosclerosis in Type 2~~their ~~diabetics.~~shares ~~Our~~of ~~Phase II~~our ~~clinical~~common ~~trial~~stock ~~program~~as ~~follows~~part ~~the successful completion~~ of ~~seven~~the ~~Phase~~Chapter I11 ~~clinical trials comprising more than 150 men and women~~Proceeding.

~~AGIX-4207,~~History ~~our second v-protectant candidate, is a novel oral agent being developed for the treatment~~ of the ~~signs~~ ~~and symptoms of rheumatoid arthritis. In March 2001, we~~Business commenced a Phase I clinical trial to assess the safety and tolerability of AGIX-4207 in healthy volunteers. In February 2002, we received results from the Phase I clinical trial demonstrating that AGIX-4207 is well tolerated over the single and multiple dose ranges studied. Adverse events were generally mild and not considered clinically significant. In October 2001, we commenced a Phase I clinical trial to assess the safety and tolerability of AGIX-4207 I.V. in healthy volunteers. AGIX-4207 I.V. is an intravenous drug designed to treat rheumatoid arthritis patients in whom the rapid attainment of target drug levels in the blood is desirable.

~~Our~~AtheroGenics ~~third~~was ~~v-protectant~~formed ~~candidate,~~in ~~AGI-1096,~~1993 ~~is a novel antioxidant~~ and ~~selective~~focused ~~anti-inflammatory~~on ~~agent~~the ~~which~~discovery, isdevelopment and ~~being~~commercialization ~~developed~~of tonovel ~~address~~drugs for the ~~accelerated~~treatment ~~inflammation~~ of ~~the grafted~~chronic ~~blood~~inflammatory ~~vessels~~diseases, ~~known~~including diabetes asand ~~arteritis,~~coronary ~~common~~heart ~~in chronic organ transplant rejection~~disease. WePrior ~~commenced~~to athe ~~Phase~~Chapter I11 ~~clinical trial~~Proceeding, inwe ~~February~~had ~~2002~~one tolate ~~assess the safety and tolerability of~~stage ~~AGI-1096~~clinical indrug ~~healthy~~development ~~volunteers~~program.

~~We have identified additional potential v~~AGI-~~protectant~~1067 ~~candidates~~was toour ~~treat~~investigational ~~other chronic inflammatory diseases including, asthma. We are evaluating these v-protectant candidates to choose lead~~ drug ~~candidates~~with ~~for~~demonstrated ~~clinical development. We plan to develop these v~~anti-~~protectants~~inflammatory ~~rapidly~~ and ~~may~~ ~~seek regulatory fast track status, if available, to expedite~~antioxidant ~~development and commercialization~~properties. WeAGI-1067 ~~will~~works ~~continue~~by toselectively ~~expand upon~~inhibiting ~~our~~signaling ~~v-protectant~~pathways ~~technology~~that ~~platform~~are ~~using~~activated ~~functional~~in ~~genomics~~response to ~~identify~~oxidative ~~novel~~stress ~~therapeutic~~and ~~gene~~pro-inflammatory ~~targets~~stimuli. ~~Functional genomics~~Oxidative isstress ~~the~~and ~~process~~inflammation ~~by which one uses scientific models and~~have ~~techniques~~been toimplicated ~~discover~~as ~~and~~playing ~~modify~~a ~~genes,~~key ~~measure~~role in the ~~consequences~~ pathogenesis of ~~the~~insulin ~~modifications,~~resistance and ~~reliably determine the function of those genes~~diabetes.

2 In 2003, we initiated a Phase III trial, referred to as ARISE (Aggressive Reduction of Inflammation Stops Events), which evaluated the impact of AGI-1067 on a composite measure of heart disease outcomes, including death due to coronary disease, myocardial infarction (heart attack), stroke, coronary re-vascularization and unstable angina. Important measures of glycemic control were included for patients with diabetes who also had coronary heart disease. The study assessed the incremental benefits of AGI-1067 versus the current standard of care therapies in this patient population. As such, all patients in the trial, including those on placebo, received other appropriate heart disease and diabetes medications, including statins and other cholesterol-lowering therapies, and glycemic control agents.

~~Table~~ The ARISE trial results were reported in March 2007 and demonstrated that while AGI-1067 did not show a difference from placebo in the composite primary endpoint, the study did achieve a number of ~~Contents~~other important predefined endpoints. These endpoints included a reduction in the composite of “hard” atherosclerotic clinical endpoints, composed of cardiovascular death, resuscitated cardiac arrest, myocardial infarction and stroke. AGI-1067 achieved a significant reduction of 19% in the rate of these combined hard endpoints. There were also improvements in the key diabetes parameters of new-onset diabetes and glycemic control.

In ~~June 2001~~August 2007, we ~~entered~~commenced ~~into~~the afirst ~~worldwide exclusive~~registration ~~license~~study ~~agreement~~for ~~with~~diabetes ~~National~~called ~~Jewish~~ANDES (AGI-1067 ~~Medical~~as ~~and Research~~Novel ~~Center~~Anti-Diabetic ofAgent ~~Denver~~Evaluation ~~Colorado~~Study), toa ~~discover~~multi-center, ~~and~~double-blind ~~develop~~study ~~novel~~with ~~therapeutics~~6-month ~~based~~dosing onusing ~~MEK~~two ~~kinases~~doses (~~MEKKs)~~150mg and ~~related~~75mg), ~~technology for~~designed ~~the~~to ~~treatment~~compare ofthe ~~inflammation.~~effects ~~MEKKs are a family~~ of ~~intracellular~~ ~~signaling molecules that we believe play an important role in immuno~~AGI-~~inflammatory~~1067 ~~diseases, such as asthma.~~versus ~~Other~~placebo ~~licensed technology focuses~~ on ~~several~~glycemic ~~naturally~~endpoints ~~occurring substances and their application~~ in ~~the~~subjects ~~development~~with ofconfirmed ~~a potential~~Type ~~treatment~~2 ~~for asthma~~diabetes. WeIn ~~believe~~July 2008, ~~these new~~we ~~technologies will provide a second broad platform for the discovery and development of a new class of anti-inflammatory drug candidates.~~

2 ~~Inflammation and Disease~~

InflammationTable is a normal response of the body to protect tissues from infection, injury or disease. The inflammatory response begins with the production and release of chemical agents by cells in the infected, injured or diseased tissue. These agents cause redness, swelling, pain, heat and loss of function. Inflamed tissues generate additional signals that recruit white blood cells to the site of inflammation. White blood cells destroy any infective or injurious agent, and remove cellular debris from damaged tissue. This inflammatory response usually promotes healing but, if uncontrolled, may become harmful. Contents

~~The~~announced ~~inflammatory~~top-line ~~response~~results ~~can~~that beshowed ~~either~~both ~~acute~~doses, ~~or chronic.~~150mg ~~Acute~~and ~~inflammation~~75mg, ~~lasts at most only a few days. The treatment~~ of ~~acute~~AGI-1067 ~~inflammation,~~met ~~where therapy includes~~ the ~~administration~~ ~~of aspirin and other non-steroidal~~primary ~~anti-inflammatory~~efficacy ~~agents,~~endpoint ~~provides relief~~ of ~~pain~~the ~~and~~reduction ~~fever~~in ~~for patients.~~glycosylated Inhemoglobin ~~contrast,~~(A1c) ~~chronic~~versus ~~inflammation~~placebo ~~lasts~~at ~~weeks,~~the ~~months~~end of orthe ~~even~~study’s ~~indefinitely~~six ~~and~~month ~~causes~~dosing ~~tissue damage~~regimen. InAlthough ~~chronic inflammation,~~we ~~the~~expect ~~inflammation~~that ~~becomes~~an ~~the~~additional ~~problem~~positive ~~rather than~~registration ~~the~~study ~~solution~~in topatients ~~infection,~~with ~~injury~~diabetes orwill ~~disease.~~be ~~Chronically inflamed~~required ~~tissues~~to ~~continue~~submit toa ~~generate~~New ~~signals~~Drug ~~that~~Application ~~attract~~for ~~white~~marketing ~~blood~~approval, ~~cells~~due ~~from~~to the ~~bloodstream.~~constraints ~~When~~imposed ~~white~~on ~~blood~~us ~~cells~~by ~~migrate from~~ the ~~bloodstream~~Chapter 11 ~~into~~Proceeding, ~~the~~we ~~tissue~~were ~~they~~unable ~~amplify the~~to ~~inflammatory~~pursue ~~response.~~any ~~This~~clinical ~~chronic~~trials ~~inflammatory~~or ~~response~~other ~~can break~~commercialization ~~down~~activities ~~healthy~~relating ~~tissue~~to inAGI-1067 aor ~~misdirected~~our ~~attempt at repair and~~other ~~healing~~products. ~~Diseases characterized by chronic inflammation include,~~ ~~among others:~~

• In ~~atherosclerosis~~2005, ~~including~~we ~~coronary~~entered ~~artery~~into ~~disease;~~a •license ~~restenosis;~~and •collaboration ~~rheumatoid~~agreement ~~arthritis;~~with •AstraZeneca ~~solid~~for ~~organ~~the ~~transplant~~global development ~~rejection;~~ and •commercialization ~~asthma~~of AGI-1067. Under the terms of the agreement, we received a license fee of $50 million. In April 2007, AstraZeneca notified us that pursuant to the terms of the agreement, it was ending the collaboration. The agreement was terminated in July 2007.

~~Atherosclerosis~~In isthe asecond ~~common~~half ~~disease~~of ~~that~~2006, ~~results from~~we ~~inflammation~~were ~~and~~engaged ~~the~~by ~~buildup~~AstraZeneca ofto ~~plaque~~conduct inFOCUS ~~arterial~~(Follow-up ~~blood~~Of ~~vessel~~Clinical ~~walls.~~Outcomes: ~~Plaque~~The ~~consists~~Long-term ofAGI-1067 ~~inflammatory~~plus ~~cells,~~Usual ~~cholesterol and~~Care ~~cellular debris~~Study). ~~Atherosclerosis,~~FOCUS ~~depending~~was ona ~~the~~follow-up ~~location~~Phase III ofclinical ~~the~~trial ~~artery~~for itpatients ~~affects~~exiting ARISE, ~~may~~designed ~~result~~to incollect aextended ~~heart~~safety ~~attack or stroke~~information. Pursuant ~~There~~to ~~are~~the ~~currently~~terms noof ~~medications~~our ~~available~~license ~~for physicians~~agreement, toAstraZeneca ~~treat~~funded ~~directly~~ the ~~underlying~~entire ~~chronic~~cost ~~inflammation~~ of ~~atherosclerosis~~the trial.

~~Atherosclerosis~~AGI-1096 ofwas ~~the~~a ~~blood~~novel ~~vessels~~antioxidant ~~of the heart~~and isselective ~~called coronary artery disease or heart disease. Treatment for coronary artery disease often progresses to therapeutic procedures, including angioplasty or bypass surgery, to re~~anti-~~establish~~inflammatory anagent ~~effective blood supply~~ to ~~the~~address ~~heart. Angioplasty corrects~~ the ~~blockage~~accelerated byinflammation ~~the inflation~~ of agrafted ~~balloon~~blood ~~delivered by catheter~~vessels, ~~with or without the placement of a stent, a small~~ ~~cylindrical~~known ~~mesh~~as ~~device,~~transplant ~~at the site of the obstructing plaque. After angioplasty~~arteritis, ~~the~~common ~~artery~~in ~~opened~~chronic byorgan ~~the~~transplant ~~procedure often re-narrows~~rejection. ~~Significant~~We ~~re-narrowing~~worked ~~may cause angina, a heart~~with ~~attack,~~Astellas orPharma ~~require a repeat angioplasty~~Inc. ~~Inflammation~~(“Astellas”) ~~plays~~to ~~an important~~further ~~role~~develop ~~in this re~~AGI-~~narrowing~~1096, ~~called~~with ~~restenosis.~~Astellas ~~There~~funding ~~is currently~~the nocosts ~~medical treatment~~ for ~~restenosis. Recently, several~~ ~~companies~~development ~~have~~activities ~~announced~~under ~~results~~the ~~from~~agreement. ~~clinical~~Astellas ~~trials~~informed ~~showing~~ us that ~~drug~~they ~~coated~~did ~~stents~~not ~~may~~have ~~be effective in significantly~~further ~~reducing~~development ~~restenosis.~~plans ~~These~~and ~~drug~~we ~~coated~~subsequently ~~stents~~ceased ~~have~~development ~~not~~activities ~~been given~~on ~~approval for use in the United States~~AGI-1096.

~~Rheumatoid~~Both ~~arthritis~~AGI-1067 ~~is a chronic inflammatory disease of the joints. Rheumatoid arthritis is marked by stiffness, pain, limitations to activity~~ and ~~the destruction of joints, including knees and wrists. Present therapy for rheumatoid arthritis includes non~~AGI-~~steroidal~~1096 ~~anti-inflammatory drugs,~~were ~~corticosteroids,~~sold ~~and drugs designed~~ to ~~slow~~ the ~~progression~~ ofPurchaser ~~disease,~~as ~~termed~~part ~~disease~~of ~~modifying~~the ~~anti-rheumatic drugs~~Asset ~~(DMARDs)~~Sale. ~~DMARDs include drugs that were originally~~ ~~designed to treat cancer, such as methotrexate. DMARDs have serious side~~

3Employees

~~Table~~ As of ~~Contents~~April 30, 2009, we had 2 full-time employees. Our employees are primarily responsible for completing required regulatory filings, and the distribution of our cash and cash equivalents to our creditors as part of the Chapter 11 Proceeding.

~~effects.~~Available ~~Recently, two new DMARDs developed by~~Information other companies, Enbrel(R) (etanercept) and Remicade(R) (infliximab), have been shown to improve the signs and symptoms of patients with rheumatoid arthritis. These drugs prove that blocking the activity of tumor necrosis factor, a molecule that stimulates a broad range of cellular activities implicated in the inflammation process, improves rheumatoid arthritis. However, both drugs must be injected and both increase the risk of severe infection.

~~Organ~~Copies ~~transplantation~~of ~~takes~~our ~~place~~reports ~~when~~filed anunder ~~organ from~~Section 13(a) ~~donor~~or is15(d) ~~surgically~~of ~~removed~~the ~~and~~Exchange ~~placed~~Act, inincluding ~~a recipient~~annual ~~patient~~reports ~~whose~~on ~~own~~Form ~~organ~~10-K, ~~has~~quarterly ~~failed~~reports ~~because~~on ofForm ~~disease~~10-Q, ~~or infection.~~current ~~Except~~reports ~~for~~on ~~transplants~~Form ~~between~~8-K ~~identical~~and ~~twins,~~ all ~~transplant~~amendments ~~donors~~to ~~and~~these ~~recipients~~reports, ~~are~~may ~~immunologically incompatible.~~be ~~This~~obtained ~~biological~~upon ~~incompatibility~~request isat aAtheroGenics, ~~barrier~~Inc., ~~that~~Investor ~~causes~~Relations, ~~the~~8995 ~~recipient’s~~Westside ~~immune~~Parkway, ~~system~~Alpharetta, toGA ~~try~~30009, tofree ~~destroy or reject the new organ. The current treatment for prevention~~ of ~~organ~~ ~~transplant~~charge, ~~rejection~~as ~~focuses~~soon ~~on the use of powerful immunosuppressive drugs such~~ as ~~cyclosporin A, tacrolimus and~~reasonably ~~rapamycin~~practicable ~~(sirolimus).~~after ~~These~~these ~~drugs,~~reports ~~which~~ are ~~initiated~~electronically ~~during the~~filed ~~acute~~with ~~rejection~~or ~~phase,~~furnished ~~need~~ to ~~be taken continuously after~~ the ~~transplant~~SEC. Additionally, ~~often~~you ~~cause~~may ~~side~~read ~~effects,~~ and ~~may~~copy ~~still~~materials ~~lead~~that ~~to long-term~~we ~~rejection~~file ofwith the ~~transplant.~~SEC ~~Immunosuppressants~~at ~~may also impair~~ the ~~recipient~~SEC’s ~~immune system in order to~~Public ~~reduce~~Reference ~~the~~Room ~~immune~~at ~~response~~100 ~~against~~F ~~the~~Street, ~~transplant~~N.E. ~~The Scientific~~Washington, ~~Registry~~D.C. of20549. ~~Transplant~~You ~~Recipients~~can ~~reports~~obtain ~~that~~information ~~even with~~on the operation ~~use~~ of ~~immunosuppressants, patients run~~ the ~~risk~~Public ~~of losing~~Reference aRoom ~~donated~~by ~~organ~~calling ~~during~~ the ~~first~~SEC ~~three~~at ~~years following transplantation, and roughly 50 percent of patients have functioning organ transplants after approximately ten years~~1-800-SEC-0330.

~~Asthma is a common chronic inflammatory disease of the bronchial tubes, which are the airways in the lungs~~Item 1A. ~~Asthma~~ isRisk ~~marked by episodic airway attacks that are caused by~~Factors many stresses, including allergy, cold air, ozone or exercise. Asthma therapy has concentrated on the use of inhaled corticosteroids to reduce chronic inflammation and bronchodilators to provide symptomatic relief. Asthmatic patients, however, continue to experience flare-ups, or exacerbations, that are not prevented nor effectively treated by these medicines.

~~Many physicians are only now becoming aware of the key role of chronic inflammation in diverse diseases such as atherosclerosis and asthma for which existing anti~~Forward-~~inflammatory treatments~~Looking ~~are incomplete and limited in use. As more physicians~~Statements ~~recognize that a wide range of chronic diseases are inflammatory~~ in nature, we believe that these physicians will require safer and more effective anti-inflammatory treatments. We believe that one of these therapeutic approaches will be the administration of drugs designed to block the migration of white blood cells through blood vessel walls into inflamed tissues unless the inflammation is due to infection.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for Vforward-~~Protectant~~looking ~~Technology~~statements made by or on behalf of AtheroGenics. AtheroGenics and its representatives may from time to time make written or oral forward-looking statements, including statements contained in this report and our other filings with the SEC and in our reports to our shareholders. Generally, the words, “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will” and similar expressions identify forward-looking statements. All statements which address events that we expect to occur in the future are forward-looking statements within the meaning of the Reform Act. The forward-looking statements are and will be based on our then current views and assumptions regarding future events, and speak only as of their dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

WeBecause ~~have~~the ~~developed~~proceeds afrom ~~proprietary v-protectant technology platform for~~ the ~~treatment~~sale of ~~chronic~~substantially ~~inflammatory diseases.~~all ~~This platform is based on the work~~ of our ~~scientific co~~non-~~founders~~cash R.assets ~~Wayne~~did ~~Alexander,~~not ~~M.D., Ph.D. and Russell M.~~exceed ~~Medford, M.D., Ph.D. In 1993, Drs. Alexander and Medford discovered a novel mechanism within arterial blood vessel walls that could control~~ the ~~excessive~~amounts ~~accumulation~~we ofowe ~~white blood cells without affecting the body’s ability~~ to ~~fight infection.~~our V-protectant technology exploits the observation that the endothelial cells that line the interior wall of the blood vessel play an active role in recruiting white blood cells from the blood to the site of chronic inflammation. V-protectants are drugs that block harmful effects of oxygen and other similar moleculescreditors, ~~collectively~~our ~~called~~shareholders ~~oxidants.~~will ~~Scientists~~receive ~~have~~no ~~known~~ value for ~~some~~their ~~time~~common ~~that some oxidants can damage cells, but have more~~stock recently determined that these same oxidants may also act as signals to modify gene activity inside cells. This change in gene activity leads to the production of proteins that initiate or maintain inflammation. The protein products of these cells, including VCAM-1, attract white blood cells to the site of chronic inflammation. We believe that an excess number of VCAM-1 molecules on the surface of cells is a disease state. We also believe that AGI-1067 and ~~other~~our ~~v-protectants~~creditors ~~can act as antioxidants and can block the specific type of inflammation caused by oxidants acting as signals. We believe that v-protectants~~ will ~~provide~~receive ~~this~~substantially ~~anti-inflammatory~~less ~~benefit without~~than ~~undermining~~payment ~~the~~in ~~body’s~~full ~~ability~~for totheir ~~protect itself against infection~~claims.

4 As further described above, we sold substantially all of our non-cash assets to the Purchaser on April 1, 2009 as part of the Chapter 11 Proceeding. Under the priority scheme established by the Bankruptcy Code, our creditors are generally entitled to receive

~~Table of Contents~~3

V-ProtectantsTable Block Activation of VCAM-1 Contents

any distributions of our assets before our shareholders are entitled to receive any such proceeds. InSince ~~Cells~~our ~~That~~cash ~~Line~~and ~~Blood~~cash ~~Vessels~~equivalents, including the proceeds from the sale of our non-cash assets, are significantly less than our prepetition liabilities, holders of our unsecured debt will receive substantially less than payment in full for their claims and our shareholders will receive no value for their shares of our common stock as part of the Chapter 11 Proceeding.

~~Activation~~ Our common stock continues to be quoted on the Pink Sheets even though our shareholders will not receive any value for their shares of ~~VCAM-1~~our ~~Inhibition~~common stock as part of ~~VCAM-1~~the Chapter 11 Proceeding and our corporate existence will be terminated once we have completed the distribution of our cash and cash equivalents to our creditors.

1 Our ~~Inflammatory~~common ~~agent~~stock ~~attaches~~was todelisted ~~cell~~from ~~surface~~the ~~receptor~~Nasdaq 2Global ~~Receptor~~Market ~~changes~~and ~~generate~~is ~~oxidant~~currently ~~signals~~quoted ~~inside~~on ~~cell~~the Pink 3Sheets ~~Oxidant~~under ~~signals~~the ~~stimulate~~symbol ~~gene~~“AGIXQ.PK”. toAs ~~produce~~discussed ~~VCAM-1~~above, 4under ~~Cell~~the ~~produces~~priority ~~VCAM-1~~scheme ~~proteins~~established under 5the ~~VCAM-1~~Bankruptcy ~~migrates~~Code, our shareholders will receive no value for their shares of our common stock as part of the Chapter 11 Proceeding and our corporate existence will be terminated once we have distributed our cash and cash equivalents to ~~cell~~our ~~surface~~creditors. 6Accordingly, ~~White~~even ~~blood~~though ~~cells~~our common ~~attach~~stock continues to ~~VCAM-1~~be quoted on ~~cell~~the ~~surface~~Pink Sheets, our common stock has no value and our shareholders should not view the trading activity of our common stock on the Pink Sheets or any other market or trading platform as being indicative of the value our shareholders will receive as part of the Chapter 11 Proceeding.

~~Business~~Item 1B. ~~Strategy~~Unresolved SEC Staff Comments

~~Our objective is to become a leading pharmaceutical company focused on discovering, developing and commercializing novel drugs for the treatment of chronic inflammatory diseases~~None. ~~The key elements of our strategy include~~ ~~the following:~~

~~• Continue aggressive development program for AGI-1067~~Item 2. We will seek initially to rapidly develop AGI-1067 for the treatment and prevention of restenosis and the progression of atherosclerosis in patients with coronary artery disease. • Extend our v-protectant technology platform into additional therapeutic areas that address unmet medical needs. We believe that our v-protectants have the potential for treating a wide variety of other chronic inflammatory diseases. These indications include: rheumatoid arthritis, asthma, solid organ transplant rejection and other diseases. We recently completed a Phase I clinical trial with a v-protectant compound, AGIX-4207, for the treatment of rheumatoid arthritis. We commenced Phase I clinical trials for AGIX-4207 I.V., an intravenously administered drug for the treatment of rheumatoid arthritis, and AGI-1096, a v-protectant developed for the prevention of solid organ transplant rejection. • Expand our clinical product candidate portfolio. In addition to our existing discovery programs, we intend to acquire rights to other product candidates and technologies that complement our existing product candidate lines or that enable us to capitalize on our scientific and clinical development expertise. We plan to expand our product candidate portfolio by in-licensing or acquiring product candidates, technologies or companies. For example, we expect our recent license agreement with National Jewish Medical and Research Center to provide us with a new, complementary platform for the discovery and development of drug candidates to treat inflammatory diseases.Properties

5 As described above, on April 1, 2009 we sold substantially all of our non-cash assets for $2 million as part of the Chapter 11 Proceeding. As a result, we no longer own or lease any properties or facilities materially important to us.

~~Table~~Item 3. ofLegal ~~Contents~~Proceedings

• On ~~Commercialize~~September 15, 2008, certain holders of our ~~products.~~2008 WeNotes ~~plan~~filed toan ~~collaborate~~involuntary ~~with~~petition ~~large~~against us ~~pharmaceutical~~under ~~companies~~Chapter 7 toof ~~commercialize~~the ~~products~~Bankruptcy ~~that~~Code in the Bankruptcy Court. On October 6, 2008, we consented ~~develop~~to the bankruptcy filing and moved the Bankruptcy Court to ~~target~~convert ~~patient~~the orChapter 7 ~~physician~~case ~~populations~~to a incase ~~broad~~under ~~markets~~Chapter 11 of the Bankruptcy Code. InOn ~~contrast~~April 1, 2009, we ~~plan~~sold tosubstantially ~~develop~~all aof ~~sales~~our non-cash ~~force~~assets for $2 million to ~~commercialize~~the ~~those~~Purchaser as part of ~~our~~the ~~products~~Chapter 11 ~~that~~Proceeding. weWe ~~develop~~have filed toa ~~target~~plan ~~appropriate~~of ~~patient~~liquidation orwith ~~physician~~the ~~populations~~Bankruptcy inCourt ~~narrow~~and, ~~markets~~if this plan is approved by the Bankruptcy Court, we will distribute our cash and cash equivalents to our creditors.

Item 4. Submission of Matters to a Vote of Security Holders ~~Products~~

~~The table below summarizes our therapeutic programs, their target indication or disease and their development status~~None.

Therapeutic Program		Disease/Indication	Development Status
V-PROTECTANTS
	AGI-1067	Restenosis, atherosclerosis	Phase IIb clinical trial
	AGIX-4207	Rheumatoid arthritis	Phase I clinical trial
	AGIX-4207 I.V	Rheumatoid arthritis	Phase I clinical trial
	AGI-1096	Solid organ transplant rejection	Phase I clinical trial
	Oral product candidate	Chronic asthma	Research
DIAGNOSTICS
	OXYKINE® assay	Atherosclerosis	Clinical testing
FUNCTIONAL GENOMICS PROGRAM		Inflammatory diseases	Research
MEKK TECHNOLOGY PLATFORM		Inflammatory diseases	Research

WeTable have established therapeutic programs for product development using lead candidates we select from among our compound libraries. These programs seek to exploit the value of the products early and to expand their use broadly. We continue to test compounds to identify back-up and second-generation product candidates. We are also pursuing novel discovery targets in chronic inflammation. Contents

~~AGI-1067~~PART II

~~AGI-1067,~~Item 5. ~~our~~Market ~~lead~~for ~~v-protectant~~Registrant’s ~~product candidate,~~Common ~~is a small molecular weight compound that patients take orally once per day. In preclinical testing~~Equity, ~~AGI-1067 demonstrated~~Related ~~the~~Shareholder ~~following~~Matters ~~three~~and ~~biological~~Issuer ~~properties~~Purchases ~~that we~~of ~~believe~~Equity ~~will benefit patients with atherosclerosis:~~Securities

•Common ~~AGI-1067~~Stock blocks production of VCAM-1. We believe that decreased VCAM-1 production will diminish atherosclerosis and restenosis. • AGI-1067 is a potent antioxidant. AGI-1067 protects LDL cholesterol from converting into a harmful inflammatory agent. • AGI-1067 lowers LDL cholesterol. LDL cholesterol lowering reduces the risk of developing atherosclerosis.Information

~~According~~Our tocommon ~~the~~stock ~~American~~was ~~Heart~~delisted ~~Association,~~from ~~more than~~the ~~12.6~~Nasdaq ~~million~~Global ~~people~~Market inand ~~the~~is ~~United~~currently ~~States~~quoted ~~have~~on ~~coronary~~the ~~artery~~Pink ~~disease,~~Sheets ~~including~~under ~~approximately~~the 1symbol “AGIXQ.~~1 million~~PK.” ~~who have~~Even ~~heart~~though ~~attacks~~our ~~every~~common ~~year.~~stock Inis ~~order~~quoted toon ~~make~~the ~~a definitive~~Pink ~~diagnosis~~Sheets, inas ~~patients~~discussed ~~with suspected coronary artery disease~~above, ~~a specially~~our ~~trained~~common ~~cardiologist~~stock orhas ~~radiologist~~no ~~performs~~value ~~a diagnostic~~and ~~procedure~~our ~~called~~shareholders ~~angiography~~should innot ~~which~~view the ~~cardiologist~~trading ~~injects~~activity ~~dye~~of ~~through~~our ancommon ~~intravenous~~stock ~~catheter~~on ~~to image~~ the ~~coronary~~Pink ~~arteries.~~Sheets ~~Angiography~~or ~~can~~any ~~reveal~~other ~~coronary artery~~market ~~disease~~or ~~that~~trading ~~may~~platform ~~require an invasive procedure.~~as ~~Physicians~~being ~~perform~~indicative ~~this~~of ~~invasive~~the ~~procedure,~~value ~~called~~our ~~angioplasty, more~~shareholders ~~than~~will ~~one~~receive ~~million~~as ~~times~~part ~~annually~~of ~~worldwide.~~the ~~This~~Chapter 11 ~~procedure~~Proceeding. ~~consists~~The offollowing ~~placing~~table asets ~~balloon-tipped~~forth ~~catheter~~the ~~into~~range ~~the~~of ~~coronary artery~~high and ~~mechanically~~low ~~re-opening~~reported ~~the~~last ~~blood~~sale ~~vessel~~price byper ~~expanding~~share of our ~~the~~common ~~balloon~~stock ~~under~~for ~~very~~each ~~high~~period indicated.


	Common Stock
	High		Low
Year ended December 31, 2008
First quarter	$	1.10	$	0.37
Second quarter		0.87		0.56
Third quarter		0.95		0.19
Fourth quarter		0.32		0.02
Year ended December 31, 2007
First quarter	$	12.46	$	2.80
Second quarter		3.86		2.10
Third quarter		3.00		1.12
Fourth quarter		1.86		0.36

~~Table~~ As of ~~Contents~~April 30, 2009, there were approximately 72 holders of our common stock. This figure does not represent the actual number of beneficial owners of our common stock because shares are generally held in “street name” by various dealers, clearing agencies, banks, brokers and other fiduciaries.

~~pressure.~~Dividend ~~In addition, cardiologists may opt to~~Policy ~~treat some of these coronary artery blockages by inserting a stent to keep the blood vessel open after the cardiologist removes the catheter.~~

~~Angioplasty~~We ~~does~~have ~~not~~never ~~cure~~declared coronary artery disease, nor does it treat the underlying chronic inflammation. In fact, angioplasty induces an inflammatory response that contributes to its failure in approximately 30 percent of patients who undergo the procedure. This process of re-narrowing, or ~~post-angioplasty~~paid ~~restenosis,~~any isdividends aon ~~major clinical~~our ~~problem~~capital ~~that limits the effectiveness of the procedure~~stock. ~~Restenosis~~ ~~following~~Since ~~balloon~~our ~~angioplasty~~current ~~occurs~~cash ~~due to local damage to the coronary artery. The development of stents~~ and ~~the~~ ~~ongoing~~cash ~~research~~equivalents ~~and~~will ~~development~~be ~~activities~~distributed ~~with respect~~ to ~~catheter~~ ~~improvement~~our ~~have not eradicated the problem of restenosis~~creditors, ~~but~~and ~~have~~we ~~introduced~~will ~~the~~not ~~new~~earn ~~problem~~any ofrevenue in~~-stent restenosis~~ ~~which is particularly difficult to treat. In-stent restenosis occurs when~~ the ~~cells that surround the stent~~ ~~proliferate~~future ~~and~~as ~~fill~~a ~~the~~result ~~opening~~ of the ~~vessel.~~Asset ~~Drug~~Sale ~~coated stents are currently being tested in clinical trials~~ and ~~in limited~~the ~~trials~~Chapter 11 ~~have~~Proceeding, ~~shown~~we towill benot ~~very~~pay ~~effective~~any ~~in reducing~~cash ~~restenosis~~dividends inon ~~patients~~our ~~who~~capital ~~can use these devices~~stock.

~~Our initial development targets are post-angioplasty restenosis and atherosclerosis~~Item 6. WeSelected ~~believe~~Financial ~~that~~Data ~~AGI-1067 may treat all areas of the coronary artery susceptible to atherosclerosis in a way that cannot be achieved with any existing therapy.~~

WeNot ~~have completed preclinical testing in multiple species to establish the therapeutic properties of AGI-1067~~applicable. ~~Our~~ preclinical results indicated that, dosed orally, AGI-1067 blocked VCAM-1 production, blocked damage from oxidants and prevented atherosclerosis. In addition, AGI-1067 reduced LDL cholesterol comparably to and in combination with statins, which are widely used cholesterol-lowering drugs. In preclinical testing, AGI-1067 lowered “bad” cholesterol, increased “good” cholesterol and blocked atherosclerosis in a year-long preclinical model of progression of atherosclerosis.

~~Based~~Item 7. ~~upon~~Management’s ~~our~~Discussion ~~successful completion of preclinical testing, we studied AGI-1067 in seven Phase I clinical trials comprising more than 150 men~~ and ~~women, including~~Analysis ~~healthy volunteers and patients up to the age~~ of ~~85, to~~Financial ~~assess~~Condition ~~tolerability~~ and ~~potential~~Results ~~for interaction with other drugs. In the course~~ of ~~these studies we gave AGI-1067 in~~Operations combination with other drug classes commonly used in patients with atherosclerosis. In these seven clinical trials, six of which we conducted under the Investigational New Drug application for cholesterol lowering, some subjects reported mild nausea during the first few doses of AGI-1067, but the nausea abated while they continued to take the drug. Overall, the subjects tolerated AGI-1067 well, with no dose or use-limiting side effects. These clinical trial results, which showed that patients tolerated AGI-1067 well alone and in combination with other drugs, supported our progression to Phase II clinical trials.

InThe ~~May~~following ~~2001,~~discussion weshould ~~completed~~be ~~testing~~read ~~of our Phase II clinical trial, CART-1, that assessed~~ in ~~305~~conjunction ~~patients~~with ~~the~~our ~~safety and~~financial ~~effectiveness~~statements ~~of AGI-1067 for the treatment of~~and ~~post-angioplasty~~related ~~restenosis.~~notes Anincluded analysis of the results indicated that six months after angioplasty, the blood vessels of patients who received AGI-1067 had greater luminal diameters of their coronary arteries than those who received placebo. This improvement showed a statistically significant dose response. At the highest dose of AGI-1067, the increase in ~~the~~this ~~size~~annual of the target blood vessel was similar to that achieved with probucol, the active control drug in CART-1, which has been shown in previous clinical studies to reduce restenosis rates significantly following angioplasty without the use of a stentreport. ~~CART-1~~ ~~also suggested that AGI-1067 may actually reverse the progression of atherosclerosis.~~ In ~~November~~this ~~2001 at the American Heart Association Scientific Sessions~~report, CART-1 data were presented from a post-study intravascular ultrasound analysis of reference vessels (blood vessels of coronary arteries that were not targets of angioplasty procedures) which indicated lumen volumes increased for patients who received either of the top two doses of AGI-1067. In contrast“AtheroGenics,” ~~patients on placebo had decreased lumen volumes, consistent with the expected progression of atherosclerosis. In December 2001,~~ “we ~~initiated a Phase IIb CART-2 clinical trial for AGI-1067. CART-2 is a 500-patient clinical trial~~,” ~~which~~“us” ~~examines the effect of 12 months of AGI-1067 therapy on restenosis~~ and ~~atherosclerosis~~ ~~following angioplasty. An additional six-month~~“our” ~~Phase~~refer ~~IIb~~to ~~clinical trial~~AtheroGenics, ~~called DART-1, is being initiated to examine the effects of AGI-1067 on restenosis and atherosclerosis in Type 2 diabetics~~Inc.

7 This annual report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to certain factors, risks and uncertainties that may cause future events to differ materially from those referred to in such statements. You should carefully consider these risks, which are discussed in this annual report, including, without limitation, in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in AtheroGenics’ SEC filings.

~~Table~~Bankruptcy ~~of Contents~~Proceeding

~~AGIX-4207~~ As previously disclosed, on September 2, 2008, we announced that we would not repay our 4.5% Convertible Notes (the “2008 Notes”) due September 2, 2008. The failure to repay the 2008 Notes on maturity resulted in an event of default under the indenture governing the 2008 Notes and created an event of default under the indentures governing our 4.5% Convertible Notes due 2011 (the “2011 Notes”) and our 1.5% Convertible Notes due 2012 (the “2012 Notes”). On September 15, 2008, an involuntary petition under

5 Rheumatoid arthritis is a common auto-immune disease that affects joints and arterial blood vessels. According to the Arthritis Foundation, there are 2.1 million people with rheumatoid arthritis in the United States. Rheumatoid arthritis and related diseases cost the U.S. economy more than $65 billion annually in direct and indirect costs. Approximately 70 percent of patients with rheumatoid arthritis are young and middle-aged women.

PhysiciansTable treat rheumatoid arthritis in a stepwise fashion, starting with the occasional to regular use of anti-inflammatory agents such as aspirin or ibuprofen, and proceeding to treatment with DMARDs, which can potentially be toxic. The newer DMARDs target the modulation of tumor necrosis factor (TNF), tissue repair and proliferation. The recent successful introduction of new drugs for rheumatoid arthritis has highlighted both the market potential and the size and scope of the unmet medical need of these patients. These drugs are partially effective and may cause serious side effects. AGIX-4207 is a selective modulator of TNF induced genes and is being tested as a medication that would be taken once a day. This selective nature of AGIX-4207 may decrease chronic inflammation in rheumatoid arthritis with fewer side effects. In March 2001, we commenced a Phase I clinical trial to assess the safety and tolerability of AGIX-4207 in healthy volunteers. In February 2002, we received results from the Phase I clinical trial demonstrating that AGIX-4207 is well tolerated over the single and multiple dose ranges studied. Adverse events were generally mild and not considered clinically significant. Contents

~~Treatment~~Chapter 7 of ~~patients~~the ~~with~~United ~~rheumatoid~~States ~~arthritis progresses~~Bankruptcy ~~from~~Code ~~pain~~(the ~~relievers~~“Bankruptcy toCode”) ~~increasingly~~was ~~toxic immunosuppressants,~~filed ~~called~~against ~~disease~~us ~~modifiers.~~in the WeUnited ~~will~~States ~~evaluate our~~Bankruptcy ~~v-protectant~~Court for the ~~treatment~~Northern District of ~~patients~~Georgia ~~who~~(the ~~are~~“Bankruptcy ~~receiving~~Court”) by ~~moderate~~certain ~~disease~~holders ~~modifying~~of ~~therapy~~our 2008 Notes. On October 6, 2008, we consented to ~~determine~~the ~~whether~~bankruptcy filing and ~~AGIX-4207~~moved ~~will~~the ~~permit~~Bankruptcy ~~decreasing~~Court to convert the ~~use~~Chapter 7 case to a case under Chapter 11 of ~~toxic~~the Bankruptcy ~~drugs~~Code ~~while~~(the “Chapter 11 Proceeding”). As part of the Chapter 11 Proceeding, we sold ~~maintaining~~substantially all of our non-cash assets to Crabtree Acquisition Co., LLC (the ~~patient’s~~“Purchaser”) ~~clinical~~for ~~status~~$2 million on April 1, 2009 (the “Asset Sale”).

We have ~~also~~filed ~~developed~~a anplan ~~intravenously-dosed v-protectant~~of ~~drug~~liquidation ~~candidate,~~with ~~AGIX-4207~~the ~~I.V.~~Bankruptcy Court and, toif ~~treat~~this ~~rheumatoid~~plan is approved by ~~arthritis~~the ~~patients~~Bankruptcy inCourt, ~~whom~~we ~~the~~will ~~rapid~~distribute ~~attainment~~our ofcash ~~target~~and ~~drug levels~~cash inequivalents ~~the~~to ~~blood~~our creditors. Once this distribution is ~~desirable.~~completed, ~~These~~our ~~populations~~corporate ~~may~~existence ~~include patients~~will ~~with~~be ~~flare-ups~~terminated orand ~~exacerbations~~our shares of common stock will be cancelled. Under the ~~disease~~Bankruptcy Code, ~~patients~~ ~~who~~our creditors are ~~intolerant~~generally entitled to receive any distributions of ~~protein-based~~our ~~parenteral~~assets ~~TNF inhibitors,~~before ~~hospitalized~~our ~~patients~~shareholders. ~~with~~Since ~~rheumatoid~~our ~~arthritis~~cash ~~who~~and cash ~~undergo~~equivalents, ~~elective~~including orthe ~~emergency~~proceeds ~~surgical~~from ~~procedures~~the ~~and~~sale ~~risks causing~~of ~~flare~~our non-~~ups~~cash assets, asare ~~well~~significantly asless than ~~patients~~our ~~who~~prepetition ~~are~~liabilities, we will be unable to ~~take oral~~fully ~~medication.~~satisfy Anthe ~~exacerbation~~claims isof aour ~~sudden~~creditors. As ~~worsening~~a ofresult, ~~the patient’s~~our ~~arthritis~~shareholders orwill ~~condition~~receive ~~that~~no ~~usually~~value ~~requires hospitalization~~for ~~and~~their ~~intensive~~shares ~~therapy.~~of Inour ~~October~~common ~~2001,~~stock weas ~~began~~part of athe ~~Phase~~Chapter 11 IProceeding. The ~~clinical~~distribution ~~trial~~and toliquidation ~~assess~~of ~~the~~AtheroGenics ~~safety~~is ~~and~~expected ~~tolerability of~~to ~~AGIX-4207~~be ~~I.V.~~completed in ~~healthy~~the ~~volunteers~~third quarter of 2009.

~~AGI~~ As a result of the Asset Sale and the Chapter 11 Proceeding, we are not currently conducting any business activities, and we will not conduct any business in the future. Even though we sold substantially all of our non-~~1096~~cash assets in the Asset Sale, and have no operations, we are still required to make certain filings with the SEC, including this Form 10-K. Accordingly, we are filing this Form 10-K solely to comply with SEC rules and nothing herein shall be construed to suggest or imply that our shares of common stock have any value or that our shareholders will receive any value for their shares of our common stock as part of the Chapter 11 Proceeding.

~~Organ~~History ~~transplant~~of rejection is caused when patients’ immune systems recognize transplanted organs as foreign and, therefore, reject them. Acute rejection occurs soon after transplantation, while chronic rejection may take years. Recent industry sources report there are approximately 200,000 organ transplant recipients in the ~~United States who are at risk~~Business ~~of chronic transplant rejection. Chronic rejection is a major factor contributing to organ shortage.~~

~~Physicians~~AtheroGenics, ~~treat~~formed ~~these~~in ~~patients~~1993, ~~with~~focused ~~powerful immunosuppressants~~on todeveloping ~~block all immune~~ and ~~inflammatory reactions~~selling ~~that~~novel ~~could~~drugs ~~cause solid organ transplant rejection. These therapies, however, may place patients at increased risk~~ for ~~infection.~~the ~~The vascular protection provided by our drug~~treatment ~~candidate~~of ~~may~~chronic ~~protect~~inflammatory ~~solid~~diseases ~~organs~~such ~~from~~as ~~rejection~~diabetes ~~beyond~~and ~~the first~~coronary ~~year~~heart ~~without increasing the risk of infection~~disease.

Prior to the Chapter 11 Proceeding, AGI-~~1096~~1067 iswas anour investigational drug with demonstrated anti-inflammatory ~~agent~~and ~~designed to~~antioxidant ~~both~~properties. ~~diminish~~In ~~the~~2003, ~~organ~~we ~~transplant~~initiated ~~response~~a toPhase ~~inflammation and~~III ~~directly~~trial, ~~protect~~referred ~~the~~to as ~~blood~~ARISE ~~vessels~~(Aggressive toReduction ~~the~~of ~~transplanted~~Inflammation ~~organ through~~Stops ~~its~~Events), ~~v-protectant~~which ~~activity.~~evaluated the impact of AGI-~~1096~~1067 ~~inhibits~~on ~~the expression~~a composite measure of ~~certain~~heart ~~inflammatory~~disease ~~proteins~~outcomes, including ~~VCAM-1~~death due to coronary disease, inmyocardial ~~endothelial~~infarction ~~cells~~(heart ~~lining~~attack), ~~the~~stroke, ~~inside~~coronary ~~surfaces~~re-vascularization ofand ~~blood~~unstable ~~vessel walls~~angina. Important Inmeasures ~~February~~of ~~2002,~~glycemic wecontrol ~~commenced~~were aincluded ~~Phase~~for Ipatients ~~clinical~~with ~~trial~~diabetes who also had tocoronary ~~assess~~heart ~~the~~disease. ~~safety~~The ~~and~~study ~~tolerability~~assessed the incremental benefits of AGI-~~1096~~1067 inversus ~~healthy~~the current ~~volunteers~~standard of care therapies in this patient population. As such, all patients in the trial, including those on placebo, received other appropriate heart disease and diabetes medications, including statins and other cholesterol-lowering therapies, and glycemic control agents.

8 The ARISE trial results were reported in March 2007 and demonstrated that while AGI-1067 did not show a difference from placebo in the composite primary endpoint, the study did achieve a number of other important predefined endpoints. These endpoints included a reduction in the composite of “hard” atherosclerotic clinical endpoints, composed of cardiovascular death, resuscitated cardiac arrest, myocardial infarction and stroke. AGI-1067 achieved a significant reduction of 19% in the rate of these combined hard endpoints. There were also improvements in the key diabetes parameters of new-onset diabetes and glycemic control.

~~Table~~ In August 2007, we commenced the first registration study for diabetes called ANDES (AGI-1067 as Novel Anti-Diabetic Agent Evaluation Study), a multi-center, double-blind study with 6-month dosing using three doses, designed to compare the effects of ~~Contents~~AGI-1067 versus placebo on glycemic endpoints in subjects with confirmed type 2 diabetes. Patient enrollment for ANDES was completed in December 2007. Dosing and an interim analysis were completed in 2008.

In 2005, we entered into a license and collaboration agreement with AstraZeneca for the global development and commercialization of AGI-~~Series~~1067. ~~for~~Under ~~Respiratory~~the ~~Diseases~~terms of the agreement, we received a license fee of $50 million. In April 2007, AstraZeneca notified us that pursuant to the terms of the agreement, it was ending the collaboration. The agreement was terminated in July 2007.

~~According~~In to the ~~American~~second ~~Lung~~half ~~Association, approximately~~of ~~24.7 million adults and children in the United States have been diagnosed with asthma in their lifetime. From 1980 to 1994~~2006, ~~the~~we ~~prevalence~~were ofengaged ~~this disease increased~~ by ~~over 75%.~~AstraZeneca ~~Asthma morbidity and mortality continue~~ to ~~rise~~conduct inFOCUS ~~spite~~(Follow-up ofOf ~~massive~~Clinical ~~public~~Outcomes: ~~health efforts.~~ The ~~American~~Long-term ~~Lung~~AGI-1067 ~~Association reports~~plus ~~that~~Usual inCare ~~1999 the combined direct and indirect costs of asthma in the United States were approximately $12~~Study).~~7 billion.~~ ~~Current~~FOCUS ~~therapies~~was ~~that~~a ~~target~~follow-up ~~the~~Phase ~~underlying~~III ~~disease~~clinical ~~include~~trial ~~corticosteroids and several classes of drugs that relieve symptoms but are not effective~~ for ~~chronic inflammation.~~patients ~~None~~exiting ~~of these drugs~~ARISE, ~~including~~designed ~~inhaled corticosteroids,~~to ~~are~~collect ~~particularly~~extended ~~effective~~safety ~~for treating exacerbations of asthma, which remain a major unmet medical problem~~information. ~~We believe that v-protectants may reduce the~~ ~~inflammation~~Pursuant ~~associated~~to ~~with chronic asthma and with~~ the ~~acute exacerbation~~terms of ~~asthma,~~our ~~and~~license ~~may~~agreement, beAstraZeneca ~~useful~~funded in the ~~treatment~~entire ofcost ~~up to 1.8 million patients annually who develop acute exacerbations~~ of ~~asthma and seek emergency room treatment in~~ the ~~United~~ ~~States~~trial.

WeAGI-1096 ~~are~~was ~~evaluating~~a ~~classes~~novel ofantioxidant ~~chemical compounds as potential treatments for asthma~~ and ~~other respiratory~~selective ~~diseases.~~anti-inflammatory Weagent ~~will~~to ~~evaluate~~address ~~these~~the ~~components~~accelerated ~~for~~inflammation ~~regular treatment~~ of ~~chronic~~grafted ~~respiratory~~blood ~~diseases~~vessels, orknown ~~for exacerbations.~~as Wetransplant ~~will~~arteritis, ~~test~~common ~~our~~in ~~compounds~~chronic ~~for~~organ ~~delivery~~transplant byrejection. ~~the oral, intravenous~~We ~~or inhaled route of administration.~~

6 In June 2001, we entered into a worldwide exclusive license agreement with National Jewish Medical and Research Center to discover and develop novel therapeutics for the treatment of inflammation and asthma. We plan to use these new technologies to discover and develop additional drug candidates for the treatment of asthma.

DiagnosticTable Assayof ProgramContents

~~Based~~worked onwith ~~our~~Astellas ~~v-protectant~~Pharma ~~technology platform, we have designed a simple and proprietary blood test that measures a circulating blood marker for atherosclerosis~~Inc. We(“Astellas”) ~~plan~~ to ~~conduct~~ ~~tests~~further ondevelop ~~human~~AGI-1096, ~~blood~~with ~~samples to establish whether this~~Astellas ~~new~~funding ~~marker,~~the ~~called~~costs ~~OXYKINE®,~~for isdevelopment anactivities ~~accurate~~under ~~and~~the ~~useful diagnostic tool~~agreement. WeAstellas ~~believe~~informed ~~OXYKINE®~~us ~~will~~that ~~allow physicians~~they todid ~~determine~~not ~~whether~~have afurther ~~patient~~development ~~has~~plans ~~active~~ and ~~progressive atherosclerosis~~we ~~and~~subsequently ~~whether~~ceased ~~the~~development ~~disease~~activities ~~is responding to medical~~on ~~therapy~~AGI-1096. ~~We are not aware of any diagnostic tools that meet this~~ ~~profile.~~

~~Research~~ Both ~~Program~~AGI-1067 and AGI-1096 were sold to the Purchaser as part of the Asset Sale.

WeCritical ~~have~~Accounting ~~built~~Policies ~~a robust research program using our demonstrated expertise in functional genomics, molecular biology, cell biology, physiology, pharmacology, biochemistry,~~ and ~~analytical~~Use ~~and~~of ~~synthetic chemistry, bioengineering and~~Estimates ~~medicine.~~

The preparation of financial statements in conformity with U.S. generally accepted accounting ~~Our~~principles ~~research~~requires ~~program~~management ~~has~~to ~~four~~make ~~main~~estimates ~~objectives:~~and assumptions and select accounting policies that affect the amounts reported in our financial statements and the accompanying notes. Actual results could significantly differ from those estimates. We have identified the following policies and related estimates as critical to our business operations and the understanding of our results of operations. A description of these critical accounting policies and a discussion of the significant estimates and judgments associated with these policies are set forth below. The impact of and any associated risks related to these policies on our business operations are also discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations.

•Research ~~To discover~~ and ~~develop~~Development v-protectants with enhanced potency and improved therapeutic properties. We are synthesizing novel compounds and testing them in a variety of biochemical and cell-based assays to discover and develop new, small molecule v-protectants. We believe that these v-protectants will have improved therapeutic properties and applicability across a wide range of chronic inflammatory diseases. We have identified a novel series of highly potent v-protectants. • To identify novel anti-inflammatory therapeutic targets utilizing functional genomics. One part of our drug discovery platform is a set of techniques that connects our knowledge of genes, which code for proteins, to agents that modify gene activity. This collection of methods, called functional genomics, enables us to select targets efficiently. Our targets for therapy may be the gene, the protein, another substance in the body that links to the protein, or the agent that induces the change. For example, oxidants are agents that induce changes in gene activity. We believe our functional genomics program will enable us to identify novel genes and their protein products that are critical to the chronic inflammatory disease process. We plan to progress these genes and proteins into targets for novel classes of drugs.Accrual

9 As part of the process of preparing our financial statements, we are required to estimate expenses that we believe we have incurred, but have not yet been billed for. This process involves identifying services and activities that have been performed by third party vendors on our behalf and estimating the level to which they have been performed and the associated cost incurred for such service as of each balance sheet date in our financial statements. Examples of expenses for which we accrue include fees for professional services, such as those provided by certain clinical research organizations and investigators in conjunction with clinical trials, and fees owed to contract manufacturers in conjunction with the manufacture of clinical trial materials. We made these estimates based upon progress of activities related to contractual obligations and also information received from vendors.

~~Table~~Revenue ~~of Contents~~Recognition

	•	To develop new classes of v-protectant drugs based on the novel therapeutic targets identified by our functional genomics program. We are identifying enzymes and other molecular targets that either control or are controlled by oxidant signals. We believe these discoveries will enable our chemists to synthesize the next generation of v- protectants. We intend to use these enzymes and other molecular targets for both internal efforts and as strategic collaboration assets.
	•	To develop a second broad platform for the discovery and development of a new class of anti-inflammatory drug candidates. As a result of entering into the license agreement with National Jewish Medical and Research Center in June 2001, we plan to expand our research program in the future to include the discovery and development of new drug candidates through the exploitation of the licensed technology.

We recognize license fee revenues in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements, as amended by SAB No. 104, Revenue Recognition, (“SAB 104”). SAB 104 provides guidance in applying U.S. generally accepted accounting principles to revenue recognition issues, and specifically addresses revenue recognition for upfront, nonrefundable fees received in connection with research collaboration agreements.

In accordance with SAB 104, license fees, which are nonrefundable, are recognized over the ~~Patents~~period the related license agreements specify that efforts or obligations are required of us. In February 2006, we received a $50 million license fee in connection with our license and collaboration ~~Intellectual~~agreement ~~Property~~with AstraZeneca. The upfront nonrefundable license payment was being recognized on a straight-line basis over the 24-month period that we estimated we were obligated to provide services to the licensee. In April 2007, AstraZeneca announced that it was ending the license and collaboration agreements and any further obligations required of us. As such, the remaining balance of approximately $20.8 million in deferred revenue related to the license fee was recognized as revenue in the second quarter of 2007.

WeDuring ~~have~~the ~~established~~third quarter of 2006, AstraZeneca separately engaged us to perform FOCUS, a follow-up ~~patent~~Phase ~~portfolio~~III ofclinical ~~owned~~trial for patients who have completed ARISE. Revenues under the research and development agreement pertaining to FOCUS are recognized in accordance with Emerging Issues Task Force (“EITF”) Issue No. 99-~~licensed~~19, ~~patents~~Reporting ~~that~~Gross ~~cover~~Revenue ~~our~~as ~~lead~~a ~~compounds~~Principal ~~and~~vs. ~~their~~Net as an ~~use~~Agent. ItAccording isto ~~our~~the ~~goal~~criteria toestablished ~~pursue~~by ~~both~~EITF ~~broad~~Issue ~~and~~No. 99-19, ~~specific~~we ~~patent~~are the primary obligor ~~protection~~of inthe agreement because we are responsible for the ~~key~~selection, ~~areas~~negotiation, contracting and payment of ~~our~~the ~~research~~third party suppliers. In addition, any liabilities resulting from the agreement are the responsibility of AtheroGenics. Research and development ~~both~~revenues are recognized, on a gross inbasis, as activities are performed under the ~~United~~terms ~~States~~of ~~and~~the ~~internationally~~related agreement. AtheroGenics concluded FOCUS in 2007, and toclosing ~~identify value-added~~activities ~~exclusive~~were billed to AstraZeneca in~~-licensing~~ ~~opportunities~~accordance with the agreement.

VStock-~~Protectant~~Based ~~Technology~~Compensation

WeEffective ~~have~~January 1, ~~license~~2006, ~~agreements~~we ~~with~~adopted ~~Emory~~the ~~University and~~provisions ~~The Regents~~ of ~~the~~Statement ~~University~~ of ~~California~~Financial ~~covering aspects~~Accounting ofStandards ~~our~~(“SFAS”) ~~v-protectant~~SFAS ~~technology~~No. 123(R), ~~These~~Share-Based ~~agreements~~Payment ~~obligate~~(“SFAS us123(R)”), ~~to make~~which ~~milestone~~revises ~~payments~~SFAS ~~upon~~No. 123, ~~attainment~~Accounting offor ~~agreed~~Stock-~~upon~~Based ~~goals~~Compensation and ~~royalty~~ ~~payments~~supersedes onAccounting ~~the~~Principles ~~sale~~Board ofOpinion ~~licensed products and technology~~No. 25, ~~The~~Accounting ~~licenses~~for ~~with~~Stock ~~Emory~~Issued ~~University~~to ~~and~~Employees. ~~The~~SFAS ~~Regents of~~123(R) ~~the~~requires ~~University~~that ofcompanies ~~California~~recognize compensation ~~also~~expense ~~require~~associated uswith tostock beoption ~~diligent in~~grants ~~commercializing~~and ~~the~~other ~~licensed~~equity ~~technologies~~instruments ~~within~~to ~~certain~~employees in ~~time~~the ~~periods.~~

7 Under our license agreement with Emory University, Emory University granted to us an exclusive license to make, use and sell methods and products covered by certain patents and patent applications owned by Emory University relating generally to the treatment and diagnosis of VCAM-1 related diseases. The license agreement requires us to make royalty payments to Emory University based on certain percentages of net revenue we derive from sales of products covered by the licensed patents or patent applications, and from sublicensing of the licensed patents or patent applications. The license agreement also requires us to make milestone payments to Emory University upon the occurrence of certain product development events. Milestone payments for AGI-1067 could total $250,000 if all milestone objectives are met. We must indemnify Emory University for all claims and/or losses caused or contributed to by AtheroGenics arising out of our use of the license. We have procured commercial general liability insurance in specified amounts customary in the industry naming Emory University as an insured.

TheTable Emory license agreement will terminate when all patent rights licensed under the agreement expire. Emory University may terminate the agreement if, after Emory gives notice to us, we fail to make a payment, we fail to render progress reports, we incur specified financial problems, we decide to no longer develop licensed products under the agreement, or we breach a material term of the agreement. We may terminate the agreement upon advance notice to Emory, or if Emory University violates certain material terms of the agreement. Contents

~~Under~~financial ~~our~~statements. ~~license~~That ~~agreement~~expense ~~with~~is ~~The~~recognized ~~Regents~~in of the ~~University~~statement of ~~California,~~operations weover ~~received a license to make, use~~the ~~and~~period ~~sell~~during ~~diagnostic~~which ~~and~~an ~~therapeutic~~employee ~~methods~~is ~~and~~required ~~products~~to ~~using monoclonal~~provide ~~antibodies~~service in ~~atherosclerosis~~exchange ~~and~~for ~~other~~the ~~diseases,~~reward. ~~which~~Stock-based ~~are~~compensation ~~claimed~~expense inis ~~applicable~~recorded ~~patent~~in ~~applications~~research ~~owned~~and bydevelopment ~~The Regents~~expense ofor ~~the~~general ~~University~~and administrative ofexpense ~~California~~depending inon the ~~U.S.~~employee’s ~~and~~job ~~Canada~~function. We ~~must~~SFAS ~~make~~123(R) ~~milestone~~applies ~~payments~~ to ~~The~~all ~~Regents~~grants after of the ~~University of~~effective ~~California~~date ~~upon~~and ~~occurrence~~to ofthe ~~various~~unvested ~~product~~portion ~~development events~~ of upstock tooptions ~~$45,000~~outstanding ~~for~~as ~~each~~of ~~therapeutic application and~~the ~~$35,000~~effective ~~for each diagnostic application~~date. ~~In addition, we must pay to~~ The ~~Regents~~pro offorma ~~the~~disclosures ~~University~~previously ofpermitted ~~California~~under aSFAS ~~percentage of~~123 ~~the~~are ~~net~~no ~~revenue~~longer ~~we receive from the sale of products covered~~an byalternative ~~the~~to ~~patents~~financial ~~and~~statement ~~patent~~recognition. ~~applications~~We ~~and~~are ~~from~~using ~~our sublicensing~~ the ~~licensed~~modified-prospective ~~patents~~method and ~~patent applications. The Regents of the~~ ~~University of California may terminate~~ the ~~agreement~~Black-Scholes ~~upon~~valuation ~~proper notice~~model for ~~violation~~valuing ~~of material terms of~~ the ~~agreement.~~share-based ~~The~~payments. ~~agreement expires in 2018, when the last patent covered by the license~~

10Results of Operations

~~Table~~Comparison of ~~Contents~~Years Ended December 31, 2008 and 2007

Revenues ~~expires. We may terminate the agreement at any~~ time upon prior notice to The Regents of the University of California. We must indemnify The Regents of the University of California for all losses and claims arising out of our use of the license. In addition, we have procured commercial liability insurance in specified amounts customary in the industry naming the University of California as an insured.

AsNo ~~part~~revenues ofwere ~~our~~recorded ~~v-protectant~~for ~~technology~~the ~~patent~~twelve months ended December 31, 2008 compared to total ~~portfolio~~revenues of $52.3 million, wefor ~~also~~the ~~purchased~~comparable Uperiod in 2007.S. ~~Patent~~License Nofee revenues of $27.1 million for the twelve months ended December 531,~~262,439 under~~ an2007 were related to the AGI-1067 license agreement with ~~Dr. Sampath~~AstraZeneca ~~Parthasarathy~~that was concluded in 2007. WeThe research and development revenues of ~~believe~~$25.2 million for the ~~cost~~twelve ofmonths ~~this~~ended ~~agreement~~December 31, 2007 were for services performed for AstraZeneca related to usthe isFOCUS ~~immaterial~~clinical trial, which was also concluded in 2007.

~~AGI-1067 Patent Portfolio~~Expenses

~~Our~~Research ~~patent~~and ~~coverage~~Development. onResearch ~~AGI-1067~~and isdevelopment ~~based~~expenses ~~on patent~~were ~~filings~~$25.9 million ~~that~~for wethe ~~own~~twelve months ~~and~~ended ~~patent~~December 31, ~~filings~~2008 ~~exclusively licensed~~and ~~from Emory University~~$72.7 million Wefor ~~own~~the ~~one~~comparable ~~issued~~period ~~patent,~~in U2007.S. The decrease ~~Patent~~in ~~No. 5,262,439,~~research ~~which~~and ~~expires~~development expenses in ~~2012,~~the ~~and~~twelve ~~related filings~~months inended ~~Japan~~December 31, ~~Canada~~2008 ~~and~~is ~~Europe~~primarily ~~that~~due to ~~generically~~decreased ~~cover~~expenditures for the ~~compound~~ ~~AGI-1067~~ARISE asand aFOCUS ~~member~~clinical oftrials, awhich ~~class~~were ofconcluded ~~related~~in ~~compounds.~~2007, Welower ~~own~~personnel ~~another patent~~costs, ~~U.S.~~as ~~Patent~~a ~~No.~~result ~~6,147,250,~~of ~~that~~the ~~protects through~~organizational ~~2018~~restructuring the ~~specific~~occurred ~~compound~~in ~~AGI-1067~~the ~~and its use to treat~~second ~~VCAM-1~~quarter ~~mediated~~of ~~diseases including~~2007, ~~among~~and ~~others, atherosclerosis,~~lower ~~post~~stock-~~angioplasty~~based ~~restenosis~~compensation ~~and coronary artery disease~~expense. WeThis ~~also~~is ~~own~~partially ~~U.S.~~offset ~~Patent No. 6,121,319, which~~by ~~covers~~expenditures in the ~~use~~twelve ofmonths aended ~~class~~December 31, of2008 ~~compounds~~for ~~including~~the ~~AGI-1067~~ANDES ~~to treat~~clinical ~~VCAM-1~~trial ~~mediated~~which commenced ~~diseases.~~in ~~Applications~~the ~~corresponding~~second ~~to U.S.~~half ~~Patent~~of ~~No. 6,147,250~~2007 and ~~U.S.~~for ~~Patent No. 6,121,319~~work ~~have~~performed ~~also~~by ~~been~~ISP ~~filed~~Pharma inSystems ~~foreign~~LLC ~~patent~~(“ISP”) under ~~offices.~~the ~~The~~manufacturing ~~patents~~and ~~that~~supply weagreement. ~~have~~As ~~exclusively~~a ~~licensed~~result ~~from Emory~~of ~~University include~~ the ~~use~~Chapter 11 ofProceeding, aAtheroGenics discontinued ~~substance~~all ~~that~~research ~~inhibits~~and ~~a class~~development ofactivities ~~oxidant~~in ~~signals~~the tothird ~~treat~~quarter ~~diseases~~of ~~mediated by VCAM-1~~2008.

~~AGIX~~ General and Administrative. General and administrative expenses were $10.4 million for the twelve months ended December 31, 2008 and $13.9 million for the comparable period in 2007. The decrease is primarily due to lower personnel related costs, including the elimination of the 2008 management incentive plan and lower stock-~~4207~~based ~~Patent~~compensation ~~Portfolio~~expense, business development activities and professional fees.

Restructuring and Impairment Costs. The reversal of restructuring and impairment costs of ~~Our~~$821,000 ~~patent~~for ~~coverage~~the ontwelve ~~AGIX-4207~~months isended ~~based~~December 31, on2008 was due to commercial manufacturing ~~patent~~activities ~~filings~~performed by ISP in exchange for certain commercial manufacturing equipment that wehad been ~~own~~impaired and ~~patent~~written-off ~~filings~~during ~~exclusively licensed~~the ~~from~~restructuring ~~Emory~~in ~~University~~2007. WeRestructuring ~~own~~and ~~one~~impairment Ucosts of $10.S.0 million ~~patent application~~for the twelve months ended December 31, ~~and~~2007 ~~associated~~were ~~non-U.S.~~incurred ~~patent~~for ~~filings~~the ~~which~~write-off of ~~describe~~impaired ~~AGIX-4207~~manufacturing ~~and~~assets, ~~its~~as ~~use~~a toresult ~~treat~~of ~~rheumatoid~~the ~~arthritis,~~transition of commercial manufacturing activities ~~other~~from ~~inflammatory~~AstraZeneca, ~~conditions~~as well as severance and ~~other~~asset ~~disorders~~impairment ~~mediated~~costs ~~by VCAM-1.~~from ~~Any~~an ~~patents~~organization restructuring ~~issuing~~that ~~from~~occurred ~~this~~during ~~application~~the ~~will~~second ~~expire~~quarter ~~in 2018~~of 2007.

~~AGI-1096~~Interest ~~Patent~~and ~~Portfolio~~Other Income

~~Our~~Interest ~~patent~~and ~~coverage~~other onincome ~~AGI-1096~~ is ~~based~~primarily ~~on patent~~comprised ~~filings~~of ~~that~~income weearned ~~own~~on ~~and~~our ~~patent~~cash ~~filings~~and ~~exclusively~~short-term ~~licensed~~investments. ~~from~~Interest ~~Emory~~and ~~University.~~other Weincome ~~own~~decreased ~~one~~to U$1.S.6 million ~~patent~~for the twelve months ended ~~application~~December 31, ~~and~~2008 ~~associated~~from ~~non-U~~$6.S0 million for the comparable period in 2007. ~~patent~~The ~~filings~~decrease ~~which~~for the twelve ~~describe~~months ~~AGI-1096~~ended ~~and~~December, ~~its~~2008 ~~use~~was primarily due to ~~treat~~the ~~disorders~~lower ~~mediated~~balance ~~by VCAM-1.~~of ~~Any~~cash ~~patents~~and ~~issuing~~short-term investment ~~from~~funds ~~the~~than ~~application~~in ~~will~~the ~~expire~~comparable period in ~~2018.~~ We2007 ~~also~~and ~~own~~lower ainterest ~~provisional~~rates ~~patent~~as ~~application~~well ~~claiming~~as ~~the~~interest ~~use~~income ofthat ~~AGI-1096~~was toclassified ~~treat~~as ~~solid~~a ~~organ~~reorganization ~~transplant~~item ~~rejection~~due to the Chapter 11 Proceeding.

~~Other~~Interest ~~V-Protectant Compounds~~Expense

~~Certain~~Interest ~~patent~~expense ~~applications~~decreased into ~~the United States and non-U~~$9.S.5 million ~~countries~~for ~~cover~~ the ~~use~~twelve ofmonths aended ~~number~~December 31, of2008 ~~compounds~~from ~~identified~~$11.1 million infor ~~our~~the ~~research~~comparable ~~program~~period ~~to act as v-protectants, and specifically for use~~ in ~~treating cardiovascular and inflammatory disease~~2007. ~~Some~~The ofdecrease ~~these~~in ~~compounds~~the ~~are~~twelve ~~novel~~months ~~and~~ended ~~some represent~~December ~~new~~31, ~~uses~~2008 ~~for~~is ~~known~~primarily ~~compounds.~~due Into ~~addition~~the weremaining ~~have~~unamortized ~~exclusively licensed~~discount ~~patents~~and ~~from~~premium ~~Emory~~on ~~University~~the ~~that~~2011 ~~cover~~Notes ~~the~~being recorded ~~use~~as ofan ~~a class~~expense in ofreorganization ~~compounds~~items, ~~which~~net ~~act~~in asconnection ~~v-protectants.~~with

~~MEKK Technology~~8

InTable June 2001, we entered into a worldwide exclusive license agreement with National Jewish Medical and Research Center. Under the agreement, National Jewish granted us an exclusive license under several of its U.S. and foreign patents and patent applications and related technical information to make, use and sell diagnostics and therapeutics for the treatment of human diseases, including inflammation and asthma. Under the terms of the agreement with National Jewish, we may grant sublicenses of our rights to others. Contents

~~Under~~ the ~~agreement~~Chapter 11 ~~with~~Proceeding. ~~National~~Due ~~Jewish,~~to wethe ~~have assumed~~Chapter 11 ~~responsibility~~Proceeding, ~~for~~no ~~all~~interest ~~future~~expense ~~costs~~was ~~associated with~~recorded ~~research~~on ~~and~~the ~~development~~2008 ofNotes, ~~products developed from~~ the ~~licensed technology.~~2011 WeNotes ~~have~~or ~~also~~the ~~assumed~~2012 ~~responsibility~~Notes ~~for~~after ~~the costs of filing~~September 15, ~~prosecuting and maintaining the licensed patent rights~~2008. ~~We granted~~

11Reorganization Items, Net

~~Table~~ In connection with the Chapter 11 Proceeding, we incurred $20.8 million of ~~Contents~~reorganization items, net which primarily consists of the recognition of the remaining unamortized debt issuance cost of $3.1 million for the 2012 Notes and the remaining unamortized discount of $16.9 million for the 2011 Notes, and professional fees. These amounts are partially offset by the recognition of the remaining unamortized premium of $435,000 for the 2011 Notes in addition to interest income that would not have been earned but for the proceedings during the twelve months ended December 31, 2008.

~~National~~Liquidity Jewish a warrant to purchase up to 40,000 shares of our common stock at an exercise price of $6.00 per share, subject to a vesting period. Under the agreement, we paid an upfront payment in connection with the execution of the agreement and ~~will~~Capital ~~pay milestone payments to National Jewish~~Resources upon the achievement of certain clinical and regulatory milestones. Upfront and milestone payments could aggregate up to approximately $800,000. If we fail to meet various performance milestones by certain dates, some or all of the licensed technology will revert to National Jewish. We must also pay a royalty to National Jewish on net sales of licensed products. If we sublicense the licensed technology, we must pay to National Jewish a percentage of the amounts paid to us by the sublicensee, which, if the sublicense agreement is executed within one year following the date of the license agreement with National Jewish, could be a material percentage of the sublicense fee.

~~Our~~We ~~patent~~have ~~position,~~filed ~~like~~a ~~that~~plan of ~~many pharmaceutical~~liquidation ~~companies,~~with isthe ~~uncertain~~Bankruptcy Court and, ~~involves~~if ~~complex~~this plan is approved by ~~legal~~the Bankruptcy Court, we will distribute our cash and ~~factual~~cash ~~questions~~equivalents ~~for~~to ~~which~~our ~~important~~creditors ~~legal~~and ~~principles~~our ~~are~~corporate ~~unresolved~~existence orwill ~~unclear.~~be Weterminated ~~may~~once ~~not~~this ~~develop~~distribution oris ~~obtain~~complete. ~~rights to~~Since ~~products~~our orcash ~~processes~~and ~~that~~cash equivalents are ~~patentable.~~significantly ~~Even~~less ifthan weour ~~do obtain~~prepetition ~~patents~~liabilities, ~~they~~holders ~~may~~of ~~not~~our ~~adequately~~unsecured ~~protect~~debt will ~~the~~receive ~~technology we~~substantially ~~own~~less orthan our payment in~~-license~~ full for their claims. In addition, ~~others~~our shareholders ~~may~~will ~~challenge,~~receive ~~seek~~no ~~to invalidate,~~value ~~infringe~~for ortheir ~~circumvent~~shares ~~any~~of ~~patents~~our wecommon ~~own~~stock oras our creditors have priority in~~-license~~ the Chapter 11 Proceeding. Moreover, since all of our existing cash and ~~rights~~cash equivalents wewill ~~receive~~be ~~under~~paid ~~those~~to ~~patents~~our ~~may~~creditors and since we are not conducting any operations and will ~~provide~~not ~~competitive~~do ~~advantages~~so toin usthe future, we do not anticipate having any long-term capital-resources needs.

WeSince ~~may~~inception, ~~terminate~~we ~~the~~financed ~~license~~our ~~agreement~~operations ~~with National~~primarily ~~Jewish~~through atsales ~~any~~of ~~time~~equity ~~upon~~securities ~~at least 90 days prior~~and ~~written~~convertible ~~notice~~notes. IfOn weSeptember 15, ~~terminate the agreement in this manner~~2008, ~~all~~ ~~licensed~~certain ~~patent~~holders ~~rights~~of ~~and~~our ~~related~~2008 ~~technology~~Notes ~~revert~~filed toan involuntary ~~National~~petition ~~Jewish.~~under ~~Either~~Chapter 7 ~~party~~of to the ~~agreement~~Bankruptcy ~~may~~Code ~~also terminate~~against itAtheroGenics. ~~upon~~On aOctober 6, ~~material~~2008, AtheroGenics ~~uncured~~consented ~~breach~~to by the ~~other, or upon the~~ bankruptcy orfiling ~~insolvency~~and ofmoved the ~~other.~~Bankruptcy WeCourt ~~must indemnify~~to ~~National~~convert ~~Jewish~~the Chapter 7 ~~for~~case ~~all~~to ~~losses~~a ~~and~~case ~~claims~~under ~~arising~~Chapter 11 ~~out~~ of ~~our~~the ~~use~~Bankruptcy ofCode. ~~the~~On ~~license.~~April 1, We2009, ~~will~~AtheroGenics sold ~~procure~~substantially ~~commercial~~all ~~liability insurance~~of inits ~~amounts~~non-cash ~~customary~~assets infor $2 million to the ~~industry~~Purchaser as ~~required~~part by of the Chapter 11 ~~agreement~~Proceeding.

~~Our~~Net ~~commercial~~cash ~~success~~used ~~will depend~~ in ~~part~~operating onactivities ~~our ability~~was to$37.4 million ~~manufacture,~~for ~~use,~~the ~~sell~~twelve ~~and~~months ~~offer~~ended ~~to sell our product~~December ~~candidates~~31, ~~and~~2008 ~~proposed~~compared ~~product~~to ~~candidates~~$56.4 million ~~without~~for ~~infringing patents~~the orcomparable ~~other~~period ~~proprietary~~in ~~rights of others~~2007. WeThe ~~may~~net ~~not~~cash beused in ~~aware~~operating ofactivities ~~all~~in ~~patents~~2008 orwas ~~patent~~primarily ~~applications~~attributable ~~that may impact our ability~~ to ~~make,~~funding ~~use~~a ornet ~~sell~~loss ~~any~~ of ~~our product candidates or proposed product candidates~~$64.1 million ~~For example, U.S. patent~~that ~~applications~~included doexpenditures ~~not~~related ~~publish~~to ~~until~~the 18ANDES ~~months~~clinical ~~from their effective filing date~~trial. ~~Further,~~The wenet ~~may~~cash ~~not~~used bein ~~aware of published or~~operating ~~granted~~activities ~~conflicting~~for ~~patent~~the ~~rights.~~twelve ~~Any~~months ~~conflicts~~ended ~~resulting~~December 31, ~~from patent~~2007 ~~applications~~was ~~and~~principally ~~patents~~for ~~of others could significantly reduce~~ the ~~coverage~~closeout of ~~our patents~~ ARISE and ~~limit~~FOCUS ~~our~~Phase ~~ability~~III ~~to obtain~~clinical ~~meaningful patent protection. If others obtain patents with conflicting claims~~trials, wethe ~~may~~start-up beof ~~required~~ANDES toPhase ~~obtain~~III ~~licenses to~~clinical ~~these~~trial ~~patents~~for ~~or to develop or obtain alternative technology. We may not be able to obtain any licenses or other rights to patents, technology or know~~AGI-~~how necessary to conduct our~~1067, ~~business~~ as ~~described~~well inas ~~this~~our ~~report. Any failure to obtain such licenses or~~ other ~~rights~~ongoing ~~could delay or prevent us from developing or commercializing our~~ product ~~candidates~~development ~~and proposed product candidates, which could materially affect our business~~programs.

~~Litigation~~Net orcash ~~patent~~provided ~~interference~~by ~~proceedings~~investing ~~may be~~activities ~~necessary~~was to$18.0 million ~~enforce~~for ~~any~~the oftwelve ~~our~~months ~~patents or other proprietary~~ended ~~rights~~December 31, or2008 compared to ~~determine~~$43.3 million ~~the~~for ~~scope and validity or enforceability of~~ the ~~proprietary~~comparable ~~rights~~period ofin ~~others~~2007. ~~The~~Net ~~defense~~cash ~~and prosecution~~provided ofby ~~patent~~investing ~~and~~activities ~~intellectual~~for ~~property claims are both costly and time consuming, even if~~ the ~~outcome~~twelve ismonths ~~favorable~~ended ~~to us. Any adverse outcome could subject us to significant liabilities~~December 31, ~~require~~ us2008 toand ~~license~~2007 ~~disputed~~consisted ~~rights from others, or require us~~primarily toof ~~cease~~the ~~selling~~net ~~our~~sales ~~future~~of ~~products~~short-term investments.

~~Trademarks~~ Net cash used in financing activities was $5.5 million for the twelve months ended December 31, 2008 compared to net cash provided by financing activities of $23,000 for the comparable period in 2007. Net cash used in financing activities for the twelve months ended December 31, 2008 was due to the retirement of $5.5 million of the 2008 Notes. Net cash provided by financing activities in the twelve months ended December 31, 2007 consisted of the proceeds received upon exercise of common stock options.

In August 2003, we issued $100.0 million in aggregate principal amount of 2008 Notes through a ~~The~~Rule 144A Uprivate placement to qualified institutional buyers.S These notes were convertible into our common stock at a conversion rate of 65.1890 ~~Patent~~shares per $1,000 principal amount of notes, or approximately $15.34 per share. Net proceeds were approximately $96.7 million. Interest of 4.5% on the 2008 Notes was payable semi-annually in arrears on March 1 and ~~Trademark~~September ~~Office~~1. ~~issued~~In aJanuary ~~Certificate~~2006, we exchanged $14.0 million in aggregate principal amount of ~~Registration~~the 2008 Notes for 1,085,000 shares of our common stock. In July 2007, we extinguished $38.0 million of the ~~trademark~~2008 ~~OXYKINE~~Notes onand in ~~April 10~~exchange, ~~2001~~issued $60.4 million of 2011 Notes. The ~~Patent~~2011 ~~and~~Notes ~~Trademark~~were ~~Office~~initially ~~issued~~recorded aat their fair ~~Certificate~~value of ~~Registration~~$38.0 million. ~~for~~The $22.4 million difference between the ~~trademark~~principal ~~AATHEROGENICS~~amount and the initial ~~DESIGN~~fair onvalue ~~November 7~~of the debt, ~~2000~~the ~~and~~discount, ~~issued~~was ~~one~~being ~~for~~accreted up to the ~~trademark~~face amount as additional ~~AGI~~interest onexpense ~~September~~over the remaining life of the 2011 Notes. In January 192008, ~~2000~~we redeemed $17.5 million in aggregate principal amount of our 2008 Notes, and in exchange issued $11.5 million of 2011 Notes and repaid $5.5 million in cash. We recorded the new 2011 Notes at their carrying value of $12.0 million. This resulted in a premium of approximately $500,000 that was being amortized as an offset to interest expense over the life of these 2011 Notes.

On ~~January~~September 302, ~~2002~~2008, ~~Applied~~we ~~Genetics Incorporated~~defaulted ~~Dermatics~~on ~~filed with~~ the ~~United~~principal ~~States Patent~~ and ~~Trademark~~ ~~Office~~interest adue ~~petition~~on tothe ~~cancel~~2008 ~~the~~Notes. ~~trademark~~This ~~“AGI.”~~default ~~Applied~~created ~~Genetics~~an ~~has~~event ~~not~~of ~~requested~~default ~~any~~under ~~monetary damages.~~the Weindentures ~~filed~~governing anthe ~~answer~~2011 toNotes and the ~~petition on March 11,~~2012 ~~2002~~Notes, ~~and~~which ~~intend~~in toturn ~~vigorously~~caused ~~defend~~the ~~our~~2011 ~~registration~~Notes inand ~~this~~the 2012 Notes to ~~matter.~~

129

become immediately due and payable. Due to the default, the remaining unamortized balance of ~~Exclusive~~the ~~License~~discount ~~Agreement~~on ~~with~~the 2011 Notes, $16.9 million, was recorded as an expense in reorganization items ~~Schering-Plough~~and the remaining unamortized balance of the premium on the 2011 Notes, $435,000, was recorded as an offset to expense in reorganization items. As of December 31, 2008, we have recorded $2.3 million of accrued interest expense related to the 2008 and 2011 Notes, which was due, but not paid on September 1, 2008. An additional 15 days of interest, $192,000, has been accrued for the time period of September 1 through September 15 when the Chapter 7 petition was filed. The accrued interest expense is included in liabilities subject to compromise.

In ~~October 1999~~January 2005, we ~~entered~~issued ~~into~~$200.0 million ain ~~worldwide~~aggregate principal amount of 2012 Notes through ~~exclusive~~a ~~license~~Rule 144A ~~agreement~~private ~~with~~placement ~~Schering-Plough~~to qualified institutional buyers. ~~This~~These ~~agreement~~notes are convertible into ~~consisted~~shares of ~~contracts~~our ~~with~~common ~~two~~stock ~~Schering-Plough~~at ~~affiliates~~a conversion rate of 38.5802 shares per $1,000 principal amount of ~~Under~~notes, ~~the~~or ~~agreement~~approximately we$25.92 ~~granted~~per toshare. ~~Schering-Plough~~Interest anof ~~exclusive license~~1.5% ~~under~~on ~~our~~the ~~patents~~2012 ~~and~~Notes ~~know~~is payable semi-~~how~~annually toin ~~make,~~arrears ~~use~~on February 1 and ~~sell~~August 1. Net proceeds were approximately $193.6 ~~AGI-1067~~million. ~~and~~Due ~~other~~to ~~specified~~the ~~compounds~~default ~~for~~on the ~~treatment~~2012 ~~of restenosis~~Notes, ~~coronary~~the ~~artery~~remaining ~~disease~~unamortized ~~and~~balance ~~atherosclerosis.~~of the debt ~~Schering-Plough~~issuance ~~paid~~costs, us$3.1 million, anwas ~~initial~~recorded ~~nonrefundable~~as ~~licensing~~an ~~fee~~expense in ofreorganization $5items,~~000,000~~ ~~upon~~net. ~~signing~~As ~~the~~of ~~agreement~~December 31, ~~and~~2008, ~~pursuant~~we tohave ~~the terms~~recorded $375,000 of accrued interest expense related to the ~~agreement~~2012 Notes, ~~had~~which includes ~~assumed~~the ~~responsibility~~time ~~for~~period ~~all~~of ~~costs going~~September ~~forward~~1 ~~associated~~through ~~with~~September 15 when the ~~development,~~Chapter 7 ~~manufacturing~~petition ~~and~~was filed. ~~commercialization~~The ofaccrued ~~products~~interest ~~containing~~expense ~~AGI-1067~~is ~~and~~included ~~any~~in ~~other licensed~~liabilities ~~compound~~subject to compromise.

~~In October 2001, we reacquired the rights to AGI-1067 and related compounds and terminated the exclusive license agreement between us and Schering-Plough~~Item 7A. ~~The reacquisition~~Quantitative ~~of these rights will permit us to expedite the clinical development process for AGI-1067. In addition, Schering-Plough returned all licensed technology to us~~ and ~~returned~~ ~~all~~Qualitative ~~materials~~Disclosures ~~related~~about toMarket ~~that technology. With the~~Risk ~~termination of this license agreement, Schering-Plough will have no further rights to the technology or financial obligations to us.~~

AsNot a result of the reacquisition of the rights and termination of the license agreement, we will now be responsible for all research and development costs associated with AGI-1067, along with the manufacture and commercialization of products that we develop containing AGI-1067applicable. ~~We currently~~ plan to undertake internally the development and commercialization of AGI-1067, although we may decide to enter into future collaborative agreements with third parties for all or part of that development and commercialization.

Item 8. Financial Statements and Supplementary Data ~~Manufacturing~~

We have entered into an arrangement with a third party manufacturer for the supply of AGI-1067 bulk drug substance and another third party manufacturer for the formulated drug product. The supplier of the bulk drug substance for AGI-1067 operates under current Good Manufacturing Practice guidelines using cost-effective and readily available materials and reliable processes. The starting material used in the manufacturing process of AGI-1067 is probucolATHEROGENICS, ~~which was once widely used in North America as a cholesterol-lowering agent, but has since been withdrawn from the North American market due to lack of efficacy~~INC. ~~Under the terms of our contract, our bulk~~ ~~drug~~INDEX ~~supplier~~TO isFINANCIAL ~~committed to manufacture sufficient quantities~~STATEMENTS ~~to support development activities for the foreseeable future.~~

Contents ~~After manufacture, a third party supplier~~ formulates AGI-1067 into the drug product under current Good Manufacturing Practice guidelines. We anticipate that this supplier will be able to provide sufficient formulated drug product to complete our ongoing and currently planned clinical trials.

We plan to establish manufacturing agreements with third parties that comply with Good Manufacturing Practice guidelines for bulk drug substance and oral or intravenous formulations of our other v-protectant product candidates, including AGIX-4207, AGIX-4207 I.V. and AGI-1096.


Report of Independent Registered Public Accounting Firm			11
Balance Sheets			12
Statements of Operations			13
Statements of Shareholders’ Deficit			14
Statements of Cash Flows			15
Notes to Financial Statements			16

10 ~~Sales and Marketing~~

WeTable plan to collaborate with large pharmaceutical companies to commercialize product candidates which are for patient or physician populations in broad markets. We believe that collaborating with large companies that have significant marketing and sales capabilities provides for optimal penetration into broad markets, particularly those areas that are highly competitive. In contrast, we plan to develop a sales force to commercialize the products targeted at appropriate patient and physician populations in narrow markets. By using our own sales and marketing organization, we believe we can retain a higher percentage of the profits generated from the sale of our products. Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ~~Competition~~

~~Developments~~The byBoard ~~others~~of ~~may~~Directors ~~render~~and ~~our~~Shareholders ~~product candidates~~of ~~obsolete~~AtheroGenics, ~~or noncompetitive~~Inc. ~~We face intense~~ competition from other companies for collaborative arrangements with pharmaceutical, biotechnology and medical device companies for establishing relationships with academic and research institutes and for licenses

13We have audited the accompanying balance sheets of AtheroGenics, Inc. (Debtor-in-Possession) (the Company) as of December 31, 2008 and 2007, and the related statements of operations, shareholders’ deficit and cash flows for each of the two years in the period ended December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

~~Table~~We conducted our audits in accordance with auditing standards of ~~Contents~~the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to ~~proprietary~~above ~~technology~~present fairly, in all material respects, the financial position of AtheroGenics, Inc. ~~These~~at ~~competitors~~December 31, 2008 and 2007, and the ~~either~~results ~~alone~~of orits inoperations ~~collaboration,~~and ~~may~~its ~~succeed~~cash flows for each of the two years in ~~developing~~the period ended ~~technologies~~December 31, or2008, ~~products~~in ~~that~~conformity ~~are~~with ~~more~~U.S. ~~effective~~generally ~~than~~accepted ~~ours~~accounting principles.

WeThe ~~believe~~accompanying ~~pharmaceutical,~~financial ~~biotechnology~~statements ~~and medical~~have ~~device~~been ~~companies~~prepared assuming that AtheroGenics, asInc. ~~well~~will continue as ~~academic~~a ~~and~~going ~~research institutions~~concern. ~~and~~As ~~government~~more ~~agencies,~~fully ~~have~~described ~~drug~~in ~~discovery~~Note ~~and development~~1, ~~programs~~the ~~related~~Company tois ~~our~~in ~~named~~Chapter 11 bankruptcy, ~~therapeutic~~has ~~areas~~sold ~~of interest.~~substantially ~~Many~~all of ~~these~~its ~~companies~~non-cash ~~and institutions~~assets, ~~including Aventis~~and ~~Pharmaceuticals,~~the ~~Inc.,~~bankruptcy ~~Genentech,~~court ~~Inc.,~~is ~~Johnson~~in &the ~~Johnson,~~process ~~and~~of ~~Novartis~~determining ~~AG,~~the ~~have~~plan ~~targeted~~of ~~indications~~distribution ~~that~~of ~~overlap significantly~~remaining ~~with~~cash ~~our targets~~ and ~~have~~cash ~~substantially~~equivalents ~~greater~~to ~~resources~~creditors. ~~than~~These weconditions ~~do.~~raise ~~They~~substantial ~~may,~~doubt ~~therefore,~~about ~~succeed~~the inCompany’s ability to continue as a ~~commercializing~~going ~~products~~concern. ~~before~~The wefinancial statements do ~~that~~not ~~compete~~include ~~with~~any usadjustments ~~on the~~that ~~basis~~might ofresult ~~efficacy,~~from ~~safety~~the outcome ~~and~~of ~~price~~this uncertainty.

~~Our~~/s/Ernst ~~ability~~& toYoung ~~compete is predicated on three related factors:~~ LLP

~~• First~~Atlanta, our scientists and their collaborators have pioneered the basic discoveries and research methodologies linking oxidant signals to vascular cell inflammation. These discoveries and research methodologies form the foundation for our proprietary drug discovery programs relating to chronic inflammation. • SecondGeorgia May 29, our scientific expertise, coupled with our expertise in clinical drug development, has enabled us to be the first company to conduct clinical trials of an orally-administered, small molecule v-protectant. We believe that our recently completed Phase II clinical trial demonstrates that we are maintaining this important first-to-clinic competitive advantage. • Third, we believe our scientific, development and licensing expertise strongly positions us to acquire promising technologies and products discovered outside AtheroGenics.2009

11 ~~Governmental Regulation~~

WeTable plan to develop prescription-only drugs for the foreseeable future. The U.S. Food and Drug Administration is the regulatory agency that is charged with the protection of people in the United States who take prescription medicines. Every country has a regulatory body with a similar mandate. In addition, the European Union has vested centralized authority in the European Medicines Evaluation Agency and Committee on Proprietary Medicinal Products to standardize review and approval across member nations. Contents

~~Regulatory agencies have established guidelines and regulations for the drug development process. This process involves several steps. First~~ATHEROGENICS, ~~the drug company must generate sufficient preclinical data to support initial human testing~~INC. In the United States, the drug company must submit an Investigational New Drug application prior to human testing. The Investigational New Drug application contains adequate data on product candidate chemistry, toxicology and metabolism and, where appropriate, animal research testing to support initial safety evaluation (Debtor-in ~~humans. In addition, the drug company provides to the FDA a clinical plan, including proposed use and testing in subjects comprising healthy volunteers and patients.~~ -Possession)

~~Clinical~~BALANCE ~~trials for a new product candidate~~SHEETS ~~usually proceed through four phases:~~

• Phase I clinical trials explore safety, blood levels, metabolism and the potential for interaction with other drugs. Phase I typically proceeds from healthy volunteers into patients with the target disease and comprises up to approximately 200 total subjects. • Phase II clinical trials establish a dose for future testing and marketing in an adequate number of patients with the target disease. The clinical trials may include hundreds of patients who have the target disease and who are receiving a range of background medications. In addition, Phase II clinical trials verify the mechanisms of action proposed preclinically. • Phase III clinical trials usually include two adequate and well controlled studies in the target population. For most chronic diseases, drug companies study a few thousand patients to assure a broadly applicable assessment of safety and efficacy.


	December 31,
	2008			2007
Assets
Current assets:
Cash and cash equivalents	$	49,966,104		$	74,795,388
Short-term investments		—			18,080,032
Accounts receivable		—			2,634,422
Prepaid expenses and other current assets		536,715			1,290,260

Total current assets		50,502,819			96,800,102

Equipment and leasehold improvements, net of accumulated depreciation and amortization		1,093,326			2,361,053
Debt issuance costs and other assets		—			3,977,873

Total assets	$	51,596,145		$	103,139,028


Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable	$	339,013		$	781,119
Accrued research and development		8,150			3,765,745
Accrued interest		—			2,876,150
Accrued compensation		157,257			2,258,051
Accrued and other liabilities		195,626			920,736
Current portion of convertible notes payable		—			35,968,750

Total current liabilities not subject to compromise		700,046			46,570,551

Liabilities subject to compromise		306,888,386			—
Convertible notes payable, net of current portion		—			252,163,102

Shareholders’ deficit:
Preferred stock, no par value: Authorized - 5,000,000 shares		—			—
Common stock, no par value:
Authorized - 100,000,000 shares; issued and outstanding - 39,518,492 shares at December 31, 2008 and 2007		219,030,853			215,243,310
Warrants		598,173			613,021
Accumulated deficit		(475,621,313	)		(411,465,815	)
Accumulated other comprehensive income		—			14,859

Total shareholders’ deficit		(255,992,287	)		(195,594,625	)

Total liabilities and shareholders’ deficit	$	51,596,145		$	103,139,028

AtThe ~~the~~accompanying ~~successful~~notes ~~conclusion~~are ofan ~~Phase~~integral ~~III,~~part ~~drug companies~~of ~~may~~these ~~submit~~financial ~~a product license application, called a New Drug Application in the United States~~statements. ~~Upon accepting the~~ ~~submission, the FDA or non-~~

1412

~~U.S. regulatory authorities review the file for completeness~~ATHEROGENICS, ~~accuracy and adherence to regulations~~INC. ~~These~~ authorities may use internal and external consultants and may convene an expert committee to advise on the safety, effectiveness and usefulness of the proposed new product candidate prior to final regulatory judgment. The final step to registration is approval of the package insert or label that defines what the drug company may promote to physicians who use the new drug. (Debtor-in-Possession)

•STATEMENTS ~~Phase~~OF IV clinical trials support marketing of the drug for its approved indication. Phase IV clinical trials generate data to allow promotion of the new drug in comparison with other approved drugs and to support healthcare economics claims. In addition, every pharmaceutical company is responsible for post-marketing surveillance for safety in the marketplace.OPERATIONS

We must meet regulatory standards prior to exposing subjects to any candidate drug product. We remain responsible for any of these development activities whether we perform them internally or contract them to a third party. The FDA may audit us or our third party contractors at any time to ascertain compliance with standards. The FDA may halt all ongoing work if it determines that we or our contractors have deviated significantly from these standards. These standards include:


	Year Ended December 31,
	2008			2007
Revenues:
License fees	$	—		$	27,083,333
Research and development		—			25,193,494

Total revenues		—			52,276,827

Operating expenses:
Research and development		25,915,956			72,696,066
Marketing, general and administrative		10,446,868			13,936,132
Restructuring and impairment costs		(821,000	)		9,996,332

Total operating expenses		35,541,824			96,628,530

Operating loss		(35,541,824	)		(44,351,703	)
Interest and other income		1,632,279			6,007,678
Interest expense		(9,452,040	)		(11,124,544	)

Net loss before reorganization items		(43,361,585	)		(49,468,569	)

Reorganization items, net		(20,793,913	)		—


Net loss	$	(64,155,498	)	$	(49,468,569	)


Net loss per share-basic and diluted	$	(1.62	)	$	(1.25	)

Weighted average shares outstanding-basic and diluted		39,518,492			39,500,154

•The ~~Good~~accompanying ~~Manufacturing~~notes Practices, which govern process chemistry, formulation, labeling and handling of a drug throughout its life cycle; • Good Laboratory Practices, which govern the use of a drug in animal studies to support establishment of safety or the disposition and metabolism of the administered drug and handling of human or other biological samples for drug assays; and • Good Clinical Practices, which govern the exposure of human subjects under our protocols. Good Clinical Practices set standards for the constitution and activities of institutional review boards that are ~~charged with assuring that the appropriate person gives informed consent prior to study participation and protect patients whether they receive~~ an ~~experimental~~integral ~~drug,~~part anof ~~approved~~these ~~drug,~~financial ~~or an inactive look-alike called a placebo~~statements.

13 Advertising is subject to FDA approval in the United States and national review elsewhere. In addition, state and local governments and other federal agencies may control marketing if the drug substance, formulation, package, intended use or disposal is subject to local regulation.

TheTable FDA has expanded its expedited review process in recognition that certain severe or life-threatening diseases and disorders have only limited treatment options. Fast track designation expedites the development process but places greater responsibility on a drug company during Phase IV clinical trials. The drug company may request fast track designation for one or more indications at any time during the Investigational New Drug application process, and the FDA must respond within 60 days. Fast track designation allows the drug company to develop product candidates and to request an accelerated or priority review of the New Drug Application based on clinical effectiveness in a smaller number of patients. If the FDA accepts the submission as a priority review, the time for New Drug Application review and approval is reduced from one year to six months. We plan to request fast track designation as appropriate for internal drug development programs. Contents

~~Research~~ATHEROGENICS, ~~and Development~~INC. (Debtor-in-Possession)

~~Our~~STATEMENTS ~~research~~OF ~~and~~SHAREHOLDERS’ ~~development expenses in 2001,~~DEFICIT ~~2000 and 1999 were $16.9 million, $12.8 million and $9.0 million, respectively.~~

Employees


											Accumulated
											Other			Total
	Common Stock							Accumulated			Comprehensive			Shareholders’
	Shares		Amount		Warrants			Deficit			(Loss) Income			Deficit
Balance at January 1, 2007		39,452,927	$	207,388,894	$	613,021		$	(361,997,246	)	$	7,682		$	(153,987,649	)
Issuance of common stock for exercise of stock options at $.30 to $.38 per share		65,565		23,075		—			—			—			23,075
Stock-based compensation		—		7,831,341		—			—			—			7,831,341
Net loss		—		—		—			(49,468,569	)		—			(49,468,569	)
Unrealized gain on available-for-sale securities		—		—		—			—			7,177			7,177

Comprehensive loss															(49,461,392	)

Balance at December 31, 2007		39,518,492		215,243,310		613,021			(411,465,815	)		14,859			(195,594,625	)
Expired warrants		—		14,848		(14,848	)		—			—			—
Stock-based compensation		—		3,772,695		—			—			—			3,772,695
Net loss		—		—		—			(64,155,498	)		—			(64,155,498	)
Change in unrealized gain on available-for-sale securities		—		—		—			—			(14,859	)		(14,859	)

Comprehensive loss															(64,170,357	)

Balance at December 31, 2008		39,518,492	$	219,030,853	$	598,173		$	(475,621,313	)	$	—		$	(255,992,287	)

~~We currently have 79 full-time employees, including 62 in research and development.~~ The ~~employee~~accompanying ~~group includes~~notes 24are ~~employees~~an ~~with~~integral ~~Ph.D.s,~~part ~~six~~of ~~with~~these ~~M.D.s~~financial ~~and 14 with Masters degrees~~statements. ~~We believe that our employee relations are good.~~

1514

~~Advisory~~ATHEROGENICS, ~~Boards~~INC. (Debtor-in-Possession)

WeSTATEMENTS ~~have~~OF ~~established~~CASH ~~advisory boards to provide~~FLOWS guidance and counsel on aspects of our business. These boards are convened once a year and individual members are contacted as required. Members of these boards provide input on product research and development strategy, education and publication plans. The names and members of these boards are as follows:

Scientific Advisory Board:


	Year Ended December 31,
	2008			2007
Operating activities
Net loss	$	(64,155,498	)	$	(49,468,569	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization on 2011 Notes		3,235,786			2,131,852
Write-off of discount and premium on 2011 Notes, net (included in reorganization costs)		16,499,112			—
Amortization of debt issuance costs		843,394			1,646,479
Write-off of debt issuance costs on 2012 Notes (included in reorganization costs)		3,134,479			—
Stock-based compensation		3,772,695			7,831,341
Depreciation and amortization		1,301,327			911,124
Amortization of deferred revenue		—			(27,083,333	)
Asset impairment costs		—			9,005,153
Changes in operating assets and liabilities:
Accounts receivable		2,634,422			3,903,470
Prepaid expenses		427,276			3,130,040
Interest receivable		326,269			261,216
Accounts payable		(365,321	)		(2,402,392	)
Accrued research and development		(2,761,003	)		(7,497,419	)
Accrued interest		(5,199	)		336,150
Accrued compensation		(2,100,794	)		792,407
Accrued and other liabilities		(179,052	)		129,075

Net cash used in operating activities		(37,392,107	)		(56,373,406	)

Investing activities
Sales and maturities of short-term investments		18,065,173			110,008,090
Purchases of short-term investments		—			(64,116,085	)
Purchases of equipment and leasehold improvements		(33,600	)		(2,592,365	)

Net cash provided by investing activities		18,031,573			43,299,640

Financing activities
Payment of convertible notes		(5,468,750	)		—
Proceeds from the exercise of common stock options		—			23,075

Net cash (used in) provided by financing activities		(5,468,750	)		23,075


Decrease in cash and cash equivalents		(24,829,284	)		(13,050,691	)
Cash and cash equivalents at beginning of year		74,795,388			87,846,079

Cash and cash equivalents at end of year	$	49,966,104		$	74,795,388


Supplemental disclosures of cash flow information
Interest paid	$	5,399,396		$	7,010,062
Reorganization items paid		1,160,322			—

R.The ~~Wayne~~accompanying ~~Alexander,~~notes ~~M.D.,~~are ~~Ph.D.,~~an ~~Chairman~~integral ~~Professor~~part ~~and Chairman~~ of ~~the~~these ~~Department~~financial ~~of Medicine, Emory University School of Medicine Victor J~~statements. Dzau, M.D. Hershey Professor of the Theory and Practice of Medicine and Chairman, Department of Medicine, Harvard Medical School and Physician in Chief and Director of Research, Brigham and Women’s Hospital Erwin W. Gelfand, M.D. Chairman, Department of Pediatrics, National Jewish Medical and Research Center David Harrison, M.D Director, Cardiology and Bernard Marcus Professor of Medicine, Emory University Gary L. Johnson, Ph.D Professor, Department of Pharmacology, University of Colorado Health Science Center Dennis Liotta, Ph.D Samuel Candler Dobbs Professor of Chemistry, Emory University School of Medicine Robert M. Nerem, Ph.D Director, Georgia Tech/ Emory Center (GTEC) for the Engineering of Living Tissues and Director, Parker H. Petit Institute for Bioengineering and Bioscience at Georgia Institute of Technology Robert D. Rosenberg, M.D., Ph.D Whitehead Professor of Biology, Massachusetts Institute of Technology and William B. Castle Professor of Medicine, Harvard Medical School

15 ~~Clinical Advisory Board:~~

WilliamTable Virgil Brown, M.D. Chief of Medicine and Primary Care, Veterans’ Affairs Medical Center, Emory University School of Medicine Harvey M. Golomb, M.D. Professor and Chairman, Department of Medicine, and Director, Section of Hematology/ Oncology, The University of Chicago Joseph L. Witzum, M.D. Professor of Medicine and Endocrinology, University of California at San DiegoContents

~~Forward-Looking~~NOTES ~~Statements~~TO ~~and~~FINANCIAL ~~Risks Related~~STATEMENTS ~~to Our Company and Business~~

~~The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of AtheroGenics~~1. ~~AtheroGenics~~Description and its representatives may from time to time make written or verbal forward-looking statements, including statements contained in this report and our other filings with the Securities and Exchange Commission and in our reports to our shareholders. Generally, the words, “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will” and similar expressions identify forward-looking statements. All statements which address operating performance, events or developments that we expect or anticipate will occur in the future, including projections of ~~our~~Business ~~future results of operations or of our financial condition, research, development~~ and ~~commercialization of~~Significant ~~our~~Accounting ~~product candidates, and~~Policies

16 Description of Business

~~Table~~ AtheroGenics, Inc. (“AtheroGenics”) was incorporated on November 23, 1993 (date of ~~Contents~~inception) in the State of Georgia to focus on the discovery, development and commercialization of novel therapeutics for the treatment of chronic inflammatory diseases, including diabetes and coronary heart disease.

On September 2, 2008, AtheroGenics announced that it would not repay the 4.5% Convertible ~~anticipated~~Notes ~~trends~~(the in“2008 ~~our~~Notes”) ~~business~~due September 2, ~~are~~2008. The failure to repay the 2008 Notes on maturity ~~forward-looking~~resulted ~~statements~~in ~~within~~an event of default under the ~~meaning~~indenture governing the 2008 Notes and created an event of default under the ~~Reform~~indentures ~~Act~~governing the 4. ~~The~~5% ~~forward-looking~~Convertible ~~statements~~Notes ~~are~~due 2011 (the “2011 Notes”) and ~~will~~the be1.5% ~~based~~Convertible onNotes ~~our~~due ~~then~~2012 (the “2012 Notes”). On September 15, 2008 an involuntary ~~current~~petition ~~views~~under ~~and~~Chapter 7 ~~assumptions~~of ~~regarding~~the ~~future~~United ~~events~~States ~~and~~Bankruptcy Code (the “Bankruptcy Code”) was filed ~~operating~~against ~~performance,~~AtheroGenics ~~and~~by ~~speak~~certain ~~only~~holders asof its 2008 Notes in the United States Bankruptcy Court for the Northern District of ~~their~~Georgia ~~dates~~(the “Bankruptcy Court”). WeOn October 6, 2008, AtheroGenics ~~undertake~~consented noto ~~obligation~~the bankruptcy filing and moved the Bankruptcy Court to ~~publicly~~convert ~~update~~the orChapter 7 ~~revise~~case ~~any~~to ~~forward-looking~~a ~~statements~~case under Chapter 11 of the Bankruptcy Code (the “Chapter 11 Proceeding”). On April 1, ~~whether~~2009, AtheroGenics assold asubstantially ~~result~~all of ~~new information~~its non-cash assets to Crabtree Acquisition Co., ~~future~~LLC ~~events~~(the “Purchaser”) orfor ~~otherwise~~$2 million as part of the Chapter 11 Proceeding (the “Asset Sale”).

AtheroGenics has filed a plan of liquidation with the Bankruptcy Court and, if this plan is ~~The~~approved ~~following~~by ~~are~~the ~~some~~Bankruptcy Court, AtheroGenics will distribute its cash and cash equivalents to the creditors. After this distribution is completed, AtheroGenics’ corporate existence will be terminated and its shares of common stock will be cancelled. Under the ~~factors~~priority ~~that~~scheme ~~could~~established ~~affect~~by ~~our~~the ~~financial~~Bankruptcy ~~performance~~Code, orAtheroGenics’ ~~could~~creditors ~~cause~~are ~~actual~~generally ~~results~~entitled to receive any distributions of its assets before the shareholders are entitled to ~~differ~~receive ~~materially~~any ~~from~~such ~~those~~proceeds. ~~expressed~~Since AtheroGenics’ orcash ~~implied~~and cash equivalents are significantly less than its prepetition liabilities, holders of the unsecured debt will receive substantially less than payment in ~~our~~full for their claims ~~forward-looking~~and ~~statements:~~AtheroGenics’ shareholders will receive no value for their shares of its common stock as part of the Chapter 11 Proceeding. The distribution and liquidation of AtheroGenics is expected to be completed in the third quarter of 2009. The accompanying financial statements do not reflect any adjustments related to the liquidation of the company that will be necessary if the company is unable to continue as a going concern.

If As ~~AGI~~a result of the Asset Sale and the Chapter 11 Proceeding, AtheroGenics is not currently conducting any business activities nor will it do so in the future. Even though AtheroGenics sold substantially all of its non-~~1067~~cash ~~fails~~assets in ~~clinical~~the ~~trials~~Asset Sale and has no operations, weit ~~may~~is ~~not~~nonetheless required to make certain filings, including this Annual Report on Form 10-K for the year ended December 31, 2008 (the “Form 10-K”), with the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, AtheroGenics is filing this Form 10-K solely to comply with SEC rules and nothing herein shall be ~~able~~construed to ~~generate~~suggest ~~future~~or ~~revenues~~imply that the shares of AtheroGenics’ common stock have any value or ~~become~~that ~~profitable~~its shareholders will receive any value for their shares of AtheroGenics’ common stock as part of the Chapter 11 Proceeding.

~~AGI-1067~~ Use isof ~~our lead compound. This compound~~Estimates could fail in clinical trials if we show it is ineffective or causes unacceptable side effects in the patients we treated. Failure in clinical trials for AGI-1067 would have a material adverse effect on our ability to generate revenue or become profitable.

We The ~~have~~preparation aof ~~history~~the offinancial ~~operating~~statements ~~losses,~~in ~~and~~conformity wewith ~~may~~U.S. ~~not~~generally ~~generate~~accepted accounting ~~revenue~~principles or(“GAAP”) ~~achieve~~requires ~~profitability~~management to make estimates and assumptions that affect the amounts reported in the ~~future~~financial statements and accompanying notes. Actual results could differ from those estimates.

~~Our~~ Cash ~~ability to generate revenue~~ and ~~achieve profitability~~Cash ~~depends on our ability, alone or with~~Equivalents collaborators, to complete successfully the development of our product candidates, conduct preclinical tests in animals and clinical trials in human beings, obtain the necessary regulatory approvals, and manufacture and market the resulting drugs. We have experienced operating losses since we began operations in 1994. As of December 31, 2001, we had an accumulated deficit of approximately $61.3 million. We expect to incur additional operating losses over the next several years and expect cumulative losses to increase substantially as our research and development, preclinical, clinical, manufacturing and marketing efforts expand. Except for an initial licensing fee and research and development revenue that Schering-Plough paid to us, we have had no significant revenue to date.

If AtheroGenics weconsiders doall ~~not~~highly ~~successfully~~liquid ~~develop~~investments ~~our~~with ~~other~~a ~~product~~maturity ~~candidates,~~of wethree ~~will~~months ~~have~~or ~~limited~~less when ~~ability~~purchased to ~~generate~~be ~~revenue~~cash equivalents. AtheroGenics’ cash equivalents consist primarily of money market accounts, commercial paper, government agency notes and corporate notes on deposit with several financial institutions, and the carrying amounts reported in the balance sheets approximate their fair value.

All of our other programs are in early stages of development, and subject to the risks of failure inherent in developing drug products based on new technologies. We do not expect any of our potential product candidates to be commercially available until at least 2005. In addition, other than AGIX Short-~~4207,~~Term ~~AGIX-4207 I.V. and AGI-1096, product candidates~~Investments ~~for which we are currently in Phase I clinical trials, our drug discovery efforts may not produce any other proprietary product candidates.~~

We Short-term ~~will~~investments ~~not~~consisted beof ~~able~~commercial topaper, ~~commercialize~~corporate ~~our~~notes ~~product~~and ~~candidates~~government ifagency notes wewith ~~fail~~original tomaturities ~~demonstrate~~of ~~adequately~~greater ~~their~~than ~~safety~~three ~~and~~months ~~efficacy~~when purchased.

WeManagement ~~cannot~~determines ~~assure~~the ~~you~~appropriate ~~that~~classification ~~any~~of ~~product~~debt ~~candidate we~~securities ~~develop,~~at ~~alone~~the ortime ~~with others, will prove safe and effective~~of inpurchase ~~clinical trials~~ and ~~will~~reevaluates ~~meet~~such ~~all~~designation as of ~~the~~each ~~applicable regulatory~~balance ~~requirements~~sheet ~~needed to receive regulatory approval~~date. We ~~will~~These ~~need~~investments ~~to conduct significant research, preclinical~~are ~~testing~~accounted ~~and~~for ~~clinical~~in ~~trials~~accordance ~~before we can file product approval applications~~ with ~~the~~Statement ~~FDA~~of ~~and~~Financial ~~similar~~Accounting ~~regulatory~~Standards, ~~authorities~~(“SFAS”) inNo. 115, ~~other~~Accounting ~~countries.~~for ~~Preclinical~~Certain ~~testing~~Investments ~~and~~in ~~clinical~~Debt ~~trials are long, expensive~~ and ~~uncertain~~Equity ~~processes~~Securities. WeAtheroGenics ~~may~~has ~~spend~~classified ~~several~~all ~~years~~investments ~~completing our testing for any particular product~~as ~~candidate, and failure can occur at any stage.~~

16 The FDA or we may suspend our clinical trials at any time if either of us believes that we are exposing the subjects participating in these trials to unacceptable health risks. The FDA or institutional review boards at the medical institutions and healthcare facilities where we sponsor clinical trials may suspend any trial indefinitely if they find deficiencies in the conduct of these trials. We must conduct clinical trials in accordance with the FDA’s Good Clinical Practices. The FDA and these institutional review boards have authority to oversee our clinical trials and the FDA may require large numbers of test subjects. In addition, we must manufacture the product candidates that we use in our clinical trials under the FDA’s Good Manufacturing Practices.

17 Table of Contents

~~Table~~available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of ~~Contents~~tax, reported in a separate component of shareholders’ deficit. Realized gains and losses are included in investment income and are determined on a specific identification basis.

~~Even~~ Fair ifValue weof ~~achieve~~Financial ~~positive~~Instruments ~~results~~and inConcentration ~~early clinical trials, these results do not necessarily predict final results. A number~~ of ~~companies~~Credit ~~in the pharmaceutical industry~~Risk have suffered significant setbacks in advanced clinical trials, even after achieving positive results in earlier trials. Negative or inconclusive results or adverse medical events during a clinical trial could cause the FDA or us to terminate a clinical trial or require that we repeat it.

~~Also,~~Financial ~~even~~instruments ifthat ~~the~~subject ~~FDA~~AtheroGenics ~~approves~~to aconcentration ~~New~~of ~~Drug Application~~credit ~~for~~risk ~~any~~consist primarily of ~~our product candidates~~cash, ~~the~~cash ~~resulting product~~equivalents ~~may~~and ~~not~~short-term beinvestments ~~accepted~~and inconvertible ~~the~~notes ~~marketplace~~payable. ~~Physicians, patients,~~These ~~payors~~assets orare ~~the~~maintained ~~medical~~by reputable ~~community~~third inparty ~~general~~financial ~~may~~institution ~~be unwilling~~custodians. toThe ~~accept,~~carrying ~~utilize~~values orreported ~~recommend~~in ~~any~~the balance ofsheets ~~our~~for ~~products. In addition~~cash, ~~after~~cash ~~approval~~equivalents and ~~use~~short-term ininvestments anapproximate ~~increasing~~fair ~~number~~values. The fair value of the convertible ~~patients,~~notes ~~our~~payable ~~products~~is ~~could~~substantially ~~show~~less ~~side~~than ~~effect~~carrying ~~profiles~~value. ~~that limit~~The ~~their~~Company ~~usefulness~~has orestimated ~~require~~the ~~their~~fair ~~withdrawal~~value ~~although~~of the convertible ~~drugs~~notes ~~did~~payable ~~not~~to ~~show~~be ~~the~~approximately ~~side~~$42.3 ~~effect~~million ~~profile~~as inof ~~Phase I through~~December ~~Phase III~~31, ~~clinical trials~~2008.

We Accounts ~~may experience delays in our clinical trials that could adversely affect our financial results and our commercial prospects.~~Receivable

WeAccounts doreceivable ~~not~~consisted ~~know~~primarily ~~whether planned clinical trials will begin on time or whether we will complete any~~ of ~~our clinical~~receivables ~~trials~~related ~~on schedule or at all. Product development costs~~ to ~~us and~~ our ~~collaborators~~license ~~will increase if we have delays in testing or approvals or if we need to perform more or larger clinical trials than planned. Significant delays may adversely affect our financial results~~ and ~~the commercial prospects for~~ ~~our~~collaboration ~~products,~~agreement ~~and~~with ~~delay~~AstraZeneca ~~our~~(See ~~ability~~Note ~~to become profitable~~2). We typically rely on third party clinical investigators at medical institutions and healthcare facilities to conduct our clinical trials and, as a result, we may face additional delaying factors outside our control.

~~Because~~ Equipment weand ~~cannot~~Leasehold ~~predict whether or when we will obtain regulatory approval to commercialize our product candidates, we cannot predict the timing of any future revenue from these product candidates.~~Improvements

WeEquipment ~~cannot~~and ~~commercialize~~leasehold ~~any~~improvements ofare ~~our~~stated ~~product candidates,~~at ~~including~~cost. ~~AGI-1067,~~Depreciation ~~AGIX-4207,~~of ~~AGIX-4207~~computer ~~I.V.~~ and ~~AGI-1096,~~ ~~until the appropriate regulatory authorities have~~lab ~~reviewed~~equipment ~~and~~is ~~approved~~computed ~~the~~using ~~applications for~~ the ~~product candidates.~~straight-line Wemethod ~~cannot~~over ~~assure you that~~ the ~~regulatory~~estimated ~~agencies will~~useful ~~complete~~lives ~~their~~of ~~review~~three ~~processes in a timely manner or that~~and wefive ~~will~~years, ~~obtain regulatory approval for any product candidate we or our collaborators develop~~respectively. ~~Satisfaction~~Amortization of ~~regulatory requirements~~leasehold ~~typically~~improvements ~~takes many years,~~ is ~~dependent~~recorded ~~upon~~over the ~~type,~~ ~~complexity~~shorter ~~and novelty~~ of ~~the product and requires the~~: ~~expenditure of substantial resources. Regulatory approval processes outside~~ (a) the ~~United~~estimated ~~States~~useful ~~include~~lives ~~all~~ of the ~~risks associated~~related ~~with~~assets; ~~the FDA approval process. In addition, we may experience delays~~ or ~~rejections based upon additional government regulation from future legislation or administrative action or changes in FDA policy during~~ (b) the ~~period~~lease ~~of product development, clinical trials and FDA regulatory review~~term.

If Research ~~we do not comply with applicable regulatory requirements in the manufacture~~ and ~~distribution~~Development ~~of our products, we may incur penalties that may inhibit our ability to commercialize our products and adversely affect our revenue.~~Accrual

~~Our~~As ~~failure~~part toof ~~comply~~the ~~with~~process ~~applicable~~of ~~FDA~~preparing ~~or other~~its ~~regulatory~~financial ~~requirements~~statements, ~~including~~AtheroGenics ~~manufacturing,~~is ~~quality~~required to ~~control,~~estimate ~~labeling,~~expenses ~~safety~~that ~~surveillance,~~it ~~promoting~~believes it has incurred, ~~and~~but ~~reporting~~has not yet been billed for. This process ~~may~~involves ~~result~~identifying inservices ~~criminal~~and ~~prosecution,~~activities ~~civil~~that ~~penalties,~~have ~~recall~~been orperformed by third party vendors on its ~~seizure~~behalf ofand ~~our~~estimating ~~products,~~the ~~total~~level orto ~~partial~~which ~~suspension~~they ~~of production~~have orbeen anperformed ~~injunction,~~and asthe ~~well~~associated cost incurred for such service as ~~other~~of ~~regulatory~~each ~~action against~~balance ~~our~~sheet ~~potential~~date ~~products~~in orits usfinancial statements. ~~Discovery~~Examples of ~~previously~~expenses ~~unknown~~for ~~problems~~which ~~with~~AtheroGenics aaccrues ~~product,~~include ~~supplier~~fees for professional services, ~~manufacturer~~such oras those provided by ~~facility~~certain ~~may~~clinical ~~result~~research organizations and investigators in ~~restrictions~~conjunction onwith clinical trials, and fees owed to contract manufacturers in conjunction with the ~~sale~~manufacture of ~~our~~clinical ~~products,~~trial ~~including~~materials. aAtheroGenics ~~withdrawal~~made these estimates based upon progress of ~~such~~activities ~~products~~related ~~from~~to contractual ~~the~~obligations ~~market~~and also information received from vendors.

We Liabilities ~~will~~Subject ~~incur~~to ~~additional~~Compromise ~~expenses for research~~ and ~~development~~Reorganization of AGI-1067 as a result of the termination of our license agreement with Schering-Plough, which could adversely impact our development of other product candidates and could materially adversely affect our financial liquidity.Items

~~Because~~The weFinancial Statements have ~~terminated~~been ~~our~~prepared ~~exclusive~~in ~~license agreement~~accordance with ~~Schering~~Statement of Position (“SOP”) 90-~~Plough~~7, weFinancial ~~will~~Reporting ~~now~~by beEntities ~~responsible~~under ~~for~~the Bankruptcy Code. SOP 90-7 does not ordinarily ~~all~~affect ofor change the ~~costs~~application ~~related~~of GAAP; however, it does require AtheroGenics to distinguish transactions and events that are directly associated with the ~~continuing~~reorganization ~~research~~in ~~and~~connection with the ~~development~~Chapter 11 Proceeding from the ongoing operations of ~~AGI-1067~~the business. AtheroGenics has recognized certain charges for allowed claims or expected allowed claims in the financial statements as of and for the twelve months ended December 31, 2008. The Balance Sheet discloses the prepetition current liabilities subject to compromise, which are liabilities that were incurred but not paid prior to the September 15, 2008 date of the bankruptcy filing. The reorganization items on the Statement of Operations consist of expenses that would not have been incurred except for the bankruptcy filing. The Bankruptcy Court will ultimately determine liability amounts that will be allowed for claims. As claims are resolved, or when better information becomes available and is evaluated, adjustments will be made to the liabilities recorded on the Financial Statements as appropriate.

18 The amounts of liabilities subject to compromise recorded on the Balance Sheet as of December 31, 2008 consisted of the following:


Accounts payable	$	76,785
Accrued interest		2,870,951
Accrued research and development		996,592
Accrued other		546,058
4.5% convertible notes due 2008		30,500,000
4.5% convertible notes due 2011		71,898,000
1.5% convertible notes due 2012		200,000,000

Total liabilities subject to compromise	$	306,888,386

17 previously reimbursed by Schering-Plough under the terms of the license agreement. These additional research and development expenses will result in the reduction of our available cash, which could adversely impact our ability to commence or continue other research and development projects, or could cause delays in the development of AGI-1067 or other projects.

OurTable failure to protect adequately or enforce our intellectual property rights or secure rights to third party patents could materially adversely affect our proprietary position in the marketplace or prevent the commercialization of our products.Contents

~~Our~~The ~~patent~~reorganization ~~position,~~items ~~like~~recorded ~~that~~in ofthe ~~many pharmaceutical~~Statement ~~companies,~~of isOperations ~~uncertain and involves complex legal and factual questions~~ for ~~which~~the ~~important~~twelve ~~legal~~months ~~principles~~ended ~~are unresolved. In addition~~December 31, we2008 ~~may~~consisted ~~not~~of be able to obtain patent rights on products, treatment methods or manufacturing processes that we may develop or to which we may obtain license or other rights. Even if we do obtain patents, they may not adequately protect the ~~technology we own or in-license. In addition, others~~following: ~~may challenge, seek to invalidate, infringe or circumvent any patents we own or in-license, and rights we receive under those patents may not provide competitive advantages to us.~~

Our commercial success will depend in part on our ability to manufacture, use, sell and offer to sell our product candidates and proposed product candidates without infringing patents or other proprietary rights of others. We may not be aware of all patents or patent applications that may impact our ability to make, use or sell any of our product candidates or proposed product candidates. For example, U.S. patent applications do not publish until 18 months from their priority date. Further, we may not be aware of published or granted conflicting patent rights. Any conflicts resulting from patent applications and patents of others could significantly reduce the coverage of our patents and limit our ability to obtain meaningful patent protection. If others obtain patents with conflicting claims, we may need to obtain licenses to these patents or to develop or obtain alternative technology. We may not be able to obtain any licenses or other rights to patents, technology or know-how necessary to conduct our business as described in this report. Any failure to obtain such licenses could delay or prevent us from developing or commercializing our drug candidates or proposed product candidates, which would adversely affect our business.


Discount on the 4.5% convertible notes due 2011	$	(16,934,684	)
Premium on the 4.5% convertible notes due 2011		435,572
Debt issuance costs on the 1.5% convertible notes due 2012		(3,134,479	)
Professional fees		(1,415,727	)
Interest income		255,405

Total reorganization items, net	$	(20,793,913	)

~~Litigation~~ Revenue ~~or patent interference proceedings may~~Recognition ~~be necessary to enforce any of our patents or other proprietary~~ rights, or to determine the scope and validity or enforceability of the proprietary rights of others. The defense and prosecution of patent and intellectual property claims are both costly and time consuming, even if the outcome is favorable to us. Any adverse outcome could subject us to significant liabilities, require us to license disputed rights from others, or require us to cease selling our future products.

~~Our~~AtheroGenics ~~commercial~~recognizes ~~success~~revenue ~~will~~in ~~also~~accordance ~~depend~~with onthe ~~our ability~~Securities ~~to manufacture, use, sell~~ and ~~offer~~Exchange ~~to sell our product~~Commission’s ~~candidates~~Staff ~~and~~Accounting ~~proposed~~Bulletin ~~product~~(“SAB”) ~~candidates without breaching our agreements with our patent licensees~~No. ~~We have obtained exclusive licenses to technologies from Emory University~~ 101, ~~covering~~Revenue ~~aspects of~~Recognition ~~our~~in ~~v-protectant~~Financial ~~technology; The Regents of the University of California~~Statements, ~~covering~~as ~~aspects of our diagnostic technology; and~~amended ~~National~~by ~~Jewish,~~Staff ~~covering~~Accounting ~~aspects~~Bulletin ~~of our new MEKK technology platform~~No. ~~Our exclusive license with Emory University requires us to take steps to commercialize the licensed technology in a timely manner. If we fail to meet these obligations~~ 104, ~~Emory University~~Revenue ~~can convert our exclusive license to a non-exclusive license~~Recognition, ~~can~~(“SAB ~~grant others non-exclusive rights in the licensed technology or can require us to sublicense aspects of the licensed technology~~104”). ~~Our~~SAB ~~license~~104 ~~agreement~~provides ~~with The Regents of~~guidance ~~the~~in ~~University~~applying ofGAAP ~~California also includes a requirement that we develop the licensed technology within certain time limits. If we fail~~ to ~~meet~~revenue ~~these~~recognition ~~time limits~~issues, ~~they~~and ~~can~~specifically ~~terminate~~addresses ~~our license.~~revenue ~~Further,~~recognition ~~The Regents of University of California are primarily responsible~~ for ~~patent prosecution of the technology~~ ~~we license from them~~upfront, ~~and~~nonrefundable wefees ~~are~~received ~~required to reimburse them for the costs they incur~~ in ~~performing~~connection ~~these activities. As a result, we do not have the ability to control these activities. Our license agreement~~ with ~~National~~research ~~Jewish~~collaboration ~~requires us to develop the licensed technology in a timely manner~~agreements. ~~If we fail~~ ~~to meet these obligations, some or all of the licensed technology may revert to National Jewish.~~

In accordance with SAB 104, license fees, which are nonrefundable, are recognized when the Werelated ~~also~~license ~~rely~~agreements ~~upon~~specify ~~trade~~that ~~secrets~~no further efforts or obligations are required. In February 2006, ~~proprietary~~AtheroGenics received a $50,000,000 license fee in connection with its license and ~~know~~collaboration agreement with AstraZeneca. The upfront nonrefundable license payment was being recognized on a straight-~~how~~line ~~and~~basis ~~technological~~over ~~advances~~the ~~which~~24-month weperiod ~~seek~~that toAtheroGenics ~~protect~~estimated it was ~~through~~obligated ~~agreements~~to ~~with~~provide ~~our~~services ~~collaborators~~to the licensee. In April 2007, ~~employees~~AstraZeneca announced that it was ending the license and collaboration agreements and any further obligations required of ~~consultants~~AtheroGenics. ~~These~~As ~~persons~~such, ~~and~~the ~~entities~~remaining balance of approximately $20,800,000 in deferred revenue related to the license fee was recognized as revenue.

During 2006, AstraZeneca separately engaged AtheroGenics to conduct the FOCUS (Follow-up Of Clinical Outcomes: The Long-term AGI-1067 Plus Usual Care Study) clinical trial. Revenues under the research and development agreement pertaining to clinical trials are recognized in accordance with SAB 104 and Emerging Issues Task Force (“EITF”) Issue No. 99-19, Reporting Gross Revenue as a Principal vs. Net as an Agent (“EITF 99-19”). According to the criteria established by EITF. 99-19, AtheroGenics is the primary obligor of the agreement because it is responsible for the selection, negotiation, contracting and payment of the third party suppliers. In addition, any liabilities resulting from the agreement are the responsibility of AtheroGenics. Research and development revenues are recognized, on a gross basis, as activities are performed under the terms of the related agreement. The FOCUS clinical trial, which has concluded, was fully funded by AstraZeneca.

~~Table~~ Research ofand ~~Contents~~Development and Patent Costs

~~could~~ Research ~~breach~~and ~~our~~development ~~agreements~~costs, ~~for~~including ~~which~~all werelated ~~may~~salaries, ~~not have~~clinical ~~adequate~~trial ~~remedies. In addition~~expenses, facility ~~others~~costs ~~could~~and ~~become~~expenditures ~~aware of~~related ~~our~~to ~~trade~~obtaining ~~secrets~~patents, orare ~~proprietary~~charged ~~know-how~~to ~~through~~expense ~~independent discovery~~when ~~or otherwise~~incurred.

If Restructuring ~~our competitors develop~~ and ~~market~~Impairment ~~anti-inflammatory products that are more effective, have fewer side effects or are less expensive than our current or future product candidates, we may have limited commercial opportunities.~~Costs

~~Our~~In ~~competitors~~May 2007, ~~include~~AtheroGenics ~~large~~implemented ~~pharmaceutical~~an ~~and medical~~organizational ~~device~~restructuring ~~companies~~plan ~~and~~that ~~more~~reduced ~~established biotechnology~~its ~~companies.~~workforce ~~These~~by ~~competitors~~approximately ~~have~~50% ~~significant~~to ~~resources~~67 ~~and expertise~~employees. inThis ~~research~~action ~~and~~was ~~development,~~designed ~~manufacturing,~~to ~~testing,~~streamline company ~~obtaining~~operations ~~regulatory approvals~~ and ~~marketing.~~was ~~Potential competitors~~the ~~also~~first ~~include~~step ~~academic~~in ~~institutions,~~the ~~government agencies,~~strategic ~~and~~plan ~~other~~to ~~public~~continue ~~and~~advancing ~~private~~the ~~research~~development ~~organizations~~of ~~that~~AGI-1067. ~~conduct~~As ~~research~~a result, ~~seek~~in ~~patent~~accordance ~~protection~~with ~~and~~SFAS ~~establish collaborative~~146, ~~arrangements~~Accounting for ~~research,~~Costs ~~development, manufacturing~~Associated ~~and~~with ~~commercialization.~~Exit Itor Disposal isActivities, ~~possible~~AtheroGenics ~~that~~recorded ~~any~~a charge of ~~these~~ ~~competitors~~approximately ~~could~~$1,000,000 ~~develop~~for ~~technologies~~severance ~~or products that~~in ~~would~~the ~~render~~second ~~our~~quarter ~~technologies~~of or2007. ~~product~~As ~~candidates~~of ~~obsolete~~December 31, ~~or non-competitive~~2007, ~~which~~all ~~could~~of ~~adversely~~the ~~affect~~severance ~~our~~had ~~revenue potential~~been paid.

~~Third~~ In ~~parties’~~addition ~~failure~~ to ~~synthesize~~the ~~and~~reduction ~~manufacture~~in ~~our~~workforce, ~~product~~AtheroGenics ~~candidates~~determined tothat ~~our~~in ~~specifications~~accordance ~~could~~with SFAS ~~delay~~144, ~~our~~Accounting ~~clinical~~for ~~trials~~the Impairment or ~~hinder~~Disposal ~~our~~of ~~commercialization~~Long-Lived ~~prospects~~Assets, (“SFAS 144”) certain excess laboratory equipment and related leasehold improvements, as well as commercial manufacturing equipment had been impaired. As AtheroGenics has no assurance that such assets will be utilized, an impairment test was performed in accordance with SFAS 144 based on estimates of cash flows associated with the equipment. Based on the results of this impairment test, AtheroGenics recorded a non-cash impairment charge of approximately $9,000,000 in the second quarter of 2007.

18 We currently have no manufacturing facilities to synthesize or manufacture our product candidates, nor do we intend to develop these capabilities in the near future. Our reliance on third parties for these services exposes us to several risks that could delay our clinical trials or hinder our commercialization prospects. These risks include the following:

•Table A finding that a third party did not comply with applicable governmental regulations. Manufacturers of pharmaceutical products are subject to continual review and periodic inspections by regulatory agencies. Failure of one of our third party manufacturers to comply with applicable regulatory requirements, whether or not related to our product candidates, could result in sanctions against our potential products, including recall or seizure, total or partial suspension of production or injunction. • A failure to synthesize and manufacture our product candidates in accordance with our product specifications. For example, a starting material used in the manufacturing process of AGI-1067 is probucol, which physicians previously prescribed as a cholesterol-lowering agent but which its manufacturer withdrew from the market for efficacy reasons. The occurrence of a rare side effect with chronic dosing of probucol requires that we maintain a very low maximal amount of probucol in the manufacture of AGI-1067. • A failure to deliver product candidates in sufficient quantities or in a timely manner. Any failure by our third party manufacturers to supply our requirements for clinical trial materials or supply these materials in a timely manner could jeopardize the scheduled initiation or completion of these clinical trials and could have a material adverse effect on our ability to generate revenue.Contents

In Stock-Based ~~addition, our continued dependence on third~~Compensation parties for the synthesis and manufacture of our future products may subject us to costs outside of our control, which could adversely affect our future profitability and our ability to commercialize products on a timely and competitive basis.

If On weJanuary 1, ~~are~~2006, ~~unable~~AtheroGenics toadopted ~~create~~SFAS ~~sales~~No. 123(R), ~~marketing~~Share-Based ~~and~~Payment, ~~distribution~~(“SFAS ~~capabilities~~123(R)”) which orrequires ~~enter~~that ~~into~~companies ~~agreements~~recognize expense associated with ~~third~~stock ~~parties~~option grants and other equity instruments to ~~perform~~employees ~~these~~in ~~functions,~~the wefinancial ~~will~~statements. ~~not~~AtheroGenics beadopted ~~able~~SFAS 123(R) using the modified prospective method and uses the Black-Scholes option valuation model to ~~commercialize~~measure the ~~our~~fair ~~future~~value ~~product~~of ~~candidates~~share-based payments. SFAS 123(R) applies to all grants after the effective date and to the unvested portion of stock options outstanding as of the effective date.

WeFor ~~currently~~the ~~have~~years noended ~~sales~~December 31, ~~marketing~~2008 ~~or distribution~~and ~~capabilities. Therefore~~2007, inAtheroGenics ~~order~~recorded toapproximately ~~commercialize~~$3,800,000 ~~our~~and ~~product~~$7,800,000, ~~candidates~~respectively, weof ~~must~~employee ~~either~~stock-based ~~develop~~compensation ~~our~~expense. ~~own~~AtheroGenics ~~sales, marketing~~has ~~and~~a ~~distribution~~net ~~capabilities~~operating orloss carryforward ~~collaborate~~as ~~with~~of ~~a third~~December 31, ~~party~~2008 toand ~~perform~~2007, ~~these~~and ~~functions.~~therefore Weno ~~have~~excess notax ~~experience~~benefits infor tax ~~developing,~~deductions ~~training~~related orto ~~managing~~the astock ~~sales~~options ~~force~~were ~~and~~recognized. ~~will~~As ~~incur~~of December 31, 2008, unamortized ~~substantial~~stock-based ~~additional~~compensation expenses inof ~~doing~~approximately ~~so.~~$5,400,000 ~~The~~remain ~~cost~~to ~~of establishing~~be ~~and~~recognized ~~maintaining~~based on a weighted ~~sales~~average ~~force~~period ~~may~~of ~~exceed~~approximately ~~its~~two ~~cost effectiveness.~~years Inprior ~~addition,~~to wethe ~~will~~consideration ~~compete~~of ~~with~~employee ~~many~~departures ~~companies~~in 2009.

20 For the years ended December 31, 2008 and 2007, AtheroGenics calculated a forfeiture rate of 27.61% and 10.31%, respectively, based on historical data. Expected volatility is based on historical volatility of AtheroGenics’ common stock. The expected term of the stock options granted is also based on historical data and represents the period of time that stock options granted are expected to be outstanding. The risk free interest rate is based on the U.S. Treasury rates in effect at the time of the grant for periods corresponding with the expected term of the options. For stock options granted during the twelve months ended December 31, 2008 and 2007 the following weighted average assumptions were used:


	2008			2007
Expected life	5 years			4 years
Risk-free interest rate		3.2	%		4.3	%
Volatility		89.14	%		83.7	%
Fair value of grants	$	0.41		$	0.94

~~that~~ Income ~~currently have extensive and well-funded~~Taxes ~~marketing and sales operations. Our marketing and sales efforts~~ ~~may be unable to compete successfully against these companies.~~

The liability method is used in accounting for income taxes. Deferred income tax assets and Toliabilities ~~the~~are ~~extent~~determined webased ~~seek~~on ~~sales,~~differences ~~marketing~~between financial reporting and tax bases of assets ~~distribution~~and ~~alliances~~liabilities ~~for~~and ~~our~~are ~~future~~measured ~~products,~~using wethe ~~face~~enacted ~~risks~~tax rates and laws that are expected to be in ~~including~~effect when the ~~following:~~differences are anticipated to reverse.

• Comprehensive weIncome may not be able to find collaborators, enter into alliances on favorable terms or enter into alliances that will be commercially successful; • any collaborator might, at its discretion, limit the amount of resources and time it devotes to marketing our products; and • any collaborator may terminate its agreement with us and abandon our products at any time for any reason, regardless of the terms of the agreement.(Loss)

~~Our~~ AtheroGenics ~~failure~~computes tocomprehensive ~~attract~~income (loss) in accordance with SFAS No. 130, ~~retain~~Reporting Comprehensive Income (“SFAS 130”). SFAS 130 establishes standards for the reporting and ~~motivate~~display ~~skilled~~of comprehensive ~~personnel~~income (loss) and ~~cultivate~~its ~~key~~components ~~academic~~in ~~collaborations~~the ~~could~~financial ~~materially~~statements. ~~adversely~~Comprehensive ~~affect~~income (loss), ~~our~~as ~~research~~defined, includes all changes in equity during a period from non-owner sources, such as unrealized gains and ~~development~~losses ~~efforts~~on available-for-sale securities. Comprehensive loss was $64,170,357 and $49,461,392 for the years ended December 31, 2008 and 2007, respectively.

We Recently ~~are~~Issued aAccounting ~~small company with 79 full-time~~Standards ~~employees. If we are unable to continue to attract, retain and~~ motivate highly qualified management and scientific personnel and to develop and maintain important relationships with leading academic institutions and scientists, we may not be able to achieve our research and development objectives. Competition for personnel and academic collaborations is intense. Loss of the services of any of our key scientific personnel and, in particular, Dr. Russell M. Medford, our President and Chief Executive Officer, could adversely affect progress of our research and development programs. Dr. Medford is the only employee with whom we have an employment agreement.

If In weSeptember 2006, ~~need~~the ~~additional~~Financial ~~financing~~Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements, (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and ~~cannot~~expands ~~obtain~~disclosures itabout fair value measurements. Available-for-sale securities are reflected on AtheroGenics Balance Sheet in short-term investments and related gains and losses are recorded in accumulated other comprehensive gain. The adoption of SFAS 157 on January 1, we2008 ~~may~~did not behave ~~able~~an toimpact ~~develop~~on orAtheroGenics’ ~~market~~financial ~~our products~~statements.

~~We may encounter increased costs due to unanticipated changes in our product development or commercialization plans~~2. ~~If these costs exceed our available~~Collaborations funds, we will need to seek additional financing. If additional funds are not available, we may need to delay clinical studies, curtail operations or obtain funds through collaborative arrangements that may require us to relinquish rights to certain of our products or potential markets.

~~Our~~ In ~~failure~~2005, toAtheroGenics ~~obtain~~announced a license and collaboration agreement with AstraZeneca for the global development and commercialization of AGI-1067. Under the terms of the agreement, AtheroGenics received an ~~adequate~~upfront ~~level~~nonrefundable license fee of ~~reimbursement~~$50,000,000 orand, ~~acceptable~~subject ~~prices~~to ~~for~~the achievement ~~our~~of ~~products~~specific ~~could~~milestones ~~diminish~~including ~~our~~a ~~revenues.~~successful outcome in ARISE (Aggressive Reduction

19 ~~Our ability to commercialize our future products successfully, alone or with collaborators, will depend in part on the extent to which reimbursement for the products will be available from:~~

•Table governmentof and health administration authorities; • private health insurers; and • other third party payors.Contents

~~Government~~of Inflammation Stops Events), AtheroGenics was eligible for development and ~~other~~regulatory ~~third~~milestones of ~~party~~up ~~payors~~to an aggregate of $300,000,000. The agreement also provided for progressively demanding ~~increasingly~~sales ~~are~~performance ~~attempting~~related milestones of up to ~~contain~~an ~~healthcare~~additional ~~costs~~$650,000,000 byin the aggregate. In ~~limiting~~addition, ~~both~~AtheroGenics ~~coverage~~was ~~and~~to ~~the~~receive ~~level~~royalties ofon ~~reimbursement~~product ~~for~~sales. ~~new~~AstraZeneca was responsible for ~~drugs~~supplying all of the manufacturing, packaging and labeling. ~~Third~~AstraZeneca ~~party~~had ~~private~~the ~~health~~right ~~insurance~~to ~~coverage~~terminate the ~~may~~license ~~not~~and becollaboration agreement at specified periods. In April 2007, AstraZeneca notified ~~available~~AtheroGenics tothat ~~patients~~pursuant ~~for~~to ~~any~~the terms of ~~our~~the ~~future~~agreement, ~~products~~it was ending the collaboration. The agreement was terminated in July 2007.

~~The~~In ~~continuing efforts of government and other third party payors to contain or reduce~~ the ~~costs~~second half of ~~healthcare through various means may limit our commercial opportunity. For example~~2006, inAtheroGenics ~~some~~was ~~countries~~engaged ~~other~~separately ~~than~~by ~~the~~AstraZeneca ~~United~~to ~~States, pricing~~conduct ~~and~~FOCUS. ~~profitability~~FOCUS ofwas ~~prescription~~a ~~pharmaceuticals~~follow-up ~~are~~Phase ~~subject~~III ~~to government~~clinical ~~control.~~trial Infor ~~the~~patients ~~United~~exiting ~~States~~ARISE, wedesigned ~~expect proposals~~ to ~~implement~~collect ~~similar~~extended ~~government~~safety ~~control to continue~~information. InPursuant ~~addition, increasing~~to ~~emphasis on managed care in~~ the ~~United~~terms ~~States~~of ~~will continue to put pressure on~~ the ~~pricing~~license ofagreement, ~~pharmaceutical~~AstraZeneca ~~products.~~funded ~~Cost control initiatives could decrease~~ the ~~price~~entire ~~that we~~cost ~~or any potential collaborators could receive for any~~ of ~~our future~~the ~~products~~trial ~~and~~which ~~could~~has ~~adversely~~been ~~affect our profitability~~concluded.

21 In 2004, AtheroGenics announced a collaboration with Astellas Pharma Inc. (Formerly Known As Fujisawa Pharmaceutical Co., Ltd.) to develop AGI-1096 as an oral treatment for the prevention of organ transplant rejection. Under the agreement, AtheroGenics agreed to collaborate with Astellas to conduct preclinical and early stage clinical development trials, with Astellas funding all development costs during the term of the agreement. Astellas received an option to negotiate for late stage development and commercial rights to the compound. Astellas has informed AtheroGenics that they have completed their current development activities and do not have further development plans.

~~Table~~3. ofShort-Term ~~Contents~~Investments

If Short-term ~~plaintiffs~~investments ~~bring~~consisted ~~product~~of ~~liability~~debt ~~lawsuits~~securities ~~against~~classified ~~us,~~as weavailable-for-sale ~~may~~and ~~incur~~have maturities ~~substantial~~greater ~~financial~~than ~~loss~~90 days orfrom ~~may~~the bedate ~~unable~~of toacquisition. ~~obtain~~AtheroGenics ~~future~~had ~~product~~invested ~~liability~~primarily in ~~insurance~~corporate atnotes ~~reasonable~~and ~~prices~~commercial paper, ifall atof ~~all~~which had a minimum investment rating of A1/P1, ~~either~~and government agency notes. During the third quarter of ~~which~~2008, ~~could~~all ~~diminish~~of ~~our~~AtheroGenics’ ~~ability~~short-term investments matured and the cash was transferred to ~~commercialize~~money ~~our~~market ~~future~~accounts. ~~products~~The realized gain from these transactions was $14,859 for the year ended December 31, 2008. The cumulative unrealized gains were $14,859 at December 31, 2007. The following table summarizes the estimated fair value of AtheroGenics’ short-term investments:

The testing and marketing of medicinal products entail an inherent risk of product liability. Clinical trial subjects, consumers, healthcare providers, or pharmaceutical companies or others selling our future products could bring product liability claims against us. We cannot assure you that we will be able to acquire or maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us.


	December 31,
	2008		2007
Commercial paper	$	—	$	12,301,963
Corporate notes		—		3,776,569
Government agency notes		—		2,001,500

Total	$	—	$	18,080,032

~~Our~~4. ~~quarterly~~Equipment ~~operating~~and ~~results~~Leasehold ~~may fluctuate, causing volatility in our stock price.~~Improvements

~~Our~~Equipment ~~product candidates are now in research~~ and ~~various~~ ~~stages~~leasehold ofimprovements ~~development~~consist ~~or clinical trials. Accordingly, we do not receive any revenues from sales~~ of these product candidates. Our results of operations historically have fluctuated on a quarterly basis, which we expect to continue. Our results of operations at any given time will be based primarily on the following ~~factors~~:

• the status of development of our various product candidates; • whether we enter into collaboration agreements and the timing and accounting treatment of payments, if any, to us under those agreements; • whether and when we achieve specified development or commercialization milestones; and • the addition or termination of research programs or funding support.


	December 31,
	2008			2007
Laboratory equipment	$	3,316,350		$	3,316,350
Leasehold improvements		3,140,953			3,107,353
Computer and office equipment		2,676,254			2,702,639

		9,133,557			9,126,342
Accumulated depreciation and amortization		(8,040,231	)		(6,765,289	)

Net equipment and leasehold improvements	$	1,093,326		$	2,361,053

In March 2005, AtheroGenics had committed to purchase certain commercial manufacturing Weequipment ~~believe~~for ~~that~~AGI-1067, ~~quarterly~~to ~~comparisons~~be ofdelivered ~~our~~in 2006. In March 2006, AstraZeneca assumed this ~~financial~~commitment, ~~results~~and ~~are~~the ~~not~~costs ~~necessarily~~were ~~meaningful~~shared equally between AtheroGenics and ~~should~~AstraZeneca, ~~not~~subject to a belimit ~~relied~~on ~~upon~~AtheroGenics’ portion, as anpart ~~indication~~ of ~~future~~the ~~performance.~~joint ~~These~~license and collaboration agreements that were ~~fluctuating~~signed ~~results~~in ~~may~~December 2005. ~~cause~~As a result of the ~~price~~termination of ~~our~~the ~~stock~~collaboration toand transition of ~~fluctuate~~commercial manufacturing equipment by AstraZeneca, ~~perhaps~~this ~~substantially.~~equipment was deemed impaired and AtheroGenics recorded a non-cash write-down of approximately $7,500,000 in the second quarter of 2007.

~~Item 2. Properties~~20

OurTable scientificof and administration facility encompasses approximately 27,000 square feet in Alpharetta, Georgia. We lease our facility pursuant to a long-term lease agreement that expires in 2009 and our aggregate commitment under this long-term, non-cancelable lease is approximately $8 million. This lease may be extended at our option to 2019. Contents

In ~~November 2001~~April 2008, weAtheroGenics ~~leased~~entered into a ~~facility~~Manufacturing ~~in Norcross,~~and ~~Georgia~~Supply ~~encompassing~~Agreement ~~approximately~~(the “Agreement”) ~~5,800~~with ~~square~~ISP ~~feet. We~~Pharma ~~lease~~Systems ~~this~~LLC ~~laboratory~~(“ISP”) ~~facility~~for ~~pursuant~~the tomanufacture aand ~~long-term~~supply ~~lease agreement~~of ~~that~~the ~~expires~~active pharmaceutical iningredient ~~2004~~ and ~~our~~an ~~aggregate~~intermediate ~~commitment under~~product ~~this~~(the ~~long-term,~~“Product”) ~~non-cancelable~~of ~~lease~~AtheroGenics’ ~~is approximately~~product ~~$346~~candidate,~~000~~ AGI-1067. WeUnder ~~have~~the terms of the ~~option~~agreement, ISP has agreed to ~~renew~~accept this ~~lease~~commercial manufacturing ~~under~~equipment ~~mutually~~used in the manufacture of the Product from AtheroGenics, in exchange for ~~agreeable~~specific ~~terms~~manufacturing activities related to AtheroGenics’ product candidate, AGI-1067.

~~Item~~ In 3.May 2007, ~~Legal~~AtheroGenics ~~Proceedings~~implemented an organizational restructuring and recorded a non-cash write-down of approximately $1,500,000 for certain excess laboratory equipment and related leasehold improvements that were deemed impaired.

WeOn ~~are~~April 1, ~~not~~2009, ~~currently~~AtheroGenics asold ~~party~~substantially all of its non-cash assets to ~~any~~the ~~legal~~Purchaser ~~proceedings~~for $2,000,000 as part of the Asset Sale.

~~Item 4~~5. ~~Submission~~Convertible ofNotes ~~Matters to a Vote of Security Holders~~Payable

In August 2003, AtheroGenics issued $100,000,000 in aggregate principal amount of 2008 Notes ~~None~~with interest payable semi-annually in March and September. Net proceeds to AtheroGenics were approximately $96,700,000, after deducting expenses and underwriters’ discounts and commissions. The issuance costs related to the notes were recorded as debt issuance costs and other assets and were being amortized to interest expense over the five-year life of the notes. The 2008 Notes could have been converted at the option of the holder into shares of AtheroGenics common stock prior to maturity at a conversion rate of 65.1890 shares per $1,000 principal amount of notes, representing a conversion price of approximately $15.34 per share.

22 In January 2006, AtheroGenics exchanged $14,000,000 in aggregate principal amount of the 2008 Notes for approximately 1,100,000 shares of AtheroGenics common stock. In accordance with SFAS No. 84, Induced Conversion of Convertible Debt, this transaction resulted in a non-cash charge of approximately $3,500,000 related to the premium paid in excess of the conversion price in order to induce conversion of the notes.

~~Table~~ In July 2007, AtheroGenics extinguished $38,000,000 in aggregate principal amount of ~~Contents~~the 2008 Notes with certain holders and issued $60,400,000 in aggregate principal amount of the 2011 Notes. This exchange was accounted for as an extinguishment of the 2008 Notes in accordance with EITF 96-19, Debtor’s Accounting for a Modification or Exchange of Debt Instruments. The 2011 Notes were initially recorded at their fair value of $38,000,000. The $22,400,000 difference between the principal amount and the initial fair value of the 2011 Notes, the discount, was to be accreted up to the face amount of $60,400,000 as additional interest expense using the effective interest method over the remaining life of the new convertible notes.

In January 2008, AtheroGenics redeemed $17,500,000 of its 2008 Notes and, in exchange, issued ~~PART~~$11,500,000 IIof 2011 Notes along with $5,500,000 of cash. This transaction was accounted for as a modification in accordance with EITF 96-19. AtheroGenics determined that the carrying value of the new 2011 Notes was $12,000,000. As $11,500,000 of 2011 Notes were issued, this resulted in a premium of approximately $500,000 that was to be amortized as an offset to interest expense over the life of these 2011 Notes.

~~Item~~ The 5terms of the 2011 Notes are substantially similar to the 2008 Notes including the same customary default events except that the 2011 Notes will mature in March 2011 as opposed to September 2008. ~~Market~~The ~~for~~2011 ~~Registrant’s~~Notes, ~~Common~~like ~~Equity~~the ~~and~~2008 ~~Related~~Notes, ~~Shareholder~~bear ~~Matters~~an interest rate of 4.5%, payable semiannually in arrears on March 1 and September 1.

Like the 2008 Notes, the 2011 Notes are convertible into shares of AtheroGenics common stock ~~Common~~at ~~Stock~~any ~~Information~~time prior to the close of business on the final maturity date, subject to AtheroGenics’ right to redeem the 2011 Notes prior to their maturity. The conversion rate for the 2011 Notes is 65.1890 shares per $1,000 principal amount of 2011 Notes, which represents a conversion price of approximately $15.34 per share.

~~Our~~In ~~common~~January 2005, ~~stock~~AtheroGenics ~~has~~issued ~~been~~$200,000,000 ~~traded~~in onaggregate ~~the~~principal ~~Nasdaq~~amount of 2012 Notes ~~National~~with ~~Market~~interest ~~under~~payable ~~the~~semi-annually ~~symbol~~in ~~“AGIX”~~February ~~since August 9,~~and ~~2000~~August. ~~Prior~~Net proceeds to ~~that~~AtheroGenics ~~time~~were approximately $193,600,000, ~~there~~after ~~was~~deducting noexpenses ~~public market~~and ~~for~~underwriters’ ~~our~~discounts ~~common~~and ~~stock~~commissions. The ~~following~~issuance ~~table~~costs ~~sets~~related ~~forth~~to the notes were recorded as debt issuance costs and other assets and ~~range~~were being amortized to interest expense over the seven-year life of ~~high~~the ~~and~~notes. ~~low~~The ~~closing~~2012 ~~sale~~Notes ~~prices~~are convertible ~~for~~into ~~our~~shares of common stock as, ~~reported~~at on the ~~Nasdaq~~option ~~National~~of ~~Market~~the ~~during~~holder, ~~fiscal~~at ~~2001~~a ~~and~~conversion rate of ~~the~~38.5802 ~~third~~shares ~~and~~per ~~fourth~~$1,000 ~~quarters~~principal amount of ~~fiscal~~notes, ~~2000~~which represents a conversion price of approximately $25.92 per share.

		Common Stock
		High		Low
Year ended December 31, 2000
	Third quarter (commencing August 9, 2000)	$	10.75	$	8.00
	Fourth quarter		8.94		4.63
Year ended December 31, 2001
	First quarter		7.13		5.25
	Second quarter		7.25		4.53
	Third quarter		6.76		3.95
	Fourth quarter		6.10		2.71

On September 2, 2008, AtheroGenics defaulted on the principal and interest due on the 2008 Notes. This default created an event of default under the indentures governing the 2011 Notes and the 2012 Notes, which in turn caused the 2011 Notes and the 2012 Notes to become immediately due and payable. In accordance with SFAS No. 78, Classifications of Obligations That Are Callable by the Creditor, (“SFAS 78”)the 2008, the 2011 Notes and the 2012 Notes, $30,500,000, $71,900,000 and $200,000,000, respectively, were reclassified as liabilities subject to compromise. The remaining unamortized debt issuance costs of $3,100,000 related to the 2012 Notes was expensed upon the event of default and recorded in reorganization items. In addition, in connection with the 2011 Notes, the remaining unamortized discount of $16,900,000

21 As of March 1, 2002, there were approximately 3,600 holders of our common stock. This number includes beneficial owners of our common stock whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.

DividendTable Policy of Contents

Wewas ~~have~~also ~~never~~recorded ~~declared~~as oran ~~paid~~expense ~~any~~in ~~dividends~~reorganization onitems, net and the remaining unamortized premium ~~our~~of ~~capital~~$435,000 ~~stock.~~was Werecorded ~~currently~~as ~~intend~~an offset to ~~retain~~expense ~~all~~in reorganization items, net. As of ~~our future~~December 31, ~~earnings~~2008, AtheroGenics ifrecorded ~~any~~$2,300,000 toof ~~finance~~accrued ~~our~~interest ~~operations~~expense related to the 2008 and do2011 ~~not~~Notes, ~~anticipate~~which ~~paying~~was ~~any~~due, ~~cash~~but ~~dividends~~not paid on ~~our~~September 1, ~~capital~~2008. ~~stock~~An inadditional 15 days of interest, $192,000, has been accrued for the time period of September 1 through September 15 when the Chapter 7 petition ~~foreseeable~~was ~~future~~filed. In addition, AtheroGenics recorded $375,000 of accrued interest expense related to the 2012 Notes, which includes the time period of September 1 through September 15. Due to the Chapter 11 Proceeding, no interest expense was recorded on the 2008 Notes, the 2011 Notes or the 2012 Notes after September 15, 2008.

~~Changes~~6. inNet ~~Securities~~Loss ~~and~~Per ~~Use of~~Share ~~Proceeds~~

~~The~~SFAS ~~Securities~~No. 128, ~~and~~Earnings ~~Exchange~~per ~~Commission~~Share, ~~declared our~~requires ~~Registration~~presentation ~~Statement~~of onboth ~~Form S-1~~basic ~~(File~~and diluted earnings per Noshare. ~~333-31140)~~ ~~effective~~Basic ~~August 8,~~earnings ~~2000.~~per ~~The~~share ~~net proceeds~~is ~~from~~computed ~~the~~by ~~sale~~dividing ofnet ~~the~~income ~~6.9~~(loss) ~~million~~by the weighted average number of shares of common stock ~~registered~~outstanding ~~pursuant~~during to the ~~Registration~~period. ~~Statement~~Diluted earnings per share is ~~(including~~computed in the ~~exercise~~same ofmanner ~~the~~as ~~underwriters’~~basic ~~over-allotment option)~~earnings ~~were~~per ~~$49.4 million~~share ~~after~~except ~~deducting~~that ~~underwriting~~diluted earnings per share ~~discounts~~reflects ofthe ~~$3.9 million~~potential ~~and~~dilution ~~offering~~that ~~expenses~~would ofoccur if outstanding options, warrants and convertible $1notes payable were exercised.~~9 million.~~

WeDuring ~~have~~all ~~used~~periods ~~and~~presented, ~~expect~~AtheroGenics tohad ~~continue~~securities tooutstanding ~~use~~that ~~the proceeds~~could ~~from our initial public offering for research and~~potentially ~~development~~dilute ~~activities,~~basic ~~including~~earnings ~~clinical~~per ~~trials,~~share ~~process development~~in ~~and~~the ~~manufacturing support~~future, ~~and~~but ~~for~~were ~~general~~excluded ~~corporate purposes,~~from ~~including~~the ~~working~~computation ~~capital. A portion~~ of ~~the proceeds~~diluted ~~may~~net beloss ~~used~~per toshare, ~~acquire~~as ortheir ~~invest~~effect inwould ~~complementary~~have ~~businesses, products~~been ~~or technologies~~antidilutive. AsThese ofoutstanding ~~December 31,~~securities consist ~~2001,~~of the ~~proceeds~~ ~~have~~following ~~been~~at ~~applied~~the ~~toward~~dates indicated:

• purchases of fixed assets and leasehold improvements, $1.6 million; • operating activities, $12.8 million; and • investments in highly liquid, interest bearing, investment grade securities, $35.0 million.


	Year Ended December 31,
	2008		2007
Shares underlying convertible notes		14,391,278		14,783,194
Options		5,061,181		6,600,816
Warrants		56,000		82,436

Total		19,508,459		21,466,446

Weighted average conversion price of shares underlying convertible notes	$	21.01	$	20.86

Weighted average exercise price of options	$	7.87	$	8.56

Weighted average exercise price of warrants	$	6.00	$	5.64

23 Because AtheroGenics reported a net loss for all periods presented, shares associated with stock options, warrants and the convertible notes are not included because they are antidilutive. Basic and diluted net loss per share amounts are the same for the periods presented.

~~Table~~7. ofCommon ~~Contents~~Stock

~~Item~~ In 6November 2001, AtheroGenics’ Board of Directors adopted a Shareholder Rights Plan, declaring a dividend distribution of one common stock purchase right on each outstanding share of its common stock. ~~Selected~~The ~~Financial~~rights ~~Data~~plan will be terminated as part of the Chapter 11 Proceeding.

~~The~~8. ~~selected~~Stock ~~financial~~Options ~~data set forth below should be read in conjunction with our financial statements~~ and ~~the~~ ~~related notes and “Management’s Discussion and~~Warrants ~~Analysis of Financial Condition and Results of Operations,”~~ ~~included in this Form 10-K. The historical results are not necessarily indicative of the operating results to be expected in the future.~~

			Year Ended December 31,
			2001			2000			1999			1998			1997
Statement of Operations Data:
Revenues:
	License fees		$	1,111,111		$	3,333,333		$	555,556		$	—		$	—
	Research and development			2,398,429			4,826,370			791,653			—			—
		Total revenues		3,509,540			8,159,703			1,347,209			—			—
Operating expenses:
	Research and development*			16,884,027			12,815,788			9,041,345			8,954,904			4,656,478
	General and administrative*			3,979,813			3,035,559			2,593,017			1,573,807			988,230
	Amortization of deferred stock compensation			2,652,031			7,972,728			85,480			—			—
		Total operating expenses		23,515,871			23,824,075			11,719,842			10,528,711			5,644,708
Operating loss				(20,006,331	)		(15,664,372	)		(10,372,633	)		(10,528,711	)		(5,644,708	)
Net interest income (expense)				2,366,748			1,714,850			(60,617	)		(205,130	)		485,392
Net loss			$	(17,639,583	)	$	(13,949,522	)	$	(10,433,250	)	$	(10,733,841	)	$	(5,159,316	)
Basic and diluted net loss per share			$	(0.68	)	$	(1.30	)	$	(4.27	)	$	(4.45	)	$	(2.25	)
Shares used in computing basic and diluted net loss per share				26,010,347			10,747,773			2,443,237			2,409,948			2,292,966
* Exclusive of amounts recorded as amortization of deferred stock compensation:
	Research and development		$	940,053		$	1,856,932		$	23,649		$	—		$	—
	General and administrative		$	1,711,978		$	6,115,796		$	61,831		$	—		$	—

During 1997, AtheroGenics established an equity ownership plan (the “1997 Plan”) whereby options to purchase AtheroGenics’ common stock may be granted to employees, directors, consultants or contractors with exercise prices not less than the fair value of the shares on the dates of grant. The 1997 Plan, as amended, authorizes the grant of options for up to 3,724,416 shares of AtheroGenics’ common stock. The 1997 Plan expired in 2007 and 119,475 shares that were available for grant expired. As of December 31, 2008, AtheroGenics had 1,156,427 shares of common stock reserved for issuance under the 1997 Plan in connection with outstanding options.

24 During 2001, AtheroGenics established an equity ownership plan (the “2001 Plan”) whereby options to purchase AtheroGenics’ common stock may be granted to employees, directors, consultants or contractors with exercise prices not less than the fair value of the shares on the dates of grant. The 2001 Plan allows for grants of non-qualified options, incentive stock options and shares of restricted stock. Non-qualified options granted under the 2001 Plan may vest immediately for non-employees, but generally vest over a four-year period for employees. Incentive stock options generally vest over four years. The 2001 Plan authorizes the grant of options for up to 2,000,000 shares of AtheroGenics’ common stock. As of December 31, 2008, AtheroGenics had 1,563,464 shares of common stock reserved for issuance under the 2001 Plan in connection with outstanding options or future grants.

~~Table of Contents~~22

TheTable following table contains a summary of our balance sheet data for the five years ending December 31, 2001. Contents

	December 31,
	2001			2000			1999			1998			1997
Balance Sheet Data:
Cash and cash equivalents	$	28,682,050		$	26,463,070		$	13,409,450		$	3,686,423		$	6,925,364
Short-term investments		29,757,945			27,518,169			—			—			—
Working capital (deficiency)		55,056,263			52,422,951			9,651,239			(4,259,366	)		6,108,938
Total assets		62,255,278			57,598,951			15,717,214			5,341,816			7,612,796
Long-term obligations, less current portion		—			84,907			61,854			163,262			281,636
Deferred stock compensation		(2,975,314	)		(5,930,880	)		(1,809,680	)		—			—
Accumulated deficit		(61,277,987	)		(43,638,404	)		(29,688,882	)		(19,255,632	)		(8,521,791	)
Total shareholders’ equity (deficit)		58,294,812			54,271,686			(29,288,600	)		(18,973,881	)		(8,240,444	)

During 2004, AtheroGenics established an equity ownership plan (the “2004 Plan”) whereby options to purchase AtheroGenics’ common stock may be granted to employees, directors, consultants or contractors with exercise prices not less than the fair value of the shares on the dates of grant. The 2004 Plan authorizes the grant of options for up to 4,500,000 shares of AtheroGenics’ common stock. As of December 31, 2008, AtheroGenics had 4,484,000 shares of common stock reserved for issuance under the 2004 Plan in connection with outstanding options or future grants. The terms of the 2004 Plan are substantially similar to the terms of the 2001 Plan.

~~Item~~ A 7.summary ~~Management’s~~of ~~Discussion~~stock ~~and~~option ~~Analysis~~activity ofunder ~~Financial~~previous ~~Condition~~plans, the 1997 Plan, the 2001 Plan and ~~Results~~the 2004 ofPlan ~~Operations~~follows:

The following discussion should be read in conjunction with our financial statements and related notes included in this Form 10-K.


						Weighted
						Average
				Weighted		Remaining		Aggregate
	Number of			Average		Contractual		Intrinsic
	Shares			Exercise Price		Life		Value
Outstanding at January 1, 2007		6,521,524		$	11.73
Granted		1,829,196			1.56
Exercised		(65,565	)		0.35
Canceled		(1,684,339	)		13.53

Outstanding at December 31, 2007		6,600,816			8.56
Granted		219,800			0.57
Exercised		—			0.00
Canceled		(1,759,435	)		9.57

Outstanding at December 31, 2008		5,061,181		$	7.87		1.31	$	0.00

Vested and expected to vest at December 31, 2008		4,691,738		$	8.13		1.34	$	0.00

Exercisable at December 31, 2008		3,864,392		$	8.66		1.37	$	0.00

The total intrinsic value of options exercised during the year ended December 31, 2007 was ~~Overview~~$255,936. Cash received from option exercises during the year ended December 31, 2007 was $23,075. AtheroGenics has a net operating loss carryforward as of December 31, 2008, and therefore no excess tax benefits for tax deductions related to the stock options were recognized.

~~Since~~The ~~our~~following ~~operations~~table ~~began~~summarizes ininformation ~~1994,~~concerning weoutstanding ~~have focused on the discovery, development~~ and ~~commercialization~~exercisable ofoptions ~~novel~~granted ~~drugs~~under ~~for~~ the ~~treatment~~1997 ~~of chronic inflammatory diseases~~Plan, ~~such~~ asthe ~~atherosclerosis,~~2001 ~~rheumatoid~~Plan ~~arthritis~~ and ~~asthma.~~the ~~Based on~~2004 ~~our~~Plan ~~proprietary~~as ~~vascular~~of ~~protectant~~December 31, ~~or v-protectant, technology platform, we have advanced three drug candidates into development, AGI-1067, AGIX-4207 and AGI-1096, and are progressing on a number of other preclinical programs~~2008.

To date, we have devoted substantially all of our resources to research and development. We have not derived any commercial revenues from product sales and, excluding the effect of certain license fees of a non-recurring nature received in connection with entering into an exclusive license agreement, expect to incur significant losses in most years prior to deriving any such product revenue.


	Options Outstanding						Options Exercisable
	Number		Weighted Average		Weighted Average		Number		Weighted Average
Exercise Price	Outstanding		Remaining Years		Exercise Price		Exercisable		Exercise Price
$ 0.30 — $ 2.41		2,186,182		1.49	$	0.97		1,451,662	$	0.90
4.61 — 14.86		1,894,267		1.28		9.83		1,565,176		9.69
15.78 — 29.99		980,732		0.95		19.47		847,554		20.04

0.30 — 29.99		5,061,181		1.31		7.87		3,864,392		8.66

WeAt ~~have incurred significant losses since we began operations in 1994 and, as of~~ December 31, ~~2001~~2008, ~~had an~~warrants ~~accumulated deficit of $61.3 million. We cannot assure you whether or when we will become profitable. We expect~~ to ~~continue~~ topurchase ~~incur~~56,000 ~~significant~~shares ~~operating~~of ~~losses~~AtheroGenics’ ~~over~~common ~~the~~stock ~~next~~remain ~~several~~outstanding ~~years~~which aswere weissued ~~continue~~in toconnection incur increasing research and development costs. We expect that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial. Our ability to achieve profitability depends upon our ability, alone or with ~~others,~~a tolicense ~~complete~~agreement ~~the~~in ~~successful development of our product candidates, to obtain required regulatory clearances, and to manufacture and market our future products~~2001.

InSince ~~October~~AtheroGenics’ ~~1999,~~cash weand ~~entered~~cash ~~into~~equivalents anwill ~~exclusive licensing~~be ~~agreement~~distributed ~~with~~to ~~Schering-Plough~~its ~~Corporation~~creditors ~~covering our~~if ~~lead~~the ~~compound,~~plan of ~~AGI-1067.~~liquidation ~~Under~~is ~~terms~~approved ofby the ~~agreement, Schering-Plough~~Bankruptcy ~~obtained~~Court ~~exclusive worldwide rights to AGI-1067~~ and ~~related~~AtheroGenics’ ~~compounds.~~cash ~~Schering-Plough was responsible for all costs of development~~ and ~~commercialization~~cash ~~and~~equivalents ~~paid us an~~are ~~initial~~significantly ~~licensing~~less ~~fee.~~than Inits ~~October~~prepetition ~~2001~~liabilities, weAtheroGenics’ ~~reacquired~~stock ~~all~~options ~~rights to AGI-1067~~ and ~~related~~warrants ~~compounds and terminated the license~~have ~~agreement.~~no ~~As a result, Schering-Plough returned all licensed technology and all materials related to that technology~~value.

In June 2001, we entered into a worldwide exclusive license agreement with National Jewish Medical and Research Center of Denver, Colorado to discover and develop novel therapeutics based on MEK kinases, enzymes that participate in a broad range of cellular activities, and related technology for the treatment of inflammation9. ~~Other~~Employee ~~licensed technology~~Benefit ~~focuses on the application of several naturally~~Plan ~~occurring substances in the development of a potential treatment~~ ~~for asthma. We expect these new technologies to provide a second broad platform for the discovery and development of a new class of anti-inflammatory drug candidates.~~

25 AtheroGenics has a defined contribution plan covering eligible employees, which is qualified under Section 401(k) of the Internal Revenue Code (“IRC”). Under the provisions of the plan, eligible participating employees may elect to contribute up to the maximum amount of tax deferred contribution allowed by the IRC. AtheroGenics may make a discretionary contribution. During 2008, AtheroGenics matched 50% of employees’ contributions, up to a maximum of 6% of the employees’ annual base compensation.

~~Table of Contents~~23

CriticalTable Accountingof Policies Contents

WeAtheroGenics’ ~~have~~contributions ~~identified~~to the ~~following~~plan ~~policies~~for ~~below as~~2008 ~~critical~~and to2007 ~~our~~aggregated ~~business~~$147,677 ~~operations~~ and ~~the understanding of~~$254,197, ~~our results of operations~~respectively. ~~The~~AtheroGenics’ ~~impact~~stock ~~and any associated risks related to these policies on our business operations~~ is ~~discussed~~ ~~throughout~~not ~~Management’s~~an ~~Discussion~~eligible ~~and~~investment ~~Analysis of~~under ~~Financial~~this ~~Condition and Results of Operations~~plan.

~~Revenue~~10. ~~Recognition~~Income Taxes

~~License~~AtheroGenics’ ~~fees,~~income ~~which~~tax ~~are~~expense ~~nonrefundable,~~was ~~are recognized~~$0 ~~when~~for the ~~related~~years ~~license~~ended ~~agreements~~December 31, ~~specify~~2008 ~~that no further efforts or obligations are required of AtheroGenics. AtheroGenics had committed to perform certain research~~ and ~~development~~ ~~activities as part of a license agreement, which has been terminated; accordingly, the upfront license payment was amortized over the anticipated time period to conduct such activities~~2007. ~~Revenues under research and development arrangements~~The ~~were~~primary ~~recognized~~factors ascausing ~~the~~income ~~research~~tax ~~and~~expense ~~development activities were performed pursuant~~ to ~~the~~be ~~terms~~different ofthan the ~~related~~federal ~~agreements.~~statutory ~~These revenues~~rates ~~were~~are ~~billed quarterly and the related payments were not refundable. Revenues that had not been invoiced were reflected~~ as ~~unbilled receivables in the accompanying balance sheets.~~ follows:

Stock-Based Compensation


	December 31,
	2008			2007
Incomes tax benefit at statutory rate	$	(21,812,869	)	$	(16,819,314	)
Incentive stock options		847,418			1,713,073
State income tax benefit net of federal tax benefit		(2,455,074	)		(1,758,635	)
General business credit		(782,141	)		(1,583,721	)
Loss on debt conversion		—			1,121,880
Other		3,338			137,635
Valuation allowance		24,199,328			17,189,082

Income tax expense	$	—		$	—

~~AtheroGenics~~At ~~has elected to follow Accounting Principles Board Opinion (“APB”) No.~~December 2531, ~~Accounting~~ ~~for Stock Issued to Employees (“APB 25”)~~2008, inAtheroGenics ~~accounting~~had ~~for~~net ~~its~~operating ~~stock-based employee~~loss ~~compensation~~carryforwards ~~plans,~~and ~~rather~~research ~~than the alternative fair~~and ~~value~~development ~~accounting~~credit ~~method~~carryforwards ~~provided~~of ~~for~~$436,791,521 ~~under~~and ~~SFAS~~$14,389,406, ~~No. 123~~respectively, ~~Accounting~~ for ~~Stock-Based~~income ~~Compensation~~tax ~~(“SFAS 123”)~~purposes, aswhich ~~SFAS 123~~both ~~requires~~begin ~~the use~~to ofexpire ~~option-valuation models that were not developed for use~~ in ~~valuing employee stock options~~2010. ~~AtheroGenics~~The ~~accounts~~significant ~~for transactions~~components inof ~~which services are received in exchange for equity instruments based on~~ the ~~fair~~deferred ~~value~~tax ~~of such services~~assets ~~received from non-employees, in accordance with SFAS 123 and Emerging Issues Task Force (EITF) Issue No. 96-18, Accounting for Equity Instruments that~~ are ~~Issued to Other~~: ~~than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.~~

Results of Operations


	December 31,
	2008			2007
Net operating loss carryforwards	$	165,419,402		$	146,807,285
Research credits		14,389,406			13,607,265
Depreciation and amortization		7,890,141			217,506
Impairment reserve		422,392			3,414,258
Deferred stock compensation		2,841,796			2,355,798
Other		53,864			415,561

Total deferred tax assets		191,017,001			166,817,673
Valuation allowance		(191,017,001	)		(166,817,673	)

Net deferred tax assets	$	—		$	—

~~Comparison~~Because of AtheroGenics’ lack of earnings history, the deferred tax assets have been fully ~~Years~~offset ~~Ended~~by ~~December 31~~a valuation allowance. The valuation allowance increased $24,199,328 ~~2001~~and $17,189,082 in 2008 and ~~2000~~2007 as follows:

Revenues


	December 31,
	2008		2007
Deferred tax valuation allowance at beginning of year	$	166,817,673	$	149,628,591
Change in cumulative tax differences		24,199,328		17,189,082

Deferred tax valuation allowance at end of year	$	191,017,001	$	166,817,673

~~Total~~AtheroGenics’ ~~revenues~~net ~~were~~operating ~~$3.5 million~~loss incarryforwards ~~2001,~~and research and development credit ~~compared~~carryforwards tomay ~~$8.2 million~~be insubject ~~2000.~~to ~~License~~certain ~~fees~~IRC ~~of $1.1~~Section ~~million~~382 and ~~$3.3~~Section ~~million~~383 ~~during~~limitations ~~2001~~on ~~and 2000,~~annual ~~respectively,~~utilization ~~were~~in ~~attributable~~the toevent anof ~~exclusive~~changes ~~license agreement signed~~ in ~~October 1999~~ownership. These ~~amounts~~limitations ~~represent~~could significantly reduce the ~~earned~~amount ~~portion~~ of the ~~$5.0 million~~net ~~initial~~operating ~~license~~loss ~~fee, which~~carryforwards ~~was~~available ~~amortized~~in ~~over~~the ~~18 months~~future. ~~Amortization~~The utilization of the ~~license~~carryforwards ~~fee~~is ~~was~~dependent ~~completed~~upon inthe ~~April~~timing ~~2001. Research~~ and ~~development~~ ~~revenues~~extent ~~related~~of toAtheroGenics’ ~~the~~future ~~license~~profitability. ~~agreement were~~The ~~$2.4 million~~annual inlimitations ~~2001~~combined ~~and~~with ~~$4.8 million~~the inexpiration ~~2000.~~dates ~~The lower~~of ~~research~~the ~~and~~carryforwards ~~development~~may ~~revenues~~prevent ~~reflect reduced~~the ~~activities~~utilization ~~due~~of toall ~~the completion~~ of the ~~CART-1~~net ~~Phase II clinical~~operating ~~trial~~loss ~~for~~and ~~AGI-1067.~~research ~~There~~and ~~will~~development becredit nocarryforwards ~~further revenues~~if ~~from~~AtheroGenics ~~this~~does ~~license~~not ~~agreement~~attain ~~which~~sufficient ~~was~~profitability ~~terminated~~by inthe ~~October~~expiration ~~2001~~dates of the carryforwards.

~~Expenses~~ AtheroGenics is currently in bankruptcy under the Chapter 11 Bankruptcy Code. The result of the Chapter 11 Proceeding would negatively impact the amount of tax attributes and the ability to use the attributes.

24 Research and Development. Research and development expenses, excluding amortization of deferred stock compensation, were $16.9 million in 2001, compared to $12.8 million in 2000. The increase of $4.1 million, or 32%, is primarily due to increased preclinical and clinical studies including the Phase I studies for AGIX-4207 and AGIX-4207 I.V., compounds being developed for the treatment of rheumatoid arthritis, and AGI-1096, a compound being developed for the treatment of solid organ transplant rejection.

GeneralTable and Administrative. General and administrative expenses, excluding amortization of deferred stock compensation, were $4.0 million in 2001, compared to $3.0 million in 2000. The increase of $1.0 million, or 33%, is primarily due to costs related to operating as a public company including legal fees and investor relations activities. Contents

26 In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement No. 109 (“FIN 48”), which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. AtheroGenics adopted the provision of FIN 48 on January 1, 2007. AtheroGenics has no uncertain tax positions and no cumulative adjustment was required or recorded as a result of the implementation of FIN 48. As of January 1, 2007, December 31, 2007 and December 31, 2008, AtheroGenics had no unrecognized tax benefits. AtheroGenics will recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense if and when incurred. AtheroGenics has no interest or penalties related to unrecognized tax benefits accrued as of December 31, 2007 and December 31, 2008. AtheroGenics does not anticipate that unrecognized benefits will be incurred within the next 12 months. Since AtheroGenics has tax net operating losses since inception, all tax years remain open under federal and state statute of limitations.

~~Table~~11. ofCommitments ~~Contents~~and Contingencies

~~Amortization~~On ofJune 19, ~~Deferred Stock Compensation. During 2001~~1998, weAtheroGenics ~~recorded non-cash~~entered ~~deferred~~into ~~stock compensation of approximately $1.1 million for warrants granted in connection with~~ a ~~licensing~~ ~~agreement~~ten-year ~~with~~operating ~~National~~lease ~~Jewish and options granted~~ for ~~the~~ ~~addition~~office ~~of new members to our Scientific Advisory Board. The fair value of the warrants~~ and ~~options was determined by~~ ~~using~~laboratory ~~the~~space ~~Black~~through ~~Scholes~~March 1, ~~model~~2009. ~~These~~Monthly ~~amounts~~lease ~~are~~payments ~~included as a reduction~~ of ~~shareholders’~~approximately ~~equity~~$89,400 ~~and are being amortized~~began ~~over the vesting periods of individual warrants and options~~March 2, ~~generally~~ ~~five years~~1999, ~~using~~ the ~~graded~~date ~~vesting~~occupancy ~~method~~commenced. ~~The~~These ~~fair value~~payments ofwere ~~the~~subject ~~options~~to ~~and~~increases ~~warrants~~during ~~is re-measured at~~ each ~~measurement~~successive ~~date.~~12-month ~~Amortization~~period ofbased ~~deferred~~on ~~stock~~changes ~~compensation was $2.7 million~~ in ~~2001,~~the ofConsumer ~~which~~Price ~~$940,053~~Index. ~~was attributable~~This tolease ~~research~~expired ~~and development expenses and~~March $1~~.7 million~~, ~~was~~2009 ~~attributable to general~~ and ~~administrative expenses.~~all Inleasehold ~~2000,~~improvements ~~amortization~~were offully ~~deferred~~amortized ~~stock~~as ~~compensation was $8.0 million,~~ of ~~which~~that $1date.~~9 million~~ ~~was~~AtheroGenics’ ~~attributable to~~other ~~research~~operating ~~and~~lease ~~development~~obligations ~~expenses~~are ~~and~~not $6significant.~~1 million was~~ ~~attributable to general and administrative expenses.~~

~~Net~~ In ~~Interest~~April 2008, ~~Income~~AtheroGenics entered into a Manufacturing and Supply Agreement (the “Agreement”) with ISP Pharma Systems LLC (“ISP”) for the manufacture and supply of the active pharmaceutical ingredient and an intermediate product (the “Product”) of AtheroGenics’ product candidate, AGI-1067.

~~Net~~The ~~interest~~initial ~~income~~term ~~was~~of ~~$2.4 million~~the ~~in 2001,~~Agreement ~~compared~~expires toon ~~$1.7~~April ~~million~~1, in2013 ~~2000.~~and ~~This~~the ~~increase~~Agreement is ~~primarily~~ ~~due to an increased level of investments with funds~~automatically ~~received~~extended ~~from~~for ~~our~~successive ~~initial~~two ~~public~~year ~~offering~~terms inthereafter ~~August~~if ~~2000~~neither ~~and~~party ~~our private~~provides ~~placement~~notice ~~financing~~of ~~in June 2001, offset by lower interest rates earned on invested funds~~non-renewal.

~~Income~~ Under ~~Taxes~~the terms of the Agreement, ISP has agreed to accept certain equipment used in the manufacture of the Product from AtheroGenics, in exchange for specific manufacturing activities related to AtheroGenics’ product candidate, AGI-1067. AtheroGenics had written the asset off as an impairment charge in 2007. Through December 31, 2008, AtheroGenics has recognized $821,000 of work performed by ISP in research and development expense with an offsetting credit to restructuring and impairment costs. In addition, ISP has agreed to supply, and AtheroGenics has agreed to purchase, specified percentages, which change over time, of the worldwide production requirements for the Product, if needed. AtheroGenics will pay ISP a specified purchase price, which varies based on annual quantities of the Product supplied. This purchase price is adjustable based on any changes in Product specifications mandated by AtheroGenics, and, following the end of each contract year, based upon certain industry price indices.

As of December 31, 2001, we had net operating loss carryforwards and research and development credit carryforwards of $50.4 million and $1.5 million, respectively, available to offset future regular and alternative taxable income. The ~~net~~Agreement ~~operating~~also ~~loss~~contains ~~carryforwards~~certain ~~and~~provisions regarding the ~~research~~ ~~and~~rights ~~development credit carryforwards will expire between 2010~~ and ~~2021.~~responsibilities ~~The maximum annual use~~ of ~~the net~~ ~~operating loss carryforwards is limited in situations where changes occur in our stock ownership. Because of our lack of earnings history,~~ the ~~resulting~~parties ~~deferred~~with ~~tax~~respect ~~assets have been fully offset by a valuation allowance. The utilization of the loss and credit carryforwards~~ to ~~reduce~~manufacturing ~~future~~specifications, ~~income~~forecasting ~~taxes will depend on our ability to generate sufficient taxable income prior to the expiration of the net operating loss carryforwards~~ and ~~research~~ordering, ~~and development credit carryforwards. We have not~~delivery ~~yet~~arrangements, ~~completed~~payment ~~full analysis of Internal Revenue Code Section 382 limitations on the cumulative net operating loss carryforward. However~~terms, ~~the annual limitations are not expected to prevent utilization of the net operating loss carryforward due to significant increases in value indicated by the successive issuances of our stock. If a~~ change ~~in ownership has occurred~~orders, ~~there~~intellectual ~~will~~property berights, anconfidentiality ~~annual limitation; however~~and indemnification, ~~this limitation~~as iswell ~~not~~as ~~expected~~other tocustomary ~~result~~terms inand ~~a loss of the deferred tax benefit~~provisions.

~~Comparison~~On April 1, 2009, the Agreement was transferred to the Purchaser, one of whom is a former ~~Years~~member ~~Ended~~of ~~December 31~~AtheroGenics’ board of directors, ~~2000~~as ~~and~~part ~~1999~~of the Asset Sale.

~~Revenues~~Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

~~Total revenues were $8~~None.~~2 million for the~~ twelve months ended December 31, 2000, compared to $1.3 million in 1999. Revenues of $3.3 million and $555,556 in 2000 and 1999, respectively, were attributable to licensing fees from the exclusive license agreement signed in October 1999 with Schering-Plough. This amount represents the earned portion of the $5.0 million initial licensing fee that was amortized over 18 months. Research and development revenues from our development activities on AGI-1067 were $4.8 million and $791,653 in 2000 and 1999, respectively.

~~Expenses~~Item 9A(T). Controls and Procedures

~~Research~~Evaluation ~~and Development. Research and development expenses, excluding amortization~~ of ~~deferred~~Disclosure ~~stock~~Controls compensation, were $12.8 million for the twelve months ended December 31, 2000, compared to $9.0 million for the twelve months ended December 31, 1999. The increase of $3.8 million, or 42%, reflects the continued expansion of our internal research and ~~development capabilities, preclinical~~Procedures ~~costs related to AGIX-4207, a novel compound being developed for~~ ~~the treatment of rheumatoid arthritis, and other product development programs.~~

~~General~~Our ~~and Administrative.~~management, ~~General~~which consists of one person that acts as our principal executive and ~~administrative~~financial ~~expenses~~officer, ~~excluding~~is ~~amortization~~responsible offor ~~deferred~~establishing and maintaining our “disclosure controls and ~~stock~~procedures” ~~compensation~~(as defined in the Securities Exchange Act of 1934, ~~were~~as ~~$3.0~~amended (the “Exchange Act”) Rules ~~million~~13a-15(e) ~~for~~and 15d-15(e)). Our management evaluated the ~~twelve~~effectiveness ~~months~~of our disclosure ~~ended~~controls ~~December 31,~~and ~~2000~~procedures as of the end of the period covered by this Form 10-K. During this evaluation, ~~compared~~the tomaterial weaknesses in our internal control over financial reporting described below were identified.

27 Our management concluded that in light of the material weaknesses described below, our disclosure controls and procedures were not effective as of December 31, 2008.

~~Table of Contents~~25

$2.6 millionTable for the twelve months ended December 31, 1999. The increase of $442,542, or 17%, was primarily due to increases in facility costs, personnel costs in administration departments and professional fees. Contents

~~Amortization~~Management’s ofReport Deferred Stock Compensation. For the twelve months ended December 31, 2000, we recorded non-cash deferred stock compensation of approximately $12.1 million for options granted with exercise prices below the deemed fair value for financial reporting purposes of our common stock on ~~their respective~~Internal ~~grant~~Control ~~dates.~~Over ~~This~~Financial ~~deferred stock compensation is~~Reporting being amortized using the graded vesting method. Amortization of deferred stock compensation was $8.0 million for the twelve months ended December 31, 2000, of which $1.9 million was attributable to research and development expenses and $6.1 million was attributable to general and administrative expenses. There was $85,480 of amortization of deferred stock compensation for the twelve months ended December 31, 1999.

~~Net~~ Our ~~Interest~~management, ~~Income~~which consists of one person that acts as our principal executive and financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

~~Net~~• ~~interest~~pertain ~~income~~to ~~was~~the ~~$1.7 million~~maintenance ~~for~~of ~~the twelve~~records ~~months~~that, ~~ended~~in ~~December 31~~reasonable detail, ~~2000~~accurately and fairly reflect the transactions and dispositions of our assets; • provide reasonable assurance that transactions are recorded as ~~compared~~necessary to ~~net interest~~permit ~~expense~~preparation of ~~$60,617~~financial ~~for~~statements ~~the~~in ~~twelve~~accordance ~~months~~with ~~ended December 31~~U.S. generally accepted accounting principles, ~~1999.~~and ~~The~~that ~~increase~~our inreceipts ~~net~~and ~~interest~~expenditures ~~income~~are ~~was due~~being tomade anonly ~~increased~~in ~~level~~accordance with authorizations of ~~invested~~our ~~funds~~management ~~from~~and ~~the~~directors; ~~initial public~~and ~~offering~~• ~~proceeds,~~provide asreasonable ~~well~~assurance asregarding ~~the~~prevention ~~elimination~~or timely detection of ~~interest expense~~unauthorized ~~related~~acquisition, touse aor ~~bridge~~disposition ~~loan,~~of ~~which~~our ~~was~~assets ~~converted~~that ~~to preferred~~could ~~stock~~have ina ~~April~~material ~~1999~~effect on the financial statements.

~~Income~~ Because ~~Taxes~~of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

AsOur management assessed the effectiveness of ~~December 31,~~our ~~2000,~~internal wecontrol ~~had~~over ~~net~~financial reporting as ~~operating~~of ~~loss~~the ~~carryforwards~~end ~~and~~of ~~research~~the ~~and~~period ~~development~~covered ~~credit carryforwards~~by ofthis ~~$35~~Form 10-K.~~6 million~~ ~~and~~In ~~$1.2~~making ~~million~~this assessment, our management used ~~respectively,~~the ~~available~~criteria toset ~~offset~~forth ~~future~~by ~~regular~~the ~~and~~Committee ~~alternative~~of Sponsoring Organizations of the Treadway Commission ~~taxable~~(COSO) in ~~income~~Internal Control-Integrated Framework.

A material weakness is a significant deficiency, or combination of significant deficiencies, ~~Liquidity~~that ~~and~~results ~~Capital~~in ~~Resources~~more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. In performing this assessment, management identified the following material weaknesses in our internal control over financial reporting as of December 31, 2008:

Since inception, we have financed our operations primarily through private placements of preferred stock and our initial public offering of 6.9 million shares of our common stock that raised net proceeds of $49.4 million. In June 2001, we completed a private placement of 3.6 million shares of our common stock that raised net proceeds of $18.8 million. At December 31, 2001, we had cash, cash equivalents and short-term investments of $58.4 million, compared with $54.0 million at December 31, 2000. Working capital at December 31, 2001 was $55.1 million, compared to $52.4 million at December 31, 2000. The increase in cash, cash equivalents, short-term investments and working capital is primarily due to the funds received from the private placement of our common stock in June 2001.

	•		The Chapter 11 Proceeding has required substantial effort from our limited management personnel which resulted in our inability to file this Form 10-K on a timely basis; based on reduction of our finance and executive management resources, which has also impacted our supervision and review, management oversight, as well segregation of duties processes. and

	•		The Chapter 11 Proceeding, the cessation of our operations and our substantial workforce reductions resulted in our inability to maintain an Audit Committee in compliance with Nasdaq listing standards and SEC regulations.

~~Net~~Notwithstanding ~~cash~~the ~~used~~above inmaterial ~~operating~~weaknesses, ~~activities~~management ~~was $12.8 million~~has inconcluded ~~2001,~~that ~~compared~~our toannual financial ~~$8.8 million~~statements were prepared in ~~2000~~ accordance with U.S. ~~The~~generally ~~increase~~accepted inaccounting principles. Accordingly, the ~~use~~annual financial ofstatements ~~cash~~included in ~~operating~~our Annual ~~activities~~Report ~~is principally~~on ~~due~~this toForm ~~the~~10-K ~~funding~~fairly ofpresent ~~net~~in ~~losses,~~all ~~excluding~~material ~~non-cash charges.~~respects Weour ~~expect~~financial ancondition, results ~~increase~~of inoperations ~~net~~and cash ~~used~~flows infor ~~operating activities~~the asperiods apresented ~~result~~in ofaccordance ~~the~~with ~~termination~~U.S. ~~of our license~~generally ~~agreement~~accepted ~~with~~accounting ~~Schering-Plough~~principles.

~~Net~~We ~~cash~~do ~~used~~not inintend ~~investing~~to ~~activities~~remediate ~~was $3.8 million~~these inmaterial ~~2001~~weaknesses, ~~compared to $28.2 million used~~ in ~~investing~~light ~~activities in 2000. Net cash used in investing activities during 2001 consisted primarily~~ of ~~net~~the ~~purchases of~~Chapter 11 ~~available-for-sale securities~~Proceeding, and ~~purchases~~our ofintention ~~equipment~~to ~~and leasehold~~liquidate ~~improvements. Net cash used~~ in ~~investing activities during 2000 consisted primarily of~~ the ~~purchases~~near ~~of short-~~term ~~investments and purchases of equipment and leasehold improvements~~.

~~Net~~This ~~cash~~annual ~~provided~~report bydoes ~~financing~~not ~~activities~~include ~~was $18.8 million~~an inattestation ~~2001,~~report ~~compared~~of toAtheroGenics’ ~~$50.1 million provided~~registered ~~by financing activities in 2000. Net cash provided by~~public ~~financing~~accounting ~~activities~~firm inregarding ~~2001~~internal ~~consisted~~control ~~primarily~~over ~~of $18~~financial reporting.~~8 million~~ ~~received~~Management’s ~~from~~report ~~the~~was ~~private placement of our~~not ~~common~~subject ~~stock~~to inattestation ~~June 2001. Net cash provided~~ by ~~financing activities~~AtheroGenics’ inregistered ~~2000~~public ~~consisted~~accounting ~~primarily~~firm ofpursuant ~~proceeds~~to ~~from our~~temporary ~~initial~~rules ~~public~~of ~~offering in August 2000, and~~ the ~~exercise~~Securities ~~of preferred stock warrants~~ and ~~common~~Exchange ~~stock~~Commission ~~options.~~that Wepermit ~~have entered into a non-formula revolving line of credit with Silicon Valley Bank in~~ the ~~amount~~company ~~$5.0 million~~ to beprovide ~~used for~~only ~~working capital requirements. Borrowings under this line of credit bear interest at the bank~~management’s ~~prime~~report ~~rate plus 1.50% floating rate and will become due 30 months from closing. In addition, we have entered into an equipment financing facility with Silicon Valley Bank~~ in ~~the~~this ~~amount~~annual ~~of $2~~report.~~5 million to be used to finance existing and new~~

28Changes in Internal Control over Financial Reporting

~~Table~~ As discussed above, we have been involved in the Chapter 11 Proceeding since our third fiscal quarter of ~~Contents~~fiscal 2008, which has significantly impacted our internal control over financial reporting to, among other things, prepare our financial statements reflecting the changes brought about as a result of the Chapter 11 Proceeding. In addition, as previously disclosed, on April 1, 2009 we announced the

26 ~~equipment purchases. Borrowings under the financing facility bear interest to be fixed at the time of each advance and each advance will mature in 33 months from the date of the advance.~~

BasedTable upon the current status of our product development and commercialization plans, we believe that our existing cash and cash equivalents, along with our line of credit and equipment financing facility with Silicon Valley Bank, will be adequate to satisfy our capital needs for at least the next 12 months. However, our actual capital requirements will depend on many factors, including: Contents

•involuntary ~~the~~separation ~~status~~ of ~~product~~Russell ~~development;~~M. •Medford, ~~the~~Mark ~~time~~P. Colonnese, and ~~cost~~W. ~~involved~~Charles inMontgomery ~~conducting~~from ~~clinical~~their positions ~~trials~~as ~~and~~officers ~~obtaining~~of ~~regulatory~~AtheroGenics. ~~approvals;~~These •officers ~~filing,~~were ~~prosecuting~~important to our financial reporting and ~~enforcing~~control ~~patent~~process, and ~~other~~their ~~intellectual~~departure ~~property~~has ~~claims;~~lead •to ~~competing~~material ~~technological~~changes ~~and~~in ~~market~~our ~~developments;~~internal control ~~and~~over •financial reporting that significantly impacted our ability to ~~market~~prepare ~~and~~our financial ~~distribute~~statements, including our ~~future~~inability ~~products~~to ~~and~~maintain ~~establish~~an ~~new~~Audit ~~licensing~~Committee ~~agreements~~in compliance with Nasdaq listing standards and SEC regulations.

Other than as described above, there were no other changes in our internal control over ~~Recently~~financial ~~Issued~~reporting ~~Accounting~~during ~~Standards~~the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~In July 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS Nos.~~Item ~~141,~~9B. ~~Business Combinations and 142, Accounting for Goodwill and~~ Other ~~Intangibles~~ (“SFAS 141” and “SFAS 142”). SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, and provides new criteria for determining whether an acquired intangible asset should be recognized separately from goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. Intangible assets that have finite lives will continue to be amortized over their useful lives. We do not expect the adoption of SFAS 141 and SFAS 142 to have an impact on our financial statements. Information

~~In October 2001, FASB issued SFAS No~~ None. 144, Accounting for the Impairment or Disposal of Long-lived Assets, (“SFAS 144”) which is applicable to financial statements issued for fiscal years beginning after December 15, 2001. SFAS 144 establishes a new method of accounting and reporting for the impairment of long-lived assets other than goodwill and intangible assets. The statement provides a single accounting model for long-lived assets to be disposed of and changes the criteria required to classify an asset as held-for-sale. We do not expect the adoption of SFAS 144 to have a material impact on our financial statements.

~~Item~~PART ~~7A. Quantitative and Qualitative Disclosures on Market Risk~~III

~~The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk~~Item 10. Some of the securities that we invest in may have market risk. This means that a change in prevailing interest rates may cause the fair value of the principal amount of the investment to fluctuate. For exampleDirectors, ~~if we~~Executive ~~hold~~Officers ~~a security that was issued with a fixed interest rate at the then-prevailing rate~~ and ~~the~~Corporate prevailing interest rate later rises, the fair value of the principal amount of our investment will probably decline. To minimize this risk in the future, we intend to continue to maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including commercial paper, money market funds, and government and non-government debt securities. The average duration of all of our investments has generally been less than one year. Due to the short-term nature of these investments, we believe we have no material exposure to interest rate risk arising from our investments. Governance

29 As previously disclosed, on April 1, 2009, R. Wayne Alexander, Samuel L. Barker and Margaret E. Grayson resigned from their positions as directors and their related committee appointments. In addition, in conjunction with the sale of substantially all of AtheroGenics’ non-cash assets, AtheroGenics announced the involuntary separation of its remaining executive officers. AtheroGenics also appointed Charles A. Deignan, 44, as its President, Chief Financial Officer and Secretary on April 1, 2009.

~~Table~~ Charles A. Deignan has served as President, Chief Financial Officer and Secretary of AtheroGenics ~~Contents~~since his appointment on April 1, 2009. From January 2007 and until his most recent appointment, Mr. Deignan previously served as AtheroGenics’ Vice President of Finance and Administration and Principal Accounting Officer. Mr. Deignan is AtheroGenics only executive officer, and will oversee the wind down of the Chapter 11 Proceeding.

~~Item~~ Michael 8A. Henos, 59, has served as chairman of AtheroGenics’ board of directors since 1994 and was AtheroGenics’ Chief Financial ~~Statements~~Officer from 1994 to 1999. From 1993 to the present, Mr. Henos has served as managing general partner of Alliance Technology Ventures, L.P., a venture capital firm with $250 million under management. Mr. Henos served as a general partner of Aspen Ventures, a $150 million early stage venture capital partnership, from 1991 to 2001. Mr. Henos previously served as a vice president of 3i Ventures Corporation, the predecessor of Aspen Ventures, from 1986 to 1991. From 1984 to 1986, Mr. Henos served as a healthcare consultant with Ernst & Young, specializing in venture financing of startup medical technology companies. Before joining Ernst & Young, Mr. Henos served in a variety of operating management positions and co-founded ~~Supplementary~~and ~~Data~~served as Chief Executive Officer of ProMed Technologies, Inc. Mr. Henos is the Chairman of the Board of Inhibitex, Inc., a clinical stage biopharmaceutical company and serves as a board member of Genoptix, Inc., a specialized laboratory service provider of diagnostic services to hematologists and oncologists.

Russell M. Medford, M.D., Ph.D., is AtheroGenics only other remaining director. Dr. Medford ~~ATHEROGENICS~~is 54 years old and his term is scheduled to expire this year. Dr. Medford has served as a member of AtheroGenics’ board of directors since its inception in 1993. Dr. Medford was the President and Chief Executive Officer from 1995 until 2009 after serving as Executive Vice President from 1993 to 1995. Dr. Medford is a director of Inhibitex, ~~INC~~Inc., a clinical stage biopharmaceutical company. Dr. Medford serves on the Biotechnology Industry Organization’ (BIO) Board of Directors and the Emerging Companies Section Governing Body, Health Section Governing Body, Co-Chair Bioethics Committee and BIO2009 Steering Committee. He served as Chairman of the Georgia BIO and is a member of the Georgia BIO Executive Committee and Board of Directors. He also serves on the Southeast BIO Board of Directors. Dr. Medford has most recently been elected to the National Health Museum Board of Trustees. He is an inaugural Fellow of the Council on Basic Cardiovascular Sciences of the American Heart Association and has held a number of academic appointments at the Emory University School of Medicine, most recently as Adjunct Clinical Professor of Medicine. Dr. Medford is a molecular cardiologist whose research has focused on the molecular basis of cardiovascular disease. Dr. Medford received a B.A. from Cornell University, and an M.D. with Distinction and a Ph.D. in molecular and cell biology from the Albert Einstein College of Medicine. Dr. Medford completed his residency in internal medicine at the Beth Israel Hospital and served as a fellow in cardiology at the Brigham and Women’s Hospital and Harvard Medical School, where he also served on the faculty of Medicine.

~~INDEX TO FINANCIAL STATEMENTS~~ 27

Report of Independent Auditors			31
Balance Sheets			32
Statements of Operations			33
Statements of Shareholders’ Equity (Deficit)			34
Statements of Cash Flows			35
Notes to Financial Statements			36

Section 16(a) Beneficial Ownership Reporting Compliance

30 Section 16(a) of the Exchange Act requires our directors and executive officers to file reports of holdings and transactions in AtheroGenics stock with the SEC. Based solely on a review of copies of reports and certain written representations from our executive officers and directors, we believe that all Section 16(a) filing requirements were met during 2008 except for one late Form 4 filing reporting the sale of shares of common stock for Mr. Bryson.

~~Table~~Code of ~~Contents~~Ethics

We have adopted a code of business conduct and ethics for directors, officers and employees, ~~REPORT~~including OFour ~~INDEPENDENT~~principal ~~AUDITORS~~executive officer and principal financial officer, known as the AtheroGenics, Inc. Code of Business Conduct and Ethics. You may request a free copy from:

AtheroGenics, Inc. ~~The~~Attention: ~~Board~~Investor ofRelations 8995 ~~Directors~~Westside ~~and~~Parkway Alpharetta, ~~Shareholders~~Georgia 30009 (678) 336-2500

~~AtheroGenics,~~Audit ~~Inc.~~Committee

WeDuring ~~have~~2008, ~~audited~~AtheroGenics ~~the~~had ~~accompanying~~an ~~balance~~audit ~~sheets~~committee which was responsible for appointing and overseeing the performance of ~~AtheroGenics,~~our ~~Inc.~~independent asregistered ofpublic ~~December 31~~accounting firm, ~~2001~~overseeing our accounting and ~~2000,~~financial reporting process and reviewing the ~~related~~scope, ~~statements~~results and costs of ~~operations,~~the ~~shareholders’~~audits and ~~equity~~other services provided by our independent registered public accounting firm. The audit committee had been established in accordance with Section 3(~~deficit~~a) (58)(A) of the Exchange Act. The audit committee members were independent directors and ~~cash~~met ~~flows~~applicable ~~for~~audit ~~each~~committee independence requirements of ~~the~~Nasdaq ~~three~~listing ~~years~~standards inand ~~the period~~SEC ~~ended~~regulations. ~~December 31,~~The ~~2001~~board of directors determined that Mr. Bearman ~~These~~was an audit committee financial ~~statements are~~expert. Due to the ~~responsibility~~departure of ~~the~~substantially all ~~Company~~of AtheroGenics’s ~~management.~~remaining ~~Our responsibility~~directors ison toApril 1, ~~express~~2009, anAtheroGenics ~~opinion~~no onlonger ~~these~~has ~~financial~~an audit ~~statements~~committee ~~based~~or onan ~~our~~audit ~~audits~~committee financial expert.

~~We conducted our audits in accordance with auditing standards generally accepted in the United States~~Item 11. ~~Those~~ ~~standards~~Executive ~~require that we plan and perform the audit to~~Compensation obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

InExecutive ~~our opinion, the financial statements referred~~Compensation to above present fairly, in all material respects, the financial position of AtheroGenics, Inc. at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

~~/S/~~ The ~~ERNST~~following &table ~~YOUNG~~summarizes ~~LLP~~the compensation paid to or earned during the years ended December 31, 2008 and 2007 by our Principal Executive Officer, and each of our two most highly compensated executive officers who were serving at December 31, 2008 and whose total salary and bonus exceeded $100,000 for services rendered to us in all capacities during 2008.

Atlanta, Georgia


					Non-Equity
					Incentive
	Fiscal				Plan		Option		All Other
Name and Principal Position	Year		Salary		Compensation		Awards (1)		Compensation (2)		Total
Russell M. Medford, M.D., Ph.D.		2008	$	502,792	$	—	$	1,104,109	$	16,062	$	1,622,963
President and Chief Executive Officer		2007		483,454		137,784		1,359,714		16,027		1,996,979

Mark P. Colonnese		2008		341,786		—		552,670		111,479		1,005,935
Executive Vice President, Commercial		2007		328,640		133,668		666,665		45,580		1,174,553
Operations and Chief Financial Officer

W. Charles Montgomery, Ph.D.		2008		308,256		—		488,842		102,696		899,794
Senior Vice President, Business		2007		296,400		112,518		597,821		43,317		1,050,056
Development and Alliance Management

~~February 8~~(1) Represents the compensation costs recognized for financial reporting purposes for the year ended December 31, ~~2002~~ 2008, excluding estimated forfeitures, in accordance with FAS 123(R). See Note 1 Description of Business and Significant Accounting Policies — Stock-Based Compensation for a discussion of all assumptions made by AtheroGenics in determining the FAS 123(R) value of its option awards. Since AtheroGenics’ cash and cash equivalents will be distributed to its creditors if the plan of liquidation is

3128

~~ATHEROGENICS~~approved by the Bankruptcy Court and AtheroGenics’ cash and cash equivalents are significantly less than its prepetition liabilities, ~~INC~~AtheroGenics’ stock options have no value. (2) Represents the compensation committee approved retention payments related to the ANDES clinical trial, a 401(k) plan matching contribution and premiums for long-term disability insurance and term life insurance paid by us for 2008.

~~BALANCE~~2008 ~~SHEETS~~Outstanding Equity Awards at Fiscal Year End

				December 31,
				2001			2000
ASSETS
Current assets:
	Cash and cash equivalents			$	28,682,050		$	26,463,070
	Short-term investments				29,757,945			27,518,169
	Accounts receivable				—			1,138,244
	Prepaid expenses, note receivable and other current assets				576,734			545,826
			Total current assets		59,016,729			55,665,309
Equipment and leasehold improvements:
	Laboratory equipment				1,861,221			1,352,692
	Leasehold improvements				1,420,579			966,869
	Computer and office equipment				968,329			476,276
	Construction in progress				309,384			131,185
					4,559,513			2,927,022
	Less accumulated depreciation and amortization				(1,644,001	)		(1,152,028	)
					2,915,512			1,774,994
Long-term notes receivable					323,037			158,648
			Total assets	$	62,255,278		$	57,598,951
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable			$	1,121,550		$	504,991
	Accrued research and development costs				1,307,435			342,210
	Accrued compensation				902,571			640,975
	Accrued liabilities				541,809			517,312
	Current portion of capitalized lease obligation				87,101			125,759
	Deferred revenues				—			1,111,111
			Total current liabilities		3,960,466			3,242,358
Long-term portion of capitalized lease obligations					—			84,907
Shareholders’ equity
	Preferred stock, no par value:
		Authorized — 5,000,000 shares			—			—
	Common stock, no par value:
		Authorized — 100,000,000 shares; issued and outstanding — 27,834,773 and 23,909,295 shares at December 31, 2001 and 2000, respectively			121,723,102			103,608,655
		Warrants			771,713			225,713
		Deferred stock compensation			(2,975,314	)		(5,930,880	)
	Accumulated deficit				(61,277,987	)		(43,638,404	)
	Accumulated other comprehensive income				53,298			6,602
			Total shareholders’ equity		58,294,812			54,271,686
			Total liabilities and shareholders’ equity	$	62,255,278		$	57,598,951

The following table sets forth information regarding each unexercised option held by each of our named executive officers as of December 31, 2008.

The accompanying notes are an integral part of these financial statements.


	Number of		Number of
	Securities		Securities
	Underlying		Underlying
	Unexercised		Unexercised			Option		Option		Option
	Option #		Option #			Exercise		Grant		Expiration
Name	Exercisable		Unexercisable (1)			Price		Date		Date
Russell M. Medford		137,500		—		$	0.30		4/28/1999		4/28/2009
		100,000		—			0.31		12/8/1999		12/8/2009
		500,000		—			0.38		1/28/2000		1/28/2010
		90,000		—			5.00		12/29/2000		12/29/2010
		120,000		—			6.05		12/31/2001		12/31/2011
		144,000		—			7.41		12/31/2002		12/31/2012
		120,000		—			14.86		12/31/2003		12/31/2013
		140,000		—			23.56		12/31/2004		12/31/2014
		120,000		36,000	(2)		15.78		2/21/2006		2/21/2016
		140,000		70,000			9.91		12/29/2006		12/29/2016
		96,691		48,345	(3)		2.41		6/19/2007		6/19/2017
		120,000		90,000			0.38		12/31/2007		12/31/2017

Mark P. Colonnese		70,600		—			0.38		1/28/2000		1/28/2010
		35,000		—			5.00		12/29/2000		12/29/2010
		60,000		—			6.05		12/31/2001		12/31/2011
		72,000		—			7.41		12/31/2002		12/31/2012
		57,000		—			14.86		12/31/2003		12/31/2013
		60,000		—			23.56		12/31/2004		12/31/2014
		60,000		18,000	(2)		15.78		2/21/2006		2/21/2016
		12,000		4,320			13.29		5/31/2006		5/31/2016
		72,000		36,000			9.91		12/29/2006		12/29/2016
		65,278		32,864	(3)		2.41		6/19/2007		6/19/2017
		72,000		54,000			0.38		12/31/2007		12/31/2017

W. Charles Montgomery		50,000		—			19.20		2/27/2004		2/27/2014
		50,000		—			23.56		12/31/2004		12/31/2014
		50,000		15,000	(2)		15.78		2/21/2006		2/21/2016
		10,000		3,600			13.29		5/31/2006		5/31/2016
		60,000		30,000			9.91		12/29/2006		12/29/2016
		59,280		29,640	(3)		2.41		6/19/2007		6/19/2017
		60,000		45,000			0.38		12/31/2007		12/31/2017


(1)		Except for the options granted on June 19, 2007, twenty five percent of these options vested on the first anniversary date of the grant. Following that date, the remaining options vested over three-consecutive twelve month periods at a rate of two percent per month during the initial eleven months of each period and three percent in the final month of each such period.

(2)		Options related to performance in 2005 were granted in February 2006.

~~Table of Contents~~29

ATHEROGENICS,Table INC. of Contents

~~STATEMENTS~~(3) OFOptions ~~OPERATIONS~~ granted on June 19, 2007 have a two year vesting period, twenty five percent vested on the anniversary of the vesting commencement date, twenty five percent vested 18 months from the vesting commencement date and fifty percent vested on the second anniversary of the vesting commencement date.

			Year Ended December 31,
			2001			2000			1999
Revenues:
	License fees		$	1,111,111		$	3,333,333		$	555,556
	Research and development			2,398,429			4,826,370			791,653
		Total revenues		3,509,540			8,159,703			1,347,209
Operating expenses:
	Research and development*			16,884,027			12,815,788			9,041,345
	General and administrative*			3,979,813			3,035,559			2,593,017
	Amortization of deferred stock compensation			2,652,031			7,972,728			85,480
		Total operating expenses		23,515,871			23,824,075			11,719,842
Operating loss				(20,006,331	)		(15,664,372	)		(10,372,633	)
Net interest income (expense)				2,366,748			1,714,850			(60,617	)
Net loss			$	(17,639,583	)	$	(13,949,522	)	$	(10,433,250	)
Net loss per share—basic and diluted			$	(0.68	)	$	(1.30	)	$	(4.27	)
Weighted average shares outstanding—basic and diluted				26,010,347			10,747,773			2,443,237

Retirement Benefits

* Prior ~~Exclusive~~to the departure of ~~amounts~~substantially ~~recorded~~all asof ~~amortization~~our directors and all of ~~deferred~~our ~~stock~~executive ~~compensation:~~officers in connection with the sale of substantially all of AtheroGenics’ non-cash assets, we provided matching contributions in connection with our 401(k) Plan for our executive officers.

Research and development		$	940,053			$	1,856,932			$	23,649
General and administrative		$	1,711,978			$	6,115,796			$	61,831

Change of Control and Severance Arrangements

As discussed above, an involuntary petition under Chapter 7 of the Bankruptcy Code was filed ~~The~~against ~~accompanying~~AtheroGenics ~~notes~~on ~~are~~September 15, an2008. ~~integral~~Subsequently, ~~part~~on October 6, 2008, AtheroGenics consented to the bankruptcy filing and moved the Bankruptcy Court to convert the Chapter 7 case to a case under Chapter 11 of the Bankruptcy Code. During the Bankruptcy Proceeding, AtheroGenics was ~~these~~required ~~financial~~to ~~statements~~seek the Bankruptcy Court’s approval of payments to be made to our executive officers upon their involuntary separation. The Bankruptcy Court approved a plan under which Drs. Medford and Montgomery, and Mr. Colonnese would each receive a cash payment of $125,000 in the event of their involuntary separation from the Company’s employment (other than a “for cause” separation).

33 On April 1, 2009, in connection with the sale of substantially all of AtheroGenics’ non-cash assets, Drs. Medford and Montgomery, and Mr. Colonnese were involuntarily separated from AtheroGenics’ employment. Pursuant to the plan approved by the Bankruptcy Court, each of Drs. Medford and Montgomery, as well as Mr. Colonnese, received a cash payment of $125,000. Since this amount was substantially lower than the amount of severance that would have been payable under each of the executive officer’s employment agreement in effect at the time of the bankruptcy filing, each executive officer has filed a non-priority, general unsecured claim against AtheroGenics’ bankruptcy estate for the following amounts: Drs. Medford and Montgomery, $2.0 million and $578,000, respectively, and Mr. Colonnese, $764,000. Since AtheroGenics’ cash and cash equivalents are substantially lower than our prepetition liabilities, the value that Drs. Medford and Montgomery and Mr. Colonnese will receive for their general unsecured claim against AtheroGenics’ bankruptcy estate will be approximately 14% of their claim due to the priority scheme established by the Bankruptcy Code.

~~Table~~Director ~~of Contents~~Compensation

On September 10, 2008, David Bearman, T. Forcht Dagi, M.D., Arthur M. Pappas and William A. ~~ATHEROGENICS~~Scott, ~~INC~~Ph.D. each resigned from AtheroGenics’ board of directors and their respective committee appointments effective as of September 9, 2008.

~~STATEMENTS~~ On OFSeptember 18, ~~SHAREHOLDERS’~~2008, ~~EQUITY~~Vaughn D. Bryson resigned from our board of directors and from his ~~(DEFICIT)~~compensation committee appointment.

														Accumulated		Total
	Common Stock							Deferred						Other		Shareholders’
								Stock			Accumulated			Comprehensive		Equity
	Shares		Amount			Warrants		Compensation			Deficit			Income		(Deficit)
Balance at January 1, 1999		2,410,375	$	281,751		$	—	$	—		$	(19,255,632	)	$	—	$	(18,973,881	)
Issuance of stock for exercise of stock options at $.10 to $.30 per share		126,168		33,051			—		—			—			—		33,051
Deferred stock compensation related to stock option grants		—		1,895,160			—		(1,895,160	)		—			—		—
Amortization of deferred stock compensation		—		—			—		85,480			—			—		85,480
Net loss		—		—			—		—			(10,433,250	)		—		(10,433,250	)
Balance at December 31, 1999		2,536,543		2,209,962			—		(1,809,680	)		(29,688,882	)		—		(29,288,600	)
Issuance of stock for exercise of stock options at $.30 to $.38 per share		602,650		185,788			—		—			—			—		185,788
Issuance of stock for services		11,000		85,438			—		—			—			—		85,438
Issuance of common stock, net of issuance cost of $5,770,749		6,900,000		49,429,251			—		—			—			—		49,429,251
Deferred stock compensation related to stock option grants		—		12,093,928			—		(12,093,928	)		—			—		—
Amortization of deferred stock compensation		—		—			—		7,972,728			—			—		7,972,728
Preferred stock conversion		13,859,102		39,604,288			—		—			—			—		39,604,288
Preferred stock warrant conversion		—		—			225,713		—			—			—		225,713
Net loss		—		—			—		—			(13,949,522	)		—		(13,949,522	)
Unrealized gain on available-for-sale securities		—		—			—		—			—			6,602		6,602
Comprehensive loss																	(13,942,920	)
Balance at December 31, 2000		23,909,295		103,608,655			225,713		(5,930,880	)		(43,638,404	)		6,602		54,271,686
Issuance of stock for exercise of stock options at $.30 to $.38 per share		335,478		108,764			—		—			—			—		108,764
Issuance of stock for services		5,000		29,778			—		—			—			—		29,778
Issuance of common stock, net of issuance cost of $1,788,310		3,585,000		18,825,440			—		—			—			—		18,825,440
Deferred stock compensation for issuance of stock options and warrants related to a technology license agreement		—		546,200			546,000		(1,092,200	)		—			—		—
Amortization of deferred stock compensation		—		—			—		2,652,031			—			—		2,652,031
Adjustment to deferred stock compensation for forfeited stock options		—		(1,395,735	)		—		1,395,735			—			—		—
Net loss		—		—			—		—			(17,639,583	)		—		(17,639,583	)
Unrealized gain on available-for-sale securities		—		—			—		—			—			46,696		46,696
Comprehensive loss																	(17,592,887	)
Balance at December 31, 2001		27,834,773	$	121,723,102		$	771,713	$	(2,975,314	)	$	(61,277,987	)	$	53,298	$	58,294,812

On April 1, 2009, R. Wayne Alexander, Samuel L. Barker and Margaret E. Grayson resigned from their positions as directors and their related committee appointments. Michael A. Henos and Dr. Russell Medford are AtheroGenics’ only remaining directors. The discussion below relates to salary payments made to AtheroGenics’ directors for their service during the year ended December 31, 2008.

The ~~accompanying~~following ~~notes~~table ~~are~~sets anforth ~~integral~~all ~~part~~ of the compensation awarded to, earned by or paid to ~~these~~AtheroGenics’ ~~financial~~non-employee ~~statements~~directors during 2008.


	Fees Earned
Name	or Paid in Cash ($)		Option Awards ($) (1)		Total ($)
Michael A. Henos	$	50,000	$	40,342	$	90,342
R. Wayne Alexander		27,500		21,031		48,531
Samuel L. Barker		30,000		76,535		106,535
David Bearman		15,000		21,031		36,031
Vaughn D. Bryson		13,750		20,687		34,437
T. Forcht Dagi		12,500		20,343		32,843
Margaret E. Grayson		27,500		75,847		103,347
Arthur M. Pappas		12,500		21,031		33,531
William A. Scott		12,500		20,343		32,843

~~Table of Contents~~30

ATHEROGENICS,Table INC. of Contents

~~STATEMENTS~~(1) OFRepresents ~~CASH~~the ~~FLOWS~~ compensation costs recognized for financial reporting purposes for the year ended December 31, 2008, excluding estimated forfeitures, in accordance with Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, or FAS 123(R). See Note 1 Description of Business and Significant Accounting Policies — Stock-Based Compensation for a discussion of all assumptions made by AtheroGenics in determining the FAS 123(R) value of its option awards. Since AtheroGenics’ cash and cash equivalents will be distributed to its creditors if the plan of liquidation is approved by the Bankruptcy Court and AtheroGenics’ cash and cash equivalents are significantly less than its prepetition liabilities, AtheroGenics’ stock options have no value. At December 31, 2008, the aggregate number of option awards outstanding was: Mr. Henos — 212,800 shares; Dr. Alexander — 150,900 shares; Dr. Barker — 70,000 shares and Ms. Grayson — 69,000. Mr. Bearman; Mr. Bryson, Dr. Dagi, Mr. Pappas and Dr. Scott did not have any option awards outstanding.

				Year Ended December 31,
				2001			2000			1999
Operating activities
Net loss				$	(17,639,583	)	$	(13,949,522	)	$	(10,433,250	)
Adjustments to reconcile net loss to net cash used in operating activities:
	Depreciation and amortization				491,973			420,192			279,823
	Amortization of deferred stock compensation				2,652,031			7,972,728			85,480
	Amortization of debt discount				—			—			235,750
	Stock issued for services				29,778			85,438			49,998
	Preferred stock issued for interest				—			—			271,071
	Changes in operating assets and liabilities:
		Accounts receivable			1,138,244			(346,591	)		(791,653	)
		Prepaid expenses, note receivable and other assets			(195,297	)		(422,996	)		977,544
		Accounts payable			616,559			(174,151	)		(770,411	)
		Accrued liabilities			1,251,318			974,897			(1,028,422	)
		Deferred revenues			(1,111,111	)		(3,333,333	)		4,444,444
			Net cash used in operating activities		(12,766,088	)		(8,773,338	)		(6,679,626	)
Investing activities
Purchases of equipment and leasehold improvements					(1,632,491	)		(738,053	)		(1,115,085	)
Purchases of short-term investments					(2,193,080	)		(27,511,567	)		—
			Net cash used in investing activities		(3,825,571	)		(28,249,620	)		(1,115,085	)
Financing activities
Payments on capital lease					(123,565	)		(175,096	)		(198,236	)
Proceeds from the issuance of preferred stock, Series C					—			—			17,535,923
Proceeds from the issuance and exercise of preferred stock warrants					—			636,635			—
Proceeds from the issuance of common stock					18,825,440			49,429,251			—
Proceeds from the exercise of common stock options					108,764			185,788			33,051
Proceeds from bridge loan financing, net of warrants					—			—			150,000
			Net cash provided by financing activities		18,810,639			50,076,578			17,520,738
Increase in cash and cash equivalents					2,218,980			13,053,620			9,726,027
Cash and cash equivalents at beginning of period					26,463,070			13,409,450			3,683,423
Cash and cash equivalents at end of period				$	28,682,050		$	26,463,070		$	13,409,450
Supplemental disclosures of cash flow information
Interest paid				$	21,536		$	30,524		$	28,317
Equipment purchases under capitalized lease obligation					—			222,500			—
Conversion of bridge loan and accrued interest to preferred stock					—			—			6,421,071
Warrants issued for extension of bridge loan					—			—			235,750
Option and warrants issued for technology license agreement					1,092,200			—			—

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

~~The~~Equity ~~accompanying~~Compensation ~~notes~~Plan ~~are an integral part of~~Information ~~these financial statements.~~

35 Prior to the filing of this Form 10-K, AtheroGenics filed a post-effective amendment to its Form S-8, to withdraw from registration its equity securities authorized for issuance. The following table sets forth certain information with respect to securities authorized for issuance under our equity compensation plans as of December 31, 2008.

Equity Compensation Plan Information

Number of securities

remaining available for

Number of securities to be

Weighted-average exercise

future issuance under

be issued upon exercise of

price of outstanding

equity compensation plans

outstanding options,

options, warrants

(excluding securities

Plan Category

warrants and rights

and rights

reflected in column (a))

(a)

(b)

(c)

Equity compensation plans approved by shareholders

5,061,181

7.87

2,142,710

Equity compensation plans not approved by shareholders (1)

56,000

6.00

—

Total

5,117,181

7.85

2,142,710

~~NOTES~~(1) TOWarrants ~~FINANCIAL~~issued ~~STATEMENTS~~ in connection with a licensing agreement dated June 29, 2001.

~~1. Description~~Security Ownership of ~~Business~~ ~~and~~Certain ~~Significant~~Beneficial ~~Accounting~~Owners ~~Policies~~and Management

~~Description~~The following table sets forth certain information provided to us by each of the following as of ~~Business~~March 31, 2009 (unless otherwise indicated) regarding their beneficial ownership of our common stock:

~~AtheroGenics,~~• ~~Inc.~~each ~~(“AtheroGenics”)~~person ~~was incorporated~~who onis ~~November 23,~~known ~~1993~~by ~~(date~~us to beneficially own more than 5% of ~~inception)~~our ~~in the~~common ~~State~~stock; • each of ~~Georgia~~the toexecutive ~~focus~~officers onnamed in the ~~discovery,~~Summary ~~development~~Compensation ~~and commercialization~~Table ofin ~~novel~~this ~~therapeutics~~proxy ~~for~~statement; ~~the~~• ~~treatment~~each of ~~chronic~~ ~~inflammatory~~our ~~diseases,~~directors ~~such~~ as ~~heart~~of ~~disease (atherosclerosis)~~March 31, ~~rheumatoid~~2009; ~~arthritis~~and • all of our directors and ~~asthma~~executive officers as a group.

~~Use~~ Beneficial ownership is determined in accordance with the rules of ~~Estimates~~the SEC, and includes voting and investment power with respect to the securities. Except as indicated by footnote, and subject to applicable community property laws, the persons and entities named in the table below have sole voting and sole investment power with respect to the shares set forth opposite each person’s or entity’s name.

31 The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

CashTable andof Cash EquivalentsContents

~~AtheroGenics~~Shares ~~considers~~of ~~all~~common ~~highly~~stock ~~liquid investments~~subject ~~with~~to aoptions ~~maturity~~or ofwarrants ~~three~~currently ~~months~~exercisable or ~~less when~~exercisable ~~purchased~~within to60 days beafter ~~cash~~March 31, ~~equivalents.~~2009 ~~AtheroGenics’~~are ~~cash equivalents~~deemed ~~consist~~outstanding ~~primarily~~for purposes of ~~money~~computing ~~market~~the ~~accounts,~~percentage ~~commercial~~ownership ~~paper,~~of ~~government~~the ~~agency~~person ~~notes~~holding ~~and~~such ~~corporate~~options ~~notes~~or ~~on deposit~~warrants, ~~with~~but ~~several~~are ~~financial~~not ~~institutions~~deemed ~~and~~outstanding for purposes of computing the ~~carrying~~percentage ownership of any other person. Unless otherwise indicated, ~~amounts~~the ~~reported~~address for each of the individuals listed in the ~~balance~~table ~~sheets~~is ~~approximate~~c/o ~~their~~AtheroGenics, ~~fair~~Inc., 8995 ~~value~~Westside Parkway, Alpharetta, Georgia 30009.

~~Short-Term~~ Even ~~Investments~~though our common stock continues to be quoted on the Pink Sheets, our common stock has no value and our shareholders should not view the trading activity of our common stock on the Pink Sheets or any other market or trading platform as being indicative of the value our shareholders will receive as part of the Chapter 11 Proceeding.

Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. These investments are accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities (“SFAS 115”). AtheroGenics has classified all investments as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in a separate component of shareholders’ equity. Realized gains and losses are included in investment income and are determined on a specific identification basis.


	Common Stock
	Beneficially Owned
	Number			Percent
	of			of
Beneficial Owner	Shares			Class
Visium Asset Management, LP		3,892,836	(1)		9.8	%
950 Third Avenue
New York, New York 10022
BNP Paribas Arbitrage SA		2,983,500	(2)		7.6	%
555 Croton Road , 4^th Floor
King of Prussia, Pennsylvania
Aristeia Capital, LLC		2,367,278	(3)		5.7	%
136 Madison Avenue, 3^rd Floor
New York, New York 10016
Russell M. Medford, M.D., Ph.D.		2,117,787	(4)		5.4	%
R. Wayne Alexander, M.D., Ph.D.		586,800	(5)		1.5	%
Mark P. Colonnese		511,664	(6)		1.3	%
W. Charles Montgomery, Ph.D.		233,140	(7)		*
Michael A. Henos		212,800	(8)		*
Samuel L. Barker, Ph.D.		70,000	(9)		*
Margaret E. Grayson		69,000	(10)		*

All directors and executive officers as a group (7 persons)		3,801,191	(11)		9.6	%

Short-term investments consist of certificates of deposit, commercial paper, government agency notes and corporate notes that will mature between four and twelve months.


*		Less than one percent (1%) of outstanding shares.

(1)		The amount shown and the following information is based on a Schedule 13G/A, dated February 13, 2009, filed by Visium Asset Management, LP, indicating beneficial ownership as of December 31, 2008. The Schedule 13G/A indicates that Visium Asset Management, LP, JG Asset, LLC and Jacob Gottlieb each have sole voting and dispositive power with respect to 3,892,836 shares.

(2)		The amount shown and the following information was provided by BNP Paribas Arbitrage SA on March 31, 2008, indicating that BNP Paribas Arbitrage SA has sole voting and dispositive power with respect to 2,983,500 shares.

(3)		The amount shown and the following information is based on a Schedule 13G, dated February 13, 2009, filed by Aristea Capital, LLC, indicating beneficial ownership as of December 31, 2008. The Schedule 13G indicates that Aristea Capital, LLC has sole voting and dispositive power with respect to 2,367,278 shares.

(4)		Includes 1,620,646 shares subject to options exercisable within 60 days and 100,000 shares owned by Medford Future Fund, LLLP, a family limited liability limited partnership of which Dr. Medford is the general partner. As the general partner, Dr. Medford exercises voting and investment power over these shares.

(5)		Includes 150,900 shares subject to options exercisable within 60 days and 100,000 shares owned by Jane Alexander, Dr. Alexander’s spouse.

(6)		Includes 511,664 shares subject to options exercisable within 60 days.

~~Fair Value of Financial Instruments and Concentration of Credit Risk~~32

FinancialTable instruments that subject AtheroGenics to concentration of credit risk consist primarily of cash, cash equivalents and short-term investments. These assets are maintained by reputable third party financial institution custodians. The carrying values reported in the balance sheets for cash, cash equivalents and short-term investments approximate their fair values. Contents

Accounts Receivable


(7)		Includes 233,140 shares subject to options exercisable within 60 days.

(8)		Includes 212,800 shares subject to options exercisable within 60 days.

(9)		Includes 70,000 shares subject to options exercisable within 60 days.

(10)		Includes 69,000 shares subject to options exercisable within 60 days.

(11)		Includes 2,868,150 shares subject to options exercisable within 60 days.

~~Accounts~~Item 13. ~~receivable~~Certain ~~consisted~~Relationships ~~of accounts receivable~~ and ~~unbilled~~Related ~~receivables from Schering-Plough. As of December 31~~Transactions, ~~2001,~~and ~~there~~Director ~~were no accounts receivable or~~Independence ~~unbilled receivables as a result of the termination of the license agreement with Schering-Plough (see Note 2 “License Agreement”).~~

~~Equipment~~Related ~~and~~Person ~~Leasehold Improvements~~Transactions

~~Equipment~~The ~~and~~Sale ~~leasehold~~of ~~improvements~~Substantially ~~are~~All ~~stated at cost. Depreciation~~ of ~~computer~~Our ~~and lab equipment is computed using the straight~~Non-~~line~~Cash ~~method over the estimated useful lives~~Assets ~~of three and five years, respectively. Amortization of leasehold improvements is recorded over the shorter of: (a) the estimated useful lives of the related assets; or (b) the lease term.~~

36 On March 17, 2009, AtheroGenics entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Crabtree Acquisition Co., LLC (the “Purchaser”). Pursuant to the Purchase Agreement, the Purchaser agreed to purchase substantially all of AtheroGenics’ non-cash assets for $2,000,000 in a transaction under Section 363 of Chapter 11 of Title 11 of the Bankruptcy Code. The Purchaser is a Delaware limited liability company, and Vaughn D. Bryson, a former member of AtheroGenics’ board of directors, is an investor in the Purchaser.

~~Table~~ The ofsale ~~Contents~~was completed on April 1, 2009 after being approved by the Bankruptcy Court, and after AtheroGenics failed to receive a better offer.

~~NOTES~~Emory TOUniversity ~~FINANCIAL~~License ~~STATEMENTS —~~Agreement ~~(Continued)~~

~~Revenue~~ In ~~Recognition~~January 1995, we entered into a license agreement with Emory University. Under the terms of the Emory license agreement, Emory granted to us an exclusive right and license to make, use and sell products utilizing inventions claimed in several patents developed by employees of Emory. The Emory employees who developed the licensed patents include Russell M. Medford, M.D., Ph.D., our President, Chief Executive Officer and director at the time the transaction was approved, and R. Wayne Alexander, M.D., Ph.D., a member of our board of directors at the time the transaction was approved. Dr. Medford now serves AtheroGenics only as a director, and Dr. Alexander is no longer a director. The Emory license agreement required us to make royalty payments to Emory based on certain percentages of net revenue we derive from sales of products utilizing inventions claimed in the licensed patents and from sublicensing of the licensed patents. The Emory license agreement also provided for milestone payments to Emory upon the occurrence of certain events relating to the development of products utilizing the licensed patents. Drs. Alexander, Medford and/or Margaret K. Offermann, M.D., Ph.D., Dr. Medford’s wife, will receive a portion of our payments to Emory under the Emory license agreement. We paid a signing fee to Emory upon the execution of the Emory license agreement and an additional amount for achievement of the first and second milestone under the agreement. The Emory license agreement was amended in August 2005 to eliminate any further milestone payments and to provide that Emory will receive a percentage of any milestone payments or royalties received by AtheroGenics related to the development and sale of products utilizing the Emory patents. The Emory License Agreement was transferred to the Purchaser in the Asset Sale.

33 License fees, which are nonrefundable, are recognized when the related license agreements specify that no further efforts or obligations are required of AtheroGenics. AtheroGenics had committed to perform certain research and development activities as part of the license agreement with Schering-Plough; accordingly, the upfront license payment was amortized over the anticipated time period to conduct such activities. Revenues under research and development arrangements were recognized as the research and development activities were performed pursuant to the terms of the related agreements (see Note 2 “License Agreement”). These revenues were billed quarterly and the related payments were not refundable. Revenues that had not been invoiced were reflected as unbilled receivables as described in the accounts receivable note above.

ResearchTable andof Development and Patent CostsContents

~~Research~~Item 14. ~~and~~Principal ~~development~~Accountant ~~costs,~~Fees ~~including all clinical trial expenses~~ and ~~expenditures related to obtaining~~Services ~~patents, are charged to expense when incurred.~~

~~Stock~~Audit and Non-~~Based~~Audit ~~Compensation~~Fees

~~AtheroGenics~~The ~~has~~following ~~elected~~table toshows ~~follow Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees (“APB 25”), in accounting for its stock-based employee compensation plans, rather than~~ the ~~alternative~~fees ~~fair~~paid ~~value accounting~~by method provided for under SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), as SFAS 123 requires the use of option-valuation models that were not developed for use in valuing employee stock options. AtheroGenics ~~accounts~~ for ~~transactions in which services are received in exchange for equity instruments based on~~ the ~~fair~~audit ~~value~~and ofother ~~such~~ services ~~received from non-employees,~~ inprovided ~~accordance~~by ~~with~~Ernst ~~SFAS~~& ~~123~~Young ~~and~~LLP ~~Emerging~~for ~~Issues~~fiscal ~~Task~~years ~~Force (EITF) Issue~~ended ~~No.~~December ~~96-18~~31, ~~Accounting~~2008 ~~for~~and ~~Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services~~2007.

Income Taxes


	December 31, 2008		December 31, 2007
Audit Fees	$	343,581	$	330,000
Audit-Related Fees		__		10,000
Tax Fees		—		—
All Other Fees		—		—

Total	$	343,581	$	340,000

~~The~~Audit ~~liability method is used in accounting for~~Fees income taxes; deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are anticipated to reverse.

~~Comprehensive~~ Audit ~~Income~~fees for the fiscal years ended December 31, 2008 and 2007 were for professional services rendered for the audits of our annual financial statements and quarterly review of the financial statements included in our Quarterly Reports on Form 10-Q. In addition, in 2007, audit fees included the audit of our internal control over financial reporting.

AtheroGenics computes comprehensive income in accordance with SFAS No. 130, Reporting Comprehensive Income (“SFAS 130”). SFAS 130 establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Comprehensive income, as defined, includes all changes in equity during a period from nonAudit-~~owner~~Related ~~sources, such as unrealized gains and losses on~~Fees available-for-sale securities. Comprehensive loss was $17,592,887 and $13,942,920 for the years ended December 31, 2001 and 2000, respectively, as AtheroGenics reported an accumulated unrealized gain from available-for-sale securities of $53,298. Comprehensive loss was equal to net loss for the year ended December 31, 1999.

~~Recently~~ Audit-related ~~Issued~~fees ~~Accounting~~for ~~Standards~~the fiscal year ended December 31, 2007 were for accounting consultations.

InPre-approval ~~July~~Policies ~~2001, the Financial Accounting Standards Board (“FASB”) issued SFAS Nos. 141, Business Combinations~~ and ~~142, Accounting for Goodwill and Other~~Procedures Intangibles (“SFAS 141” and “SFAS 142”). SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, and provides new criteria for determining whether an acquired intangible asset should be recognized separately from goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually. Intangible assets that

37 As discussed above, on April 1, 2009, AtheroGenics sold substantially all of its non-cash assets for $2 million pursuant to the Chapter 11 Proceeding, and is currently in the process of winding-down its business. In addition, on April 1, 2009, substantially all of the remaining members of AtheroGenics’ board of directors resigned from their positions as directors. Since there are no-longer any members of the audit committee, and there will not be any need for approving audit services in the future (other than auditing services performed in connection with AtheroGenics’ Form 10-Q for its quarter ended March 31, 2009 which services will be approved by AtheroGenics’ remaining board members consistent with the policy described above), the discussion below relates to our procedures for the year ending December 31, 2008.

~~Table~~ The audit committee had a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. The pre-approval policy was detailed as to the particular service or category of ~~Contents~~services and was subject to a specific budget. The services include the engagement of the independent registered public accounting firm for audit services, audit-related services, and tax services.

If AtheroGenics needed to engage the independent registered public accounting firm for other ~~NOTES~~services, TOwhich ~~FINANCIAL~~were ~~STATEMENTS —~~not considered subject to the general pre-approval as described above, then ~~(Continued)~~the audit committee would have to approve each such specific engagement as well as the projected fees. If the timing of the project required an expedited decision, then the audit committee delegated to the Chairman of the committee the authority to pre-approve such engagement, subject to fee limitations. The Chairman would have to report all such pre-approvals to the entire audit committee for ratification at the next committee meeting.

34 ~~have finite lives will continue to be amortized over their useful lives. AtheroGenics does not expect the adoption of SFAS 141 and SFAS 142 to have an impact on its financial statements.~~

InTable October 2001, FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, (“SFAS 144”) which is applicable to financial statements issued for fiscal years beginning after December 15, 2001. SFAS 144 establishes a new method of accounting and reporting for the impairment of long-lived assets other than goodwill and intangible assets. The statement provides a single accounting model for long-lived assets to be disposed of and changes the criteria required to classify an asset as held-for-sale. AtheroGenics does not expect the adoption of SFAS 144 to have a material impact on its financial statements. Contents

~~Reclassifications~~PART IV

~~Certain prior year balances have been reclassified to conform with the current year presentation~~Item 15. ~~These~~ ~~reclassifications~~Exhibits ~~had~~and noFinancial ~~effect~~Statement ~~on previously reported net~~Schedules ~~loss or shareholders’ equity (deficit).~~

2. License Agreement

	(1)		Financial Statements, filed as part of this report

			Report of Independent Registered Public Accounting Firm

			Balance Sheets as of December 31, 2008 and 2007

			Statements of Operations for the years ended December 31, 2008 and 2007

			Statements Shareholders’ Deficit for the years ended December 31, 2008 and 2007

			Statements of Cash Flows for the years ended December 31, 2008 and 2007

			Notes to Financial Statements

	(2)		Financial Statement Schedules

			No financial statement schedules are provided, because the information called for is not required or is shown either in the financial statements or the notes thereto.

	(3)		Listing of Exhibits

On October 22, 1999, AtheroGenics entered into an exclusive license agreement (the “Agreement”), consisting of contracts with each of Schering Corporation and Schering-Plough Ltd. (collectively, “Schering-Plough”). The Agreement provided for license fees and milestone payments to be made by Schering-Plough to AtheroGenics.


Exhibit No.		Description
3.01	—	Fourth Amended and Restated Articles of Incorporation of AtheroGenics, Inc. (filed as Exhibit 3.01 to Amendment No. 1 to AtheroGenics’ Annual Report on Form 10-K for the year ended December 31, 2004 on April 6, 2005 and incorporated herein by reference).

3.02	—	Third Amended and Restated Bylaws of AtheroGenics, Inc., as amended (filed as Exhibit 3.02 to AtheroGenics’ Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference).

3.03	—	Amendment No. 1 to Third Amended and Restated Bylaws of AtheroGenics, Inc. (filed as Exhibit 3.02 to AtheroGenics’ Current Report on Form 8-K on December 8, 2006 and incorporated herein by reference).

4.01	—	Form of Common Stock Certificate (filed as Exhibit 4.01 to Amendment No. 4 to AtheroGenics’ Registration Statement on Form S-1, Registration No. 333-31140, on August 4, 2000 and incorporated herein by reference).

4.02	—	Rights Agreement dated as of November 9, 2001 between AtheroGenics, Inc. and American Stock Transfer & Trust Company, as Rights Agent (filed as Exhibit 4.4 of AtheroGenics’ Form 8-K on November 19, 2001 and incorporated herein by reference).

4.03	—	Indenture dated August 19, 2003 between AtheroGenics, Inc. and The Bank of New York Trust Company of Florida N.A., as Trustee (filed as Exhibit 4.1 to AtheroGenics’ Registration Statement on Form S-3, Registration No. 333-110160, on October 31, 2003 and incorporated herein by reference).

4.04	—	Global 4¹/2% Convertible Note Due 2008 (filed as Exhibit 4.04 to Amendment No. 1 to AtheroGenics’ Annual Report on Form 10-K for the year ended December 31, 2004 on April 6, 2005 and incorporated herein by reference).

4.05	—	Indenture dated January 12, 2005 between AtheroGenics, Inc. and The Bank of New York Trust Company of Florida N.A., as Trustee, including the form of Global 1.50% Convertible Note Due 2012 filed as Exhibit A thereto (filed as Exhibit 4.5 to AtheroGenics’ Registration Statement on Form S-3, Registration No. 333-123895, on April 6, 2005 and incorporated herein by reference).

35 In November 1999, under the terms of the Agreement, AtheroGenics received a $5,000,000 non-refundable license fee for the exclusive worldwide license to patent rights and licensor know-how held by AtheroGenics. AtheroGenics amortized the fee over 18 months, which represents the period AtheroGenics conducted development activities pursuant to the Agreement. Under the Agreement, AtheroGenics granted to Schering-Plough rights to develop, make, have made, import, export, use, distribute, market, promote, offer for sale and sell AGI-1067, AtheroGenics’ lead product candidate, and specified compounds.

ToTable the extent that AtheroGenics performed additional research and development at Schering-Plough’s request, Schering-Plough paid AtheroGenics for such research and development. AtheroGenics recognized research and development revenues of $2,398,429, $4,826,370 and $791,653 during 2001, 2000 and 1999, respectively, in relation to such requests. Contents

In October 2001, AtheroGenics reacquired all rights to AGI-1067 and related compounds and terminated the license agreement. As a result, Schering-Plough returned all licensed technology and all materials related to that technology.


Exhibit No.		Description
4.06	—	Indenture dated July 11, 2007 between AtheroGenics, Inc. and The Bank of New York Trust Company of Florida N.A., as Trustee (filed as Exhibit 4.1 to AtheroGenics’ Current Report on Form 8-K, on July 12, 2007 and incorporated herein by reference).

10.01	—	Asset Purchase Agreement, dated March 17, 2009, by and between Crabtree Acquisition Co., LLC, AtheroGenics, Inc. and King & Spalding LLP (filed as Exhibit 10.1 to AtheroGenics’ Current Report on Form 8-K on March 18, 2009, and incorporated herein by reference).

10.02#	—	AtheroGenics, Inc. 2004 Equity Ownership Plan (filed as Appendix B to the proxy statement on Schedule 14A for AtheroGenics’ 2004 Annual Shareholders’ Meeting as filed on March 26, 2004 and incorporated herein by reference).

10.03#	—	AtheroGenics, Inc. 2004 Equity Ownership Plan form of incentive equity ownership agreement and form of directors’ nonqualified equity ownership agreement (filed as Exhibit 10.33 to AtheroGenics’ Annual Report on Form 10-K for the year ended December 31, 2004 on March 16, 2005 and incorporated herein by reference).

10.04#	—	AtheroGenics, Inc. 2004 Equity Ownership Plan form of nonqualified equity ownership agreement (filed as Exhibit 10.02 to AtheroGenics’ Current Report on Form 8-K on March 10, 2006 and incorporated herein by reference).

10.05	—	Form of Indemnification Agreement dated July 5, 2006 (filed as Exhibit 10.1 to AtheroGenics’ Current Report on Form 8-K on July 6, 2006 and incorporated herein by reference).

10.06#	—	Employment Agreement dated December 14. 2007 between AtheroGenics, Inc. and Russell M. Medford.

10.07#	—	Employment Agreement dated December 14, 2007 between AtheroGenics, Inc. and Mark P. Colonnese.

10.08#	—	Employment Agreement dated February 13, 2008 between AtheroGenics, Inc. and W. Charles Montgomery.

10.09#	—	Employment Agreement dated February 13, 2008 between AtheroGenics, Inc. and Joseph M. Gaynor, Jr.

31.1*	—	Certification of Chief Executive Officer and Chief Financial Officer under Rule 13a-14(a).

32*	—	Certifications of Chief Executive Officer and Chief Financial Officer under Section 1350.

3. Net Loss Per Share


*		Filed herewith.

+		Certain confidential information contained in this document has been omitted and filed separately with the Commission pursuant to a request for confidential treatment under Rule 406 of the Securities Act of 1933, as amended.

++		We agree to furnish supplementally to the Commission a copy of any omitted schedule or exhibit to this agreement upon request by the Commission.

#		Management contract or compensatory plan or arrangement.

36 Net loss per share has been computed according to SFAS No. 128, Earnings Per Share (“SFAS 128”), which requires disclosure of basic and diluted earnings per share. Basic earnings per share excludes any dilutive effects of options, shares subject to repurchase, warrants, and convertible securities. Diluted earnings per share includes the impact of potentially dilutive securities. AtheroGenics’ potentially dilutive securities are antidilutive and, therefore, are not included in the computation of weighted average shares used in computing diluted loss per share. Following the guidance given by the Securities and Exchange Commission, common stock and preferred stock that has been issued or granted for nominal consideration prior to the anticipated effective date of the initial public offering must be included in the calculation of basic and diluted net loss per common share as if these shares had been outstanding for all periods presented. AtheroGenics has not issued or granted shares for nominal consideration since its formation.

BasicTable and diluted pro forma net loss per share for 2000 and 1999 was computed by dividing the net loss by the weighted average number of shares of common stock outstanding plus the conversion of all outstanding convertible preferred stock into common stock, which occurred upon consummation of AtheroGenics’ initial Contents

38SIGNATURES

~~Table~~ Pursuant to the requirements of ~~Contents~~Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on June 2, 2009.

~~NOTES~~ATHEROGENICS, TOINC. ~~FINANCIAL~~By: ~~STATEMENTS — (Continued)~~ /s/ CHARLES A. DEIGNAN Charles A. Deignan President, Chief Financial Officer and Secretary

~~public~~ Pursuant ~~offering,~~to ~~retroactive~~the torequirements of the ~~date~~Securities Exchange Act of 1934, this report has been ~~issuance.~~signed ~~This~~below ~~information~~by isthe ~~included~~following persons on behalf of the registrant and in the ~~following~~capacities ~~table for~~and ~~comparative~~on ~~purposes~~the dates indicated.

The following is a reconciliation of the numerator and denominator of basic and diluted net loss per share amounts:


Name	Title	Date
Principal Executive Officer and Principal Financial Officer:

/s/ CHARLES A. DEIGNAN	President, Chief Financial Officer and	June 2, 2009
Charles A. Deignan	Secretary

/s/ MICHAEL A. HENOS	Director	June 2, 2009
Michael A. Henos

/s/ RUSSELL M. MEDFORD	Director	June 2, 2009
Russell M. Medford

		Year Ended December 31,
		2001			2000			1999
Basic and diluted:
	Net loss	$	(17,639,583	)	$	(13,949,522	)	$	(10,433,250	)
	Weighted average shares used in computing basic and diluted net loss per share		26,010,347			10,747,773			2,443,237
	Basic and diluted net loss per share	$	(0.68	)	$	(1.30	)	$	(4.27	)
Pro forma basic and diluted:
	Shares used above					10,747,773			2,443,237
	Pro forma adjustment to reflect weighted average effect of assumed conversion of preferred stock					8,595,672			10,268,792
	Pro forma weighted average shares of common stock outstanding					19,343,445			12,712,029
	Basic and diluted pro forma loss per share				$	(0.72	)	$	(0.82	)

During all periods presented, AtheroGenics had securities outstanding which could potentially dilute basic earnings per share in the future, but were excluded from the computation of diluted net loss per share, as their effect would have been antidilutive. These outstanding securities consist of the following at the dates indicated:

	Year Ended December 31,
	2001		2000		1999
Convertible (at one share for one share) preferred stock		—		—		13,643,837
Options		3,360,660		2,858,175		1,785,325
Warrants		350,290		250,290		467,503
Total		3,710,950		3,108,465		15,896,665
Weighted average exercise price of options	$	2.99	$	1.49	$	0.28
Weighted average exercise price of warrants	$	4.14	$	3.40	$	3.21

4. Redeemable Convertible Preferred Stock

AtheroGenics sold shares of Series A, Series B, Series B-1 and Series C Redeemable Convertible Preferred Stock at various offerings between 1994 and 2000. These shares were convertible into common stock, at a conversion rate of one-to-one, upon certain qualifying conditions which included the completion of an underwritten public offering of AtheroGenics’ common stock.

On August 8, 2000, AtheroGenics’ Registration Statement on Form S-1 was declared effective by the Securities and Exchange Commission. Immediately prior to the closing of AtheroGenics’ initial public offering on August 14, 2000, all of the outstanding shares of convertible preferred stock automatically

NOTES TO FINANCIAL STATEMENTS — (Continued)

converted into 13,859,102 shares of common stock. Immediately following the automatic conversion of preferred stock, an amended and restated certificate of incorporation was filed. Under the amended and restated certificate of incorporation, AtheroGenics is authorized to issue 100,000,000 shares of common stock and 5,000,000 shares of preferred stock.

The following table summarizes AtheroGenics’ outstanding shares and value of Series A, Series B, Series B-1 and Series C Redeemable Convertible Preferred Stock at December 31, 2000 and 1999:

	December 31, 2000				December 31, 1999
	Shares		Carrying		Shares		Carrying
	Outstanding		Value		Outstanding		Value
Series A		—	$	—		1,000,000	$	1,000,000
Series B		—		—		4,586,815		13,704,499
Series B-1		—		—		—		—
Series C		—		—		8,057,022		24,006,992
		—	$	—		13,643,837	$	38,711,491

5. Common Stock

On August 14, 2000, AtheroGenics completed an initial public offering of 6,900,000 shares of common stock (including the exercise of underwriters’ over-allotment option) that raised gross proceeds of approximately $55,200,000 and net proceeds of approximately $49,400,000.

On June 19, 2001, AtheroGenics completed a private placement of 3,585,000 shares of common stock that raised gross proceeds of approximately $20,600,000 and net proceeds of approximately $18,800,000. Both new and existing investors participated in the transaction.

On November 9, 2001, AtheroGenics’ Board of Directors adopted a Shareholder Rights Plan declaring a dividend distribution of one common stock purchase right on each outstanding share of its common stock. Until the rights become exercisable, the rights will trade automatically with the common stock of AtheroGenics and separate rights certificates will not be issued. Under the rights plan, each right consists of an initial right and subsequent rights. Initial rights will be exercisable only if a person or group acquires 15% or more of AtheroGenics’ common stock, whether through open market or private purchases or consummation of a tender or exchange offer. Any shareholders who owned, as of November 9, 2001, in excess of 15% of AtheroGenics’ common stock will be permitted to acquire up to an aggregate of 20% of AtheroGenics’ outstanding common stock without triggering the rights plan. If, following the exercise of initial rights, a person or group again acquires 15% or more of AtheroGenics’ common stock, or a person or group who had previously acquired 15% or more of AtheroGenics’ common stock acquires an additional 10% or more of the common stock, the subsequent rights become exercisable. Each right will initially entitle shareholders to buy eight shares of common stock at an exercise price equal to 20% of the then current market value of the common stock, calculated and adjusted according to the terms of the rights plan. The number of shares that can be purchased upon exercise will increase as the number of shares held by the bidder increases.

If AtheroGenics is acquired in a merger or other business combination, each right will entitle its holder to purchase, at the right’s then-current exercise price, a number of the acquiring company’s shares equal value to those obtainable if the rights were exercisable in AtheroGenics’ stock.

The rights are intended to enable all shareholders to realize the long-term value of their investment in AtheroGenics. They will not prevent a takeover, but should encourage anyone seeking to acquire AtheroGenics to negotiate with the Board prior to attempting a takeover. The Board of Directors may redeem any non-exercisable rights at any time at its option at a redemption price of $.0001 per right. The rights plan expires at the close of business on November 8, 2011.

NOTES TO FINANCIAL STATEMENTS — (Continued)

6. Stock Options and Warrants

During 1995, AtheroGenics established a stock option plan (the “1995 Plan”) which, as amended, provides that options to purchase AtheroGenics’ common stock may be granted to employees, directors, consultants or contractors with exercise prices not less than 75% of the fair values of the shares on the dates of grant.

The 1995 Plan, as amended, authorizes the grant of options for up to 1,264,084 shares of AtheroGenics’ common stock, and as of December 31, 2001, AtheroGenics had reserved 267,800 shares of common stock for future issuance under the 1995 Plan. Options granted under the 1995 Plan vest over periods ranging from the date of grant to five years from that date. A summary of stock option activity under the 1995 Plan follows:

						Weighted
	Number of					Average
	Shares			Price Range		Price
Outstanding at January 1, 1999		457,000		$	.10-.30	$	.20
Exercised		(24,000	)		.10		.10
Canceled		(17,800	)		.30		.30
Outstanding at December 31, 1999		415,200			.10-.30		.20
Exercised		(165,200	)		.10-.30		.29
Outstanding at December 31, 2000 and 2001		250,000			.10-.30		.14

The following table summarizes information concerning outstanding and exercisable options under the 1995 Plan as of December 31, 2001:

	Options Outstanding						Options Exercisable
	Number		Weighted Average		Weighted Average		Number		Weighted Average
Exercise Price	Outstanding		Remaining Years		Exercise Price		Exercisable		Exercise Price
$.10		200,000		3.62	$	.10		200,000	$	.10
.30		50,000		4.61		.30		49,000		.30
		250,000		3.82		.14		249,000		.14

Effective July 30, 1997, AtheroGenics established an equity ownership plan (the “1997 Plan”) whereby options to purchase AtheroGenics’ common stock may be granted to employees, directors, consultants or contractors with exercise prices not less than the fair values of the shares on the dates of grant. The 1997 Plan authorizes the grant of options for up to 1,474,416 shares of AtheroGenics’ common stock. On January 28, 2000, AtheroGenics’ Board of Directors authorized an additional 2,250,000 shares to be issued under the 1997 Plan. As of December 31, 2001, AtheroGenics had reserved 2,831,975 shares of common stock for issuance under the 1997 Plan. The 1997 Plan allows for grants of non-qualified options, incentive stock options and shares of restricted stock. Non-qualified options granted under the 1997 Plan may vest immediately for non-employees, but vest over a four-year period for employees. Incentive stock options generally vest over four years. The majority of the stock options granted under the 1997 Plan are incentive stock options.

NOTES TO FINANCIAL STATEMENTS — (Continued)

A summary of stock option activity under the 1997 Plan follows:

						Weighted
	Number of					Average
	Shares			Price Range		Price
Outstanding at January 1, 1999		778,875		$	.30	$	.30
Granted		748,000			.30-.31		.30
Exercised		(102,168	)		.30		.30
Canceled		(54,582	)		.30		.30
Outstanding at December 31, 1999		1,370,125			.30-.31		.30
Granted		1,797,850			.38-9.88		2.28
Exercised		(448,450	)		.30-9.88		.50
Canceled		(111,350	)		.30-8.25		.67
Outstanding at December 31, 2000		2,608,175			.30-9.88		1.62
Granted		791,450			4.37-6.85		6.01
Exercised		(340,478	)		.30-6.56		.41
Canceled		(228,487	)		.30-8.25		2.31
Outstanding at December 31, 2001		2,830,660			.30-9.88		2.93

The following table summarizes information concerning currently outstanding and exercisable options granted under the 1997 Plan as of December 31, 2001.

Options Outstanding								Options Exercisable
		Number		Weighted Average		Weighted Average		Number		Weighted Average
Exercise Price		Outstanding		Remaining Years		Exercise Price		Exercisable		Exercise Price
$	.30-.31		644,595		7.16	$	.30		424,385	$	.30
	.38-4.36		913,915		8.08		.38		481,413		.38
	4.37-6.03		637,150		9.28		5.38		169,503		5.50
	6.04-9.88		635,000		9.26		6.83		107,883		7.77
			2,830,660		8.41		2.93		1,183,184		1.76

Effective April 18, 2001, AtheroGenics established an equity ownership plan (the “2001 Plan”) whereby options to purchase AtheroGenics’ common stock may be granted to employees, directors, consultants or contractors with exercise prices not less than the fair values of the shares on the dates of grant. The 2001 Plan authorizes the grant of options for up to 2,000,000 shares of AtheroGenics’ common stock. As of December 31, 2001, AtheroGenics had reserved 2,000,000 shares of common stock for issuance under the 2001 Plan. The terms of the 2001 Plan are substantially similar to the terms of the 1997 Plan.

A summary of stock option activity under the 2001 Plan follows:

					Weighted
	Number of				Average
	Shares		Price Range		Price
Outstanding at January 1, 2001		—	$	—	$	—
Granted		280,000		6.05		6.05
Outstanding at December 31, 2001		280,000		6.05		6.05

NOTES TO FINANCIAL STATEMENTS — (Continued)

The following table summarizes information concerning currently outstanding and exercisable options granted under the 2001 Plan as of December 31, 2001.

Options Outstanding								Options Exercisable
		Number		Weighted Average		Weighted Average		Number		Weighted Average
Exercise Price		Outstanding		Remaining Years		Exercise Price		Exercisable		Exercise Price
$	6.05		280,000		10.0	$	6.05		—	$	—

During 2000 and 1999, in connection with the grant of certain options to employees, AtheroGenics recorded non-cash deferred stock compensation of $12,093,928 and $1,895,160, respectively, representing the difference between the exercise price and the deemed fair value of AtheroGenics’ common stock on the dates these stock options were granted. Deferred stock compensation is included as a reduction of shareholders’ equity and is being amortized to expense using the graded vesting method. The graded vesting method provides for vesting of each portion of the overall award over its respective vesting period, and results in higher vesting in earlier years than straight-line vesting. During 2001, 2000 and 1999, AtheroGenics recorded amortization of deferred stock compensation of $2,316,141, $7,972,728 and $85,480, respectively.

In June 2001, in connection with the grant of certain warrants as part of a licensing agreement with National Jewish Medical and Research Center and options granted for the addition of new members to the Scientific Advisory Board, AtheroGenics recorded non-cash deferred stock compensation of $1,092,200. The fair value of the warrants and options for purposes of this calculation was determined by using the Black Scholes model. These amounts are included as a reduction of shareholders’ equity and are being amortized over the vesting periods of the individual warrants and options, generally five years, using the graded vesting method. During 2001, AtheroGenics recorded a total of $335,890 of amortization of deferred stock compensation for these warrants and options. The fair value of the options and warrants is re-measured at each measurement date. Accordingly, at December 31, 2001, 100,000 shares of common stock were reserved for issuance upon the exercise of outstanding warrants.

At December 31, 2001, AtheroGenics had a total of $2,975,314 remaining to be amortized over the corresponding vesting period of each respective option. Such amortization will approximate $1,923,000 in 2002, $837,000 in 2003, $133,000 in 2004, $63,000 in 2005 and $19,000 in 2006. During 2001, 165,500 shares were forfeited and deferred stock compensation was decreased by $1,395,735.

Pro forma information regarding net income is required by SFAS 123, which also requires that the information be determined as if AtheroGenics had accounted for the employee stock options granted subsequent to December 31, 1994 under the fair value method. The fair value for these options (which are granted with an exercise price equal to fair market value as determined by the board of directors on the grant date) was estimated at the date of grant using the minimum value method with the following weighted average assumptions for 2001, 2000 and 1999: risk-free interest rates of 4.51%, 6.36% and 5.75%, respectively; no dividend yield; and a weighted average expected life of the options of five years. For the period following AtheroGenics’ initial public offering, the Black-Scholes option valuation model was used to calculate the fair value of options granted. This method includes the above assumptions as well as the estimated volatility (99.79% and 20.85% for 2001 and 2000, respectively) of the common stock.

For purposes of pro forma disclosures, the estimated fair values of the options are amortized to expense over the options’ vesting periods. The weighted average fair values of options granted during 2001, 2000 and 1999 equal $4.60, $1.16 and $2.54, respectively. Pro forma net loss and net loss per share are as follows:

	Year Ended December 31,
	2001			2000			1999
Net loss	$	(18,694,195	)	$	(14,151,546	)	$	(10,503,993	)
Net loss per share (basic and diluted)		(0.72	)		(1.32	)		(4.30	)

NOTES TO FINANCIAL STATEMENTS — (Continued)

In August 1998, in connection with a bridge loan agreement, AtheroGenics issued to lenders warrants for 205,002 shares of Series B Redeemable Convertible Preferred Stock. These warrants became exercisable on January 1, 1999 for $3.00 per share and expire on August 19, 2008.

In February 1999, in connection with an amendment to the bridge loan agreement, AtheroGenics issued the lenders additional warrants to purchase 200,001 shares of Series C Redeemable Convertible Preferred Stock. The warrants became exercisable on April 13, 1999 for $3.00 per share and expire on December 31, 2008.

The Series B and Series C Redeemable Convertible Preferred Stock were subsequently converted into common stock at a conversion rate of one-to-one upon the completion of AtheroGenics’ initial public offering in August 2000. At such time, the warrants became exercisable for common stock. Accordingly, at December 31, 2001, 250,290 shares of common stock were reserved for issuance upon the exercise of outstanding warrants.

7. Short-Term Investments

Short-term investments consist of debt securities classified as available-for-sale and have maturities greater than 90 days and less than twelve months from the date of acquisition. AtheroGenics has invested primarily in corporate notes and commercial paper, all of which have a minimum investment rating of A1/P1, and government agency notes. AtheroGenics had no realized gains or losses from the sale of investments for the period ended December 31, 2001. The following table summarizes unrealized gains and losses on AtheroGenics’ short-term investments:

	Available-for-Sale Securities
			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
	Cost		Loss		Gain		Fair Value
Government agency notes	$	16,081,537	$	—	$	15,212	$	16,096,749
Corporate notes		7,084,617		—		38,086		7,122,703
Commercial paper		6,500,000		—		—		6,500,000
Certificate of deposit		38,493		—		—		38,493
Balance at December 31, 2001	$	29,704,647	$	—	$	53,298	$	29,757,945

All available-for-sale securities held at December 31, 2001, will mature during 2002.

NOTES TO FINANCIAL STATEMENTS — (Continued)

8. Income Taxes

At December 31, 2001, AtheroGenics had net operating loss carryforwards and research and development credit carryforwards of $50,389,176 and $1,544,330, respectively, for income tax purposes, which both begin to expire in 2010. The significant components of the deferred tax assets are:

		December 31,
		2001			2000
Net operating loss carryforwards		$	19,147,887		$	12,763,242
Deferred revenue			—			422,222
Research credits			1,544,330			1,241,809
Deferred stock compensation			3,284,001			698,197
Other			259,746			392,092
	Total deferred tax assets		24,235,964			15,517,562
Valuation allowance			(24,235,964	)		(15,517,562	)
Net deferred tax assets		$	—		$	—

Because of AtheroGenics’ lack of earnings history, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased $8,718,402 and $3,271,774 in 2001 and 2000, respectively.

AtheroGenics’ net operating loss carryforwards may be subject to certain Internal Revenue Code Section 382 limitations on annual utilization in the event of changes in ownership. These limitations could significantly reduce the amount of the net operating loss carryforwards available in the future. AtheroGenics has not yet completed a full analysis of IRC Section 382 on the cumulative net operating loss carryforward. However, the annual limitations are not expected to prevent utilization of the net operating loss carryforward due to the significant increases in value indicated by the successive issues of our stock. If a change in ownership has occurred, there will be an annual accrual limitation; however, this limitation is not expected to result in a loss of the deferred tax benefit.

9. Leases

On June 19, 1998, AtheroGenics entered into a ten-year operating lease for office and laboratory space through March 1, 2009. Monthly lease payments of approximately $89,400 began March 2, 1999, the date occupancy commenced. These payments are subject to increases during each successive twelve-month period based on changes in the Consumer Price Index (“CPI”). Future increases in monthly lease payments due to increases in the CPI are considered to be contingent rentals, and, therefore, will be charged to expense over the lease term as they become payable. AtheroGenics may extend the lease term for two successive five-year periods. AtheroGenics’ other operating lease obligations are not significant.

NOTES TO FINANCIAL STATEMENTS — (Continued)

At December 31, 2001, AtheroGenics’ minimum aggregate commitments (net of sublease income) under long-term, non-cancelable operating leases are as follows:

	Gross		Sublease Income		Net
2002	$	1,247,663	$	323,508	$	924,155
2003		1,247,663		230,811		1,016,852
2004		1,228,416		184,975		1,043,441
2005		1,126,100		184,975		941,125
2006		1,117,583		—		1,117,583
Thereafter		2,421,432		—		2,421,432
	$	8,388,857	$	924,269	$	7,464,588

Rent expense under operating leases amounted to $835,608, $786,452 and $639,934 in 2001, 2000 and 1999, respectively.

Equipment and leasehold improvements include the following amounts for leases that have been capitalized at December 31, 2001 and 2000:

	2001			2000
Lab equipment	$	972,500		$	972,500
Less accumulated amortization		(837,162	)		(742,205	)
	$	135,338		$	230,295

Amortization of leased assets is included in depreciation and amortization expense. The equipment leases provide for one-year extensions at the end of the lease terms.

Future minimum lease payments under capital leases consist of the following at December 31, 2001:

2002		$	92,125
2003			—
	Total minimum lease payments		92,125
Less amounts representing interest and warrants			(5,024	)
Present value of net minimum lease payments			87,101
Less current portion			87,101
		$	—

The amounts recorded as capital lease obligations approximate the estimated fair market values.

10. Related Party Transactions

During the year ended December 31, 2001, AtheroGenics made a secured loan in the amount of $200,000 to one of its executive officers, who is also a shareholder. The loan bears interest at a rate of 2.48% per annum, the applicable Federal rate at the time of the loan, and is due on December 26, 2004. The loan is secured by 41,000 shares of AtheroGenics’ common stock.

AtheroGenics has a sublease agreement for a portion of its office and laboratory space with Inhibitex, Inc. The monthly lease payments are approximately $20,000. The lease term ends on December 31, 2005. Dr. Medford, the President and Chief Executive Officer of AtheroGenics, and Mr. Henos, the Chairman of AtheroGenics’ Board of Directors, are both on the Inhibitex Board of Directors.

NOTES TO FINANCIAL STATEMENTS — (Continued)

AtheroGenics has a sublease agreement for a portion of its office space with ATV Management Corp. Monthly lease payments are approximately $3,400. The lease term ends on July 31, 2003. The Chairman of the Board of Directors of AtheroGenics is the President and sole shareholder of ATV Management Corp.

11. Employee Benefit Plan

AtheroGenics has a defined contribution plan covering eligible employees, which is qualified under Section 401(k) of the Internal Revenue Code. Under the provisions of the plan, eligible participating employees may elect to contribute up to 15% of their salary (up to the maximum amount of tax deferred contribution allowed by the Internal Revenue Code). AtheroGenics may make a discretionary contribution. During 2001, AtheroGenics matched 50% of employees’ contributions, up to a maximum of 6% of the employees’ annual base compensation. AtheroGenics’ contribution to the plan for 2001, 2000 and 1999 aggregated $91,852, $62,093 and $37,703, respectively. AtheroGenics’ stock is not an eligible investment under this plan.

12. Quarterly Results of Operations (Unaudited)

The following is a summary of the unaudited quarterly results of operations:

		Year Ended December 31, 2001
		1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
Net revenues		$	1,430,422		$	481,245		$	538,511		$	1,059,362
Operating loss			(3,884,934	)		(4,537,847	)		(5,456,025	)		(6,127,525	)
Net loss			(3,100,628	)		(3,949,277	)		(4,862,219	)		(5,727,459	)
Net loss per share data:
	Basic and diluted		(0.13	)		(0.16	)		(0.18	)		(0.21	)

		Year Ended December 31, 2000
		1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
Net revenues		$	2,091,280		$	2,064,050		$	1,905,155		$	2,099,218
Operating loss			(3,552,560	)		(3,219,745	)		(4,475,752	)		(4,416,315	)
Net loss			(3,394,793	)		(3,083,213	)		(3,963,531	)		(3,507,985	)
Net loss per share data:
	Basic and diluted		(1.29	)		(1.05	)		(0.30	)		(0.15	)

Because of the method used in calculating per share data, the quarterly per share data will not necessarily add to the per share data as computed for the year.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

We have set forth information relating to the directors and executive officers and compliance with Section 16(a) of the Securities Exchange Act of 1934 under the captions “Executive Officers and Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance,” respectively, in our proxy statement for our 2002 annual meeting of shareholders to be held on April 24, 2002. We are incorporating this information by reference in this Form 10-K. Our definitive proxy statement was filed with the Securities and Exchange Commission on March 11, 2002.

Item 11. Executive Compensation

We have set forth information relating to executive compensation under the caption “Executive Compensation” in the proxy statement referred to in Item 10 above. We are incorporating this information by reference in this Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management

We have set forth information relating to ownership of our common stock by certain persons under the caption “Security Ownership of Certain Beneficial Owners and Management” in the proxy statement referred to in Item 10 above. We are incorporating this information by reference in this Form 10-K.

Item 13. Certain Relationships and Related Transactions

We have set forth information relating to existing or proposed relationships or transactions between us and certain of our affiliates under the caption “Certain Relationships and Related Transactions” in the proxy statement referred to in Item 10 above. We are incorporating this information by reference in this Form 10-K.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1) Financial Statements, filed as part of this report

Financial Statements (indexed as pages 30-47)

Report of Independent Auditors

Balance Sheets as of December 31, 2001 and 2000

Statements of Operations for the years ended December 31, 2001, 2000 and 1999

Statements Shareholders’ Equity (Deficit) for the years ended December 31, 2001, 2000 and 1999

Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999

Notes to Financial Statements

(2) Financial Statement Schedules

No financial statement schedules are provided, because the information called for is not required or is shown either in the financial statements or the notes thereto.

(3) Listing of Exhibits — The response to this portion of Item 14 is submitted below as Item 14(c) of this report.

(b) Reports on Form 8-K filed in the fourth quarter of 2001:

AtheroGenics filed a report on Form 8-K on October 9, 2001 under Item 5 to report the reacquisition of full rights to AGI-1067 from Schering-Plough.

AtheroGenics filed a report on Form 8-K on November 19, 2001 under Item 5 to report the adoption of a shareholders’ right plan.

Exhibit No.			Description
	3.01**	—	Form of Fourth Amended and Restated Articles of Incorporation of AtheroGenics, Inc.
	3.02*	—	Form of Third Amended and Restated Bylaws of AtheroGenics, Inc., as amended
	4.01**	—	Form of Common Stock Certificate.
	4.02**	—	Amended and Restated Master Rights Agreement dated October 31, 1995, as amended by First Amendment dated November 1, 1995; Second Amendment dated July 30, 1996; Third Amendment dated April 13, 1999; Fourth Amendment dated May 11, 1999; and Fifth Amendment dated August 30, 1999.
	4.03**	—	Applicable provisions of Fourth Amended and Restated Articles of Incorporation and Third Amended and Restated Bylaws of AtheroGenics, Inc. (incorporated by reference to Exhibits 3.01 and 3.02).
	4.04	—	Rights Agreement dated as of November 9, 2001 between AtheroGenics, Inc. and American Stock Transfer & Trust Company, as Rights Agent (filed as an exhibit of the same number with AtheroGenics’ Form 8-K on October 9, 2001 and incorporated herein by reference).
	10.02**+	—	Exclusive License Agreement dated July 17, 1998 between The Regents of the University of California and AtheroGenics, Inc.
	10.03**+	—	License Agreement dated January 11, 1995 between Emory University and AtheroGenics, Inc.
	10.04**+	—	Patent Purchase Agreement dated April 26, 1995 between AtheroGenics, Inc. and Sampath Parthasarathy, together with Services Agreement dated April 26, 1995 between AtheroGenics, Inc. and Sampath Parthasarathy.
	10.05**+	—	Sponsored Research Agreement dated October 14, 1996 between Emory University and AtheroGenics, Inc.
	10.07**	—	AtheroGenics, Inc. 1995 Stock Option Plan, together with form of nonqualified stock option agreement.
	10.08**	—	AtheroGenics, Inc. 1997 Equity Ownership Plan, as amended by Amendment No. 1 and Amendment No. 2.
	10.09**	—	Preferred Shares Purchase Warrant dated August 24, 1998 between AtheroGenics, Inc. and certain Lenders named therein.
	10.10**	—	Series C Convertible Preferred Stock Purchase Warrants of AtheroGenics, Inc.
	10.11**	—	Promissory Note dated April 1, 1999 between Inhibitex, Inc. and AtheroGenics, Inc.
	10.12**++	—	Lease Agreement dated June 19, 1998 between Cousins Properties, Inc. and AtheroGenics, Inc.
	10.13**++	—	Master Equipment Lease dated November 1, 1995 between Phoenix Leasing Incorporated and AtheroGenics, Inc.
	10.14***	—	Employment Agreement dated March 1, 2001 between AtheroGenics, Inc. and Russell M. Medford.
	10.15***	—	Amendment dated January 1, 2001 to Promissory Note dated April 1, 1999 between Inhibitex, Inc. and AtheroGenics, Inc.

Exhibit No.			Description
	10.16	—	Form of Common Stock Purchase Agreement dated as of June 19, 2001 between AtheroGenics, Inc. and the Purchasers named therein (filed as an exhibit of the same number with AtheroGenics’ Registration Statement on Form S-1, Registration No. 333-64228, on July 23, 2001 and incorporated herein by reference).
	10.17+	—	Exclusive License Agreement dated as of June 29, 2001 between AtheroGenics, Inc. and National Jewish Medical and Research Center (filed as an exhibit with the same number with Amendment No. 1 to AtheroGenics’ Registration Statement on Form S-1, Registration No. 333-64228, on June 29, 2001 and incorporated herein by reference).
	10.18	—	AtheroGenics, Inc. 2001 Equity Ownership Plan (filed as Appendix B to the proxy statement for AtheroGenics’ 2001 Annual Shareholders’ Meeting as filed on March 22, 2001 and incorporated herein by reference).
	10.19*	—	Promissory Note and Stock Pledge Agreement dated as of December 26, 2001 between AtheroGenics, Inc. and Mitchell Glass.
	23.01*	—	Consent of Ernst & Young LLP.
	24.01*	—	Powers of Attorney.

* Filed herewith.

** Filed as the exhibit of the same number with AtheroGenics’ registration statement on Form S-1, Registration No. 333-31140, declared effective by the SEC on August 8, 2000, and incorporated herein by reference.

*** Filed as an exhibit of the same number with AtheroGenics’ Annual Report on Form 10-K for the year ended December 31, 2001, and incorporated herein by reference.

+ Certain confidential information contained in this document has been omitted and filed separately with the Commission pursuant to a request for confidential treatment under Rule 406 of the Securities Act of 1933, as amended.

++ We agree to furnish supplementally to the Commission a copy of any omitted schedule or exhibit to this agreement upon request by the Commission.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 29, 2002.

ATHEROGENICS, INC.

By: /s/ RUSSELL M. MEDFORD, M.D., PH.D.

Russell M. Medford, M.D., Ph.D. President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
Principal Executive Officer:
/s/ RUSSELL M. MEDFORD Russell M. Medford	President and Chief Executive Officer, Director	March 29, 2002
Principal Financial and Principal Accounting Officer:
/s/ MARK P. COLONNESE Mark P. Colonnese	Senior Vice President of Finance and Administration and Chief Financial Officer	March 29, 2002
Additional Directors:
* Michael A. Henos	Director	March 29, 2002
* R. Wayne Alexander	Director	March 29, 2002
* Vaughn D. Bryson	Director	March 29, 2002
* T. Forcht Dagi	Director	March 29, 2002
* Arthur M. Pappas	Director	March 29, 2002
* William A. Scott	Director	March 29, 2002
* Stephen G. Sudovar	Director	March 29, 2002
*By: /s/ MARK P. COLONNESE ----------------------------------------- Mark P. Colonnese Attorney-in-fact

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