In December 2007, Acura and King Pharmaceuticals Research and Development, Inc. (“King”), a wholly-owned subsidiary of King Pharmaceuticals, Inc., closed a License, Development and Commercialization Agreement (the “King Agreement” or "Agreement") to develop and commercialize in the United States, Canada and Mexico (the "King Territory") certain opioid analgesic products utilizing our proprietary Aversion® Technology including Acurox™ Tablets.  The Agreement provides King with an exclusive license in the King Territory for Acurox™ Tablets and another undisclosed opioid product candidate utilizing Aversion® Technology.  In addition, the King Agreement provides King with an option to license in the King Territory all future opioid analgesic products developed utilizing Acura's Aversion® Technology.  We encourage you to review the Company’s filings with Securities and Exchange Commission for more details about the King Agreement.

In December 2007, King made an upfront, non refundable cash payment to us of $30.0 million pursuant to the Agreement.  Depending on the achievement of certain development and regulatory milestones, King could also make additional cash payments to us of up to $28 million relating to Acurox™ Tablets and similar amounts with respect to each subsequent Aversion® Technology opioid product developed under the Agreement.  King will reimburse us for all research and development expenses incurred beginning from September 19, 2007 for Acurox™ Tablets and all research and development expenses related to future products after King's exercise of its option to an exclusive license for each future product.  King will record net sales of all licensed products.  For net sales occurring following the one year anniversary of the first commercial sale of a licensed product, King will pay us a royalty at one of six (6) rates ranging from 5% to 25% based on the level of combined annual net sales for all licensed products subject to the Agreement.  King will also make a one-time cash payment to us of $50 million in the first year in which the combined annual net sales of all products exceed $750 million.

In December 2007, we and King formed a Joint Steering Committee to coordinate development and commercialization strategies for all products licensed by King from Acura pursuant to the Agreement.  With King’s oversight, we will conduct all Acurox™ Tablet development activities through approval of a 505(b)(2) New Drug Application (“NDA”) and thereafter King will commercialize Acurox™ Tablets in the U.S.  With respect to all other products subject to the Agreement, King will be responsible for development and regulatory activities following either acceptance of an Investigational New Drug Application ("IND") by the U.S. Food and Drug Administration (“FDA”) or our demonstration of certain stability and pharmacokinetic characteristics for each future product.  King will have final decision making authority with respect to all development and commercialization activities for all licensed Aversion® Technology opioid products.

In May, 2008, King and Acura announced that King exercised its option to license a third immediate-release opioid analgesic product utilizing Acura’s proprietary AVERSION® Technology.  In connection with King's exercise of its option for this third opioid product, King paid Acura an option exercise fee of $3.0 million.  As a result, Acura and King are now jointly developing three immediate-release opioid analgesics utilizing Acura’s AVERSION^® Technology.

In June, 2008, Acura announced that clinical evaluation is now allowed under an active Investigational New Drug application (“IND”) for a second undisclosed opioid analgesic product candidate using Aversion^® Technology.  This product candidate was previously licensed by Acura to King.

The Company’s future revenue, if any, will be derived from milestone and royalty payments relating to the King Agreement and other milestone and royalty payments, if any, derived from agreements anticipated to be potentially negotiated and executed by the Company with other pharmaceutical company partners.  No assurance can be given that the Company will receive the milestone and royalty payments provided for in such Agreement, or that the Company will be successful in entering into similar agreements with other pharmaceutical partners to develop and commercialize products incorporating the Aversion® Technology.

Commercial Manufacturing of Products Licensed to King 

All opioid products developed pursuant to the King Agreement will be manufactured by King or a third party contract manufacturer under the direction of King.  Subject to the Agreement, King will have final decision making authority with respect to all Acurox™ Tablets commercial manufacturing activities.  Acurox™ Tablets utilize a dry blend, direct compression manufacturing process. This process requires commonly utilized blending and tablet compression equipment and, compared to other tablet product formulations, is simple and economical.