GPC Biotech Reports Financial Results for Third Quarter and First Nine Months of 2007

GPC Biotech AG (Frankfurt Stock Exchange: GPC; TecDax 30; NASDAQ: GPCB) today reported financial results for the third quarter and first nine months ended September 30, 2007. First nine months of 2007 compared to first nine months of 2006 Revenues decreased 9% to € 16.1 million for the nine months ended September 30, 2007, compared to € 17.6 million for the same period in 2006. Revenues were affected by lower development funding received under the co-development and license agreement with Pharmion for satraplatin in Europe and certain other territories, as well as the expiration of various research collaboration arrangements with ALTANA Pharma. The Company booked as revenue a € 5.9 million milestone payment from Pharmion in the third quarter of 2007 as a result of the acceptance of the Marketing Authorization Application (MAA) for satraplatin by the European Medicines Agency (EMEA). Research and development (R&D) expenses decreased 11% to € 43.7 million for the first nine months of 2007 compared to € 49.1 million for the same period in 2006. R&D expenses for the third quarter 2007 include Spectrum’s portion of the € 5.9 million milestone payment from Pharmion. In the first nine months of 2007, general and administrative (G&A) expenses increased 130% to € 37.2 million compared to € 16.2 million for the first nine months of 2006. The increase in G&A expenses is primarily due to the formation of a sales and marketing organization in the first half of 2007 in preparation for the potential launch of satraplatin that was originally planned to occur in late 2007, as well as legal expenses. For the first nine months of 2007, The Company reported restructuring charges of € 1.7 million. These charges are related to employee severance and termination costs related to the closing of the Company’s Massachusetts facility, announced in May 2007, and additional restructuring activities in August 2007 that included a staff reduction in the U.S. The restructuring charges are included in R&D and G&A expenses. Net loss for the first nine months of 2007 increased 34% to € (62.8) million compared to € (46.8) million for the first nine months of 2006. Basic and diluted loss per share was € (1.75) for the first nine months of 2007 compared to € (1.44) for the same period in 2006. Quarter over quarter results: third quarter 2007 compared to second quarter 2007 Revenues increased 162% to € 8.9 million for the third quarter of 2007 compared to € 3.4 million for the previous quarter. R&D expenses decreased 3% to € 15.1 million for the third quarter of 2007, compared to € 15.5 million in the second quarter of 2007. G&A expenses for the third quarter of 2007 increased 11% to € 13.8 million compared to € 12.4 million for the previous quarter. The Company’s net loss decreased 16% to € (20.0) million in the third quarter of 2007, compared to € (23.7) million for the previous quarter. Basic and diluted loss per share was € (0.55) for the third quarter of 2007 compared to € (0.66) for the previous quarter. Comparison to previous year: third quarter 2007 compared to third quarter 2006 Revenues for the three months ended September 30, 2007 increased 35% to € 8.9 million compared to € 6.6 million for the same period in 2006. R&D expenses decreased 25% for the third quarter of 2007 to € 15.1 million compared to € 20.1 million for the same period in 2006. G&A expenses for the third quarter of 2007 increased 126% to € 13.8 million compared to € 6.1 million for the same quarter in 2006. Net loss for the third quarter of 2007 increased 7% to € (20.0) million compared to € (18.7) million for the third quarter of 2006. Basic and diluted loss per share was € (0.55) for the third quarter of 2007 compared to € (0.56) for the same period in 2006. Cash position As of September 30, 2007, cash, cash equivalents, marketable securities and short-term investments totaled € 77.1 million (December 31, 2006: € 97.1 million), including € 1.5 million in restricted cash. Net cash burn for the first nine months of 2007 was € 58.6 million with net cash burn of € 19.4 million in the first quarter, € 22.6 million in the second quarter and € 16.6 million in the third quarter of 2007. Net cash burn is derived by adding net cash used in operating activities and purchases of property, equipment and licenses. The figures used to calculate net cash burn are contained in the Company’s unaudited consolidated statements of cash flows for the nine-month period ended September 30, 2007. "This is the most challenging time that our Company has faced in its ten-year history,” said Bernd R. Seizinger, M.D., Ph.D., Chief Executive Officer. "We are finalizing a strategic plan for moving the Company forward, and we will implement that plan in the weeks ahead. Part of that process will involve a substantial restructuring to position the Company for future success.” Mirko Scherer, Ph.D., Senior Vice President and Chief Financial Officer said, "We continue to expect to have around € 60 million in cash and equivalents at the end of 2007. We anticipate that this amount will be sufficient to support our business operations for approximately two years.” Updated financial guidance GPC Biotech provided the following financial guidance. Revenues for the full year 2007 expected to be in the range of € 17 to 19 million. This is consistent with previous guidance provided in August. Year-end 2007 cash, cash equivalents and available-for-sale securities position expected to be approximately € 60 million. This is consistent with previous guidance provided in August. Numerous cost-cutting measures to be implemented shortly, including a significant workforce reduction. Conference call scheduled As previously announced, the Company has scheduled a conference call to which participants may listen via live webcast, accessible through the GPC Biotech Web site at www.gpc-biotech.com or via telephone. A replay will be available via the Web site following the live event. The call, which will be conducted in English, will be held on November 8th at 15:00 CET/9:00 AM ET. The dial-in numbers for the call are as follows: Participants from Europe: 0049-(0)89-9982-99913 or 0044-(0)20-7806-1961 Participants from the U.S.: 1-718-354-1391 Please dial in 10 minutes before the beginning of the meeting. About GPC Biotech GPC Biotech AG is a publicly traded biopharmaceutical company focused on discovering, developing and commercializing new anticancer drugs. GPC Biotech's lead product candidate is satraplatin, an oral platinum compound. The Company has various anti-cancer programs in research and development that leverage its expertise in kinase inhibitors. GPC Biotech AG is headquartered in Martinsried/Munich (Germany) and has a wholly owned U.S. subsidiary headquartered in Princeton, New Jersey. For additional information, please visit GPC Biotech's Web site at www.gpc-biotech.com. This press release contains forward-looking statements, which express the current beliefs and expectations of the management of GPC Biotech, including financial projections and forecasts relating to our operations and financial situation. Such statements are based on current expectations and are subject to risks and uncertainties, many of which are beyond our control, that could cause future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Actual results could differ materially depending on a number of factors, and we caution investors not to place undue reliance on the forward-looking statements contained in this press release We direct you to GPC Biotech’s Annual Report on Form 20-F for the fiscal year ended December 31, 2006 and other reports filed with the U.S. Securities and Exchange Commission for additional details on the important factors that may affect the future results, performance and achievements of GPC Biotech. Forward-looking statements speak only as of the date on which they are made and GPC Biotech undertakes no obligation to update these forward-looking statements, even if new information becomes available in the future. GPC Biotech AG           Condensed Consolidated Statements of Operations   Three months ended September 30, Nine months ended September 30, in thousand €, except share and per share data   2007 (unaudited)   2006 (unaudited)   2007 (unaudited)   2006 (unaudited) Collaborative revenues (a) 8,848 6,480 15,930 17,303 Grant revenues 69 86 213 280 Total revenues 8,917 6,566 16,143 17,583 Research and development expenses 15,128 20,072 43,695 49,126 General and administrative expenses 13,833 6,070 37,232 16,247 Amortization of intangible assets 19 70 200 213 Total operating expenses   28,980     26,212       81,127     65,586   Operating loss (20,063 ) (19,646 ) (64,984 ) (48,003 ) Other income (expense), net (664 ) (105 ) (575 ) (2,252 ) Interest income 785 1,084 2,862 3,120 Interest expense   (31 )   (21 )     (98 )   (65 ) Net loss before cumulative effect of change in accounting principle (19,973 ) (18,688 ) (62,795 ) (47,200 ) Cumulative effect of change in accounting principle   -     -       -     433   Net loss (19,973 ) (18,688 ) (62,795 ) (46,767 ) Loss per share before change in accounting principle (0.55 ) (0.56 ) (1.75 ) (1.45 ) Cumulative effect of change in accounting principle - - - 0.01 Basic and diluted loss per share (0.55 ) (0.56 ) (1.75 ) (1.44 ) Shares used in computing basic and diluted loss per share 36,375,359 33,208,042 35,978,772 32,554,200     (a) Revenues from related party Collaborative revenues - 2,483 - 5,827   See accompanying notes to unaudited condensed consolidated financial statements. GPC Biotech AG       Condensed Consolidated Balance Sheets in thousand €, except share data and per share data   September 30, December 31, Assets   2007 (unaudited)   2006 Current assets Cash and cash equivalents 29,341 38,336 Marketable securities and short-term investments 46,302 57,186 Accounts receivable 2,986 11 Accounts receivable, related party - 395 Prepaid expenses 1,199 1,299 Other current assets 3,283 2,970 Restricted Cash   1,293     -   Total current assets 84,404 100,197   Property and equipment, net 3,814 4,259 Intangible assets, net 188 405 Other assets, non-current 946 1,127 Restricted cash   187     1,531   Total assets 89,539 107,519 Liabilities and shareholders' equity         Current liabilities Accounts payable 1,269 2,262 Accrued expenses and other current liabilities 13,469 14,346 Current portion of deferred revenue 5,385 7,240 Current portion of deferred revenue, related party   -     896   Total current liabilities 20,123 24,744   Deferred revenue, net of current portion 14,140 9,103 Convertible bonds 3,649 3,108 Other liabilities, non-current - 3,389   Shareholders' equity Ordinary shares, € 1 non-par, notional value: Shares authorized: 70,383,150 at September 30, 2007 and 62,695,630 at December 31, 2006 Shares issued and outstanding: 36,664,973 at September 30, 2007 and 33,895,444 at December 31, 2006 36,665 33,895 Additional paid-in capital 373,492 328,171 Subscribed shares 1,470 334 Accumulated other comprehensive loss (3,735 ) (1,755 ) Accumulated deficit   (356,265 )   (293,470 ) Total shareholders' equity   51,627     67,175   Total liabilities and shareholders' equity 89,539 107,519   See accompanying notes to unaudited condensed consolidated financial statements. Condensed Consolidated Statements of Cash Flows   Nine months ended September 30, in thousand €   2007 (unaudited)   2006 (unaudited) Cash flows from operating activities   Net loss (62,795 ) (46,767 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 1,284 1,324 Amortization 200 213 Compensation cost for stock option plans and convertible bonds 8,845 5,124 Loss accrual on sublease contract (381 ) 1,956 Cumulative effect of change in accounting principle - (433 ) Change in accrued interest income on marketable securities and short-term investments (405 ) (328 ) Bond premium amortization 159 468 Other than temporary impairment on marketable securities - 390 (Gain)/loss on disposal of property and equipment (17 ) (23 ) Changes in operating assets and liabilities: Accounts receivable (2,986 ) 31,326 Accounts receivable, related party 395 1,436 Other assets, current and non-current (154 ) 959 Accounts payable (910 ) (814 ) Deferred revenue 3,183 (11,356 ) Deferred revenue, related party (896 ) (4,450 ) Other liabilities and accrued expenses, current and non-current   (2,651 )   3,791   Net cash (used in) provided by operating activities (57,129 ) (17,184 )   Cash flows from investing activities Purchases of property, equipment and licenses (1,479 ) (979 ) Proceeds from the sale of property and equipment 45 45 Proceeds from the sale or maturity of marketable securities and short-term investments 11,000 20,445 Purchases of marketable securities and short-term investments   -     (19,906 ) Net cash provided by (used in) investing activities 9,566 (395 )   Cash flows from financing activities Proceeds from issuance of shares, net of payments for cost of transaction 32,633 36,080 Proceeds from issuance of convertible bonds 1,006 140 Payments for cancellation of convertible bonds (24 ) - Proceeds from exercise of stock options and convertible bonds 5,154 1,032 Cash received for subscribed shares   2,080     -   Net cash provided by financing activities 40,849 37,252   Effect of exchange rate changes on cash (2,229 ) (490 ) Changes in restricted cash (52 ) (47 ) Net increase/(decrease) in cash and cash equivalents (8,995 ) 19,136 Cash and cash equivalents at the beginning of the period   38,336     30,559   Cash and cash equivalents at the end of the period 29,341 49,695     See accompanying notes to unaudited condensed consolidated financial statements GPC Biotech AG Consolidated Statements of Changes in Shareholders' Equity (in thousand €, except share data)             Ordinary shares Shares   Amount Additional Paid-in Capital Subscribed Shares Accumulated Other Comprehensive Loss Accumulated Deficit Total Shareholders' Equity   Balance at December 31, 2005 30,151,757   30,152   284,931     -   (2,093 )   (229,457 )   83,533   Components of comprehensive loss: Net loss (46,767 ) (46,767 ) Change in unrealized gain on available-for-sale securities 636 636 Accumulated translation adjustments (130 ) (130 ) Total comprehensive loss (46,261 ) Issuance of shares 2,860,000 2,860 33,220 36,080 Exercise of stock options and convertible bonds 251,641 252 874 1,126 Cumulative effect of change in accounting principle (433 ) (433 ) Compensation cost for stock options and convertible bonds         5,124                 5,124   Balance at September 30, 2006 (unaudited) 33,263,398   33,264   323,716     -   (1,587 )   (276,224 )   79,169                               Balance at December 31, 2006 33,895,444   33,895   328,171     334   (1,755 )   (293,470 )   67,175   Components of comprehensive loss: Net loss (62,795 ) (62,795 ) Change in unrealized gain on available-for-sale securities (129 ) (129 ) Accumulated translation adjustments (1,851 ) (1,851 ) Total comprehensive loss (64,775 ) Issuance of shares 1,564,587 1,565 31,068 32,633 Exercise of stock options and convertible bonds 1,204,942 1,205 5,333 1,136 7,674 Compensation cost for stock options and convertible bonds         8,920                 8,920   Balance at September 30, 2007 (unaudited) 36,664,973   36,665   373,492     1,470   (3,735 )   (356,265 )   51,627       See accompanying notes to unaudited condensed consolidated financial statements GPC Biotech AG Notes to the Unaudited Condensed Consolidated Financial Statements 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of GPC Biotech AG (the "Company”) have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP”), applicable to interim financial reporting, specifically Accounting Principles Board Opinion No. 28 "Interim Financial Reporting". These unaudited condensed consolidated financial statements do not include all information and disclosures required for a complete set of financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three month and nine-month periods ended September 30, 2007, are not necessarily indicative of results to be expected for the full year ending December 31, 2007. The balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date, but does not include all of the information required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2006. 2. New Accounting Pronouncements As of January 1, 2007, GPC Biotech adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (FIN 48). The Company has certain deferred tax assets as a result of several years of losses from operations. Management determined that it was not probable that sufficient future taxable income would be available to realize those deferred tax assets, therefore, management recognized a full valuation allowance for those deferred tax assets. The Company’s policy is to accrue interest and penalties on the tax obligations and classify them as current or non-current depending on when the amount is anticipated to be paid. Currently, the Company does not take any other tax positions nor has any interest or penalties. On June 14, 2007, the Financial Accounting Standards Board ("FASB") ratified EITF 07-3, "Accounting for Non-Refundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities”. EITF 07-3 requires that all non-refundable advance payments for R&D activities that will be used in future periods be capitalized until used. In addition, the deferred research and development costs need to be assessed for recoverability. EITF 07-3 is applicable for fiscal years beginning after December 15, 2007 and is to be applied prospectively without the option of early application. The Company will evaluate the impact, if any, of EITF 07-3 on its financial statements. 3. Related Party Disclosures ALTANA Pharma AG ("ALTANA Pharma”) is no longer a related party to the Company because the board membership of Dr. Bernd Seizinger at ALTANA Pharma ended December 31, 2006. Therefore, transactions consummated with ALTANA Pharma from and after January 1, 2007, are no longer classified as transactions with a related party. 4. Commitments and Contingencies Contingent Commitments and Contingent Losses From time to time, the Company may be party to certain legal proceedings and claims which arise during the ordinary course of business. The Company also has other contingencies relating to potential milestone payments. Legal proceedings and contingent commitments are subject to various uncertainties and the outcomes are difficult to predict. GPC Biotech may incur significant expense in defending these or future legal proceedings and in fulfilling these contingencies, however, in the opinion of management, the ultimate outcome of these matters will not have material adverse effects on the Company’s financial position, results of operations or cash flows. In accordance with SFAS No. 5, "Accounting for Contingencies”, the Company makes a provision for a liability when it is both probable that a liability has been incurred at the date of the financial statements and when the amount of the loss is reasonably estimable. With respect to a number of the items listed below, management has determined that a loss is not probable or the amount of the loss is not reasonably estimable, or both. Arbitration Proceedings On December 12, 2006, the Company was notified by Spectrum Pharmaceuticals Inc. ("Spectrum”), that Spectrum had initiated an arbitration proceeding with the American Arbitration Association in the United States to resolve a dispute between the companies under the co-development and license agreement for satraplatin. In the course of the arbitration proceedings, Spectrum has made several claims of breach of contract, including (1) an assertion that it is entitled to a payment from GPC Biotech of approximately € 9.0 million relating to payments received by GPC Biotech under the co-development and license agreement between GPC Biotech and Pharmion GmbH entered on December 19, 2005, (2) a claim that GPC Biotech has not used commercially reasonable efforts to obtain regulatory approval and to promote the distribution of satraplatin in Japan, and (3) a claim that GPC Biotech has not negotiated with Spectrum in good faith regarding the co-promotion of satraplatin in the United States. Spectrum is also seeking a declaration that GPC Biotech’s alleged breaches of contract provide a basis for termination of the co-development and license agreement. The Company believes that Spectrum’s claims have no merit and is therefore contesting such claims vigorously. Management assessed the prospect of an unfavorable outcome of this arbitration as less than probable. The hearing was completed on July 13, 2007 and closing arguments were held at the end of August 2007. On November 5, 2007, the Company announced the arbitration panel issued its decision. Please refer to footnote 10 "Subsequent Events” for further details. Fees which the Company pays to its external legal advisors and for other services associated with this arbitration process are expensed in the period when such legal and other services are rendered. Shareholder Litigation On July 27, 2007, the Company announced that it had been sued in the United States District Court for the Southern District of New York, purportedly in a class action lawsuit on behalf of all persons who purchased or acquired securities of GPC Biotech between December 5, 2005 and July 24, 2007 inclusive. The suit also named the Company’s Chief Executive Officer and two other executives of the Company. The complaint alleges that GPC Biotech violated U.S. federal securities laws by making materially false public statements relating to satraplatin, thereby inflating the price of GPC Biotech securities. Since the date of that announcement two other similar lawsuits have been filed against the Company. Other similar lawsuits may be filed. The complaints in these lawsuits seek monetary damages in an unspecified amount. GPC Biotech believes the allegations in the complaints to be without merit and intends to vigorously defend the Company. GPC Biotech cannot predict the outcome of any of these suits and is not currently able to estimate the possible cost to the Company from these suits, given the early stage of the proceedings. Marketing Approval of Satraplatin in Europe Upon receiving marketing approval for satraplatin in Europe, the Company is required to make the following payments: Under the Company’s agreement with Spectrum, GPC Biotech is obligated to make a milestone payment for this approval in the total amount of approximately € 2.1 million. The Company has a cash bonus plan to retain the Company’s employees in which the total payout may lead to an increase in personnel expenses of up to € 0.6 million. The Company issued stock appreciation rights (SARs) to senior management, the members of the Supervisory Board, and certain employees. These SARs would entitle the holder to cash payments if the performance condition were to be met. The Company records the expense associated with these milestones as the events become probable. Acceptance of NDA Filing On April 16, 2007, the U.S. Federal Drug Administration (FDA) accepted the Company’s filing of the New Drug Application (NDA) for satraplatin for patients with hormone-refactory prostate cancer (HRPC) whose prior chemotherapy has failed. In connection with this acceptance, the Company was required to pay approximately € 2.9 million to Spectrum. This payment was made in May 2007, however, charged to research and development expense in 2006 when the occurrence of this event was deemed probable. On July 30, 2007, the Company announced that it had withdrawn the satraplatin capsules NDA filed for accelerated approval for the treatment of hormone-refractory prostate cancer patients whose prior chemotherapy has failed. The Company based its decision on the vote by the Oncologic Drugs Advisory Committee (ODAC) to the U.S. Food and Drug Administration (FDA) on July 24, 2007 that the FDA should wait for the final survival analysis of the SPARC trial before deciding whether satraplatin is approvable. On October 31, 2007, the Company announced that the SPARC trial did not achieve the endpoint of overall survival. Please refer to footnote 10 "Subsequent Events” for further details. Acceptance of MAA by EMEA In July 2007, the European Medicines Agency (EMEA) accepted Pharmion’s filing of the Marketing Authorization Application (MAA) for satraplatin in combination with prednisone for the treatment of patients with metastatic hormone refractory prostate cancer whose prior chemotherapy has failed. As a result of the MAA acceptance by the EMEA, GPC Biotech received a € 5.9 million milestone payment from Pharmion. Also, under the terms of GPC Biotech’s agreement with Spectrum, the acceptance of the MAA by the EMEA triggered payments by GPC Biotech to Spectrum in the total amount of approximately € 2.4 million, representing a direct milestone payment plus Spectrum’s portion of the € 5.9 million milestone payment from Pharmion. Development and Supply Agreement GPC Biotech is the owner and licensee of certain technology and patent rights regarding the monoclonal antibody known as 1D09C3. In March 2007, GPC Biotech entered into a development and supply agreement with a biologics supplier under which the biologics supplier agreed to: (1) develop a high-productivity cell line and develop and scale-up a robust manufacturing process and (2) produce quantities of 1D09C3 bulk drug substance for clinical development and commercial supply. Pursuant to the agreement, GPC Biotech is required to make certain payments over a period of 7 (seven) years. These payments are charged to research and development expenses as services are rendered. In the third quarter 2007 the Company decided to not make additional financial commitments to its 1D09C3 monoclonal antibody program at this time. However, the Company plans to maintain the capability to accelerate this program at a later date. Contingent Gains The Company is entitled to receive a milestone payment from Pharmion (net of licensing fee paid to Spectrum) of approximately € 11.6 million upon the approval of the MAA for satraplatin with the EMEA. Gross receipt will be recognized as revenue upon milestone achievement. 5. Loss per Share Basic loss per common share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed using the weighted average number of common and dilutive common equivalent shares from stock options and convertible debt where the dilutive effect of options and warrants was calculated using the treasury stock method. For all periods presented, diluted net loss per share is the same as basic net loss per share, as the inclusion of weighted average shares of common stock issuable upon the exercise of stock options and convertible debt would be antidilutive. 6. Comprehensive Loss Comprehensive loss was € 64.8 million and € 46.2 million for the nine months ended September 30, 2007 and 2006, respectively. Comprehensive loss is composed of net loss, unrealized gains and losses on marketable securities and short-term investments and cumulative foreign currency translation adjustments. Accumulated other comprehensive loss at September 30, 2007 and 2006 reflected € 0.3 million and € 0.4 million of unrealized gains on marketable securities and short-term investments and € 4.0 million and € 2.0 million of cumulative foreign currency translation loss adjustments, respectively. 7. Shareholders’ Equity On January 24, 2007, the Company issued 1,564,587 new ordinary shares at € 21.50 per share for a total net amount of € 32.6 million through a private placement. GPC Biotech received the proceeds from the placement in February 2007. At September 30, 2007, employees of the Company had subscribed to 166,000 ordinary shares with a total value of € 1.5 million, which has been included in shareholders’ equity. The subscribed shares represent amounts paid for exercises of stock options for which ordinary shares have not been issued at September 30, 2007. The ordinary shares are expected to be registered and issued by December 31, 2007. During the nine months ended September 30, 2007, members of the Management Board and employees of the Company exercised some of their fully vested stock options and convertible bonds, receiving 1,204,942 new ordinary shares of the Company. 8. Additional Disclosures General and Administrative Expenses General and administrative (G&A) expenses for the nine months ended September 30, 2007 increased 130% to € 37.2 million compared to € 16.2 million for the same period in 2006. The increase in G&A expenses is primarily due to the formation of a sales and marketing organization in the first half of 2007 in preparation of the potential product launch of satraplatin in the U.S. as well as various legal expenses. However, the Company has since implemented certain restructuring measures, including the restructuring plan announced on August 23, 2007 as described below. Share-Based Compensation For the nine months ended September 30, 2007 and 2006, the Company incurred share-based compensation cost of € 8.8 million and € 5.1 million, respectively. This increase is the result of additional stock option and convertible bond grants combined with the recognition of certain stock appreciation rights. Product Candidate Licensing Activities On June 25, 2007, the Company entered into a license agreement with Yakult Honsha Co. Ltd. ("Yakult") for satraplatin in Japan. Under the terms of the agreement, Yakult gains exclusive commercialization rights to satraplatin for Japan and will take the lead in developing the drug in Japan. Under the agreement, Yakult was required to make an upfront payment of ¥1.2 billion (€ 7.4 million) to the Company as reimbursement for past satraplatin development expenses. Payment was received in July 2007, net of a withholding tax payment to the Japanese government totalling €0.7 million which was recorded in Other Income (Expense), net. This agreement has more than one deliverable and has been accounted for following the guidance provided by EITF 00-21. In accordance with EITF 00-21, all of the revenue associated with this agreement has been deferred and will be recognized over the Company’s period of substantial involvement in this agreement which was determined to coincide with the Yakult’s product development plan of 48 months. However, due to the recent topline overall survival results for the double-blinded, randomized satraplatin Phase 3 registrational trial, the SPARC trial, the Company determined that adjustments may be necessary to that original estimate and will continue to defer all revenues associated with the agreement until its impact can be reliably determined. Also, according to the license agreement with Yakult, Yakult is obligated to make additional payments to the Company based on the achievement of certain regulatory filing and approval milestones. These revenues (if any) will be recognized when the milestone is achieved. In addition, the Company will receive a minimum of 21.1% royalties on net sales of satraplatin in Japan. Costs Associated with Exit Activities On May 3, 2007, the Company announced the consolidation of its drug discovery efforts to one location, resulting in the closing of the facility in Waltham, Massachusetts, USA along with a total workforce reduction of approximately 16%. The Company has accounted for this restructuring in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities” (FAS 146). Under FAS 146, the Company incurred a restructuring charge of € 0.9 million in the second quarter of 2007 and minimal costs in the third quarter of 2007, primarily relating to employee severance and termination costs. These charges are included in both Research and Development and General and Administrative expenses at September 30, 2007. In addition, the Company has incurred and will continue to incur certain contract termination costs relating to the closing of the Waltham facility. Prior to the announcement of the reorganization the Company had a remaining sublease loss liability relating to the same facility totaling € 4.0 million which was charged to expense in prior years in accordance with FAS 146. Because this liability was deemed adequate to cover all contract termination costs and professional fees associated with this restructuring, no additional amounts have been charged to expense in the current year. However, during the third quarter of 2007, the Company adjusted this liability down as the Company’s facility closing costs and legal expenses are believed to be lower than originally anticipated. This reduction was recorded to General and Administrative Expense. The Company expects to complete this reorganization by December 31, 2007, incurring a total charge of approximately € 1.0 million. These charges are included in both Research and Development and General and Administrative expenses at September 30, 2007. During the third quarter 2007, the Company recorded an impairment charge of approximately €0.5 million which represents the carrying value of the fixed assets that were disposed of at the Waltham facility. This charge primarily related to laboratory equipment and furniture and was recorded in General and Administrative expense in accordance with FAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets”. On August 23, 2007, the Company announced a restructuring plan that involved a staff reduction of 46 out of 316 employees, or approximately 15% of the total workforce. All affected staff were based in the U.S., with reductions in the commercialization, drug development and general and administrative groups. The Company also accounted for this reorganization under FAS 146, incurring a total restructuring charge of € 0.7 million in the third quarter of 2007, primarily relating to employee severance and termination costs. This restructuring was completed on August 31, 2007. The charges are included in both Research and Development and General and Administrative expenses for the nine months ending September 30, 2007. A summary of the significant components of the restructuring liability is as follows (in thousand €):       Employee   Facility   Termination Closing Benefits Costs Total       January 1, 2007 balance -   3,967   3,967     Amortization of sublease loss including interest - (381 ) (381 )   Restructuring charges 1,655 - 1,655   Restructuring payments (687 ) - (687 )   Adjustments / Changes in estimates - (506 ) (506 )   Exchange differences (64 ) (246 ) (310 )       September 30, 2007 balance 904   2,834   3,738   Supervisory Board At the Company’s Annual Shareholders Meeting on May 25, 2007, Donald Soltysiak was elected to its Supervisory Board. Mr. Soltysiak succeeded Dr. Prabhavathi Fernandes, whose term ended on the same day. 9. Disclosures Required by the Frankfurt Stock Exchange Number of Employees As of September 30, 2007 and 2006, the number of employees totalled 248 and 228, respectively. Shareholdings of Management As of September 30, 2007, the members of the Management Board and Supervisory Board held shares, stock options, convertible bonds and stock appreciation rights in the amounts set forth in the table below:     Number of Shares   Number of Stock Options   Number of Convertible Bonds   Number of Stock Appreciation Rights Management Board                 Bernd R. Seizinger, M.D., Ph.D. (Chairman)   61,500   789,000   1,413,501   - Elmar Maier, Ph.D. 170,000 95,000 358,000 - Sebastian Meier-Ewert, Ph.D. 194,405 189,000 424,375 - Mirko Scherer, Ph. D. 7,776 215,000 413,000 -   Supervisory Board                 Jürgen Drews, M.D. (Chairman) 26,900 10,000 12,500 80,000 Michael Lytton (Vice Chairman) 7,500 10,000 31,500 60,000 Metin Colpan, Ph.D. 19,400 10,000 10,000 45,000 Donald Soltysiak - - - 10,000 James Frates 1,000 - - 60,000 Peter Preuss 87,500 - 22,500 50,000 10. Subsequent Events SPARC Trial On October 31, 2007, the Company announced topline overall survival results for the double-blinded, randomized satraplatin Phase 3 registrational trial, the SPARC trial. The trial evaluated satraplatin plus prednisone versus placebo plus prednisone as a second-line treatment in 950 patients with HRPC. The Company reported that the trial did not achieve the endpoint of overall survival (p=0.80, stratified log rank analysis). The median was 61.3 weeks for the satraplatin arm compared to 61.4 weeks for the control group and the hazard ratio was 0.97 (95% CI: 0.83, 1.13). The Company is currently conducting pre-specified subset analyses. Based on the results, GPC Biotech is re-evaluating its development plans for satraplatin. Arbitration Decision On November 5, 2007, the Company announced that a three-arbitrator panel of the American Arbitration Association, which was appointed to resolve a dispute over claims raised by Spectrum against GPC Biotech regarding the co-development and license agreement for satraplatin, issued its decision in favor of GPC Biotech. The panel unanimously rejected all of Spectrum’s claims and found no violations of the agreement by GPC Biotech. The decision of the panel included the following key rulings: • Spectrum is not entitled to any portion of the up-front payments that GPC Biotech received from Pharmion Corporation or from Yakult; • Spectrum does not have a contractual right to co-promote satraplatin in the United States and GPC Biotech did not violate any obligation to negotiate in good faith a co-promotion agreement; and • GPC Biotech did not violate its obligation to use commercially reasonable efforts to commercialize satraplatin in Japan. Although the panel ruled for GPC Biotech on the merits, it did not award GPC Biotech re-imbursement of attorneys’ fees and costs.