• potential future licensing fees, milestone payments, and royalty payments including any milestone payments or royalty payments that we may receive under our collaborative arrangements with Ipsen Limited and Merck & Co., Inc.;

• our and our collaborator's ability to obtain and maintain regulatory approvals of our product candidates and any related restrictions, limitations, and/or warnings;

• our and our collaborator's ability to market, commercialize and achieve market acceptance for our product candidates or products that we may develop;

• our and our collaborators' ability to generate additional product candidates for clinical testing;

• our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; and

• our estimates regarding the sufficiency of our cash resources.

In some cases, you can identify forward-looking statements by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "will," "would" and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events, are based on

assumptions and are subject to risks and uncertainties. We discuss many of these risks in this Quarterly Report on Form 10-Q in greater detail in the section entitled "Risk Factors" under Part II, Item 1A below. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q. You should read this Quarterly Report on Form 10-Q and the documents that we incorporate by reference in and have filed as exhibits to this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
Overview
We are a biopharmaceutical company dedicated to the discovery, development and commercialization of small molecules that selectively target hormone pathways to treat cancer, osteoporosis and bone loss, muscle loss and other serious medical conditions. We are developing toremifene citrate, a selective estrogen receptor modulator, or SERM, in two separate clinical programs in men:
first, toremifene 80 mg in a completed pivotal Phase III clinical trial for the prevention of fractures and treatment of other estrogen deficiency side effects of androgen deprivation therapy, or ADT, for prostate cancer, and second, toremifene 20 mg in an ongoing pivotal Phase III clinical trial for the prevention of prostate cancer in high risk men with precancerous prostate lesions called high grade prostatic intraepithelial neoplasia, or high grade PIN. In the first quarter of 2008, we announced that the Phase III clinical trial results for toremifene 80 mg for the prevention of fractures and treatment of other estrogen deficiency side effects of ADT for prostate cancer showed that toremifene 80 mg reduced new morphometric vertebral fractures, met other key endpoints of bone mineral density, or BMD, lipid profiles and gynecomastia, and also showed that toremifene 80 mg demonstrated a reduction in hot flashes in a subset of patients. We plan to submit a New Drug Application, or NDA, for toremifene 80 mg to the U.S. Food and Drug Administration, or FDA, in the fourth quarter of 2008. We have licensed to Ipsen Limited, or Ipsen, exclusive rights in the European Union, Switzerland, Norway, Iceland, Lichtenstein and the Commonwealth of Independent States, which we refer to collectively as the European Territory, to develop and commercialize toremifene in all indications which we have licensed from Orion Corporation, or Orion, which include all indications in humans except the treatment and prevention of breast cancer outside of the United States. We currently market FARESTON® (toremifene citrate) 60 mg tablets, approved for the treatment of metastatic breast cancer in postmenopausal women in the United States.
In December 2007, we and Merck & Co., Inc., or Merck, entered into a collaboration to discover and develop selective androgen receptor modulators, or SARMs, a new class of drugs with the potential to treat sarcopenia, which is the loss of skeletal muscle mass resulting in reduced physical strength and ability to perform activities of daily living, cancer cachexia (cancer induced muscle loss), and other musculoskeletal wasting or muscle loss conditions. We and Merck are conducting several Phase I and Phase II clinical trials evaluating multiple SARM product candidates including Ostarine™ (also designated by Merck as MK-2866) for sarcopenia. In October 2008, we announced topline results of a Phase II clinical trial evaluating Ostarine™ in patients with cancer cachexia. In this analysis, the study met its primary endpoint of absolute change in total lean body mass (muscle) compared to placebo and the secondary endpoint of muscle function (performance) after 16 weeks of treatment. In addition to cancer cachexia and sarcopenia, we and Merck are evaluating additional muscle loss indications for potential SARM clinical development.
We also have an extensive preclinical pipeline generated from our own discovery program, including GTx-758, an oral luteinizing hormone, or LH, inhibitor being developed for the treatment of advanced prostate cancer, and GTx-878, an estrogen receptor beta agonist, a new class of drugs being developed for

the treatment of benign prostatic hyperplasia, or BPH. Since we are planning for the commercialization of our toremifene product candidates, we only plan to initiate Phase I clinical testing for GTx-758 in 2009.
Our most advanced product candidate, toremifene, is being developed for the prevention of fractures and treatment of other estrogen deficiency side effects of ADT for prostate cancer and to prevent prostate cancer in high risk men with high grade PIN. ADT, by gonadotropin releasing hormone therapy or surgical castration, is the primary treatment for advanced prostate cancer, and we believe it is currently used to treat approximately 700,000 men in the United States. In men, aromatase converts testosterone to estrogen. By reducing testosterone to castrate levels, ADT depletes up to 80% of a man's estrogen, resulting in multiple estrogen deficiency side effects. These side effects include increased risk of serious fractures, which can reduce survival in men on ADT by more than 3 years, as well as accelerated and continuous bone loss. Other estrogen deficiency side effects include adverse lipid changes and increased risk of cardiovascular disease, as well as common symptomatic side effects, such as hot flashes and gynecomastia (painful breast enlargement). There are currently no drugs approved by the FDA for the treatment of the estrogen deficiency side effects of ADT. We commenced a pivotal Phase III clinical trial of toremifene 80 mg under a Special Protocol Assessment, or SPA, with the FDA for this indication in November 2003. A SPA is designed to facilitate the FDA's review and approval of drug products by allowing the agency to evaluate the proposed design and size of clinical trials that are intended to form the primary basis for determining a drug product's efficacy. The primary endpoint was new morphometric vertebral fractures measured by x-ray, and the secondary endpoints included BMD, lipid profile changes, gynecomastia and hot flashes. In the first quarter of 2008, we announced that the results of the Phase III clinical trial showed that toremifene 80 mg reduced new morphometric vertebral fractures, met other key endpoints of BMD, lipid profiles and gynecomastia and also demonstrated a reduction in hot flashes in a subset of patients. We plan to submit a NDA for toremifene 80 mg in the fourth quarter of this year. We cannot predict if the NDA will be approved in a timely manner, or at all, and if approved, if the FDA will require any restrictions, limitations, and/or warnings in the label.
In January 2005, we initiated a pivotal Phase III clinical trial of toremifene 20 mg for the prevention of prostate cancer in high risk men with high grade PIN, which is being conducted under a SPA with the FDA. A planned efficacy interim analysis was conducted in the second quarter of 2008 which did not reach the specified statistical outcome of p<0.003 required under the SPA. We anticipate conducting a second planned efficacy analysis after a certain number of additional cancer events have been recorded among study patients, which we currently expect to occur in the summer of 2009. If the efficacy analysis achieves a prespecified statistical goal, we plan to submit a NDA to the FDA. If we are able to submit a NDA based on the results of the planned efficacy analysis, we will continue the study to collect efficacy data and safety data during the NDA review process to satisfy the FDA's safety requirements set forth in the SPA. If the results from the efficacy analysis do not satisfy the specified statistical requirements, we will make a final determination about the continuation of the toremifene 20 mg Phase III clinical trial. In July 2008, an independent Data Safety Monitoring Board conducted a planned, semi-annual review of unblinded safety data from the approximately 1,590 patients participating in the toremifene 20 mg Phase III high grade PIN clinical trial and recommended the clinical trial continue as planned.
In our third clinical program, OstarineTM, a SARM, is being developed to treat sarcopenia, cancer cachexia, and other musculoskeletal wasting or muscle loss conditions. In December 2006, we announced that OstarineTM met its primary endpoint in a Phase II proof of concept, double blind, randomized, placebo controlled clinical trial in 60 elderly men and 60 postmenopausal women. In October 2008, we announced topline results of a Phase II clinical trial evaluating Ostarine™ in patients with cancer cachexia. In this analysis, the study met its primary endpoint of absolute change in total lean body mass (muscle) compared to placebo and the secondary endpoint of muscle function (performance) after 16 weeks of treatment in 159 cancer patients with reported weight loss. We and Merck, through our

SARM collaboration, will determine the continued development strategy of Ostarine™ and other SARM collaboration compounds.
In December 2007, we entered into a license and collaboration agreement with Merck which governs our and Merck's joint research, development and commercialization of SARM compounds and related SARM products, including SARMs currently being developed by us and Merck and those yet to be discovered, for all potential indications of interest. Under the agreement, we are conducting preclinical research of SARM compounds and products, and Merck is primarily responsible for conducting and funding development and commercialization of products developed. We received an upfront licensing fee of $40.0 million in January 2008, of which $1.9 million was paid to the University of Tennessee Research Foundation, or UTRF, as sublicense royalty. Merck also agreed to pay us $15.0 million in guaranteed cost reimbursements for research and development activities in equal annual installments over a three year period beginning on the first anniversary of the effective date of the agreement. We are also eligible to receive up to $422.0 million in future milestone payments associated with the development and regulatory approval of a lead product candidate, including Ostarine™, as defined in the agreement, if multiple indications are developed and receive required regulatory approvals, as well as additional milestone payments for the development and regulatory approval of other product candidates developed under the agreement, upon the achievement of such development and regulatory approval milestones and assuming the continued effectiveness of the agreement. Merck also has agreed to pay us tiered royalties on net sales of products that may be developed under the agreement. On the date the license and collaboration agreement with Merck became effective in December 2007, we issued to Merck 1,285,347 newly-issued shares of our common stock for an aggregate purchase price of approximately $30.0 million.
Our net loss for the nine months ended September 30, 2008 was $37.9 million. Our net loss included FARESTON® net product sales of $846,000 and the recognition of collaboration revenue of $9.7 million. We have financed our operations and internal growth primarily through public offerings and private placements of our common stock and preferred stock, as well as proceeds from our collaborations. We expect to continue to incur net losses as we continue our clinical development and research and development activities, apply for regulatory approvals, expand our sales and marketing capabilities and grow our operations.

• the continuation of the pivotal Phase III clinical trial of toremifene 20 mg for the prevention of prostate cancer in high risk men with high grade PIN;

• our ongoing SARM research efforts with Merck as a part of our collaboration;

• the continued preclinical and clinical development of other product candidates, including GTx-758; and

• increases in research and development personnel.

There is a risk that any drug discovery and development program may not produce revenue. Moreover, because of uncertainties inherent in drug discovery and development, including those factors described in Part II, Item 1A, "Risk Factors" of this Quarterly Report on Form 10-Q, we may not be able to successfully develop and commercialize any of our product candidates.

                             Product
                            Candidate/             Development
Program                Proposed Indication            Phase                 Status


                                        Clinical

SERM                 Toremifene
                     80 mg
                     Estrogen deficiency side    Pivotal Phase       Phase III clinical
                     effects of ADT for          III                 trial, which was
                     prostate cancer             clinical trial      conducted under a
                                                                     SPA, completed in
                                                                     February 2008;
                                                                     achieved primary
                                                                     endpoint of
                                                                     reduction of new
                                                                     morphometric
                                                                     vertebral fractures;
                                                                     NDA planned to be
                                                                     submitted in the
                                                                     fourth quarter of
                                                                     2008

                     Toremifene
                     20 mg
                     Prevention of prostate      Pivotal Phase       Phase III clinical
                     cancer in high risk men     III                 trial ongoing under
                     with high grade PIN         clinical trial      a SPA; planned
                                                                     efficacy analysis
                                                                     expected to occur in
                                                                     the summer of 2009

SARM                 OstarineTM
                     Cancer cachexia             Phase II            Phase II proof of
                                                 clinical trial      concept clinical
                                                                     trial completed in
                                                                     December 2006;
                                                                     results of a Phase
                                                                     II clinical trial to
                                                                     treat cancer
                                                                     cachexia announced
                                                                     in October 2008

                                       Preclinical

LH inhibitor         GTx-758
                     Advanced prostate           Preclinical         Phase I clinical
                     cancer                                          testing planned to
                                                                     initiate in 2009

Estrogen receptor    GTx-878
beta agonist         BPH                         Preclinical         Preclinical

Revenue Recognition
Our revenues consist of product sales of FARESTON® and revenues derived from our collaboration and license agreements.
We use revenue recognition criteria outlined in Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements as amended by SAB No. 104, (together, "SAB 104"), Statement of Financial Accounting Standards ("SFAS") No. 48, Revenue Recognition When Right of Return Exists ("SFAS No. 48"), Emerging Issues Task Force ("EITF") Issue No. 00-21, Revenue Arrangements with Multiple Deliverables ("EITF 00-21") and EITF Issue No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent ("EITF 99-19"). Accordingly, revenues from licensing agreements are recognized based on the performance requirements of the agreement. We have analyzed our agreements with multiple element arrangements to determine whether the deliverables under the agreement, including license and performance obligations such as joint steering committee participation and research and development activities, can be separated or whether all of the deliverables must be accounted for as a single unit of accounting in accordance with EITF 00-21. For these arrangements, we were not able to identify evidence of fair value for the undelivered elements and therefore recognize any consideration for a single unit of accounting in the same manner as the revenue is recognized for the final deliverable, which is ratable over the performance period. The performance period is estimated at the inception of the agreement and is reevaluated at each reporting period. Cost reimbursements for research activities are recognized as collaboration revenue if the provisions of EITF 99-19 are met, the amounts are determinable and collection of the related receivable is reasonably assured. Revenues from milestone payments for which we have no continuing performance obligations are recognized upon achievement of the performance milestone, as defined in the related agreement, provided the milestone is substantive and a culmination of the earnings process has occurred. Performance obligations typically consist of significant milestones in the development life cycle of the related product candidates and technology, such as initiation of clinical trials, achievement of specified clinical trial endpoints, filing for approval with regulatory agencies and approvals by regulatory agencies.
We estimate the performance obligation period to be ten years for our collaboration agreement with Merck and five years for the development of toremifene for both the high grade PIN and ADT indications in the European Territory under our collaboration agreement with Ipsen. The factors that drive the actual development period of a pharmaceutical product are inherently uncertain and include determining the timing and expected costs to complete the project, projecting regulatory approvals and anticipating potential delays. We use all of these factors in initially estimating the economic useful lives of our performance obligations, and we also continually monitor these factors for indications of appropriate revisions.
We recognize net product sales revenue from sales of FARESTON® less deductions for estimated sales discounts and sales returns. We recognize revenue from product sales when the goods are shipped and title and risk of loss pass to the customer and the other criteria of SAB No. 104 and SFAS No. 48 are satisfied. We account for rebates to certain governmental agencies as a reduction of product sales. We allow customers to return product within a specified time period prior to and subsequent to the product's labeled expiration date. As a result, we estimate an accrual for product returns, which is recorded as a reduction of product sales, based on factors which include historical product returns and estimated product in the distribution channel which is expected to exceed its expiration date. We retained substantially the same wholesale customers of, and the distribution channel that was used by, another pharmaceutical company that distributed FARESTON® for six years prior to our obtaining the rights to market FARESTON®in January 2005. We also obtained historical product return trend information that we continue to update with our own product return data. We estimate the amount of product in the distribution . . .