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Polymedix, Inc – ‘10-K’ for 12/31/11

On:  Tuesday, 3/13/12, at 4:30pm ET   ·   For:  12/31/11   ·   Accession #:  1341843-12-4   ·   File #:  0-51895

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  As Of               Filer                 Filing    For·On·As Docs:Size

 3/13/12  Polymedix, Inc                    10-K       12/31/11   34:4.5M

Annual Report   —   Form 10-K   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

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24: R1          Document And Entity Information                     HTML     39K 
18: R2          Consolidated Balance Sheets                         HTML    115K 
22: R3          Consolidated Balance Sheets (Parenthetical)         HTML     36K 
25: R4          Consolidated Statements of Operations               HTML     69K 
32: R5          Consolidated Statement of Changes in Stockholders'  HTML    195K 
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21: R7          Organization and Business Activities                HTML     25K 
17: R8          Summary of Significant Accounting Policies          HTML     36K 
15: R9          Investments                                         HTML     20K 
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‘10-K’   —   Annual Report — form10k
Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Item1B. Unresolved Staff Comments
"Item 2. Properties
"Item 3. Legal Proceedings
"Item 4. Mine Safety Disclosures
"Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
"Item 6. Selected Financial Data
"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
"Item 7A. Quantitative and Qualitative Disclosures About Market Risk
"Item 8. Financial Statements and Supplementary Data
"Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
"Item 9A. Controls and Procedures
"Item 9B. Other Information
"Item 10. Directors, Executive Officers and Corporate Governance
"Item 11. Executive Compensation
"Item 12 . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
"Item 13. Certain Relationships and Related Transactions and Director Independence
"Item 14. Principal Accountants Fees and Services
"Item 15. Exhibits, Financial Statement Schedules
"Signatures
"Financial Statements
"F-1
"Report of Independent Registered Public Accounting Firm
"F-2
"PolyMedix, Inc. Consolidated Balance Sheets as of December 31, 2011 and 2010
"F-4
"PolyMedix, Inc. Consolidated Statements of Operations for the Years Ended December 31, 2011, 2010 and 2009, and for the Period from August 8, 2002 (Inception) to December 31, 2011
"F-5
"PolyMedix, Inc. Consolidated Statements of Changes in Stockholders' Equity from August 8, 2002 (Inception) to December 31, 2011
"F-6
"PolyMedix, Inc. Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010, and 2009, and for the Period from August 8, 2002 (Inception) to December 31, 2011
"F-9
"Notes to Consolidated Financial Statements
"F-10

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 C:   C:   C: 
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, 2011

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)
Delaware
 
27-0125925
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

 170 N. Radnor-Chester Road; Suite 300
(Address of principal executive offices including zip code)
 
(484) 598-2332
(Registrant’s telephone number, including area code)

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). xYes 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.  x

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, 2011 was approximately $77,817,810 (based on the closing sales price of the registrant’s Common Stock on that date ($0.75).
 
The number of shares of the issuer’s Common Stock outstanding as of March 9, 2012 was 106,305,860.

DOCUMENTS INCORPORATED BY REFERENCE
The registrant’s definitive proxy statement to be filed in connection with solicitation of proxies for its 2012 Annual Meeting of Stockholders to be held within 120 days of the end of its fiscal year, is incorporated by reference into Part III of this Annual Report on Form 10-K.
 

 
 

 

TABLE OF CONTENTS
Page
Part I.
 
   
   
   
   
   
   
   
   
Part I30
 
   
   
   
   
   
   
   
   
   
Part III.
 
   
   
   
   
   
   
Part IV.
 
   
   
   


 
-i-

 

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
the results of our preclinical and clinical trials, including regulatory approvals necessary for advancement and continuation of our development programs;
 
 
Ø
our ability to attract patients to participate in and third party providers to administer our clinical studies;
 
 
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 may make raising capital or entering into strategic arrangements difficult and expensive;
 
 
Ø
changes to the regulations to which we and our product candidates are subject, both in the United States and internationally;
 
 
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 maintenance of our existing licenses with the University of Pennsylvania (Penn) and the University of Massachusetts (UMass);
 
 
Ø
the size of our product opportunity for our product candidates;
 
 
Ø
the ability of our product candidates to successfully compete against existing and new products made by our competitors;
 
 
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 period, 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 resulting from new information, future events or otherwise, except as may be required by applicable law or regulation.
 

 
-ii-

 

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:
 
PolyMedix is a clinical stage biotechnology company that is developing small-molecule drugs for the treatment of serious acute care conditions. Using our proprietary drug discovery platform, we have internally created a pipeline of innovative infectious disease, cancer supportive care and cardiovascular product candidates, which include the following:

 

 

 
1

 

CLINICAL PROGRAMS:
 
PMX-30063- Defensin Mimetic Antibiotic
 
PMX-30063 is the first drug candidate in a new class of antibiotics, defensin-mimetics, which are intended to address the global problem of bacterial resistance. PMX-30063 is an antibiotic agent designed to mimic one of the body’s first lines of defense against bacteria: host defense proteins. Host defense proteins kill bacteria by physically puncturing and forming pores in bacterial cell membranes. By mimicking this mechanism, PMX-30063 exploits a method of bacterial cell killing that may significantly reduce the risk for emergence of resistance. In addition to its resistance profile, in pre-clinical testing PMX-30063 has shown rapid bactericidal activity against many Gram-positive and Gram-negative pathogens, including methicillin-resistant Staphylococcus aureus (MRSA), drug resistant Enterococci, Escherichia coli, and NDM-1 drug-resistant Klebsiella pneumonia.
 
PMX-30063 has completed enrollment in a Phase 2 clinical trial at multiple sites in Canada and Europe to treat patients with acute bacterial skin and skin structure infections (ABSSSI) caused by Staphylococcus aureus, including MRSA. Interim results from this on-going study suggest both efficacy and safety in treating Staphylococcus aureus infections.  Our clinical studies to date have been, and in the future will continue to be, conducted in accordance with United States and International Conference on Harmonization (ICH) standards.  Our current plan is to initially seek FDA approval for an intravenous (IV) formulation of PMX-30063 in treating patients with ABSSSI. In the future, we plan to conduct additional clinical studies of PMX-30063 in patients with other infections, such as blood stream infections and lung infections, and in cancer patients with oral mucositis. In the future, we also intend to evaluate other routes of administration beyond IV.
 
Defensin Mimetic Class of Antibiotics
 
To date, all currently marketed antibiotics employ biochemical mechanisms of action, which are based on the defense systems used by simple life forms. Bacteria, mold, and fungi secrete antibiotics such as penicillin, tetracycline, and vancomycin to protect themselves against other bacteria. Use of these or derivatives of these biochemical approaches to killing bacteria has been the basis of antibiotic therapy since their discovery in the 1940’s. While the use of biochemical antibiotics has saved many lives, a significant disadvantage to their use is that bacteria can readily and rapidly mutate in ways that render these biochemical antibiotics ineffective or drug resistant. This may in part explain why as more advanced forms of life evolved, this biochemical approach was abandoned and more robust defenses to which bacteria are less likely to resist evolved, including 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, urogenital tract, gastrointestinal track and epidermal tissues under the skin, all locations where microbial pathogens first enter the human body. Host defense proteins use a simple, but effective method for killing bacteria by targeting bacterial membranes and creating instability of the cellular contents and membrane, which results in the rapid killing of the bacterial cell. Resistance to this mechanism of action has not developed despite hundreds of millions of years of evolution.  By mimicking this mechanism, PMX-30063 exploits a method of bacterial cell killing that may significantly reduce the risk for emergence of resistance.  In addition, host defense proteins are known to have inflammatory and anti-biofilm activities.  Preclinical experiments have shown that our defensin mimetics may also have these activities.
 
Medical Need and Market Opportunity
 
Bacterial drug resistance to presently available antibiotics is one of the most serious global healthcare problems which has reached alarming levels, with 70% of infections treated in some hospitals being resistant to at least one antibiotic drug. A recent analysis of antibiotic resistant infection data conducted at Chicago Cook County Hospital estimated that the societal annual cost to the United States health care system for antibiotic resistance is in excess of $35 billion. There are many antibiotics in development for treatment of resistant bacterial infections. Since these antibiotics are generally derivatives or new generations of known classes of antibiotics to which resistance has been demonstrated, we believe resistance is likely to evolve to these new antibiotics as well, which may render future infections more difficult to treat.
 
We believe that 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 study supported by the U.S. Department of Health and Human Services, Centers for Disease Control and Prevention (CDC) and 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.  According to IMS Health, the total United States sales of the five antibiotics labeled for MRSA doubled from 2005 to 2009 to $1.5 billion. Sales of linezolid and daptomycin account for 75% of these sales, with the most prescribed MRSA drug being generic vancomycin.
 
 
2

 
 
PMX-30063 Clinical Development
 
Our first product candidate is an IV formulation initially intended for the treatment of ABSSSI, caused by drug susceptible and drug resistant strains of Staphylococcus aureus bacteria.  In the future, we also intend to expand indications to potentially include other infections, bacterial strains, and routes of administration.
 
ABSSSI
 
In December 2008, we completed and announced positive results from our single-dose, dose-escalation Phase 1 clinical study, where we evaluated the safety and pharmacokinetics of PMX-30063 in single IV doses of up to 2.5 mg/kg. In this study PMX-30063 was generally well tolerated and there were no serious adverse effects. The study provided detailed information on the pharmacokinetics of the drug. The half-life for elimination from plasma was approximately 20 hours. This relatively long half-life may allow for both flexibility in dosing, as well as potentially infrequent dosing.
 
In March 2010, we completed and announced positive results from our multiple-dose escalation Phase 1B clinical study where we evaluated the safety and pharmacokinetics of PMX-30063 administered in multiple doses every 12, 24 or 48 hours, over five or ten days, for a planned total of five to ten doses. In the study, subjects received up to a total dose of 3.0 mg/kg of PMX-30063 over the course of treatment. PMX-30063 was generally well tolerated and there were no significant adverse effects.
 
In February 2011, we completed and announced positive results from a randomized, double-blind, placebo-controlled Phase 1 exposure-escalation clinical study where we evaluated the safety and pharmacokinetics of PMX-30063 in once-daily dosing up to 14 days. Subjects in this study received a total dose of up to 5.55 mg/kg of PMX-30063 over the course of the trial. PMX-30063 met the study safety endpoints and was generally well tolerated. The dosing regimen of PMX-30063 administered in this study was identical to the highest dosing regimen being administered over five days in the present ongoing Phase 2 ABSSSI clinical study.
 
In January 2012, we completed enrollment in 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, Russia and Ukraine. The study objectives are to evaluate the safety and efficacy of PMX-30063 as treatment for ABSSSI caused by Staphylococcus aureus, including methicillin-resistant Staphylococcus aureus (MRSA). Interim results, released in December 2011, from this on-going study suggest both efficacy and safety in treating ABSSSI Staphylococcus aureus infections. The study is being conducted in accordance with FDAs most recent ABSSSI guidelines and is intended to support regulatory approval in the United States.  Final results from the study are expected during the first half of 2012.  A second Phase 2 study is expected to commence during the second half of 2012.
 
PMX-30063- Blood Stream and Lung Infections
 
PMX-30063 is initially being studied in a multi-national Phase 2 clinical trial to assess its safety and efficacy in treating ABSSSI caused by Staphylococcus aureus. In the future, we plan to evaluate PMX-30063 for the treatment of other serious infection types, such as blood stream infections (bacteremia and endocarditis) and lung infections (hospitalized pneumonia).
 
PMX-30063- Cancer Oral Mucositis
 
Oral mucositis, a common and often debilitating inflammation and ulceration that occurs in the mouth as a side-effect of certain cancer treatments, afflicts approximately 450,000 patients each year in the United States and affects the course and outcome of cancer therapy. In addition to increasing patient risk and discomfort, oral mucositis is also associated with increased treatment costs of up to $25,000 per patient. Despite these numbers, there are no effective pharmacological therapeutic options for this condition and treatment today is mostly focused on pain management.
 
In animal models of oral mucositis, an oral rinse containing PMX-30063 was shown to reduce the occurrence of severe ulcerative oral mucositis by greater than 90% compared to placebo. Like the host defense proteins, PMX-30063 and related compounds have shown antibacterial, anti-biofilm and anti-inflammatory properties. It is believed that the combination of these attributes contribute to the efficacy of PMX-30063 in these animal models. We believe there is a significant unmet medical need and pharmacoeconomic rationale for evaluating PMX-30063 in the future as a therapeutic drug to treat cancer patients with oral mucositis.
 
 
3

 

PMX-60056-Heptagonist
 
PMX-60056 is a synthetic, small-molecule designed to restore coagulation to help manage the balance of antithrombosis and anticoagulation and reduce the incidence of bleeding in certain interventional cardiology procedures, where unfractionated heparin (UFH) is used, such as Percutaneous Coronary Intervention (PCI) and Coronary Arterial Bypass Graft (CABG), and bleeding associated with low molecular weight heparins (LMWH). PMX-60056 is designed to reverse the most common anticoagulants used in the hospital setting, UFH, and its derivative, LMWH. Because bleeding is a common side effect that can occur from use of these drugs, there is an unmet medical need for a pharmaceutical agent that can safely reverse their anticoagulation activity.
 
PMX-60056 is currently being evaluated in a Phase 2 clinical trial to assess the safety and efficacy of reversing heparin in patients undergoing PCI procedures. PMX-60056 is also in a Phase 1B/2 dose response clinical trial to evaluate the safety and efficacy of reversing the anticoagulant effects of LMWH enoxaparin, the most widely used LMWH, in healthy volunteers.
 
Heptagonist Class of Anticoagulant Reversing Agent
 
Both UFH and LMWH impart their anticoagulant activity by interrupting the clotting cascade through a pentasaccharide sequence common to both UFH and LMWH.  The pentasaccharide sequence on UFH and LMWH turns off coagulation in the blood by binding to clotting factor anti-thrombin and further sequestering clotting factor-Xa and in some cases thrombin. Heptagonists are designed to reverse the anticoagulant activity of UFH and LMWH by binding to the common pentasaccharide sequence found on both UFH and LMWH.  By binding to pentasaccharide, the sequence is no longer available for binding to clotting factors, the clotting cascade is no longer interrupted, and coagulation is restored.
 
Medical Need and Market Opportunity
 
Patients undergoing certain interventional cardiovascular procedures are at risk of developing dangerous and sometimes life-threatening blood clots. To reduce this risk, patients often receive anticoagulant drugs that reduce or prevent the blood from clotting. Managing coagulation can be a delicate balance between clot prevention and bleeding.  Bleeding encountered in surgical procedures, which may be associated with the use of anticoagulants, can significantly increase hospital costs, patient recovery time and mortality. One potential way to reduce the incidence of bleeding or manage the severity of bleeding associated with anticoagulant use, may be to turn off the anticoagulant effect in a rapid, predictable, and controllable way, with the goal of restoring the blood’s ability to clot normally. PMX-60056 is designed to provide physicians with greater flexibility and control in balancing clotting and bleeding risk, and to treat emergency bleeding in patients on heparin and LMWH.  There is presently one product on the market approved to reverse heparin, which has many limitations, including;
 
 
Ø
allergic and immune reactions,
 
 
Ø
abnormal clot formation and disassociation which can lead to rebound bleeding,
 
 
Ø
inter-patient variability and inherent anticoagulant properties which can make dosing unpredictable, and
 
 
Ø
lowering of blood pressure.
 
There is no approved reversal agent for LMWH.
 
We believe there is a 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, eight million doses of protamine are used annually worldwide.  We believe PMX-60056 has the potential to be a safe alternative to protamine.
 
According to IMS Health 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 Health sales data we estimate that more than 20 million patients receive LMWH annually.

 
4

 

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.
 
PMX-60056 Clinical Development
 
Our first heptagonist product candidate is an IV formulation designed to manage coagulation in patients who have received UFH and LMWH.
 
Clinical Experiments to Date
 
In October 2009, we completed a single-dose Phase 1B/2 study where PMX-60056 met the study endpoints regarding safely and efficacy in permanently reversing heparin. Six healthy subjects were given 70 U/kg of heparin followed twenty minutes later with either a single dose of 0.3 mg/kg of PMX-60056 or a placebo administered intravenously. Each subject received two dosing regimens, initially with heparin and either PMX-60056 or a placebo and then, two days after the first dose, with the alternative regimen (heparin and either PMX-60056 or placebo). The anticoagulant activity of heparin was rapidly and completely reversed in all subjects receiving PMX-60056, as measured by activated partial thromboplastic time (aPTT).
 
In June 2010, we completed a single-dose Phase 1B/2 study where PMX-60056 met the study endpoints regarding safety and efficacy in reversing the LMWH tinzaparin (Innohep®). Six healthy subjects were given a subcutaneous injection of tinzaparin, followed 5 and 8 hours later by two ten-minute intravenous infusions of PMX-60056 or placebo. PMX-60056 rapidly reduced anti-Xa activity (a critical clotting factor) and rapidly and completely reversed the anticoagulant action of tinzaparin, as measured by aPTT. Each subject’s minimum aPTT readings after being dosed with PMX-60056 were at or near the subject’s aPTT readings prior to being dosed with tinzaparin.
 
In August 2010, we completed a dose-ranging Phase 1B/2 clinical study where PMX-60056 met the study endpoints regarding safety and efficacy in both the reversal of varying heparin levels, and allowing re-anticoagulation and re-reversal. Twelve healthy subjects received either 200 U/kg or 350 U/kg of heparin, followed 20 minutes later by an initial ten-minute infusion of PMX-60056. Subjects then received additional infusions of PMX-60056 until the remaining heparin was fully reversed. Following the first reversal of heparin, a second dose of 100 U/kg of heparin was administered to achieve re-anticoagulation, which was then also reversed with PMX-60056. PMX-60056 was generally well tolerated with no serious adverse events reported during the study.
 
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 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.  The primary endpoint of the study is to evaluate the safety and efficacy of PMX-60056 in reversing UFH in a surgical setting. Final results from the study are expected during the first half of 2012.
 
In September 2011, we initiated a Phase 1B/2 clinical study to evaluate the safety and efficacy of PMX-60056 in reversing the anticoagulant activity of the LMWH enoxaparin (Lovenox®).  This open-label, dose-response, Phase 1B/2 study will be conducted at a single site in the United States and enroll up to 18 healthy male and female subjects. The primary objective of the study is to assess the safety of using PMX-60056 in subjects that have received enoxaparin.  Final results from the study are expected during the first half of 2012.
 
PRECLINICAL PROGRAMS:
 
In addition to our clinical programs, we have conducted preclinical studies for other product candidates, including; compounds active against Gram-negative bacteria, fungal infections, malaria, tuberculosis, biowarfare pathogens, and PolyCide® antimicrobial biomaterials.  These preclinical programs are either currently on hold or are being supported primarily by grants or research contracts.  Further, we may consider expanding or initiating other development activities if and when we are able to generate sufficient additional funding and resources.
 

 
5

 

Commercialization Strategy
 
Our primary goal is to discover and develop novel agents for the treatment of serious acute care conditions.  To achieve this objective, we are implementing the following strategies:
 
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 may consider, among other things, entering into agreements with third parties for development and commercialization rights.  Our priority is to continue to internally develop PMX-30063 and our infectious disease franchise in more advanced trials and/or broader potential uses. To that end, we may seek out-licensing opportunities with respect to our other programs, including PMX-60056 and our antimicrobial polymers (PolyCides).  If we are successful in capitalizing on any such opportunities, they could generate multiple sources of revenue, such as up-front fees, research funding, milestone payments and royalties, and allow us to focus and partially fund the future internal development of our retained programs.
 
We intend to out-license selected product candidates from certain internal programs, such as our PolyCides®. Such collaborations could generate multiple sources of revenue, such as up-front fees, research funding, milestone payments and royalties.
 
Research and Development
 
We incurred research and development expenses of $13,775,000, $10,951,000, and $7,374,000 for the years ended December 31, 2011, 2010 and 2009, respectively.
 
 
6

 

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 the following:
 
Patent
Status
Description
COMPOSITION AND USE PATENTS
Design, preparation and properties of antibacterial beta-peptides. (1)
 
United States - Issued 01/13/04
This patent claims composition of matter for particular beta-peptides that have antibacterial properties.  It also claims pharmaceutical preparations containing particular antibacterial beta-peptides and methods for creating sanitizing surfaces by treatment with an antibacterial beta-peptide.
 
Amphiphilic Polymers as Anti-Infective Agents: 1 (1)
 
United States – filed
Patent Cooperation Treaty – filed
National Phase entered
United States - issued 02/06/2007
European Patent - issued 09/17/2008
Other issued patents include Australia, China, Japan, South Korea
 
These patents and application family claims composition of matter for facially amphiphilic polymers that are polyamides, polyesters, polyurea, polyurethane, polycarbonate, or polyphenylene, compounds.  Also claimed are material articles made from the amphiphilic polymers that have antimicrobial properties.
 
Amphiphilic Polymers as Anti-Infective Agents: 2 (Phenylalkynes) (1)
 
United States – filed
 
Patent Cooperation Treaty – filed
 
National Phase entered
 
European Patent - issued 05/25/2011
 
Other issued patents: Australia, South Korea
 
European Divisional filed
 
Other divisional filings: Japan, China
 
These patents are similar to “Amphiphilic Polymers as Anti-Infective Agents: 1” above, but further claims facially amphiphilic polymers that are polyphenylene and heteroarylene compounds.
 
 
Facially amphiphilic polymers and oligomers and uses thereof: 1 (1)
 
United States - filed
Patent Cooperation Treaty - filed
National Phase entered
 
Other issued patents: Australia
 
United Stated Divisional – filed
 
European Divisionals – four filed
 
Other Divisional filings: Australia, China, Japan
 
 
This application claims pharmaceutical compositions and uses for facially amphiphilic polymers, oligomers and small molecules that are polyamides, polyesters, polyurea, polyurethane, polycarbonate, or polyphenylene, compounds.  Uses include method of treatment (systemic and topical) as antimicrobial agents against bacteria, fungi and viruses and as an antidote to heparin and LMWH.  Also, composition of matter claims are expanded.
 

 
 
7

 
 
   Patent  Status  Description
Facially amphiphilic polymers and oligomers and uses thereof: 2 (Phenylalkynes) (1)
United States - filed
Patent Cooperation Treaty - filed
National Phase entered
 
United States patent issued (date pending)
 
United States Divisional – filed
 
European Divisional - filed
 
These patents are similar to “Amphiphilic Polymers as Anti-Infective Agents: 1” above, except that the small molecules to which it claims use are polyphenylene and heteroarylene compounds.
 
Polycationic Compounds and Uses thereof
 
United States – filed
 
Patent Cooperation Treaty – filed
 
National Phase entered
 
United States patent issued 06/30/2009
 
United States Continuations – three filed
 
United States patents issued 06/29/2010 and 03/06/2012 and one pending
 
Other Divisional filings: Japan, China
This application claims method of use for modulating angiogenesis with polycationic compounds, compositions of anti-heparin compounds and methods of inhibiting heparin activity.
 
Composition and Use of Polymethacrylate Co-Polymers (1)
 
United States - filed
Patent Cooperation Treaty - filed
National Phase entered
European Divisionals - three filed
This application claims amphiphilic co-polymers that exhibit antimicrobial activity and uses in a number of pharmaceutical and material applications.
 
Composition and Use of Polynorbornene Co-Polymers (2)
United States - filed
Patent Cooperation Treaty - filed
National Phase entered
 
European Divisional filed
 
Other patents issued: Australia, China
This application specifies novel polynorbornene polymers and co-polymers and their use as antimicrobial agents for pharmaceutical and material applications.
 
Facially Amphiphilic Polymers and Oligomers, Compositions Thereof, and Use Thereof in Methods of Treating Cancer (1,2)
United States - filed
Patent Cooperation Treaty - filed
National Phase entered
 
European Divisional filed
 
Other Divisional filed - Japan
 
Other patent issued: Australia
 
This application claims pharmaceutical compositions and uses for facially amphiphilic polymers, oligomers and small molecules to treat cancers.
 
 
 
 
8

 
 
 Patent  Status  Description
Ophthalmic and Otic Compositions of Facially Amphiphilic Polymers and Oligomers and Use Thereof
United States - filed
Patent Cooperation Treaty - filed
National Phase entered
 
Other patents issued: China
 
Other divisional filings: China (two)
This application relates to antimicrobial compositions of facially amphiphilic antimicrobial polymers and oligomers useful for the treatment or prevention of ophthalmic and otic infections.  The application also relates to methods of using the compositions for treating and/or preventing ophthalmic and otic infections.
Combination of Synthetic Antimicrobial Polymers and Sesquiterpenoid Compounds
 
United States - filed
 
This application relates to the combination of facially amphiphilic antimicrobial polymers and oligomers with sesquiterpenoids to enhance antimicrobial activities.
 
Anti-Malarial  Compounds
United States - filed
Patent Cooperation Treaty - filed
National Phase entered
 
This application relates in to arylamide and other classes of compounds and their use in treating malaria.
 
Synthetic Mimetics of Host Defense and Uses Thereof
United States - filed
Patent Cooperation Treaty - filed
National Phase entered
 
This application relates to arylamide compounds, their antimicrobial uses and methods of synthesis.
 
Antimicrobial Molecules for Treating Multi-Drug Resistant and Extensively-Drug Resistant Strains of Mycobacterium
United States - filed
Patent Cooperation Treaty - filed
National Phase entered
 
This application relates to treating multi-drug resistant and extremely drug resistant strains of mycobacterium with antimicrobial compounds and compositions.
 
Antimicrobial Polymers (2)
United States – filed
Patent Cooperation Treaty – filed
National Phase entered
This application relates to compositions of polynorborene polymers useful as antimicrobials and delivery vehicles for cell entry of macromolecules.
Processes for Preparing a Polymeric Compound
 
United States - filed
Patent Cooperation Treaty - filed
 
This application relates to preferred methods for synthesizing and preparing pharmaceutical compositions of representative compounds in the salicylamide class of compounds
Anti-Heparin Compounds
 
United States - filed
Patent Cooperation Treaty - filed
This application relates to methods of antagonizing anticoagulant agents, such as unfractionated heparin, low molecular weight heparin, and/or a derivatives and compositions of the antagonists.
Methods of Immune Modulation
 
United States - filed
Patent Cooperation Treaty - filed
The present invention is directed, in part, to methods of modulating an immune response in an animal with facially amphiphilic compounds.
Facially Amphiphilic Compounds, Compositions, and Uses Thereof
in Treating Cancer
United States - filed
Patent Cooperation Treaty - filed
The present invention relates to compositions of facially amphiphilic compounds and their use in methods for treating cancers in animals, such as humans.
COMPUTATIONAL PATENTS
Methods, systems and computer program products for computational analysis and design of amphiphilic polymers (1)
United States - issued 09/15/2009
 
This application is directed to the creation and use of novel force field packages for modeling the structure and behavior of complex molecules in complex environments.  Specific utilities are the prediction of oligomer structures in polar and apolar medias.
 
 
 
9

 
 
Patent  Status  Description
Computer simulation of biomembranes using a Coarse Grain Model (1)
 
United States - filed
 
This application is directed to the creation and use of a novel coarse grain model for studying complex biological structures, such as membranes.  Specifically a computational approach is described that accurately predicts the structural and dynamic properties of membranes that are far less demanding of CPU time than comparable methods.
Computational design of a water-soluble analog of a protein, such as phospholamban and potassium channel Kcsa (1)
United States - filed
 
This application claims methods and computer programs for the computational design of water-soluble analogs of membrane proteins that retain biological function.
 
 
 
(1)
Patent rights obtained pursuant to a license agreement with the University of Pennsylvania.
 
(2)
Patent rights obtained pursuant to a license agreement with the University of Massachusetts-Amherst.

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 the marks PolyMedix,® PolyCide®, and PolyDentix®.
 
COMPETITION:
 
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., and Rib-X Pharmaceuticals 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.
 
Many of 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.

 
10

 
 
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:
 
 
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;
 
 
Ø
execution of adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each indication for which approval is sought;
 
 
Ø
submission to the FDA of a New Drug Application (NDA), or biologics license application, or BLA;
 
 
Ø
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current Good Manufacturing Practices (cGMP); and
 
 
Ø
FDA review and approval of the NDA or BLA, or any supplements thereto, including, if applicable, a determination of its controlled substance schedule.
 

 
11

 
 
Preclinical studies generally are conducted in laboratory animals to evaluate the potential safety and activity of a product.  Violation of the FDA’s good laboratory practices regulations can, in some cases, lead to invalidation of the studies, requiring these studies to be replicated.  In the U.S., drug developers submit the results of preclinical trials, together with manufacturing information and analytical and stability data, to the FDA as part of the IND, which must become effective before clinical trials can begin in the U.S.  An IND becomes effective 30 days after receipt by the FDA unless before that time the FDA raises concerns or questions about the proposed clinical trials outlined in the IND.  In that case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed.  If these concerns or questions are unresolved, the FDA may not allow the clinical trials to commence.
 
Clinical trials involve the administration of the investigational product candidate or approved products to human subjects under the supervision of qualified investigators.  Clinical trials are conducted under protocols detailing, among other things, the objectives of the study and the parameters to be used in assessing the safety and the effectiveness of the drug.  Typically, clinical evaluation involves a time-consuming and costly three-phase sequential process, but the phases may overlap.  Each trial must be reviewed, approved and conducted under the auspices of an independent institutional review board, and each trial must include each patient’s informed consent.  The following sets forth a brief description of the typical phases of clinical trials:
 
Phase 1
Refers typically to closely monitored clinical trials and includes the initial introduction of an investigational new drug into human patients or healthy volunteer subjects.  Phase 1 clinical trials are designed to determine the safety, metabolism and pharmacologic actions of a drug in humans, the potential side effects of the product candidates associated with increasing drug doses and, if possible, to gain early evidence of the product candidate’s effectiveness.  Phase 1 trials also include the study of structure-activity relationships and mechanism of action in humans, as well as studies in which investigational drugs are used as research tools to explore biological phenomena or disease processes.  During Phase 1 clinical trials, sufficient information about a drug’s pharmacokinetics and pharmacological effects should be obtained to permit the design of well-controlled, scientifically valid Phase 2 studies.  The total number of subjects and patients included in Phase 1 clinical trials varies, but is generally in the range of 20 to 80 people.  Phase 1 clinical studies generally take from six to 30 months to complete.
 
Phase 2
Refers to controlled clinical trials conducted to evaluate appropriate dosage and the effectiveness of a drug for a particular indication or indications in patients with a disease or condition under study and to determine the common short-term side effects and risks associated with the drug.  These clinical trials are typically well controlled, closely monitored and conducted in a relatively small number of patients, usually involving no more than several hundred subjects, and may take 2 to 3 years to complete.
 
Phase 3
Refers to expanded controlled and uncontrolled clinical trials.  These clinical trials are performed after preliminary evidence suggesting effectiveness of a drug has been obtained.  Phase 3 clinical trials are intended to gather additional information about the effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis for physician labeling.  Phase 3 trials usually include from several hundred to several thousand subjects.  Phase 3 testing varies by disease state, but can often last from 2 to 7 years.
 
Phase 4
Refers to trials conducted after approval of a new drug and which explore approved uses and approved doses of the product.  These trials must also be approved and conducted under the auspices of an institutional review board.  Phase 4 studies may be required as a condition of approval.
 
Clinical testing may not be completed successfully within any specified time period, if at all.  The FDA closely monitors the progress of each of the first three phases of clinical trials that are conducted in the U.S. and may, at its discretion, reevaluate, alter, suspend or terminate the testing based upon the data accumulated to that point and the FDA’s assessment of the risk/benefit ratio to the patient.  The FDA can also provide specific guidance on the acceptability of protocol design for clinical trials.  The FDA or we may suspend or terminate clinical trials at any time for various reasons, including a finding that the subjects or patients are being exposed to an unacceptable health risk.  The FDA can also request additional clinical trials be conducted as a condition to product approval.  During all clinical trials, physicians monitor the patients to determine effectiveness and to observe and report any reactions or other safety risks that may result from use of the drug candidate.

 
12

 

Assuming successful completion of the required clinical trial, drug developers submit the results of preclinical studies and clinical trials, together with other detailed information including information on the chemistry, manufacture and control of the product, to the FDA, in the form of an NDA or BLA, requesting approval to market the product for one or more indications.  In most cases, the NDA/BLA must be accompanied by a substantial user fee.  The FDA reviews an NDA/BLA to determine, among other things, whether a product is safe and effective for its intended use.
 
Before approving an application, the FDA will inspect the facility or facilities where the product is manufactured.  The FDA will not approve the application unless cGMP compliance is satisfactory.  The FDA will issue an approval letter if it determines that the application, manufacturing process and manufacturing facilities are acceptable.  If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and will often request additional testing or information.  Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval and refuse to approve the application by issuing a “not approvable” letter.
 
The testing and approval process requires substantial time, effort and financial resources, which may take several years to complete.  The FDA may not grant approval on a timely basis, or at all.  We may encounter difficulties or unanticipated costs in our efforts to secure necessary governmental approvals, which could delay or preclude us from marketing our products.  Furthermore, the FDA may prevent a drug developer from marketing a product under a label for its desired indications or place other conditions, including restrictive labeling, on distribution as a condition of any approvals, which may impair commercialization of the product.  After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval.
 
If the FDA approves the NDA/BLA, the drug can be marketed to physicians to prescribe in the U.S.  After approval, the drug developer must comply with a number of post-approval requirements, including delivering periodic reports to the FDA, submitting descriptions of any adverse reactions reported, biological product deviation reporting, and complying with drug sampling and distribution requirements.  The holder of an approved NDA/BLA is required to provide updated safety and efficacy information and to comply with requirements concerning advertising and promotional labeling.  Also, quality control and manufacturing procedures must continue to conform to cGMP after approval.  Drug manufacturers and their subcontractors are required to register their facilities and are subject to periodic unannounced inspections by the FDA to assess compliance with cGMP, which imposes procedural, and documentation requirements relating to manufacturing, quality assurance and quality control.  Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.  The FDA may require post-market testing and surveillance to monitor the product’s safety or efficacy, including additional studies to evaluate long-term effects.
 
In addition to studies requested by the FDA after approval, a drug developer may conduct other trials and studies to explore use of the approved drug for treatment of new indications, which require submission of a supplemental or new NDA and FDA approval of the new labeling claims. The purpose of these trials and studies is to broaden the application and use of the drug and its acceptance in the medical community.
 
Foreign Regulation
 
Whether or not we obtain FDA approval for a product, we must obtain approval of a clinical trial or product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries.  The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval.  The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement also vary greatly from country to country.  Although governed by the applicable country’s regulations, clinical trials conducted outside of the U.S. typically are administered with the three-phase sequential process that is discussed above under “U.S.  Government Regulation.” However, the foreign equivalent of an IND is generally not a prerequisite to performing pilot studies or Phase 1 clinical trials.
 
Furthermore, regulatory approval of prices is required in most countries other than the U.S.  We face the risk that the resulting prices would be insufficient to generate an acceptable return.
 
 
13

 

Business History
 
PolyMedix traces its roots to the incorporation of our subsidiary, PolyMedix Pharmaceuticals, Inc., which was incorporated in August 2002 as “PolyMedix, Inc.”  That corporation commenced operations as a biotechnology company focused on treating infectious diseases, and continues those operations to this day.
 
Our public holding company, PolyMedix, Inc., is a Delaware corporation, incorporated in March 2005 and formerly known as BTHC II Acquisition Corp.  Prior to its acquisition of our operating company, BTHC II Acquisition Corp. was a public shell company, which resulted from the reorganization of one of a group of affiliated debtors, BTHC II LLC, pursuant to an amended plan of reorganization approved by the U.S. Bankruptcy Court for the Northern District of Texas in November 2004.
 
BTHC II Acquisition Corp. acquired our operating company (then known as “PolyMedix, Inc.”) in November 2005, pursuant to an agreement and plan of merger and reorganization.  In accordance with the agreement, the former stockholders of the operating company exchanged their equity ownership interests in the operating company for an aggregate 94 percent equity ownership interest in BTHC II Acquisition Corp., and our operating company merged with PolyMedix Merger Sub, Inc., a wholly-owned subsidiary of BTHC II Acquisition Corp.  As a result of the merger, our operating company became a wholly-owned subsidiary of BTHC II Acquisition Corp.
 
At the time of the merger, neither BTHC II Acquisition Corp. nor its merger subsidiary had any operations, assets or liabilities.  Because the former stockholders of the operating company exchanged their equity ownership interests in the operating company for an aggregate 94 percent equity ownership interest in the former BTHC II Acquisition Corp., our operating company was, for accounting purposes, the surviving entity of the merger.  Accordingly, all financial information included in this report for the periods prior to the merger is for PolyMedix Pharmaceuticals, Inc.
 
On February 24, 2006, the parent corporation changed its name from “BTHC II Acquisition Corp.” to “PolyMedix, Inc.”, and the operating company changed its name from “PolyMedix, Inc.” to “PolyMedix Pharmaceuticals, Inc.”
 
Employees
 
We currently have 28 full-time employees, including one M.D. and 15 employees with Ph.D. degrees.  Nineteen of our employees are focused on research and development and nine are focused on general administration.  We also utilize a number of consultants to assist with research and development activities.
 
Securities and Exchange Commission Filings
 
We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information with the SEC.  Members of the public may read and copy materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.  Members of the public may also obtain information on the Public Reference Room by calling the SEC at 1-800-732-0330.  The SEC also maintains an Internet web site that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC.  The address of that site is www.sec.gov.  We also make our SEC filings available free of charge through our web site, www.polymedix.com, under “Investors/Financials/SEC Filings.”
 

 
14

 

Item 1A. Risk Factors.
 
Risks Related to Our Business
 
We have incurred losses since inception and anticipate that we will continue to incur losses for the foreseeable future.

We are a development stage company with a limited operating history.  As of December 31, 2011, we had an accumulated deficit of approximately $84,134,000.  We expect to continue to incur significant and increasing operating losses, in the aggregate and on a per share basis, for the foreseeable future.  These losses, among other things, have had and will continue to have an adverse effect on our results of operations, financial condition, stockholders’ equity, net current assets and working capital.
 
Because of the numerous risks and uncertainties associated with developing new drugs, we are unable to predict the extent of any future losses or when we will become profitable, if at all.  Currently, we have no products available for commercial sale, and, to date, we have not generated any product revenue.  We have financed our operations and internal growth primarily through equity and debt financings.  We have devoted substantially all of our efforts to research and development, including current Good Manufacturing Practices (cGMP) manufacturing and current Good Laboratory Practices (cGLP) compliant toxicology, safety pharmacology, genotoxicity studies and clinical studies for our lead clinical product candidates.

If we are unable to meet our needs for additional funding in the future, we will be required to limit, scale back or cease operations.

We do not currently have the funding resources necessary to carry out all of our proposed operating activities.   We will need to obtain additional financing in the future in order to fully fund these product candidates through the regulatory approval process. Costs of our proposed activities unrelated to our two lead product candidates would be in addition to these estimates.
 
We believe that our current cash and investment balances as of the date of this report will be sufficient to fund the completion of our ongoing Phase 2 studies for each PMX-30063 and PMX-60056, as well as fund our operations for at least the next 12 months. If we are unable to secure adequate additional funding in the future, we may delay, scale-back or eliminate certain of our planned research, drug discovery and development activities and certain other aspects of our operations and our business until such time as we are successful in securing adequate additional funding. As a result, our business may be materially and adversely affected.
 
As of the date of this report, we estimate that the direct development costs for the present ongoing clinical studies for each PMX-30063 and PMX-60056 will be approximately $6 million to $8 million for PMX-30063 and $1 million to $3 million for PMX-60056.  We expect that the direct development costs to conduct a second Phase 2 clinical study for PMX-30063 will be approximately $4 million to $6 million.  We will incur substantial costs beyond the present and planned Phase 2 trials in order to file a New Drug Application (NDA) for PMX-30063 and PMX-60056, in each case the nature, design, size and cost of further studies will depend in large part on the outcome of preceding studies and discussions with regulators.
 
Our future capital requirements will depend on many factors, including:
 
 
Ø
the timing and success of our clinical trials for PMX-30063 and PMX-60056;
 
 
Ø
continued progress of and increased spending related to our research and development activities, including our plan to hire additional research and development employees;
 
 
Ø
the conditions in the capital markets and the biopharmaceutical industry that make raising capital or entering into strategic arrangements difficult and expensive;
 
 
Ø
progress with preclinical experiments and clinical trials, including regulatory approvals necessary for advancement and continuation of our development programs;
 
 
Ø
changes in regulatory requirements and guidance of the FDA and other regulatory authorities, which may require additional clinical trials to evaluate safety and/or efficacy, and thus have significant impacts on our timelines, cost projections, and financial requirements;
 
 
Ø
ongoing general and administrative expenses related to our being a reporting company;
 
 
15

 
 
 
Ø
the cost, timing, and results of regulatory reviews and approvals;
 
 
Ø
the maintenance of our existing licenses with Penn and UMass;
 
 
Ø
the success, timing, and financial consequences of any future collaborative, licensing and other arrangements that we may establish;
 
 
Ø
the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
 
 
Ø
the costs of commercializing any of our other product candidates;
 
 
Ø
technological and market developments;
 
 
Ø
the cost of manufacturing development; and
 
 
Ø
timing and volume of sales of products for which we obtain marketing approval.
 
These factors could result in variations from our currently projected operating and liquidity requirements.  Additional funds may not be available when needed, or, if available, we may not be able to obtain such funds on terms acceptable to us.  If adequate funds are unavailable, we may be required, among other things, to:
 
 
Ø
delay, reduce the scope of or eliminate one or more of our research or development programs;
 
 
Ø
license rights to technologies, product candidates or products at an earlier stage than otherwise would be desirable or on terms that are less favorable to us than might otherwise be available; or
 
 
Ø
obtain funds through arrangements that may require us to relinquish rights to product candidates or products that we would otherwise seek to develop or commercialize by ourselves.
 
Funding, especially on terms acceptable to us, may not be available to meet our future capital needs because of the state of the credit and capital markets.

Global market and economic conditions have been, and continue to be, disruptive and volatile. The debt and equity capital markets have been impacted by significant write-offs in the financial services sector and the re-pricing of credit risk in the broadly syndicated market, among other things. These events have negatively affected general economic conditions and it is uncertain when the credit and capital markets will stabilize or improve.

In particular, the cost of raising money in the debt and equity capital markets has increased substantially while the availability of funds from those markets has diminished significantly. Also, as a result of concern about the stability of financial markets generally and the solvency of counterparties specifically, the cost of obtaining money from the credit markets has increased as many lenders and institutional investors have increased interest rates, enacted tighter lending standards and reduced and, in some cases, ceased to provide funding to borrowers. Low valuations and decreased appetite for equity investments, among other factors, may make the equity markets difficult to access on acceptable terms or unavailable altogether.

If funding is not available when needed, or is available only on unfavorable terms, meeting our capital needs or otherwise taking advantage of business opportunities may become challenging, which could have a material adverse effect on our business plans.
 
We have pledged substantially all of our assets, other than our intellectual property, as collateral to secure certain credit facilities and have provided the lenders with remedies in the event of a default, including the ability to collect and liquidate the collateral.
 
We have established a $10 million credit facility with Hercules Technology II, L.P., or “Hercules,” and a $1,000,000 letter of credit agreement to secure our payment obligations under our facility operating lease.  We may renew or extend these credit facilities or establish similar credit facilities in the future.  If we do not make required payments to our secured creditors or otherwise experience an event of default, our secured creditors may exercise all remedies available under to them under the applicable credit agreements and applicable law, including acceleration of our obligations to them and the collection and liquidation of the collateral.  While we have not pledged our intellectual property as collateral, we have pledged the rights to any payments and proceeds from the sale, licensing or disposition of all or any part our intellectual property.
 
 

 
16

 

We may not be able to access sufficient funds under our Equity Line with Dutchess Opportunity Fund, II, L.P. when needed.

Our ability to put shares to Dutchess and obtain funds under our Equity Line is limited by the terms and conditions in the Investment Agreement with Dutchess, including restrictions on when we may exercise our put rights, restrictions on the amount we may put to Dutchess at any one time, which is determined in part by the trading volume of our common stock, and a limitation on our ability to put shares to Dutchess to the extent that it would cause Dutchess to beneficially own more than 4.99% of our outstanding shares. In addition, we do not expect the Equity Line to satisfy all of our funding needs, even if we are able and choose to take full advantage of the Equity Line.  In addition, this Investment Agreement expires in July 2012.

Development of our product candidates is a lengthy, expensive and uncertain process that requires investment of substantial amounts of time and money that may not yield viable products, which may cause our business and results of operations to suffer.
 
We face the risks of failure inherent in developing drugs based on new technologies and particularly those with novel mechanisms of action. Product candidates with novel mechanisms of action may receive increased scrutiny by the FDA and other regulatory bodies due to the greater uncertainty and questions regarding potential novel toxicities, which could result in requirements for additional safety and other studies, which, if required, would increase the time and cost of development. None of our product candidates have received regulatory approval for commercial sale and our product candidates may never be commercialized. In addition, all of our product candidates are in the early stages of development and certain of our programs are on hold until we are able to obtain and allocate sufficient resources, including financing. The progress and results of any ongoing or future clinical trials or future pre-clinical testing are uncertain, and if our product candidates do not receive regulatory approvals, our business, operating results, financial condition and cash flows will be materially adversely affected. Our product candidates are not expected to be commercially available for several years, if at all.
 
Our development programs require a significant amount of cash to support the development of product candidates.  We will need to obtain additional financing in the future. We may not be able to obtain such additional financing on terms acceptable to us or at all.
 
In addition, a number of potential drugs, including drugs intended to be utilized for similar indications as our product candidates, have shown promising results in early studies, but failed in subsequent clinical trials and/or failed to obtain necessary regulatory approvals. Data obtained from such studies are susceptible to varying interpretations, which may delay, limit or prevent regulatory approval. Regulatory authorities may refuse or delay approval as a result of many other factors, including changes in regulatory policy during the period of product development.
 
The FDA has been actively working to revise certain of its guidance and in August 2010 issued draft guidance for clinical trial conduct, evaluation, clinical endpoints, and requirements for regulatory approval for antibiotic product candidates intended for use in acute bacterial infections, including acute bacterial skin and skin structure infections (ABSSSI), which has been the intended first clinical indication for PMX-30063.  Based on the potential impacts of revised final FDA guidance, there may be delays in the conduct of clinical trials in the United States.  Furthermore, there has not been a new product candidate for heparin reversal considered by the FDA in recent years, and there has never to date been a product candidate for reversal of LMWH considered by the FDA.  The FDA and/or other foreign regulatory authorities may in the future request clinical trial parameters that result in clinical trials that are too expensive or too difficult to demonstrate pharmacoeconomic and therapeutic benefits compared to current therapy. As a result, our present plans for clinical development, including the cost and timing for development of our product candidates, may ultimately be substantially different than our present expectations, and there is no way of predicting what impacts on our timelines, cost projections, and clinical trials requirements may result from these changes in policy, requirements, standards, and guidance of the FDA and other regulatory authorities.
 
Completion of clinical trials may take many years. The length of time required varies substantially according to the type, complexity, novelty and intended use of the product candidate. The FDA and/or other foreign regulatory authorities monitor the progress of each phase of testing, and may require the modification, suspension, or termination of a trial if it is determined to present excessive risks to patients. The clinical trial process may also be accompanied by substantial delay and expense and the data generated in these studies ultimately may not be sufficient for marketing approval by the FDA and/or other foreign regulatory authorities. Our rate of commencement and completion of clinical trials may be delayed by many factors, including:
 

 
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our inability to manufacture or obtain sufficient quantities of materials for use in clinical trials;
 
 
Ø
variability in the number and types of patients available for each study;
 
 
Ø
difficulty in maintaining contact with patients after treatment, resulting in incomplete data;
 
 
Ø
safety issues or side effects;
 
 
Ø
poor or unanticipated effectiveness of products during the clinical trials;
 
 
Ø
government or regulatory delays; and/or
 
 
Ø
changes in regulatory requirements and guidance of the FDA and other regulatory authorities, which may require additional clinical trials to evaluate safety and/or efficacy, and thus have significant impacts on our timelines, cost projections, and financial requirements.
 
Notwithstanding our efforts during the application process and the submission of any requested additional information, the FDA and/or other foreign regulatory authorities ultimately may decide that the application does not satisfy the regulatory criteria for approval and refuse to approve the application.  Furthermore, the FDA and/or other foreign regulatory authorities may prevent us from marketing a product candidate under a label for its desired indications or place other conditions, including restrictive labeling, on distribution as a condition of any approvals, which may impair commercialization of the product.
 
We are a development stage company, which makes it difficult to evaluate our existing business and business prospects and increases the risk that the value of any investment in our company may decline.
 
We are a development stage company and to date, our only revenues have been from research grants and contracts.  We will not be able to generate revenue from product sales or royalties unless and until we receive regulatory approval and begin commercialization of our product candidates or otherwise out license our compounds.  We are not certain of when, if ever, that will occur.  Although we intend to introduce products, we may not do so.  Because the expected markets for our products are not established, uncertain and evolving, and because we are a development stage company, it is difficult to assess or predict the growth rate, if any, and the size of this market.  We may not develop additional product candidates or be able to introduce products, a market for our products may not develop, and/or our products may not achieve market acceptance.
 
If our product candidates are not demonstrated to be sufficiently safe and effective in clinical trials, they will not receive regulatory approval and we will be unable to commercialize them and our business and results of operations will suffer.
 
Our product candidates must satisfy rigorous standards of safety and efficacy before they can be approved by the FDA and/or other foreign regulatory authorities for commercial use.  The FDA and foreign regulatory authorities have full discretion over this approval process.  We will need to conduct significant additional research, involving testing in animals and in humans, before we can file applications for product approval.  Typically, in the pharmaceutical industry there is a high rate of attrition for product candidates in pre-clinical testing and clinical trials.  Also, satisfaction of regulatory requirements typically takes many years, is dependent upon the type, complexity and novelty of the product and requires the expenditure of substantial resources.  Success in pre-clinical testing and early clinical trials does not ensure that later clinical trials will be successful.  For example, a number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials and in interim analyses.  In addition, delays or rejections may be encountered based upon additional government regulation, including any changes in regulatory policy, during the process of product development, clinical trials and regulatory approvals.
 
If we are not able to retain our current management and advisory team and attract and retain qualified scientific, technical and business personnel, our business will suffer.
 
We are highly dependent on our executive officers and other key management and technical personnel, including Nicholas Landekic, Daniel M. Jorgensen, MD, MPH, Bozena Korczak, Ph.D., Richard Scott, Ph.D., and Edward Smith.  The loss of any of them could have a material adverse effect on our future operations.  We presently do not maintain “key person” life insurance policies on any of our personnel.
 
Our success is also dependent on our ability to attract, retain and motivate highly trained technical, marketing, sales and management personnel for the development, maintenance and expansion of our activities.  We may not be able to retain our existing personnel or attract additional qualified employees.  The loss of key personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on our business, financial condition, and results of operation.

 
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Our success is dependent on the continuation of certain licensing arrangements and other strategic relationships with third parties.  These arrangements and relationships may not continue and we may not be successful in entering into other similar arrangements and relationships.
 
All of our product candidates are licensed from or based upon licenses from either Penn or UMass.  If either or any of these license agreements, or the related consulting arrangements, are properly terminated, our ability to advance our current product candidates or develop new product candidates will be materially adversely affected.
 
We depend, and will continue to depend, on these arrangements, and potentially on other licensing arrangements and/or strategic relationships with third parties for the research, development, manufacturing and commercialization of our product candidates.  If any of our licenses or relationships are terminated or breached, we may:
 
 
Ø
lose our rights to develop and market our product candidates;
 
 
Ø
lose patent and/or trade secret protection for our product candidates;
 
 
Ø
experience significant delays in the development or commercialization of our product candidates;
 
 
Ø
not be able to obtain any other licenses on acceptable terms, if at all; and/or
 
 
Ø
incur liability for damages.
 
Licensing arrangements and strategic relationships in the pharmaceutical and biotechnology industries can be very complex, particularly with respect to intellectual property rights.  Disputes may arise in the future regarding ownership rights to technology developed by or with other parties.  These and other possible disagreements between us and third parties with respect to our licenses or our strategic relationships could lead to delays in the research, development, manufacture and commercialization of our product candidates.  These third parties may also pursue alternative technologies or product candidates either on their own or in strategic relationships with others in direct competition with us.  These disputes could also result in litigation or arbitration, both of which are time consuming and expensive, and could require significant time and attention from our management.
 
Even if regulatory authorities approve our product candidates, they may not be commercially successful.
 
Our product candidates may not be commercially successful because physicians, government agencies and other third party payors may not accept them, or the potential markets may prove smaller than we estimate.  Third parties may develop superior products or have proprietary rights that preclude us from marketing our products.  We also expect that most of our product candidates will be very expensive, if approved.  If we do obtain regulatory approval for any of our product candidates, we will need to achieve patient acceptance and demand in order to be commercially successful.  Patient acceptance of and demand for any product candidates will depend upon many factors, including but not limited to, the extent, if any, of reimbursement of drug and treatment costs by government agencies and other third party payers, pricing, the safety and effectiveness of alternative products, and the prevalence and severity of side effects associated with our products.  If we are unable to demonstrate pharmacoeconomic and therapeutic benefits, we will not achieve product acceptance and sufficient demand, and our operating results and financial condition will be materially adversely affected.
 
We do not currently have sales, marketing or distribution capabilities.  If we fail to effectively sell, market and distribute any product candidate for which we receive regulatory approval, our business and results of operations will suffer.
 
If we are unable to create sales, marketing and distribution capabilities or enter into agreements with third parties to perform these functions, we will not be able to successfully commercialize any of our product candidates that may receive regulatory approval in the future.  We currently have no sales, marketing or distribution capabilities.  In order to successfully commercialize any of our product candidates, we must either internally develop sales, marketing and distribution capabilities or make arrangements with third parties to perform these services.
 
If we do not develop a marketing and sales force with technical expertise and supporting distribution capabilities, we will be unable to market any of our products directly.  To promote any of our products through third parties, we will have to locate acceptable third parties for these functions and enter into agreements with them on acceptable terms and we may not be able to do so.  In addition, any third-party arrangements we are able to enter into may result in lower revenues than we could have achieved by directly marketing and selling our products.
 
 

 
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We may suffer losses from product liability claims.
 
Any of our product candidates could cause adverse events to patients, such as immunologic or allergic reactions.  These reactions may not be observed in clinical trials, but may nonetheless occur after commercialization.  If any of these reactions occur, they may render our product candidates ineffective in some patients and our sales would suffer.
 
We may be susceptible to product liability lawsuits from events arising out of the use of product candidates in clinical studies.  If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of any products or product candidates.  Our business exposes us to potential product liability risks, which are inherent in the testing, manufacturing, marketing and sale of pharmaceutical products.  We may not be able to avoid product liability claims. Product liability insurance for the pharmaceutical and biotechnology industries is generally expensive, if available at all.  If we are unable to protect against potential product liability claims, we may be unable to commercialize our product candidates.  A successful product liability claim brought against us in excess of our insurance coverage may cause us to incur substantial liabilities and, as a result, our business may fail.
 
Due to our reliance on third party manufacturers, suppliers and research organizations, we may be unable to implement our manufacturing, supply and clinical operations strategies, which would materially harm our business.
 
If our current and future licensing, manufacturing and supply strategies are unsuccessful, then we may be unable to complete any preclinical or clinical trials and/or commercialize our product candidates in a timely manner, if at all.  Completion of any preclinical or clinical trials and/or commercialization of our product candidates will require access to, or development of, facilities to manufacture a sufficient supply of our product candidates, or the ability to license them to other companies to perform these functions.  We do not have the resources, facilities or experience to manufacture our product candidates on our own and do not intend to develop or acquire facilities for the manufacture of product candidates for pre-clinical trials, clinical trials or commercial purposes in the foreseeable future.  We intend to continue to license technology and/or rely on contract manufacturers to produce sufficient quantities of our product candidates necessary for any pre-clinical or clinical testing we undertake.  Such contract manufacturers may be the sole source of production and may have limited experience at manufacturing, formulating, analyzing, filling and finishing our types of product candidates.
 
We also intend to rely on third parties to supply the components that we will need to develop, test and commercialize all of our product candidates.  There may be a limited supply of these components.  We might not be able to enter into agreements that assure us of the availability of such components in the future from any supplier.  Our potential suppliers may not be able to adequately supply us with the components necessary to successfully conduct our pre-clinical and clinical trials and/or to commercialize our product candidates.  If we cannot acquire an acceptable supply of components to produce our product candidates, we will not be able to complete pre-clinical and clinical trials and will not be able to commercialize our product candidates.
 
In addition, we rely on contract research organizations in conducting clinical trials for our product candidates.  We do not have the resources, facilities or experience to conduct clinical studies for our product candidates on our own and do not intend to develop or acquire such resources, facilities or experience in the foreseeable future.  The quality, cost and timing of work performed by our contracted contract research organizations has a significant impact on our clinical programs and our business.
 
If we make technology or product acquisitions, we may incur a number of costs, may have integration difficulties and may experience other risks that could harm our business and results of operations.
 
We may acquire and/or license additional product candidates and/or technologies in the future.  Any product candidate or technology we license or acquire will likely require additional development efforts prior to commercial sale, including extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities, if any.  All product candidates are prone to risks of failure inherent in biotechnology product development, including the possibility that the product candidate or product developed based on licensed technology will not be shown to be sufficiently safe and effective for approval by regulatory authorities.  In addition, we cannot assure you that any product candidate that we develop based on acquired or licensed technology that is granted regulatory approval will be manufactured or produced economically, successfully commercialized or widely accepted in the marketplace.  Moreover, integrating any newly acquired product could be expensive and time-consuming.  If we cannot effectively manage these aspects of our business strategy, our business may not succeed.
 

 
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Furthermore, proposing, negotiating and implementing an economically viable acquisition or license can be a lengthy, costly and complex process.  Other companies, including those with substantially greater financial, marketing and sales resources, may compete with us for the acquisition or license of product candidates and/or technologies.  We may not be able to acquire the rights to alternative product candidates and/or technologies on terms that we find acceptable, or at all.  Our failure to acquire or license alternative products and/or technologies could have a material adverse effect on our business, prospects and financial condition.
 
Failure to effectively manage our growth may have a material adverse effect on our business, results of operations and financial condition.
 
In March 2010 and April 2011, we obtained additional debt and equity financing to fund the continued clinical development of our two lead drug candidates, PMX-30063 and PMX-60056. As a result, we have begun to expand our operations, including hiring of additional personnel. However, we may not be able to effectively grow and expand our business. Successful implementation of our business plan will require management of growth, which will result in an increase in the level of responsibility for management personnel. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls to expand, train and manage our employee base. The management, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps taken to hire personnel and to improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on our business, results of operations and financial condition.
 
Our executive officers and directors have the ability to significantly influence matters submitted to our stockholders for approval.
 
As of December 31, 2011, our executive officers and directors, in the aggregate, beneficially owned shares representing approximately 10.8% of our common stock.  Beneficial ownership includes shares over which an individual or entity has investment or voting power and includes shares that could be issued upon the exercise of options and warrants within 60 days after the date of determination.  On matters submitted to our stockholders for approval, holders of our common stock are entitled to one vote per share.  If our executive officers and directors choose to act together, they would have significant influence over all matters submitted to our stockholders for approval, as well as our management and affairs.  For example, these individuals, if they chose to act together, would have significant influence on the election of directors, and other matters submitted to stockholder vote, including approval of any merger, consolidation or sale of all or substantially all of our assets.  This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire.
 
Risks Related to our Intellectual Property
 
We rely on third parties to provide software necessary to the future success of our business.
 
Currently, we rely on a non-exclusive license from Penn to use, copy, perform, display, distribute, modify and prepare derivative works based on three software packages, which include a suite of proprietary computational algorithms that we use in the development, refinement, and testing of our product candidates.  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.
 
 

 
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In the future, we expect to rely upon the software programs licensed from Penn, as well as software licensed from other third parties, including software that might be integrated with our software and used to perform key functions.  If we license such third-party software, it is likely that certain of these licenses may not contain favorable terms for us, including duration for limited terms, can be renewed only by mutual consent and may be terminated if we breach the terms of the license and fail to cure the breach within a specified period of time.  Such licenses may not be available to us on commercially reasonable terms, if at all.  The loss of or inability to maintain or obtain licenses on such third party software could result in the discontinuation of, or delays or reductions in, product availability unless and until equivalent technology is identified, licensed and integrated with our software.  Any such discontinuation, delay or reduction would harm our business, results of operations and financial condition.  In addition, financial or other difficulties that may be experienced by such third-party vendors may have a material adverse effect upon the technologies that may be incorporated into our products.  If such technologies become unavailable, we may not be able to find suitable alternatives, which could harm our business, operating results, and financial condition.
 
The obstacles to procurement and enforcement of our intellectual property and proprietary rights could harm our competitive position by allowing competitors access to our proprietary technology and to introduce competing products.
 
We regard our product candidates as proprietary and rely primarily on a combination of patents, trademarks, copyrights, and trade secrets and other methods to protect our proprietary rights.  We maintain confidentiality agreements with our employees, consultants and current and potential affiliates, customers and business partners.
 
If we fail to secure and then enforce patents and other intellectual property rights underlying our product candidates and technologies, we may be unable to compete effectively.  The pharmaceutical industry places considerable importance on obtaining patent and trade secret protection for new technologies, products and processes.  Our success will depend, in part, on our ability, and the ability of our licensors, to obtain and to keep protection for our products and technologies under the patent laws of the U.S. and other countries, so that we can stop others from using our inventions.  Our success also will depend on our ability to prevent others from using our trade secrets.
 
Our pending U.S. and foreign patent applications may not result in the issuance of patents to us or may not result in the issuance of patents that will be advantageous to us.  If we do not receive patents for these applications or do not receive adequate protections, our developments will not have any proprietary protection and other entities will be able to make the products and compete with us.  Also, any patents we have obtained or do obtain may be challenged by reexamination, opposition or other administrative proceeding, or may be challenged in litigation, and such challenges could result in a determination that the patent is invalid or unenforceable.  In addition, competitors may be able to design alternative methods or devices that avoid infringement of our patents.  To the extent our intellectual property protection offers inadequate protection, or is found to be invalid, we are exposed to a greater risk of direct competition.  Both the patent application process and the process of managing patent disputes can be time consuming and expensive and may require significant time and attention from our management.  Furthermore, the laws of some foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States.
 
In addition, the standards that the United States Patent and Trademark Office, (U.S. PTO), uses to grant patents can change.  Consequently, we may be unable to determine the type and extent of patent claims that will be issued to us or to our licensors in the future, if any patent claims are issued at all.  In addition, if the U.S. PTO and/or other patent offices where we file our patent applications increase the fees associated with filing and prosecuting patent applications we would incur higher expenses and our intellectual property strategy could be adversely affected.
 
The confidentiality agreements we require of our employees and those which we enter into with other parties may not provide adequate protection for our trade secrets, know-how or other confidential information or prevent any unauthorized use or disclosure or the unlawful development by others.  If any of our confidential intellectual property is disclosed, our business may suffer.  Such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, and we may not be able to prevent such unauthorized disclosure.  Monitoring unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate.
 
 

 
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We may have to engage in costly litigation to enforce or protect our proprietary technology, which may harm our business, results of operations, financial condition and cash flows.
 
The pharmaceutical field is characterized by a large number of patent filings involving complex legal and factual questions, and, therefore, we cannot predict with certainty whether any patents or in-licensed patents will be enforceable.  Additionally, we may not be aware of all of the patents potentially adverse to our interests that may have been issued to others.  Should third parties file patent applications, or be issued patents, claiming technology also claimed by us in pending applications, we may be required to participate in interference proceedings in the U.S. PTO to determine priority of invention.  We, or our licensors, also could be required to participate in interference proceedings involving our issued patents and pending applications of another entity.
 
In the event a competitor infringes upon our patent or other intellectual property rights, litigation to enforce our intellectual property rights or to defend our patents against challenge, even if successful, could be expensive and time consuming and could require significant time and attention from our management.  We may not have sufficient resources to enforce our intellectual property rights or to defend any patents against challenges from others.  If our intellectual property does not provide adequate protection against our competitors’ products, our competitive position and business could be adversely affected.
 
Our commercial success depends significantly on our ability to develop and commercialize our products without infringing the intellectual property rights of third parties.
 
Our commercial success will depend, in part, on our not infringing the patents or proprietary rights of third parties.  Third parties that believe we are infringing on their rights could bring actions against us claiming damages and seeking to enjoin clinical testing, manufacturing and marketing of the affected product or products.
 
If we become involved in any litigation, it could consume a substantial portion of our resources, regardless of the outcome of the litigation.  If any of these actions are successful, we could be required, in addition to any potential liability for damages, to obtain a license to continue to manufacture or market the affected product, in which case we may be required to pay substantial royalties or grant cross licenses to our patents.  However, any such license may not be available on acceptable terms or at all.  Ultimately, we could be prevented from commercializing a product, or forced to cease some aspect of our business operations, as a result of patent infringement claims, which would harm our business.
 
We may enter into licensing agreements with third party intellectual property owners for use of their property in connection with our products in order to ensure that such third party’s rights are not infringed.  Although we are not aware that any of our intended products would materially infringe the rights of others, a claim of infringement may be asserted against us and any such assertion may result in costly litigation or may require us to obtain a license in order to make, use, or sell our products.  Third parties may assert infringement claims against us in the future with respect to current or future products.  Any such claims or litigation, with or without merit, could be costly and a diversion of management’s attention, which could have a material adverse effect on our business, operating results and financial condition.  Adverse determinations in such claims or litigation could harm our business, operating results and financial condition.
 
We may be unable to protect the intellectual property rights of the third parties from whom we license certain of our intellectual property or with whom we have entered into other strategic relationships, which may harm our business.
 
We are, and will continue to be, reliant upon such third parties to protect their intellectual property rights to this technology.  Such third parties may determine not to protect the intellectual property rights that we license from them and we may be unable defend such intellectual property rights on our own or we may have to undertake costly litigation to defend the intellectual property rights of such third parties.  We may not continue to have proprietary rights to the intellectual property that we license from such third parties or otherwise have the right to use through similar strategic relationships.  Any loss or limitations on use with respect to our right to use such intellectual property licensed from third parties or otherwise obtained from third parties with whom we have entered into strategic relationships could have a material adverse effect on our business, operating results and financial condition.
 

 
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Many countries, including certain countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties.  In addition, most countries limit the enforceability of patents against government agencies or government contractors.  In these countries, the patent owner may be limited to monetary relief and may be unable to enjoin infringement, which could materially diminish the value of the patent.  Compulsory licensing of life-saving products is also becoming increasingly popular in developing countries, through either direct legislation or international initiatives.  Such compulsory licenses could be extended to include some of our product candidates, which may limit our potential revenue opportunities.
 
International patent protection is particularly uncertain, and if we are involved in opposition proceedings in foreign countries, we may have to expend substantial sums and management resources.
 
Patent law outside the U.S. is even more uncertain than in the U.S. and is periodically reviewed and revised in many countries.  Further, the laws of some foreign countries may not protect our intellectual property rights to the same extent as U.S. laws.  For example, certain countries do not grant patent claims that are related to the treatment of humans.  We may participate in opposition proceedings to determine the validity of our foreign patents or our competitors’ foreign patents, which could result in substantial costs and diversion of our management’s efforts.
 
The government maintains certain rights to data and government use of our technology that we develop using government grant and contract money and we may lose the revenues from such technology if we do not commercialize and utilize the technology pursuant to established government guidelines.
 
Some of our research has been or are being funded in part by government grants and contracts. As a result of such funding, the U.S. Government has established guidelines and have certain rights in the technology developed with the grant and contract. If we fail to meet these guidelines, we would lose our exclusive rights to these products, and we would lose potential revenue derived from the sale of these products.
 
Risks Related to our Industry
 
We may experience delays in obtaining or we may not obtain required regulatory approvals in the U.S. to market our proposed product candidates.
 
Delays in regulatory approval, limitations in regulatory approval and withdrawals of regulatory approval may have a negative impact on our results of operations.  If we experience significant delays in testing or approvals, or in our ability to license product candidates, our product development costs may increase.  If the FDA grants regulatory approval of a product, this approval will be limited to those disease states and conditions for which the product has been demonstrated through clinical trials to be safe and effective.  Any product approvals that we receive in the future could also include significant restrictions on the use or marketing of our products.  Product approvals, if granted, can be withdrawn for failure to comply with regulatory requirements or upon the occurrence of adverse events following commercial introduction of the products.  Failure to comply with applicable FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or seizure of products, total or partial suspension of production or injunction, as well as other regulatory action against our product candidates or us.  If approvals are withdrawn for a product, or if a product were seized or recalled, we would be unable to sell or license that product and our revenues would suffer.  In addition, outside the U.S., our ability to market any of our potential products is contingent upon receiving market application authorizations from the appropriate regulatory authorities and these foreign regulatory approval processes include all of the risks associated with the FDA approval process described above.
 
The FDA has been actively working to revise certain of its guidance and in August 2010 issued draft guidance for clinical trial conduct, evaluation, clinical endpoints, and requirements for regulatory approval for antibiotic product candidates intended for use in acute bacterial infections, including skin and skin structure infections (ABSSSI), which has been the intended first clinical indication for PMX-30063.  Based on the potential impacts of revised final FDA guidance, there may be delays in the conduct of clinical trials in the United States. Furthermore, there has not been a new product candidate for heparin reversal considered by the FDA in recent years, and there has never to date been a product candidate for reversal of LMWH considered by the FDA.  The FDA and/or other foreign regulatory authorities may in the future request clinical trial parameters that result in clinical trials that are too expensive or too difficult to demonstrate pharmacoeconomic and therapeutic benefits compared to current therapy.  As a result, our present plans for clinical development, including the cost and timing for development of our product candidates, may ultimately be substantially different than our present expectations, and there is no way of predicting what impacts on our timelines, cost projections, and clinical trials requirements may result from these changes in policy, requirements, standards, and guidance of the FDA and other regulatory authorities.
 

 
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If competitors develop and market products that offer advantages as compared to our product candidates, our commercial opportunities will be limited.
 
Other companies have products and product candidates in development to treat the conditions we are seeking to ultimately treat.  If these competitors are able to develop products that are more effective, have fewer side effects, are less expensive or offer other advantages as compared to our product candidates, our commercial opportunities will be limited.  Furthermore, if our competitors commercialize competing products before we do, then our ability to penetrate the market and sell our products may be impaired.
 
Our competitors include fully integrated pharmaceutical companies and biotechnology companies, universities and public and private research institutions.  Many of the organizations competing with us have substantially greater capital resources, larger research and development staffs and facilities, greater experience in drug development and in obtaining regulatory approvals, and greater manufacturing and marketing capabilities than we do.  These organizations also compete with us to:
 
 
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attract parties for acquisitions, joint ventures or other collaborations;
 
 
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license proprietary technology that is competitive with the technology we are practicing;
 
 
Ø
attract funding; and
 
 
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attract and hire scientific talent.
 
In the antibiotic market, many major pharmaceutical companies, such as GlaxoSmithKline, Pfizer, Bayer, Merck and Sanofi Aventis have already established significant positions.  Additionally, many smaller companies, such as Astellas Pharma, Forest Laboratories, Cubist Pharmaceuticals, Basilea Pharmaceutica, Theravance, The Medicines Company, Trius Therapeutics, NovaBay Pharmaceuticals, Inc., and Rib-X Pharmaceuticals either have marketed, 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.  In the UFH antagonist market, protamine is the only available antidote for and antagonist to UFH and, as such, protamine currently dominates this market.  Because of protamine’s virtual monopoly of the UFH antidote/antagonist market, we believe that it may be difficult for our future UFH antidote/antagonist products to penetrate this market.  In addition, new products competing with UFH and LMWH may be successful in gaining market share and reduce the market for a UFH and LMWH reversing agent. There may be additional competitive products about which we are not aware.
 
Recently enacted health care reform legislation may increase our costs, impair our ability to match our pricing with any such increased costs, and therefore could materially and adversely affect our business, financial condition and results of operations.
 
The Patient Protection and Affordable Care Act (“PPACA”) was signed into law on March 23, 2010.  The PPACA was subsequently amended on March 30, 2010 by the Health Care and Education Reconciliation Act of 2010 (the “Reconciliation Act”).  The PPACA and Reconciliation Act (collectively the “Act”) entail sweeping health care reforms with staggered effective dates from 2010 through 2018, and many provisions in the Act require the issuance of additional guidance from the U.S. Department of Labor, the Internal Revenue Service, the U.S. Department of Health & Human Services, and the states.  This reform includes, but is not limited to: the implementation of a small business tax credit; required changes in the design of our healthcare policy including providing insurance coverage to part-time workers working thirty or more hours per week; “grandfathering” provisions for existing policies; state insurance exchanges; “pay or play” requirements; and a “Cadillac plan” excise tax.  We are currently unable to determine the long-term impact of such legislation on our business. Since many provisions of the Act do not become operative until future years, we do not expect the Act to have a material adverse impact on our results of operations in 2012.  However, health care reform as mandated and implemented under the Act and any future federal or state mandated health care reform could materially and adversely affect our financial position and results of operations by increasing our costs, hindering our ability to effectively match our cost of providing health insurance with our pricing and impeding our ability to attract and retain customers as well as potentially changing our business model or causing us to lose certain current competitive advantages.
 

 
25

 

Healthcare reform measures could adversely affect our business.
 
The business and financial condition of pharmaceutical companies is affected by the efforts of governmental and third party payors to contain or reduce the costs of healthcare.  In the U.S. and in foreign jurisdictions there have been, and we expect that there will continue to be, a number of legislative and regulatory proposals aimed at changing the healthcare system.  For example, in some countries other than the U.S., pricing of prescription drugs is subject to government control, and we expect proposals to implement similar controls in the U.S. to continue.  The implementation of such additional controls could have the effect of reducing the prices that we are able to charge for any products we develop and sell through these plans.  Prescription drug legislation and related amendments or regulations could also cause third party payors other than the federal government, including the states under the Medicaid program, to discontinue coverage for any products we develop or to lower reimbursement amounts that they pay.
 
Further federal, state and foreign healthcare proposals and reforms are likely.  While we cannot predict the legislative or regulatory proposals that will be adopted or what effect those proposals may have on our business, including the future reimbursement status of any of our product candidates, the pendency or approval of such proposals could result in a decrease in our stock price or limit our ability to raise capital or to obtain strategic partnerships or licenses.
 
Because our activities may involve the use of hazardous materials, we may be subject to claims relating to improper handling, storage or disposal of these materials that could be time consuming and costly.
 
If we use biological and hazardous materials in a manner that causes injury, we may be liable for damages.  Our research and development activities may involve the controlled use of potentially harmful biological materials as well as hazardous materials, chemicals and various radioactive compounds.  We cannot completely eliminate the risk of accidental contamination or injury from the use, storage, handling or disposal of these materials.  In the event of contamination or injury, we could be held liable for damages that result, and any liability could exceed our resources.  We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products.  The cost of compliance with these laws and regulations could be significant.
 
Risks Related to our Capital Stock
 
Our common stock price is volatile, our stock is highly illiquid, and any investment in our securities could decline substantially in value.
 
Our common stock is currently quoted on the OTC Bulletin Board. Trading of our stock through the OTC Bulletin Board is frequently thin and highly volatile. In light of our small size and limited resources, as well as the uncertainties and risks that can affect our business and industry, our stock price is expected to continue to be highly volatile and can be subject to substantial drops, with or even in the absence of news affecting our business. The following factors, in addition to the other risk factors described in this Form 10-K and the potentially low volume of trades in our common stock, may have a significant impact on the market price of our common stock, some of which are beyond our control:

 
Ø
results and timing for achievements of preclinical and clinical milestones;
 
Ø
commercial success of approved products;
 
Ø
corporate partnerships;
 
Ø
technological innovations by us or competitors;
 
Ø
changes in laws and government regulations both in the U.S. and overseas;
 
Ø
changes in key personnel at our company;
 
Ø
developments concerning proprietary rights, including patents and litigation matters;
 
Ø
public perception relating to the commercial value or safety of any of our product candidates;
 
Ø
future sales of our common stock;
 
Ø
future issuance of our common stock causing dilution;
 
Ø
anticipated or unanticipated changes in our financial performance or future prospects;
 
Ø
general trends related to the biopharmaceutical and biotechnological industries; and
 
Ø
general conditions in the stock market

 
26

 

The stock market in general has experienced relatively large price and volume fluctuations. In particular, the market prices of securities of smaller biotechnology companies have experienced dramatic fluctuations that often have been unrelated or disproportionate to the operating results of these companies. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in its value. You should also be aware that price volatility may be worse if the trading volume of the common stock remains limited or declines.

A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our ability to continue operations.
 
A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital.  Because a significant portion of our operations has been and will continue to be financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our operations.  Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plans and operations, including our ability to develop our product candidates and continue our current operations.  If our stock price declines, it may be more difficult to raise additional capital.  If we are unable to raise sufficient capital in the future, and we are unable to generate funds from operations sufficient to meet our obligations, we will not be able to have the resources to continue our normal operations.
 
The market price for our common stock may also be affected by our ability to meet or exceed expectations of analysts or investors.  Any failure to meet these expectations, even if minor, may have a material adverse effect on the market price of our common stock.
 
If we undergo a reverse split of our common stock, the value of our common stock may be less than the market value of the common stock before the split multiplied by the split ratio.
 
We may in the future undergo a reverse stock split.  After completion of such a reverse split, the post-split market price of our common stock may be less than the pre-split price multiplied by the split ratio.  In addition, a reduction in the shares available in the public float may impair the liquidity in the market for our common stock which may reduce the value of our common stock.
 
If we issue additional shares in the future, it will likely result in the dilution of our existing stockholders.
 
Our certificate of incorporation authorizes the issuance of up to 250,000,000 shares of common stock with a $0.001 par value and up to 10,000,000 preferred shares with a par value of $0.001, of which approximately 106,000,000 common shares were issued and outstanding as of December 31, 2011. We may need to increase our authorized share count in order to issue additional shares of common stock in the future.  From time to time we also will increase the number of shares available for issuance in connection with our equity compensation plans and we may issue awards to our employees outside the terms of our stock plans. As of December 31, 2011, we had approximately 9,662,000 additional shares of common stock reserved for future issuance under our stock plans. Our board of directors may fix and determine the designations, rights, preferences or other variations of each class or series within each class of preferred stock and may choose to issue some or all of such shares to provide additional financing or acquire more businesses in the future.
 
Moreover, in the past, we issued warrants and options to acquire shares of common stock. As of December 31, 2011, we had warrants and options to purchase approximately 67,618,000 shares of our common stock outstanding.  In addition, our Equity Line with Dutchess contemplates the issuance of up to 12,000,000 shares of our common stock to Dutchess, subject to certain restrictions and obligations.
 
The issuance of any securities for acquisition, licensing or financing efforts, upon conversion of any preferred stock or exercise of warrants and options, pursuant to our equity compensation plans, or otherwise may result in a reduction of the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current stockholders. Further, such issuance may result in a change in control of our corporation.
 

 
27

 

Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit a stockholder’s ability to buy and sell our Common Stock.
 
FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.  Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information.  Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers.  FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
 
We have never paid dividends on our common stock and do not anticipate paying any in the foreseeable future.
 
Since our reincorporation in Delaware in March 24, 2005, we have never declared or paid a cash dividend on our common stock and we do not expect to pay cash dividends in the foreseeable future.  If we do have available cash, we intend to use it for research and development of our product candidates and for general corporate purposes.
 
Sales of a substantial number of shares of our common stock into the public market, including shares of common stock that we may issue to Dutchess pursuant to our Equity Line, may result in significant downward pressure on the price of our common stock and could affect your ability to realize the current trading price of our common stock.
 
We have registered the resale by Dutchess of a maximum of 12,000,000 shares of common stock that may be issued to Dutchess pursuant to our Equity Line. The common stock to be issued to Dutchess pursuant to the Investment Agreement with Dutchess will be sold at a 5% discount to the volume weighted average price (VWAP) of our common stock during the five consecutive trading day period beginning on the trading day immediately following the date of delivery of a put notice by us to Dutchess, subject to certain exceptions. Dutchess has a financial incentive to sell our common stock upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price.
 
Sales of a substantial number of shares of our common stock in the public market, including shares of common stock that we may issue to Dutchess pursuant to our Equity Line, could cause a reduction in the market price of our common stock. To the extent stockholders sell shares of common stock, the price of our common stock may decrease due to the additional shares of common stock in the market.
 
Any significant downward pressure on the price of our common stock as stockholders sell their shares could encourage short sales by our stockholders or others. Any such short sales could place further downward pressure on the price of our common stock.
 
Delaware law, our stockholder rights plan, and our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay and discourage takeover attempts that stockholders may consider favorable.
 
Certain provisions of our amended and restated certificate of incorporation and our amended and restated bylaws and applicable provisions of Delaware corporate law may make it more difficult for or prevent a third party from acquiring control of us or changing our board of directors and management. These provisions include:
 
 
Ø
the ability of our board of directors to issue preferred stock with voting or other rights or preferences;
 
 
Ø
limitations on the ability of stockholders to amend our charter documents, including stockholder supermajority voting requirements;
 
 
Ø
requirements that special meetings of our stockholders may only be called by the chairman of our board of directors, our president, or upon a resolution adopted by, or an affirmative vote of, a majority of our board of directors; and
 
 
Ø
advance notice procedures our stockholders must comply with in order to nominate candidates for election to our board of directors or to place stockholders’ proposals on the agenda for consideration at meetings of stockholders.
 
 
 
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We will also be afforded the protections of Section 203 of the Delaware General Corporation Law, which will prevent us from engaging in a business combination with a person who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless board or stockholder approval were obtained.

We review these provisions from time to time. Any delay or prevention of a change in control transaction or changes in our board of directors or management could deter potential acquirers or prevent the completion of a transaction in which our stockholders could receive a premium over the then current market price for their shares.

In addition, we have a stockholder rights plan pursuant to which we distributed rights to purchase shares of our Series C Preferred Stock. The rights become exercisable upon the earlier of ten business days after a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, 15% or more of our common stock then outstanding or ten business days after the commencement of a tender or exchange offer that would result in a person or group beneficially owning 15% or more of our common stock then outstanding. These rights may cause substantial dilution to a person or group that attempts to acquire us (or which otherwise acquires 15% or more of our common stock) on terms or in a manner not approved by our board of directors, except pursuant to an offer conditioned upon the negation, purchase or redemption of these rights. Accordingly, these rights could delay or discourage someone from acquiring our business, even if doing so would benefit our stockholders.
 
Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.
 
We currently lease 24,223 square feet of office and laboratory facilities at 170 N. Radnor-Chester Road; Suite 300 in Radnor, Pennsylvania, pursuant to a twelve-year lease. All of our tangible personal property, consisting mainly of computers, office furniture and lab equipment, is located at our leased office and laboratory facilities and is in good operating condition and repair (subject to normal wear and tear).
 
Item 3. Legal Proceedings.
 
To our knowledge, we are not a party to any material pending or threatened legal proceedings. To our knowledge, no governmental authority is contemplating commencing a legal proceeding in which we would be named as a party.
 
Item 4. Mine Safety Disclosures.
 
Not applicable.
 
 
 
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PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
Market Information

Since August 18, 2006, our Common Stock has been quoted on the OTC Bulletin Board under the symbol “PYMX”. The market for our Common Stock is limited and volatile. The following table sets forth the range of high and low sales prices for our Common Stock for each of the periods indicated as reported by the OTC Bulletin Board. The prices quoted on the OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, markdown or commissions. The OTC Bulletin Board prices listed below may not represent actual transaction prices.

   
 
   
High
   
Low
 
First Quarter
  $ 1.03     $ 0.83  
Second Quarter
  $ 0.84     $ 0.56  
Third Quarter
  $ 0.78     $ 0.55  
Fourth Quarter
  $ 0.77     $ 0.56  

   
 
   
High
   
Low
 
First Quarter
  $ 1.38     $ 0.99  
Second Quarter
  $ 1.18     $ 0.91  
Third Quarter
  $ 1.04     $ 0.74  
Fourth Quarter
  $ 1.08     $ 0.80  
 
 
Holders of Record
 
As of March 9, 2012, there were approximately 700 holders of record of shares of our Common Stock.
 
Dividends
 
Since our reincorporation in Delaware in March 24, 2005, we have not paid or declared any cash dividends on our Common Stock. We currently intend to retain any earnings for future growth and, therefore, do not expect to pay cash dividends on our Common Stock in the foreseeable future.
 
Stock Performance Graph
 
The following graph compares the yearly percentage change in the cumulative total shareholder return on our common stock during the five years ended December 31, 2011 with the cumulative total returns on the Amex Biotechnology Index and Amex Composite Index.  The graph assumes $100 was invested on December 31, 2006 in our common stock and in each of the following indices and assumes the reinvestment of dividends, where applicable.

 
30

 

 
Date
Amex Biotech
PolyMedix
Amex Composite
12/31/2006
$100.00
$100.00
$100.00
12/31/2007
104.28
68.00
117.17
12/31/2008
85.80
49.60
67.96
12/31/2009
124.91
54.80
88.74
12/31/2010
172.04
40.00
107.39
12/31/2011
144.70
30.80
119.05
 
Recent Sales of Unregistered Securities
 
We have not made any sales of unregistered securities over the past three years that have not been previously disclosed in our filings with the Securities and Exchange Commission.

 
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Item 6. Selected Financial Data

The following selected financial data is derived from our audited financial statements and should be read in conjunction with, and is qualified in its entirety by, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8 “Financial Statements and Supplementary Data.”
 
 
   
YEAR ENDED DECEMBER 31,
 
(in thousands)
 
2011
   
2010
   
2009
   
2008
   
2007
 
                               
Operations data:
                             
Revenues
  $ 2,457     $ 2,144     $ 1,048     $ 1,066     $ 1,126  
Operating expenses
    20,973       16,718       12,931       12,276       13,801  
                                         
Net loss
    (19,930 )     (15,516 )     (11,829 )     (10,986 )     (12,164 )
Beneficial conversion and conversion inducement on Preferred Stock
    -       -       -       (5,845 )     (2,247 )
Net loss attributable to common shareholders
    (19,930 )     (15,516 )     (11,829 )     (16,831 )     (14,411 )
                                         
Net loss per share - basic and diluted
  $ (0.20 )   $ (0.19 )   $ (0.19 )   $ (0.40 )   $ (0.61 )
                                         
Balance sheet data:
                                       
Cash and investments
  $ 21,354     $ 20,821     $ 23,974     $ 15,106     $ 8,903  
Working capital
    13,496       14,281       22,864       13,404       5,101  
Total assets
    22,651       22,445       25,392       16,077       9,722  
Long-term debt, including current portion, and capital lease obligations
    6,550       9,665       -       -       104  
Shareholders’ equity
    5,384       9,203       22,319       13,143       5,134  
 
 
 
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
The following discussion and analysis should be read in conjunction with the consolidated financial statements including the notes thereto.  This discussion and analysis may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially as a result of various factors, including those set forth under “Risk Factors” or elsewhere in this Form 10-K.
 
Overview
 
We are a clinical stage biotechnology company focused on developing treatments for patients with acute care conditions with synthetic small molecule compounds referred to as biomimetics. Using our proprietary drug discovery platform, we have created novel defensin mimetic antibiotic compounds, heparin antagonist compounds, and other drug compounds intended for human therapeutic use. Since 2002, we have been a development stage enterprise, and accordingly, our operations have been directed primarily toward developing business strategies, raising capital, research and development activities, conducting pre-clinical testing and human clinical trials of our product candidates, exploring marketing channels and recruiting personnel.
 
We have incurred operating losses since inception, have not generated any product sales revenues and have not achieved profitable operations. Our deficit accumulated during the development stage through December 31, 2011 was $84,134,000, and we expect to continue to incur substantial losses in future periods.
 
None of our product candidates have received regulatory approval for commercial sale and our product candidates may never be commercialized. In addition, all of our product candidates are in the early stages of development and most of our programs are either on hold pending additional funding or being developed only to the extent they are substantially funded by targeted grants or research contracts. The progress and results of our current and any future clinical trials or future pre-clinical testing are uncertain, and if our product candidates do not receive regulatory approvals, our business, operating results, financial condition and cash flows will be materially adversely affected. Our development programs require a significant amount of cash to support the development of product candidates.
 
We are highly dependent on the success of our research, development and licensing efforts and, ultimately, upon regulatory approval and market acceptance of our products under development. Our short and long-term capital requirements depend upon a variety of factors, including market acceptance for our technologies and product candidates and various other factors. We believe that our current cash and investment balances as of the date of this report will be sufficient to fund our operations for at least the next 12 months.
 
As of the date of this report, we estimate that the direct development costs for the present ongoing clinical studies for each PMX-30063 and PMX-60056 will be approximately $6 million to $8 million for PMX-30063 and $1 million to $3 million for PMX-60056.  We expect that the direct development costs to conduct a second Phase 2 clinical study for PMX-30063 will be approximately $4 million to $6 million.  We will incur substantial costs beyond the present and planned Phase 2 trials in order to file a New Drug Application (NDA) for PMX-30063 and PMX-60056, in each case the nature, design, size and cost of further studies will depend in large part on the outcome of preceding studies and discussions with regulators.
 
We believe that our current cash and investment balances as of the date of this report will be sufficient to fund the completion of our ongoing studies for each PMX-30063 and PMX 60056, as well as fund our operations for at least the next 12 months. We will need to secure additional funding in the future, from one or more equity or debt financings or other sources, in order to carry out all of our planned research, drug discovery and development activities, including with respect to PMX-30063 and PMX 60056.
 
The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operations for the years ended December 31, 2011, 2010, and 2009, and financial condition as of December 31, 2011 and 2010.

 
 
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Critical Accounting Policies and Practices
 
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to adopt critical accounting policies and to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. These critical accounting policies and estimates have been reviewed by our audit committee of our board of directors. The principal items in our consolidated financial statements reflecting critical accounting policies or requiring significant estimates and judgments are as follows:
 
Stock-based compensation
 
Since inception, we have used the Black-Scholes-Merton formula to estimate the fair value of stock options and warrants and have elected to continue to estimate the fair value of stock options and warrants using the Black-Scholes-Merton formula. The volatility and expected term assumptions have the most significant effect on the results obtained from the Black-Scholes Merton formula. We have to date assumed that stock options have an expected life of five years, representing about half of their contractual life, and assumed Common Stock volatility of between 41% and 75%. Warrants have an initial expected life of five years, equal to their contractual life, with adjustments made each reporting period for certain warrants requiring mark-to-market treatment.  Higher estimates of volatility and expected life of the option or warrant increase the value of an option or warrant and the resulting expense. Given the absence of an active market for our Common Stock in prior periods, the fair value of our Common Stock has periodically been estimated using several criteria, including progress and milestones achieved in our research activities along with the price per share of our preferred and Common Stock offerings.
 
Results of Operations
 
Year ended December 31, 2011 compared to year ended December 31, 2010

Grant and contract revenues were $2,457,000 and $2,144,000 for the years ended December 31, 2011 and 2010, respectively. The increase was due to several new grants and contracts that commenced during the third quarter of 2010 and continued into fiscal year 2011.
 
Research and development expenses were $13,775,000 and $10,951,000 for the years ended December 31, 2011 and 2010, respectively. The increase was due to the Phase 2 trials which commenced late in 2010 and early 2011, and continued throughout 2011.  Additionally, there were increased costs associated with the performance of our research grants and contracts.
 
For PMX-30063, we incurred direct research and development costs of $5,800,000, $3,900,000, and $2,700,000 for each of the three years ended December 31, 2011, 2010 and 2009, respectively, and $21,100,000 for the period from August 8, 2002 (Inception) to December 31, 2011.  For PMX-60056, we incurred direct research and development costs of $1,200,000, $2,200,000, and $700,000 for each of the three years ended December 31, 2011, 2010 and 2009, respectively, and $8,400,000 million for the period from August 8, 2002 (Inception) to December 31, 2011. While we do not specifically track indirect costs and general and administrative expenses by product candidate, most of these costs and expenses have been incurred in support of these two lead product candidates.
 
General and administrative expenses were $7,198,000 and $5,767,000 for the years ended December 31, 2011 and 2010, respectively. This increase was due primarily to an approximately $745,000 increase in patent legal costs for 2011 as we expanded our patent applications internationally.  Additionally, we incurred an increase of approximately $650,000 in personnel costs and equity compensation expense, driven primarily by the hiring of new officers late in 2010 and during 2011.
 
Interest income was $94,000 and $96,000 for the years ended December 31, 2011 and 2010, respectively. Interest income remained flat for comparatively to both periods due to a combination of similar average cash balances and flat interest rates.
 
Interest expense was $1,158,000 and $1,038,000 for the years ended December 31, 2011 and 2010, respectively.  Interest expense for each period is in line with our debt commitments.
 
 
34

 

Loss on derivative instruments was $350,000 and $0 for the years ended December 31, 2011 and 2010, respectively.    In April 2011, we closed on an equity financing which included the issuance of Series D warrants with certain provisions requiring the warrants to be classified as a non-cash derivative liability.  The warrants are adjusted for changes in fair value at each reporting period, and such changes are recorded through earnings.  Due to increases in our stock price since the initial issuance of these warrants, the fair value increased during the year, resulting in an increase in the liability and the loss.
 
Cash Flows
 
Operating Activities. Cash used in operating activities during the year ended December 31, 2011 increased to $14,496,000 as compared to $12,414,000 used in the year ended December 31, 2010. The increase was driven primarily by an increase in research and development costs to advance our lead product candidates into Phase 2.
 
Investing Activities. Cash used in investing activities primarily represents cash paid for the purchase of capital assets and investments offset by the proceeds from the maturity and sale of such assets and investments.  During the year ended December 31, 2011, we purchased approximately $183,000 in computer and lab equipment.  During the year ended December 31, 2010, we purchased $474,000 in computer and lab equipment, $5,448,000 of short-term and long-term investments, and received proceeds of $3,800,000 on the maturity of short-term investments.
 
Financing Activities. To date, we have financed our operating and investing activities primarily from the proceeds from the sale of equity securities and issuance of debt. During the year ended December 31, 2011, we received net proceeds of $18,451,000 in connection with our April 2011 equity financing, and paid down $3,237,000 in principal on our outstanding debt obligations.  During the year ended December 31, 2010, we received net proceeds of $9,839,000 from the issuance of debt, and paid $106,000 in financing costs associated with our November 2009 equity financing and the filing of a shelf registration statement in 2010.
 
Year ended December 31, 2010 compared to year ended December 31, 2009

Grant and contract revenues were $2,144,000 and $1,048,000 for the years ended December 31, 2010 and 2009, respectively. The increase was due to several new grants and contracts that commenced during the third quarter of 2009 and continued into the third quarter of 2010, as well as new grants that commenced in the fourth quarter of 2010.

Research and development expenses were $10,951,000 and $7,374,000 for the years ended December 31, 2010 and 2009, respectively. The increase was due to the additional Phase 1B activities completed in the second half of 2010 for PMX-60056, and drug manufacturing and other activities in preparation for and commencing Phase 2 clinical trials for PMX-30063 and PMX-60056, as well as increased costs associated with our performance of research grants and contracts.

General and administrative expenses were $5,767,000 and $5,557,000 for the years ended December 31, 2010 and 2009, respectively. General and administrative expenses remained relatively consistent with the prior year’s level.

Interest income was $96,000 and $55,000 for the years ended December 31, 2010 and 2009, respectively. The increase was due to higher average cash and investment balances and higher interest rates in 2010.

Interest expense was $1,038,000 and $1,000 for the years ended December 31, 2010 and 2009, respectively.  The increase was due to interest on our $10,000,000 long-term debt, which commenced on March 31, 2010 resulting in significantly higher interest expense than was incurred solely from our capital lease obligations in 2009.
 
Cash Flows
 
Operating Activities. Cash used in operating activities during the year ended December 31, 2010 increased to $12,414,000 as compared to $10,248,000 used in the year ended December 31, 2009. The increase was driven primarily by an increase in research and development costs to advance our lead product candidates through Phase 1B clinical trials and preparations for and commencement of Phase 2.
 
Investing Activities. Cash used for investing activities represents cash paid for purchases of investments and property and equipment, net of maturities of investments.  During the year ended December 31, 2010 and 2009, we purchased $5,448,000 and $3,798,000 of investments, respectively. During the year ended December 31, 2010 and 2009, maturities of our investments were $3,800,000 and $11,703,000, respectively. During the years ended December 31, 2010 and 2009, property and equipment purchases were $474,000 and $38,000, respectively.

 
35

 

Financing Activities. To date, we have financed our operating and investing activities primarily from the proceeds from the sale of equity securities and issuance of debt. During the year ended December 31, 2010, we received net proceeds of $9,839,000 from the issuance of debt, and paid $106,000 in financing costs associated with our November 2009 equity financing and the filing of a shelf registration statement in 2010.  During the year ended December 31, 2009, we received $18,753,000 in net proceeds from our November 2009 financing, $500,000 in proceeds from the exercise of outstanding warrants, and paid $104,000 in principal associated with our then outstanding capital lease obligations.
 
Financial Condition, Liquidity and Capital Resources
 
In April 2011, we completed an underwritten registered offering for gross proceeds of $20,000,000.  In March 2010, we closed a debt financing for gross proceeds of $10,000,000.  Proceeds from these financing activities are being used to fund our ongoing clinical development of PMX-30063 and PMX-60056 and for general corporate purposes.  We may seek additional funds through equity or debt financing, among other sources, or through government grants and contracts. However, we may not be able to obtain additional funding on favorable terms, if at all. If we are unable to secure adequate additional funding in the future, we may delay, scale-back or eliminate certain of our planned research, drug discovery and development activities and certain other aspects of our operations and our business until such time as we are successful in securing adequate additional funding. As a result, our business may be materially and adversely affected.
 
As of December 31, 2011 and December 31, 2010, we had cash and investment balances of approximately $21,354,000 and $20,821,000, respectively, and total liabilities of approximately $17,267,000 and $13,242,000, respectively.  The increase in our cash and investment balances from December 31, 2010 to December 31, 2011 was primarily attributable to cash proceeds from an underwritten registered direct offering completed in April 2011, partially offset by the repayment of debt obligations and costs of our Phase 2 clinical trials for both of our lead product candidates. The increase in our total liabilities was primarily attributable to the nonrecurring, noncash issuance of Series D warrants classified as a derivative liability and increased research and development costs, partially offset by paying down a portion of the principal on our long-term debt.

We presently have an Investment Agreement (“Investment Agreement”) with Dutchess Opportunity Fund, II, L.P. (formerly known as Dutchess Equity Fund, L.P.) (“Dutchess”), pursuant to which Dutchess committed to purchase up to $10,000,000 (but not to exceed 12,000,000 shares) of our common stock, subject to the terms and conditions of the Investment Agreement.  As of December 31, 2011, we have not issued any shares pursuant to this Investment Agreement.  This Investment Agreement expires in July 2012.

We are a development stage company and have not experienced significant revenue generating activities since our formation.  We have incurred operating losses for each year since our inception in 2002. To achieve operating profits, we, alone or with others, must successfully identify, develop and market product candidates.

We are subject to many risks associated with development-stage businesses, including the above-discussed risks associated with the ability to raise capital. Please see the section entitled “Risk Factors” in this Form 10-K for more information regarding risks associated with our business.
 
Off-Balance Sheet Arrangements

Credit Line.  In December 2011, we entered into a letter of credit agreement to secure our payment obligations under our facility operating lease. This letter of credit is for $1,000,000, expires on December 1, 2012, subject to annual renewal, and is secured by certificates of deposits held at the same financial institution.
 
Commitments and Contingencies
 
As described above, we believe our current cash and investment balances are adequate to fund operations, including the following commitments and contingencies, at least for the next twelve months. If we are unable to secure adequate additional funding during 2012, we may 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, if at all.
 

 
36

 

Operating Lease

In June 2006, we entered into an operating lease agreement for 24,223 square feet of combined office and laboratory space located in Radnor, Pennsylvania.  The initial term of the lease is 12 years. Payments under the lease commenced on December 1, 2006.  Our annual future minimum lease payments under this non-cancelable operating lease are as follows (in thousands):

   
Operating Leases
 
2012
  $ 686  
2013
    705  
2014
    724  
2015
    743  
2016
    756  
Thereafter
    1,388  
Total minimum lease payments
  $ 5,002  
 
Rent expense was $598,000 for each of the three years ended December 31, 2011, and $3,671,000 for the period from August 8, 2002 (Inception) to December 31, 2011.
 
Contractual Obligations
 
On March 31, 2010, we entered into a Loan and Security Agreement (LSA) with Hercules Technology II, L.P. (HTGC) whereby we borrowed $10,000,000.  This loan bears an interest rate at the greater of 12.35%, or the Federal Reserve Prime Rate plus 7.10%, not to exceed 14%, and has a term of 42 months with interest-only payments for the first nine months.  In connection with this loan, we paid the following (in thousands):
 
 
Years Ended December 31,
Period from August 8, 2002 (Inception) to
 
2011
2010
Principal
$        3,237
$        -
$         3,237
Interest
        1,070
        841
         1,911
Total principal and interest
$   4,307
$   841
$     5,148
 
Our annual future payments under this loan obligation are as follows (in thousands):
 
 
Principal
Interest
Total
2012
$     3,664
$         643
$     4,307
2013
     3,099
     165
     3,264
Total minimum loan payments
$   6,763
$     808
$   7,571
 
Other
 
Agreements with Employees. We have entered into employment agreements with various executives. These agreements provide for severance arrangements and accelerated vesting of equity compensation awards in the event that the executive is terminated by us other than for cause or disability or if the executive resigns for good reason.
 
 

 
37

 
 
Recently Issued Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) relating to fair value disclosures, to add new requirements for disclosures about transfers into and out of Levels 1 and 2, and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value.  The guidance in this ASU is effective for the first reporting period (including interim periods) beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which was effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  The adoption of this guidance did not have a material impact on our consolidated financial statements.

In May 2011, the FASB issued an ASU which converges guidance with that of the International Accounting Standards Board (IASB) on how to measure fair value and on what disclosures to provide about fair value measurements.  While the ASU is largely consistent with existing fair value measurement principles in U.S. GAAP, it expands Accounting Standards Codification (ASC) 820’s existing disclosure requirements for fair value measurements and makes other amendments. Many of these amendments were made to eliminate unnecessary wording differences between U.S. GAAP and International Financial Reporting Standards. However, some could change how the fair value measurement guidance in ASC 820 is applied.  The ASU is effective for interim and annual periods beginning after December 15, 2011.  We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
 
In June 2011, the FASB issued ASU 2011-05, which revised the manner in which entities present comprehensive income in their financial statements.  The new guidance removes the presentation options in ASC 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements.  The ASU does not change the items that must be reported in other comprehensive income (OCI).  With the exception of the indefinite deferral of the provisions that require entities to present, in both net income and OCI, adjustments of items that are reclassified from OCI to net income, for public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements
 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 
Interest Rate Risk
 
Our investment assets consist solely of certificates of deposit with a financial institution.  The interest rates are fixed over the duration of the certificate, and are backed by the full faith and credit of the financial institution.  We intend to hold such certificates to maturity at which time the certificate will be redeemed at face value, and all accrued interest will be paid. Due to the backing of the financial institution, we do not believe that we have a material exposure to interest rate risk related to our investment portfolio.

Our long-term debt carries a variable interest rate indexed to the prime rate, subject to a cap.  The prime rate in the U.S. has remained at 3.25% since December of 2008.  While we cannot predict when, if at all, this rate will be increased, the prime rate would have to increase by more than 2% to increase our current interest rate on our long-term debt, and our interest rate cannot increase by more than 1.65%.  We believe the stability of the prime rate over the past three years and our interest rate cap sufficiently mitigate interest rate risk related to our debt. In the event that prime rate increases by 3.65% to the capped rate, we would incur additional interest expense and cash outflows of $170,000 through loan maturity in 2013.

 
38

 

Item 8. Financial Statements and Supplementary Data.
 
Our consolidated financial statements, accompanying notes and Report of Independent Registered Public Accounting Firm are included in this Annual Report on Form 10-K beginning on page F-1, which are incorporated in this Item 8 by reference.
 
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
 
None.
 
Item 9A. Controls and Procedures.

Conclusions regarding disclosure controls and procedures. An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, and also accumulated and communicated to our management, including the CEO and CFO, to allow timely decisions regarding required disclosure as specified in Securities and Exchange Commission rules and forms.
 
Management’s Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
 
Our internal control over financial reporting includes those policies and procedures that:
 
 
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets.
 
 
Provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the United States, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors.
 
 
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time. Our internal control contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.
 
Our management conducted an evaluation of the effectiveness of the internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2011. The effectiveness of our internal controls over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which is included herein.

 
39

 

Audit Committee Oversight. The Audit Committee of the Board of Directors, which is comprised solely of independent directors, has oversight responsibility for our financial reporting process, including our internal control over financial reporting, and the audits of our consolidated financial statements. The Audit Committee meets regularly with management and our independent registered public accounting firm to review matters related to the quality and integrity of our financial reporting, internal control over financial reporting (including compliance matters related to our Code of Ethics and Business Conduct), and the nature, extent, and results of internal and external audits. Our independent registered public accounting firm has full and free access and reports directly to the Audit Committee. The Audit Committee recommended, and the Board of Directors approved, that the audited consolidated financial statements be included in this Form 10-K.
 
Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our fiscal quarter ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
Item 9B. Other Information.

Annual Meeting
 
On March 8, 2012, the Nominating and Corporate Governance Committee of the Board of Directors of PolyMedix, Inc. (the “Company”) fixed May 1, 2012 as the date of the Company’s 2012 Annual Meeting of Stockholders (the “Annual Meeting”).  March 19, 2012 has been fixed as the record date for stockholders entitled to notice of and to vote at the Annual Meeting.
 
Because the Annual Meeting will be held more than 30 days from the calendar date of the Company’s 2011 Annual Meeting of Stockholders, the due dates for the provision of any qualified stockholder proposal or qualified stockholder nominations under the rules of the Securities and Exchange Commission (the “SEC”) and the Bylaws of the Company listed in the Company’s 2011 Proxy Statement on Schedule 14A as filed with the SEC on April 29, 2011 are no longer applicable. Such nominations or proposals, including any notice on Schedule 14N, are now due to the Company no later than March 23, 2012. The Company currently intends to make its proxy materials available beginning on or about March 29, 2012.
 
Departure of Director
 
On March 12, 2012, Dr. Richard Bank (79) informed the board of directors of PolyMedix, Inc. (the “Company”) that, for personal reasons and not any disagreement with the Company, he would not stand for re-election to the board of directors of the Company at the Company’s 2012 annual meeting of stockholders to be held on May 1, 2012.    Dr. Bank will continue as a consultant and special financial advisor to PolyMedix.  Dr. Bank currently serves as a member of the board of directors and as a member of the Compensation Committee.

 
40

 

PART III
 
Item 10. Directors and Executive Officers and Corporate Governance.

We incorporate the information required by this Item 10 by reference to the definitive proxy statement for our 2012 annual meeting of shareholders, to be filed with the Securities and Exchange Commission.
 
Item 11. Executive Compensation.
 
We incorporate the information required by this Item 11 by reference to the definitive proxy statement for our 2012 annual meeting of shareholders, to be filed with the Securities and Exchange Commission.
 
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
 
We incorporate the information required by this Item 12 by reference to the definitive proxy statement for our 2012 annual meeting of shareholders, to be filed with the Securities and Exchange Commission.
 
Item 13. Certain Relationships and Related Transactions and Director Independence.
 
We incorporate the information required by this Item 13 by reference to the definitive proxy statement for our 2012 annual meeting of shareholders, to be filed with the Securities and Exchange Commission.
 
Item 14. Principal Accountants Fees and Services.
 
We incorporate the information required by this Item 14 by reference to the definitive proxy statement for our 2012 annual meeting of shareholders, to be filed with the Securities and Exchange Commission.
 
Item 15. Exhibits and Financial Statement Schedules.

(a)   Documents filed as part of this report:
1.       Financial Statements. The financial statements as set forth under Item 8 of this Annual Report on Form 10-K are incorporated herein.
2.       Financial Statement Schedules. All financial statement schedules have been omitted because they are not applicable, not required, or the information is shown in the financial statements or related notes.
3.       Exhibits. See (b) below.
 
 
(b)              Exhibits:
 
Exhibit No.
Description of Exhibit
            2.1
Agreement and Plan of Merger and Reorganization, dated October 6, 2005, among the Registrant, PolyMedix Merger Sub, Inc., PolyMedix Pharmaceuticals, Inc. and those stockholders of Registrant identified on Exhibit A thereto(1)
3.1.1
Amended and Restated Certificate of Incorporation of Registrant dated November 8, 2005(1)
3.1.2
Certificate of Designations of Registrant dated November 8, 2005(1)
3.1.3
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Registrant dated February 17, 2006(1)
3.1.4
Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Registrant dated June 5, 2008(2)
3.1.5
Certificate of Amendment of the Certificate of Designations of Registrant dated June 5, 2008(2)
3.1.6
Certificate of Designations of Registrant dated September 18, 2008(3)
3.1.7
Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Registrant dated December 10, 2008(4)
3.1.8
Certificate of Designation, Preferences and Rights of Series C Preferred Stock of Registrant dated May 12, 2009(5)
3.2*
Amended and Restated By-Laws of Registrant
4.1
Form of Common Stock Purchase Warrant(6)
4.2
Form of Series A Warrant Agreement (including Series A Warrant certificate)(7)
        4.3         Form of Placement Agent Warrant(7)
 
 
 
41

 
 
 
 Exhibit No.  Description of Exhibit
4.4
Form of Series B Warrant to Purchase Capital Stock(8)
4.5
Rights Agreement, by and between PolyMedix, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent, including exhibits thereto, dated as of May 12, 2009(5)
4.6
Form of Series C Warrant to Purchase Common Stock issued in connection with the November 2009 offering(9)
4.7
Form of Placement Agent Warrant issued in connection with the November 2009 offering(9)
4.8
Common Stock Purchase Warrant dated March 31, 2010(10)
4.9
Form of Series D Warrant To Purchase Common Stock(18)
10.1
Patent License Agreement, dated January 3, 2003, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the University of Pennsylvania(1)
10.2
Letter Agreement, dated December 23, 2003, amending the Patent License Agreement, dated January 3, 2003, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the University of Pennsylvania(1)
10.3
Software License Agreement, dated May 30, 2003, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the University of Pennsylvania(1)
10.4
Exclusive License Agreement, dated January 2, 2005, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the University of Massachusetts(1)
10.5
Employment agreement, dated July 30, 2002, between Nicholas Landekic and PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.)**(1)
10.6
Employment agreement, dated December 5, 2005, between Edward Smith and PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.)**(1)
10.7
Employment agreement, dated March 28, 2003, between Richard Scott, Ph.D. and PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.)**(1)
10.8
Pennsylvania Full-Service Lease Agreement for 170 N. Radnor-Chester Road; Suite 300, Radnor, PA 19087, dated May 26, 2006, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the Radnor Properties — SDC, L.P.(11)
10.9
Amended and Restated 2005 Omnibus Equity Compensation Plan**(12)
10.10
2002 Equity Compensation Plan**(13)
10.11
Form of Incentive Stock Option Agreement**(1)
10.12
Form of Nonqualified Stock Option Agreement**(1)
10.13
Employment agreement, dated November 5, 2007, between Bozena Korczak, Ph.D. and PolyMedix Pharmaceuticals, Inc.(14)
10.14
Investment Agreement by and between PolyMedix, Inc. and Dutchess Equity Fund, LP dated May 20, 2009(15)
10.15
Registration Rights Agreement by and between PolyMedix, Inc. and Dutchess Equity Fund, LP dated May 20, 2009(15)
10.16
Amendment No. 1 to Investment Agreement dated July 8, 2009, between the Registrant and Dutchess Equity Fund, LP(16)
10.17
Loan and Security Agreement dated March 31, 2010 by and among PolyMedix, Inc., PolyMedix Pharmaceuticals, Inc. and Hercules Technology II, L.P.(10)
10.18
Registration Rights Agreement dated March 31, 2010 by and between PolyMedix, Inc. and Hercules Technology II, L.P.(10)
10.19
Employment agreement, dated as of January 18, 2011, between R. Eric McAllister and PolyMedix Pharmaceuticals, Inc.**(17)
10.20
Underwriting Agreement, dated April 5, 2011, by and between PolyMedix, Inc. and Cowen and Company, LLC(19)
10.21
Change in Control Severance Plan**(20)
10.22*
Employment agreement, dated as of July 19, 2011, between Daniel Jorgensen, M.D. and PolyMedix Pharmaceuticals, Inc.**
21*
List of Subsidiaries
23.1*
24*
Power of Attorney (Included on signature page)
31.1*
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
42

 

* Filed herewith.
** Management contract or compensatory arrangement.

(1) Filed as an Exhibit to the Registration Statement on Form 10-SB (File No. 000-51895) filed on April 5, 2006 and incorporated herein by reference.
(2) Filed as an Exhibit to the Current Report on Form 8-K filed on June 5, 2007 and incorporated herein by reference.
(3) Filed as an Exhibit to the Current Report on Form 8-K filed on September 24, 2008 and incorporated herein by reference.
(4) Filed as an Exhibit to the Current Report on Form 8-K filed on December 12, 2008 and incorporated herein by reference.
(5) Filed as an Exhibit to the Current Report on Form 8-K filed on May 14, 2009 and incorporated herein by reference.
(6) Filed as an Exhibit to Amendment No. 5 to the Registration Statement on Form SB-2 (File No. 333-146180) on November 30, 2007 and incorporated herein by reference.
(7) Filed as an Exhibit to Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-151084) on June 27, 2008 and incorporated herein by reference.
(8) Filed as an Exhibit to the Current Report on Form 8-K filed on September 24, 2008 and incorporated herein by reference.
(9) Filed as an Exhibit to Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-160833) on November 6, 2009 and incorporated herein by reference.
(10) Filed as an Exhibit to the Current Report on Form 8-K filed on April 2, 2010 and incorporated herein by reference.
(11) Filed as an Exhibit to Amendment No. 2 to the Registration Statement on Form 10-SB/A (File No. 000-51895) filed on June 19, 2006 and incorporated herein by reference.
(12) Filed as Appendix A to the Registrant’s Definitive Proxy Statement filed on May 15, 2009 and incorporated herein by reference.
(13) Filed as an Exhibit to the Registration Statement on Form S-8 (File No. 333-139686) filed on December 26, 2006 and incorporated herein by reference.
(14) Filed as an Exhibit to the Current Report on Form 8-K filed on November 16, 2007 and incorporated herein by reference.
(15) Filed as an Exhibit to the Current Report on Form 8-K filed on May 22, 2009 and incorporated herein by reference.
(16) Filed as an Exhibit to the Registration Statement on Form S-1 (File No. 333-160470) on July 8, 2009 and incorporated herein by reference.
(17) Filed as an Exhibit to the Current Report on Form 8-K filed on January 24, 2011 and incorporated herein by reference.
(18) Filed as an Exhibit to the Current Report on Form 8-K filed on April 6, 2011 and incorporated herein by reference.
(19) Filed as an Exhibit to the Current Report on Form 8-K/A filed on April 7, 2011 and incorporated herein by reference.
(20) Filed as an Exhibit to the Quarterly Report on Form 10-Q filed on November 9, 2011 and incorporated herein by reference.
 
 
 
(c)           None.

 
43

 
 
SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
PolyMedix, Inc.
 
     
Date
By:
 
     
   
President & Chief Executive Officer
 
       
     
     
Date
By:
 
     
   
Vice President & Chief Financial Officer
 
       

 
POWER OF ATTORNEY
 
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Nicholas Landekic and Edward F. Smith as his attorney-in-fact, with the full power of substitution, for him or her in any and all capacities, to sign any amendments to this Report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Name
Capacity
Date
President & Chief Executive Officer and Director (Principal Executive Officer)
Vice President, Finance & Chief Financial Officer (Principal Financial and Accounting Officer)
Shaun O’Malley
Chairman of the Board of Directors
Director
Director
Director
Director
Director
 

 
44

 

FINANCIAL STATEMENTS
 
POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011 AND 2010 AND
FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
AND FOR THE PERIOD AUGUST 8, 2002 (INCEPTION) TO DECEMBER 31, 2011
 

 
CONTENTS
 Page

   
   
   
   
   

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 

 
F-1

 

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
To the Board of Directors and Stockholders of
PolyMedix, Inc.
Radnor, Pennsylvania
 
We have audited the accompanying consolidated balance sheets of PolyMedix, Inc. and its subsidiary (a development stage company) (the "Company") as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2011, and for the period from August 8, 2002 (date of inception) to December 31, 2011. We also have audited the Company's internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.  Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
 
F-2

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PolyMedix, Inc. and its subsidiary as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, and for the period from August 8, 2002 (date of inception) to December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
 
 
 
 
 
Philadelphia, Pennsylvania
 
 
 
 
 
 
 

 
F-3

 

POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2011 AND 2010
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
   
December 31,
     
       
2010
 
ASSETS
           
Current Assets:
           
Cash and cash equivalents
  $ 19,704     $ 19,171  
Prepaid expenses and other current assets
    129       166  
Grant and contract receivable
    543       701  
Short-term investments
    1,650       -  
Total current assets
    22,026       20,038  
                 
Property and Equipment:
               
Computers
    799       616  
Office furniture and lab equipment
    734       734  
Accumulated depreciation
    (943 )     (677 )
Total property and equipment
    590       673  
                 
Long-term investments
    -       1,650  
Long-term assets – other
    35       84  
                 
TOTAL ASSETS
  $ 22,651     $ 22,445  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Current Liabilities:
               
Accounts payable
  $ 3,033     $ 1,112  
Accrued expenses
    1,955       1,530  
Current portion of long-term debt
    3,542       3,115  
Total current liabilities
    8,530       5,757  
                 
Long-term debt, less current portion
    3,008       6,550  
Deferred rent
    866       935  
Derivative liability
    4,863       -  
Total liabilities
    17,267       13,242  
                 
Commitments and contingencies
               
                 
Stockholders' Equity:
               
Preferred Stock ($0.001 par value; 10,000 shares authorized; 0 issued and outstanding at December 31, 2011 and December 31, 2010)
    -       -  
Common Stock ($0.001 par value; 250,000 shares authorized; 106,000 and 81,000 issued and outstanding at December 31, 2011 and December 31, 2010)
    106       81  
Additional paid-in capital
    89,412       73,326  
Deficit accumulated during the development stage
    (84,134 )     (64,204 )
Total stockholders' equity
    5,384       9,203  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 22,651     $ 22,445  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
F-4

 

POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009 AND
PERIOD FROM AUGUST 8, 2002 (INCEPTION) THROUGH DECEMBER 31, 2011
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
   
Years Ended December 31,
   
For the period August 8, 2002 (Inception) to December 31,
 
       
2010
   
2009
   
2011
 
Revenues:
                       
Grant and research revenues
  $ 2,457     $ 2,144     $ 1,048     $ 9,162  
Total revenues
    2,457       2,144       1,048       9,162  
                                 
Operating Expenses:
                               
Research and development
    13,775       10,951       7,374       56,691  
General and administrative
    7,198       5,767       5,557       35,796  
Total operating expenses
    20,973       16,718       12,931       92,487  
                                 
Other Income and Expenses:
                               
Interest income
    94       96       55       1,785  
Interest expense
    (1,158 )     (1,038 )     (1 )     (2,244 )
Loss on derivative instrument
    (350 )     -       -       (350 )
Total other income (expense)
    (1,414 )     (942 )     54       (809 )
                                 
Net loss
  $ (19,930 )   $ (15,516 )   $ (11,829 )   $ (84,134 )
                                 
Beneficial conversion feature on Series 2008 preferred stock, conversion inducement and dividends on Series 1 preferred stock
    -       -       -       (11,118 )
                                 
Net loss attributable to common stockholders
  $ (19,930 )   $ (15,516 )   $ (11,829 )   $ (95,252 )
                                 
Net loss per common share - basic and diluted
  $ (0.20 )   $ (0.19 )   $ (0.19 )        
                                 
Weighted average common shares outstanding - basic and diluted
    99,131       81,000       62,437          
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
F-5

 

POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FROM AUGUST 8, 2002 (INCEPTION) THROUGH DECEMBER 31, 2011 (IN THOUSANDS)
 
 
Common Stock
 
Preferred Stock
 
Additional
 
Unearned Stock-Based
 
Deficit Accumulated During the Development
 
Unrealized Gain/Loss on Available for Sale
 
Total Stockholders'
Description
Shares
Amount
 
Shares
Amount
 
Paid-In Capital
 
Compensation
 
Stage
 
Securities
 
Equity
Balance at August 8, 2002
 -
 $-
 
 -
 $-
 
 $-
 
 $-
 
 $-
 
 $-
 
 $-
Issuance of common stock
 800
 1
 
 -
 -
 
 19
 
 -
 
 -
 
 -
 
 20
Issuance of Series A preferred stock
 -
 -
 
 920
 1
 
 229
 
 -
 
 -
 
 -
 
 230
Issuance of restricted common stock grants
 1,152
 1
 
 -
 -
 
 28
 
 (29)
 
 -
 
 -
 
 -
Amortization of stock-based compensation
 -
 -
 
 -
 -
 
 -
 
 2
 
 -
 
 -
 
 2
Net loss
 -
 -
 
 -
 -
 
 -
 
 -
 
 (162)
 
 -
 
 (162)
 1,952
 $2
 
 920
 $1
 
 $276
 
 $(27)
 
 $(162)
 
 $-
 
 $90
Issuance of Series A-1 preferred stock
 -
 -
 
 1,000
 1
 
 224
 
 -
 
 -
 
 -
 
 225
Issuance of Series A preferred stock
 -
 -
 
 497
 1
 
 124
 
 -
 
 -
 
 -
 
 125
Issuance of Series B preferred stock
 -
 -
 
 1,328
 1
 
 1,659
 
 -
 
 -
 
 -
 
 1,660
Issuance of common stock
 432
 1
 
 -
 -
 
 10
 
 -
 
 -
 
 -
 
 11
Issuance of restricted common stock grants
 227
 -
 
 -
 -
 
 5
 
 (6)
 
 -
 
 -
 
 (1)
Amortization of stock-based compensation
 -
 -
 
 -
 -
 
 -
 
 9
 
 -
 
 -
 
 9
Net loss
 -
 -
 
 -
 -
 
 -
 
 -
 
 (1,227)
 
 -
 
 (1,227)
 2,611
 $3
 
 3,745
 $4
 
 $2,298
 
 $(24)
 
 $(1,389)
 
 $-
 
 $892
Issuance of Series B preferred stock
 -
 -
 
 3,312
 3
 
 4,097
 
 -
 
 -
 
 -
 
 4,100
Issuance of common stock grants to non-employees in exchange for services
 518
 -
 
 -
 -
 
 336
 
 -
 
 -
 
 -
 
 336
Amortization of stock-based compensation
 -
 -
 
 -
 -
 
 -
 
 8
 
 -
 
 -
 
 8
Net loss
 -
 -
 
 -
 -
 
 -
 
 -
 
 (1,590)
 
 -
 
 (1,590)
 3,129
 $3
 
 7,057
 $7
 
 $6,731
 
 $(16)
 
 $(2,979)
 
 $-
 
 $3,746
Proceeds from Series B subscription receivable
 -
 -
 
 -
 -
 
 40
 
 -
 
 -
 
 -
 
 40
Issuance of common stock grants to non-employees in exchange for services
 196
 -
 
 -
 -
 
 127
 
 -
 
 -
 
 -
 
 127
Issuance of common stock grants
 500
 1
 
 -
 -
 
 325
 
 -
 
 -
 
 -
 
 326
Issuance of stock option grants
 -
 -
 
 -
 -
 
 2,855
 
 (2,855)
 
 -
 
 -
 
 -
Amortization of stock-based compensation
 -
 -
 
 -
 -
 
 -
 
 1,235
 
 -
 
 -
 
 1,235
Conversion of Series A and B preferred stock to common stock
 7,057
 7
 
 (7,057)
 (7)
 
 -
 
 -
 
 -
 
 -
 
 -
Issuance of common stock for net assets of PolyMedix, Inc.
 1,500
 1
 
 -
 -
 
 (2)
 
 -
 
 -
 
 -
 
 (1)
Issuance of Series 1 preferred stock
 -
 -
 
 5,589
 6
 
 14,140
 
 -
 
 -
 
 -
 
 14,146
Net loss
 -
 -
 
 -
 -
 
 -
 
 -
 
 (4,764)
 
 -
 
 (4,764)
 12,382
 $12
 
 5,589
 $6
 
 $24,216
 
 $(1,636)
 
 $(7,743)
 
 $-
 
 $14,855
 
The accompanying notes are an integral part of these consolidated financial statements.

 
F-6

 

POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FROM AUGUST 8, 2002 (INCEPTION) THROUGH DECEMBER 31, 2011 (IN THOUSANDS)– Continued
 
 
Common Stock
 
Preferred Stock
 
Additional
 
Unearned Stock-Based
 
Deficit Accumulated During the Development
 
Unrealized Gain/Loss on Available for Sale
 
Total Stockholders'
Description
Shares
Amount
 
Shares
Amount
 
Paid-In Capital
 
Compensation
 
Stage
 
Securities
 
Equity
 12,382
 $12
 
 5,589
 $6
 
 $24,216
 
 $(1,636)
 
 $(7,743)
 
 $-
 
 $14,855
Reclassification of unearned compensation on nonvested stock balance upon adoption of SFAS No. 123(R)
 -
 -
 
 -
 -
 
 (1,636)
 
 1,636
 
 -
 
 -
 
 -
Issuance of Series 1 preferred stock
 -
 -
 
 1,466
 1
 
 3,719
 
 -
 
 -
 
 -
 
 3,720
Issuance of common stock grants to non-employees in exchange for services
 30
 -
 
 -
 -
 
 45
 
 -
 
 -
 
 -
 
 45
Amortization of stock-based compensation
 -
 -
 
 -
 -
 
 1,094
 
 -
 
 -
 
 -
 
 1,094
Conversion of Series 1 preferred stock to common stock
 68
 -
 
 (34)
 -
 
 -
 
 -
 
 -
 
 -
 
 -
Dividends paid on Series 1 preferred stock
 -
 -
 
 462
 -
 
 (1)
 
 -
 
 -
 
 -
 
 (1)
Unrealized loss on available on sale securities
 -
 -
 
 -
 -
 
 -
 
 -
 
 -
 
 (1)
 
 (1)
Net loss
 -
 -
 
 -
 -
 
 -
 
 -
 
 (5,966)
 
 -
 
 (5,966)
 12,480
 $12
 
 7,483
 $7
 
 $27,437
 
 $-
 
 $(13,709)
 
 $(1)
 
 $13,746
Conversion of Series 1 preferred stock to common stock
 15,944
 16
 
 (7,483)
 $(7)
 
 $(9)
             
 -
Issuance of common stock grants to non-employees in exchange for services
 12
 -
 
 -
 -
 
 12
 
 -
 
 -
 
 -
 
 12
Amortization of stock-based compensation
 -
 -
 
 -
 -
 
 1,189
 
 -
 
 -
 
 -
 
 1,189
Proceeds from exercise of common stock options
 122
 1
 
 -
 -
 
 183
 
 -
 
 -
 
 -
 
 184
Issuance of common stock to employees
 -
 -
 
 -
 -
 
 58
 
 -
 
 -
 
 -
 
 58
Issuance of common stock, net of issuance costs
 3,481
 3
 
 -
 -
 
 2,103
 
 -
 
 -
 
 -
 
 2,106
Unrealized gain on available for sale securities
 -
 -
 
 -
 -
 
 -
 
 -
 
 -
 
 3
 
 3
Net loss
 -
 -
 
 -
 -
 
 -
 
 -
 
 (12,164)
 
 -
 
 (12,164)
 32,039
 $32
 
 -
 $-
 
 $30,973
 
 $-
 
 $(25,873)
 
 $2
 
 $5,134
 
The accompanying notes are an integral part of these consolidated financial statements.

 
F-7

 

POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FROM AUGUST 8, 2002 (INCEPTION) THROUGH DECEMBER 31, 2011 (IN THOUSANDS) – Continued
 
 
Common Stock
 
Preferred Stock
 
Additional
 
Unearned Stock-Based
 
Deficit Accumulated During the Development
 
Unrealized Gain/Loss on Available for Sale
 
Total Stockholders'
Description
Shares
Amount
 
Shares
Amount
 
Paid-In Capital
 
Compensation
 
Stage
 
Securities
 
Equity
 32,039
 $32
 
 -
 $-
 
 $30,973
 
 $-
 
 $(25,873)
 
 $2
 
 $5,134
Issuance of Series 2008 preferred stock, net of issuance costs
     
 609
 1
 
 3,856
 
 -
 
 -
 
 -
 
 3,857
Conversion of Series 2008 preferred stock to common stock
 6,089
 6
 
 (609)
 (1)
 
 -
 
 -
 
 -
 
 -
 
 5
Issuance of common stock grants to non-employees in exchange for services
 -
 -
 
 -
 -
 
 -
 
 -
 
 -
 
 -
 
 -
Amortization of stock-based compensation
 -
 -
 
 -
 -
 
 1,378
 
 -
 
 -
 
 -
 
 1,378
Proceeds from exercise of common stock options
 214
 -
 
 -
 -
 
 214
 
 -
 
 -
 
 -
 
 214
Issuance of common stock to employees
 75
 -
 
 -
 -
 
 26
 
 -
 
 -
 
 -
 
 26
Issuance of common stock, net of issuance costs
 21,428
 22
 
 -
 -
 
 13,483
 
 -
 
 -
 
 -
 
 13,505
Unrealized gain on available for sale securities
 -
 -
 
 -
 -
 
 -
 
 -
 
 -
 
 10
 
 10
Net loss
 -
 -
 
 -
 -
 
 -
 
 -
 
 (10,986)
 
 -
 
 (10,986)
 59,845
 $60
 
 -
 $-
 
 $49,930
 
 $-
 
 $(36,859)
 
 $12
 
 $13,143
Issuance of common stock, net of issuance costs
 20,700
 21
 
 -
 -
 
 18,710
 
 -
 
 -
 
 -
 
 18,731
Issuance of common stock upon exercise of outstanding warrants
 455
 -
 
 -
 -
 
 500
 
 -
 
 -
 
 -
 
 500
Amortization of stock-based compensation
 -
 -
 
 -
 -
 
 1,786
 
 -
 
 -
 
 -
 
 1,786
Reclassification of unrealized gains into net loss
 -
 -
 
 -
 -
 
 -
 
 -
 
 -
 
 (17)
 
 (17)
Unrealized gain on available for sale securities
 -
 -
 
 -
 -
 
 -
 
 -
 
 -
 
 5
 
 5
Net loss
 -
 -
 
 -
 -
     
 -
 
 (11,829)
 
 -
 
 (11,829)
 81,000
 $81
 
 -
 $-
 
 $70,926
 
 $-
 
 $(48,688)
 
 $0
 
 $22,319
Issuance of common stock, net of issuance costs
 -
 -
 
 -
 -
 
 (31)
 
 -
 
 -
 
 -
 
 (31)
Issuance of detachable warrants in connection with debt
 -
 -
 
 -
 -
 
 426
 
 -
 
 -
 
 -
 
 426
Amortization of stock-based compensation
 -
 -
 
 -
 -
 
 2,005
 
 -
 
 -
 
 -
 
 2,005
Net loss
 -
 -
 
 -
 -
     
 -
 
 (15,516)
 
 -
 
 (15,516)
 81,000
 $81
 
 -
 $-
 
 $73,326
 
 $-
 
 $(64,204)
 
 $0
 
 $9,203
Issuance of common stock, net of issuance costs
 25,000
 25
 
 -
 -
 
 18,426
 
 -
 
 -
 
 -
 
 18,451
Issuance of Series D warrant
 -
 -
 
 -
 -
 
 (4,513)
 
 -
 
 -
 
 -
 
 (4,513)
Amortization of stock-based compensation
 -
 -
 
 -
 -
 
 2,173
 
 -
 
 -
 
 -
 
 2,173
Net loss
 -
 -
 
 -
 -
 
 -
 
 -
 
 (19,930)
 
 -
 
 (19,930)
 106,000
 $106
 
 -
 $-
 
 $89,412
 
 $-
 
 $(84,134)
 
 $0
 
 $5,384
 
The accompanying notes are an integral part of these consolidated financial statements.
 

 
F-8

 

POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2011, 2010, AND 2009 AND
PERIOD FROM AUGUST 8, 2002 (INCEPTION) THROUGH DECEMBER 31, 2011
 (IN THOUSANDS)
 
   
Twelve-Months Ended December 31,
   
For the period August 8, 2002 (Inception) to
 
   
2011
   
2010
   
2009
     
Cash Flows from Operating Activities:
                       
Net loss
  $ (19,930 )   $ (15,516 )   $ (11,829 )   $ (84,134 )
Adjustments to reconcile net loss to net cash used in operating activities:
                               
Depreciation
    267       182       205       1,177  
Amortization
    47       35       -       82  
Accretion of discount on investment securities
    -       (2 )     (17 )     (461 )
Stock-based compensation
    2,173       2,005       1,786       11,808  
Non-cash interest expense
    122       91       -       213  
Non-cash interest income
    (22 )     -       -       (22 )
Loss on derivative instruments
    350       -       -       350  
(Increase) decrease in prepaid expenses and other current assets
    220       214       (629 )     (602 )
Increase in accounts payable, accrued expenses and deferred rent
    2,277       577       236       5,839  
Loss on disposal of fixed assets
    -       -       -       23  
Net cash used in operating activities
    (14,496 )     (12,414 )     (10,248 )     (65,727 )
                                 
Cash Flows from Investing Activities:
                               
Cash paid for property and equipment
    (183 )     (474 )     (38 )     (1,446 )
Purchases of investments
    -       (5,448 )     (3,798 )     (39,489 )
Proceeds from maturities of investments
    -       3,800       11,703       38,301  
Net cash (used in) provided by investing activities
    (183 )     (2,122 )     7,867       (2,634 )
                                 
Cash Flows from Financing Activities:
                               
Proceeds from issuance of stock, net of financing costs
    18,451       (106 )     18,753       80,898  
Proceeds from warrant and stock option exercises
    -       -       500       898  
Principal payments on capital lease obligations
    -       -       (104 )     (331 )
Proceeds from issuance of debt, net of issue costs
    (2 )     9,839       -       9,837  
Principal payments on debt obligations
    (3,237 )     -       -       (3,237 )
Net cash provided by financing activities
    15,212       9,733       19,149       88,065  
                                 
Net increase (decrease) in cash and cash equivalents
    533       (4,803 )     16,768       19,704  
                                 
Cash and cash equivalents - beginning of period
    19,171       23,974       7,206       -  
                                 
Cash and cash equivalents - end of period
  $ 19,704     $ 19,171     $ 23,974     $ 19,704  
                                 
Cash Paid for Interest
  $ 1,070     $ 841     $ 2     $ 967  
                                 
Non-Cash Investing Activities:
                               
Capital expenditures acquired on account
  $ -     $ -     $ -     $ 15  
                                 
Non-Cash Financing Activities:
                               
Accrued financing costs
  $ -     $ -     $ 73     $ -  
Series D warrant issuance
  $ 4,513     $ -     $ -     $        4,513  
        Warrants issued to creditor and placement agents   $     $ 426      $ 119      $ 3,059   
 
The accompanying notes are an integral part of these consolidated financial statements.
 

 
F-9

 

POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011 AND 2010 AND
FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
AND FOR THE PERIOD AUGUST 8, 2002 (INCEPTION) TO DECEMBER 31, 2011
 
In these consolidated financial statements, "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
 
NOTE 1 – ORGANIZATION AND BUSINESS ACTIVITIES

We are a clinical stage biotechnology company focused on developing treatments for acute care conditions with synthetic small molecule compounds that mimic the activity of large natural protein molecules, compounds referred to as biomimetics. Using our proprietary drug discovery platform, we have created novel defensin mimetic antibiotic compounds, novel heparin antagonist compounds, and other drug compounds intended for human therapeutic use. Since 2002, we have been a development stage enterprise, and accordingly, our operations have been directed primarily toward developing business strategies, raising capital, research and development activities, conducting pre-clinical testing and human clinical trials of our product candidates, exploring marketing channels and recruiting personnel.

We have incurred operating losses since inception, have not generated any product sales revenues and have not achieved profitable operations. Our deficit accumulated during the development stage through December 31, 2011 was approximately $84,134,000, and we expect to continue to incur substantial losses in future periods.   None of our product candidates has received regulatory approval for commercial sale and our product candidates may never be commercialized.  In addition, all of our product candidates are in the early stages of development and several programs are on hold pending additional financing.  Our development programs require a significant amount of cash to support the development of product candidates.  The progress and results of our current and any future clinical trials or future pre-clinical testing are uncertain, and if our product candidates do not receive regulatory approvals, our business, operating results, financial condition and cash flows will be materially adversely affected.

We are highly dependent on the success of our research, development and licensing efforts and, ultimately, upon regulatory approval and market acceptance of our products under development. Our short and long-term capital requirements depend upon a variety of factors, including the timing and results of our clinical trials, market acceptance for our technologies and product candidates and various other factors. We believe that our current cash and investment balances as of the date of this report will be sufficient to fund our operations for at least the next 12 months.  Our ability to advance the clinical development of our drug candidates and ultimately seek regulatory approval depends upon our ability to meet the regulatory requirements of the United States Food and Drug Administration (FDA) and other regulatory authorities on an ongoing basis, many of which develop and change over time and are subject to interpretation by such regulatory authorities.  Any changes in regulatory requirements may have significant impacts on the timing and cost of clinical trials, and our ability to complete such trials, if at all.
 
In April 2011, we closed an equity financing for gross proceeds of $20,000,000, and in March 2010, we closed a debt financing for gross proceeds of $10,000,000.  Proceeds from these financing activities are being used to fund our clinical development of our lead product candidates PMX-30063 and PMX-60056 and for general corporate purposes.  We may seek additional funds through equity or debt financing, among other sources, or through government grants and contracts.  We may not, however, be able to obtain additional funding on favorable terms, if at all. If we are unable to secure adequate additional funding in 2012, we may delay, scale-back or eliminate certain of our planned research, drug discovery and development activities and certain other aspects of our operations and our business until such time as we are successful in securing adequate additional funding. As a result, our business, operating results, financial condition and cash flows may be materially and adversely affected.
 

 
F-10

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Principles of Consolidation
 
The consolidated financial statements include the accounts of PolyMedix, Inc. and its wholly owned subsidiary PolyMedix Pharmaceuticals, Inc. All intercompany accounts and transactions have been eliminated in consolidation.
 
Development Stage Company
 
We are considered to be in the development stage as defined by accounting principles generally accepted in the United States (“GAAP”). We have devoted substantially all of our efforts to business planning, research and development, recruiting management and technical staff, and raising capital.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates include the value of our stock options and warrants.
 
Cash and Cash Equivalents
 
We consider all highly liquid investments purchased with a maturity of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of cash in banks and money market funds.
 
Long-term Investments
 
Investments purchased with a maturity of more than three months, or which mature in less than 12 months are classified as short-term investments. We generally hold these investments to maturity and have classified these investments as such as defined by GAAP.
 
Property and Equipment
 
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful life of the assets; three years for computer equipment and related software, seven years for office furniture and five years for lab equipment. When property and equipment are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in operating expenses. Depreciation expense was $267,000, $182,000, $205,000, and $1,177,000 for the years ended December 31, 2011, 2010 and 2009 and for the period from August 8, 2002 (Inception) to December 31, 2011, respectively.
 
Impairment of Long-Lived Assets
 
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the basis of an asset may not be recoverable. In accordance with GAAP, impairment is assessed by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with them. If the expected future cash flows are less than the carrying value, an impairment loss is recognized for the amount by which the carrying value exceeds the fair value of the assets.

 
F-11

 

Long-term Investments
 
Investments purchased with a maturity of more than 12 months are classified as long-term investments. We generally hold investments to maturity and have classified these investments as such as defined by GAAP.
 
Grant and Contract Revenue
 
Sponsored research grant and contract revenues are recognized pursuant to the terms of the related agreements as work is performed.
 
Research and Development Expense
 
Research and development costs are expensed as incurred.
 
Income Taxes
 
We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities and the expected benefits of using net operating loss carryforwards. The impact of changes in tax rates and laws on deferred taxes, if any, applied during the years in which temporary differences are expected to be settled, is reflected in the consolidated financial statements in the period of enactment.  The measurement of deferred tax assets is reduced, if necessary, if, based on weight of the evidence, it is more likely than not that some, or all, of the deferred tax assets will not be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. At December 31, 2011 and 2010, we have concluded that a full valuation allowance is necessary for deferred tax assets (See Note 6).
 
We apply the provisions of GAAP as it relates to the recognition threshold and measurement attribute for the financial statement recognition and measurement of uncertain tax positions taken or expected to be taken in a tax return. We had no material amounts recorded for uncertain tax positions, interest or penalties in the accompanying consolidated financial statements. See Note 6 for additional information.
 
Loss per Share of Common Stock
 
We calculate our loss per share in accordance with GAAP, which requires a dual presentation of “basic” and “diluted” loss per share on the face of the income statement. Basic loss per share is computed by dividing loss by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as unvested restricted stock, convertible preferred stock, stock options and warrants, which would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share allocable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation. Potentially dilutive securities include options and warrants to purchase our common stock. These potentially dilutive securities are more fully described in Note 7.
 
Comprehensive Loss
 
Comprehensive loss consists of reported net income or loss and any unrealized gains or losses on available for sale securities. As of December 31, 2011 and 2010, we did not hold any such securities.  Accordingly, the comprehensive loss for each of the periods presented approximates the net loss in the consolidated statements of operations.
 
Segment Information
 
In accordance with the definitions provided by GAAP, we have one reportable segment operating within the United States.

 
F-12

 

Fair Value of Financial Instruments and Credit Risk
 
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts payable, short-term investments, and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.
 
We invest our cash in accordance with a policy objective that seeks to ensure both liquidity and safety of principal. The policy limits investments to instruments issued by the U.S. government and commercial institutions with strong investment grade credit ratings and places restrictions on maturity terms and concentrations by type and issuer.
 
Stock-Based Compensation
 
We currently sponsor equity compensation plans under which we have granted options to purchase our common stock to employees, directors, and key consultants.  We have also granted awards outside of these plans.  Compensation expense associated with equity awards is based on the fair value estimated at the date of grant, recognized ratably over the period in which the related services are provided.  The total stock-based compensation expense was $2,173,000, $2,005,000, $1,786,000, and $11,808,000 for the years ended December 31, 2011, 2010 and 2009 and for the period from August 8, 2002 (Inception) to December 31, 2011, respectively.
 
Recently Issued and Adopted Accounting Standards

In January 2010, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) relating to fair value disclosures, to add new requirements for disclosures about transfers into and out of Levels 1 and 2, and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value.  The guidance in this ASU is effective for the first reporting period (including interim periods) beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which was effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  The adoption of this guidance did not have a material impact on our consolidated financial statements.

In May 2011, the FASB issued an ASU which converges guidance with that of the International Accounting Standards Board (IASB) on how to measure fair value and on what disclosures to provide about fair value measurements.  While the ASU is largely consistent with existing fair value measurement principles in U.S. GAAP, it expands Accounting Standards Codification (ASC) 820’s existing disclosure requirements for fair value measurements and makes other amendments. Many of these amendments were made to eliminate unnecessary wording differences between U.S. GAAP and International Financial Reporting Standards. However, some could change how the fair value measurement guidance in ASC 820 is applied.  The ASU is effective for interim and annual periods beginning after December 15, 2011.  We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, which revised the manner in which entities present comprehensive income in their financial statements.  The new guidance removes the presentation options in ASC 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements.  The ASU does not change the items that must be reported in other comprehensive income (OCI).  With the exception of the indefinite deferral of the provisions that require entities to present, in both net income and OCI, adjustments of items that are reclassified from OCI to net income, for public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
 
NOTE 3 – INVESTMENTS

As of December 31, 2011, we held only short-term investments, consisting of investments with maturities less than one year.  All short-term investments represent certificates of deposit which are expected to be redeemed in the next 12 months, and are classified as “held to maturity” and are recorded at cost.  At December 31, 2010, we held only long-term investments, consisting of investments with maturities greater than one year.  

 
 
F-13

 

All long-term investments represented certificates of deposit classified as “held to maturity” and recorded at cost. As discussed in Note 10, these certificates of deposit secure our letter of credit.
 
NOTE 4 – FAIR VALUE MEASUREMENTS
 
The FASB has established a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value. Classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
 
As of December 31, 2010, we did not have any assets or liabilities measured at fair value which were in the scope of this guidance.  As of December 31, 2011, we did not have any financial or nonfinancial instruments carried at fair value measured on a nonrecurring basis. The following table provides financial and nonfinancial assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2011 (in thousands):
 
         
Fair Value Measurements at December 31, 2011
 
       
Quoted prices in
active markets
(Level 1)
   
Significant other
observable
inputs
(Level 2)
   
Significant
unobservable
inputs
(Level 3)
 
Derivative liability
  $ 4,863     $ -     $ -     $ 4,863  
 
The fair value of our derivative liabilities was determined using the Black-Scholes-Merton formula – a Level 3 input.  As of December 31, 2011, unobservable inputs included an exercise price of $0.80, expected life of 4.28 years, volatility of 66.35%, a 4.28-year interpolated risk-free rate of 0.66%, and 0% dividend rate.  The only observable input was our current stock price of $0.77.

The following tables set forth a summary of changes in the fair value of Level 3 liabilities for the year ended December 31, 2011 (in thousands).  We did not have any instruments measured at fair value with Level 3 inputs for the year ended December 31, 2011:

       
Warrant Issuance
   
Change in fair value
     
Derivative liability
  $ -     $ 4,513     $ 350     $ 4,863  

NOTE 5 – ACCRUED EXPENSES
 
At December 31, 2011 and 2010, accrued expenses consisted of the following (in thousands):
 
   
2011
   
2010
 
Payroll related costs
  $ 1,177     $ 939  
Research and development related costs
    455       158  
Accrued interest expense
    72       106  
Other costs
    251       327  
Total accrued expenses
  $ 1,955     $ 1,530  
  

 
F-14

 

NOTE 6 – PROVISION FOR INCOME TAXES
 
We account for income taxes using the asset and liability approach as required by GAAP. Deferred income taxes are provided for the differences between the tax bases of assets or liabilities and their reported amounts in the financial statements. This method also requires the recognition of future tax benefits, such as net operating loss carryforwards and research and development credits, to the extent that realization of such benefits is more likely than not.  At December 31, 2011 and 2010, deferred tax assets consisted of the following (in thousands):
 
   
2011
   
2010
 
Deferred tax assets:
           
Net operating loss carryforward
  $ 27,528     $ 20,871  
Stock compensation expense
    2,871       1,900  
Contribution carryforward
    -       -  
R & D credit carryforward
    2,648       2,026  
Straight-line rent
    352       380  
Other
    468       151  
        Gross deferred tax assets
    33,867       25,328  
Less: Valuation allowance
    (33,852 )     (25,292 )
        Net deferred tax assets
    15       36  
Deferred tax liability
    (15 )     (36 )
        Net deferred tax
  $ -     $ -  
 
 We believe there is not sufficient evidence that future taxable income will be adequate to permit the realization of the future tax deductions embedded in this asset. As such, in accordance with GAAP, we have established a valuation allowance to reduce the deferred tax asset since it is more likely than not that the deferred tax asset will not be realized.
 
The difference between the provision for (benefit from) income taxes and the amount computed by applying the federal statutory income tax rate to income (loss) before provision for (benefit from) income taxes is explained below (in thousands):
 
             
             
   
Years ended December 31,
   
Period from
(Inception) to
 
       
2010
   
2009
   
2011
 
Loss before provision for income taxes
  $ (19,930 )   $ (15,516 )   $ (11,829 )   $ (84,134 )
                                 
Tax benefit at federal statutory rate
    (6,776 )     (5,275 )     (4,022 )     (28,606 )
State tax benefits, net of federal
    (1,314 )     (1,023 )     (506 )     (5,535 )
Research and development credits
    (413 )     (322 )     (253 )     (1,947 )
Other permanent differences
    443       728       432       1,813  
Other
    (500 )     191       2       423  
Change in valuation allowance
    8,560       5,701       4,347       33,852  
Provision for income taxes
  $     $     $     $  
 
We have available at December 31, 2011, approximately $68,000,000 in unused federal and $60,000,000 in unused state operating loss carryforwards that expire between 2022 and 2031.  We also have available at December 31, 2011, approximately $2,600,000 unused federal research and development credit carryforwards that may provide future tax benefits and expire between 2025 and 2030.

 
F-15

 

The Tax Reform Act of 1986 contains provisions that may limit the NOL and research and development credit carryforwards available to be used in any given year upon the occurrence of certain events, including significant changes in ownership interest. Generally, a change in ownership of a company of greater than 50% within a three-year period results in an annual limitation on that company’s ability to utilize its NOL carryforwards and tax credits from the tax periods prior to the ownership change. A study needs to be performed to determine if we have undergone a change in ownership, however, we believe that we have undergone an ownership change and are subject to an annual limitation on the use of our NOL carryforwards pursuant to these provisions.
 
No adjustments were made to retained earnings for unrecognized tax benefits after applying the “more likely than not” threshold to the initial recognition and derecognition of our tax positions.
 
We file income tax returns in the U.S. federal jurisdiction and Pennsylvania.  Our policy is to record interest and penalties on uncertain tax positions as income tax expense.  The tax years back to 2002 remain open to examination by the major taxing jurisdictions where we file. Net operating loss and credit carryforwards from earlier periods also remain open to examination by taxing authorities, and will for a period post utilization. We do not reasonably estimate that the unrecognized tax benefit will change significantly within the next twelve months. Any changes in the future would also have no impact on our consolidated financial statements due to the existence of a full valuation allowance. As of December 31, 2011, we had no material amounts recorded for uncertain tax positions, interest or penalties in the accompanying consolidated financial statements.
 
NOTE 7 – STOCKHOLDERS’ EQUITY
 
Common Stock

We are authorized to issue 250,000,000 shares of common stock, with a par value of $0.001, of which approximately 106,000,000 and 81,000,000 were issued and outstanding at December 31, 2011 and 2010, respectively.

In April 2011, we closed on an underwritten offering whereby we sold 25,000,000 units, consisting of one share of our common stock and a warrant to purchase one half of a share of our common stock at a price of $0.80 per unit.  In connection with this offering, we incurred financing costs of approximately $1,549,000.
 
Preferred Stock

We are authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.001, of which no shares were issued and outstanding at December 31, 2011 and 2010, respectively.
 
Warrants

We presently have the following warrants outstanding to purchase shares of our common stock (number of warrants in thousands):
 
Warrant Series
 
Number of Warrants Outstanding
   
Exercise Price
 
Expiration Date
2007
    2,489     $ 1.10  
December 2012
Series A
    22,285     $ 1.00  
July 2013
Series B
    6,368     $ 1.00  
September 2013
Series C
    6,417     $ 1.25  
November 2014
HTGC
    628     $ 1.16  
March 2015
Series D
    12,500     $ 0.80  
April 2016
Total
    50,687            

All warrants are exercisable beginning five years prior to their expiration date.

 
F-16

 

In connection with our underwritten offering which closed in April 2011, we issued Series D warrants to purchase 12,500,000 shares of our common stock at an aggregate initial fair value of $4,512,500, which are classified as a derivative liability on our statement of financial position.  See note 9 for additional information, and note 4 with respect to fair value.

Stock-Based Compensation
 
We maintain equity compensation plans under which grants of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units and other stock-based awards are granted to selected employees, non-employee directors and key advisors.  Since our inception on August 8, 2002, we have recognized equity compensation expense over the requisite service period using the Black-Scholes-Merton formula to estimate the fair value of stock options.  The following table summarizes the total stock-based compensation expense included in our Consolidated Statements of Operations (in thousands):
 
   
Years Ended December 31,
   
Period from August 8, 2002 (Inception) to December 31,
 
       
2010
   
2009
   
2011
 
Research and development
  $ 848     $ 950     $ 704     $ 4,303  
General and administrative
    1,325       1,055       1,082       7,505  
Total stock-based compensation expense
  $ 2,173     $ 2,005     $ 1,786     $ 11,808  

During the year ended December 31, 2011, approximately 2,853,000 stock options were awarded to non-employee directors, officers, employees and consultants for services performed.  Options awarded to our non-employee consultants are granted for their continuing services under our consulting agreements which have no definitive end date, and therefore, we apply a similar approach in identifying the grant date and vesting period for these awards as we do for our employees.  As of December 31, 2011, there were 16,931,000 shares of common stock issuable upon exercise of outstanding stock options and 9,662,000 shares of Common Stock available for issuance of future equity compensation awards in connection with our equity compensation plans.

Stock Options

As of December 31, 2011, there was approximately $2,106,000 of total unrecognized compensation cost related to non-vested stock options, which will be amortized over the weighted average remaining service period of approximately 0.94 years.  This expected cost does not include the impact of any future stock option awards.  Options granted are generally exercisable for a period of up to ten years from the date of grant at an exercise price which is not less than the fair value on the date of grant and generally vest over terms ranging from immediately to three years.  A summary of the status of our stock options as of December 31, 2011 and changes during the year ended December 31, 2011 is presented below (in thousands, except per share amounts):

 
F-17

 


   
Options
   
Weighted Average Exercise Price per share
   
Weighted Average Remaining Contractual Life (in years)
   
Aggregate Intrinsic Value
 
Outstanding at beginning of period
    15,592     $ 1.28              
Granted
    2,853     $ 1.05              
Exercised
    -       -              
Expired
    -       -              
Cancelled
    1,213     $ 1.91              
Forfeited
    301     $ 1.05              
Outstanding at end of period
    16,931     $ 1.17       6.88     $ 147  
Exercisable at end of period
    13,043     $ 1.25       6.31     $ 33  

The aggregate intrinsic value in the preceding tables represent the total pretax intrinsic value that would have been received by the option holders had all option holders exercised their options on the last day of 2011. Intrinsic value is determined by calculating the difference between the value of our stock on the last day of the year and the exercise price, multiplied by the number of options.  For options where our stock price on December 31, 2011 was below the exercise price, the intrinsic value was given a value of $0.

The following table summarizes the fair value of options granted during the years ended December 31, 2011, 2010 and 2009 and for the period from August 8, 2002 (Inception) to December 31, 2011, respectively (in thousands, except per share amounts):
 
   
Years Ended December 31,
   
Period from August 8, 2002 (Inception) to December 31,
 
       
2010
   
2009
   
2011
 
Fair value of options granted
  $ 1,386     $ 2,994     $ 417     $ 13,565  
Fair value of options granted (per share)
  $ 0.49     $ 0.60     $ 0.49     $ 0.70  

The fair value of options granted is amortized over the requisite service period.  The fair value of each option grant is estimated on the date of grant using the Black-Scholes-Merton formula with the following weighted average assumptions:
 
 
Year Ended
Year Ended
Year Ended
Range of risk free interest rates
0.99% – 2.30%
1.11% – 2.40%
1.65% - 2.51%
Dividend yield
0%
0%
0%
Expected volatility
67% – 68%
69% – 72%
72% - 74%
Expected life of options (in years)
5
5
5
Forfeitures
0%
0%
0%

Expected volatility and expected life for the years ended December 31, 2011, 2010, and 2009 were estimated based upon historical activity and peer company expectations.  The risk-free interest rate is calculated using the U.S. Treasury yield curves in effect at the time of grant.  We currently estimate that all of our outstanding options will vest.

 
F-18

 

Restricted Common Stock Grants

We have also issued shares of restricted Common Stock to selected employees, non-employee directors and key advisors. During the three-year period ended December 31, 2011, there were no grants of restricted stock. As of December 31, 2011, there was no recognized or unrecognized compensation cost related to non-vested restricted stock grants.  The restriction period for restricted stock awards was for a four year vesting period, commencing from the grant date.

Since inception, August 8, 2002, we granted 1,464,000 shares of restricted stock.  No shares of restricted stock vested during the three-year period ended December 31, 2011.   The total grant date fair value of these restricted stock awards was $34,000.  All restricted shares awarded have grant date fair values of $0.025 per share.

Common Stock Grants

We also issued Common Stock grants to selected employees, non-employee directors and key advisors. For the period from August 8, 2002 (Inception) to December 31, 2011, we issued Common Stock grants of 1,244,000 shares. The total grant date fair value of these common stock grants and expense recognized for the period from August 8, 2002 (inception) to December 31, 2011 was $834,000.  We did not grant or recognize any expense related to these awards for the three-year period ended December 31, 2011.
  
Equity Line
 
In May 2009, we signed an Investment Agreement with Dutchess Opportunity Fund, II (Dutchess) which allows us to put shares of our common stock at an aggregate value of up to $10,000,000, but not to exceed 12,000,000 shares, to Dutchess, subject to the terms and conditions of the agreement.  The purchase price will be determined on a volume-weighted average price calculated in accordance with the terms of the agreement.  As of December 31, 2011, we have not put any shares of our common stock to Dutchess under this Investment Agreement.  This Investment Agreement expires in July 2012.
 
NOTE 8 – DEBT
 
On March 31, 2010, we entered into a Loan and Security Agreement (LSA) with Hercules Technology II, L.P. (HTGC) whereby we borrowed $10,000,000.  This loan bears an interest rate at the greater of 12.35%, or the Federal Reserve Prime Rate plus 7.10%, not to exceed 14%, and has a term of 42 months with interest-only payments for the first nine months.  In connection with this loan, we also issued to HTGC a detachable warrant to purchase 627,586 shares of our common stock which expires on March 30, 2015.  The following table summarizes our debt included in our consolidated balance sheets as of December 31, 2011 and 2010 (in thousands):
 
 
Principal
   
Unamortized Discount
 
Current portion
  $ 3,664     $ 122  
Long-term portion
    3,099       91  
Total
  $ 6,763     $ 213  

 
Principal
   
Unamortized Discount
 
Current portion
  $ 3,237     $ 122  
Long-term portion
    6,763       213  
Total
  $ 10,000     $ 335  


 
F-19

 

We allocated the $10,000,000 of proceeds received to both the debt and the detachable warrant based on the relative fair value of the debt instrument without the warrant and the warrant itself. The relative fair value at the time of issuance was $9,574,000 and $426,000 for the debt and warrant, respectively. The portion allocated to the warrant was recorded in additional paid-in capital, and will be amortized to interest expense as a discount to the principal balance of the debt. As of December 31, 2011, we had accrued interest of approximately $78,000. There are no financial covenants associated with this debt. As of December 31, 2011, we were in compliance with all nonfinancial covenants. We incurred $164,000 in debt issue costs in connection with securing the LSA, which we have recorded as an asset being amortized over the life of the loan.
 
Fair Value
 
We estimate the fair value of the principal balance of our debt to be $6,774,000 as of December 31, 2011.  We determined this value by discounting the remaining cash flows of our outstanding debt obligations as of December 31, 2011 using an interest rate of 11.95%, which we estimate is our current rate of borrowing.  As of December 31, 2010, we estimated our current rate of borrowing to be consistent with our existing debt arrangement at 12.35%.  Accordingly, a discounted cash flows model resulted in an estimated fair value equal to book value.
 
We estimate the fair value of the outstanding detachable warrants to be $164,000 as of December 31, 2011.  We determined this value using a Black-Scholes-Merton fair value calculation with the following inputs: Stock price: $0.77; Exercise Price: $1.16; Volatility: 66.01%; Risk-free rate: 0.42%; Interpolated estimated remaining life: 3.25 years; 0% dividend rate.  We estimate the fair value of the outstanding detachable warrants to be $312,000 as of December 31, 2010.  We determined this value using a Black-Scholes-Merton fair value calculation with the following inputs: Stock price: $1.00; Exercise Price: $1.16; Volatility: 69.41%; Risk-free rate: 0.65%; Interpolated estimated remaining life: 4.25 years; 0% dividend rate.
 
NOTE 9 – DERIVATIVE FINANCIAL INSTRUMENTS

Generally, we do not use derivative financial instruments to hedge exposures to cash flow or market risks.  From time to time, we seek additional funding from debt and equity financing arrangements, which frequently include the issuance of warrants to purchase our common stock.  Occasionally, such warrants contain certain provisions that require derivative classification in our financial statements.

Currently, the only outstanding warrants classified as derivative financial instruments are the Series D warrants, issued in connection with an equity financing that we closed in April, 2011.  Upon issuance of any warrant, we evaluate the terms of the warrant in connection with ASC 815, “Derivatives and Hedging.”  Our Series D warrants contain a provision whereby the exercise price may be reduced upon the occurrence of certain events within our control, such as the future issuance of common stock or rights to purchase common stock at a price below the current exercise price of the Series D warrants.  Accordingly, the Series D warrants are recorded as a derivative liability on our statement of financial position, with subsequent changes to fair value recorded through earnings at each reporting period in our statement of operations as other income (expense). As a noncash item, each subsequent change in fair value is reflected in our statement of cash flows as a noncash adjustment to net loss under operating activities.  Upon exercise of these warrants, the cash inflow will be recorded as a financing activity on our statement of cash flows.  As of December 31, 2011, no Series D warrants have been exercised.
 
NOTE 10 – COMMITMENTS AND CONTINGENCIES
 
Operating Lease

In June 2006, we entered into an operating lease agreement for 24,223 square feet of combined office and laboratory space located in Radnor, Pennsylvania.  The initial term of the lease is 12 years. Payments under the lease commenced on December 1, 2006.  Our annual future minimum lease payments under this non-cancelable operating lease are as follows (in thousands):

 
 
F-20

 
 

 

   
Operating Leases
 
2012
  $ 686  
2013
    705  
2014
    724  
2015
    743  
2016
    756  
Thereafter
    1,388  
Total minimum lease payments
  $ 5,002  
 
Rent expense was $598,000 for each of the three years ended December 31, 2011, and $3,671,000 for the period from August 8, 2002 (Inception) to December 31, 2011.
 
Other
 
Agreements with Employees. We have entered into employment agreements with various executives. These agreements provide for severance arrangements and accelerated vesting of equity compensation awards in the event that the executive is terminated by us other than for cause or disability or if the executive resigns for good reason.
 
Credit Line.  In December 2011, we entered into a letter of credit agreement to secure our payment obligations under our facility operating lease. This letter of credit is for $1,000,000, expires on December 1, 2012, and is secured by certificates of deposits held at the same financial institution.
 
NOTE 11 – QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
The following tables set forth certain unaudited financial information for each of the quarters in the years ended December 31, 2011 and 2010. This unaudited quarterly information has been prepared on the same basis as the audited financial statements and includes all necessary adjustments, consisting only of normal recurring adjustments that we consider necessary for a fair presentation of the unaudited quarterly results when read in conjunction with the audited financial statements and notes. We believe that quarter-to-quarter comparisons of financial results are not necessarily meaningful and should not be relied upon as an indication of future performance (in thousands, except per share amounts).
 
      Q1       Q2       Q3       Q4    
Year
 
2011:
                                     
Grant and research revenues
  $ 799     $ 334     $ 387     $ 937     $ 2,457  
Operating expenses
    4,130       4,574       5,534       6,735       20,973  
Net loss attributable to common shareholders
    (3,636 )     (5,216 )     (4,142 )     (6,936 )     (19,930 )
Net loss per common share - basic and diluted
  $ (0.04 )   $ (0.05 )   $ (0.04 )   $ (0.07 )   $ (0.20 )
2010:
                                       
Grant and research revenues
  $ 560     $ 468     $ 484     $ 632     $ 2,144  
Operating expenses
    4,091       4,580       4,127       3,920       16,718  
Net loss attributable to common shareholders
    (3,524 )     (4,428 )     (3,954 )     (3,610 )     (15,516 )
Net loss per common share - basic and diluted
  $ (0.04 )   $ (0.05 )   $ (0.05 )   $ (0.04 )   $ (0.19 )
 
 

 
F-21

 
 
Exhibit No.
Description of Exhibit
            2.1
Agreement and Plan of Merger and Reorganization, dated October 6, 2005, among the Registrant, PolyMedix Merger Sub, Inc., PolyMedix Pharmaceuticals, Inc. and those stockholders of Registrant identified on Exhibit A thereto(1)
3.1.1
Amended and Restated Certificate of Incorporation of Registrant dated November 8, 2005(1)
3.1.2
Certificate of Designations of Registrant dated November 8, 2005(1)
3.1.3
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Registrant dated February 17, 2006(1)
3.1.4
Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Registrant dated June 5, 2008(2)
3.1.5
Certificate of Amendment of the Certificate of Designations of Registrant dated June 5, 2008(2)
3.1.6
Certificate of Designations of Registrant dated September 18, 2008(3)
3.1.7
Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Registrant dated December 10, 2008(4)
3.1.8
Certificate of Designation, Preferences and Rights of Series C Preferred Stock of Registrant dated May 12, 2009(5)
3.2*
Amended and Restated By-Laws of Registrant
4.1
Form of Common Stock Purchase Warrant(6)
4.2
Form of Series A Warrant Agreement (including Series A Warrant certificate)(7)
4.3
Form of Placement Agent Warrant(7)
4.4
Form of Series B Warrant to Purchase Capital Stock(8)
4.5
Rights Agreement, by and between PolyMedix, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent, including exhibits thereto, dated as of May 12, 2009(5)
4.6
Form of Series C Warrant to Purchase Common Stock issued in connection with the November 2009 offering(9)
4.7
Form of Placement Agent Warrant issued in connection with the November 2009 offering(9)
4.8
Common Stock Purchase Warrant dated March 31, 2010(10)
4.9
Form of Series D Warrant To Purchase Common Stock(18)
10.1
Patent License Agreement, dated January 3, 2003, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the University of Pennsylvania(1)
10.2
Letter Agreement, dated December 23, 2003, amending the Patent License Agreement, dated January 3, 2003, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the University of Pennsylvania(1)
10.3
Software License Agreement, dated May 30, 2003, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the University of Pennsylvania(1)
10.4
Exclusive License Agreement, dated January 2, 2005, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the University of Massachusetts(1)
10.5
Employment agreement, dated July 30, 2002, between Nicholas Landekic and PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.)**(1)
10.6
Employment agreement, dated December 5, 2005, between Edward Smith and PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.)**(1)
10.7
Employment agreement, dated March 28, 2003, between Richard Scott, Ph.D. and PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.)**(1)
10.8
Pennsylvania Full-Service Lease Agreement for 170 N. Radnor-Chester Road; Suite 300, Radnor, PA 19087, dated May 26, 2006, between PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) and the Radnor Properties — SDC, L.P.(11)
10.9
Amended and Restated 2005 Omnibus Equity Compensation Plan**(12)
10.10
2002 Equity Compensation Plan**(13)
 
 
 

 
 

 

 Exhibit No.  Description of Exhibit
10.11
Form of Incentive Stock Option Agreement**(1)
10.12
Form of Nonqualified Stock Option Agreement**(1)
10.13
Employment agreement, dated November 5, 2007, between Bozena Korczak, Ph.D. and PolyMedix Pharmaceuticals, Inc.(14)
10.14
Investment Agreement by and between PolyMedix, Inc. and Dutchess Equity Fund, LP dated May 20, 2009(15)
10.15
Registration Rights Agreement by and between PolyMedix, Inc. and Dutchess Equity Fund, LP dated May 20, 2009(15)
10.16
Amendment No. 1 to Investment Agreement dated July 8, 2009, between the Registrant and Dutchess Equity Fund, LP(16)
10.17
Loan and Security Agreement dated March 31, 2010 by and among PolyMedix, Inc., PolyMedix Pharmaceuticals, Inc. and Hercules Technology II, L.P.(10)
10.18
Registration Rights Agreement dated March 31, 2010 by and between PolyMedix, Inc. and Hercules Technology II, L.P.(10)
10.19
Employment agreement, dated as of January 18, 2011, between R. Eric McAllister and PolyMedix Pharmaceuticals, Inc.**(17)
10.20
Underwriting Agreement, dated April 5, 2011, by and between PolyMedix, Inc. and Cowen and Company, LLC(19)
10.21
Change in Control Severance Plan**(20)
10.22*
Employment agreement, dated as of July 19, 2011, between Daniel Jorgensen, M.D. and PolyMedix Pharmaceuticals, Inc.**
21*
List of Subsidiaries
23.1*
24*
Power of Attorney (Included on signature page)
31.1*
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
* Filed herewith.
** Management contract or compensatory arrangement.

(1) Filed as an Exhibit to the Registration Statement on Form 10-SB (File No. 000-51895) filed on April 5, 2006 and incorporated herein by reference.
(2) Filed as an Exhibit to the Current Report on Form 8-K filed on June 5, 2007 and incorporated herein by reference.
(3) Filed as an Exhibit to the Current Report on Form 8-K filed on September 24, 2008 and incorporated herein by reference.
(4) Filed as an Exhibit to the Current Report on Form 8-K filed on December 12, 2008 and incorporated herein by reference.
(5) Filed as an Exhibit to the Current Report on Form 8-K filed on May 14, 2009 and incorporated herein by reference.
(6) Filed as an Exhibit to Amendment No. 5 to the Registration Statement on Form SB-2 (File No. 333-146180) on November 30, 2007 and incorporated herein by reference.
(7) Filed as an Exhibit to Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-151084) on June 27, 2008 and incorporated herein by reference.
(8) Filed as an Exhibit to the Current Report on Form 8-K filed on September 24, 2008 and incorporated herein by reference.
(9) Filed as an Exhibit to Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-160833) on November 6, 2009 and incorporated herein by reference.
(10) Filed as an Exhibit to the Current Report on Form 8-K filed on April 2, 2010 and incorporated herein by reference.
(11) Filed as an Exhibit to Amendment No. 2 to the Registration Statement on Form 10-SB/A (File No. 000-51895) filed on June 19, 2006 and incorporated herein by reference.
(12) Filed as Appendix A to the Registrant’s Definitive Proxy Statement filed on May 15, 2009 and incorporated herein by reference.
 
 
 
 
 

 
 
(13) Filed as an Exhibit to the Registration Statement on Form S-8 (File No. 333-139686) filed on December 26, 2006 and incorporated herein by reference.
(14) Filed as an Exhibit to the Current Report on Form 8-K filed on November 16, 2007 and incorporated herein by reference.
(15) Filed as an Exhibit to the Current Report on Form 8-K filed on May 22, 2009 and incorporated herein by reference.
(16) Filed as an Exhibit to the Registration Statement on Form S-1 (File No. 333-160470) on July 8, 2009 and incorporated herein by reference.
(17) Filed as an Exhibit to the Current Report on Form 8-K filed on January 24, 2011 and incorporated herein by reference.
(18) Filed as an Exhibit to the Current Report on Form 8-K filed on April 6, 2011 and incorporated herein by reference.
(19) Filed as an Exhibit to the Current Report on Form 8-K/A filed on April 7, 2011 and incorporated herein by reference.
(20) Filed as an Exhibit to the Quarterly Report on Form 10-Q filed on November 9, 2011 and incorporated herein by reference.
 



Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-K’ Filing    Date    Other Filings
3/30/15
12/1/12
5/1/128-K
3/29/12
3/23/12
3/19/12
Filed on:3/13/12
3/12/12PRE 14A
3/9/12
3/8/12
For Period end:12/31/11
12/15/11
11/9/1110-Q,  CORRESP,  UPLOAD
7/19/11
6/30/1110-Q
4/29/118-K,  DEF 14A
4/7/118-K/A
4/6/11424B5,  8-K
4/5/11
1/24/114,  8-K
1/18/11
12/31/1010-K
12/15/10
4/2/108-K
3/31/1010-Q,  S-3
3/30/108-K
3/23/10
12/31/0910-K,  EFFECT
12/15/09
11/6/09S-1/A
7/8/09RW,  S-1
5/22/098-K
5/20/098-K
5/15/098-K,  DEF 14A,  DEFA14A
5/14/098-A12G,  8-K
5/12/0910-Q,  8-K
12/31/0810-K,  4,  S-1
12/12/088-K
12/10/088-K,  DEF 14A,  PRE 14A
9/24/088-K,  DEFA14A
9/18/08
6/27/08S-1/A
6/5/08
12/31/0710-K
11/30/07SB-2/A
11/16/078-K
11/5/07
6/5/078-K
12/31/0610KSB,  10KSB/A
12/26/06
12/1/06
8/18/06
6/19/0610SB12G/A,  CORRESP
5/26/06
4/5/0610SB12G
2/24/06
2/17/06
12/31/05
12/5/05
11/8/05
10/6/05
3/24/05
1/2/05
12/31/04
12/31/03
12/23/03
5/30/03
3/28/03
1/3/03
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7/30/02
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