GPC Biotech AG (GPCB)

Liquidity and Capital Resources

Our cash, cash equivalents and marketable securities and short-term investments totaled €128.7 million, and our restricted cash totaled €2.3 million, at December 31, 2004. Over the last five years, we have financed our operations primarily through the sale of equity securities, cash payments (including licensing fees) from several collaboration partners, interest earned on investments, government grants, capital lease financings and long-term debt.

The following table summarizes our sources of funding over the last five years (in thousands of €):

Net cash used in operating activities was €37.8 million for the year ended December 31, 2004, primarily reflecting the net loss for this period of €39.9 million, adjusted for non-cash depreciation and amortization, non-cash compensation expense for stock options and convertible bonds and changes in accounts payable, other current and non-current assets, deferred revenue and other liabilities and accrued expenses. Net cash used in investing activities for the year ended December 31, 2004 amounted to €17.0 million, including purchases of property and equipment and licenses in the amount of €1.1 million and net purchases of marketable securities and short-term investments of €15.9 million. Net cash provided by financing activities was €79.7 million for the year ended December 31, 2004, mainly reflecting net proceeds of €78.0 million from the combined offering. Cash provided by financing activities also included €2.0 million from the exercise of stock options and convertible bonds and €0.9 million received from the sale of convertible bonds. Cash used in financing activities included €1.3 million for the repayment of long term debt and capital leases.

Capital resources derived from cash payments from collaboration partners has declined over the last four years. This decline is the result of not entering into significant new collaboration agreements in recent years and the completion of several collaboration agreements. This decline reflects our change in emphasis to drug development from technology and collaboration activities in recent years. We expect this trend to continue.

On February 1, 2005, we announced the initiation of an open-label Phase 1 clinical trial evaluating our monoclonal antibody product candidate, 1D09C3, in patients with relapsed or refractory B-cell lymphomas who have failed prior standard therapy. We expect that with the start of the Phase 1 clinical trial operating expenses will increase in 2005.

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On March 2, 2005, we purchased material assets of Axxima Pharmaceuticals AG, a Munich, Germany based kinase drug discovery firm. Axxima filed for insolvency in December 2004. These assets of Axxima were transferred to a newly formed company along with an additional net €8.7 million cash from new investors. We purchased this new company from the investors with approximately 1.3 million shares of GPC Biotech.

Net cash used in operating activities was €23.0 million and €23.5 million for the years ended December 31, 2003 and 2002, respectively. These amounts primarily reflect net losses of €26.8 million and €32.9 million for the years ended December 31, 2003 and 2002 , respectively, adjusted for non-cash depreciation and amortization, non-cash compensation expense for stock options and convertible bonds and changes in accounts payable, other current assets, deferred revenue and other liabilities and accrued expenses. In 2002, cash used in operating activities was significantly less than the net loss because of a €7.3 million non-cash charge related to an impairment of goodwill. Collaborations yielded additional cash resources of €4.2 million and €4.8 million in 2003 and 2002. Other major sources of cash are derived from the sale of FTE services, milestone and grant revenues. In 2003 and 2002, cash from the sale of FTE services was €7.8 million and €9.7 million, respectively. Cash from milestones reached during 2003 and 2002 was €4.4 million and €1.4 million, respectively. Grant revenues provided cash of €0.8 million and €1.1 million during the years ended December 31, 2003 and 2002, respectively.

Net cash provided by investing activities consisted of €18.7 million for the year ended December 31, 2003. Net cash used in investing activities amounted to €26.8 million for the year ended December 31, 2002. Purchases of property, equipment and licenses amounted to €1.7 million and €1.6 million for the years ended December 31, 2003 and 2002, respectively. Cash was primarily provided when our investments matured or when we sold investments to meet liquidity needs. We used cash in investing activities to fund purchases of our investments and, to a lesser extent, to fund purchases of property, equipment and licenses for operations.

Net cash provided by financing activities was €42,000 for the year ended December 31, 2003, reflecting the issuance of our ordinary bearer shares upon the exercise of vested stock options held by our employees. Net cash used in financing activities was €0.3 million for the year ended December 31, 2002. This amount mainly represented principal payments under capital lease obligations and long-term debt, partially offset by proceeds from the issuance of convertible bonds and from the issuance of our ordinary bearer shares upon exercise of vested stock options.