UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. 

For the Fiscal Year Ended December 31, 2010

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: 000-51895

POLYMEDIX, INC.

(Exact name of Registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o  Yes x No    

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o  Yes x No

Indicate by check whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the 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 requirement for the past 90 days. xYes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). oYes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or 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 x             Non-accelerated filer o             Smaller reporting company o

                 (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 Act). o  Yes x No 

The aggregate market value of the registrant’s Common Stock, $0.001 par value per share, held by non-affiliates of the registrant on June 30, 2010 was approximately $77,135,980 (based on the closing sales price of the registrant’s Common Stock on that date ($1.00)).

The number of shares of the issuer’s Common Stock outstanding as of March 7, 2011 was 80,999,610.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

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Note Regarding Forward-Looking Statements.

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our financial condition, operations, plans, objectives, goals, business strategies, future events, capital expenditures, future results, our competitive strengths, and the trends in our industry are forward-looking statements. The words “believe,” “may,” “could,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “appear,” “future,” “likely,” “probably,” “suggest,” “goal,” “potential” and similar expressions, as they relate to us, are intended to identify forward-looking statements.

Forward-looking statements reflect only our current expectations. In any forward-looking statement, where we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith as of the date of such statement and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished. Our actual results, performance or achievements could differ materially from those expressed in or inferred from the forward-looking statements due to a number of uncertainties, many of which are unforeseen, including:

Ø  our need for, and the availability of, substantial capital in the future to fund our operations and planned clinical trials;

Ø  the conditions in the capital markets and the biopharmaceutical industry that make raising capital or entering into strategic arrangements difficult and expensive;

Ø  the timing of our product development and evaluation;

Ø  the timing and magnitude of expenditures we may incur in connection with our ongoing research and development activities;

Ø  the results of our preclinical and clinical trials, including regulatory approvals necessary for advancement and continuation of our development programs;

Ø  the maintenance of our existing licenses with the University of Pennsylvania (Penn) and the University of Massachusetts (UMass);

Ø  the success, timing and financial consequences of our formation of new business relationships and alliances; and

Ø  the timing and volume of sales of products for which we may obtain marketing approval.

In addition, you should refer to the “Risk Factors” section of this report for a discussion of other factors that may cause our actual results to differ materially from those implied by our forward-looking statements. Because of these factors or others, the forward-looking statements in this report may not prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, if at all. Accordingly, you should not place undue reliance on these forward-looking statements. All subsequent written and oral forward looking statements attributable to us or the persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. We undertake no obligation to update any forward looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law or regulation.

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PART I

Item 1. Business.

In this annual report on Form 10-K, "PolyMedix," "we," "us" and "our" refer to PolyMedix, Inc. and its wholly owned subsidiary PolyMedix Pharmaceuticals, Inc. and "Common Stock" refers to PolyMedix’s Common Stock, par value $0.001 per share.

This Business section outlines both how we perceive the current status of our business initiatives as well as our plans to further develop our business and product portfolio.  We do not currently have the funding resources necessary to carry out all of our planned operating activities.  We believe that our current cash and investment balances will fund our ongoing Phase 2 studies for PMX-30063 and PMX-60056 and can fund our operations for at least the next twelve months.  We plan to seek additional funding in one or more equity or debt financings, among other sources.  However, if we are unable to secure adequate additional funding, we will delay, scale-back or eliminate certain of our future research, drug discovery or development activities or certain other aspects of our operations and our business until such time as we are successful in securing adequate additional funding. In the absence of adequate additional financing, we believe that we have the ability to scale our operations such that our current cash and investment balances can fund our operations for at least the next twelve months. 

SUMMARY:

We are a biotechnology company focused on developing small synthetic molecule compounds that mimic the activity of large natural protein molecules, for the treatment of infectious diseases and acute cardiovascular disorders.  Using our proprietary computational drug design technology, we have created novel defensin mimetic antibiotic compounds and heparin antagonist compounds (or “heptagonists”), and other drug compounds intended for human therapeutic use.  The following chart illustrates the current stage of development of our internally developed pipeline along with planned development timings for our two lead programs that are in clinical development:

Note: Other pipeline opportunities are primarily funded through government grants and contracts.

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CLINICAL PROGRAMS:

Defensin Mimetic Antibiotic: PMX-30063

Market Opportunity

Worldwide approximately 49 million patients are treated for infections annually, with more than 7 million patients hospitalized for bacterial infections.  According to DataMonitor, a provider of healthcare market analysis data, in 2008 the global and U.S. markets for systemic anti-bacterials were approximately $38.1 billion and $9.7 billion, respectively.  A 2007 Public Health Report issued by the Centers for Disease Control (CDC) estimates that in 2002 there were approximately 1.7 million healthcare acquired infections (HAI’s) in U.S. hospitals (adjusted to include federal facilities) which accounted for 99,000 deaths.  Direct expenditures for healthcare associated infections cost U.S. hospitals approximately $45 billion in 2007, according to a 2009 analysis done by the CDC.

The public health threat posed by the increasing spread of bacterial resistance to mainstay antibiotics, including antibiotics that until recently were thought of as treatments of last resort, continues to be a major worldwide concern. The World Health Organization (WHO) has identified antibiotic resistance as “one of the three greatest threats to human health.” A February 2008 report from the Association for Professionals in Infection Control and Epidemiology estimates that 70% of infections may now be resistant to antibiotics.  A recent analysis of antibiotic-resistant infection data conducted at Chicago Cook County Hospital suggested that the direct and indirect economic costs of antibiotic resistance to the U.S. health care system are in excess of $20 billion annually, more than $35 billion in societal costs. As drug‑resistance continues to spread, the need for potent novel antibiotic drugs increases.

There is a significant need for new antibiotics to treat serious drug-resistant Gram-positive infections, such as methicillin-resistant Staphylococcus aureus (MRSA).  A recent CDC-supported study published in the Journal of the American Medical Association estimated that invasive MRSA infects more than 94,000 people and kills nearly 19,000 people annually in the U.S. Invasive MRSA infections represent only one segment of the greater MRSA problem in the U.S. The market for MRSA antibiotics is growing at a compound annual growth rate of 18% with U.S. sales nearly doubling from $778 million in 2005 to $1.5 billion in 2009.

The portion of the antibiotic market that we initially intend to target is the North American acute‑care hospital market.  This market includes intravenous or subcutaneously infused products that are administered or prescribed in the hospital.  According to DataMonitor, the size of this market in 2006 was valued at $3.7 billion.

Host Defense Proteins

Our small molecule antibiotics mimic the activity of host defense proteins.  Host defense proteins are part of the innate immune system.  In the human body, host defense proteins represent a first line of defense against bacterial attack and primarily exist in the respiratory tract, the urogenital tract, the gastrointestinal track and the epidermal tissues under the skin, all locations where microbial pathogens first enter the human body.  Host defense proteins act rapidly against bacteria, unlike other parts of the immune system that take longer to work.

Host defense proteins use a simple, but effective method for killing bacteria by targeting bacterial membranes and creating an instability of the cellular contents and membrane, which results in the killing of the bacterial cell.

Antibiotics on the market today generally act on specific molecular targets in bacteria and many must enter the bacteria cell to work.  Bacterial cells can become resistant to antibiotics through:

Ø  genetic mutations that modify the molecular targets themselves, rendering them invulnerable to the antibiotic in question; or

Ø  metabolic responses that cause the cell to pump out foreign agents, preventing the antibiotics from accessing the molecular targets.

By contrast, host defense proteins physically disrupt the cell from the outside.  The mechanism of action of the host defense proteins makes it difficult for bacteria to develop resistance because of several reasons:

Ø  they do not have to enter the bacterial cell to work;

Ø  they act quickly, killing bacteria within minutes of exposure, thereby limiting the bacterial response time; and

Ø  in order to develop effective defenses, the bacteria would have to alter the structure of its cell membrane, which is a highly complex multi‑step response that would likely reduce the ability of the newly mutated bacteria to grow and survive in a natural environment due to changes in membrane transport of essential nutrients and wastes.

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It has been documented in many studies published by the American Society of Microbiology and others that susceptible bacteria do not readily develop resistance to host defense proteins under experimental conditions where resistance readily develops against conventional antibiotics.  Furthermore, bacteria remain sensitive to the host defense proteins despite hundreds of millions of years of evolution in which bacteria have been exposed to host defense proteins’ antimicrobial mechanism of action.

Another favorable attribute of host defense proteins is that they selectively target bacteria and not mammalian cells, by recognizing the differences in the composition of bacterial and mammalian cell membranes.  The outer surfaces of bacterial cell membranes are more negatively charged than mammalian cells.  Bacterial cell membranes also lack cholesterol, an essential component of all mammalian membranes.  Host defense proteins specifically target membranes that lack cholesterol and have a high degree of negative electrical charge.  Therefore, they selectively attack bacterial cell membranes while mitigating harm to mammalian cells.

We believe that the host defense proteins provide an attractive mechanistic approach for the development of a new type of antibiotic therapeutic drug due to their strong antimicrobial activity, unique mechanism of action for which bacterial resistance appears less likely to develop, and selective targeting of bacteria but not mammalian cells.  Attempts were made in the past by other companies to develop natural host defense proteins as novel antibiotics.  Those products lacked robust activity in models of systemic infection, and were studied for niche topical applications, likely because of their limited systemic availability.  None of them has been successfully commercialized to date because of difficulties relating to some of the inherent complexities associated with protein drugs: a lack of systemic bioavailability and stability.  For systemic applications, all protein drugs have a number of limitations, including often not being bioavailable with either injectable or oral administration, often expensive to produce, often unstable even with intravenous administration, and at risk of eliciting immunological reactions which can neutralize their activity.

Our Approach

We have developed PMX‑30063, our lead antibiotic, and other novel small molecule antibiotics that mimic the activity of host defense proteins.  We are developing these defensin mimetic antibiotics in a variety of forms to combat drug‑resistant bacterial infections.  Our current focus is developing PMX-30063 for the treatment of Acute Bacterial Skin and Skin Structure Infections (ABSSSI), caused by drug susceptible and drug resistant strains of Staph aureus bacteria.  PMX‑30063 and our other defensin mimetic antibiotics are completely synthetic, which make them easier and less expensive to produce than proteins.  Importantly, our small molecule compounds demonstrate activity in animal models of systemic infection, activity that was lacking in others’ past attempts to develop natural host defense proteins.  These defensin mimetic antibiotics may be developed in a variety of formulations, including injectable, tablet and topical, for a wide range of antibiotic applications.  The results of our preclinical experiments for PMX‑30063 and our other defensin mimetic antibiotics suggest several advantages compared to marketed antibiotics.  Such advantages include:

Ø  Targeted spectrum of activity, including against resistant bacterial strains.  Because they act on bacterial cell membranes, we believe the structure activity relationship of our antibiotics can be optimized for activity against Gram‑positive and Gram‑negative pathogens.  In our in vitro efficacy studies and animal models of systemic infections, our defensin mimetic antibiotics as a class demonstrated potent antibacterial activity on hundreds of common bacterial pathogens.  Our lead defensin mimetic antibiotic, PMX-30063, has been optimized for Gram-positive pathogens to support our initial clinical target of ABSSSI.

Ø  Lower likelihood for the development of drug‑resistance.  It is very difficult for bacteria to develop drug resistance to natural antimicrobial host defense proteins because these proteins act on bacterial membranes rather than on a single, mutable molecular target, such as an enzyme.  Because our defensin mimetic antibiotics are designed to have the same mechanism of action as host defense proteins, we anticipate they will have a similar lower likelihood of developing bacterial resistance compared to conventional antibiotics.  This reduced likelihood of bacterial resistance has been demonstrated in laboratory serial passage experimental studies.

Ø  Potentially faster acting than other antibiotics.  In time‑kill studies, our defensin mimetic antibiotics act quickly when bacteria are exposed to them.  We observed bactericidal activity in a matter of minutes after exposure to our defensin mimetic antibiotics.  In contrast, many currently marketed drugs can take hours or even several days to show effect.

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PMX-30063 Clinical Development

Our first product candidate is an intravenous (or “IV”) formulation initially intended for the treatment of ABSSSI, caused by drug susceptible and drug resistant strains of Staph aureus bacteria.  In the future, we also hope to expand indications to potentially include other infections and bacterial strains.

Clinical Studies to Date

In December 2008, we completed and announced positive results from our single dose escalation clinical study of healthy subjects receiving PMX-30063 at various dose levels (Phase 1A). This ascending single-dose intravenous pharmacokinetic and safety study met the study endpoints of defining both a limiting single dose and the plasma distribution/elimination kinetics. In this study, the dose was not limited by any measurable clinical or laboratory parameters. A subjective syndrome of paresthesias was identified, appearing only at the higher dosages and consisting of abnormal numbness and/or tingling. These effects were graded as mild to moderate by investigators or subjects, but their reproducibility and dose-proportionality allowed dose-escalation to be successfully concluded after achieving levels well in excess of that which we expect, based on other studies, to be the therapeutic range. The effects were temporary and resolved on their own. The same study provided detailed information on the time course of the drug during and after dosing. These pharmacokinetics appear favorable for therapeutic use of the drug. The half-life for elimination from the plasma was approximately 12 to 15 hours, allowing for flexibility in dosing to obtain optimal peak and trough drug levels.

In March 2010, we completed and announced positive results from our ascending multi-dose intravenous pharmacokinetic and safety study of healthy subjects receiving PMX-30063 at various dose levels (Phase 1B). The Phase 1B blinded, randomized, placebo-controlled ascending multiple-dose study was designed to find the limiting tolerable dosage for PMX-30063 when administered as five daily doses, and to define the resulting plasma distribution/elimination kinetics. In this study, the limiting effects of the dose were found to be the same subjective syndrome of paresthesias identified in the previously completed Phase 1A single-dose study, which appeared only at the higher dosages and consisted of abnormal numbness and/or tingling. In all cases the effects were temporary and resolved without treatment shortly after discontinuation of PMX-30063 administration. Transient changes in liver enzymes (ALT and AST) were also observed in some subjects at higher doses. In most cases these changes were less than twice the upper limit of normal, and in all cases resolved without treatment after completion of the study. These changes were not considered clinically significant by the study physicians, and were similar to those often seen with many other marketed drugs.

Antimicrobial assays were also performed with blood samples drawn from the study subjects. In these assays, blood samples were taken from the subjects after they had received a single dose of PMX-30063. Staphylococcus aureus bacteria was then added to these blood samples, to determine if, and at what concentrations, the PMX-30063 in the subjects blood would have antimicrobial activity. The bacteriostatic and bactericidal activity against MSSA (methicilin-sensitive Staphylococcus aureus) and MRSA (methicillin-resistant Staphylococcus aureus, or drug-resistant Staph) strains were achieved at doses between 0.1 mg/kg and 0.3  mg/kg, and largely correlated with those established in normal medium and in experimental animal studies (as seen in data presented by PolyMedix at the American Society of Microbiology ICAAC 2009 meeting). These data suggest that antimicrobial activity and bacteriostatic and bactericidal concentrations can be achieved in human subjects following multiple administrations of PMX-30063 at doses below the identified limiting dosage. Based upon the doses of PMX-30063 administered in the study, and blood levels of drug observed in subjects in this study, together with our pre-clinical studies, we believe that a beneficial therapy may exist.

In February 2011, we completed and announced positive results from a randomized, double-blind, placebo-controlled Phase 1 exposure-escalation study of twenty healthy male and female subjects receiving PMX-30063.  PMX-30063 met the study safety endpoints regarding high dosing beyond five days of administration, and the pharmacokinetic profiles in male subjects were very similar to those in female subjects.  Similar to results from two previously completed Phase 1 clinical studies with PMX-30063,  the most frequently reported side effects  included transient sensations of paraesthesia affecting the lips, face, and fingers.   These sensations did not worsen over the course of the study and resolved on their own without treatment shortly after discontinuation of PMX-30063 administration. There were no significant clinical neurosensory abnormalities noted.  One subject discontinued from the study due to paraesthesia. Several subjects were discontinued by the investigator after receiving between nine and thirteen days of dosing due to increased blood pressure and heart rate, for which there were no associated clinical signs or symptoms.  After nine days of dosing, there was one reportable adverse event of atrial fibrillation that was fully reversed within a few hours following dosing.  As seen in previous Phase 1 clinical studies, there were a few minor and transient increases in liver enzymes that were not considered clinically significant. All subjects demonstrated complete return to normal and reported no adverse effects by the time of the last follow up visit.  The doses of PMX-30063 administered in this study were identical to the highest dosing level being administered for five days  in our current Phase 2 efficacy study in Staph infections.

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Ongoing Clinical Studies

In September 2010, we initiated a Phase 2 clinical trial with PMX-30063.  This randomized, blinded, active controlled Phase 2 clinical trial is being conducted at multiple sites in Canada and Europe. The study objective is to evaluate the safety and efficacy of PMX-30063 as treatment for ABSSSI caused by Staphylococcus aureus. The trial will enroll up to 200 patients that have ABSSSI due to either MSSA or MRSA. Patients will be randomized to receive one of three dosing regimens of PMX-30063 or daptomycin active control, and will have an early treatment assessment at 48 and 72 hours for clinical and microbiologic response. Following the treatment assessment, patients will be re-evaluated at day 10 to 15 for test of cure and again for safety at four weeks.  Clinical studies conducted outside the United States have and are being conducted to United States standards are intended to support regulatory approval in the United States.

Heptagonist: PMX-60056

Unfractionated Heparin (or “UFH”) and Low Molecular Weight Heparin (or “LMWH”) are blood clot prevention drugs, which are commonly used in numerous post‑surgical applications as anti‑coagulants, as well as during cardiac surgery with extracorporeal bypass.  Overdoses of UFH or LMWH are dangerous due to potentially life‑threatening bleeding.  While widely used, anti-coagulation with UFH and LMWH carries the risk of adverse bleeding events, a certain percentage of which are life-threatening or clinically significant.  These bleeding events require medical intervention and cause significant direct costs.

Market Opportunity

Unfractionated Heparin (UFH)

Protamine is the only available reversing agent for UFH.  Protamine is used both as an antidote in the event of overdose, and more commonly in standard treatment as a reversing agent following coronary artery bypass grafts (CABG, or “bypass” procedures), in which standard practice involves administering UFH while the patient is on a heart‑lung bypass machine to prevent blood clots from forming in the machine.  However, protamine has many significant potential problems with its use, including:

Ø  difficult to predict efficacy, resulting in variable inter‑patient activity;

Ø  anticoagulant activity of protamine can actually increase and worsen the anticoagulant activity of UFH, and which requires complex dose‑titration and careful administration of often several doses;

Ø  allergic anaphylactic reactions in some patients due to the fact that protamine is a biological product derived from fish sperm;

Ø  inferior fibrokinetics, or clot formation, can result in leaky clots and in more serious cases rebound bleeding may occur; and

Ø  immune reactions with neutralizing antibodies formed after sensitization to protamine in patients who have previously received protamine can impact efficacy and result in severe reaction; some patients, such as diabetic patients receiving zinc insulin, or males who have undergone vasectomy, may have pre‑existing antibodies that could pre‑dispose them to sensitivity to protamine.

As a result, we believe there is a significant medical and market need for a safer UFH antagonist.  Worldwide, we estimate that approximately two million extracorporeal blood procedures, including cardiothoracic procedures, are performed that utilize heparin and may require UFH reversal.  According to IMS Health, six to eight million doses of protamine are used annually worldwide.  We believe our heptagonists have the potential to be a safer alternative to protamine.

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Low Molecular Weight Heparin (LMWH)

The LMWHs are often used for longer term prevention of blood clots (thromboprophylaxis), in indications such as deep vein thrombosis (DVT), in patients who have had heart attacks (post Myocardial Infarction, or MI), and in cancer patients.  All of these patient groups are at risk of developing potentially life‑threatening blood clots, and are given anti‑clotting drugs including LMWHs to prevent dangerous clot formation.  Based on a study by the Agency for Healthcare Research and Quality, a division of the Department of Health and Human Services, most hospitalized patients have at least one risk factor for deep vein thrombosis and should receive prophylaxis with UFH or LMWH. This includes a significant number of the 23 million people in the US who undergo surgery as well as medical patients.  According to IMS data, sales for LMWHs in the US and Canada were approximately $3 billion annually, corresponding to approximately 100 million individual doses of LMWH dispensed. In Europe, where LMWH is used more widely, the number of doses is estimated to be twice as high. Based on IMS sales data we estimate that more than 20 million patients receive LMWH annually. 

While having favorable risk/benefit characteristics, clinical studies have shown that there is a significant incidence of bleeding in patients who receive LMWHs.  Most of these studies generally have shown that 1%‑4% of patients experience serious, life‑threatening bleeding, and up to 20% may experience clinically significant bleeding.  Neither protamine nor any other drug is approved for reversal of LMWH.  In patients who experience bleeding problems while on LMWH, current care may involve hospitalization, blood transfusions, and surgery, which can be expensive and unreliable.

LMWHs are not currently used in acute surgical settings, such as cardiothoracic procedures, because of the lack of a reversing agent.  The long half‑life of LMWH products of up to 24 hours, while an advantage for longer‑term administration, can be a major disadvantage if a patient has a major bleeding episode or must be re‑operated on shortly after surgery.  If clotting time is prolonged due to systemic LMWH, re‑operation may not be possible.    The availability of a reversing agent for LMWHs could create an opportunity for these drugs to be used in cardiothoracic surgical procedures.  Thus, an approved LMWH reversing agent could have the potential to substantially increase the market and sales of LMWHs, thereby increasing the need and market for that same reversing agent.

Our Approach

UFH and LMWH are composed of sulfated polysaccharides, which provide an attractive target for the structure based design of novel molecules.  Based on a model for the three‑dimensional structure of these molecules, we have produced a series of compounds that bind very tightly to the critical pentasaccharide site found on both UFH and LMWH.  In clinical experiments, our compounds demonstrated efficacy in safely reversing the effect of both UFH and LMWH. 

Our objectives in this program are to develop a product that:

Ø  is as effective as protamine in reversing the anticoagulant effect of UFH;

Ø  is safer than protamine;

Ø  is easy to use;

Ø  has superior fibrokinetic activity (less deleterious impact on clot formation than protamine);

Ø  is less sensitizing than protamine; and

Ø  is effective in reversing the anticoagulant effect of LMWH.

We believe that a heptagonist with these attributes could be an attractive alternative to protamine, expand the heparin reversal market by introducing a reversing agent for LMWHs, provide a new treatment for patients receiving LMWHs and who experience bleeding complications and require reversal, and further expand the LMWH market by allowing physicians to more widely use LMWHs.

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PMX-60056 Clinical Development

Clinical Experiments to Date

In October 2009, we successfully completed a double-blind, placebo-controlled, crossover, proof-of-concept UFH reversal study (Phase 1B/2) of PMX-60056, which was conducted at a single site in the United States.   PMX-60056 met the study safety and efficacy endpoints in reversing the anticoagulant activity of UFH.  In all subjects receiving PMX-60056, there was a rapid and complete reversal of the anticoagulant action of UFH, as measured by activated clotting time (ACT) and activated partial thromboplastin time (aPTT). The UFH reversal appeared to occur at or before the end of the 10-minute infusion of PMX-60056, suggesting that the dose may have been in excess of requirements for reversal of the administered UFH dose. Furthermore, the reversal was permanent: there was no return of anticoagulation during the hours required for heparin’s effects to decline naturally.  PMX-60056 was well tolerated in this study, with no serious or reportable adverse events occurring. Subjects in the study experienced minimal side effects, which consisted of mild itching or warmth lasting only minutes, and brief reductions in blood pressure, which were transient and not clinically significant.  

In June 2010, we successfully completed a double-blind, placebo-controlled, crossover, proof-of-concept tinzaparin (a LMWH) reversal study (Phase 1B/2) of PMX-60056, which was conducted at a single site in the United States.    PMX-60056 met the study safety and efficacy endpoints in reversing the anticoagulant activity of tinzaparin.  PMX-60056, administered as a ten-minute infusion, reduced both anti-Xa activity (a critical clotting factor in the blood) and aPTT. After the first administration of PMX-60056, the tinzaparin continued to enter the subjects’ systems from the subcutaneous injection site, and as it did so, anticoagulation returned or continued. A second ten-minute infusion of PMX-60056 was administered three hours later, which showed similar results.  PMX-60056 was well tolerated in this study, with no serious or reportable adverse events occurring. Subjects in the study experienced minimal side effects, which consisted of mild itching or warmth lasting only minutes, and brief reductions in blood pressure, which were transient and not clinically significant when LMWH was present.

In August 2010, we successfully completed an open label, dose titration, UFH reversal study (Phase 1B/2) of PMX-60056, which was conducted at a single site in the United States.   PMX-60056 met the study safety and efficacy endpoints in both the reversal of surgical levels of UFH and in subsequent re-anticoagulation with UFH and re-reversal with PMX-60056.  PMX-60056 was well tolerated in this study, with no serious or reportable adverse events occurring. Subjects in the study experienced minimal side effects, which consisted of transient reductions in blood pressure, which were not clinically significant and were seen only at the end of some reversals when ACT was already nearing baseline after the last dose of PMX-60056.

Ongoing Clinical Studies

In February 2011, we initiated a Phase 2 clinical trial to assess the safety and efficacy of PMX-60056, in reversing UFH in patients undergoing Percutaneous Coronary Intervention (PCI) procedures.  This multi-center, open-label Phase 2 clinical study is intended to enroll up to 40 patients undergoing PCI in the United States. All patients will receive PMX-60056 by intravenous infusion, in a dose calculated to reduce the post-procedure ACT to less than 20 seconds above the baseline level. The primary endpoint of the study is to evaluate the safety and efficacy of PMX-60056 in reversing UFH in a surgical setting. Data collected from this study are intended to support further development of PMX-60056 in larger and more diverse patient populations.

In October 2007, we received a Small Business Innovation Research (SBIR) grant of $100,000 from the National Institute of Health (NIH) to support the development of biomimetic compounds, such as PMX-60056, as anti-coagulant antagonists. The research under this grant has been completed and, in June 2009, we received a Phase II SBIR grant in the amount of $923,080, to be disbursed over two years, to support the development of LMWH anticoagulant reversing agents.  As of December 31, 2010, we had approximately $132,000 still available for research under this grant.

PRECLINICAL PROGRAMS:

In addition to our clinical programs for PMX‑30063 and PMX‑60056, we have conducted preclinical studies for other product candidates that are described below.  These preclinical programs are either currently on hold or are being supported by grants or research contracts for the NIH or US Department of Defense.  Further, we may consider expanding or initiating other development activities if and when we are able to generate additional funding and resources.

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Defensin Mimetic Antibiotics

We also hope to conduct pre-clinical development of PMX-30063 and other defensin mimetic antibiotic compounds for topical inhaled and oral antibiotic applications.  We are presently investigating the development of defensin mimetics for the treatment of oral candidiasis, a fungal infection in the mouth of immune-compromised patients caused by the yeast, Candida albicans.  This work is being supported by a Phase 2 SBIR grant from the National Institute of Dental and Craniofacial Research (NIDCR) of the NIH, and is an extension of work initiated in a Phase 1 grant from the same Institute.  Other programs that are currently on hold until we are able to obtain and allocate sufficient resources include the development of an ophthalmic topical antibiotic for the treatment of eye infections, and the development of a non-absorbed oral antibiotic for the treatment of gastrointestinal infections such as Clostridium difficile. With sufficient resources, we plan to advance pre-clinical development and file additional Investigational New Drug applications (IND) for the ophthalmic topical and non-absorbed oral antibiotic indications in the future.

We are also evaluating our defensin mimetic antibiotic compounds for a number of other topical and local applications, including topical antibiotic use for skin structure infections, oral healthcare applications for treatment of periodontal disease, a type of gum disease, topical treatment for ear infections, topical treatment of fungal infections, topical treatment of acne, and a variety of non‑therapeutic applications in personal care and materials applications.

We are also exploring the potential use of our defensin-mimetic antibiotics for the treatment of other infectious diseases. In particular, recent pre-clinical studies by PolyMedix and our academic collaborators have shown activity of certain of our compounds for potential use against tuberculosis and malaria. We have obtained a fast track SBIR grant from the National Institute of Infectious and Allergic Diseases (NIAID) of the NIH for development of a defensin mimetic to treat malaria.  In addition, we have a NIH U01 grant for development of defensin mimetics to treat illnesses caused by foodborne pathogens and a Phase 2 grant from the US Army to develop defensin mimetics for treatment of bacterial infections associated with biofilm formation.

Medical Device, Industrial and Consumer Applications

We have conducted preliminary experiments which demonstrate that polymer derivatives of certain of our compounds, such as PMX-70004 and PMX‑50003, which we refer to as our PolyCides^®, may be used as effective antimicrobial agents as additives to materials, such as paints, plastics and textiles. 

For example, when our PolyCides are incorporated into the plastic of intravenous catheter tubing or sutures and then exposed to a high inoculum of bacteria, significant anti‑bacterial activity is observed compared to untreated plastics.

We do not currently plan to conduct advanced development of any medical device, industrial or consumer application of our PolyCides, but rather intend to focus on generating a limited core of basic enabling data to support our efforts to license these PolyCides to partners who will continue research and development efforts in developing products. 

In August 2010, we received a Phase 1 grant from the National Science Foundation for $150,000 in support of development of antimicrobial sutures formulated with PolyCides to combat MRSA and other pathogens associated with surgical site infections.  As of December 31, 2010, we had approximately $92,000 still available for research under this grant.

Biodefense

Over the past decade, improving our nation’s defense against bioterrorism has become a greater priority.  Antibiotic activity against anthrax and other biowarfare pathogens, with a mechanism by which resistance is unlikely to develop, has commercial, medical and national security value.  Preliminary data from our preclinical experiments indicate that our product candidates have potent activity against biowarfare agents that cause anthrax, tularemia and plague.

As a result of this preliminary data, we are pursuing grants and research contracts from government sources, such as the Department of Defense, the Defense Advanced Research Projects Agency and other military and security agencies to further test and advance our product candidates for indications important to national security.  To-date we have been awarded the following grants and contracts in support of biodefense applications:

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Ø In June 2009, we were awarded a $1.6 million contract with the Defense Threat Reduction Agency to develop new defensin mimetic antibiotic compounds to combat biowarfare pathogens.  As of December 31, 2010, we had approximately $270,000 still available for research under this contract.

Ø In July 2009, we, and our academic collaborators at the University of Massachusetts (or UMass), received a contract for $70,000 from the Office of Naval Research to develop antibacterial compounds against pathogens of military interest.  As of December 31, 2010, research under this contract has been completed.

Ø In July 2009, we, and our academic collaborators at UMass, received a grant for up to $6.6 million from the NIH to develop new compounds for biodefense and emerging food-borne infectious diseases.  As of December 31, 2010, we had approximately $6,100,000 still available for research under this grant.

Ø In August 2009, we and our academic collaborators at UMass, received a Phase 1 contract for $100,000 from the Army Research Office to develop compounds against drug-resistant bacterial biofilms.  As of December 31, 2010, research under this contract was completed.

Ø In October 2010, we were awarded a $750,000 Phase 2 contract from the Army Research Office (ARO) to continue our research on treating biofilm-associated infections.  As of December 31, 2010, we had approximately $702,000 still available for research under this grant.

Anti-Tuberculosis

Tuberculosis is a highly contagious disease that affects one-third of the world’s population today.  Approximately, 1.7 billion people are infected worldwide, including 15 million cases in the United States.  There are 8 million newly reported cases each year and 3.1 million people die from the disease annually. Tuberculosis is the leading cause of death of women, AIDs patients and the young in the world and there are more deaths from tuberculosis than any other single infectious disease.  Mycobacterium tuberculosis is the primary infectious agent for tuberculosis and drug resistance has become a paramount issue, accounting for over 50 million infections.  The drug-resistant forms of the disease are significantly more difficult to treat, leading to higher mortality rates and escalating costs of care.  PolyMedix compounds, including PMX-10070, have demonstrated encouraging in vitro specificity for tuberculosis bacteria versus mammalian cells.

Anti-Malaria Agents

Recent pre-clinical studies with PolyMedix’s defensin mimetic antibiotics show encouraging activity for the potential treatment of the malaria parasite, Plasmodium falciparum, the infectious agent for the most prevalent and deadly forms of malaria.  P. falciparum accounts for 80% of all human malarial infections and 90% of deaths from such infections.  More than 120 million clinical cases of malaria and between 1 to 1.5 million deaths occur worldwide every year.  Current therapies for malaria are plagued by rapid resistance, which has become endemic in certain regions of the world.  Several of our compounds, including PMX-70008 and PMX-30024, have demonstrated encouraging in vitro specificity for the parasite versus mammalian cells.

As a result of these preliminary data, we are pursuing grants and research contracts from government sources, such as the National Institutes of Health to further test and advance our product candidates.  In July 2010, we received a Fast Track Advanced Technology SBIR grant from the NIAID to support the development of defensin-mimetic antimicrobial compounds for the treatment of malaria.  The initial phase of this grant provides PolyMedix with $0.5 million over the first year, with the opportunity for an additional $0.5 million in the second year, to validate and pursue defensin-mimetic antimicrobial compounds for therapeutic development. The goal of the first phase of research is to generate proof-of-concept through in vitro and in vivo efficacy testing. Subject to satisfactory performance of the initial phase and availability of funds, the grant provides for funding of up to $1 million per year for each of an additional three years, which brings the potential value of the grant up to an aggregate of $4 million over the five-year period.  As of December 31, 2010, we had approximately $410,000 still available for research under the first year of this grant.

Antifungal Agents

Our compounds, such as PMX-10098 and PMX-70004, have demonstrated promising activity against fungus strains that often cause human infectious diseases.  In preclinical experiments, certain of our compounds have demonstrated effectiveness at inhibiting fungal growth and for certain strains of fungus, effectiveness was achieved at lower concentrations than that of fluconazole, a commonly used antifungal agent.  We intend to continue to investigate the potential of our compounds as novel treatments for human fungal infections.

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As a result of these preliminary data, we are pursuing grants and research contracts from government sources, such as the National Institutes of Health to further test and advance our product candidates.  In May 2008, we received a Phase 1 SBIR grant of $126,000 from the NDICR to support preliminary research for antifungal defensin mimetic applications.    A Phase 2 grant totaling $1,000,000 was awarded in October, 2010 from the same institute to continue our anti-fungal research for development of defensin mimetics to treat oral candidiasis. As of December 31, 2010, the Phase 1 grant was completed, and we had approximately $885,000 still available for use under the Phase 2 grant.

Angiogenesis Inhibitor

Our angiogenesis inhibitor compounds, such as PMX‑20005, have demonstrated promising activity in in vitro and animal models of inhibition of angiogenesis, the abnormal growth of blood vessels.  An angiogenesis inhibitor may be effective in treating age related macular degeneration (or AMD); a common form of blindness caused by excessive and abnormal growth of blood vessels in the back of the eye.  With adequate additional financing and resources, we hope to continue to investigate the potential of our compounds as novel treatments of AMD and other angiogenesis related diseases.

Our Strategy

Our primary goal is to discover and develop novel agents for the treatment of infectious diseases and patients with cardiovascular disorders.  To achieve this objective, we are implementing the following strategies:

Advance the Development of our Lead Product Candidates.  We believe our current financial resources provide us with sufficient funding to support the ongoing Phase 2 clinical trials for each PMX-30063 and PMX-60056.    Further studies for current and future potential indications will require additional financial resources.

Retain Rights to Market Hospital‑Based Products in North America.  We have exclusive commercial rights to all of our current programs and in addition have either exclusive ownership rights or options to obtain exclusive license rights to any new products that result from our academic relationships. Our objective is to generate maximum value from sales of our product candidates if regulatory approval is achieved.  To achieve this goal, we intend to build our own specialty sales force to market hospital‑based therapeutics, such as PMX‑30063 and PMX‑60056, in North America.  Additionally, we plan to collaborate with third parties to commercialize our products in primary care, international and other markets.

Pursue Near‑Term Revenue Opportunities through Out‑Licensing and Partnership Agreements.  We intend to out‑license selected product candidates from internal programs, such as our PolyCides, that are not part of our strategic focus.      Such collaborations could generate multiple sources of revenue, such as up‑front fees, research funding, milestone payments and royalties.

Utilize our Technology to Pursue Additional Drug Development Programs for Other Therapeutic Areas.  Using our computational drug design tools, we have already identified potential product candidates for other therapeutic areas.  If sufficient resources become available, we plan to pursue development in these areas through partnerships or on our own in order to expand our product pipeline.

Strengthen Collaborations with Existing Partners and Enter into Agreements with Potential New Partners.  We have entered into collaborations and agreements with leading academic institutions.  We are actively pursuing additional agreements that would provide for license fees, research funding and milestone payments and royalties to PolyMedix from research results and subsequent product development and commercialization. 

Research and Development

We incurred research and development expenses of $10,951,000, $7,374,000, and $7,401,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

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Proprietary Rights

University of Pennsylvania

In January 2003, we entered into a Patent License Agreement with the University of Pennsylvania, or Penn.  Under the terms of the agreement, as amended, we have been granted an exclusive, worldwide royalty‑bearing license to use, make and sell products utilizing seven of Penn’s issued patents or pending patent applications for the life of such patents.  These patents and applications cover our clinical and preclinical stage product candidates, as well as future product candidates utilizing the licensed patents and applications.  The licensed patents and applications include:

Ø  three issued U.S. patents and three pending U.S. patent applications covering the composition of matter on antimicrobial compounds, including small molecules, oligomers and polymers.  The first issued patent expires in 2017, the second issued patent expires in 2022, and the third issued patent expires in 2023. The other patents, if issued, will expire at varying times from 2022 to 2025.  There are corresponding foreign applications to one of the issued U.S. patents and to each of the three pending U.S. patent applications.

Ø  one U.S. patent application and two corresponding foreign patent applications covering polycationic compounds and their use for treating cancer.  The patent, if issued, will expire in 2026.

Penn may terminate the licenses if:

Ø  we are more than 60 days late in paying to Penn royalties, expenses, or any other undisputed amounts due under the agreement and we do not pay such amounts within 30 days’ written notice of such delinquency;

Ø  we become insolvent, enter into bankruptcy or a similar proceeding or call a meeting of our creditors in order to arrange adjustment of our debts; or

Ø  we otherwise materially breach the agreement.

If this license agreement is properly terminated by Penn, we may not be able to execute our strategy to develop and commercialize our IV antibiotic, PMX-30063, our heptagonist, PMX-60056, our oral antibiotic product candidates, our PolyCides for biomaterials applications (PolyCides®), or future product candidates utilizing the licensed patents.

We also entered into a Software License Agreement with Penn in May 2003.  Under the terms of the agreement, Penn granted us a non‑exclusive, royalty‑free license to use three software programs and an exclusive, royalty‑free license to three patent applications relating to such software programs. The software programs and patents covered by the agreement include a suite of proprietary computational algorithms that we use in the development, refinement and testing of our product candidates.  The licenses expire contemporaneously with our Patent License Agreement with Penn.  The patents relating to the software licenses, if issued, will expire at varying times in 2023 and 2024.  Penn may terminate the agreement if:

Ø  we are more than 60 days late in paying to Penn any undisputed amounts due under the agreement and we do not pay such amounts within 30 days’ written notice of such delinquency;

Ø  we become insolvent, enter into bankruptcy or a similar proceeding or call a meeting of our creditors in order to arrange adjustment of our debts; or

Ø  we otherwise materially breach the agreement.

If this license agreement is properly terminated by Penn, our ability to advance our current product candidates or develop new product candidates may be adversely affected.

We also retain as a paid consultant Dr. William DeGrado, a Professor of Biochemistry and Biophysics at Penn, who provides these consulting services on our premises.  Any inventions made under this arrangement are intended to be covered by our existing intellectual property, our existing Patent License Agreement with Penn, or a new license agreement with Penn containing substantially the same terms. Dr. DeGrado’s current consulting services for us focuses on further development of our antimicrobial and heptagonist applications, and other general matters of pharmaceutical research and development relating to our programs.  For these services, we pay Dr. DeGrado a consulting fee of $5,000 per month.  In addition, we have granted stock options to Dr. DeGrado.  Dr. DeGrado also serves as Chairman of our Scientific Advisory Board.  Either we or Dr. DeGrado may terminate his consulting arrangement at any time. 

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University of Massachusetts

In January 2004, we entered into a Sponsored Research Agreement with the University of Massachusetts, or UMass.  Under the terms of this agreement, as amended, we have agreed to sponsor certain research of Dr. Gregory Tew, an Assistant Professor in the Polymer Science and Engineering Department at UMass, through March 2009, and have the exclusive option to license any intellectual property generated by such research.    We may exercise this option by issuing 7,500 shares of our Common Stock to UMass for each $100,000 of research conducted by Dr. Tew.  We are in the process of negotiating an extension to the term of this Sponsored Research Agreement.  During 2007, we issued 12,500 shares to UMass in connection with this agreement.  Dr. Tew’s research focuses on methods to add our antibiotic agents to biomaterials, testing the physical properties of our antibiotic agents and safety evaluation of our antimicrobial agents.  The agreement will terminate if Dr. Tew leaves UMass or ceases work in the antimicrobial field of research.  In addition, UMass may terminate the agreement including any licenses granted thereunder if we materially breach the agreement, including by nonpayment of amounts due under the agreement.  If the Sponsored Research Agreement or any license thereunder is properly terminated by UMass, our ability to develop new product candidates may be adversely affected.

In January 2005, we entered into an Exclusive License Agreement with UMass, pursuant to which UMass granted us an exclusive, worldwide license to use, make and sell products under one U.S. patent application and seven corresponding foreign patent applications covering polynorborene co‑polymers and methods of use for the life of such patents.  The patents, if issued, will expire in 2025.  UMass may terminate the license agreement if we materially breach the agreement, including by nonpayment of amounts due under the agreement or in the case of a change in our ownership or control.  If the license agreement is properly terminated by UMass, we may not be able to execute our strategy to develop and commercialize our PolyCides for biomaterials applications or to develop and commercialize future product candidates utilizing the licensed patents.

We also retain as a paid consultant Dr. Gregory Tew, Assistant Professor in the Polymer Science and Engineering Department at UMass, who provides these consulting services for biomaterials applications for our antimicrobial agents.  Any inventions made under this arrangement are intended to be covered by our existing intellectual property, our existing Exclusive License Agreement with UMass, or a new license agreement with UMass containing substantially the same terms. For these services, we pay Dr. Tew a consulting fee of $2,500 per month.  In addition, we have granted stock options to Dr. Tew.  Dr. Tew also serves on our Scientific Advisory Board.  Either we or Dr. Tew may terminate his consulting arrangement at any time. 

Our Technology

We initiate the design of our product candidates using our proprietary computational drug design technology that is licensed from Penn.  There are several computational methods used to assist the drug design process, which includes the ability to:

Ø  model molecular interactions in the presence of solvent, such as an aqueous environment, rather than in a vacuum, which more closely resembles the real‑life characteristics of how molecules interact with each other;

Ø  simulate molecular interactions for hundreds of microseconds which are time frames much longer than possible with previous molecular dynamics technologies; and

Ø  design compounds which target the bacterial cell membrane, instead of a biochemical cell target.

Our innovative and proprietary de novo drug design approach starts with protein targets with well‑understood physical structures and biological activity, and designs small molecule compounds that mimic or regulate the activity of these targets.  This biomimetic approach of regulating biological activities by mimicking nature itself with synthetic small molecule compounds allows us to rationally design product candidates that we believe greatly improve the efficiency of new drug discovery.

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Intellectual Property

We rely on a combination of patents and trade secrets, as well as confidentiality and non‑use agreements to protect our intellectual property.  Our patent strategy is designed to facilitate commercialization of our current and future product candidates; and create barriers to entry.  Our intellectual property portfolio currently consists of three provisional applications, two patent applications (U.S. and foreign) owned by us, two issued U.S. patents we exclusively license from Penn and eight U.S. patent applications we exclusively license from Penn and/or UMass (as well as foreign counterparts thereof).  Our patent applications and the ten issued patents and pending patent applications we exclusively license from Penn and/or UMass include:

Ø  seven U.S. patent applications that have been filed (as well as foreign counterparts thereof) covering the composition of matter on 11 classes of antimicrobial compounds, including small molecules, oligomers and polymers.  Two U.S. patents have been granted on two of these applications;

Ø  one patent application covering the use of claimed oligomers for treating ophthalmic and otic infections;

Ø  one patent application covering the use of claimed oligomers for treating mycobacterium

Ø  one patent application covering the use of claimed oligomers for treating malarial infections

Ø  one patent application covering synthetic mimetics of host defense proteins and their use 

Ø  one patent application covering the combination of claimed compounds and polymers with sesquiterpenoid enhancing agents;

Ø  one patent application covering novel angiogenesis inhibitors with a wide range of therapeutic uses;

Ø  one patent application covering the use of claimed oligomers for treating cancer;

Ø  one patent application covering processes for preparing a polymeric compound;

Ø  two patent applications covering anti-heparin compounds;

Ø  one patent application covering methods of immune modulation;

Ø  one patent application covering facially amphiphilic oligomers and uses thereof; and

Ø  three patent applications covering our proprietary, computational algorithms and models, such as the coarse grain model and a new force field.  These patent applications do not disclose the specific computer code, which either will be copyrighted or kept as a proprietary trade secret.  One U.S. patent has been granted on one of these applications.

We expect to continue to expand our intellectual property portfolio with additional filings of both composition of matter and method of use patent applications.  A number of new patent applications are currently in process.

We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, employees and consultants.  Our employees and consultants also sign agreements requiring that they assign to us their interests in patents and other intellectual property arising from their work for us.  All employees sign an agreement not to engage in any conflicting employment or activity during their employment with us and not to disclose or misuse confidential information.

In addition, we have received trademark protection for “PolyMedix^®” and “PolyCide^®.”

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COMPETITION:

Defensin Mimetic Antibiotic Competition

The pharmaceutical industry is highly competitive.  We face significant competition from pharmaceutical companies and biotechnology companies that are researching and selling products designed to treat bacterial infections.  Many major pharmaceutical companies, such as GlaxoSmithKline, Pfizer, Bayer, Merck, Novartis, Johnson & Johnson, and Sanofi Aventis have already established significant positions in the antibiotic market.  Additionally, many mid-sized and smaller companies, such as Astellas Pharma, Forest Laboratories, Cubist Pharmaceuticals, Basilea Pharmaceutica, Theravance, The Medicines Company, Trius Therapeutics, NovaBay Pharmaceuticals, Inc., Paratek, and Inhibitex have either marketed antibiotics and/or are attempting to enter this market by developing novel and more potent antibiotics that are intended to be effective against drug‑resistant bacterial strains. 

These companies, as well as other potential entrants into the antibiotic market, have longer operating histories, larger customer or user bases, greater brand recognition and significantly greater financial, marketing and other resources than we do.  Many of these current or potential competitors can devote substantially greater resources to the development and promotion of their products than we can.

Additionally, there has been consolidation within the pharmaceutical industry and larger, well‑established and well‑financed entities may continue to acquire, invest in or form joint ventures to gain access to additional technology or products.  Any of these trends would increase the competition we face and could adversely affect our business and operating results.

Heptagonist Competition

There are currently no products available in the marketplace or approved as an antidote for and antagonist to LWMH, while protamine is the only available antidote for and antagonist to UFH and, as such, protamine currently dominates this market.  Because of protamine’s potentially problematic side effect profile, we believe that our heptagonist products may penetrate into the UFH antagonist market.

Government Regulation

Government authorities in the U.S., at the federal, state, and local level, and foreign countries extensively regulate, among other things, the following areas relating to our products candidates:

Ø  research and development;

Ø  testing, manufacture, labeling and distribution;

Ø  advertising, promotion, sampling and marketing; and

Ø  import and export.

All of our product candidates will require regulatory approvals by government agencies prior to commercialization, but none of our product candidates has received these approvals.  In particular, human therapeutic products are subject to rigorous preclinical and clinical trials to demonstrate safety and efficacy and other approval procedures of the FDA and similar regulatory authorities in foreign countries.  Various federal, state, local, and foreign statutes and regulations also govern testing, manufacturing, labeling, distribution, storage and record keeping related to such products and their promotion and marketing.  The process of obtaining these approvals and the compliance with federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.  In addition, the current regulatory and political environment at the FDA could lead to increased testing and data requirements that could impact regulatory timelines and costs.

U.S. Government Regulation

In the U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act and implementing regulations.  If we fail to comply with the applicable requirements at any time during the product development process, approval process, or after approval, we may become subject to administrative or judicial sanctions.  These sanctions could include:

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Ø  refusal to approve pending applications;

Ø  withdrawals of approvals;

Ø  clinical holds;

Ø  warning letters;

Ø  product recalls and product seizures; and

Ø  total or partial suspension of our operations, injunctions, fines, civil penalties or criminal prosecution.

Any agency enforcement action could have a material adverse effect on us.

Currently there is a substantial amount of congressional and administration review of the FDA and the regulatory approval process for drug candidates in the U.S.  As a result, there may be significant changes made to the regulatory approval process in the U.S.

The steps required before a drug may be marketed in the U.S. include:

Ø  preclinical laboratory tests, animal studies and formulation studies;

Ø  submission to the FDA of an IND, which must become effective before human clinical trials may begin;