CASI Pharmaceuticals, Inc. - FORM 10-Q

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EX-32.2 - EX-32.2 - CASI Pharmaceuticals, Inc.	v239737_ex32-2.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

¨ 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 0-20713

ENTREMED, INC.

(Exact name of registrant as specified in its charter)

Delaware	58-1959440
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

9640 Medical Center Drive

Rockville, Maryland

(Address of principal executive offices)

20850

(Zip code)

(240) 864-2600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 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 requirements for the past 90 days.

YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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).

YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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 ¨

Accelerated filer ¨

Non-accelerated filer ¨

Smaller reporting company þ

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ¨ NO x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most recent practicable date.

Class		Outstanding at November 8, 2011
Common Stock $.01 Par Value		12,237,644

ENTREMED, INC.

Table of Contents

		PAGE

PART I. FINANCIAL INFORMATION		4

Item 1 — Consolidated Financial Statements		4

Consolidated Balance Sheets as of September 30, 2011 (unaudited) and December 31, 2010		4

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2011 and 2010 (unaudited)		5

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 (unaudited)		6

Notes to Consolidated Financial Statements (unaudited)		7

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations		13

Item 3 — Quantitative and Qualitative Disclosures About Market Risk		23

Item 4 — Controls and Procedures		23

Part II. OTHER INFORMATION		25

Item 1 — Legal Proceedings		25

Item 1A – Risk Factors		25

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds		26

Item 3 — Defaults upon Senior Securities		26

Item 4 — Removed and Reserved		26

Item 5 — Other Information		26

Item 6 — Exhibits		26

SIGNATURES		27

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements also may be included in other statements that we make. All statements that are not descriptions of historical facts are forward-looking statements. These statements can generally be identified by the use of forward-looking terminology such as “believes,” “expects,” “intends,” “may,” “will,” “should,” or “anticipates” or similar terminology. These forward-looking statements include, among others, statements regarding the timing of our clinical trials, our cash position and future expenses, and our future revenues.

Our forward-looking statements are based on information available to us today, and we will not update these statements.

Actual results could differ materially from those currently anticipated due to a number of factors, including: the risk that we may be unable to continue as a going concern as a result of our inability to raise sufficient capital for our operational needs; our reliance on a single product candidate, ENMD-2076 and the risk that we may not be able to license it to a third party; the volatility of our common stock; our history of losses and expectation of incurring continued losses; risks relating to the need for additional capital, including the uncertainty of securing additional funding on favorable terms and the risk that we will not be able to drawdown the full amount of funding available under our standby equity distribution agreement; the need for additional funds to conduct any additional clinical trials, our dependence on royalty sharing agreement based on sales of a product, Thalomid®, that we do not control; declines in actual sales of Thalomid® resulting in materially reduced royalty payments; risks associated with our product candidates; results in preclinical models that are not necessarily indicative of clinical results; risks relating to the commercialization, if any, of our proposed products (such as marketing, safety, regulatory, patent, product liability, supply and other risks); and our ability to compete with larger, better financed biotechnology companies that may develop new approaches to the treatment of our targeted diseases or develop product candidates more advanced than ENMD-2076. Such factors, among others, could have a material adverse effect upon our business, results of operations and financial condition. We caution readers not to place undue reliance on any forward-looking statements, which only speak as of the date made. Additional information about the factors and risks that could affect our business, financial condition and results of operations, are contained in our filings with the U.S. Securities and Exchange Commission (“SEC”), which are available at www.sec.gov.

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

EntreMed, Inc.

Consolidated Balance Sheets

(Unaudited)

	September 30, 2011			December 31, 2010
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,986,165		$	4,885,972
Short-term investments		-			25,816
Accounts receivable, net of allowance for doubtful accounts of $26,073 and $72,145 at September 30, 2011 and December 31, 2010, respectively		-			2,750,447
Prepaid expenses and other		224,169			265,683
Total current assets		2,210,334			7,927,918

Property and equipment, net		28,822			104,729
Other assets		4,584			4,584
Total assets	$	2,243,740		$	8,037,231

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	491,939		$	1,351,004
Accrued liabilities		268,355			595,341
Current portion of loan payable		-			757,471
Total current liabilities		760,294			2,703,816

Commitments and contingencies

Stockholders' equity :		-			-
Convertible preferred stock, $1.00 par value;
5,000,000 shares authorized and 3,350,000 shares issued and outstanding at September 30, 2011 and December 31, 2010 (liquidation value - $33,500,000 at September 30, 2011 and December 31, 2010)		3,350,000			3,350,000
Common stock, $.01 par value:
170,000,000 shares authorized at September 30, 2011 and December 31, 2010: 12,237,644 and 11,517,566 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively		122,376			115,176

Additional paid-in capital		385,835,858			384,130,011
Treasury stock, at cost: 79,545 shares held at September 30, 2011 and December 31, 2010		(8,034,244	)		(8,034,244	)

Accumulated deficit		(379,790,544	)		(374,227,528	)
Total stockholders' equity		1,483,446			5,333,415
Total liabilities and stockholders' equity	$	2,243,740		$	8,037,231

See accompanying notes.

EntreMed, Inc.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2011			September 30, 2010			September 30, 2011			September 30, 2010
Revenues:
Royalties	$	-		$	-		$	8,852		$	-
Other		-			-			-			-
	$	-		$	-		$	8,852		$	-

Costs and expenses:
Research and development		703,456			1,291,721			3,051,437			3,146,802
General and administrative		556,601			691,623			2,529,604			2,513,527
Acquired In-Process R&D		-			-			-			3,000,000
		1,260,057			1,983,344			5,581,041			8,660,329

Interest expense		-			(106,784	)		-			(496,482	)
Other income (expense)		(48,320	)		(5,183	)		9,173			(9,230	)

Net Loss		(1,308,377	)		(2,095,311	)		(5,563,016	)		(9,166,041	)

Dividends on Series A convertible preferred stock		(251,250	)		(251,250	)		(753,750	)		(753,750	)

Net loss attributable to common shareholders	$	(1,559,627	)	$	(2,346,561	)	$	(6,316,766	)	$	(9,919,791	)

Net loss per share (basic and diluted)	$	(0.13	)	$	(0.24	)	$	(0.54	)	$	(1.09	)
Weighted average number of common shares outstanding (basic and diluted)		12,004,435			9,837,665			11,654,078			9,098,380

See accompanying notes.

EntreMed, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	NINE MONTHS ENDED SEPTEMBER 30,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,563,016	)	$	(9,166,041	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		33,587			55,449
Write-off of in-process R&D		-			3,000,000
Stock-based compensation expense		565,948			250,311
Net gain on disposal of assets		(8,180	)		-
Realized gain on sale of short-term investment		(993	)		-
Non-cash interest		-			45,095
Investment impairment loss		-			9,230
Changes in operating assets and liabilities:
Accounts receivable		2,750,447			3,286,858
Prepaid expenses and other		41,515			(93,468	)
Accounts payable		(859,065	)		(618,105	)
Accrued liabilities		(326,986	)		(462,005	)
Net cash used in operating activities		(3,366,743	)		(3,692,676	)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets		56,500			-
Proceeds from sale of short-term investment		26,809			-
Purchases of furniture and equipment		(6,001	)		(3,595	)
Net cash provided (used in) by investing activities		77,308			(3,595	)

CASH FLOWS FROM FINANCING ACTIVITIES
Stock issuance costs		(164,964	)		(991,404	)
Repayment of loan		(757,471	)		(6,330,709	)
Net proceeds from sale of common stock or exercise of options and warrants		1,312,063			13,094,064
Net cash provided by financing activities		389,628			5,771,951

Net (decrease) increase in cash and cash equivalents		(2,899,807	)		2,075,680
Cash and cash equivalents at beginning of period		4,885,972			6,312,182
Cash and cash equivalents at end of period	$	1,986,165		$	8,387,862

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	7,145		$	451,378

Non-cash investing activity:
Stock issued in connection with milestone payment related to acquisition of Miikana	$	-		$	3,000,000

See accompanying notes.

ENTREMED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011 (unaudited)

1.	Basis of Presentation

The accompanying consolidated financial statements include the accounts of EntreMed, Inc. (the Company or EntreMed) and its subsidiary, Miikana Therapeutics, Inc. (Miikana). All inter-company balances and transactions have been eliminated in consolidation. The Company refers to EntreMed and its consolidated subsidiary.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, such consolidated financial statements do not include all of the information and disclosures required by U. S. generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. For further information, refer to our audited consolidated financial statements and footnotes thereto included in our Form 10-K for the year ended December 31, 2010.

Material subsequent events have been considered for disclosure and recognition through the filing date of these consolidated financial statements.

Liquidity Risks and Management’s Plans

The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As of September 30, 2011, the Company has operating and liquidity concerns. Since inception, the Company has incurred significant losses from operations and has incurred an accumulated deficit of $379.8 million. The Company expects to continue to incur expenses, resulting in operating losses, for the foreseeable future due to, among other factors, its continuing clinical activities and operations. During the nine-months ended September 30, 2011, the Company raised an aggregate of $1.1 million in connection with sales made to a purchaser under a Standby Equity Distribution Agreement (the “SEDA”) (see Note 4 in the notes to the financial statements included in this Quarterly Report on Form 10-Q). Assuming expenses are consistent with the trends of the previous quarter, the Company expects its current available cash and cash equivalents will be sufficient to meet its cash requirements into the second quarter of fiscal 2012. As part of its cash preservation efforts, the Company will continue to look for ways to reduce operating expenses in any nonessential areas. To improve the Company’s cash position, the Company will continue to evaluate opportunities to raise funds from the capital markets and will continue to pursue development partnerships for ENMD-2076. If funding is not available to the Company, or available on acceptable terms, by the second quarter of 2012, the Company will be required to delay or stop further clinical activity on its ENMD-2076 program.

The Company’s ability to continue as a going concern is dependent on its success at raising additional capital sufficient to meet its obligations on a timely basis, the ongoing receipt of royalty payments and its ability to ultimately attain profitability. As the amount of royalty payments to be received cannot be reasonably estimated, the Company will likely be required to raise additional capital sufficient to enable the Company to continue its operations through the next 12 months. If additional funds are raised by issuing equity securities, dilution to existing shareholders may result. There can be no assurance that adequate additional financing will be available to the Company on terms that it deems acceptable, if at all, or that the Company will be able to receive the maximum gross funds available under the SEDA. In the event the Company is unable to successfully raise additional capital, it is unlikely that the Company will have sufficient cash flows and liquidity to finance its business operations and ENMD-2076 development program, as currently conducted, by the second quarter of fiscal 2012. Accordingly, in the event new financing is not obtained, the Company will likely further reduce general and administrative expenses and delay, scale back, or interrupt the clinical development of ENMD-2076, until it is able to obtain sufficient financing to do so.

These factors could significantly limit the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

2.	Short-Term Investments

Short-term investments at December 31, 2010 consisted of equity securities. The Company classified these investments as available for sale. Such securities were carried at fair market value. The cost of securities sold was calculated using the specific identification method. Realized gains and losses and declines in value judged to be other than temporary on securities available for sale, if any, are included in operations. The Company sold all of its available-for-sale securities in June 2011 resulting in proceeds of $26,809 and a net realized gain for the nine months ended September 30, 2011 of $993. As a result of a decline in value that was considered to be other than temporary, realized losses of $ 5,183 and $9,230 were recorded for the three and nine months ended September 30, 2010, respectively.

The following is a summary of available-for-sale securities at December 31, 2010:

	Available-for-Sale Securities
	Amortized		Gross Unrealized		Gross Realized			Estimated Fair Value (Net Carrying
	Cost		Gains		Losses			Amount)
Equity Securities	$	125,000	$	-	$	(99,184	)	$	25,816

Total	$	125,000	$	-	$	(99,184	)	$	25,816

3.	Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (“the exit price”) in an orderly transaction between market participants at the measurement date. The authoritative guidance outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. In determining fair value, EntreMed primarily uses prices and other relevant information generated by market transactions involving identical or comparable assets (“market approach”). The Company has determined that the fair value measurements are in accordance with the guidance.

The guidance established a three-level hierarchy for fair value measurements that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity (“observable inputs”) and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (“unobservable inputs”). EntreMed currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.

There have been no transfers of assets or liabilities between the fair value measurement classifications.

The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy, defined as follows:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

Level 2 – Inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted pries that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 – Unobservable inputs that reflect our own assumptions, based on the best information available, including our own data.

In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value as of September 30, 2011 and December 31, 2010:

			Fair Value Measurements at September 30, 2011
	Total Carrying Value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	September 30, 2011		(Level 1)		(Level 2)		(Level 3)
Cash equivalents	$	105,868	$	105,868	$	—	$	—

			Fair Value Measurements at December 31, 2010
	Total Carrying Value at		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	December 31, 2010		(Level 1)		(Level 2)		(Level 3)
Cash equivalents	$	1,105,868	$	105,868	$	—	$	—
Available for sale securities*		25,816		25,816		—		—

* Realized losses related to available for sale securities are included in operations, as disclosed in Footnote 2.

The Company’s Level 1 assets include money market instruments and equity securities with quoted prices in active markets.

4.	Stockholders’ Equity

On June 28, 2011, the Company entered into the SEDA with YA Global Master SPV Ltd. (“YA Global”), a fund managed by Yorkville Advisors, LLC (“Yorkville”). Under the SEDA, the Company has the option, at its sole discretion, to sell, from time to time, up to $7.5 million of common stock to YA Global. Concurrent with the signing of the SEDA, the Company agreed to sell shares to YA Global and received gross proceeds of $1.1 million on June 29, 2011. The number of shares for the initial drawdown of $1.1 million was determined in accordance with the SEDA and settled in shares in equal amounts over the five weeks ending August 5, 2011. The total number of shares issued to YA Global related to the initial drawdown of $1.1 million, net of issuance costs of $155,000, was 600,412 shares. No further sales were made under the SEDA subsequent to June 29, 2011.

There can be no assurance that the Company will draw down all or any portion of the remaining $6.4 million available under the SEDA. Future drawdowns are subject to the limitations set forth in the SEDA, and the amount of future drawdowns, if any, may be limited by the future trading volume of our common stock or by SEC or Nasdaq requirements.

Under the terms and conditions of the SEDA, the Company has the right, but not the obligation, to sell, and YA Global is obligated to purchase, up to $7.5 million of common stock in tranches, at the Company’s sole discretion, over the course of 36 months. The pricing of the shares for the initial drawdown and any future drawdowns is to be based on 97% of the five-day trailing volume weighted average price preceding the sale of any tranche of stock.

In connection with the execution of the SEDA, the Company paid Yorkville a one-time fee of $26,000 and issued YA Global 39,741 shares of common stock as a commitment fee on June 29, 2011. The SEDA permits the Company to terminate the agreement at any time, subject to the advance notice provision, and to pursue any other financing alternatives available to the Company.

On September 7, 2010, the Company consummated the issuance and sale of 1,886,662 shares of its common stock, par value $0.01 per share, and warrants to purchase up to an aggregate of 377,327 shares of common stock, to a group of investors for an aggregate purchase price of $5,094,000 or $2.70 per share. The offering was made pursuant to a securities purchase agreement effective as of September 7, 2010 between the Company and such investors. The warrants shall be exercisable on or after March 9, 2011 and are exercisable until September 9, 2013 at an exercise price of $2.825 per share. As of September 30, 2011, warrants for the purchase of 66,665 shares of Company common stock have been exercised and the Company received proceeds of $188,329 upon the exercise of such warrants.

Concurrent with the issuance and sale of the common stock and warrants, the Company entered into a Rights Agreement with Selected Value Therapeutics I, LLC (“SVT”) pursuant to which SVT has an option to exercise certain license, development and commercialization rights for ENMD-2076 in China and certain of its territories. In June 2011, SVT exercised its option. The parties are in negotiation of the license agreement, in accordance with the terms and conditions set forth in the Rights Agreement. Under the terms of the agreement, the Company is entitled to certain development milestone payments, as well as royalties on future product sales within the geographic market. SVT will be responsible for all clinical development and regulatory costs related to regulatory approval in the China territory. EntreMed retains development and commercialization rights to ENMD-2076 in the rest of the world.

5.	Share-Based Compensation

The Company has adopted incentive and nonqualified stock option plans for executive, scientific and administrative personnel of the Company as well as outside directors and consultants. In June 2011, the Company’s shareholders approved the 2011 Long-Term Incentive Plan, of which 835,341 shares of common stock will be available for grants and awards. This number includes 135,341 shares available under the Company’s 2001 Long-Term Incentive Plan which expired in June 2011. All of the 835,341 shares remain available for grant under the Company’s 2011 Long-Term Incentive Plan as of September 30, 2011. There are 708,880 shares issuable under options previously granted under the plans and currently outstanding, with exercise prices ranging from $1.76 to $522.50. Options granted under the plans vest over periods varying from immediately to three years, are not transferable and generally expire ten years from the date of grant.

The Company records compensation expense associated with stock options and other equity-based compensation in accordance with provisions of authoritative guidance. Compensation costs are recognized based on a straight-line method over the requisite service period, which is generally the option vesting term of three years.

The Company’s net loss for the nine months ended September 30, 2011 and 2010 includes compensation expense of $565,948 and $250,311, respectively, related to the Company’s share-based compensation awards. The compensation expense related to the Company’s share-based compensation arrangements is recorded as components of general and administrative expense and research and development expense, as follows:

	NINE MONTH PERIOD ENDED SEPTEMBER 30,
	2011		2010
Research and development	$	114,257	$	28,993
General and administrative		451,691		221,318
Share-based compensation expense	$	565,948	$	250,311
Net share-based compensation expense, per common share:
Basic and diluted	$	0.05	$	0.03

The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of stock options granted to employees. Option valuation models, including Black-Scholes-Merton, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant date fair value of an award.

Following are the weighted-average assumptions used in valuing the stock options granted to employees during the nine-month periods ended September 30, 2011 and 2010:

	NINE MONTH PERIOD ENDED SEPTEMBER 30,
	2011			2010
Expected volatility		94.09	%		97.50	%
Risk-free interest rate		2.04	%		2.38	%
Expected term of option	5.49 years			5 years
Forfeiture rate*		5.00	%		5.00	%
Expected dividend yield		0.00	%		0.00	%

* - Authoritative guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. During the nine-month periods ended September 30, 2011 and 2010, forfeitures were estimated at 5%.

The weighted average fair value of stock options granted during the nine-month periods ended September 30, 2011 and 2010 was $4.63 and $5.50, respectively.

A summary of the Company’s stock option plans and of changes in options outstanding under the plans for the nine months ended September 30, 2011, is as follows:

	Number of Options			Weighted Average Exercise Price
Outstanding at January 1, 2011		590,009		$	38.94
Granted		181,750		$	6.22
Exercised		(13,260	)	$	1.76
Expired		(49,099	)	$	142.31
Forfeited		(519	)	$	8.31
Outstanding at September 30, 2011		708,880		$	24.11
Vested and expected to vest at September 30, 2011		704,211		$	24.23
Exercisable at September 30, 2011		615,507		$	26.94

Cash received from option exercises under all share-based payment arrangements for the three and nine months ended September 30, 2011 was $0 and $23,338, respectively. Cash received from option exercises for the three and nine months ended September 30, 2010 was $2,000 and $12,340, respectively.

6.	Income Taxes

At December 31, 2010, the Company has a $3.1 million unrecognized tax benefit. The Company has recorded a full valuation allowance on the net deferred tax asset recognized in the consolidated financial statements as of December 31, 2010.

During the nine months ended September 30, 2011 there were no material changes to the measurement of unrecognized tax benefits in various taxing jurisdictions. The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense.

The tax returns for all years in the Company’s major tax jurisdictions are not settled as of January 1, 2011; no changes in settled tax years have occurred through September 30, 2011. Due to the existence of tax attribute carryforwards (which are currently offset by a full valuation allowance), the Company treats all years’ tax positions as unsettled due to the taxing authorities’ ability to modify these attributes.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

We are a clinical-stage pharmaceutical company focused on developing ENMD-2076, an Aurora A and angiogenic kinase inhibitor for the treatment of cancer. EntreMed has conducted Phase 1 and Phase 2 studies of ENMD-2076 in patients with a variety of solid and hematological cancers including a Phase 2 study in patients with platinum resistant ovarian cancer.

As previously reported, at the American Society of Clinical Oncology (ASCO) Annual Meeting in June, Phase 2 data in ovarian cancer patients was presented by the principal investigator conducting the Phase 2 ENMD-2076 study. The data demonstrated ENMD-2076 activity in a population of difficult to treat platinum resistant patients. In October 2011, we announced that the final data for the primary endpoint of progression free survival rate at 6 months was 22 percent. We believe that this data, together with the Phase 1 results, provide support for additional clinical studies in ovarian cancer and other forms of cancer in combination with other cancer therapeutics. We continue to monitor patients who are receiving ENMD-2076, and are focused on collecting additional data on overall survival and other endpoints. We are currently assessing strategies for additional and combination trials with our clinical trial investigators and consultants. Without additional capital or third party financial support, it is unlikely that we will be able to conduct such trials.

Our partner in China, Selected Value Therapeutics, has exercised its licensing option for ENMD-2076 and is currently working with us to finalize the terms of a license agreement to advance and fund development in China, Hong Kong, Macau and Taiwan.

ENMD-2076 is a novel orally-active, Aurora A/angiogenic kinase inhibitor with potent activity against Aurora A and multiple tyrosine kinases linked to cancer and inflammatory diseases. ENMD-2076 is relatively selective for the Aurora A isoform in comparison to Aurora B. Aurora kinases are key regulators of the process of mitosis, or cell division, and are often over-expressed in human cancers. ENMD-2076 exerts its effects through multiple mechanisms of action, including anti-proliferative activity and the inhibition of angiogenesis. ENMD-2076 has demonstrated significant, dose-dependent preclinical activity as a single agent, including tumor regression, in multiple xenograft models (e.g. breast, colon, leukemia), as well as activity towards ex vivo-treated human leukemia patient cells.

ENMD-2076 has received orphan drug designation for the treatment of ovarian cancer, multiple myeloma and acute myeloid leukemia (“AML”).

ENMD-2076 is our only program currently under active clinical evaluation. We have directed the majority of our resources to the clinical development of ENMD-2076. We also own or have exclusive rights to certain intellectual property for our other existing therapeutic candidates. Our other therapeutic candidates include MKC-1, an oral cell-cycle inhibitor with activity against the mTOR pathway that has completed multiple Phase 2 clinical trials for cancer, and ENMD-1198, an anti-mitotic agent that has completed a Phase 1 study in advanced cancers. We also have an approved Investigational New Drug Application (IND) for the use of Panzem® in rheumatoid arthritis (RA) treatment. All of our candidates are multi-mechanism and affect multiple pathways necessary for tumor growth. We will not be able to initiate additional new studies for ENMD-2076 or other programs unless additional significant financing becomes available to us, or we enter into a partnership or collaboration to further develop ENMD-2076 and these other product candidates.

We have incurred substantial operating losses since our inception due in large part to expenditures for our research and development activities. At September 30, 2011, we had an accumulated deficit of $379.8 million. We expect to continue to incur expenses, resulting in operating losses, for the foreseeable future due to, among other factors, our continuing clinical trials, planned future clinical trials, and other anticipated research and development activities. Assuming expenses are consistent with the trends of the previous quarter, we expect our current available cash and cash equivalents to meet our cash requirements into the second quarter of fiscal 2012. Therefore, there exists substantial doubt about our ability to continue as a going concern. We will require significant additional funding by the second quarter of fiscal 2012 to enable the continuance of operations and continue our activities with ENMD-2076. The level of financing proceeds available to us and the status of any collaborative discussions and opportunities will help us determine and plan for the next significant clinical milestone for ENMD-2076. We intend to augment our cash and cash equivalent balances as of September 30, 2011 by continuing to evaluate opportunities to raise funds from the capital market and will continue to pursue other forms of capital infusion, including strategic alliances or collaborative development opportunities with organizations that have capabilities and/or products that are complementary to our capabilities and products . However, there can be no assurance that adequate additional financing under such arrangements will be available to us on terms that we deem acceptable, if at all, and within the timeframe we require.

Additional funds raised by issuing equity securities may result in dilution to existing shareholders. If we fail to obtain additional capital by the second quarter of fiscal 2012, or enter into collaboration agreements with development partners to finance our clinical trials, we will be required to delay or stop further clinical activity on our ENMD-2076 program.

CRITICAL ACCOUNTING POLICIES AND THE USE OF ESTIMATES

The preparation of our financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Our critical accounting policies, including the items in our financial statements requiring significant estimates and judgments, are as follows:

Going Concern - A fundamental principle of the preparation of financial statements in accordance with GAAP is the assumption that an entity will continue in existence as a going concern, which contemplates continuity of operations and the realization of assets and settlement of liabilities occurring in the ordinary course of business. This principle is applicable to all entities except for entities in liquidation or entities for which liquidation appears imminent. In accordance with this requirement, our policy is to prepare our consolidated financial statements on a going concern basis unless we intend to liquidate or have no other alternative but to liquidate. As a result of our operational losses and the potential that we may be unable to meet our cash requirements for the next twelve months, there is substantial doubt about our ability to continue as a going concern. While we have prepared our consolidated financial statements on a going concern basis, if we do not receive additional funding, our ability to continue as a going concern may be impacted. Our consolidated financial statements included in this Quarterly Report on Form 10-Q do not reflect any adjustments that might specifically result from the outcome of this uncertainty.

Revenue Recognition - We recognize revenue in accordance with the provisions of authoritative guidance issued, whereby revenue is not recognized until it is realized or realizable and earned. Revenue is recognized when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed and determinable and collectibility is reasonably assured.

Royalty Revenue – Royalties from licenses are based on third-party sales and recorded as earned in accordance with contract terms, when third-party results are reliably measured and collectibility is reasonably assured. We expect that the majority of our 2011 revenues will be from royalties on the sale of Thalomid®, which we will recognize when earned. In 2004, certain provisions of a purchase agreement dated June 14, 2001 by and between Bioventure Investments kft (“Bioventure”) and the Company were satisfied and, as a result, beginning in 2005 we became entitled to share in the royalty payments received by Royalty Pharma Finance Trust, successor to Bioventure, on annual Thalomid® sales above a certain threshold. Based on the licensing agreement royalty formula, annual royalty sharing commences when net royalties received by Royalty Pharma exceeds $15,375,000, which equates to approximately $225 million in Thalomid® annual sales.

The Company is also eligible to receive royalties from Oxford Biomedica, PLC based on a portion of the net sales of products developed for the treatment of ophthalmic (eye) diseases based in part on Endostatin. We received our first royalty in the amount of $368,000 under this agreement in 2009, a portion of which was paid to Children’s Medical Center Corporation under the Company’s original Endostatin license agreement with Children’s. We did not receive any additional payment from Oxford Biomedica, PLC in 2010. We do not expect to receive additional payments from Oxford Biomedica, PLC in 2011.

Royalty payments, if any, are recorded as revenue when received and/or when collectibility is reasonably assured.

Research and Development - Research and development expenses consist primarily of compensation and other expenses related to research and development personnel, research collaborations, costs associated with preclinical testing and clinical trials of our product candidates, including the costs of manufacturing drug substance and drug product, regulatory maintenance costs, and facilities expenses. Research and development costs are expensed as incurred.

Expenses for Clinical Trials – Expenses for clinical trials are incurred from planning through patient enrollment to reporting of the data. We estimate expenses incurred for clinical trials that are in process based on patient enrollment and based on clinical data collection and management. Costs that are associated with patient enrollment are recognized as each patient in the clinical trial completes the enrollment process. Estimated clinical trial costs related to enrollment can vary based on numerous factors, including expected number of patients in trials, the number of patients that do not complete participation in a trial, and when a patient drops out of a trial. Costs that are based on clinical data collection and management are recognized in the reporting period in which services are provided. In the event of early termination of a clinical trial, we would accrue an amount based on estimates of the remaining non-cancelable obligations associated with winding down the clinical trial.

Stock-Based Compensation – All share-based payment transactions are recognized in the financial statements at their fair values. Using the straight-line expense attribution method over the requisite service period, which is generally the option vesting term of three years, share-based compensation expense recognized for the nine months ended September 30, 2011 and 2010 totaled approximately $566,000 and $250,000, respectively.

The determination of fair value of stock-based payment awards on the date of grant using the Black-Scholes model is affected by our stock price, as well as the input of other subjective assumptions. These assumptions include, but are not limited to, the expected forfeiture rate and expected term of stock options and our expected stock price volatility over the term of the awards. Changes in the assumptions can materially affect the fair value estimates.

Any future changes to our share-based compensation strategy or programs would likely affect the amount of compensation expense recognized.

RESULTS OF OPERATIONS

For the Three and Nine Months Ended September 30, 2011 and September 30, 2010.

Revenues. Our 2011 revenues will likely result solely from Celgene’s sale of Thalomid®. We earn royalties once sales of Thalomid exceed approximately $225 million annually, pursuant to a 2001 agreement with Royalty Pharma, as noted above. Thalomid® is distributed and sold by Celgene Corporation and/or its affiliates, and thus, we have no control over sales of Thalomid® or the amount, if any, of royalty payments we will receive. We recorded royalty revenue of $8,852 during the nine month period ended September 30, 2011. This royalty related to certain sales by Celgene of Thalomid in 2010 that were not reported to Royalty Pharma until the second quarter of 2011, at which time we received our share of the applicable royalty payment. We do not expect to record any additional revenue in fiscal 2011 until the fourth quarter.

Research and Development Expenses. Our research and development expenses for the three and nine months ended September 30, 2011 totaled $703,000 and $3,051,000, respectively. Research and development expenses for the corresponding 2010 periods were $1,292,000 and $3,147,000, respectively.

Reflected in our R&D expenses totaling $703,000 for the three-month period ended September 30, 2011 are direct project costs of $496,000 for ENMD-2076, $13,000 for Panzem® oncology, $5,000 for ENMD-1198 and $4,000 for MKC-1. The 2010 research and development expenses for the comparable period included $1,045,000 for ENMD-2076, $24,000 for Panzem® oncology, $22,000 for ENMD-1198 and $13,000 for MKC-1. Research and development expenses totaling $3,051,000 for the nine-month period ended September 30, 2011 include direct project costs of $2,264,000 related to ENMD-2076, $56,000 related to Panzem® oncology, $23,000 related to ENMD-1198 and $29,000 for MKC-1. The 2010 research and development expenses for the comparable period included $2,570,000 for ENMD-2076, $74,000 for Panzem®, and $56,000 for ENMD-1198. Additionally, during the nine-month period ended September 30, 2010, we wrote off approximately $268,000 of costs previously accrued for patients enrolled in MKC-1 clinical trials that wound down before all cycles of treatment were completed. The decrease in research and development costs in the three month period ended September 30, 2011, as compared to the same period in 2010, relates to fewer patients remaining on trial during the 2011 period and increased costs during the 2010 period to due to the start of the Phase 2 trials in 2010. The overall decrease in research and development costs in the nine-month period ended September 30, 2011, as compared to the same period in 2010, reflects a decrease in costs associated with the clinical development of ENMD-2076 as we had fewer patients enroll during 2011 compared to the 2010 period, in addition to the MKC-1 cost write off of $268,000 during the three months ended March 31, 2010.

At September 30, 2011, accumulated direct project expenses for Panzem® oncology were $54,416,000; direct ENMD-1198 project expenses totaled $13,227,000; and, since acquired, accumulated direct project expenses for ENMD-2076 totaled $20,447,000 and for MKC-1, accumulated project expenses totaled $10,168,000. Our research and development expenses also include non-cash stock-based compensation totaling $18,000 and $114,000, respectively, for the three and nine months ended September 30, 2011 and $10,000 and $29,000 for the respective corresponding 2010 periods. The increase in stock-based compensation expense is related to stock options granted in January 2011. The balance of our research and development expenditures includes facility costs and other departmental overhead, and expenditures related to the non-clinical support of our programs.

We do not expect to fund new research and development in 2011. To the extent we are able based upon our available funding; we will continue to conduct research on ENMD-2076 in order to comply with stipulations made by the FDA, as well as to increase understanding of the mechanism of action and toxicity parameters of ENMD-2076 and its metabolites. Completion of clinical development may take several years or more, but the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product candidate.

We estimate that clinical trials of the type we generally conduct are typically completed over the following timelines:

CLINICAL PHASE		ESTIMATED COMPLETION PERIOD
Phase 1		1-2 Years
Phase 2		2-3 Years
Phase 3		2-4 Years

The duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the clinical trial protocol, including, among others, the following:

the number of patients that ultimately participate in the trial;

the duration of patient follow-up that seems appropriate in view of the results;

the number of clinical sites included in the trials; and

the length of time required to enroll suitable patient subjects.

We test our potential product candidates in numerous preclinical studies to identify indications for which they may be product candidates. We may conduct multiple clinical trials to cover a variety of indications for each product candidate. As we obtain results from trials, we may elect to discontinue clinical trials for certain indications in order to focus our resources on more promising indications.

Our proprietary product candidates have also not yet achieved regulatory approval, which is required before we can market them as therapeutic products. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, regulatory agencies must conclude that our clinical data establish safety and efficacy. Historically, the results from preclinical testing and early clinical trials have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologics have shown promising results in clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals.

Our business strategy includes being opportunistic with collaborative arrangements with third parties to complete the development and commercialization of our product candidates. In the event that third parties take over the clinical trial process for one of our product candidates, the estimated completion date would largely be under the control of that third party rather than us. We cannot forecast with any degree of certainty which proprietary products or indications, if any, will be subject to future collaborative arrangements, in whole or in part, and how such arrangements would affect our capital requirements.

As a result of the uncertainties discussed above, among others, we are unable to estimate the duration and completion costs of our ENMD-2076 program or any of our other non-leading programs. Our failure to enter into collaborative agreements or raise significant capital from external sources could significantly increase our capital requirements and could adversely impact our liquidity. There can be no assurance that we will be able to successfully access external sources of financing in the future. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the future success of our business.

Research and development expenses consist primarily of compensation and other expenses related to research and development personnel, research collaborations, costs associated with internal and contract preclinical testing and clinical trials of our product candidates, including the costs of manufacturing drug substance and drug product, regulatory maintenance costs, and facilities expenses. Research and development expenses decreased to $703,000 during the three months ended September 30, 2011 from $1,292,000 for the corresponding period in 2010. Research and development expenses decreased slightly to $3,051,000 during the nine months ended September 30, 2011 from $3,147,000 for the corresponding period in 2010. Expenditures during the three and nine months ended September 30, 2011 were specifically impacted by the following:

Outside Services – In the three-month period ended September 30, 2011, we expended $4,000 on outside service activities versus $29,000 in the same 2010 period. For the nine-month period ended September 30, 2011 outside services are $51,000 compared to $40,000 for the same 2010 period. The increase in 2011 as compared to 2010 reflects an increase in outsourced services related to the development of ENMD-2076.

Clinical Trial Costs – Clinical trial costs, which include clinical site fees, monitoring costs and data management costs, decreased to $159,000 in the three months ended September 30, 2011 from $665,000 in the three-month period ended September 30, 2010. The decrease during this period relates to fewer patients on trial during the 2011 period and increased costs during the 2010 period due to patient enrollment in the Phase 2 trials in 2010. Clinical trial costs for the nine-month period ended September 30, 2011 decreased to $934,000 from $1,131,000 for the comparable 2010 period. The decrease relates primarily to the timing of clinical trials as fewer patients were enrolled as of September 30, 2011 compared to the 2010 period.

Contract Manufacturing Costs - The costs of manufacturing the material used in clinical trials for our product candidates is reflected in contract manufacturing. These costs include bulk manufacturing, encapsulation and fill and finish services, product release costs and storage fees. Contract manufacturing costs for the three months ended September 30, 2011 decreased by $30,000 compared to the same period in 2010. For the nine-month period ended September 30, 2011, manufacturing costs increased to $226,000 from $189,000 for the comparable 2010 period. The increase reflects the encapsulation costs for ENMD-2076 that were incurred in the early part of 2011, plus a credit received in 2010 reflecting a reduction in the scope of previously contracted compatibility, formulation development and GMP manufacture of ENMD-2076.

Personnel Costs — Personnel costs increased to $304,000 in the three-month period ended September 30, 2011 from $297,000 in the corresponding 2010 period. For the nine-month period, personnel costs increased in 2011 to $1,018,000 from $957,000 for the corresponding 2010 period. The increase is attributable to the $85,000 increase in non-cash stock-based compensation expense primarily related to stock options granted in 2011.

Also reflected in our 2011 research and development expenses for the three-month period ended September 30, 2011 are patent costs of $134,000 and facility and related expenses of $43,000. In the corresponding 2010 period, these expenses totaled $133,000 and $50,000, respectively. For the nine-month period ended September 30, 2011, patent costs were $440,000 and facility and related expenses were $145,000. In the corresponding 2010 period, these expenses totaled $330,000 and $158,000, respectively. Patent costs during the three and nine months ended September 30, 2011 increased primarily due to higher costs associated with the execution of our intellectual property strategy, including maintaining our patent portfolio and expanding our patent protection internationally.

General and Administrative Expenses. General and administrative expenses include compensation and other expenses related to finance, business development and administrative personnel, professional services and facilities.

General and administrative expenses decreased to $557,000 in the three-month period ended September 30, 2011 from $692,000 in the corresponding 2010 period. For the nine-month period, general and administrative expenses increased slightly in 2011 to $2,530,000 from $2,514,000 for the corresponding 2010 period. This increase is attributable to the $230,000 increase in non-cash stock-based compensation expense primarily related to stock options granted in 2011, offset by lower salary and rent expenses.

Interest Expense. Our term loan from General Electric Capital Corporation, pursuant to a transaction in September 2007, was fully paid on January 3, 2011, and accordingly there was no interest expense recorded for the three and nine month periods ended September 30, 2011. Interest expense for the three and nine month periods ended September 30, 2010 was approximately $107,000 and $496,000, respectively (including $9,545 and $45,095 of non-cash interest, respectively).

Dividends on Series A Convertible Preferred Stock. The Consolidated Statement of Operations for the three and nine-month periods ended September 30, 2011 and 2010 reflect a dividend of $251,250 and $753,750, respectively, relating to Series A Convertible Preferred Stock held by Celgene pursuant to a Securities Purchase Agreement dated December 31, 2002. The holders of Series A Preferred Stock accumulate dividends at an annual rate of 6% and will participate in dividends declared and paid on our common stock, if any. All accumulated dividends must be paid before any dividends may be declared or paid on the common stock. The Company has no plans to pay any dividends in the foreseeable future.

LIQUIDITY AND CAPITAL RESOURCES

To date, we have been engaged primarily in research and development activities. As a result, we have incurred and expect to continue to incur operating losses in 2011 and the foreseeable future before we commercialize any products. Assuming expenses are consistent with the trends of the previous quarter, we expect our current available cash and cash equivalents to meet our cash requirements into the second quarter of fiscal 2012. If we fail to obtain additional capital by the second quarter of fiscal 2012, or enter into collaboration agreements with development partners to finance our clinical trials, we will be required to delay or stop further clinical activity on our ENMD-2076 program. Having additional financing beyond our current resources will help us plan for the next clinical trial or other milestone for ENMD-2076.

As of September 30, 2011, the Company has operating and liquidity concerns and plans to continue to pursue opportunities to raise additional capital to fund its operating needs. We did not include any adjustments to the consolidated financial statements included in this Quarterly Report on Form 10-Q to reflect the possible future effects that may result from the uncertainty of our ability to continue as a going concern.

We will require significant additional funding by the second quarter of fiscal 2012 to fund our operations and further ENMD-2076 trials. We intend to augment our cash and cash equivalent balances by pursuing other methods of raising capital, including strategic alliances or collaborative development opportunities with organizations that have capabilities and/or products that are complementary to our capabilities and products in order to continue the development of our potential product candidates that we intend to pursue to commercialization. If we seek strategic alliances, licenses, or other alternative arrangements, such as arrangements with collaborative partners or others, to raise further financing, we may need to relinquish rights to certain of our existing product candidates, or products we would otherwise seek to develop or commercialize on our own, or to license the rights to our product candidates on terms that are not favorable to us.

We intend to explore one or more of the following alternatives to raise additional capital so that the Company can continue as a going concern:

selling additional equity securities;

out-licensing product candidates to one or more corporate partners;

monetizing our remaining Thalomid® royalty payment stream;

completing an outright sale of non-priority assets; and/or

engaging in one or more strategic transactions.

We also will consider additional actions to reduce our expenses.

There can be no assurance that adequate additional financing under such arrangements will be available to us on terms that we deem acceptable, if at all. If additional funds are raised by issuing equity securities, dilution to existing shareholders may result, or the equity securities may have rights, preferences, or privileges senior to those of the holders of our common stock.

At September 30, 2011, we had cash and cash equivalents of $1,986,165 with working capital of $1,450,040.

On June 28, 2011, we entered into a standby equity distribution agreement (the “SEDA”), with YA Global Master SPV Ltd. (“YA Global”), a fund managed by Yorkville Advisors, LLC (“Yorkville”). Under the SEDA, the Company has the option, at its sole discretion, to sell, from time to time, up to $7.5 million of common stock to YA Global during the three-year term of the SEDA, and YA Global is obligated to purchase such shares. Concurrent with the signing of the SEDA, we agreed to sell shares to YA Global and received gross proceeds of $1.1 million on June 29, 2011. Between June 29 and August 5, 2011, we issued an aggregate of 600,412 shares to YA Global in settlement of the initial $1.1 million drawdown. The number of shares issued each week, and the purchase price for such shares, in settlement of the initial $1.1 million drawdown were determined in accordance with the SEDA.

There can be no assurance that we will draw down all, or any portion of, the remaining $6.4 million available under the SEDA. Future drawdowns, if any, may be limited by the future trading volume of our common stock, and by SEC and Nasdaq regulations. The SEDA permits us to terminate the agreement at any time, subject to the advance notice provision, and to pursue any other financing alternatives available to the Company. As of the date of this Quarterly Report on Form 10-Q, we have not requested any additional drawdowns under the SEDA.

In January 2006, we acquired Miikana Therapeutics, a private biotechnology company. We acquired certain drug candidates in connection with the acquisition, including the lead molecule in the Aurora Kinase Program, ENMD-2076, which advanced into clinical development in 2008. ENMD-2076 is a kinase inhibitor with activity towards Aurora A and multiple other kinases linked to promoting cancer. Dosing of the first patient in ENMD-2076 trials triggered a milestone payment of $2 million to the former Miikana stockholders payable in stock or cash, at the Company’s discretion. In June 2008, 233,100 shares of common stock were issued to the former Miikana stockholders as consideration for the satisfaction of the milestone payment. Under the terms of the merger agreement, dosing of the first patient in a Phase 2 trial in April 2010 triggered an additional purchase price adjustment milestone payment of $3 million, which we paid by issuing 403,550 shares of our common stock. Under the terms of the merger agreement, the former shareholders if Miikana may, upon the satisfaction of certain milestones primarily relating to ENMD-2076, receive up to $13 million of potential payments. We do not expect any further milestones to be achieved in 2011. Through the Miikana acquisition, we also acquired rights to MKC-1, a Phase 2 clinical candidate licensed from Roche by Miikana in April 2005. Under the terms of the agreement, Roche may be entitled to receive future payments upon successful attainment of certain clinical, regulatory and commercialization milestones; however, since ENMD-2076 is the only program currently under active clinical evaluation, we do not expect to trigger any of these milestone payments during the remainder of fiscal 2011.

We expect that the majority, if not all, of our 2011 revenues will continue to be from royalties on the sales of Thalomid®. Thalomid® is sold by a third-party and is subject to competition from other products and generic drugs, and we have no control over such party’s sales efforts or the resources devoted to Thalomid® sales. In 2010 and 2009, we received royalty-sharing revenue in the amount of $3,449,000 and $4,990,000, respectively. There can be no assurance as to future sales trends of Thalomid® and the amount of revenue we will receive and record in 2011. Based upon the trend of declining sales over the past two years, together with recent publicly disclosed information from Celgene Corporation regarding sales of Thalomid®, we expect annual sales of Thalomid® in 2011 to continue to decrease, which will result in a reduction in our revenues in 2011. As we continue to incur costs for the clinical investigation and development activities of ENMD-2076 during the remainder of fiscal 2011, such a reduction in our royalty revenue would have a material adverse effect on both our short-term and long-term liquidity if we are unable to obtain other financial resources to replace the anticipated decrease in Thalomid® royalty revenues. There is no assurance that the amount of royalty-sharing revenues received for fiscal 2011 will be similar to amounts received during prior fiscal years.

In addition, under our licensing agreement with Oxford BioMedica, PLC and Oxford BioMedica (UK) Limited Oxford, we are entitled to receive payments upon the achievement of certain milestones with respect to the development of gene therapies for ophthalmic (eye) diseases. In connection with the announced 2009 collaboration between Oxford BioMedica and Sanofi Aventis which included certain compounds (RetinoStat® and EncorStat®) that are governed by our licensing agreement, we received $368,000 from Oxford BioMedica in 2009, $74,000 of which we paid to Children’s Medical Center Corporation under our agreement with Children’s Medical Center Corporation. The $368,000 payment represented the Company’s share of the upfront payment received by Oxford BioMedica after division among third-party product technologies. No payments were received in 2010 from this licensing agreement and we do not expect to receive any payments during the remainder of fiscal 2011. However, we do not control the drug development efforts of Oxford or Sanofi and have no information or control over when or whether any milestones will be reached that would result in additional payments to us.

Our estimated future capital requirements are uncertain and could change materially as a result of many factors, including the progress of our research, development and clinical activities. If significant funds are not available through either the capital markets, strategic alliances, or a partnership or collaboration, we may be required to delay, reduce the scope of or eliminate our research, development or clinical program efforts relating to ENMD-2076, effect additional changes to our facilities or personnel, or obtain funds through other arrangements that may require us to relinquish some of our assets or rights to certain of our existing or future technologies, product candidates, or products on terms not favorable to us.

INFLATION AND INTEREST RATE CHANGES

Management does not believe that our working capital needs are sensitive to inflation and changes in interest rates.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activities is to preserve our capital until it is required to fund operations while at the same time maximizing the income we receive from our investments without incurring investment market volatility risk. Our investment income is sensitive to the general level of U.S. interest rates. In this regard, changes in the U.S. interest rates affect the interest earned on our cash and cash equivalents. Due to the short-term nature of our cash and cash equivalent holdings, a 10% movement in market interest rates would not materially impact on the total fair market value of our portfolio as of September 30, 2011.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s Executive Chairman and Principal Accounting Officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) were effective as of September 30, 2011 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its Executive Chairman and Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s assessment of the effectiveness of internal control over financial reporting is expressed at the level of reasonable assurance because a control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system’s objectives will be met.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2011 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II.

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject in the normal course of business to various legal proceedings in which claims for monetary or other damages may be asserted. Management does not believe such legal proceedings, except as otherwise disclosed herein, are material.

ITEM 1A. RISK FACTORS

For information regarding factors that could affect the Company’s results of operations, financial condition and liquidity, see the risk factors discussion set forth in Item 1A of EntreMed’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and the information under “Special Note Regarding Forward-Looking Statements” included in this report. There have been no material changes to our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 or as set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, except as follows:

Our common stock may be delisted from The Nasdaq Capital Market, which could negatively impact the price of our common stock and our ability to access the capital markets.

Our shares are listed on the Nasdaq Capital Market. The Nasdaq Capital Market and Nasdaq rules require, among other things, maintaining a minimum stockholders equity of $2.5 million or a minimum market capitalization of $35 million. At September 30, 2011, our stockholders’ equity was $1.5 million and market capitalization was $18.6 million. If the stockholders’ equity continues below the $2.5 million minimum and the Company’s market capitalization continues below the minimum $35 million for thirty consecutive days, we will not be in compliance with the continued listing requirements. We have received deficiency notices from Nasdaq in the past and have been subject to delisting proceedings and have cured deficiencies in the past. If we are unable to cure any new failures in a timely manner and our common stock were delisted from the Nasdaq Capital Market, it could be more difficult to buy or sell our common stock and to obtain accurate quotations, and the price of our stock could suffer a material decline. Trading, if any, of our securities would thereafter be conducted in the over-the-counter market, or the “pink sheets,” or on the OTC Bulletin Board. Not maintaining our Nasdaq Capital Market listing may result in a decrease in the trading price of our common stock, lessen interest by institutions and individuals in investing in our common stock, make it more difficult to obtain analyst coverage, and make it more difficult for us to raise capital in the future.

We need to raise substantial additional funding to continue the development and clinical trials of ENMD-2076.

We will need substantial additional funding, or a partnership with a third-party, to continue the development of ENMD-2076 and may be unable to raise capital when needed or enter into a strategic partnership or collaboration on attractive terms, which would force us to significantly delay, scale back or discontinue the development of ENMD-2076. If we raise additional funds through collaboration and/or licensing arrangements with third parties, it may be necessary to relinquish certain rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Should the financing we require to sustain our working capital needs be unavailable to continue the development of ENMD-2076, our business, operating results, financial condition and prospects could be materially and adversely affected and we may be unable to continue our operations.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. REMOVED AND RESERVED

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

31.1		Rule 13a-14(a) Certification of Executive Chairman
31.2		Rule 13a-14(a) Certification of Principal Accounting Officer
32.1		Section 1350 Certification of Executive Chairman
32.2		Section 1350 Certification of Principal Accounting Officer
101		The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in eXtensible Business Reporting Language (XBRL): (i) Unaudited Consolidated Balance Sheets at September 30, 2011 and December 31, 2010, (ii) Unaudited Consolidated Statement of Operations for the Three and Nine months ended September 30, 2011 and 2010, (iii) Unaudited Consolidated Statements of Cash Flows for the Three and Nine months ended September 30, 2011 and 2010 and (iv) Notes to Unaudited Consolidated Financial Statements (tagged as blocks of text).*

* This exhibit is furnished and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ENTREMED, INC.
	(Registrant)

Date: November 14, 2011	/s/ Michael M. Tarnow
	Michael M. Tarnow
	Executive Chairman

Date: November 14, 2011	/s/ Sara B. Capitelli
	Sara B. Capitelli
	Principal Accounting Officer

EXHIBIT INDEX

31.1		Rule 13a-14(a) Certification of Executive Chairman
31.2		Rule 13a-14(a) Certification of Principal Accounting Officer
32.1		Section 1350 Certification of Executive Chairman
32.2		Section 1350 Certification of Principal Accounting Officer
101		The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in eXtensible Business Reporting Language (XBRL): (i) Unaudited Consolidated Balance Sheets at September 30, 2011 and December 31, 2010, (ii) Unaudited Consolidated Statement of Operations for the Three and Nine months ended September 30, 2011 and 2010, (iii) Unaudited Consolidated Statements of Cash Flows for the Three and Nine months ended September 30, 2011 and 2010 and (iv) Notes to Unaudited Consolidated Financial Statements (tagged as blocks of text).*

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