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  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 1/22/07  Optimer Pharmaceuticals Inc       S-1/A                 13:360                                    Merrill Corp/New/- FA

Document/Exhibit                   Description                      Pages   Size 

 1: S-1/A       Pre-Effective Amendment to Registration Statement   HTML  1,172K 
                          (General Form)                                         
 2: EX-1.1      Underwriting Agreement                              HTML    189K 
 3: EX-3.2      Articles of Incorporation/Organization or By-Laws   HTML     19K 
 4: EX-5.1      Opinion re: Legality                                HTML     10K 
 5: EX-10.4     Material Contract                                   HTML    261K 
 6: EX-10.5     Material Contract                                   HTML    199K 
 7: EX-10.6     Material Contract                                   HTML    223K 
 8: EX-10.11    Material Contract                                   HTML    123K 
 9: EX-10.12    Material Contract                                   HTML    226K 
10: EX-10.23    Material Contract                                   HTML     65K 
11: EX-10.24    Material Contract                                   HTML     61K 
12: EX-10.25    Material Contract                                   HTML     73K 
13: EX-23.2     Consent of Experts or Counsel                       HTML      8K 

As filed with the Securities and Exchange Commission on January 22, 2007

Registration No. 333-138555

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

OPTIMER PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.

Subject to Completion, dated January 22, 2007

The information in this prospectus is not complete and may be changed. We and the selling stockholder may not sell these securities until the Securities and Exchange Commission declares our registration statement effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

5,250,000 Shares

Common Stock

Price $           per share

We are offering 5,250,000 shares of our common stock. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $12.00 and $14.00 per share.

We expect our common stock to be listed on the Nasdaq Global Market under the symbol "OPTR."

This investment involves risks. See "Risk Factors" beginning on page 10.

The underwriters have a 30-day option to purchase up to 787,500 additional shares of common stock from the selling stockholder to cover over-allotments, if any. We will not receive any of the proceeds from the sale of these shares by the selling stockholder.

Neither the Securities and Exchange Commission nor any state securities commission has approved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on or about                           , 2007.

The date of this prospectus is                           , 2007.

   
TABLE OF CONTENTS

You should rely only on the information contained in this prospectus and in any free writing prospectus that we provide. We and the selling stockholder have not, and the underwriters have not, authorized any other person to provide you with different information. We and the selling stockholder are offering to sell and seeking offers to buy shares of our common stock only in jurisdictions where offers and sales are permitted. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted. The information in this prospectus is complete and accurate as of the date on the front cover, but the information may have changed since that date.

   
PROSPECTUS SUMMARY

The items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected information and does not contain all the information you should consider. Therefore, you should also read the more detailed information set out in this prospectus, including the financial statements and the accompanying notes. References in this prospectus to "we," "us" and "our" refer to Optimer Pharmaceuticals, Inc., unless the context requires otherwise.

Overview

We are a biopharmaceutical company focused on discovering, developing and commercializing innovative anti-infective products. Our initial development efforts address products that treat gastrointestinal infections and related diseases where current therapies have limitations, including diminished efficacy, serious adverse side effects, drug-to-drug interactions, difficult patient compliance and bacterial resistance. We currently have two late-stage anti-infective product candidates, Difimicin and Prulifloxacin.

Difimicin, our lead product candidate, is an antibiotic currently in a Phase 2b/3 registration trial for the treatment of Clostridium difficile-associated diarrhea, or CDAD, the most common nosocomial, or hospital-acquired, diarrhea. CDAD is caused by infection of the lining of the colon by C. difficile bacteria, which results in severe diarrhea and, in serious cases, death. The U.S. Food and Drug Administration, or FDA, granted Difimicin Fast Track status for the treatment of CDAD and selected it to be the only investigational new drug in the Division of Anti-Infective and Ophthalmology Products' Continuous Marketing Applications, or CMA, Pilot 2 Program. These FDA programs are designed to facilitate and expedite development and marketing of drugs that address serious conditions for which there are no effective treatments, but participation in the programs will not eliminate any phase of clinical development. We believe that Difimicin is highly active against C. difficile, has a favorable safety profile and offers a more convenient dosing regimen than current treatments for CDAD.

We are developing Prulifloxacin for the treatment of infectious diarrhea. Prulifloxacin is an antibiotic currently in two Phase 3 trials for the treatment of travelers' diarrhea, a form of infectious diarrhea. We acquired the exclusive U.S. rights to develop and commercialize Prulifloxacin from Nippon Shinyaku Co., Ltd. in June 2004. Prulifloxacin has been marketed by other companies in Japan since 2002 to treat a wide range of bacterial infections, including infectious diarrhea, and in Italy since 2004 to treat urinary tract infections and respiratory tract infections, or RTIs. Prulifloxacin has been established by other parties to be well-tolerated as demonstrated by its use in the treatment of over two million patients. We believe that Prulifloxacin has a more convenient dosing regimen than current treatments for travelers' diarrhea, is active against a broad set of gastrointestinal pathogens and has a favorable safety profile.

We are developing additional product candidates using our proprietary technology, including our Optimer One-Pot Synthesis, or OPopS, drug discovery platform. OPopS is a computer-aided technology that enables the rapid and low cost synthesis of a wide array of carbohydrate-based compounds. Using this technology, we have identified product candidates for treating RTIs, serious nosocomial infections, breast cancer and osteoarthritis, a degenerative joint disease. We intend to license these product candidates opportunistically to third-party partners for further clinical development. We currently have no products approved for commercial sale and to date we have not generated any revenues from product sales.

1

Our Market Opportunity

The combined market for prescription antibacterial drugs in 2004 for the United States, Japan, Korea, Germany, France, Italy, the United Kingdom and Spain exceeded $20.0 billion, according to IMS Health, an independent marketing research firm. We believe there is a growing market for new anti-infective products due to limitations of current antibiotic treatments. These shortcomings include diminished efficacy, serious adverse side effects, drug-to-drug interactions, difficult patient compliance and bacterial resistance. We estimate that CDAD affected over 500,000 patients in the United States in 2005. The total projected annual cost for treating CDAD in Europe is approximately $3.8 billion according to data presented at the 2006 Interscience Conference on Antimicrobial Agents and Chemotherapy, and we believe that CDAD incidence is growing in patients worldwide. We believe that the incidence of CDAD may be higher than what is currently being reported because many hospitals are not required to and do not report incidents of CDAD. In addition, we estimate that approximately 23 million patients are treated with antibiotics for infectious diarrhea annually in the United States. The U.S. Centers for Disease Control and Prevention, or CDC, estimates that for the years 2005 and 2006 there are approximately 50,000 cases of travelers' diarrhea each day among the 50 million worldwide annual travelers to developing countries.

Our Product Candidates

The following table summarizes our product candidates and their current development status:

(1)

We filed an investigational new drug application, or IND, with the FDA for Difimicin (OPT-80) in August 2003.

(2)

We have granted our partner Par Pharmaceutical, Inc., or Par, rights to market Difimicin in North America and, at its option, Israel. We have the right to receive royalties from Par on any sales of Difimicin. We intend to use a portion of the net proceeds of this offering to repurchase these commercial rights from Par following completion of this offering subject to our continuing obligation to pay Par royalties on sales of Difimicin and net revenues we receive from any future license of rights to Difimicin to another party. We own all other commercial rights to Difimicin.

(3)

A proof-of-concept trial is an exploratory clinical trial to provide or establish evidence that a product candidate is efficacious for a target indication.

(4)

We filed an IND with the FDA for Prulifloxacin (OPT-99) in December 2005.

(5)

We have the right to receive royalties from Cempra Pharmaceuticals, Inc. on any sales of OPT-1068 and OPT-1273.

2

Difimicin (OPT-80)

Difimicin is a differentiated antibiotic for the treatment of CDAD. We believe that Difimicin offers advantages over current treatments due to its superior activity against C. difficile, low rates of recurrence, evidence of low C. difficile resistance, minimal systemic exposure, limited disruption of normally occurring gastrointestinal bacteria and convenient dosing regimen. Our studies indicate that Difimicin acts by inhibiting RNA polymerase, a bacterial enzyme, which results in the death of specific bacteria such as C. difficile. In May 2006, we initiated a Phase 2b/3 trial to compare the safety and efficacy of Difimicin dosed at 200 mg twice daily (400 mg/day), versus oral vancomycin, the only FDA-approved drug for the treatment of CDAD, dosed at 125 mg every six hours (500 mg/day) for ten days. In the initial Phase 2b trial, we plan to enroll a total of 100 CDAD patients at approximately 20 sites. Following an interim-blinded safety analysis by an independent data safety monitoring board, we intend to transition this trial to a Phase 3 trial in the first quarter of 2007. We plan to expand the number of sites in this trial to approximately 100 and target total enrollment of approximately 664 CDAD patients. We anticipate receiving data from this trial in the fourth quarter of 2007. We plan to initiate a second Phase 3 pivotal trial of the same design in the first half of 2007 and anticipate receiving data from this trial in the first half of 2008. If both trials are successful, we intend to file a new drug application, or NDA, in the second half of 2008.

In July 2005, we completed a Phase 2a open-label, dose-ranging, randomized safety and clinical evaluation study of Difimicin in patients with CDAD at five sites. A primary endpoint of the trial was clinical cure of CDAD. Among the 45 evaluated patients, only four patients failed to achieve clinical cure by the end of ten days of therapy, two of whom were in the lowest 100 mg/day dose group and two of whom were in the 200 mg/day dose group. None of the patients in the 400 mg/day dose group failed to achieve clinical cure. Two of the cured patients experienced recurrence within the six-week study period following therapy. The median cure times, or time-to-resolution of diarrhea, were as follows: 5.5 days for the 100 mg/day dose group, 3.5 days for the 200 mg/day dose group and 3.0 days for the 400 mg/day dose group.

In April 2005, we entered into an agreement with Par Pharmaceutical, Inc., or Par, a wholly-owned subsidiary of Par Pharmaceutical Companies, Inc. pursuant to which we agreed to exclusively collaborate with Par on the development and commercialization of Difimicin. We granted to Par an exclusive royalty bearing license, with the right to sublicense, promote, market, distribute and sell Difimicin in a territory composed of the United States, Canada and Puerto Rico, with an option to extend the territory to include Israel. We retained rights to receive double-digit royalties for the first year of Difimicin sales by Par and royalties of over 20% each year thereafter. We also granted to Par a non-exclusive license to manufacture Difimicin for its territory. We retained all other rights to Difimicin in the rest of the world, subject to a requirement to pay Par low single-digit royalties on our net sales of Difimicin in certain markets.

In January 2007, we entered into an agreement with Par pursuant to which we intend to use a portion of the net proceeds of this offering to repurchase Par's rights to develop and commercialize Difimicin in North America and Israel. Upon such repurchase, we would obtain worldwide rights to Difimicin and our April 2005 collaboration agreement with Par would terminate. In addition, we would be required to pay Par a one-time $20.0 million upfront payment, a future one-time $5.0 million milestone payment, a 5% royalty on net sales by us, our affiliates and our licensees of Difimicin in North America and Israel, and a 1.5% royalty on net sales by us or our affiliates of Difimicin in the rest of the world. In addition, in the event we license our right to market Difimicin in the rest of the world to another party, we will be required to pay Par a 6.25% royalty on net revenues we receive related to Difimicin.

3

We are also pursuing the development of Difimicin for additional indications. We believe Difimicin may be effective for CDAD prophylaxis, or the prevention of CDAD. Independent investigators at Oxford University are planning to conduct a proof-of-concept clinical trial of Difimicin for CDAD prophylaxis in the second half of 2007. In addition, we are planning to conduct a proof-of-concept clinical trial for the prevention of nosocomial infections by vancomycin-resistant Enterococci, or VRE, and we are developing a formulation for methicillin-resistant Staphylococci, or MRS, prophylaxis. Enterococci are common bacteria that reside in the gastrointestinal tract, or GI tract, and Staphylococci are common bacteria that reside on the skin and in the GI tract.

Prulifloxacin (OPT-99)

We are developing Prulifloxacin for the treatment of infectious diarrhea, including travelers' diarrhea, which can be caused by a broad range of bacteria. Prulifloxacin is a prodrug, or an inactive form of the compound, that converts in the body to the active form ulifloxacin following oral administration. Ulifloxacin, a compound that inhibits bacterial DNA replication, has demonstrated activity against a wide range of the bacteria that can cause infectious diarrhea. We are currently conducting two Phase 3 trials of Prulifloxacin for the treatment of travelers' diarrhea. The first trial is being conducted in 375 patients located in the United States, Mexico and Peru. The second trial is being conducted in 250 patients in India with plans to add additional sites in other countries such as Guatemala and Thailand. Both trials are double-blind and placebo-controlled. The primary endpoint for the trials is the time to last unformed stool. We anticipate data from both of these trials in the second half of 2007. We intend to conduct a 320-patient Phase 4 trial subsequent to NDA submission to compare Prulifloxacin to ciprofloxacin, an antibiotic commonly used to treat infectious diarrhea. We believe that Prulifloxacin is active against a broad set of gastrointestinal pathogens, has a favorable safety profile and has a more convenient dosing regimen than current treatments for travelers' diarrhea.

Other Pipeline Product Candidates

Using our OPopS technology, we are developing a pipeline of promising new drug candidates, which we intend to license opportunistically to third-party partners. Our anti-infective product candidates in pre-clinical studies include OPT-1068 and OPT-1273 for the treatment of RTIs, both of which have been out-licensed to Cempra Pharmaceuticals, Inc. Product candidates outside of our core anti-infective area include the OPT-822/OPT-821 combination therapy for the treatment of breast cancer and OPT-88 for the treatment of osteoarthritis. We currently retain all development and marketing rights to the OPT-822/OPT-821 combination therapy and OPT-88.

Our Drug Discovery Platform

OPopS is the core of our proprietary drug discovery platform. We acquired worldwide rights to the technology underlying OPopS from The Scripps Research Institute in July 1999. We have built approximately 500 carbohydrate building blocks, and through our proprietary OptiMer software program, we are able to rapidly and reliably produce a wide variety of carbohydrate-based molecules. With OPopS, we are able to reduce the time required for the synthesis of these molecules from weeks or months to hours. We intend to use our drug discovery platform, including the OPopS technology, to identify additional novel carbohydrate-based product candidates with significant commercial potential.

4

Our Strategy

Our principal objective is to become a leading biopharmaceutical company focused on the discovery, development and commercialization of innovative anti-infective compounds, with an initial focus on gastrointestinal infections and related diseases. To achieve these objectives, our strategy includes the following key elements:

•

Build a branded anti-infective franchise through current and in-licensed product candidates;



•

Develop our lead product candidates for clinical and regulatory approval;



•

Build marketing and sales capabilities in our core markets; and



•

Leverage our internal discovery capabilities and expertise in carbohydrate chemistry to expand our portfolio of product candidates.

Risks Related to Our Business

We are a relatively early-stage biopharmaceutical company and our business and our ability to execute our business strategy are subject to a number of risks that you should be aware of before you decide to buy our common stock. In particular, you should consider the following risks, which are discussed more fully in "Risk Factors" beginning on page 10:

•

We are a company with limited sources of revenues, and we are largely dependent on the success of our lead product candidate Difimicin and, to a lesser degree, our other lead product candidate Prulifloxacin;



•

We have no products approved for commercial sale and, to date, we have not generated any revenues from product sales;



•

We have incurred significant operating losses since inception, including an accumulated deficit of approximately $47.5 million as of September 30, 2006, and anticipate that we will incur continued losses for the foreseeable future;



•

If we fail to obtain additional financing, we may be unable to complete the development and commercialization of Difimicin and Prulifloxacin and other product candidates, or continue our other research and development programs;



•

The clinical and commercial success of Difimicin depends on our ability to develop and commercialize in collaboration with Par or in the event that we repurchase Par's rights to develop and commercialize Difimicin as currently contemplated, on our own or with a future partner;



•

If we are unable to obtain FDA approval of our product candidates, we will not be able to commercialize them in the United States, and our ability to generate revenues and achieve and sustain profitability will be significantly diminished;



•

Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results;

5

•

Delays in clinical trials are common and have many causes, and any such delays could result in increased costs to us and jeopardize or delay our ability to achieve regulatory approval and commence product sales as currently contemplated; and



•

If we fail to gain and maintain approval from regulatory authorities in international markets for Difimicin and any future product candidates for which we have rights in international markets, our market opportunities will be limited.

Corporate Information

We were incorporated under the laws of the state of Delaware on November 18, 1998. Our principal executive offices are located at 10110 Sorrento Valley Road, Suite C, San Diego, CA 92121, and our telephone number is (858) 909-0736. Our web site address is http://www.optimerpharma.com. The information contained in, or that can be accessed through, our web site is not part of this prospectus.

The names "Optimer" and "Optimer Pharmaceuticals" are trademarks for which we have filed applications. The name "OPopS" is our registered service mark. All other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.

6

   
THE OFFERING

The number of shares of common stock that will be outstanding immediately after this offering is based on 14,747,659 shares of common stock outstanding as of September 30, 2006 and excludes:

•

1,584,300 shares of common stock issuable upon the exercise of options under our 1998 stock plan outstanding as of September 30, 2006, with a weighted average exercise price of $1.09 per share;



•

43,843 shares of common stock issuable upon the exercise of options granted under our 1998 stock plan after September 30, 2006, with a weighted average exercise price of $2.17;



•

282,073 shares of common stock reserved for future issuance as of September 30, 2006 under our 1998 stock plan and will no longer be available under our 1998 stock plan upon the completion of this offering;



•

46,153 shares of common stock held by us as treasury stock;



•

2,200,000 shares of common stock reserved for future issuance under our employee stock purchase plan and 2006 equity incentive plan, each of which will become effective upon the completion of this offering, and both of which contain provisions that automatically increase the number of shares reserved each year, as more fully described in "Management — Employee Benefit Plans"; and



•

1,186,386 shares of common stock issuable upon the exercise of warrants outstanding as of September 30, 2006, with a weighted average exercise price of $1.37 per share.

Except as otherwise indicated, all information in this prospectus assumes:

•

a 1-for-2.1667 reverse split of our capital stock to occur prior to the completion of this offering;



•

the conversion of all our outstanding shares of preferred stock into 12,215,507 shares of common stock upon the completion of this offering;



•

the filing of our amended and restated certificate of incorporation, which will occur immediately prior to the completion of this offering; and



•

no exercise of the underwriters' over-allotment option.

7

   
SUMMARY CONSOLIDATED FINANCIAL DATA

We have derived the following summary of our consolidated statements of operations data for the years ended December 31, 2003, 2004 and 2005 from our audited consolidated financial statements appearing elsewhere in this prospectus. We have derived the following summary of our consolidated statements of operations data for the nine months ended September 30, 2005 and 2006 and the consolidated balance sheet data as of September 30, 2006 from our unaudited consolidated financial statements appearing elsewhere in this prospectus. The unaudited consolidated financial statements include, in the opinion of management, all adjustments, which include only normal recurring adjustments, that management considers necessary for the fair presentation of the financial information set forth in those consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future. The summary of our consolidated financial data set forth below should be read together with our consolidated financial statements and the accompanying notes to those statements, as well as "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," appearing elsewhere in this prospectus.

The pro forma as adjusted balance sheet data reflects the balance sheet data as of September 30, 2006, as adjusted for the sale of 5,250,000 shares of our common stock in this offering at an assumed initial offering price to the public of $13.00 per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and the automatic conversion of all preferred stock into common stock upon the completion of this offering.

(1)

Please see Note 1 to our notes to consolidated financial statements for an explanation of the method used to calculate the historical and pro forma net loss attributable to common stockholders per share and the number of shares used in the computation of the per share amounts.

8

(2)

Each $1.00 increase or decrease in the assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover of this prospectus, would increase or decrease, respectively, the amount of cash, cash equivalents and short-term investments, working capital, total assets and total stockholders' equity (deficit) by $4.9 million, assuming the number of shares offered by us in this offering, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(3)

Excludes the $20.0 million payment we intend to make to Par in connection with our repurchase of Par's rights to develop and commercialize Difimicin substantially concurrent with the completion of this offering.

9

   
RISK FACTORS

You should carefully consider the risks described below, which we believe are the material risks of our business and this offering, before making an investment decision. Our business could be harmed by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing these risks, you should also refer to the other information contained in this prospectus, including our financial statements and accompanying notes.

Risks Related to Our Business

We are a company with limited sources of revenue, and we are largely dependent on the success of our lead product candidate Difimicin and, to a lesser degree, our other lead product candidate Prulifloxacin.

We are a biopharmaceutical company with no products approved for commercial sale and, to date, we have not generated any revenues from product sales. Our ability to generate future revenues depends heavily on our success in:

•

developing and securing U.S. and/or foreign regulatory approvals for Difimicin and Prulifloxacin and, to a lesser extent, other product candidates;



•

commercializing any product candidates for which we receive approval from the FDA; and



•

generating a pipeline of innovative product candidates utilizing our drug discovery platform or through licensing strategies.

Our product candidates will require extensive additional clinical study and evaluation, regulatory approval in multiple jurisdictions, substantial investment and significant marketing efforts before we generate any revenues from product sales. We are not permitted to market or promote our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities. We have not submitted an NDA, or received marketing approval for either Difimicin or Prulifloxacin, and we cannot be certain that either of these product candidates will be successful in clinical trials or receive regulatory approval. If we do not receive regulatory approval for and successfully commercialize Difimicin and Prulifloxacin, we will not generate any revenues from product sales for several years, if at all, and we may not be able to continue our operations.

We believe our initial success will be more dependent on Difimicin than Prulifloxacin, because we believe that our market for the treatment of Clostridium difficile-associated diarrhea, or CDAD, is larger than our market for the treatment of infectious diarrhea. Even if we successfully obtain regulatory approval to market Difimicin or Prulifloxacin, our revenues for either drug candidate are dependent upon the size of the markets in the territories for which we have commercial rights. If the markets for the treatment of CDAD or infectious diarrhea are not as significant as we estimate, our business and prospects will be harmed.

We have incurred significant operating losses since inception and anticipate that we will incur continued losses for the foreseeable future.

We have experienced significant operating losses since our inception in 1998. As of September 30, 2006, we had an accumulated deficit of approximately $47.5 million. We have generated no revenues from product sales to date. We have funded our operations to date from the sale of approximately $70.0 million of our securities and through research funding pursuant to collaborations with partners

10

or government grants. We expect to continue to incur substantial additional operating losses for the next several years as we advance our clinical trials and research and development initiatives and build our marketing and sales capabilities. Because of the numerous risks and uncertainties associated with developing and commercializing antibiotics, we are unable to predict the extent of any future losses. We may never successfully commercialize our product candidates and thus may never have any significant future revenues or achieve and sustain profitability.

If we fail to obtain additional financing, we may be unable to complete the development and commercialization of Difimicin, Prulifloxacin and other product candidates, or continue our other research and development programs.

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts to:

•

complete the clinical development of Difimicin and Prulifloxacin;



•

license or acquire additional product candidates;



•

launch and commercialize any product candidates for which we receive regulatory approval, including building our own sales force to address certain markets; and



•

continue our research and development programs to advance our product pipeline.

We estimate that our net proceeds from this offering will be approximately $62.0 million, based upon an assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting estimated underwriting discounts and commissions and offering expenses payable by us. We expect that the net proceeds from this offering, together with our existing cash, cash equivalents and short-term investments will be sufficient to fund our capital requirements for at least the next twelve months including to use $20.0 million of the net proceeds from this offering to repurchase Par's rights to develop and commercialize Difimicin. We will require additional capital to complete the development and commercialization of our current lead product candidates Difimicin and Prulifloxacin. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may require us to pledge our assets as collateral or involve restrictive covenants, such as limitations on our ability to incur additional indebtedness, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could negatively impact our ability to conduct our business. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or one or more of our other research and development initiatives. We also could be required to:

•

seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or



•

relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.

Any of the above events could significantly harm our business and prospects and could cause our stock price to decline.

11

The clinical and commercial success of Difimicin depends on our ability to develop and commercialize in collaboration with Par, on our own or with one or more future partners upon our repurchase of commercial rights associated with Difimicin. Our inability to collaborate effectively with Par or one or more future partners for the development and commercialization of Difimicin or any adverse developments in any such relationships could materially harm our business and prospects.

In January 2007, we entered into a prospective buy-back agreement with Par pursuant to which we intend to use a portion of the net proceeds of this offering to repurchase Par's rights to develop and commercialize Difimicin in North America and Israel. Upon such repurchase, our April 2005 collaboration agreement with Par would terminate, and we would be free to develop on our own or seek one or more new partners for the development and commercialization of Difimicin. We currently plan to build our own marketing and sales force for Prulifloxacin in the United States and upon our repurchase of Par's rights to develop and commercialize Difimicin with a portion of the net proceeds of this offering, we may decide to focus our marketing and sales capabilities on the commercialization of Difimicin in the United States and Canada. Whether or not we decide to use our own marketing and sales force for Difimicin in the United States and Canada, we may seek one or more new partners for commercialization of Difimicin. We cannot be certain that we would be successful in attracting any such partners, due to our continuing obligations to pay royalties to Par, other terms of the prospective buy-back agreement or other factors. If we were not able to find appropriate partners for the continued development and commercialization of Difimicin, we would either have to delay these initiatives, or raise significant additional funds to develop clinical and commercialization capabilities internally. In either case, our business and prospects would be harmed.

If we do not repurchase Par's rights to develop and commercialize Difimicin, either because we fail to raise sufficient funds in this offering or due to other developments, then our April 2005 collaboration agreement with Par will remain in full force and effect, and we and Par will continue to collaborate exclusively in the development and commercialization of Difimicin. Under the terms of the April 2005 collaboration agreement, we have limited or no control over the amount and timing of resources that Par will dedicate to the development, approval and marketing of Difimicin. Additionally, in the event the FDA approves Difimicin, Par will have responsibility for manufacturing, marketing and selling the approved product in the United States. It is also possible that Par would seek to sublicense its rights to Difimicin to another company, in which case we would need to collaborate with a new party and may face even greater risks in the development and potential commercialization of this product candidate.

We are subject to a number of additional risks associated with our dependence on collaborations with third parties. Conflicts may arise between us and collaborators, such as conflicts concerning the interpretation of clinical data, the achievement of milestones, the interpretation of financial provisions or the ownership of intellectual property developed during the collaboration. If any such conflicts arise, a collaborator could act in its own self-interest, which may be adverse to our best interests. Any such disagreement between us and a collaborator could result in one or more of the following, each of which could delay or prevent the development or commercialization of Difimicin, and in turn prevent us from generating sufficient revenues to achieve or maintain profitability:

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reductions in the payment of royalties or other payments we believe are due pursuant to the applicable collaboration arrangement or agreement;



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uncertainties regarding ownership of intellectual property rights arising from our collaborative activities, which could prevent us from entering into additional collaborations or commercializing such rights upon any termination of our collaboration with Par;

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actions taken by a collaborator inside or outside our collaboration which could negatively impact our rights or benefits under our collaboration; or



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unwillingness on the part of a collaborator to keep us informed regarding the progress of its development and commercialization activities or to permit public disclosure of the results of those activities.

In addition, a collaborator may shift its research, development, manufacturing and commercialization resources to other product opportunities including those that might be competitive with Difimicin.

Par or a future collaborator could also fail to manage effectively the manufacturing relationship with Biocon Limited, or Biocon, the supplier of the active pharmaceutical ingredient, or API, for Difimicin. Biocon, located in India, will continue as the manufacturer of API for Difimicin regardless of whether or not the prospective buy-back agreement becomes effective. As such, Biocon will be subject to ongoing periodic unannounced inspections by the FDA and other agencies for compliance with current good manufacturing practices regulations, or cGMP, and similar foreign standards. Par or a future collaborator could fail to monitor Biocon's compliance with these regulations and standards and Biocon's failure to comply could result in a temporary or permanent shutdown of Biocon's manufacturing operations, which would interrupt clinical or commercial supplies of Difimicin. In such event, we or our collaborator would be required to find and qualify an alternative supply of Difimicin, which might not be available in the necessary quantities or on suitable terms for our clinical or commercial needs. Any alternative manufacturer would be required to be approved by the FDA and other regulatory authorities. In addition, the search for an alternative supply of Difimicin could be time consuming, causing distraction on the part of our management team and potential delay of clinical trials, regulatory approvals or subsequent commercial sales of Difimicin.

Par has the right to assign its rights under the April 2005 collaboration agreement without our consent to an entity which acquires substantially all of its assets or its business relating to Difimicin. In addition, Par has the right to sublicense its rights under the collaboration agreement without our consent. If such an event were to occur, we would have no ability to determine the party that would assume Par's obligations under the collaboration agreement. There can be no assurance that the assignee or sublicensee of Par's rights would develop and commercialize Difimicin to the same extent that Par would have or, in any case, to our satisfaction. If any assignee or sublicensee of Par does not expend efforts to further develop and commercialize Difimicin, our ability to commercialize Difimicin would be significantly harmed, which would adversely affect our business and prospects. Although we are entitled to a percentage of the net amounts received by Par from any sublicensee, including upfront payments and royalties, these amounts may not be as significant as if Par were to commercialize Difimicin itself and pay us royalties on net sales. To the extent that Par does not sublicense its rights under the collaboration on favorable terms or the sublicensee does not successfully commercialize Difimicin, our potential payments under the collaboration agreement could be adversely affected. We could be required to give future collaborators similar rights subsequent to our repurchase of Par's rights to develop and commercialize Difimicin.

Furthermore, if we do not repurchase Par's rights to develop and commercialize Difimicin, the April 2005 collaboration agreement shall remain in effect. Under the April 2005 collaboration agreement, Par could terminate such collaboration agreement upon our material breach of the agreement, in the event of our bankruptcy, upon 60 days' prior written notice at its discretion or upon 90 days' prior written notice if Par provides written notice of its determination to discontinue or not to pursue regulatory approval and/or commercial sale of Difimicin for its territory. If we cannot commercialize Difimicin, we will have to rely solely on Prulifloxacin and earlier stage product candidates for any future revenues, and our ability to achieve and sustain profitability will be materially and adversely

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harmed. If either we or Par do not perform our respective obligations under, or devote sufficient resources to, our collaboration, or if we and Par do not work effectively together, Difimicin may not be successfully approved and commercialized. If our collaboration were to be terminated, we would need to establish an alternative collaboration and may not be able to do so on acceptable terms or at all. We do not currently have the resources necessary to develop and market Difimicin on our own.

If we are unable to obtain FDA approval of our product candidates, we will not be able to commercialize them in the United States.

We need FDA approval prior to marketing our product candidates in the United States. If we fail to obtain FDA approval to market our product candidates, we will be unable to sell our product candidates in the United States, which will significantly impair our ability to generate any revenues.

This regulatory review and approval process, which includes evaluation of pre-clinical studies and clinical trials of our product candidates as well as the evaluation of our manufacturing processes and our third-party contract manufacturers' facilities, is lengthy, expensive and uncertain. To receive approval, we must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that the product candidate is both safe and effective for each indication for which approval is sought. Satisfaction of the approval requirements typically takes several years and the time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the pharmaceutical product. We cannot predict if or when we might receive regulatory approvals for any of our product candidates currently under development. Moreover, any approvals that we obtain may not cover all of the clinical indications for which we are seeking approval, or could contain significant limitations in the form of narrow indications, warnings, precautions or contra-indications with respect to conditions of use. In such event, our ability to generate revenues from such products would be greatly reduced and our business would be harmed.

The FDA has substantial discretion in the approval process and may either refuse to consider our application for substantive review or may form the opinion after review of our data that our application is insufficient to allow approval of our product candidates. If the FDA does not consider or approve our application, it may require that we conduct additional clinical, pre-clinical or manufacturing validation studies and submit that data before it will reconsider our application. Depending on the extent of these or any other studies, approval of any applications that we submit may be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional studies, if performed and completed, may not be successful or considered sufficient by the FDA for approval or even to make our applications approvable. If any of these outcomes occur, we may be forced to abandon one or more of our applications for approval, which might significantly harm our business and prospects.

Even if we do receive regulatory approval to market a product candidate, any such approval may be subject to limitations on the indicated uses for which we may market the product. It is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain the appropriate regulatory approvals necessary for us or our collaborators to commence product sales. Moreover, recent events, including complications arising from FDA-approved drugs such as Vioxx and Ketek, have raised questions about the safety of marketed drugs and may result in increased cautiousness by the FDA and comparable foreign regulatory authorities in reviewing new drugs based on safety, efficacy or other regulatory approvals. This increased scrutiny by regulatory authorities may result in significant delays in obtaining regulatory approvals, as well as more stringent product labeling and post-marketing testing requirements. Any delay in obtaining, or an inability to obtain, applicable regulatory approvals would prevent us from commercializing our product candidates, generating revenues and achieving and sustaining profitability.

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Although the FDA has granted Fast Track status to Difimicin and selected it for participation in a CMA Pilot 2 Program, we cannot be certain that we will receive any benefits from these designations or that the designations will expedite regulatory review or approval of Difimicin. Participation in these programs will not eliminate any phase of clinical development. Moreover, our participation in the CMA Pilot 2 Program will involve frequent scientific discussions and other interactions with the staff of the FDA during the investigational new drug phase of our development of Difimicin. These frequent discussions could subject Difimicin to a greater level of scrutiny than it might otherwise have received or require us to make more frequent submissions and endure other burdens that would have been avoided if we had not participated in the program. Therefore, despite any potential benefits of Difimicin's Fast Track and CMA Pilot 2 Program designations, significant uncertainty remains regarding the clinical development and regulatory approval process for Difimicin.

Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

Clinical testing is expensive and can take many years to complete, and its outcome is uncertain. Failure can occur at any time during the clinical trial process. The results of pre-clinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical testing. The time required to obtain approval by the FDA and similar foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials, depending upon numerous factors. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change. We have not obtained regulatory approval for any product candidate.

Our product candidates could fail to receive regulatory approval for many reasons, including the following:

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we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for any indication;



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the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;



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the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;



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we may be unable to demonstrate that a product candidate's clinical and other benefits outweigh its safety risks;



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we may be unable to demonstrate that a product candidate presents an advantage over existing therapies, or over placebo in any indications for which the FDA requires a placebo-controlled trial;



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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from pre-clinical studies or clinical trials;



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the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a new drug application or other submission or to obtain regulatory approval in the United States or elsewhere;



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the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we or our collaborators contract for clinical and commercial supplies; and

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the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

Delays in clinical trials are common and have many causes, and any such delays could result in increased costs to us and jeopardize or delay our ability to achieve regulatory approval and commence product sales as currently contemplated.

We may experience delays in clinical trials of our product candidates. Difimicin is currently in a Phase 2b/3 clinical trial for the treatment of CDAD. We anticipate receiving data from this trial in the fourth quarter of 2007. We plan to initiate a second Phase 3 pivotal trial of the same design in the first half of 2007 and anticipate receiving data from this trial in the first half of 2008. If both trials are successful, we intend to file an NDA in the second half of 2008. In addition, we and third parties such as independent investigators at Oxford University are currently planning to conduct clinical and proof-of-concept clinical trials for other indications of Difimicin. Prulifloxacin is in two Phase 3 trials for the treatm