~~FORM~~UNITED ~~10-Q~~STATES SECURITIES AND EXCHANGE COMMISSION

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~(Mark~~FORM ~~One)~~10-Q


þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~June~~March 3031, ~~2005~~2009,


o		Transition Period Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From to .

Commission file number 0-19591

~~EPIMMUNE~~IDM PHARMA, INC.

(Exact name of registrant as specified in its charter)

Delaware		33-0245076
(State or other jurisdiction of		(I.R.S. Employer
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
incorporation or organization)		Identification No.)

~~5820~~9 ~~Nancy~~Parker, ~~Ridge Drive~~Suite 100 ~~San Diego~~Irvine, California ~~92121~~ 92618 (Address of principal executive offices and zip code)

(~~858~~949) ~~860~~470-~~2500 (Registrant’s telephone number, including area code)~~4751

~~Indicate by check mark whether the registrant~~ (~~1) has~~Registrant’s ~~filed~~telephone all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)number, ~~and~~including ~~(2) has~~area ~~been subject to such filing requirements for the past 90 days. Yes þ No o~~ code)

Indicate by check mark whether the ~~Registrant~~registrant is(1) has anfiled ~~accelerated~~all ~~filer~~reports asrequired ~~defined~~to inbe ~~Rule~~filed by Section ~~12b-2~~13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes oþ No þo

Indicate by check mark whether the ~~number~~registrant ofhas ~~shares~~submitted ~~outstanding~~electronically ofand ~~each~~posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the ~~issuer’s~~preceding ~~classes~~12 months of(or ~~common~~for ~~stock,~~such asshorter ofperiod that the ~~latest~~registrant ~~practicable~~was ~~date~~required to submit and post such files). Yes o No o

~~Common~~Indicate ~~Stock:~~by ~~$.01~~check ~~par~~mark ~~value~~whether 16the registrant is a large accelerated filer,~~039~~ an accelerated filer,~~992~~ ~~shares~~a non-accelerated ~~outstanding~~filer, asor a smaller reporting company. See the definitions of ~~August 9~~“large accelerated filer,” ~~2005~~“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

~~EPIMMUNE~~Large ~~INC.~~ accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ (Do not check if a smaller reporting company)

~~QUARTERLY~~Indicate ~~REPORT FORM~~by 10check mark whether the Registrant is a shell company (as defined in Rule 12b-Q2 of the Exchange Act). Yes o No þ

COVER PAGE		1
TABLE OF CONTENTS		2
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Condensed Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004	3
	Condensed Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2005 and 2004	4
	Condensed Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2005 and 2004	5
	Notes to Condensed Financial Statements (unaudited)	6
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	16
	Risk Factors	17
ITEM 4.	Controls and Procedures	30
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	31
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	*
ITEM 3.	Defaults upon Senior Securities	*
ITEM 4.	Submission of Matters to a Vote of Security Holders	*
ITEM 5.	Other Information	*
ITEM 6.	Exhibits	31
SIGNATURE		34
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

The number of shares outstanding of the issuer’s Common Stock $.01 par value, as of May 6, 2009: 25,278,599 shares.

*IDM NoPHARMA, ~~information~~INC. QUARTERLY ~~provided~~REPORT FORM ~~due to inapplicability of item.~~10-Q

2COVER PAGE TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2009 (unaudited) and December 31, 2008			3
Condensed Consolidated Statements of Operations for the three month periods ended March 31, 2009 and 2008 (unaudited)			4
Condensed Consolidated Statements of Cash Flows for the three month periods ended March 31, 2009 and 2008 (unaudited)			5
Notes to Condensed Consolidated Financial Statements (unaudited)			6
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk			25
ITEM 4T. Controls and Procedures			26
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings			27
ITEM 1A. Risk Factors			27
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			*
ITEM 3. Defaults upon Senior Securities			*
ITEM 4. Submission of Matters to a Vote of Security Holders			*
ITEM 5. Other Information			*
ITEM 6. Exhibits			43
SIGNATURES			45


*		No information provided due to inapplicability of item.
EX-31.1
EX-31.2
EX-32.1

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

~~EPIMMUNE~~IDM PHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS ~~(in thousands, except share and per share data)~~

	June 30,			December 31,
	March 31,			December 31,
	2005			2004
	2009			2008
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	37,~~038~~371,000		$	712,~~006~~752,000
Accounts receivable		~~758~~21,000			245,~~667~~000
Prepaids and other current assets		280			221
Inventory		487,000			—
Total current assets		4,076			9,894
Research and development tax credit, current portion		228,000			240,000
Restricted long-term cash		354			354
Prepaid expenses and other current assets		516,000			470,000
Property and equipment, net		899			1,032
Total current assets		8,623,000			13,507,000
Patents and other assets, net		3,388			3,527
Property and equipment, net		215,000			242,000
TOTAL ASSETS	$	8,717		$	14,807
Patents, trademarks and other licenses, net		2,373,000			2,642,000
Goodwill		2,812,000			2,812,000
Research and development tax credit, less current portion		449,000			473,000
	$	14,472,000		$	19,676,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, trade	$	420		$	1,013
Accounts payable and accrued liabilities	$	2,816,000		$	2,672,000
Accrued liabilities		421			1,700
Accrued payroll and related expenses		677,000			736,000
Deferred contract revenues		382			607
Deferred revenues, current portion		408,000			430,000
Accrued payroll and related expenses		192			161
Common stock warrants		4,034,000			3,522,000
Total current liabilities		1,415			3,481
Other current liabilities		1,911,000			1,956,000
Deferred rent		202			210
Total current liabilities		9,846,000			9,316,000
Long-term debt, less current portion		320,000			337,000
Deferred revenues, less current portion		114,000			124,000
Other non-current liabilities		750,000			750,000
Total liabilities		11,030,000			10,527,000
Stockholders’ equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized, 1,409,288 shares issued and outstanding of Series S and S-1 convertible preferred stock at June 30, 2005 and December 31, 2004. Liquidation preference of $10,000,000 at June 30, 2005 and December 31, 2004.		14			14
Preferred stock, $0.01 par value, 10,000,000 shares authorized and no shares issued and outstanding at March 31, 2009 and December 31, 2008.		—			—
Common stock, $.01 par value, 40,000,000 shares authorized, 16,039,992 shares and 16,011,655 shares issued and outstanding at June 30, 2005 and December 31, 2004, respectively.		160			160
Common stock, $0.01 par value, 55,000,000 shares authorized at March 31, 2009 and December 31, 2008 and 25,273,935 and 25,250,364 shares issued and outstanding at March 31, 2009 and December 31, 2008, respectively.		253,000			253,000
Additional paid-in capital		~~172~~207,~~952~~657,000			~~172~~207,~~933~~452,000
Deferred compensation		(150	)		(184	)
Accumulated other comprehensive income		17,378,000			18,125,000
Accumulated deficit		(~~165~~221,~~876~~846,000	)		(~~161~~216,~~807~~681,000	)
Total stockholders’ equity		73,~~100~~442,000			119,~~116~~149,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	8,717		$	14,807
	$	14,472,000		$	19,676,000

See accompanying notes to the Condensed Consolidated Financial Statements.

~~EPIMMUNE~~IDM PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ~~(unaudited) (in thousands, except per share data)~~

	Three months ended June 30,						Six months ended June 30,
	2005			2004			2005			2004
Revenues
License fees and milestones	$	116		$	127		$	230		$	224
Research grants and contract revenue		1,132			1,736			2,851			3,190
Related party revenue		—			—			—			1,026
Total revenues		1,248			1,863			3,081			4,440
Costs and expenses:
Research and development		1,972			2,232			4,658			4,639
General and administrative		412			522			880			1,180
Transaction costs for business combination		574			—			1,662			—
Total costs and expenses		2,958			2,754			7,200			5,819
Loss from operations		(1,710	)		(891	)		(4,119	)		(1,379	)
Interest income, net		22			22			58			26
Other expense, net		(3	)		(3	)		(8	)		(4	)
Net loss	$	(1,691	)	$	(872	)	$	(4,069	)	$	(1,357	)
Net loss per share — basic and diluted	$	(0.11	)	$	(0.06	)	$	(0.25	)	$	(0.09	)
Shares used in computing net loss per share		16,024			15,782			16,020			14,619

(unaudited)

See accompanying notes.


	Three Months Ended March 31,
	2009			2008

Revenues:
Related party revenue	$	—		$	2,401,000
License fees, milestones and other revenues		4,000			4,000

Total revenues		4,000			2,405,000

Costs and expenses:
Research and development		3,020,000			3,902,000
Selling and marketing		488,000			150,000
General and administrative		1,329,000			2,591,000
Restructuring expense		—			2,576,000

Total costs and expenses		4,837,000			9,219,000

Loss from operations		(4,833,000	)		(6,814,000	)

Interest income		28,000			238,000
Interest expense related to warrants		(514,000	)		(4,728,000	)
Foreign exchange gain (loss)		137,000			(852,000	)

Loss before income tax		(5,182,000	)		(12,156,000	)
Income tax benefit		17,000			20,000

Net loss	$	(5,165,000	)	$	(12,136,000	)


Weighted average number of shares outstanding		25,865,082			25,162,411

Basic and diluted loss per share	$	(0.20	)	$	(0.48	)


Comprehensive loss:
Net loss		(5,165,000	)		(12,136,000	)
Other comprehensive (loss) gain		(746,000	)		1,422,000

	$	(5,911,000	)	$	(10,714,000	)

See accompanying notes to the Condensed Consolidated Financial Statements.

~~EPIMMUNE~~IDM PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(unaudited) (in thousands)~~

	Six months ended June 30,
	2005			2004
OPERATING ACTIVITIES
Net loss	$	(4,069	)	$	(1,357	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		413			440
Stock-based compensation		32			57
Deferred rent		(8	)		1
Deferred revenue		(225	)		(356	)
Write-off of abandoned patents		111			29
Change in operating assets and liabilities:
Accounts receivable		1,909			51
Prepaids and other current assets		(59	)		(61	)
Change in restricted cash		—			118
Accounts payable, trade		(593	)		198
Accrued liabilities		(1,271	)		(395	)
Accrued payroll and related expenses		31			15
Net cash used in operating activities		(3,729	)		(1,260	)
INVESTING ACTIVITIES
Purchase of property and equipment		(8	)		(81	)
Patents and other assets		(244	)		(434	)
Net cash used in investing activities		(252	)		(515	)
FINANCING ACTIVITIES
Net proceeds from issuance of common stock		13			5,011
Net cash provided by financing activities		13			5,011
(Decrease) increase in cash and cash equivalents		(3,968	)		3,236
Cash and cash equivalents at beginning of year		7,006			6,416
Cash and cash equivalents at end of period	$	3,038		$	9,652
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid	$	1		$	2
Reclassification of unvested common shares from liabilities to equity	$	7		$	89

(unaudited)

See accompanying notes.


	Three Months Ended March 31,
	2009			2008
Operating activities
Net loss	$	(5,165,000	)	$	(12,136,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		205,000			448,000
Change in fair value of common stock warrants		512,000			4,728,000
Depreciation and amortization		167,000			170,000
Foreign exchange loss		(222,000	)		911,000
Change in operating assets and liabilities:
Related party accounts receivable (sanofi-aventis)		—			418,000
Accounts receivable		21,000			(7,000	)
Inventory		(487,000	)		—
Prepaid expenses and other current assets		(64,000	)		(47,000	)
Other long-term assets		—			42,000
Accounts payable and accrued liabilities		271,000			(1,448,000	)
Accrued payroll and related expenses		(45,000	)		(580,000	)
Deferred revenues		(4,000	)		(5,000	)
Other liabilities		93,000			650,000

Net cash used in operating activities		(4,718,000	)		(6,856,000	)

Investing activities
Proceeds from sale of assets		—			62,000
Purchase of property and equipment		(3,000	)		(9,000	)

Net cash (used in) provided by investing activities		(3,000	)		53,000

Financing activities
Net proceeds from issuance of common stock		—			1,000

Net cash provided by financing activities		—			1,000

Effect of exchange rate on cash and cash equivalents		(660,000	)		787,000

(Decrease) increase in cash and cash equivalents		(5,381,000	)		(6,015,000	)
Cash and cash equivalents at beginning of period		12,752,000			28,382,000


Cash and cash equivalents at end of period	$	7,371,000		$	22,367,000

See accompanying notes to the Condensed Consolidated Financial Statements.

~~EPIMMUNE~~IDM PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(unaudited)~~ ~~June 30, 2005~~

~~1. Basis of Presentation~~ (unaudited)

The interim unaudited condensed financial statements contained herein have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. generally accepted accounting principles for complete financial statements. In management’s opinion, the unaudited information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. Interim results are not necessarily indicative of results to be expected for the full year. The financial statements should be read in conjunction with the audited financial statements and disclosures thereto included in the Company’s Form 10-K/A for the year ended DecemberMarch 31, ~~2004.~~ 2009

~~The preparation of financial statements in conformity with U~~1.S. ~~generally~~The ~~accepted accounting~~Company principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~The~~ IDM ~~Company~~Pharma, ~~has an accumulated deficit of $165~~Inc.~~9 million~~ as(“IDM ofPharma” ~~June 30,~~or ~~2005.~~the ~~The~~ “Company’s”) ~~ability to attain profitable operations~~ is ~~dependent~~a ~~upon~~biopharmaceutical ~~obtaining~~company ~~sufficient~~focused ~~working~~on ~~capital to complete~~ the ~~successful~~ development of ~~its~~innovative cancer products, ~~regulatory~~that ~~approval~~either ofdestroy ~~its~~residual ~~products,~~cancer ~~achieving~~cells ~~market~~by activating ~~acceptance~~the ofimmune ~~such~~system ~~products~~or ~~and~~prevent ~~achievement~~tumor ofrecurrence ~~sufficient~~by ~~levels~~triggering ofa ~~revenue~~specific toadaptive ~~support~~immune ~~the Company’s cost structure~~response.

In The ~~March 2005 the~~ Company ~~agreed~~is todeveloping ~~combine~~ its ~~business~~lead ~~with~~product ~~IDM~~candidate, ~~S.A. (Immuno-Designed Molecules)~~mifamurtide, or ~~IDM. If the planned combination is successful~~L-MTP-PE, ~~the~~known ~~Company expects to be able to maintain its~~as ~~current~~MEPACT® ~~level~~in ~~of operations through at least June 30~~Europe, ~~2006,~~for ~~based on anticipated expenditures. If~~ the ~~planned~~treatment in combination iswith ~~unsuccessful,~~chemotherapy ~~management~~following ~~intends~~surgery toof ~~take~~patients with ~~the~~non-metastatic ~~appropriate~~resectable ~~steps~~osteosarcoma, ~~including~~ ~~the delay~~ or ~~discontinuation~~bone ofcancer. ~~certain~~In ~~of its research and development programs and operational activities~~October 2006, ~~to ensure that~~ the Company ~~will have sufficient funds to support its~~ ~~operations~~submitted ~~through~~a atNew ~~least~~Drug ~~December 31~~Application, ~~2005.~~or ~~The~~NDA, ~~Company~~to ~~would also anticipate seeking additional equity financing if~~ the ~~planned~~U.S. ~~combination~~Food ~~with~~and ~~IDM~~Drug isAdministration, ~~unsuccessful.~~or ~~While~~ the ~~Company~~FDA, ~~has been~~for ~~successful~~mifamurtide, inrequesting ~~raising~~marketing ~~equity~~approval ~~financing~~ in the ~~past,~~U.S. ~~there~~In ~~can~~November 2006 ~~be no assurance that~~ the Company ~~will~~submitted a beMarketing ~~able~~Authorization toApplication, ~~raise~~or ~~additional funds in the future~~MAA, ~~and~~for itMEPACT ~~will likely be even more difficult~~ to ~~raise additional~~the ~~funding~~European onMedicines ~~satisfactory terms~~Agency, ifor atEMEA for ~~all,~~marketing ifapproval ~~the~~in ~~IDM transaction is not completed~~Europe.

~~Earnings~~ On ~~per share (“EPS”) is computed in accordance with Statement of Financial Accounting Standards (SFAS)~~November ~~No. 128~~17, ~~Earnings~~2008 ~~per~~the ~~Share.~~Committee ~~SFAS~~for ~~No. 128~~Medicinal ~~requires~~Products ~~dual~~for ~~presentation~~Human ofUse, ~~basic~~or ~~and diluted~~CHMP, ~~earnings~~issued ~~per share. Basic EPS includes no dilution and is computed by dividing net loss by~~a ~~the~~positive ~~weighted~~opinion, ~~average~~recommending ~~number~~grant of ~~common~~a ~~shares~~centralized ~~outstanding~~marketing ~~for~~authorization in the ~~period~~European Union, ~~excluding~~or ~~owned~~EU, ~~but unvested~~for ~~shares~~MEPACT. ~~There~~The ~~were~~CHMP ~~zero~~recommendation ~~and~~was ~~38,779~~formally ~~owned~~adopted ~~but~~by ~~unvested~~the ~~shares~~CHMP ason ~~of June~~December 3018, 2008 ~~2005~~ and ~~2004, respectively,~~final ~~which~~European ~~were~~Commission ~~excluded~~approval ~~from~~was ~~the~~received ~~earnings~~on ~~per~~March 6, ~~share calculation~~2009. ~~Diluted~~The ~~EPS reflects the~~centralized ~~potential~~marketing ~~dilution~~authorization ofallows ~~securities~~mifamurtide ~~that~~to ~~could~~be ~~share~~marketed in the ~~Company’s~~27 ~~earnings,~~Member ~~such~~States ~~as common stock equivalents that may be issuable upon exercise~~ of ~~outstanding~~the ~~common~~EU, ~~stock options or warrants~~ as well as ~~all~~in ~~shares of preferred stock~~Iceland, ~~which~~Liechtenstein ~~may~~and beNorway. ~~converted~~Mifamurtide ~~into~~was ~~common~~granted ~~stock.~~orphan ~~Prior~~medicinal ~~to the~~product ~~application~~status ofin ~~the~~Europe ~~treasury~~in ~~stock~~2004 ~~method,~~and ~~common~~under ~~stock~~European ~~equivalents~~pharmaceutical oflegislation ~~6,453,269~~is ~~and~~entitled ~~6,624,929~~to ~~for the~~a period ~~ended June~~of 10 ~~30,~~years ~~2005~~market ~~and~~exclusivity ~~2004,~~in ~~respectively,~~respect ~~have~~of ~~been excluded from EPS as~~ the ~~effect~~approved ~~is antidilutive~~indication.

On August 27, 2007 the FDA issued a not approvable letter to the Company and requested data from additional clinical trials to demonstrate the benefit of mifamurtide, as well as information or clarification with respect to other sections of the NDA. In order to focus existing resources on certain MEPACT pre-launch commercial activities in Europe and to conserve cash while the Company completes its review of strategic options, it has placed the U.S. mifamurtide NDA amendment submission on hold until it completes its review.

The Company had been jointly developing UVIDEM, a cell-based therapeutic vaccine product candidate based on dendritic cells, with sanofi-aventis S.A., or sanofi-aventis, for the treatment of melanoma. As discussed in Note 6, in December 2007, sanofi-aventis announced it decision to terminate participation in the UVIDEM development program. In January 2008, the Company’s Board of Directors approved a plan to discontinue operations in Paris, France, which was primarily dedicated to the UVIDEM development program and such operations ceased in the second quarter of 2008.

2. Basis of Presentation

The interim unaudited condensed consolidated financial statements of IDM Pharma have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. However, they do not include all of the information and disclosures required by GAAP for complete financial statements. These statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission on March 31, 2009, as amended.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the consolidated financial position, results of operations and cash flows as of and for the three month periods ended March 31, 2009 and 2008 have been made. The interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year.

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries: Immuno-Designed Molecules, Inc. in Irvine, California and IDM Pharma S.A. in Paris, France. All intercompany accounts and

transactions have been eliminated in the consolidation. The ~~following~~Company ~~table~~closed ~~shows~~the ~~total~~operations ~~shares~~of IDM ~~outstanding~~Pharma S.A. as of June ~~30,~~2008 ~~2005~~pursuant ~~and~~to ~~2004,~~the ~~respectively,~~January 2008 onrestructuring aplan. The Company ~~fully~~continues ~~diluted~~to ~~basis,~~maintain ~~assuming~~IDM ~~full~~Pharma ~~vesting~~S.A. ~~and~~as ~~conversion~~a ofFrench ~~all~~subsidiary ~~common~~and ~~stock~~to ~~equivalents~~conduct ~~upon~~its business, now ~~exercise~~solely ofrelated ~~outstanding~~to ~~common~~MEPACT, ~~stock~~both ~~options~~directly and ~~warrants~~through asthe ~~well~~use ~~as conversion~~ of ~~all~~consultants ~~shares~~and ~~of preferred~~contracted ~~stock:~~activity.

	2005		2004
Common stock outstanding		16,039,992		16,004,263
Preferred shares, as converted		1,787,572		1,787,572
Options outstanding		2,390,271		2,561,931
Warrants outstanding		2,275,426		2,275,426
Fully diluted shares		22,493,261		22,629,192

3. Recent Operating Results and Liquidity

As The ~~permitted~~Company byhas ~~SFAS~~incurred Nosignificant net losses and has generated limited revenues since inception. ~~123,~~ ~~Accounting~~As ~~for~~of ~~Stock-based~~March 31, ~~Compensation~~2009, the Company’s ~~elected~~accumulated todeficit was $221.8 million and the ~~follow~~Company’s ~~Accounting~~revenues ~~Principles~~for ~~Board~~the ~~(APB)~~three months ended March ~~Opinion~~31, No2009 and 2008 were $4,000 and $2.4 ~~25,~~million respectively. ~~Accounting~~The ~~for~~Company ~~Stock~~will ~~Issued~~continue to ~~Employees, and~~spend ~~related~~significant ~~interpretations~~amounts on pre-commercial activities for mifamurtide in ~~accounting~~Europe, including amounts spent for ~~its~~manufacturing ~~employee~~clinical ~~stock~~and ~~options~~commercial supplies. ~~Under~~Successful ~~APB~~transition ~~Opinion~~to ~~No. 25,~~commercialization and to attaining profitable operations is ~~among~~dependent ~~other~~upon ~~things,~~achieving ~~when~~a level of revenues adequate to support the ~~exercise~~Company’s ~~price~~cost ofstructure and, if necessary, obtaining additional financing and/or reducing expenditures. The Company has historically funded its ~~employee~~operations ~~stock~~through ~~options~~collaborative isagreements ~~not~~with ~~less~~strategic ~~than~~partners ~~the~~and ~~market~~equity ~~price~~financings. ofAs ~~the~~discussed ~~underlying~~in ~~stock~~Note on9, beginning in 2006 and continuing through 2008, management has implemented restructuring and cost reduction initiatives, including the ~~date~~closure of IDM ~~grant,~~Pharma noS.A. ~~compensation~~in ~~expense~~the issecond ~~recognized~~quarter of 2008.

As Financing ~~required~~proceeds ~~under~~and ~~SFAS~~savings ~~No. 123~~from ~~and~~continued ~~SFAS~~cost ~~No. 148,~~management ~~Accounting~~initiatives ~~for~~are ~~Stock-Based~~expected ~~Compensation -~~to ~~Transition~~provide ~~and~~sufficient ~~Disclosure,~~working capital for the ~~pro~~Company’s ~~forma~~currently ~~effects~~planned operations into the third quarter of ~~stock-based~~2009. ~~compensation~~To focus on ~~net~~those ~~loss~~areas ~~and~~the ~~net loss~~Company ~~per~~believes ~~common~~can ~~share~~provide ~~have~~the ~~been~~most ~~estimated~~near atterm ~~the~~value to ~~date~~its ofstockholders ~~grant~~and ~~using~~to ~~the~~ensure ~~Black-Scholes~~it ~~option pricing~~has ~~model~~adequate ~~based~~funds onto ~~the~~complete ~~following~~its ~~weighted~~review ~~average~~of ~~assumptions~~strategic options for ~~June 30~~the Company, ~~2005~~it ~~and~~is ~~June 30, 2004:~~concentrating ~~risk~~its near-~~free~~term ~~interest~~efforts ~~rates~~on ofcertain 5%MEPACT ~~and~~pre-launch ~~4%,~~commercial activities ~~respectively;~~in ~~dividend~~Europe ~~yield~~and the review of ~~zero~~such ~~for~~strategic ~~both~~options, ~~periods; and~~including amerger ~~weighted~~or ~~average~~acquisition opportunities, ~~expected~~which ~~life~~may ~~for~~involve ~~all~~a ~~options~~change in control of ~~six~~the ~~years~~company. ~~The~~Consequently, ~~volatility~~it ~~factor assumptions~~has of placed the ~~expected~~U.S. ~~market~~mifamurtide ~~price~~NDA ofamendment ~~the~~submission ~~Company’s~~on ~~common~~hold ~~stock~~until ~~were~~it ~~71%~~completes ~~and~~its ~~90%~~strategic ~~for~~review. ~~June~~The ~~30,~~Company ~~2005~~currently has no committed sources of funding and ~~June 30,~~its ~~2004,~~cash ~~respectively~~needs are not entirely predictable.

~~For~~ To ~~purposes~~continue ~~of adjusted pro forma disclosures~~operations, the ~~estimated~~Company ~~fair~~will ~~value~~need ofto ~~the~~raise ~~options~~additional ~~is amortized~~capital toor ~~expense~~pursue ~~over~~strategic opportunities ~~the~~in ~~option’s vesting period~~2009. The ~~effect~~Company ofhas ~~applying~~engaged ~~SFAS~~JMP ~~No. 123~~Securities, ~~for purposes~~LLC, ofan ~~providing~~investment ~~pro~~bank, ~~forma disclosures is not likely~~ to ~~be representative of the effects on~~advise ~~the~~it ~~Company’s operating results for future years because changes~~ in ~~the~~exploring ~~subjective~~alternatives ~~input assumptions~~available ~~can~~to ~~materially~~it ~~affect~~with ~~future~~respect ~~value~~to ~~estimates.~~a ~~Pro~~possible ~~forma~~merger ~~information~~or ~~for the three and~~acquisition ~~six months ended June 30, 2005 and 2004 is as follows:~~transaction.

	Three months ended June 30,						Six months ended June 30,
	2005			2004			2005			2004
Net loss as reported	($	1,691,000	)	($	872,000	)	($	4,069,000	)	($	1,357,000	)
Add: stock-based employee compensation expense included in reported net loss		15,000			32,000			30,000			32,000
Deduct: stock-based employee compensation expense determined under fair value based method for all awards		(190,000	)		(601,000	)		(479,000	)		(817,000	)
Pro forma net loss	($	1,866,000	)	($	1,441,000	)	($	4,518,000	)	($	2,142,000	)
Net loss per share:
Basic and diluted — as reported	($	0.11	)	($	0.06	)	($	0.25	)	($	0.09	)
Basic and diluted — pro forma	($	0.12	)	($	0.09	)	($	0.28	)	($	0.15	)

There is no assurance that the Company will be able to raise additional funds, that it can find a commercialization or collaboration partner or that a merger or acquisition will occur. Management will continue to assess the adequacy of the Company’s capital resources on an ongoing basis. If a partnership, merger or acquisition is not consummated, the Company will need to raise additional capital during 2009 to fund its ongoing operations and commercialization for MEPACT in Europe. Should such financing be unavailable or on terms unacceptable to the Company, when required, the consequences would have a material adverse effect on its business, financial condition, results of operations and cash flows.

In As ~~December 2004~~a result of sanofi-aventis’ decision to terminate its participation in the UVIDEM development program, and the ~~Financial~~Company’s ~~Accounting~~decision ~~Standards~~to ~~Board~~discontinue ~~issued~~operations ~~SFAS~~in ~~No. 123(R)~~Paris, ~~Share-Based Payments~~France, ~~which~~the Company ~~replaces~~expects ~~SFAS~~to ~~No. 123~~generate ~~and~~little, ~~supersedes~~if ~~APB~~any, ~~Opinion~~revenues ~~No. 25.~~in ~~SFAS~~the Nonear term. ~~123(R)~~ ~~will require~~The ~~all~~Company ~~share-based~~expects ~~payments~~ to receive ~~employees,~~revenues ~~including~~from ~~grants~~sales in Europe of ~~employee~~its ~~stock~~lead ~~options~~product candidate, toMEPACT, beassuming that it can ~~recognized~~find ina ~~the~~commercialization ~~statement~~partner ofor ~~operations~~can ~~based~~raise onadditional ~~their~~capital ~~fair~~to ~~values.~~commercialize ~~SFAS~~it Noitself. ~~123(R) offers~~ ~~alternative~~However, ~~methods~~any ~~for~~efforts ~~determining~~by the ~~fair~~Company ~~value.~~or Inany ~~April 2005,~~future ~~the~~partners ~~SEC~~to ~~issued~~commercialize aMEPACT ~~new~~may ~~rule~~not ~~that~~be ~~allows companies~~successful.

On December 26, 2007, sanofi-aventis notified the Company of its decision to terminate its participation in the UVIDEM development program and the Company has put further development of the program on hold. As disclosed in Note 6, the Company entered into a settlement agreement with sanofi-aventis under which sanofi-aventis paid the research and development costs of the UVIDEM development program for the first quarter of 2008 and an additional amount related to the shut down of the UVIDEM program.

In January 2008, the Company’s Board of Directors authorized a second organizational restructuring that resulted in a workforce reduction in Irvine, California on January 29, 2008, and the closure of the Company’s operations in Paris, France as of the end of the second quarter of 2008. The Company continues to maintain IDM Pharma S.A. as a French subsidiary and conduct its business, now solely related to MEPACT, both directly and through the use of consultants and contracted activity.

to The ~~implement~~Company’s ~~SFAS~~continuing ~~No. 123(R)~~operating atlosses, ~~the~~operating ~~beginning~~cash offlow ~~the next fiscal year~~deficits, ~~instead~~uncertainty ofin ~~the~~funding ~~next~~sources ~~reporting~~and ~~period,~~plans ~~that~~for ~~begins~~pre-launch ~~after~~commercial ~~June 15,~~activities ~~2005.~~of AsMEPACT ain ~~result~~Europe, wetogether ~~will implement SFAS No. 123(R) in the~~raise ~~reporting~~substantial ~~period~~doubt ~~starting~~about ~~January 1,~~its ~~2006.~~ability Weto ~~expect~~continue ~~that~~as ~~SFAS~~a Nogoing concern. ~~123(R)~~ ~~will~~The ~~have~~accompanying ~~a significant~~unaudited ~~impact~~condensed onconsolidated ~~our~~ financial statements. ~~At the present time, we~~ have ~~not~~been ~~yet~~prepared ~~determined~~assuming ~~which~~that ~~valuation method~~it we will ~~use.~~continue ~~The~~as ~~impact~~a going ofconcern ~~adoption~~and ofdo ~~SFAS~~not ~~No. 123(R)~~include ~~cannot~~any beadjustments ~~accurately~~to ~~predicted~~reflect ~~at this~~the ~~time~~possible ~~because~~future iteffects ~~will depend~~ on ~~levels of share-based payments granted in~~ the ~~future. However,~~ ~~had~~recoverability ~~the~~and ~~Company~~classification ~~adopted~~of ~~Statement~~assets ~~No. 123(R)~~or inthe ~~prior~~amounts ~~periods,~~and ~~the~~classification ~~impact~~ of ~~that~~liabilities ~~standard would~~that ~~have~~may ~~approximated~~result ~~the~~from ~~impact of Statement No. 123 as described in~~ the ~~disclosure~~outcome of ~~pro forma net loss and loss per share included elsewhere in~~ this ~~Note 1 to the financial statements~~uncertainty.

24. ~~Proposed~~Summary ~~Business~~of ~~Combination~~Significant ~~with~~Accounting ~~IDM S.A.~~Policies

On The ~~March 16,~~preparation ~~2005,~~of these condensed consolidated financial statements requires the Company ~~announced~~to make estimates and judgments in certain circumstances that itaffect ~~had~~the ~~agreed~~reported toamounts ~~combine~~of ~~its~~assets, liabilities, ~~business~~revenues ~~with~~and ~~IDM~~expenses, ~~a privately~~and ~~held~~related ~~company~~disclosure ~~based~~of incontingent ~~France,~~assets ~~pursuant~~and toliabilities. The aCompany’s ~~Share~~management ~~Exchange~~bases ~~Agreement,~~its asestimates ~~amended,~~on historical experience and various other assumptions ~~referred~~that are believed to asbe ~~the~~reasonable ~~Share~~under ~~Exchange~~the ~~Agreement~~circumstances. The ~~all-stock~~Company ~~transaction~~reviews ~~has~~its ~~been~~estimates ~~unanimously~~on ~~approved~~an byongoing ~~the~~basis. ~~boards~~Actual ofresults ~~directors~~may ofdiffer ~~both~~from ~~companies.~~these Inestimates ~~addition,~~under asdifferent ofassumptions ~~June 29,~~or conditions. ~~2005,~~The ~~IDM shareholders~~Company ~~collectively~~believes ~~owning~~that ~~more~~the ~~than~~policies ~~98%~~described ofbelow involve the ~~IDM~~most ~~shares~~significant judgments ~~had~~and ~~thus~~estimates ~~far~~used ~~entered~~in ~~into~~ the ~~Share~~ ~~Exchange~~preparation ~~Agreement~~of its condensed consolidated financial statements.

~~Under~~Concentration ~~Nasdaq National Market rules, the Company must obtain shareholder approval~~ of ~~the~~credit ~~issuance of~~risk shares of its common stock contemplated by the Share Exchange Agreement. On June 30, 2005, the Company filed a definitive proxy statement with the Securities and Exchange Commission, or SEC, to seek approval from its shareholders of the issuance of shares of Epimmune common stock pursuant to the Share Exchange Agreement and related transactions, as well as approval of certain related actions including increasing its authorized shares of capital stock and effecting a reverse split of its outstanding common stock. The closing of the transaction with IDM is subject to, among other things, approval by the Company’s shareholders of the foregoing actions at the meeting of the Company’s shareholders on August 11, 2005 and other customary closing conditions. Upon closing of the transaction, the combined company’s shares are expected to be traded on the Nasdaq National Market under the symbol “IDMI.” The combined company will focus on immunotherapeutic products for cancer and selected infectious diseases.

~~Pursuant~~ The ~~to the Share Exchange Agreement, the~~ Company’s ~~will acquire all of the outstanding shares of IDM~~deposits, ~~except~~which ~~shares~~are ~~and~~kept ~~a warrant held~~ in ~~French~~dollars ~~share~~and ~~savings plans~~euros, inare ~~exchange~~maintained ~~for~~in ~~shares~~major ~~of the Company’s common stock, and IDM will become a subsidiary of the Company~~U.S. ~~Each share of IDM will be~~and ~~exchanged~~French ~~for approximately 3~~institutions.~~771865~~ ~~shares~~The ~~of the~~ Company’s ~~common~~has ~~stock,~~established ~~and~~guidelines ~~the~~relative ~~former shareholders~~to ofdiversification ~~IDM will hold, in aggregate, approximately 78% of the Company’s outstanding common~~and ~~stock,~~maturities onthat amaintain ~~fully~~safety ~~diluted~~and ~~basis, immediately following the closing of the transaction~~liquidity. ~~In connection~~These ~~with~~guidelines ~~the~~are ~~transaction,~~periodically ~~the~~reviewed ~~Company’s outstanding Series S~~ and ~~Series S-1 preferred stock~~ ~~will~~modified beto ~~exchanged~~take ~~for~~advantage ~~a total~~ of ~~1,949,278~~trends ~~shares~~in ofyields ~~the~~and ~~Company’s~~interest ~~common~~rates. ~~stock,~~Management ~~pursuant~~attempts to anschedule ~~Amended and Restated Preferred Exchange Agreement dated April 12, 2005, between~~ the ~~Company~~maturities ~~and G.D. Searle, LLC, an affiliate~~ of ~~Pfizer Inc.,~~ the ~~holder~~Company’s ofinvestments ~~all~~to ofcoincide ~~the~~with ~~outstanding shares of preferred stock of~~ the Company.’s ~~The~~expected ~~Share Exchange Agreement also sets forth the terms for~~cash ~~treatment of outstanding options and warrants to purchase IDM shares in the transaction~~requirements.

~~Subsequent~~ At March 31, 2009, $5.7 million was invested in three money market mutual funds, which consist of primarily government and high-grade securities, generally with maturities of less than three months. Due to ~~the~~their ~~transaction~~very short-term nature, such securities are subject to minimal interest rate risk. However, these investment can be affected by losses to the ~~shareholders~~extent ofthe ~~IDM~~underlying ~~will~~securities are ~~effectively~~adversely ~~control~~impacted by the ~~Company~~current credit market conditions. AsThe amoney market mutual funds are ~~result,~~not ifinsured ~~approved~~or ~~and~~guaranteed ~~completed~~by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve the value of the investment at $1.00 per share, the Company ~~transaction~~can ~~will~~lose beits ~~accounted~~invested ~~for~~principal asif athe ~~reverse~~underlying ~~acquisition~~securities suffer losses. The funds may inhave holdings which, ~~for~~include ~~financial~~certain ~~reporting~~securities ~~purposes~~that are illiquid, ~~IDM~~in isdefault, ~~considered~~under ~~the~~restructuring or ~~acquiring~~have ~~company~~been subject to a ratings downgrade. ~~Following~~However, the funds continue to report a per share net ~~closing~~asset value, or NAV, of $1.00, which represents the ~~transaction,~~price at which investors buy and sell fund shares from and to the ~~historical~~fund ~~financial~~company. ~~statements~~The ofNAV ~~IDM~~is ~~will~~computed ~~become~~once at the ~~historical~~end of each trading day based ~~financial~~on ~~statements~~the closing market prices of the portfolio’s securities. The Company believes that its investment has not been impaired and ~~include~~that ~~the~~it ~~results~~can ofcontinue ~~operations~~to withdraw its funds at any time without restriction. The Company will continue to monitor the value of the ~~Company~~funds ~~only~~periodically ~~from~~for ~~the~~potential ~~acquisition~~indicators ~~date~~of ~~forward~~impairment.

~~The shares the Company will issue in the exchange will not be registered under U.S. securities laws~~Inventory ~~and may not be offered or sold in the U.S. absent registration or unless an applicable exemption from the~~

Inventory relates to raw materials for the Company’s lead product, MEPACT. The Company began to capitalize raw material costs to manufacture mifamurtide for commercial sales in the first quarter of 2009 as it received final approval on a centralized marketing authorization in the EU on March 6, 2009.

Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-to-expire method. Inventories are reviewed periodically for slow-moving or obsolete status. The Company adjusts its inventory to reflect situations in which the cost of inventory is not expected to be recovered. The Company would record a reserve to adjust inventory to its net realizable value: (1) if the launch of a new product is delayed, inventory may not be fully utilized and could be subject to impairment; (2) when a product is close to expiration and not expected to be sold; (3) when a product has reached its expiration date; or (4) when a product is not expected to be saleable. In determining the reserves for these products, the Company considers factors such as the amount of inventory on hand and its remaining shelf life, and current and expected market conditions, including management forecasts and levels of competition. As of March 31, 2009, no inventory reserves were recorded on the Company’s consolidated balance sheet.

~~registration~~Impairment ~~requirements is available. The Company has agreed to file a registration statement covering the resale~~ of ~~the~~long ~~shares~~lived ~~issued in the transaction following the closing of the~~assets ~~transaction.~~

~~The~~ In ~~Company~~accordance ~~has~~with ~~filed~~SFAS aNo. 144, ~~definitive~~Accounting ~~proxy~~for ~~statement~~the ~~concerning~~Impairment or Disposal of Long-Lived Assets, the Company periodically evaluates the value reflected on its ~~proposed~~balance ~~combination~~sheet ~~with~~of ~~IDM~~long-lived ~~with~~assets, such as patents and licenses, when events and circumstances indicate that the ~~SEC~~carrying amount of an asset may not be recovered. Such events and circumstances include recommendations by advisory panels to the FDA regarding evidence of effectiveness of the Company’s drug candidates, communication ~~which~~with ~~explains~~the regulatory agencies regarding safety and efficacy of our products under review, the ~~proposed~~use ~~transaction~~of the asset in ~~greater~~current ~~detail~~research and development projects, ~~including~~any potential alternative uses of the ~~risks~~asset in other research and development projects in the short to medium ~~involved~~term, clinical trial results and research and development portfolio management options. Determination ~~Investors~~of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and ~~security~~its ~~holders~~eventual disposition. In the event that such cash flows are ~~advised~~not expected to ~~read~~be sufficient to recover the ~~proxy~~carrying ~~statement~~amount ~~related~~of the assets, the assets are written down to their estimated fair values. At March 31, 2009, the license from Novartis granting the Company ~~proposed~~an ~~transaction~~exclusive, ~~because~~worldwide itlicense ~~contains~~to ~~important~~intellectual ~~information~~property ~~related~~rights relating to mifamurtide represented approximately $2.2 million of the ~~transaction~~total amount in Patents, Trademarks and Other Licenses. The balance relates to IDM-2101, which the Company has placed on hold, other than planning activities for possible future clinical studies. Based on the recent marketing authorization for MEPACT in Europe, the company believes the future cash flows to be received from the long-lived assets will exceed the assets carrying value indicating no impairment at March 31, 2009.

~~The~~Net ~~foregoing~~Loss ~~statements~~Per ~~regarding the proposed transaction between Epimmune and IDM include~~Share forward-looking statements, which are subject to risks and uncertainties, including but not limited to the possibility that the proposed transaction with IDM may not ultimately close for any of a number of reasons, such as Epimmune not obtaining shareholder approval of the transaction or related matters; the possibility that the conditions to Nasdaq’s approval of the listing of the combined company’s shares for trading on the Nasdaq National Market will not be satisfied; and the possibility that, in the event the transaction is completed, the combination of Epimmune and IDM may not result in a stronger company, that the technologies and clinical programs of the two companies may not be compatible and that the parties may be unable to successfully execute their integration strategies or realize the expected benefits of the transaction.

3 Earnings per share, referred to as EPS, is computed in accordance with SFAS No. 128, ~~Subsequent~~Earnings per ~~Events~~Share. SFAS No. 128 requires dual presentation of basic and diluted earnings per share. Basic EPS includes no dilution and is computed by dividing net loss by the weighted average number of common shares outstanding for the period, excluding owned but unvested shares. Diluted EPS reflects the potential dilution of securities, such as common stock equivalents that may be issuable upon exercise of outstanding common stock options or warrants as well as all shares of preferred stock, which may be converted into common stock. Diluted EPS is computed by dividing net loss by the weighted average number of common and common stock equivalent shares. Prior to the application of the treasury stock method, common stock equivalents of 4,855,435 and 5,987,228 for the periods ended March 31, 2009 and 2008, respectively, have been excluded from EPS, as the effect is antidilutive.

On July 19, 2005, the Company announced it had been notified by Syngenta Crop Protection AG (“Syngenta”) that all conditions had been met for the assignment of certain portions of Epimmune’s existing agreement with Aeres Biomedical to Syngenta. The assignment and restructuring of certain commercial terms of the agreement triggered a payment to Epimmune by Syngenta.


	March 31, 2009		March 31, 2008

Options outstanding		1,005,558		1,760,881
Restricted stock awards (unvested)		100,000		476,470
Warrants outstanding		3,377,412		3,377,412
Reserved pursuant to option liquidity agreements		372,465		372,465

Total		4,855,435		5,987,228

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”). Under SFAS No. 123R, the fair value of share-based awards is estimated at grant date using an option pricing model, and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. The Company uses the Black-Scholes-Merton option-pricing model to determine the fair-value of stock-based awards. The determination of fair value using the Black-Scholes-Merton option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors.

Beginning January 1, 2008, the Company estimated expected stock price volatility for accounting purposes based on historical volatility data since its listing as a publicly traded company in August 2005. The Company applies the “simplified method” in estimating the expected term of equity awards as allowed under Staff Accounting Bulletin (SAB) No. 110. SAB 110 permits the continued use of the simplified method after December 31, 2007 for companies which do not have sufficient historical exercise data due to limited trading history or where an entity has or expects to have significant structural changes in its business such that its historical exercise data may not be relevant. There are no changes to other valuation assumptions and methodologies.

~~ITEM~~ The 2.following ~~MANAGEMENT~~table summarizes the share-based compensation expense for stock options and restricted stock awards granted under the Company’Ss ~~DISCUSSION~~equity ~~AND~~plans ~~ANALYSIS~~to OFemployees, ~~FINANCIAL~~directors ~~CONDITION~~and consultants ~~AND~~that ~~RESULTS~~the OFCompany ~~OPERATIONS~~recorded in accordance with SFAS No. 123(R) for the three months ended March 31, 2009 and 2008.

Except for the historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, without limitation, those discussed below and in the section entitled “Risk Factors.”


	Three months ended
	March 31,
	2009		2008

Research and development	$	23,000	$	86,000
General and administrative		179,000		359,000
Selling and marketing		3,000		3,000

Total stock-based compensation expense	$	205,000	$	448,000

~~Epimmune~~ As ~~was~~of ~~incorporated~~March 31, in2009, ~~Delaware~~there onwas ~~July~~$1.8 ~~10,~~million ~~1987~~(gross asof ~~Cytel~~estimated ~~Corporation.~~forfeitures) Onof ~~July 1,~~total unrecognized ~~1999,~~compensation ~~Cytel merged~~cost ~~with~~related ~~its~~to ~~majority~~non-~~owned~~vested ~~subsidiary,~~options ~~Epimmune~~granted ~~Inc.,~~under ~~and~~all ~~changed~~equity ~~its~~compensation plans. ~~name~~The ~~from~~weighted ~~Cytel Corporation~~average toterm ~~Epimmune~~over ~~Inc.~~which ~~Epimmune®~~the ~~and~~compensation ~~PADRE®~~cost ~~are~~will ~~our~~be ~~trademarks~~recognized ~~and~~is ~~EIS~~2.13 ~~and~~years. ~~ImmunoSense~~Total ~~are~~unrecognized ~~our~~compensation ~~service~~cost ~~marks~~will be adjusted for future changes in estimated forfeitures.

~~Since~~Restricted ~~1997,~~Stock ~~we have devoted substantially all of our resources to the discovery and development of~~Awards potential therapeutic and prophylactic products. To date, we have not received any revenues from the sale of products. We began a Phase I/II clinical trial targeting HIV in September 2002 and two Phase I/II clinical trials targeting lung cancer and colorectal cancer in February 2003. Based on the results we received from those clinical trials during the course of 2004, we began a Phase II clinical trial in late-stage lung cancer patients at the end of 2004 and expect to initiate a follow-on Phase I/II trial in HIV-infected patients in the fourth quarter of 2005 to evaluate alternative vaccine delivery options. We have funded our research and development primarily from equity-derived working capital and through strategic alliances and collaborations with other companies. We have not been profitable since our inception and expect to incur substantial operating losses for at least the next several years. As of June 30, 2005, our accumulated deficit was approximately $165.9 million.

In The ~~July 2001,~~Company wehas ~~entered~~outstanding ~~into~~restricted astock ~~collaboration~~awards ~~with~~issued ~~Genencor~~to ~~International,~~employees ~~Inc.~~and to ~~develop vaccines~~non-employees tothat ~~treat~~vest orover ~~prevent~~one ~~hepatitis~~to Bfour-year ~~virus,~~service ~~hepatitis~~periods. CCertain ~~virus~~awards ~~and~~are ~~human~~subject ~~papilloma~~to ~~virus.~~acceleration ~~In February~~if ~~2004,~~performance weconditions ~~announced~~are ~~that~~met weand ~~had~~certain ~~earned~~awards aaccelerate ~~milestone~~vesting ~~payment~~upon ~~from~~termination ~~Genencor~~without ~~as a result of Genencor~~cause ~~filing~~or anleaving ~~Investigational~~employment ~~New~~for ~~Drug~~good ~~Application,~~reason or ~~IND,~~upon ~~for~~ a ~~vaccine~~change ~~to treat hepatitis B, the lead program~~ in ~~the collaboration~~control. InCompensation ~~March 2004,~~costs ~~Genencor~~based ~~assigned~~on ~~its~~the grant ~~rights~~date ~~under~~fair ~~our collaboration~~value ~~agreement~~of tothe ~~Innogenetics~~shares ~~NV.~~are Ininitially ~~connection~~recognized ~~with~~over the ~~assignment~~explicit byservice ~~Genencor, we~~period. ~~extended~~When the ~~collaboration~~milestones ~~term~~become ~~with~~probable, ~~Innogenetics~~the ~~through~~remaining ~~September 2005.~~unrecognized ~~Innogenetics~~expense ~~has~~attributed to the milestone ~~right~~is torecorded ~~terminate~~over the ~~collaboration~~adjusted ~~early,~~service ~~upon~~period ~~three~~through ~~months~~the ~~written~~expected ~~notice~~milestone achievement date.

~~Critical~~ During ~~Accounting~~the ~~Policies~~three months ended March 31, 2009, the Company granted no restricted stock awards. The Company recorded $0.1 million in share-based compensation expense for restricted stock awards in the three months ended March 31, 2009 and 2008. At March 31, 2009, the Company had 744,414 shares of restricted stock awards outstanding, of which 644,414 were vested. Unrecognized compensation for restricted stock was $0.1 million at March 31, 2009 (assuming that all service and performance milestones will be met) and will be recognized in the second quarter of 2009.

~~Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with U~~5.S. ~~generally~~Sale ~~accepted accounting principles unless otherwise indicated. The preparation~~ of ~~these~~Common ~~financial~~Stock ~~statements requires us to make estimates~~ and ~~judgments that affect the reported amounts of assets,~~Warrants liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates on an ongoing basis, including those related to revenue recognition, patents and income taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect the significant judgments and estimates used in the preparation of our financial statements.

~~Revenue~~ On ~~Recognition~~February 20, 2007, the Company completed a private placement of 4,566,995 shares of its common stock and detachable warrants to purchase 782,568 common shares for a total of $12.9 million (excluding any proceeds that might be received upon exercise of the warrants). The warrants have an initial exercise price of $3.243 per share. If the Company issues additional common shares in certain non-exempt transactions for a price less than $3.243 per share, the exercise price will be adjusted downward based on a broad-based weighted average formula provided in the warrant agreement, but in no event will the exercise price be less than $2.82 per share. Initially, the warrants are exercisable at any time until February 2012 and may be exercised in cash or on a cashless exercise basis.

We In ~~recognize~~connection ~~revenues~~with ~~pursuant~~the financing, the Company agreed to ~~Staff~~file ~~Accounting~~a ~~Bulletin~~registration ~~No.~~statement on Form S-3 under the Securities Act of 1933, as amended, or the Securities Act, registering for resale the shares of common stock sold in the financing, including the shares of common stock underlying the warrants, within 30 ~~101~~days of the closing and have the registration statement declared effective within 90 days of the closing, ~~Revenue~~referred ~~Recognition~~to as the Resale Registration Statement. ~~License~~Pursuant to the ~~fees~~terms ~~are~~of ~~earned~~the ~~and~~unit ~~recognized~~purchase agreement, the Company is subject to various penalties up to approximately $1.6 million on an annual basis, in ~~accordance~~the event that the Resale Registration Statement was not filed with the ~~provisions~~Securities ofand ~~each~~Exchange Commission, or SEC, within 30 days after the closing date or was not declared effective within 90 days after the closing date or is not available for resales by the purchasers or other specified events have occurred as set forth in the unit purchase agreement. ~~Upfront~~Pursuant ~~license~~to the terms of the unit purchase agreement, the Company filed the Resale ~~fees~~Registration Statement with the SEC on March 21, 2007, which was declared effective May 4, 2007.

~~for~~ On ~~perpetual~~June 20, ~~licenses~~2007, ~~where~~the weCompany ~~have~~sold noan ~~performance~~aggregate ~~obligations~~of 7,142,855 shares of the Company’s common stock and detachable warrants to purchase 2,357,139 common shares to certain new and existing investors at the negotiated price of $3.50 per unit for $25.0 million in gross proceeds. The warrants are ~~recognized~~exercisable ~~when~~immediately ~~received~~following issuance over the next five years at $4.06 ~~This~~per ~~involves~~share. usThe ~~conveying~~Company ~~rights~~also paid $1.4 million (approximately 5.6% of the gross proceeds) and issued warrants to ~~intellectual~~purchase ~~property~~237,705 wecommon ~~own~~shares to the placement agent as a ~~licensee~~transaction ~~upon~~fee. ~~signing~~These warrants were valued at $0.6 million on the date of agrant and are subject to the same terms as ~~definitive~~those ~~agreement~~issued to the investors. Total transaction costs (exclusive of the warrants) were $1.6 million, resulting in net cash proceeds of $23.4 million. The shares, warrants and ~~where~~shares weissuable upon ~~have~~exercise noof ~~further~~the ~~delivery~~warrants orare ~~performance~~registered ~~obligations~~under ~~beyond~~the Securities Act, on the Company’s previously ~~conveyance~~filed ofand ~~those~~effective ~~rights~~Registration Statement on Form S-3 (Registration No. 333-143058), as amended.

~~License~~ Under ~~fees~~both ~~under agreements in which we have ongoing involvement or performance obligations are recognized over~~ the ~~term~~February ofand ~~the~~June 2007 ~~agreement.~~stock ~~Milestone~~purchase ~~payments~~agreements, ~~are~~upon ~~recognized~~a aschange ~~revenue~~in ~~upon~~control ~~the~~(as ~~completion~~described ofin the ~~milestone~~warrant asagreements) ~~long~~in aswhich the ~~milestone~~Company ~~event~~receives ~~was~~all ~~substantive~~cash consideration, ~~and its achievability~~the ~~was~~unexercised ~~not~~portion ~~reasonably~~of ~~assured~~these atwarrants ~~inception~~becomes ~~and~~exercisable ~~our~~for ~~performance~~(or ~~obligations~~in ~~after~~the ~~milestone~~case ~~achievement will~~of ~~continue to be funded at a comparable level to what it was before~~ the ~~milestone achievement.~~February 20, ~~Contract~~2007 ~~research~~warrants ~~and development funding~~ is ~~recognized~~terminated ~~as revenue~~ in ~~the~~exchange ~~same~~for) ~~period~~cash ~~as reimbursable expenses under a contract are incurred and~~ in an amount orequal atto asuch ~~rate billable under each contract~~warrants’s ~~terms. Revenues from grants are recognized on a cost reimbursement or cost plus~~value ~~fixed~~computed ~~fee~~using ~~basis as related costs are incurred, which approximates~~ the ~~services~~Black-Scholes-Merton ~~performed~~pricing ~~under~~model ~~the contract.~~with Weprescribed ~~defer~~assumptions ~~revenue recognition until performance obligations have been completed~~ and ~~collectibility~~ ~~is reasonably assured~~guidelines.

~~Patents~~ Upon such a change in control and absent this Black-Scholes-Merton settlement provision, warrant holders would ordinarily receive a cash payment on an as-converted basis equal to the intrinsic value of the warrants, which is equal to the excess (if any) of the underlying share price over the warrant exercise price. The Black-Scholes-Merton pricing model values the warrants above their intrinsic value by adding a remaining-life time-value component. Consequently, when warrant holders receive a cash payment equal to the Black-Scholes-Merton value of the warrants, they benefit from a supplemental payment equal to the time value component not otherwise received by other equity holders.

We In ~~capitalize~~accordance ~~the~~with ~~costs~~EITF ~~incurred~~00-19, toAccounting ~~file~~for ~~patent~~Derivative ~~applications~~Financial ~~when~~Instruments weIndexed ~~believe~~To, ~~there~~and Potentially isSettled In, a ~~high likelihood~~Company’s ~~that~~Own Stock, the ~~patent~~warrants ~~will~~have ~~issue~~been ~~and~~classified ~~there~~as ~~will~~a beliability until ~~future~~the ~~economic~~earlier ~~benefit~~of ~~associated~~the ~~with~~date the warrants are exercised in full or expire. The Company allocated ~~patent~~$0.8 million ~~These~~of ~~costs~~the ~~are~~February 2007 ~~amortized~~offering proceeds and $3.5 million of the June 2007 offering proceeds to the warrants based on atheir ~~straight~~respective fair value on the issuance date measured using the Black-~~line~~Scholes-Merton ~~basis~~model, ~~over~~adjusted for the ~~estimated~~probability ~~useful~~of ~~life~~a ~~which~~change ~~is generally~~of ~~ten~~control ~~years~~event ~~from~~occurring during the ~~date~~life of ~~patent~~the ~~filing~~warrants. WeEITF ~~expense~~00-19 ~~all~~also ~~costs~~requires ~~related~~that tothe ~~abandoned~~warrants be revalued as ~~patent~~derivative ~~applications~~instruments periodically. InAt ~~addition,~~each webalance ~~review~~sheet date the ~~carrying~~Company ~~value~~adjusts ofthe instruments ~~patents~~to ~~for~~their ~~indicators~~current ~~of impairment~~fair onvalue ausing ~~periodic~~the ~~basis.~~Black-Scholes-Merton Ifmodel weformula, ~~elect~~with tothe change ~~abandon~~in ~~any~~value ofrecorded ~~our~~as ~~currently~~an ~~issued~~increase or ~~unissued patents~~reduction orof wenon-cash ~~determine~~interest ~~that~~expense. Fluctuations in the ~~carrying~~market ~~value~~price isof ~~impaired,~~the weCompany’s ~~value~~common ~~the~~stock ~~patent~~between atmeasurement ~~fair~~periods ~~value~~will ~~and~~have an impact on the ~~related~~revaluations, ~~expense~~the ~~could~~results beof ~~material~~which toare ~~our~~highly ~~results~~unpredictable ofand ~~operations~~may ~~for~~have a significant impact on the ~~period~~results of ~~the abandonment~~operations.

~~Investment~~ The ~~Policy~~fair value of the warrants during the three months ended March 31, 2009 and 2008 increased in the aggregate by $0.5 million and $4.7 million, respectively, which was recorded as non-cash interest expense in the respective periods. The change in the value of the warrants during the three months ended March 31, 2009 and 2008 was primarily due to a net increase in the Company’s stock price.

~~The~~ As ~~primary objective~~ of ~~our~~March 31, ~~investment~~2009 ~~activities~~and isDecember 31, to2008, ~~preserve~~the ~~principal~~fair ~~while~~value atof the ~~same~~warrants ~~time achieving~~recorded ~~competitive~~on ~~yields,~~the Company’s ~~without~~balance ~~significantly~~sheet ~~increasing~~was ~~risk~~$4.0 million Toand ~~achieve~~$3.5 million, ~~this~~respectively. ~~objective,~~The we$4.0 million ~~primarily~~represents ~~invest~~the infair ~~cash~~value ~~and~~of ~~money~~the ~~market~~warrants ~~accounts~~using asthe ~~well~~Black-Scholes-Merton aspricing A1model. orIf P1a change orin ~~higher~~control ~~rated~~in ~~debt securities~~which ~~with~~all ~~maturities~~cash ofconsideration ~~less~~is ~~than~~paid ~~two~~were ~~years,~~actually ~~with~~to occur, the ~~weighted~~amount ~~average maturity not~~ to ~~exceed~~be ~~eighteen~~paid ~~months.~~to Wethe ~~also~~warrant ~~attempt~~holders towould ~~minimize~~be ~~our~~determined ~~portfolio~~using ~~risk~~specific byvaluation ~~placing~~assumptions ~~constraints~~prescribed onin the ~~how~~warrant ~~much of~~agreements ~~our~~which ~~portfolio~~differ ~~may~~from bethose ~~held~~used in ameasuring ~~specific~~the ~~type~~fair value of ~~investment~~the ~~such~~warrants prior asto ~~asset-backed~~such ~~securities~~event. ~~or collateralized~~The ~~mortgage~~cash ~~obligations~~payment ascould ~~well~~be assignificantly ~~limiting~~higher ~~our~~or ~~holdings~~lower, independing ~~any~~on ~~one~~the actual ~~issuer.~~per Atshare ~~June 30~~transaction price, ~~2005,~~ ~~our~~prescribed ~~investment~~volatility ~~portfolio~~and ~~included~~after ~~only~~adjusting ~~cash~~the ~~and~~expected ~~money~~term ~~market~~to the ~~accounts~~actual ~~and~~remaining ~~had~~life noof ~~fixed-income securities~~the outstanding warrants.

~~Results~~ In June 2008, the FASB issued EITF Issue No. 07-5 “Determining whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own Stock” (“EITF No. 07-5”). Paragraph 11(a) of ~~Operations~~SFAS 133 “Accounting for Derivatives and Hedging Activities” specified that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company’s own stock and (b) classified in stockholders’ equity in the statement of financial position would not be considered a derivative financial instrument. EITF No. 07-5 provided a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer’s own stock and thus able to qualify for the SFAS 133 paragraph 11(a) scope exception. Since the Company’s warrants are accounted for as a

Three months ended June 30, 2005, as compared with three months ended June 30, 2004.

We had total revenues of $1.2 million in the three months ended June 30, 2005 compared to $1.9 million in the three months ended June 30, 2004. The decrease in revenue during the second quarter of 2005 compared to the same period in 2004 was primarily due to a $0.3 million decrease in reimbursable expenses under our HIV contract with the National Institutes of Health (NIH) and a $0.3 million decrease in reimbursements under certain other NIH grants and contracts as a result of completion of those programs.

Research and development expenses decreased to $2.0 million in the three months ended June 30, 2005 from $2.2 million in the three months ended June 30, 2004. The decrease in the three months ended June 30, 2005 relates primarily to a $0.1 million decrease in labor and related personnel costs and a $0.1 million decrease in sponsored research and other outside costs due to the completion of work on certain NIH grants and contracts. Tables for both the three and six months ended June 30, 2005 and 2004

~~showing~~liability ~~costs~~under ~~incurred~~EIFT ~~for four major research and development projects~~00-19, ~~cancer,~~the ~~HIV, collaborations~~adoption ~~and~~of ~~other,~~EITF ~~and~~No. 07-5 ~~total~~did ~~costs~~not ~~incurred~~have ~~for~~a ~~research~~material ~~grants~~impact ~~and contract revenue~~on ~~included in research and development are included below under research and development expenses for~~ the ~~six~~Company’s ~~months~~condensed ~~ended~~consolidated ~~June 30,~~financial ~~2005 and 2004~~statements.

~~General and administrative costs were approximately $0~~6.~~4 million~~ inResearch ~~the three months ended June 30, 2005~~ and ~~$0.5 million~~Development ~~in the three months ended June 30, 2004. The decrease in the second quarter of 2005 was primarily due to a decrease in labor~~ and ~~related~~Other ~~personnel costs, lower non-cash, stock~~Agreements ~~based compensation charges and lower consultant and general legal expenses in the current period.~~

In License ~~the~~Agreement ~~three months ended June 30, 2005, we recorded $0.6 million in transaction costs associated~~ with ~~our proposed business combination with IDM. These transaction costs included investment~~Novartis ~~banking advisory fees and accounting, legal and printing fees.~~

~~Net~~ In ~~interest~~March 2003, ~~income~~the Company entered into an asset purchase agreement with Jenner Biotherapies, Inc., or Jenner. Pursuant to the terms of the agreement, the Company purchased certain of Jenner’s assets, which included the Company’s lead product candidate, mifamurtide, and an exclusive worldwide license from Ciba-Geigy Ltd., now known as Novartis, covering patent rights to compounds that the Company uses in the production of mifamurtide. The initial purchase consideration of $3.1 million was ~~negligible~~allocated to the MEPACT license, which was determined to have alternative future use and is included in ~~both~~Patents, Trademarks and Other Licenses. Under the ~~three~~license ~~months~~agreement, ~~ended~~the Company ~~June~~is required to make certain potential milestone payments with respect to MEPACT totaling $2.75 30million which is triggered by the achievement of gross profit related to MEPACT. The Company achieved two of the milestones totaling $750,000 ~~2005~~in 2006 and prior years although no amounts had been previously recorded in the ~~three~~Company’s financial statements because ultimate payment was not ~~months~~determined ~~ended~~to ~~June 30~~be probable. In the second quarter of 2008, ~~2004~~based on the status of the EMEA review of the MAA and the assessed probability of European approval, the Company determined that the $750,000 could be payable in the event MEPACT is successfully commercialized in Europe. As such, the Company capitalized this additional amount as Patents, Trademarks and Other Licenses and recorded a corresponding liability. Pursuant to the license agreement, the total milestones payable in any year with respect to all such milestones shall not exceed twenty-five percent of the gross profit of MEPACT in any year, with the balance being carried forward to later years without incurring interest. The Company also agreed to pay royalties with respect to net sales of MEPACT, which royalties will be reduced by an established percentage upon the expiration of certain patent protection in accordance with the terms of the license. A portion of the milestone payments will be credited against these royalty obligations.

~~Six~~ The ~~months~~Novartis ~~ended~~license ~~June~~was being amortized over ten years, which was management’s estimate of the expected life of products developed from the use of the license at the time the assets were acquired. Beginning in the second quarter of 2009, the remaining net book value of the Novartis license at March 3031, ~~2005~~2009 will be amortized over ten years (the market exclusivity period) as ~~compared~~the final ~~with~~approval ~~six~~from ~~months~~the ~~ended~~European ~~June~~Commissiion on the MAA for MEPACT was received on March 306, ~~2004~~2009.

In IDM ~~the~~Pharma’s ~~six~~direct ~~months~~research ~~ended~~and ~~June 30,~~development ~~2005,~~expenses werelated ~~had~~to ~~total~~MEPACT ~~revenues~~amounted ~~of $3.1 million, as compared~~ to approximately $42.4 ~~million in revenue in the six months ended June~~ ~~30, 2004. The decrease in the six months ended June 30, 2005 relates primarily to a $1.0~~ million ~~decrease in related party revenue~~ and a $02.3 1 million decrease in research grants and contract revenue. The decrease in related party revenue was mainly a result of lower milestone revenue than during the 2004 period when we received a milestone payment from our partner at the time, Genencor International, after Genencor filed an Investigational New Drug (IND) application for a Hepatitis B vaccine candidate on which we collaborated. Payments received from our previous collaboration with Genencor, which owns an equity position in Epimmune, were recorded as related party revenue. In March 2004, Genencor assigned its rights under the ~~collaboration~~three agreement to Innogenetics. Innogenetics does not own an equity position in Epimmune and, therefore, is not a related party and reimbursements under the collaboration agreement are now recorded as contract revenue. The decrease in research grants and contract revenue in the six months ended ~~June~~March 3031, ~~2005~~2009 ~~relates primarily to lower labor~~ and ~~related~~2008, ~~personnel costs and to lower outside sponsored research costs due to the completion of work on certain NIH grants and contracts~~respectively.

~~Research~~ Agreement ~~and~~with development expenses increased to $4.7 million in the six months ended June 30, 2005 from $4.6 million in the six months ended June 30, 2004. The increase in research and development expenses during the six months ended June 30, 2005 compared to the corresponding period in 2004 was primarily due to a $0.1 million increase in subcontract costs incurred under NIH grants and contracts as well as our ongoing Phase II clinical trial in nonsanofi-~~small cell lung cancer (NSCLC)~~aventis patients, which began in late 2004, as well as a $0.1 million expense for patents abandoned in the current period. These increases were offset by a $0.1 million decrease in labor and related personnel costs in the six months ended June 30, 2005.

~~The~~ Sanofi-aventis ~~table~~is ~~below~~a ~~shows~~stockholder ~~costs~~and, ~~incurred~~until inMarch 2008, ~~four~~was ~~major~~a ~~research~~collaborative ~~and~~partner ~~development~~of ~~project~~the Company ~~categories~~and is, ~~cancer,~~ ~~HIV~~therefore, ~~collaborations~~considered ~~and~~a ~~other~~related party. Through March 31, ~~which~~2009, ~~includes~~sanofi-aventis invested ~~basic~~approximately ~~research~~$33.0 million ~~programs~~in the Company and ~~patent~~owned ~~expenses~~approximately 4.6% of the Company’s ~~The~~outstanding ~~costs~~common ofstock. ~~each~~In ~~project~~July 2001, ~~category~~the ~~include~~Company ~~direct~~entered ~~labor~~into an agreement with sanofi-aventis to cooperate in cellular immunotherapy research for the development and ~~fringe~~marketing ~~benefits~~of immunologic treatment for cancers. Under this agreement, ~~project~~sanofi-aventis ~~specific~~has the right to select up to 20 cell ~~materials~~drug ~~and~~development ~~subcontract~~programs ~~costs,~~over asa ~~well~~ten asyear ~~allocations~~period ~~for~~(individually ~~general~~an ~~supplies,~~“option”) ~~overhead~~from ~~and~~the Company’s line ~~facilities~~of ~~costs~~research and development activities.

On December 26, 2007, sanofi-aventis notified the Company of its decision to terminate its participation in the UVIDEM development program and the Company has put on hold further development of the program. In March 2008, the Company and sanofi-aventis entered into the Settlement Agreement aimed at resolving the various pending or potential issues related to the UVIDEM development program. All rights to the UVIDEM development program have reverted to the Company and sanofi-aventis has no further rights to that program, including any right of first refusal. Sanofi-aventis retains its options with respect to the Company’s other cell therapy programs under the existing collaboration agreement, although the Company does not currently have any such programs in development, or plans to conduct any further development.

	Three months ended June 30,				Six months ended June 30,
	2005		2004		2005		2004
Cancer Programs	$	731,000	$	366,000	$	1,673,000	$	818,000
HIV Programs		642,000		1,123,000		1,572,000		2,319,000
Collaborations		270,000		359,000		674,000		711,000
Other Programs		329,000		384,000		739,000		791,000
	$	1,972,000	$	2,232,000	$	4,658,000	$	4,639,000

The Settlement Agreement provided that sanofi-aventis would pay the Company $8.1 million (€5.2 million converted at the average exchange rate in the second quarter of 2008). Of the $8.1 million, $2.4 million was for the research and development costs of the UVIDEM development program for the first quarter of 2008, which was received and recognized as revenue in that quarter, and $5.7 million was related to the shut down of the UVIDEM program, which was received and recognized as contract settlement income in the second quarter of 2008. Revenue recognized for the three months ended March 31, 2008 under the sanofi-aventis agreement was $2.4 million which was all related to the reimbursement of R&D expenses. No further payments or revenues from sanofi-aventis for the UVIDEM program were received after the second quarter of 2008.

~~Total~~ Direct ~~costs~~research ~~incurred~~and ~~for~~development ~~research~~expenses ~~grants~~related ~~and~~to ~~contract~~UVIDEM ~~revenue~~were ~~included~~$4,000 in ~~research~~the ~~and~~three months ~~development~~ended ~~are~~March 31, as2009, ~~follows:~~and approximately $0.8 million in the three months ended March 31, 2008.

	Three months ended June 30,				Six months ended June 30,
	2005		2004		2005		2004
Cancer Programs	$	160,000	$	156,000	$	343,000	$	272,000
HIV Programs		631,000		938,000		1,567,000		2,087,000
Collaborations		270,000		359,000		674,000		711,000
Other Programs		107,000		173,000		216,000		366,000
	$	1,168,000	$	1,626,000	$	2,800,000	$	3,436,000

7. Obligations under collaboration, licensing and contract research organization agreements

~~General~~ Under certain collaboration and ~~administrative~~licensing ~~costs~~agreements, ~~were~~the ~~approximately~~Company ~~$0.9 million~~is inobligated to make specified payments upon achieving certain milestones relating to the ~~six~~development ~~months~~and ~~ended~~approval ~~June~~of 30its products, ~~2005~~or ~~and~~on $1the basis of net sales of its products.~~2 million~~ inIn addition, under certain agreements with clinical sites for the ~~six~~conduct ~~months~~of ~~ended~~clinical ~~June 30~~trials, ~~2004.~~the ~~The~~Company ~~decrease~~makes inpayments ~~the~~based ~~six~~on ~~months~~the ~~ended~~number ~~June 30,~~of ~~2005~~patients ~~was~~enrolled. ~~primarily~~These ~~due~~contingent topayment aobligations $0are subject to significant variability.~~2 million~~ ~~decrease~~Such inamounts ~~labor~~are based on a variety of estimates and ~~related~~assumptions, ~~personnel~~including future ~~costs~~sales volumes and ~~lower~~timing ~~non-cash~~of clinical trials and regulatory processes, ~~stock~~which ~~based~~may ~~compensation~~not ~~charges~~be inaccurate, may ~~the~~not ~~current~~be ~~period~~realized, and ~~$0.1 million~~are inherently subject to various risks and uncertainties that are ~~decrease~~difficult into ~~consultant~~predict and ~~general~~are ~~legal~~beyond ~~expenses~~the Company’s control.

~~In the six months ended June 30, 2005, we recorded $1~~8.~~7 million~~ inGovernment ~~transaction~~Research ~~costs associated~~Funding with our proposed business combination with IDM. These transaction costs included investment banking advisory fees and accounting, legal and printing fees. We expect to continue to incur transaction costs over the next quarter in connection with our proposed combination with IDM.

~~Net~~ In ~~interest~~January 2007, ~~income~~the ~~was~~Company received $0.14 million inon ~~the~~a ~~six~~grant ~~months~~through ~~ended~~a ~~June 30,~~new ~~2005~~French government sponsored program to conduct research and ~~negligible~~clinical instudies ~~the~~related to macrophages with antibodies ~~six~~and ~~months~~cancer ~~ended~~vaccine ~~June~~antigen formulations. As of March 3031, ~~2004~~2009, the $0.4 million ~~The~~was ~~increase~~recorded as deferred revenue. As a result of the decision to shut down its operations in Paris, France, the Company ~~first~~has ~~six~~provided ~~months~~notice of ~~2005~~cancellation isof ~~primarily~~this ~~due~~grant, which it has the right to do with ~~higher~~30-days ~~interest~~notice ~~rates~~without inpenalty. According to the ~~current~~terms ~~period~~of the grant, ~~compared~~upon cancellation, the Company may have to ~~those~~refund any advance payments received for work it has not yet performed, although the Company does not believe it will have to refund any advance payments based on work it has performed and monetary contributions it has made to the project. The unamortized revenue will remain in current liabilities until the ~~2004~~Company ~~period~~receives confirmation from the grant agency as to whether such amount is subject to repayment.

We9. ~~expect to incur significant operating losses over the next several years due to continuing expenses associated with our research and development programs~~Restructuring, ~~including~~Severance ~~clinical trials, preclinical testing~~ and ~~development~~Retention ~~activities,~~Related ~~as well as transaction costs for our proposed~~Charges combination with IDM as described above. Operating losses may fluctuate from quarter to quarter as a result of differences in the timing of revenues received and expenses incurred, and such fluctuations may be substantial.

~~Liquidity~~ January 2008 ~~and~~Restructuring ~~Capital Resources~~Plan

We The ~~have~~Company ~~financed~~accounted ~~operations~~for ~~since~~the ~~our~~restructuring ~~inception~~activities ~~primarily~~in ~~through~~accordance ~~private~~with ~~placements~~Statement of ~~equity~~ ~~securities,~~Financial ~~two~~Accounting ~~public~~Standards ~~common stock offerings~~No. 146, ~~revenues~~Accounting ~~under~~for ~~collaborative~~Costs ~~research~~Associated ~~and development~~with ~~agreements,~~Exit ~~grant~~or ~~revenues, certain asset divestitures and interest income. Through~~Disposal ~~June 30,~~Activities ~~2005,~~(“SFAS ~~we had raised approximately $170~~No.1 ~~million~~146”) ~~from~~and ~~the~~Statement ~~sale~~ of ~~equity~~Financial ~~securities.~~Accounting AsStandards ~~of June~~No. 30112, ~~2005, we had 17,827,564 shares outstanding on an as-converted to common stock basis, assuming conversion of all~~Employers’ ~~outstanding~~Accounting ~~shares~~for ofPostemployment ~~our~~Benefits ~~preferred~~(“SFAS ~~stock~~No. 112”).

In January 2008, the Company’s Board of Directors authorized an organizational restructuring that resulted in a workforce reduction in Irvine, California on January 29, 2008, and the closure of the operations and termination of all employees in Paris, France as of the end of the second quarter of 2008. This organizational restructuring resulted primarily from the discontinued development of UVIDEM, the Company’s investigational therapy for the treatment of melanoma. Although the Company has suspended specific product development programs and has closed its Paris, France facilities, it will continue to develop product candidates for the treatment of cancer, including mifamurtide. The Company has consolidated and transferred the development activities of MEPACT from Paris, France to its Irvine, California facility and may also resume development of products put on hold when funding becomes available. As such, it has reported activities related to the suspended programs in continuing operations.

The Company recorded a total cumulative charge of $4.5 million in restructuring costs under the January 2008 restructuring plan ($2.6 million was recorded in the first quarter of 2008). These costs were recorded as restructuring expense in the statements of operations and other current liabilities in the balance sheets. The Company does not expect

Asto ofincur ~~June 30,~~additional ~~2005,~~costs ~~our~~related ~~cash~~to ~~and~~the ~~cash equivalents were $3.0~~January ~~million~~2008 ~~compared~~restructuring ~~to $7~~plan.~~0 million at December 31, 2004~~. ~~The~~As ~~decrease in cash and cash equivalents was due to cash used for operations~~such, ~~primarily~~ ~~to fund our ongoing Phase II clinical trials in NSCLC patients, activities related to~~no ~~further~~restructuring ~~clinical studies of our therapeutic HIV vaccine candidate, and transaction related~~ costs ~~associated~~ ~~with our proposed business combination with IDM. Our operating expenses~~ were ~~offset~~incurred ~~by grant~~in ~~and~~the ~~contract~~first ~~revenues~~quarter weof ~~received~~2009. ~~We expect to continue to use our cash and cash equivalents~~ ~~to fund our ongoing and future clinical trials, as well as drug research and development programs.~~

~~Capital~~ A ~~expenditures~~substantial ~~were~~portion ~~negligible~~of inthese ~~the~~expenses ~~six~~were ~~months~~offset ~~ended~~by ~~June 30, 2005, compared to~~ $05.1 7 million received in ~~the six months ended June~~April ~~30,~~2008 under ~~2004. In~~ the ~~past,~~March 2008 weSettlement ~~have~~Agreement ~~financed~~with ~~our~~sanofi-aventis ~~laboratory equipment~~in ~~and~~connection ~~research~~with ~~and~~its ~~office~~termination ~~facilities primarily through operating lease arrangements and a~~of ~~note~~participation ~~payable.~~in Wethe ~~fully~~UVIDEM ~~paid~~development ~~off~~program ~~our~~as ~~note~~discussed ~~payable~~in asNote of6. ~~the~~In ~~end~~addition, of the ~~first quarter of 2003. During~~Company ~~2005,~~was weable ~~anticipate~~to ~~that~~sell ~~payments~~the ~~related~~property toand ~~capital~~equipment ~~expenditures~~and ~~will~~transfer ~~decrease~~the ~~compared~~facility leases to ~~2004~~third parties. ~~levels~~Costs torecovered ~~approximately~~and ~~$0.1 million.~~obligations Werelieved ~~will~~were ~~also~~recorded ~~pay~~as ~~approximately~~a ~~$0.6 million~~reduction in ~~rent~~restructuring onexpense ~~our~~in ~~lease~~2008 ~~commitments~~when ~~during 2005~~realized. ~~The~~In ~~future~~2008, ~~minimum~~proceeds ~~rental~~received ~~commitment~~from ~~for~~sale ~~the lease~~ of ~~our~~property ~~facility will~~and ~~range~~equipment ~~from~~was ~~approximately~~ $0.61 million ~~to $0.7 million each year over five years, based upon~~ ~~pre-established annual rent increases. Upon successful completion~~ and ~~closing of~~ the ~~proposed business~~costs ~~transaction~~to ~~with~~transfer ~~IDM,~~facility weleases ~~will~~to bethird ~~liable~~parties ~~for~~amounted ~~additional~~to ~~transaction costs of approximately~~ $10.52 million~~, which include investment banking advisory fees and employee bonuses~~.

~~Payments~~ Employee ~~related to capitalized patent expenses were $0.2 million in the six months ended June 30,~~Retention 2005 and $0.4 million in the six months ended June 30, 2004. We expect payments related to patents to be relatively flat or slightly lower in 2005 compared to 2004 as we continue to pursue filings and claims in our intellectual property portfolio.

As Retention ~~funds~~bonuses ~~are~~based ~~available,~~on wecontinuous ~~expect~~service ~~our~~and ~~net~~stock-based ~~cash~~compensation ~~burn~~related to restricted ~~increase~~stock inawards ~~2005~~are ~~compared~~recorded toratably ~~2004~~over asthe ~~we incur~~requisite ~~costs~~service ~~related~~or tovesting ~~ongoing~~periods, ~~clinical trials in connection~~ with immediate ~~our~~recognition ~~ongoing~~of ~~drug~~the ~~research~~remaining ~~and development~~expenses ~~programs,~~if ~~research~~payment ~~and~~or ~~development~~vesting ~~activities~~is onaccelerated ~~sponsored~~upon ~~programs and contracts,~~the ~~preclinical~~occurrence ~~testing~~ of ~~product~~specified ~~candidates~~events. ~~and~~Payments ~~manufacturing~~triggered ofby ~~clinical~~performance ~~supplies.~~conditions Wewill ~~intend~~be torecorded ~~seek~~over ~~collaborative~~the ~~research~~implicit ~~and~~service ~~development~~period ~~relationships~~if ~~with~~achievement ~~suitable~~is ~~corporate~~probable, ~~partners~~or ~~and~~otherwise ~~U.S. government~~when ~~agencies~~the specified event occurs. WeSeverance ~~have~~payments inwill ~~the~~be ~~past~~recorded ~~and~~upon ~~may~~separation. inFor the ~~future~~three ~~also~~months ~~license~~ended toMarch 31, 2009, ~~third~~the ~~parties~~Company ~~some of~~recorded ~~our~~$0.1 million ~~technology~~ in ~~markets~~cash ~~that~~compensation weexpense ~~are~~associated ~~not~~with ~~pursuing~~retention ~~ourselves or through our collaborations. Any~~and ~~agreements~~milestone ~~that~~bonuses ~~may~~and ~~result~~$5,000 ~~from~~in ~~these~~stock ~~discussions~~compensation ~~may~~expense ~~not~~in ~~successfully~~relation ~~reduce~~to ~~our~~the ~~funding requirements~~stock ~~or, if entered into, may be terminated~~awards.

We To ~~will~~retain ~~continue~~key ~~to spend substantial amounts on research and development~~employees, ~~including~~the ~~amounts~~Company ~~spent for~~adopted ~~manufacturing~~the ~~clinical~~following ~~supplies,~~employee ~~conducting~~retention ~~clinical trials for our product candidates and advancing development of certain sponsored and partnered~~ programs. ~~Therefore, we will need to~~These ~~secure~~programs ~~additional~~are ~~funding. If we do~~ not ~~complete~~directly ~~the~~related ~~proposed combination with IDM as planned, our cash position will be further reduced, and it will likely be even more difficult~~ to ~~raise additional~~the ~~funding~~January 2008 onrestructuring ~~satisfactory~~plan ~~terms, if at all. We do not have committed external sources of funding~~ and ~~may~~the ~~not be able to obtain any additional funding, especially if volatile market~~related ~~conditions~~compensation ~~persist~~expense ~~for~~is ~~biotechnology~~included ~~companies.~~in Ifthe weapplicable ~~are~~operating ~~unable~~expense tocategory ~~obtain~~in ~~additional funding, we will be required to delay, further reduce~~ the ~~scope of or eliminate one or more of our research and~~consolidated ~~development~~statement ~~projects, sell Epimmune or certain~~ of ~~its assets or technologies, or dissolve and liquidate all of its assets~~operations. ~~As of June 30, 2005, we had approximately $3.0 million in cash and~~ cash equivalents. We have incurred and will continue to incur investment banking advisory fees, legal, accounting and other transaction costs in connection with our proposed combination with IDM. Our future operational and capital requirements will depend on many factors, including:

• On ~~whether~~December 20, ~~our~~2007, ~~proposed~~the ~~transaction~~Company’s ~~with~~Board ~~IDM~~of isDirectors ~~successfully~~approved ~~completed;~~a •non-executive ~~whether~~retention program wewhich ~~are~~would ~~able~~provide to$0.3 million ~~secure~~in ~~additional~~retention ~~financing~~bonuses onfor ~~favorable~~employees ~~terms~~who remained employed on June 30, 2008 or atwere ~~all;~~terminated •without ~~the~~cause ~~costs~~before ~~associated~~then, ~~with~~a ~~our~~separate ~~ongoing~~$0.5 million ~~Phase~~in ~~I/II~~total potential ~~clinical~~stay-on ~~trial~~bonuses for ~~our~~those ~~vaccine~~terminated ~~targeting~~without ~~HIV,~~cause ~~which~~before ~~began~~June 30, ~~in September 2002~~2008, ~~including~~and ~~the~~restricted stock ~~status~~awards ofthat ~~our~~vest ~~contract~~over ~~with~~one ~~the NIH;~~year.

On January 10, 2008, the Company’s Board of Directors also approved an executive officer retention program which provided that if a specified executive officer is terminated without cause prior to August 31, 2008, the executive officer would be entitled to receive a lump sum cash payment equal to such executive officer’s base salary, less standard deductions and withholding, for the period from the date of termination through August 31, 2008. The Company did not incur any expenses in connection with this aspect of the retention program as none of the executives were terminated without cause before August 31, 2008. The Company would also have had to pay a bonus to its executives upon a change in control through a merger or purchase transaction in 2008 or upon completing a financing transaction with gross proceeds of at least $7.0 million. The total bonus that could have been earned was $0.6 million, which is in addition to severance benefits in accordance with employment agreements. This amount was subsequently reduced to $0.4 million following our Chief Financial Officer’s decision to begin serving on a part-time basis. As a change in control or a financing did not occur by December 31, 2008, this bonus was not earned and no expenses were recognized. Additionally, the Company’s Board of Directors granted 250,000 shares of restricted stock with a total grant date fair value of $0.2 million on January 10, 2008 that vested over one year from December 20, 2007. Vesting of these restricted stock awards would have accelerated if a change in control occurred or if the executive was terminated without cause. The restricted shares were vested as of December 20, 2008 and the Company recorded $0.2 million of stock based compensation in connection with these vested awards in 2008.

On April 3, 2008, the Company’s Board of Directors approved a retention program for certain non-executive employees which provides for the payment of bonuses on June 30, 2009, which can be accelerated, if the employee is terminated without cause or there is a change of control before such date. Bonuses totaling $0.4 million may be paid under the plan over 2008 and 2009. As of March 31, 2009, the Company recorded a cumulative charge of $0.3 million related to this bonus plan, of which $0.1 million was recorded in the first quarter of 2009. In addition, the Company’s Board of Directors granted 296,750 shares of restricted stock with a total grant date fair value of $0.8 million that vest upon the Company’s receipt of a positive opinion with respect to the MAA for mifamurtide from the CHMP of the EMEA prior to December 31, 2008. The restricted stock was deemed vested on November 17, 2008. The Company recorded $0.8 million of stock based compensation ratably over the last three quarters of fiscal 2008 in connection with these restricted awards.

• On June 25, 2008, the ~~costs~~Company’s ~~associated~~Board ~~with~~of ~~our~~Directors ~~Phase~~approved IIan ~~clinical~~executive ~~trial~~officer ~~for~~(applicable to ~~our~~executive ~~vaccine~~officers ~~targeting~~other ~~non-small~~than ~~cell~~the ~~lung~~CEO, ~~cancer~~and following his decision to move to part-time status, the orCompany’s ~~NSCLC~~CFO) retention and bonus plan, which ~~began~~provided inthat if a specified executive officer was terminated without cause after August 31, 2008 but prior to December 31, ~~2004;~~2008, •the ~~progress~~executive officer ~~with~~would ~~other~~be ~~preclinical~~entitled ~~testing~~to receive a lump sum cash payment equal to such executive officer’s base salary, less standard deductions and ~~clinical~~withholding, ~~trials~~for the period from the date of termination through December 31, 2008. The Company could have incurred expenses totaling $0.2 million in connection with the ~~future;~~retention •program ~~our~~if ~~ability~~executives towere ~~establish~~terminated ~~and~~without ~~maintain~~cause ~~collaboration~~before ~~and~~December 31, ~~license~~2008. ~~agreements~~As ~~and~~none of the executives was terminated without cause before December 31, 2008, the Company did not incur any ~~government~~expenses. ~~contracts~~The Company would also be obligated to pay a bonus to its executives (applicable to executive officers other than the CEO and ~~grants;~~CFO) •upon the ~~actual~~earlier ~~revenue~~of wethe filing ~~receive~~of ~~under~~an ~~our~~amended ~~collaboration~~NDA ~~and~~with ~~license~~the ~~agreements;~~FDA •for mifamurtide prior to December 31, 2008 or a change of control of the ~~actual~~Company ~~costs~~(as wedefined ~~incur~~in the executive plan) prior to December 31, 2008. The total bonus that could have been earned under ~~our~~this ~~research~~provision ~~collaboration~~of ~~with~~the ~~Bavarian~~plan ~~Nordic;~~was •$0.2 million. Because the Company ~~time~~did ~~and~~not ~~costs~~file ~~involved~~the inamended ~~obtaining~~NDA ~~regulatory~~to ~~approvals;~~address •issues raised by the ~~costs~~FDA ~~involved~~by inDecember 31, ~~filing~~2008, ~~prosecuting~~this milestone was not achieved. As such, ~~enforcing~~no ~~and~~expenses ~~defending~~were ~~patent~~recorded ~~claims~~related ~~and~~to ~~any~~this ~~other~~bonus. ~~proprietary~~In addition, ~~rights;~~the •Company ~~competing~~would ~~technological~~pay ~~and~~a ~~market~~bonus ~~developments;~~to •each ~~changes~~of inits ~~our~~executive ~~existing~~officers ~~research~~upon ~~relationships;~~the •earlier ~~continued~~of ~~scientific~~the Company’s ~~progress~~receipt inof ~~our~~a ~~drug~~positive ~~discovery~~opinion ~~programs;~~with ~~and~~respect •to the ~~magnitude~~MAA for mifamurtide from the CHMP of the ~~our~~EMEA ~~drug~~prior ~~discovery~~to December 31, 2008, or a change of control of the Company prior to December 31, 2008. The total potential bonus under this provision of the plan was $0.4 million. As the Company received the positive opinion from the CHMP on November 17, 2008, it recorded $0.4 million of compensation expense ratably over the last two quarters of fiscal 2008. This bonus was paid out as of December 31, 2008. All benefits payable to the executive officers under this retention and bonus ~~development~~plan ~~programs~~are in addition to severance benefits in accordance with their respective employment agreements.

As On isDecember 11, ~~typical~~2008, in the ~~biotechnology~~Company’s ~~industry,~~Board ~~our~~also ~~commercial~~approved ~~success~~the ~~will~~adoption ~~depend~~of ina ~~part~~plan onfor ~~not~~certain of ~~infringing~~its ~~upon~~specified ~~the~~executive ~~patent~~officers or(applicable ~~other~~to ~~proprietary~~executive ~~rights~~officers ofother ~~others~~than the CEO and ~~maintaining~~CFO) primarily providing for a cash bonus payable in connection with the ~~technology~~filing of an amended NDA with ~~licenses~~the ~~upon~~U.S. ~~which~~FDA ~~our~~for ~~products~~mifamurtide ~~might~~on beor ~~based~~prior to March 31, 2009. ~~Our~~Under ~~business~~the isterms ~~also~~of ~~subject~~this toplan, ~~other~~upon ~~significant~~the ~~risks,~~earlier ~~including~~of (i) the ~~uncertainties~~filing ~~associated~~of an NDA amendment with ~~our~~the ~~ability~~FDA tofor ~~enter~~mifamurtide ~~into~~prior ~~and~~to ~~maintain~~March 31, ~~new~~2009 ~~collaborations,~~or (ii) a change of control of the ~~lengthy~~Company ~~regulatory~~prior ~~approval~~to ~~process~~March 31, ~~and~~2009, ~~potential~~a ~~competition~~lump ~~from~~sum ~~other products.~~cash ~~Even~~bonus ifpayment would ~~our~~be ~~products~~payable ~~appear~~to ~~promising~~certain atof anthe ~~early~~Company’s ~~stage~~specified ofexecutive ~~development~~officers, ~~they~~provided ~~may~~such ~~not~~executive ~~reach~~officer was an employee of the ~~market~~Company ~~for~~immediately aprior ~~number~~to the closing of ~~reasons~~such change of control or filing of such NDA amendment. ~~Such~~This ~~reasons~~cash ~~include,~~payment ~~but~~would ~~are~~have ~~not~~been ~~limited~~in addition to, ~~our~~any payment the ~~inability~~specified toexecutive ~~fund~~officer ~~clinical~~is ~~development~~entitled ofto under such ~~products,~~officer’s employment agreement or any other compensation arrangement. The Company would have had to pay a total of $0.2 million in connection with this plan. As the ~~possibilities~~Company ~~that~~has placed the ~~potential~~U.S. mifamurtide NDA amendment submission on hold ~~products~~until ~~will~~it becompletes ~~found~~its ~~ineffective~~review ~~during~~of ~~clinical~~strategic ~~trials,~~alternatives ~~fail~~available to ~~receive~~the ~~necessary regulatory approvals~~Company, bethis ~~difficult~~milestone was tonot ~~manufacture~~achieved. onAs asuch, ~~large~~no ~~scale~~expenses orwere berecorded ~~uneconomical~~related to ~~market~~this bonus.

In addition, on December 11, 2008, the Company’s Board adopted a plan for certain of its specified executive officers providing for a cash bonus payable in connection with closing of an acquisition of the Company. Under this compensation plan, upon the closing of a change of control of the Company on or prior to June 30, 2009, a lump sum cash bonus payment will be payable to those specified executive officers, provided such executive officer is an employee of the Company immediately prior to the closing of such change of control. This cash payment would be in addition to any payment to which the specified executive officer is entitled to under such officer’s employment agreement or any other compensation arrangement. The Company may pay a total of $0.7 million in connection with this plan and any expense related to this bonus plan will be recorded upon the closing of a change of control of the Company.

10. FIN 48 Uncertain Tax Positions

Due to historical losses and uncertainties surrounding the Company’s ability to generate future taxable income to realize net operating loss carryforwards and other deferred tax assets, the Company maintains a full valuation allowance for these assets with the exception of research and development tax credits generated by its Paris, France subsidiary, which are payable to the Company in cash if the credits are not utilized three years after they are generated.

In accordance with the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of SFAS No. 109, Accounting for Income Taxes (FIN 48), uncertain tax positions and related interest and penalties are included in income tax expense. At March 31, 2009 and December 31, 2008 the Company recorded

~~ITEM~~$1,424,000 3and $1,493,000, respectively, of unrecognized tax benefits, including accrued interest and penalties. ~~QUANTITATIVE~~Uncertain ~~AND~~tax ~~QUALITATIVE~~positions ~~DISCLOSURES~~are ~~ABOUT~~classified ~~MARKET~~as ~~RISK~~non-current liabilities unless expected to be paid in one year. Unrecognized tax benefits are not expected to change significantly over the next twelve months except for tax payments related to these matters. Due to the existence of the valuation allowance, future changes in unrecognized tax benefits are not expected to impact the Company’s effective tax rate.

~~At June 30, 2005, our investment portfolio included only cash and money market accounts and had no fixed-income securities~~11. ~~There~~Fair ~~would~~Value ~~be no material impact to our investment portfolio, in the~~Measurements short term, associated with any change in interest rates. Any decline in interest rates over time will reduce our interest income, while increases in interest rates over time will increase our interest income.

The Company adopted the provisions of the SFAS No. 157, Fair Value Measurements effective January 1, 2008 for its financial assets and liabilities. The FASB delayed the effective date of SFAS No. 157 until January 1, 2009, with respect to the fair value measurement requirements for non-financial assets and liabilities that are not remeasured on a recurring basis. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The adoption of SFAS 157 did not have a material impact on the Company’s condensed consolidated financial statements.

In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. The Company classifies cash equivalents (including its money market mutual funds) as Level 1 assets as they are valued using quoted market prices with no valuation adjustments applied. As of March 31, 2009 the Company had $5.7 million in money market securities included in cash and cash equivalents. Fair values determined by Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable or can be corroborated by observable market data for the asset or liability, either directly or indirectly. The Company classifies its common stock warrants, which are valued at $4.0 million at March 31, 2009 as Level 2 instruments. The fair value of these derivative liabilities are determined using the modified Black Scholes pricing model based on market observable inputs, including the Company’s stock price, volatility and risk-free interest rates. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. These include certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. The Company does not hold any Level 3 instruments.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement.

There were no remeasurements to fair value during the three months ended March 31, 2009 of financial assets and liabilities that are not measured at fair value on a recurring basis.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 expands opportunities to use fair value measurement in financial reporting and permits entities to choose to measure many financial assets and liabilities and certain other items at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company did not elect to measure any additional assets or liabilities at fair value that are not already measured at fair value under existing accounting standards.

12. New Accounting Standards

In December 2007, the FASB ratified EITF Issue No. 07-1, Accounting for Collaborative Arrangements. EITF No. 07-1 provides guidance regarding financial statement presentation and disclosure of collaborative arrangements to jointly develop, manufacture, distribute and market a product whereby the collaborators will share, based on contractually defined calculations, the profits or losses from the associated activities. The consensus requires collaborators in such an arrangement to present the result of activities for which they act as the principal on a gross basis and report any payments received from (made to) other collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational and consistently applied accounting policy election. EITF Issue No. 07-1 is effective for fiscal years beginning after December 31, 2008, which is the Company’s fiscal year 2009, and is applied as a change in accounting principle

~~RISK~~retrospectively ~~FACTORS~~for all collaborative agreements existing as of the effective date. The adoption of EITF No. 07-1 did not have a material impact on the Company’s condensed consolidated financial statements.

We In ~~wish~~December 2007, tothe ~~caution~~FASB ~~readers~~issued ~~that~~SFAS No. 141(R), ~~the~~Business ~~following~~Combinations ~~important~~and ~~factors~~SFAS No. 160, Accounting ~~among~~and ~~others,~~Reporting of Noncontrolling Interests in ~~some~~Consolidated ~~cases~~Financial ~~have~~Statements — an ~~affected~~amendment ~~our~~of ~~results~~ARB No. 51. These standards will significantly change the accounting and reporting for business combination transactions and noncontrolling (minority) interests in consolidated financial statements. SFAS No. 141(R) requires companies to recognize all the ~~future~~assets ~~could~~acquired ~~cause~~and liabilities ~~our~~assumed ~~actual~~in ~~results~~a business combination and ~~needs~~establishes tothe ~~vary~~acquisition-date ~~materially~~fair value as ~~from~~the ~~forward~~measurement objective, including capitalizing at the acquisition date the fair value of acquired in-~~looking~~process ~~statements~~research ~~made~~and ~~from~~development, ~~time~~and tore-measuring ~~time~~and bywriting usdown onthese assets, if necessary, in subsequent periods during their development. SFAS No. 141(R) will also impact the determination ~~basis~~of acquisition-date fair value of ~~management’s~~consideration paid in a business combination ~~then~~(including contingent consideration), exclude transaction costs from acquisition accounting, and change accounting practices for acquired contingencies, acquisition-~~current~~related ~~expectations~~restructuring costs, indemnification assets, and tax benefits. ~~The~~SFAS No. 141(R) and SFAS No. 160 will be applied prospectively for business incombinations ~~which~~that weoccur ~~are~~on ~~engaged~~or isafter ~~rapidly~~January 1, ~~changing~~2009, ~~and~~except ~~competitive~~that presentation and ~~involves~~disclosure arequirements ~~high~~of ~~degree~~SFAS No. 160 regarding noncontrolling interests shall be applied retrospectively. The Company adopted SFAS No. 141(R) and SFAS No. 160 as of ~~risk~~January 1, 2009, as required and will apply this prospectively to business combinations for which the acquisition date is on or after January 1, 2009.

~~Our~~ In ~~substantial~~April 2008, ~~additional~~the ~~financing~~FASB ~~requirements~~issued ~~and~~FSP ~~limited~~FAS ~~access~~No. 142-3, which amends the factors that must be considered in developing renewal or extension assumptions used to ~~financing,~~determine the useful life over which ~~will~~the cost of a recognized intangible asset is amortized under SFAS No. 142, Goodwill and Other ~~likely~~Intangible beAssets. ~~even~~The ~~more~~FSP ~~limited~~requires inan entity to consider its own assumptions about renewal or extension of the ~~absence~~term of the ~~proposed~~arrangement, ~~combination~~consistent with ~~IDM~~its expected use of the asset, ~~may~~and ~~adversely~~is an ~~affect~~attempt ~~our~~to ~~ability~~improve consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to ~~develop~~measure ~~products~~the fair value of the asset under SFAS No. 141, Business Combinations. The FSP is effective for fiscal years beginning after December 15, 2008, and ~~fund~~the ~~our~~guidance ~~operations~~for determining the useful life of a recognized intangible asset must be applied prospectively to intangible assets acquired after the effective date. The adoption of FSP FAS No. 142-3 did not have a material impact on the Company’s condensed consolidated financial statements.

We In ~~will continue to spend substantial amounts on research and development~~May 2008, ~~including~~the ~~amounts~~FASB ~~spent for~~issued ~~manufacturing~~SFAS ~~clinical supplies~~No. 162, ~~conducting~~The ~~clinical~~Hierarchy ~~trials~~of ~~for~~Generally ~~our~~Accepted ~~product candidates and~~Accounting ~~advancing~~Principles. SFAS ~~development~~162 ofsupersedes ~~certain~~Statement ~~sponsored~~on ~~and~~Auditing ~~partnered~~Standards ~~programs.~~(“SAS”) ~~Therefore~~No. 69, weThe ~~will~~Meaning ~~need to~~of ~~secure~~Present ~~additional~~Fairly ~~funding.~~in IfConformity wewith doGenerally ~~not~~Accepted ~~complete~~Accounting ~~the~~Principles. ~~proposed~~The ~~combination~~guidance ~~with~~in ~~IDM~~this new ~~as planned~~standard, ~~our cash~~which ~~position~~identifies ~~will~~the besources ~~further~~of ~~reduced,~~accounting principles and itthe ~~will~~framework ~~likely~~for beselecting the ~~even~~principles ~~more difficult~~ to ~~raise additional~~be ~~funding~~used onin ~~satisfactory~~the ~~terms,~~preparation ifof atfinancial ~~all.~~statements Wein doconformity ~~not~~with ~~have~~GAAP, ~~committed external sources of~~is ~~funding and may~~ not bematerially ~~able~~different tofrom ~~obtain~~the ~~any~~guidance ~~additional~~contained ~~funding,~~in ~~especially~~SAS if69. ~~volatile~~SFAS ~~market conditions persist for biotechnology companies~~No. 162 Ifbecame weeffective ~~are~~60 days ~~unable~~following tothe ~~obtain~~SEC’s ~~additional funding~~approval, ~~we will~~which beoccurred ~~required~~on toSeptember 16, ~~delay~~2008, ~~further~~of ~~reduce~~ the ~~scope~~Public ofCompany Accounting orOversight ~~eliminate~~Board ~~one~~amendments orto ~~more~~AU ~~of our research and development projects~~Section 411, ~~sell~~“The ~~Epimmune~~Meaning ~~or certain~~ of ~~its~~Present ~~assets~~Fairly ~~or technologies, or dissolve and~~in ~~liquidate~~Conformity ~~all~~With ofGenerally ~~its~~Accepted ~~assets~~Accounting Principles”. AsThe adoption of ~~June 30,~~SFAS ~~2005, we had approximately $3~~No.0 ~~million~~162 indid ~~cash and~~not ~~cash equivalents. We~~ have ~~incurred~~a ~~and~~material ~~will~~impact ~~continue~~on tothe ~~incur~~Company’s ~~investment~~condensed ~~banking~~consolidated ~~advisory~~financial ~~fees, legal,~~statements ~~accounting~~or ~~and~~result ~~other transaction costs in connection with our proposed combination with IDM~~of operations. ~~Our future operational and capital requirements will depend on many factors, including:~~

• In ~~whether~~June 2008, ~~our~~the ~~proposed~~FASB ~~transaction~~issued ~~with~~EITF ~~IDM~~Issue isNo. 07-5 ~~successfully~~“Determining ~~completed; •~~ whether wean ~~are~~Instrument ~~able~~(or Embedded toFeature) ~~secure~~is ~~additional~~indexed ~~financing~~to onan ~~favorable~~Entity’s ~~terms,~~Own orStock” at(“EITF ~~all;~~No. 07-5”). •Paragraph ~~the~~11(a) ~~costs~~of ~~associated~~SFAS 133 ~~with~~“Accounting ~~our ongoing Phase I/II clinical trial~~ for ~~our~~Derivatives ~~vaccine~~and ~~targeting~~Hedging ~~HIV,~~Activities” ~~which~~specified ~~began~~that ina ~~September 2002, including the status of our~~ contract ~~with~~that ~~the~~would otherwise ~~NIH;~~meet • the ~~costs~~definition ~~associated~~of ~~with~~a ~~our~~derivative ~~Phase~~but IIis ~~clinical~~both ~~trial~~(a) indexed ~~for~~to ~~our~~the ~~vaccine~~Company’s ~~targeting~~own ~~NSCLC,~~stock and ~~which~~(b) classified ~~began~~ in ~~December~~stockholders’ ~~2004;~~equity ~~• progress with other preclinical testing and clinical trials~~ in the ~~future;~~statement •of ~~our~~financial ~~ability~~position towould ~~establish~~not ~~and~~be considered ~~maintain~~a ~~collaboration~~derivative ~~and~~financial ~~license~~instrument. ~~agreements~~EITF ~~and~~No. 07-5 ~~any~~provided ~~government~~a ~~contracts~~new ~~and~~two-step ~~grants;~~model •to ~~the~~be applied ~~actual~~in ~~revenue~~determining wewhether ~~receive~~a ~~under~~financial ~~our~~instrument ~~collaboration~~or ~~and~~an ~~license~~embedded ~~agreements;~~feature •is ~~the~~indexed ~~actual~~to ~~costs~~an issuer’s weown ~~incur~~stock ~~under our research collaboration with Bavarian Nordic; • the time~~ and ~~costs~~thus ~~involved~~able into ~~obtaining~~qualify ~~regulatory~~for ~~approvals; •~~ the ~~costs~~SFAS ~~involved~~133 inparagraph ~~filing,~~11(a) ~~prosecuting,~~scope ~~enforcing~~exception. ~~and~~The adoption ~~defending~~of ~~patent~~EITF ~~claims~~No. 07-5 ~~and~~did ~~any~~not ~~other~~have ~~proprietary~~a ~~rights;~~material •impact ~~competing~~on ~~technological~~the ~~and~~Company’s ~~market~~condensed ~~developments;~~consolidated financial ~~• changes in our existing research relationships;~~statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future consolidated financial statements.

•ITEM ~~continued~~2. ~~scientific~~MANAGEMENT’S ~~progress~~DISCUSSION inAND ~~our~~ANALYSIS ~~drug~~OF ~~discovery~~FINANCIAL ~~programs;~~CONDITION ~~and~~AND •RESULTS ~~the~~OF ~~magnitude of our drug discovery and development programs.~~OPERATIONS

WeThis ~~intend~~discussion ~~to seek additional funding through collaboration~~ and ~~license~~analysis ~~agreements,~~should ~~government research grants and contracts, or equity or debt financings. In the event we are able to obtain financing, it may not~~ be onread ~~favorable~~in ~~terms.~~conjunction Inwith ~~addition, we may not be able to enter into additional collaborations to reduce~~ our ~~funding~~financial ~~requirements.~~statements ~~If we acquire funds by issuing~~and ~~securities,~~accompanying ~~dilution~~notes toincluded ~~existing~~in ~~stockholders~~this ~~will~~report ~~result,~~and ~~such as the dilution that occurred as a result of~~ our ~~financing~~2008 inaudited ~~April 2004.~~financial Ifstatements ~~we raise funds through additional collaborations~~ and ~~license~~ ~~agreements, we will likely have to relinquish some or all of the rights to product~~notes ~~candidates~~thereto orincluded ~~technologies that we may have otherwise developed ourselves. If we are unable to obtain funding, we may be required to engage~~ in ~~another~~our ~~restructuring,~~Form ~~cease~~10-K ~~development~~filed ofwith ~~some product candidates, further reduce~~ the ~~scope~~Securities ofand ~~our~~Exchange ~~operations,~~Commission ~~sell~~on ~~the Company or certain of its~~March 31, ~~assets or technologies or cease operations~~2009.

WeOperating ~~presently~~results dofor ~~not~~the ~~meet~~three ~~all~~months ofended ~~The Nasdaq National Market’s continued listing requirements and we may be delisted~~March 31, ~~which~~2009 ~~could~~are ~~reduce~~not ~~the~~necessarily ~~liquidity~~indicative of ~~our common stock and adversely affect our~~ ~~ability~~results tothat ~~raise~~may ~~additional~~occur ~~necessary~~in ~~capital~~future periods.

InExcept ~~order~~for tothe ~~continue~~historical ~~trading~~information oncontained ~~The~~herein, ~~Nasdaq~~the ~~National~~following ~~Market,~~discussion wecontains forward-looking ~~must~~statements ~~comply~~that ~~with~~involve ~~The~~risks ~~Nasdaq~~and ~~National Market’s~~uncertainties. ~~continued~~When ~~listing~~used ~~requirements~~herein, ~~which~~the ~~require~~words “believe,” ~~that~~“anticipate,” we“expect,” ~~maintain~~“estimate” aand ~~minimum~~similar ~~stockholders’ equity~~expressions ofare ~~$10~~intended to identify such forward-looking statements.~~0 million~~ ~~and~~There acan ~~minimum~~be ~~closing~~no ~~bid~~assurance ~~price~~that ofthese ~~$1.00~~statements ~~per~~will ~~share~~prove to be correct. Our ~~stockholders’ equity~~actual ~~was~~results ~~$7.1 million~~could ~~and~~differ $8materially from those discussed here.~~8 million~~ asFactors ofthat ~~June 30,~~could cause ~~2005~~or ~~and~~contribute ~~March 31~~to such differences include, ~~2005~~but are not limited to, ~~respectively~~those discussed in this report. We undertake no obligation to update any of the forward-looking statements contained herein to reflect any future events or developments.

~~On May 23, 2005, we filed a Current Report on Form 8-K reporting that we received a letter from the~~Overview Nasdaq Stock Market which indicated that, based on the stockholders’ equity disclosed in our Form 10-Q/A for the period ended March 31, 2005, we do not comply with the minimum stockholders’ equity requirement for continued listing on the Nasdaq National Market. In addition, on June 2, 2005, we filed a Current Report on Form 8-K reporting that on May 26, 2005 we received notice from Nasdaq that, based on the closing bid price of our common stock for the 30 consecutive business days preceding the date of the letter, we did not comply with the minimum $1.00 per share minimum closing bid price requirement for continued listing on the Nasdaq National Market. Pursuant to the Nasdaq staff’s request, we submitted to The Nasdaq National Market a specific plan to effect the share exchange transaction with IDM and related transactions, including a reverse stock split of our outstanding common stock, as the way to achieve and sustain compliance with the minimum stockholders’ equity requirement and the minimum closing bid price per share requirement. On June 20, 2005, we received a letter from the Nasdaq Stock Market indicating that our plan to achieve compliance with Nasdaq listing requirements was not accepted by the Nasdaq staff because, among other things, we will be unable to demonstrate compliance until the share exchange transaction is complete and the share exchange transaction is subject to approval by our stockholders and therefore is not definitive. On June 27, 2005, we filed a request for an appeal with the Nasdaq Listing Qualifications Panel, and we attended an oral hearing on July 21, 2005, at which we presented our case to the Nasdaq Listing Qualifications Panel, including the fact that we have mailed to our stockholders the definitive proxy statement regarding our annual meeting of stockholders, at which the share exchange transaction, reverse stock split and related matters are being submitted for approval by our stockholders, we have scheduled our annual meeting of stockholders for August 11, 2005 and we have begun to receive proxies for our stockholders supporting matters submitted for approval. During the appeal process and until a final determination is made with respect to our continued listing, our common stock will continue to trade on The Nasdaq National Market. As stated in our Form 10-Q/A for the period ended March 31, 2005, we believe there is a significant risk that we will not meet the Nasdaq stockholders’ equity requirement in the future if we do not complete the share exchange with IDM and related transactions. In connection with our proposed business combination with the IDM, we believe we will satisfy both the minimum stockholders’ equity listing requirement and, as a result of a planned reverse stock split, the minimum bid price listing requirement of the Nasdaq National Market, although there can be no assurance we will do so. The delisting of our common stock

We are a biopharmaceutical company focused on the development of innovative cancer products that either destroy cancer cells by activating the immune system or prevent tumor recurrence by triggering a specific adaptive immune response. We were incorporated in Delaware in July 1987.

We are developing our lead product candidate, mifamurtide, or L-MTP-PE, known as MEPACT^{^®}in Europe, for the treatment in combination with chemotherapy following surgery of patients with non-metastatic resectable osteosarcoma, or bone cancer. We have received orphan drug designation for mifamurtide in the United States, or U.S., and the European Union, or EU, for the treatment of osteosarcoma. A Phase 3 clinical trial for the treatment of osteosarcoma was completed by the Children’s Oncology Group, or COG, before the product candidate was acquired by us in 2003. In October 2006, we submitted a New Drug Application, or NDA, in electronic Common Technical Document, or eCTD format, to the U.S. Food and Drug Administration, or the FDA, for mifamurtide, requesting approval for its use in the treatment of patients with newly diagnosed resectable high-grade osteosarcoma following surgical resection in combination with multiple agent chemotherapy. The FDA accepted the NDA for substantive review, on a standard review basis, contingent upon our commitment to provide pharmacokinetic data for the to-be-marketed mifamurtide product.

In November 2006, we submitted a Marketing Authorization Application, or MAA, for MEPACT to the European Medicines Agency, or EMEA. The EMEA determined the application was valid and the review procedure was started in late November 2006.

On November 17, 2008, the Committee for Medicinal Products for Human Use, or CHMP, issued a positive opinion, recommending grant of a centralized marketing authorization for MEPACT. The CHMP recommendation was formally adopted by the CHMP on December 18, 2008, and final European Commission, or EC, approval was received on March 6, 2009. The centralized marketing authorization allows MEPACT to be marketed in the 27 Member States of the EU, as well as in Iceland, Liechtenstein and Norway. MEPACT was granted orphan medicinal product status in Europe in 2004 and under European pharmaceutical legislation is entitled to a period of 10 years market exclusivity in respect of the approved indication.

On August 27, 2007, the FDA issued a not approvable letter to us after completing the review of the NDA for mifamurtide. The FDA requested data from additional clinical trials to demonstrate the benefit of mifamurtide, as well as information or clarification with respect to other sections of the NDA. In order to focus on those areas we believe can provide the most near term value to our stockholders and to ensure we have adequate cash to complete our review of strategic options for the Company, we are concentrating our near-term efforts on certain MEPACT pre-launch commercial activities in Europe and review of such strategic options, including merger or acquisition opportunities, which may involve a change in control of our company. Consequently, we have placed the U.S. mifamurtide NDA amendment submission on hold until we complete our strategic review, which will allow us to operate into the third

~~may~~quarter ~~result in the trading~~ of ~~the~~2009. ~~stock~~We onhave ~~the~~engaged ~~Nasdaq~~JMP ~~SmallCap~~Securities, ~~Market~~LLC, oran ~~the~~investment ~~OTC Bulletin Board~~bank, ~~which~~ ~~could~~to ~~reduce~~advise ~~the~~us ~~liquidity~~in exploring ofalternatives ~~our~~available ~~common~~to ~~stock~~us ~~and~~with ~~adversely~~respect ~~affect~~to ~~our~~a ~~ability~~possible tomerger ~~raise additional~~or ~~capital~~acquisition transaction.

The ~~process~~timing of ~~developing~~potential ~~therapeutic~~marketing ~~products~~approval ~~requires~~of ~~significant~~mifamurtide ~~research~~in the U.S. is subject to risks and uncertainties ~~development~~beyond our control. These risks and uncertainties regarding product approval and commercialization include the timing of submission and FDA review of the amendment to the NDA, our ~~preclinical~~ability ~~testing~~to respond to questions and ~~clinical~~concerns ~~trials~~raised by the FDA in a satisfactory manner, ~~all~~the time needed to respond to any issues raised by the FDA during the review of ~~which~~our ~~are~~amended ~~extremely~~NDA ~~expensive~~for mifamurtide and ~~time-consuming~~the possibility that the FDA may not consider existing safety and efficacy data, the Phase 3 study design, conduct and analysis, available nonclinical studies, or the existing drug comparability studies between the drug used in the Phase 3 study and the drug manufactured by us as adequate or valid for their assessment of the marketing approval of mifamurtide. These factors may cause ~~not~~delays in submission or review of the NDA amendment, may result in the FDA requiring us to conduct or complete additional clinical trials, nonclinical and drug comparability studies, or may result in a ~~commercial~~determination ~~product~~by the FDA that the data in the to be submitted NDA amendment do not support marketing approval. As a result, we may not receive approval from the FDA for the marketing and commercialization of mifamurtide in the U.S. when expected or at all.

~~Except~~ In ~~for~~addition, ~~our~~we ~~HIV~~currently ~~and~~do ~~NSCLC~~not ~~and~~have ~~colorectal~~operational ~~cancer~~sales ~~vaccine~~and ~~candidates,~~marketing infrastructure for MEPACT ~~which~~and wedo ~~began~~not ~~clinical trials~~currently inhave ~~September 2002~~plans ~~and~~or ~~February 2003~~sufficient ~~respectively,~~funds ~~all~~to ofsecure ~~our~~this ~~potential~~capability. ~~vaccine~~We ~~products are~~would inneed ~~research~~to orcomplete ~~preclinical~~a ~~development,~~strategic ~~the~~collaboration ~~results~~or ofother ~~which~~transaction dowith ~~not~~a ~~necessarily~~strategic ~~predict~~partner orthat ~~prove~~has ~~safety~~EU and/or ~~efficacy~~U.S. incommercialization ~~humans.~~abilities Weor ~~must~~otherwise ~~demonstrate~~arrange for ~~each~~the ~~vaccine,~~commercialization ourselves. ~~safety~~If ~~and~~we ~~efficacy~~are inunable ~~humans through~~to ~~extensive~~commercialize ~~clinical~~MEPACT ~~testing,~~ourselves ~~which~~or iswith ~~very~~or ~~expensive,~~through ~~can~~a ~~take many years~~partner, ~~and has an~~any ~~uncertain~~delay ~~outcome.~~would Wematerially ~~may~~adversely ~~experience~~affect ~~numerous~~our ~~unforeseen~~business ~~events~~and ~~during~~financial orposition asdue ato ~~result~~reduced ~~of the~~or ~~testing~~delayed ~~process~~revenues ~~that~~from ~~could~~MEPACT ~~delay or prevent testing or commercialization of our products, including~~sales. ~~the following:~~

• We ~~the~~have ~~results~~an ofagreement ~~preclinical~~with ~~studies~~Novartis ~~may~~granting beus ~~inconclusive,~~an ~~or they may not be indicative of results that will be obtained in human clinical trials; • after reviewing test results~~exclusive, weworldwide orlicense ~~our collaborators may abandon projects that we might previously have believed~~ to beintellectual property ~~promising;~~rights •relating ~~we, our collaborators or regulators may suspend or terminate clinical trials if the participating subjects or patients are being exposed~~ to ~~unacceptable~~MEPACT. ~~health~~We ~~risks; • we may~~ have toexclusive ~~delay~~worldwide ~~clinical~~sales ~~trials as a result of scheduling conflicts with participating clinicians~~ and ~~clinical~~marketing ~~institutions~~rights for MEPACT, orexcept ~~difficulties~~ in ~~identifying~~Israel and ~~enrolling~~South ~~patients~~East ~~who~~Europe ~~meet~~where ~~trial~~we ~~eligibility~~granted ~~criteria;~~distribution •rights ~~safety~~to and efficacy results attained in early human clinical trials may not be indicative of results that are obtained in later clinical trials; and • the effects our vaccine candidates have may not be the desired effects or may include undesirable side effects or other characteristics that preclude regulatory approval or limit their commercial use if ever approvedthird parties.

~~The~~ We ~~data~~had ~~collected~~been ~~from~~jointly ~~clinical~~developing ~~trials~~UVIDEM, ~~may~~a ~~not~~cell-based betherapeutic ~~sufficient~~vaccine toproduct ~~support~~candidate based ~~regulatory~~on ~~approval~~dendritic ofcells, ~~any of~~with ~~our~~sanofi-aventis ~~products~~S.A., ~~and~~or ~~the U~~sanofi-aventis.S. ~~Food~~UVIDEM ~~and~~is ~~Drug~~based ~~Administration~~on dendritic cells, ora ~~FDA,~~type ~~may~~of ~~not~~specialized ~~ultimately~~immune ~~approve~~cells ~~any of~~derived ~~our~~from ~~therapeutic~~a ~~products~~patient’s ~~for~~own ~~commercial~~white ~~sale~~blood cells, exposed ~~which~~to ~~will~~tumor ~~adversely~~cell ~~affect~~antigens in our ~~revenues~~production facility and then reinjected into the patient in ~~prospects.~~order Ifto westimulate ~~fail~~the immune system to ~~commence~~recognize orand ~~complete,~~kill ortumor ~~experience~~cells ~~delays~~that ~~in,~~display ~~any~~these ofantigens on ~~our~~their ~~planned~~surface. We completed patient enrollment in two Phase 2 clinical trials, ~~our~~of ~~operating~~UVIDEM ~~income,~~for ~~our~~the treatment ~~stock~~of ~~price~~melanoma and ~~our~~in ~~ability~~the tofourth ~~conduct~~quarter ~~our~~of ~~business~~2007 asstarted ~~currently planned~~a ~~could~~new bePhase ~~harmed~~2 clinical trial of UVIDEM.

~~Some~~ On December 26, 2007, sanofi-aventis notified us of ~~our~~its ~~programs~~decision ~~are~~to ~~funded~~terminate byits participation in the UUVIDEM development program and we have put on hold further development of the program.S In March 2008, we and sanofi-aventis entered into an agreement, referred to as the Settlement Agreement, aimed at resolving the various pending or potential issues related to the UVIDEM development program. ~~government~~All rights to the UVIDEM development program have reverted to us, and sanofi-aventis has no further rights to that program, including any right of first refusal. In accordance with the ~~government~~terms ~~may~~of ~~not~~the ~~allocate~~Settlement ~~funds~~Agreement, sanofi-aventis retains its options with respect to our other cell therapy programs under an existing collaboration agreement for ~~these~~the development and commercialization of up to 20 Cell Drugs, a term we use to refer to therapeutic products derived from a patient’s own white blood cells, over a 10-year period, although we do not currently have any such programs in ~~future~~development, ~~fiscal~~or ~~years~~plans to conduct any further development. The Settlement Agreement also provided that sanofi-aventis would pay $8.1 million (€5.2 million converted at the average exchange rate in the second quarter of 2008). Of the $8.1 million, $2.4 million was for the research and development costs of the UVIDEM development program for the first quarter of 2008, which was received and recognized as revenue in that quarter, and $5.7 million was related to the shut down of the UVIDEM program, which was received and recognized as contract settlement income in the second quarter of 2008.

We ~~fund~~have ~~certain~~also ofbeen ~~our~~developing ~~research~~IDM-2101 ~~and~~for ~~development~~non-small ~~related~~cell tolung ~~our HIV~~cancer, ~~cancer~~or ~~and~~NSCLC. ~~malaria~~IDM-2101 ~~programs~~is ~~pursuant~~composed toof ~~multi~~multiple tumor-~~year~~specific ~~grants~~cytotoxic ~~and~~T-lymphocyte ~~contracts~~(CTL), epitopes that were selected from tumor-associated antigens. Some of the ~~U.S.~~epitopes ~~government.~~have ~~The~~been ~~government~~modified isto ~~under~~create ~~no obligation~~analogs in order to enhance ~~and~~the ~~may~~potency ~~not~~of ~~fund~~the ~~these~~T ~~programs~~cell ~~over~~response ~~their~~induced ~~full~~by ~~term~~the ~~which~~vaccine. ~~would~~We ~~have~~reported aon ~~significant~~early Phase 2 ~~impact~~results of IDM-2101 at the ASCO meeting in June 2007 and the iSBTc meeting in November 2007, and reported on ~~our~~Phase ~~ability~~2 tofollow-up ~~continue~~data ~~development~~at the ASCO meeting in June 2008. A manuscript of ~~our~~the ~~HIV~~study results were submitted, ~~cancer~~accepted and ~~malaria~~published ~~programs~~in the September 20, 2008 issue of the Journal of Clinical Oncology. To conserve capital, we have put all further development of IDM-2101 on hold.

Our history of operating losses and our expectations of continuing losses may hurt our ability to reach profitability or continue operations.

We have experienced significant operating losses since our inception in 1987. As of June 30, 2005, we had an accumulated deficit of $165.9 million. We expect to continue to incur substantial operating expenses and net operating losses for the foreseeable future, which may hurt our ability to continue

~~operations.~~ As Wepreviously ~~have~~announced, ~~not~~we ~~generated~~are ~~revenues~~evaluating ~~from the commercialization of any product. All of~~ our ~~revenues~~ ~~to date have consisted of contract~~ research and development ~~revenues~~programs, ~~license and~~including ~~milestone~~related ~~payments,~~assets ~~research~~and ~~grants~~costs, ~~certain~~and ~~asset~~strategic ~~divestitures~~alternatives ~~and~~available ~~interest~~to ~~income~~us. We ~~expect~~are ~~that substantially~~focusing ~~all of~~ our ~~revenues~~current research ~~for~~and ~~the~~development ~~foreseeable~~activities ~~future~~primarily ~~will~~on ~~result from similar sources~~mifamurtide. ~~To achieve~~In ~~profitable~~order ~~operations,~~to ~~we,~~contain ~~alone~~our ~~or with collaborators~~expenses, ~~must successfully identify,~~we ~~develop,~~have ~~register~~discontinued ~~and~~further ~~market~~development ~~proprietary~~of ~~products.~~our Weother doproduct ~~not~~candidates, ~~expect~~including toUVIDEM ~~generate revenues from the~~for ~~commercialization~~treatment of ~~any~~melanoma, ~~product~~COLLIDEM for attreatment ~~least~~of ~~six~~colorectal ~~years~~cancer (and ~~this~~BEXIDEM, ~~would~~a ~~assume~~product ~~approval of either~~candidate ~~our~~for ~~HIV or NSCLC product candidates,~~ which ~~may~~we ~~not~~completed ~~occur).~~the WePhase ~~may~~2 ~~not~~stage beof ~~able~~a toPhase ~~generate sufficient~~2/3 ~~product~~clinical ~~revenue~~trial toin ~~become~~Europe ~~profitable.~~for ~~Even~~the iftreatment of wesuperficial dobladder ~~achieve profitability~~cancer, weuntil ~~may~~collaborative ~~not~~partners can be ~~able~~ tofound ~~sustain~~ or ~~increase~~other ~~our~~funding ~~profitability~~for onthose programs abecomes ~~quarterly or yearly basis~~available.

We ~~are~~completed ata an$12.9 million ~~early~~equity ~~stage~~financing ofin ~~development,~~February 2007 and wea ~~may~~$25.0 million ~~experience~~equity financing ~~delays~~in ~~and~~June 2007 ~~other~~(see ~~problems~~Note 5 to the Condensed Consolidated Financial Statements included in ~~entering~~this ~~clinical~~report). ~~trials~~These proceeds and savings from continued cost management initiatives are expected to provide sufficient working capital for our currently planned operations into the third quarter of 2009.

WeResults ~~are an early stage research and development company, and only commenced our first Phase I/II clinical trials for one~~ of ~~our~~Operations ~~vaccines within the past two years, and a Phase II trial~~ for ~~one of our vaccines in December 2004. There are many factors outside of our control that may affect~~ the ~~timing~~ ofThree ~~completion~~Months ofEnded ~~our current clinical trials~~March 31, ~~and~~2009 any future clinical trials may not commence when planned or be completed within any anticipated time frame. For example, in the past we experienced unexpected delays in filing an IND for our therapeutic vaccine candidate targeting HIV, due to additional time necessary to complete all of the animal safety studies that were contemplated in our pre-IND discussions with the FDA. We may experience unexpected delays in our research and ~~development efforts that would require us to postpone the commencement or completion~~2008 of clinical trials of other vaccine candidates. The FDA may comment or raise concerns or questions with respect to any IND that we file and, therefore, clinical trials may not begin when planned, if at all.

~~Unexpected~~ Revenues. ~~side~~We ~~effects~~had ortotal ~~other~~revenues ~~characteristics~~of $4,000 for the three months ended March 31, 2009, compared to total revenues of ~~our~~$2.4 million ~~technology~~for ~~may~~the ~~delay~~three ormonths ~~otherwise~~ended ~~hurt~~March 31, 2008. Revenue for the three ~~development~~months ended March 31, 2009 were from amortization of deferred revenues related to the distribution agreements for MEPACT. For the three months ended March 31, 2008, substantially all of our revenues ~~vaccine~~were ~~candidates~~generated from our research and development activities under our collaboration agreement with sanofi-aventis for the UVIDEM program, which we placed on hold in December 2007 following sanofi-aventis’ notification that it was discontinuing its participation in the development of the program.

~~There~~ Research ~~may~~and beDevelopment ~~side~~Expenses. ~~effects~~Total inresearch ~~our~~and ~~current~~development orexpenses ~~future~~were ~~clinical~~$3.0 million and ~~trials~~$3.9 million ~~that~~for wethe ~~may~~three ~~discover~~months ended March 31, ~~including~~2009 and March 31, 2008, respectively. The ~~side~~decrease ~~effects~~in ~~that~~research ~~become~~and ~~apparent~~development ~~only~~expenses ~~after~~were ~~long-term~~primarily ~~exposure~~due to a $0.8 million reduction in spending related to clinical development of UVIDEM, ~~even~~which ~~though~~we ~~our~~placed ~~safety~~on ~~tests~~hold ~~may~~in December 2007 ~~indicate~~following ~~favorable~~sanofi-aventis’ ~~results.~~notification Wethat ~~may~~it ~~also~~was ~~encounter~~discontinuing ~~technological~~its ~~challenges~~participation ~~relating~~in ~~to these~~the ~~technologies~~development ~~and~~of ~~applications~~the program, $0.2 million in savings due to the closing of our ~~research~~Paris, France facility, and ~~development~~$0.2 million ~~programs~~decrease ~~that~~in wespending ~~may~~associated ~~not~~with bedevelopment ~~able~~activities related to ~~resolve.~~products ~~Any~~currently ~~such~~on ~~unexpected~~hold, ~~side~~partially ~~effects~~offset orby ~~technological~~higher ~~challenges~~spending ~~may~~of ~~delay~~$0.3 million orrelated ~~otherwise~~to ~~adversely~~regulatory ~~affect~~filings ~~the~~and ~~development,~~manufacturing ~~regulatory~~of ~~approval~~MEPACT orclinical ~~commercialization~~supplies offor our ~~drug~~compassionate ~~candidates~~use program.

~~There~~ Direct ~~are~~research noand ~~therapeutic~~development ~~vaccines~~expenses ~~that~~related ~~have~~to ~~been~~our ~~approved~~product ~~for~~candidates ~~use~~to bydestroy ~~the~~residual cancer ~~FDA~~cells were approximately $2.4 million and ~~our~~$2.1 million ~~vaccines~~for ~~may~~the three months ended March 31, ~~not~~2009 ~~work~~and 2008, ~~which~~respectively. ~~would~~Direct research and development expenses related to our product candidates to prevent ustumor ~~from~~recurrence ~~ever~~were ~~becoming~~approximately ~~profitable~~$0.1 million and $1.0 million for the three months ended March 31, 2009 and 2008, respectively.

~~Because~~ Selling ~~there~~and ~~are~~Marketing ~~not~~Expenses. ~~yet~~Selling ~~any~~and ~~therapeutic~~marketing ~~vaccines~~expenses ~~that~~were ~~have~~$0.5 million ~~undergone~~and ~~the~~$0.2 million ~~complete~~for ~~clinical development~~the ~~process~~three ~~and~~months ~~FDA~~ended ~~review~~March 31, ~~there~~2009 isand ~~still~~2008, ~~insufficient~~respectively. ~~evidence~~These ~~that~~expenses ~~therapeutic vaccines~~consisted ~~will~~primarily ~~become~~of ~~products.~~costs ~~Our~~related ~~business~~to isour ~~dependent~~participation ~~upon~~in ~~the~~trade ~~concept~~conferences ofand ~~therapeutic~~to ~~vaccines~~the ~~and, therefore,~~employment ifcosts ~~therapeutic~~of our ~~vaccines~~business ~~were~~development ~~found~~employees. ~~not~~Higher toexpenses bein ~~safe~~2009 orwere ~~effective,~~the weresult ~~would~~of ~~never~~additional ~~commercialize~~consulting afees ~~product~~in ~~candidate~~connection with pricing and ~~would~~reimbursement ~~never~~analysis ~~make~~of aMEPACT ~~profit~~in Europe.

~~Adverse~~ General ~~publicity~~and ~~regarding~~Administrative Expenses. General and administrative expenses were $1.3 million and $2.6 million for the ~~safety~~three ormonths ~~side~~ended ~~effects~~March 31, of2009 and 2008, respectively. Expenses for the ~~technology~~2009 ~~approach~~period orwere ~~products~~lower primarily due to $0.5 million savings from the closing of our Paris ~~others~~facility, ~~could~~a ~~reduce~~$0.5 million ~~our~~reduction ~~revenues~~in ~~and~~finance-related ~~cause~~consulting ~~our~~fees, as well as a decrease of $0.2 million in stock ~~price~~compensation toexpense ~~fall~~during the 2009 period.

~~Despite~~ Restructuring ~~any~~Expenses. ~~favorable~~There ~~safety~~were ~~tests~~no ~~that~~restructuring ~~may~~expenses berecorded ~~completed~~for ~~with~~the ~~respect~~three tomonths ended ~~our product candidates~~March 31, ~~adverse~~ ~~publicity~~2009 ~~regarding~~as ~~vaccines~~we orrecorded ~~products~~all ~~being~~charges ~~developed~~related orto ~~marketed~~the byJanuary 2008 ~~others~~restructuring ~~could~~plan as ~~negatively~~of ~~affect~~December 31, us2008. IfRestructuring ~~other~~expenses ~~researchers’~~were ~~studies~~$2.6 million ~~raise~~for orthe ~~substantiate~~three ~~concerns~~months ~~over~~ended ~~the safety~~March or31, ~~side~~2008, ~~effects~~which ofincluded ~~vaccines~~$2.3 million orof ~~our~~severance ~~technology~~benefits ~~approach~~and or$0.3 million ~~product~~of ~~development~~shutdown ~~efforts generally,~~costs ~~our~~related ~~reputation~~to ~~and~~the ~~public~~closing ~~support~~of ~~for~~ our ~~clinical~~facility ~~trials~~in ~~or products could be harmed~~Paris, ~~which would harm our business and could cause our stock price to fall~~France.

~~Our~~ Interest ~~research~~Income. ~~and~~Interest ~~development~~income ~~programs~~for ~~may~~the ~~not~~three ~~yield~~months ~~effective~~ended ~~product~~March 31, ~~candidates~~2009 and 2008 were $28,000 ~~which~~and ~~could~~$0.2 million, respectively. The decrease in interest income during the 2009 period was ~~prevent~~due usto ~~from~~lower ~~developing~~average ~~our~~investment ~~products~~balances and lower rates of return.

We Interest ~~cannot~~Expense ~~guarantee~~related ~~that~~to ~~our~~Warrants. ~~research~~Interest ~~and~~expense ~~development~~for ~~programs~~the ~~will~~three bemonths ~~successful~~ended ~~in identifying~~March 31, ~~vaccine~~2009 ~~candidates~~and ~~for~~2008 ~~clinical~~was ~~trials~~$0.5 million ~~Even if we do receive positive data during preclinical testing~~ and ~~during~~$4.7 million, ~~Phase~~respectively, ~~I/II~~substantially ~~clinical~~all ~~trials~~of ~~for~~which ~~our~~is ~~therapeutic vaccine candidate targeting HIV,~~a ~~and~~non-cash ~~Phase~~interest IIexpense ~~clinical~~to ~~trials~~record ~~targeting~~the ~~NSCLC,~~net orchange ~~any~~in ~~other~~the ~~candidates~~fair wevalue ~~may~~of ~~develop,~~warrants ~~this~~issued ~~data~~in ~~cannot~~connection bewith ~~relied upon as evidence that~~ the ~~clinical~~February ~~candidate~~and ~~will~~June 2007 befinancings. ~~safe~~The ~~and~~lower ~~effective~~increase in ~~humans, and~~the ~~assuming~~fair wevalue ~~initiate~~during the ~~any~~2009 ~~Phase~~period ~~III~~is ~~trials,~~primarily ~~data~~due ~~from~~to ~~Phase~~a ~~III~~smaller orincrease ~~other~~in ~~pivotal~~our ~~clinical~~stock ~~trials may~~price ~~not~~during bethe ~~consistent~~2009 ~~with~~period compared ~~earlier data or be sufficient~~ to ~~support~~the ~~regulatory~~2008 ~~approval~~period.

Foreign Exchange Gain or Loss. We ~~may~~have ~~not~~an ~~identify~~inter-company loan from our subsidiary in France to our subsidiary in the ~~correct~~United ~~epitopes~~States. This loan is denominated in U.S. dollars and is revalued each quarter based on changes in the value of the U.S. dollar versus the euro and all related changes are recognized in earnings. For the three months ended March 31, ~~therefore~~2009, ~~not~~we ~~develop~~recorded a ~~safe~~foreign exchange orgain ~~effective~~of ~~vaccine~~$0.1 million compared to a loss of $0.9 million for the three months ended March 31, 2008. The gain in the 2009 period was due to the decrease in the exchange rate between the U.S. dollar and the euro with no change to the inter-company loan balance during the quarter ended March 31, 2009, compared to an increase in the exchange rate between the U.S. dollar and the euro with a decreasing inter-company loan balance during the quarter ended March 31, 2008.

~~Our~~ Income ~~strategy~~Tax ~~involves~~Benefit. ~~identifying~~We ~~multiple~~recorded ~~epitopes~~$17,000 inand ~~order~~$20,000 toof ~~create~~tax ~~our~~benefit ~~vaccines.~~for Ifthe wethree ~~are~~months ended ~~unable~~March 31, to2009 ~~identify~~and ~~the~~2008, ~~correct~~respectively. ~~epitopes,~~The or2009 ifand we2008 ~~are~~periods ~~unable~~reflect toan ~~combine~~adjustment ~~them~~of the provision for income tax in ~~the~~accordance ~~correct~~with ~~manner,~~FIN 48 for uncertain income tax positions (see Note 10 to ~~stimulate~~the ~~desired~~Condensed ~~immune~~Consolidated ~~responses~~Financial weStatements ~~may~~included ~~never~~in ~~develop~~this report). Due to our historical losses, we maintain a ~~vaccine~~full ~~that~~valuation isallowance ~~safe~~for orall ~~effective~~deferred ~~in any~~tax assets with the exception of research and development tax credits generated by our Paris, France subsidiary, which are payable to us in cash if the ~~indications~~credits ~~that~~are wenot utilized three years after they are ~~pursuing~~generated.

~~Our~~ As ~~business~~of isMarch 31, ~~based~~2009, onwe ahad ~~novel~~research ~~technology,~~and ~~which~~development ~~has~~tax ~~not~~credits ~~been~~of ~~used~~$0.7 million inthat represent ~~any~~an ~~commercial~~account ~~drugs,~~receivable ~~and~~corresponding to our accumulated income tax benefit from the French ~~may~~government, ~~not~~of ~~work~~which $0.2 million is recoverable during the next nine months.

~~Our~~ Net ~~vaccine~~Loss. ~~candidates~~Our ~~use~~net ~~epitopes~~loss decreased to ~~stimulate~~$5.2 million ~~specific~~for Tthe ~~cell~~three ~~immune~~months ~~responses~~ended March 31, ~~but we are not~~2009, ~~aware~~compared ofto ~~any~~$12.1 million ~~commercial~~for ~~drugs~~the ~~that~~three ~~are~~months ~~based~~ended onMarch 31, ~~this~~2008, ~~technology.~~as ~~Our~~a ~~technology~~result ~~related~~of tothe ~~T cell~~factors ~~stimulation~~described ~~is unproven and may not produce any commercial vaccines~~above.

~~Our~~Liquidity ~~failure to obtain issued patents~~ and, ~~consequently,~~Capital ~~to protect our proprietary technology,~~Resources ~~could hurt our competitive position.~~

Our ~~success~~continuing ~~will~~operating ~~depend~~losses, inoperating ~~part~~cash onflow ~~our~~deficits, ~~ability~~uncertainty ~~to obtain and enforce claims~~ in ~~our~~funding ~~patents directed~~sources ~~to our products, technologies~~ and ~~processes,~~plans ~~both~~for inpre-launch ~~the~~commercial ~~United~~activities ~~States~~of ~~and other countries. Although we have filed various patent applications~~MEPACT, ~~our~~together ~~patent~~raise ~~position~~substantial isdoubt ~~highly uncertain and~~about ~~involves~~our ~~complex~~ability ~~legal and factual questions. Legal standards relating~~ to ~~patentability,~~continue ~~validity and~~as ~~scope~~a ofgoing ~~patent~~concern. ~~claims~~The inaccompanying ~~epitope~~condensed ~~identification~~consolidated ~~and other aspects of our technology field are~~financial ~~still~~statements ~~evolving.~~have ~~Patents~~been ~~may~~prepared ~~not~~assuming ~~issue~~that ~~from~~we ~~any~~will ofcontinue ~~the~~as ~~patent~~a ~~applications~~going ~~that~~concern ~~we own or license~~ and, ~~if patents~~ do ~~issue, claims issued in the patents may~~ not beinclude any ~~sufficiently~~adjustments ~~broad~~ to ~~protect~~reflect ~~our vaccines,~~the ~~technologies~~possible ~~and~~future ~~processes.~~effects ~~For~~on ~~example,~~the ~~even~~recoverability ~~though~~and ~~our~~classification ~~patent portfolio includes patent~~of ~~applications~~assets ~~with~~or ~~claims~~the ~~directed~~amounts ~~to peptide epitopes~~ and ~~methods~~classification of ~~utilizing~~liabilities ~~sequence~~that ~~motifs~~may ~~to identify~~result ~~peptide~~from ~~epitopes, we cannot assure you of~~ the ~~breadth~~outcome of ~~claims that will be allowed or~~this ~~that may issue in future patents~~uncertainty.

~~Other~~ We ~~risks~~will continue to spend significant amounts on pre-commercial activities for mifamurtide, including amounts spent for manufacturing clinical and ~~uncertainties~~commercial supplies. On January 10, 2008, our Board of Directors authorized an organizational restructuring that weresulted ~~face~~in ~~with~~a ~~respect~~workforce reduction toin ~~our~~Irvine, ~~patents~~California on January 29, 2008, and ~~patent~~the ~~applications~~closure of our operations in Paris, ~~include~~France as of the ~~following:~~end of the second quarter of 2008. This organizational restructuring resulted primarily from the discontinued development of UVIDEM, our investigational therapy for the treatment of melanoma. We continue to maintain IDM Pharma S.A. as a French subsidiary and conduct its business, now solely related to MEPACT, both directly and through the use of consultants and contracted activity.

• As ~~the~~of ~~pending~~March 31, ~~patent~~2009, ~~applications~~our wecash ~~have~~and ~~filed~~cash orequivalents tototaled ~~which~~$7.4 million, wecompared ~~have~~to ~~exclusive~~$12.8 million ~~rights~~as ~~may~~of ~~not~~December 31, ~~result~~2008. inIn ~~issued~~February 2007, ~~patents or may take longer than~~ we ~~expect~~completed toa ~~result~~private inplacement ~~issued~~of ~~patents;~~our •common stock ~~the~~and ~~allowed~~warrants ~~claims~~to ofpurchase ~~any~~common ~~patents~~stock ~~that~~and ~~issue~~received ~~may~~approximately ~~not~~$12.9 million ~~provide~~in ~~meaningful~~gross proceeds. ~~protection;~~In •June 2007, we ~~may~~completed bea ~~unable~~registered todirect ~~develop~~offering ~~additional~~of ~~proprietary~~our ~~technologies~~common ~~that~~stock ~~are~~and ~~patentable; • the patents licensed or issued~~ warrants to uspurchase ~~may~~common ~~not~~stock ~~provide~~and areceived ~~competitive~~approximately ~~advantage;~~$25.0 million •in ~~other~~gross ~~companies~~proceeds. ~~may~~Cash ~~challenge~~and ~~patents~~cash equivalents ~~licensed~~include orprincipally ~~issued~~cash ~~to us; • disputes may arise regarding inventions~~ and ~~corresponding~~money-market ~~ownership~~funds ~~rights~~denominated in ~~inventions~~both euros and ~~know-how~~U.S. dollars. ~~resulting~~We ~~from the joint creation or~~ use ofour ~~intellectual~~cash ~~property~~and bycash ~~us,~~equivalents ~~our~~to ~~licensors,~~cover orresearch ~~collaborators;~~ and development

•expenses ~~other~~and ~~companies~~corporate ~~may~~expenses ~~design~~related ~~around~~to selling and marketing and general and administrative activities. If we enter into collaborations for certain of our ~~patented~~products, ~~technologies~~we expect that our strategic partners would assume most, if not all, of the costs of further product development. Unless we find a strategic partner for a product, we bear all costs related to its development. We expect to incur significant expenses as we continue to pursue regulatory approval and potential commercialization of MEPACT.

~~Our~~ Net ~~competitors~~cash ~~may~~used ~~develop~~in ~~products~~operating ~~that~~activities ~~are~~decreased ~~more~~to ~~effective~~$4.7 million ~~and~~for ~~that~~the ~~render~~three ~~our~~months ~~potential~~ended March 31, ~~products~~2009, compared to $6.9 million for the three months ended March 31, 2008. This decrease ~~obsolete~~in cash used by operating activities was primarily the result of lower losses including the effects from the shut down of our operations in Paris, France.

~~The~~ Net ~~biotechnology~~cash ~~industry~~used ~~continues~~in toinvesting ~~undergo~~activities ~~rapid~~was ~~change~~$3,000 ~~and~~during ~~competition~~the isthree ~~intense~~month ~~and~~ended isMarch 31, 2009, ~~expected~~compared to ~~increase~~$0.1 million ~~Our~~of ~~competitors~~net ~~may~~cash ~~succeed~~provided inby ~~developing~~investing ~~technologies,~~activities ~~vaccines~~during orthe ~~other~~three months ended ~~therapeutic~~March 31, ~~products~~2008. ~~that~~The ~~are~~proceeds ~~more~~from ~~effective~~investing ~~than~~activities ~~any~~in of2008 ~~the~~is ~~products~~from wesale ~~are~~of ~~developing,~~property ~~which~~and ~~would~~equipment ~~render~~from our ~~technology~~Paris ~~and products obsolete and noncompetitive~~facility.

If As weof ~~are~~March 31, ~~unable~~2009, our current liabilities were $9.8 million, which includes the current portion of deferred revenues of $0.4 million, $2.8 million in accounts payable and accrued liabilities, $0.7 million in accrued compensation for employees and $4.0 million related to ~~compete~~common stock ~~effectively~~warrant liabilities. Current liabilities also include $1.5 million in tax obligations, $0.1 million relating to the ~~highly~~current ~~competitive~~portion ~~biotechnology~~of ~~industry~~an interest-free loan from the French government, ~~our~~which ~~business~~is ~~will~~due ~~fail~~and payable upon request and $0.3 million of accrued restoration costs for our Irvine, California facility.

~~Many~~ Our ~~companies~~long-term ~~and~~liabilities ~~institutions~~as ~~compete~~of ~~with~~March 31, us2009 inwere ~~developing~~$1.2 million, ~~vaccines~~which ~~and~~includes ~~other~~the ~~therapies~~$0.8 million toNovartis milestone payment accrual, the non-current portion of deferred revenues of $0.1 ~~activate~~million, and the ~~body’s~~non-current ~~immune~~portion ~~system~~of oran interest-free loan of $0.3 million from the French government that provides support to ~~otherwise~~French ~~treat~~companies orfor ~~more~~research ~~effectively~~and ~~manage~~development. ~~infectious~~We must repay ~~diseases~~the ~~and~~remaining ~~cancer,~~$0.3 million ~~including:~~balance of the French government loan in 2011.

• Our ~~pharmaceutical~~financial ~~companies;~~requirements •to ~~chemical~~date ~~companies;~~have •been ~~specialized~~met ~~biotechnology~~primarily ~~companies;~~through •sales ~~academic~~of ~~institutions;~~equity securities, payments received under our collaboration agreement with sanofi-aventis and •other ~~research~~partners, together ~~organizations~~with grants received from governmental agencies.

~~Many~~ As ofa ~~the~~result ~~companies~~of ~~developing~~sanofi-aventis’ ~~competing~~decision ~~technologies~~to ~~and~~terminate ~~products~~its ~~have~~participation ~~significantly~~in ~~greater~~the UVIDEM ~~financial~~development ~~resources~~program, and ~~expertise~~our indecision ~~research~~to ~~and~~discontinue ~~development~~operations in Paris, ~~manufacturing~~France, ~~preclinical~~we ~~and~~expect to ~~clinical~~generate ~~development~~little, ~~obtaining~~if ~~regulatory~~any, ~~approvals~~revenues ~~and~~in ~~marketing~~the ~~than~~near weterm. doWe expect to receive revenues from sales of our lead product candidate, ~~and~~MEPACT, in Europe assuming that we ~~may~~choose ~~not~~to bemarket MEPACT ourselves. ~~able~~However, we may have to ~~compete~~spend ~~effectively~~significant ~~against~~amounts ~~them~~of capital to commercialize MEPACT, and these efforts may not be successful.

~~Our~~ As ~~vaccines~~previously ~~under~~announced, we are evaluating our research and development ~~address~~programs, aincluding related ~~range~~assets ofand ~~cancer~~costs, and ~~infectious~~strategic ~~disease~~alternatives ~~markets~~available to us. The options we are ~~competition~~considering ininclude ~~these~~various ~~markets~~strategic istransactions, ~~extremely~~including ~~formidable.~~merger ~~There~~or ~~are~~acquisition 27opportunities, which ~~drugs~~may ~~currently~~involve ~~approved~~a change in ~~the~~control of our company. We have engaged JMP Securities, LLC, an ~~United~~investment ~~States~~bank, ~~for~~to ~~HIV~~advise ~~and~~us ~~according~~in exploring alternatives available to us with respect to a ~~PhRMA2003~~possible merger ~~report~~or onacquisition ~~pharmaceutical~~transaction. ~~drug~~In ~~development~~the event we do not complete a strategic transaction, ~~there~~we ~~were~~will 83likely ~~new~~seek ~~product~~additional ~~candidates~~funding, inwhich ~~clinical~~may ~~development~~be ~~for~~accomplished ~~HIV~~through ~~and~~equity ~~related~~or ~~conditions~~debt financings, and/or ~~including~~collaboration ~~15 HIV~~and ~~vaccines~~license agreements. InWe ~~addition,~~may ~~according~~not be able to ~~the~~obtain ~~PhRMA~~additional ~~2003~~financing ~~report,~~or accomplish ~~there~~any ~~were~~other ~~395~~business ~~new~~transaction ~~product candidates~~we indecide ~~clinical~~to ~~development~~pursue ~~for~~on ~~the~~terms ~~treatment~~that ofare ~~cancer,~~favorable ~~and~~to us or at ~~least~~all. 30In ~~companies~~addition, ~~were developing~~we ~~more~~may ~~than~~not 50be ~~vaccines~~able ~~against~~to ~~various~~enter ~~cancers~~into additional collaborations to reduce our funding requirements. AnGiven ~~important~~the ~~factor~~current volatility in ~~competition~~the ~~may~~capital bemarkets and the weakening economy, obtaining additional funding in the ~~timing~~near offuture, ~~market~~whether ~~introduction~~through ofequity ~~our~~or ~~vaccines~~debt financing and/or ~~competitive~~collaboration ~~products.~~and ~~Accordingly~~license agreements, ~~the~~or otherwise completing a merger or acquisition ~~relative~~transaction, ~~speed~~may ~~with~~be ~~which~~difficult or impossible. If we ~~can~~acquire ~~develop~~funds ~~vaccines~~by issuing securities, ~~complete~~dilution to ~~the~~existing ~~clinical~~stockholders ~~trials~~will ~~and~~result. ~~approval processes~~If we raise funds through additional collaborations and license ~~supply~~agreements, ~~commercial~~we ~~quantities~~will likely have to relinquish some or all of the ~~vaccines~~rights to ~~the~~our ~~market~~product candidates ~~are~~or ~~expected~~technologies tothat ~~be important~~we ~~competitive~~may ~~factors~~have otherwise developed ourselves. We ~~expect~~do ~~that~~not ~~competition~~have committed ~~among~~sources ~~products~~of ~~approved~~additional ~~for~~funding ~~sale~~and ~~will~~may not be able to obtain additional funding, ~~based~~particularly if volatile conditions in the capital markets, ~~among~~and ~~other~~more ~~things~~particularly in the markets for biotechnology company stocks, onpersist. ~~product~~Our ~~effectiveness~~failure to obtain additional funding may require us to delay, ~~safety~~reduce the scope of or eliminate one or more of our current research and development projects, ~~reliability~~sell certain of our assets (including one or more of our drug programs or technologies), sell ~~availability~~our company, ~~price~~or dissolve and ~~patent~~ ~~position~~liquidate all of our assets.

Litigation regarding intellectual property rights owned or used by us may be costly and time-consuming.

Litigation may be necessary to enforce the claims in any patents issued to us, to defend ourselves against any patents owned by third parties that are asserted against us, or to determine the scope and validity of others’ proprietary rights. In addition, we may have to participate in one or more interference proceedings declared by the United States Patent and Trademark Office, which could result in substantial costs to determine the priority of inventions.

If Our wecapital ~~become~~expenditures ~~involved~~include inpurchase ~~litigation~~of orproperty ~~interference~~and ~~proceedings~~equipment, weincluding ~~may~~research ~~incur substantial expense,~~ and development ~~the~~laboratory ~~proceedings~~equipment ~~may divert the attention of our technical~~ and ~~management~~product ~~personnel,~~manufacturing ~~even if we ultimately prevail~~facilities. AnCapital ~~adverse~~expenditures ~~determination~~also include inpurchase ~~proceedings~~ of ~~this~~intangible ~~type could subject us to significant liabilities~~assets, ~~allow~~including ~~our~~payment ~~competitors~~of topatent ~~market~~development ~~competitive products without obtaining a license from us~~costs, ~~prohibit us from marketing vaccines or other products or require us to seek~~and ~~licenses~~acquisition ~~from~~of third ~~parties~~party ~~that may not be available on commercially reasonable terms~~licenses, ~~if at all. If we cannot obtain such licenses~~patents, ~~we may be restricted or prevented from developing~~ and ~~commercializing~~ ~~our~~other ~~product candidates~~intangibles.

~~The~~ Our ~~enforcement~~major outstanding contractual obligations relate to our long-term debt, ~~defense~~operating lease obligations, obligations under a number of our collaboration, licensing and ~~prosecution~~consulting agreements and certain cash settlement provisions in our warrant agreements. As a result of ~~intellectual~~sanofi-aventis’ decision ~~property~~to ~~rights,~~terminate ~~United~~its ~~States~~participation ~~Patent~~in the UVIDEM development program and our decision to shut ~~Trademark~~down ~~Office~~our ~~interference~~operations ~~proceedings~~in Paris, France, we have terminated and ~~related~~transferred ~~legal~~our leases to third parties with respect to our facilities in Paris, France, and ~~administrative~~terminated ~~proceedings~~various contractual arrangements in order to minimize the financial impact of the program termination. In addition, ~~United~~the ~~States~~lease ~~and~~for ~~elsewhere~~our ~~involve~~facility ~~complex~~in ~~legal~~Irvine, ~~and~~California ~~factual~~terminates ~~questions~~November 30, 2009. AsIn aconnection ~~result~~with the termination of the lease we are required to restore certain portions of the facility, ~~these~~which we ~~proceedings~~made ~~are~~modifications ~~costly~~to ~~and~~in support of our business needs at the time~~-consuming~~, ~~and~~to their ~~outcome~~pre-existing condition. isWe ~~uncertain.~~have ~~Litigation~~estimated ~~may~~that bethe restoration would cost approximately $0.3 million, which we ~~necessary~~have ~~to:~~recorded as a current liability as of March 31, 2009.

• Under ~~assert~~certain ~~against~~of ~~others~~our collaboration and licensing agreements, such as our agreement with Novartis, we are obligated to make specified payments upon achieving certain milestones relating to the development and approval of our products, or ~~defend~~on ~~ourselves~~the ~~against~~basis ~~claims~~of net sales of ~~infringement;~~our •products. ~~enforce~~As ~~patents~~of March 31, 2009, we believe that we have achieved two milestones totaling $750,000 due to Novartis that would be payable in ~~our~~the ~~portfolio~~event ~~owned~~MEPACT byis ussuccessfully orcommercialized ~~licensed~~in ~~from~~Europe. ~~another~~As ~~party;~~such, •we have ~~protect~~recorded ~~our~~this ~~trade~~amount ~~secrets~~as orPatents, ~~know~~Trademarks and Other Licenses with a corresponding non-~~how;~~current orliability •on ~~determine~~our balance sheet as of the ~~enforceability~~quarter ended March 31, ~~scope~~2009. ~~and~~In ~~validity~~addition, under certain of our agreements with clinical sites for the ~~proprietary~~conduct ~~rights~~of our clinical trials, we make payments based on the number of ~~ours~~patients orenrolled. ~~others~~There is significant variability associated with these agreements which are impacted by a variety of estimates and assumptions, including future sales volumes and timing of clinical trials and regulatory processes, which may not be accurate, may not be realized, and are inherently subject to various risks and uncertainties that are difficult to predict and are beyond our control.

If In order to focus on those areas we ~~cannot~~believe ~~obtain~~can provide the most near term value to our stockholders and ~~maintain~~to ensure we have adequate cash to complete our review of strategic ~~collaborations~~options for the Company, we are concentrating our near-term efforts on ~~acceptable~~certain ~~terms~~MEPACT pre-launch commercial activities in Europe and the ~~future~~review of such strategic options, weincluding merger or acquisition opportunities, which may involve a change in control of our company. Consequently, we have placed ~~not~~the beU.S. ~~able~~mifamurtide NDA amendment submission on hold until we complete our strategic review, which will allow us to ~~develop~~operate ~~products~~into the third quarter of 2009. Our future capital requirements, the timing and amount of expenditures and the adequacy of available capital will depend upon a number of factors. These factors include the scope and progress of our research and development programs, our ability to sign new collaboration agreements, our progress in ~~markets~~developing ~~where~~and itcommercializing new ~~would~~products beresulting ~~too~~from ~~costly~~our ordevelopment ~~complex~~programs and collaborations including the achievement of milestones, the cost of launching, marketing and sales of products if we choose to docommercialize products soourselves, ontechnological developments, our preparation and filing of patent applications, ~~own~~our securing and maintaining patents and other intellectual property rights and our dealings with the regulatory process. See the section entitled “Trends” below.

WeOff-Balance ~~will~~Sheet ~~need to enter into and maintain collaborative arrangements with pharmaceutical and~~Arrangements biotechnology companies or other strategic partners both for development and commercialization of potential vaccine products in markets where it would be too costly or complex to do so on our own. Currently, our only collaborations are with Innogenetics and Bavarian Nordic. If we are not able to enter into and maintain additional research and development collaborations or other collaborations in the future on acceptable terms, we may be forced to abandon development and commercialization of some vaccine product candidates.

If As ~~our~~of ~~collaboration~~March 31, or2009, ~~license~~we ~~arrangements~~were ~~are~~not ~~unsuccessful,~~a ~~our~~party ~~revenues~~to ~~and~~any ~~product~~transactions, ~~development~~agreements or contractual ~~may~~arrangements beto ~~limited.~~which an entity that is not consolidated with us was a party, under which we had:

~~Our~~• ~~collaborations~~any obligations under a guarantee contract; • a retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support for such assets; • any obligation under a derivative instrument that is both indexed to our stock and ~~license~~classified ~~arrangements~~in ~~generally~~shareholders’ ~~pose~~equity, ~~the~~or ~~following~~not ~~risks:~~ reflected, in our statement of financial position; or

• collaborators and licensees may not pursue further development and commercialization of potential products resulting from our collaborations or may elect not to renew research and development programs; • collaborators and licensees may delay clinical trials, under-fund a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require new formulation of a product candidate for clinical testing; • expected revenue might not be generated because milestones may not be achieved and product candidates may not be developed; • collaborators and licensees could independently develop, or develop with third parties, products that could compete with our future products; • the terms of our contracts with our current or future collaborators and licensees may not be favorable to us in the future;

• aany ~~collaborator~~obligation, orincluding ~~licensee~~a ~~with~~contingent ~~marketing~~obligation, ~~and~~arising ~~distribution~~out ~~rights to one or more~~ of ~~our~~a ~~products~~variable ~~may~~interest, ~~not~~in ~~commit~~an ~~enough~~unconsolidated ~~resources~~entity tothat ~~the~~is ~~marketing~~held by, and ~~distribution~~material ofto, ~~our products~~us, ~~limiting~~where ~~our~~such ~~potential~~entity ~~revenues~~provides ~~from~~financing, ~~the~~liquidity, ~~commercialization~~market ofrisk ~~a product; • disputes may arise delaying~~ or ~~terminating~~credit ~~the~~risk ~~research,~~support ~~development~~to ~~or commercialization of our product candidates~~us, or ~~result~~engages in ~~significant~~leasing, ~~and~~hedging ~~costly litigation~~ or ~~arbitration;~~research and ~~• collaborations and licensee arrangements may be terminated and we will experience increased operating expenses and capital requirements if we elect to pursue further~~ development ofservices ~~the~~with ~~product candidate~~us.

~~We may not be able to obtain licenses to technology that is necessary for us to develop products.~~Trends

We The ~~may~~level beof ~~required~~our toresearch ~~enter~~and ~~into~~development ~~licenses~~spending orwill ~~other~~depend ~~collaborations~~on ~~with~~numerous ~~third~~factors ~~parties in order to~~including ~~access~~the ~~technology~~number ~~that~~of isproducts ~~necessary~~in todevelopment, ~~successfully~~the ~~develop~~number ~~certain~~ of ~~our~~ products. Wepartnered, ~~may~~the ~~not successfully~~results ~~negotiate~~and ~~acceptable licenses or other collaborative arrangements that will allow us~~progress toof ~~access~~nonclinical ~~such technologies. If we cannot obtain~~ and ~~maintain~~clinical ~~license~~testing, ~~rights~~the onregulatory ~~acceptable~~approval ~~terms~~process ~~to access~~for ~~necessary~~our ~~technologies~~products, weespecially for ~~may~~mifamurtide bein ~~prevented~~the ~~from~~U.S. ~~developing~~in ~~some~~the ~~product~~near ~~candidates. In addition~~term, ~~any~~our ~~technologies~~financial ~~accessed~~condition ~~through~~and ~~such~~ability ~~licenses~~to orraise additional ~~other~~capital ~~collaborations~~as ~~may~~well ~~not~~as ~~help~~general ~~us achieve~~market ~~our product development goals~~conditions.

We For ~~may~~the ~~not~~three bemonths ~~able~~ended March 31, 2009 and 2008, we have spent approximately $3.0 million and $3.9 million, respectively, related to ~~commercialize~~research and development. As a result of sanofi-aventis’ decision to terminate its participation in the UVIDEM development program and our decision ~~products~~to ~~under~~shut down our operations in Paris, France, and the granting of marketing authorization in Europe for MEPACT, we expect our research and development ifexpenses ~~they~~to ~~infringe~~decrease ~~claims~~in 2009 from 2008 levels. Spending on MEPACT associated with certain pre-launch commercial activities in Europe will ~~existing~~be ~~patents~~partially oroffset ~~patents~~as ~~that~~a ~~have~~result ~~not~~of ~~yet~~shutting ~~issued,~~down our French operations and ~~this~~related ~~would~~development activities. ~~materially~~In ~~harm~~addition, the lease for our ~~ability~~facility in Irvine, California terminates November 30, 2009. In connection with the termination of the lease we are required to restore certain portions ~~operate~~of the facility, which we made modifications to in support of our business needs at the time, to their pre-existing condition. We have estimated that the restoration would cost approximately $0.3 million, which we have recorded as a current liability as of March 31, 2009.

As If iswe ~~typical~~are inunable ~~the~~to ~~biotechnology~~find ~~industry,~~a ~~our~~commercialization ~~commercial~~partner ~~success~~and ~~will~~proceed ~~depend~~with incommercialization ~~part on our~~of ~~ability~~MEPACT toin ~~avoid~~Europe ~~infringing~~ourselves, ~~patents~~we ~~issued~~expect toour ~~others~~selling orand ~~breaching~~marketing ~~the~~expenses ~~technology~~to ~~licenses upon~~increase ~~which~~correspondingly wewith ~~might base~~ our ~~vaccines~~activities orto ~~other~~commercialize ~~products~~MEPACT. WeIn ~~are~~addition, ~~aware~~we ofwould ~~patents~~expect ~~issued~~ to ~~others that~~incur ~~contain~~significant ~~claims~~costs ~~that~~related ~~may~~to ~~cover~~manufacturing ~~certain aspects of our or our collaborators’ technologies~~MEPACT, ~~including cancer~~which ~~vaccine~~would ~~epitopes,~~be ~~HIV~~recorded ~~vaccine~~as ~~epitopes,~~cost ~~and~~of ~~methods~~goods ~~for delivering DNA vaccines to patients~~sold. WeFurthermore, dodepending ~~not~~on ~~believe~~the ~~that~~outcome ~~any~~ of ~~these~~the ~~known~~NDA ~~patents~~filing ~~are~~with ~~likely to require us to obtain a license in order to pursue~~ the ~~development~~FDA orfor ~~commercialization of our vaccine product candidates. However~~mifamurtide, we may beowe milestone ~~required~~payments toas ~~take~~well aas ~~license~~royalties ~~under~~in ~~one~~the orevent ~~more~~ of ~~these~~its ~~patents to practice certain aspects of our vaccine technologies in the United States~~commercialization, ~~and~~under ~~such~~ a ~~license may not be available on~~licensing ~~commercially~~agreement ~~reasonable~~with ~~terms~~Novartis, ifwhich atwas ~~all.~~transferred ~~If we fail~~ to ~~obtain~~us aby ~~license~~Jenner ~~on acceptable terms to any technology that we need~~ in ~~order~~2003. toHowever, ~~develop or commercialize~~ our ~~vaccines or other products, or to~~obligations ~~develop~~to anmake ~~alternative~~milestone ~~vaccine~~payments orare ~~other~~contractually ~~product~~deferred ~~that~~until ~~does~~we ~~not~~realize ~~infringe~~profitability on ~~the patent rights of others, we would be prevented from commercializing our vaccine, and our business would be harmed~~MEPACT.

If We ~~we,~~expect or our ~~collaborators~~general ~~cannot~~and ~~cost-effectively~~administrative ~~manufacture~~expenses ~~vaccines~~to decrease in ~~commercial~~2009 ~~quantities~~compared to 2008 levels ~~and~~as ~~for~~a ~~clinical~~result ~~trials~~of insanofi-aventis’ ~~compliance~~decision ~~with~~to ~~regulatory~~terminate ~~requirements,~~its ~~we,~~participation orin ~~our~~the ~~collaborators~~UVIDEM ~~may~~development ~~not~~program beand ~~able~~our decision to ~~successfully~~shut ~~commercialize~~down ~~the~~our ~~products~~operations in Paris, France and our near-term focus on strategic alternatives.

We have not commercialized any products, and we do not have the experience, resources or facilities to manufacture vaccines on a commercial scale. We will not be able to commercialize any vaccines and earn product revenues unless we, or our collaborators, demonstrate that we can manufacture commercial quantities of vaccines in accordance with regulatory requirements. Among the other requirements for regulatory approval is the requirement that prospective manufacturers conform to the FDA’s Good Manufacturing Practices (GMP) requirements specifically for biological drugs, as well as for other drugs. In complying with the FDA’s GMP requirements, manufacturers must continue to expend time, money and effort in production, record keeping and quality control to assure that the product meets applicable specifications and other requirements.

WeITEM ~~currently rely and intend to continue to rely on third-party contract manufacturers to produce materials needed for clinical trials and, ultimately, for product commercialization~~3. ~~Third-party manufacturers~~QUANTITATIVE ~~may~~AND ~~not~~QUALITATIVE beDISCLOSURES ~~able~~ABOUT toMARKET ~~meet our needs with respect to timing, quantity or quality. If we~~RISK are unable to contract for a sufficient supply of needed materials on acceptable terms, or if we encounter delays or difficulties in our relationships with manufacturers, it may delay clinical trials, regulatory approvals and marketing efforts for our vaccines. Such delays could adversely affect our ability to earn revenues and our chances of achieving profitability. We cannot be sure that we can manufacture, either on our own our through contracts with outside parties, vaccines at a cost or in quantities that are commercially viable.

If At weMarch 31, do2009, ~~not~~our ~~successfully~~investment ~~develop~~portfolio included cash and ~~commercialize~~money market accounts. Approximately $5.7 million of our ~~products~~cash is invested in three money market mutual funds, which consist primarily of government and high-grade securities, generally with maturities of less than three months. Due to their very short-term nature, such securities are subject to minimal interest rate risk. However, our investment can be affected by losses to the extent the underlying securities are adversely impacted by the current credit market conditions. The money market mutual funds are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve the value of the investment at $1.00 per share, we can lose the invested principal if the underlying securities suffer losses. The funds may have ~~never~~holdings ~~generate~~which ~~significant~~include certain securities that are illiquid, in default, under restructuring ~~revenues~~or have been subject to a ratings downgrade. However, the funds continue to report a per share net asset value, or ~~become~~NAV, ~~profitable~~of $1.00, which represents the price at which investors buy and sell fund shares from and to the fund company. The NAV is computed once at the end of each trading day based on the closing market prices of the portfolio’s securities. We believe that our investment has not been impaired and that we can continue to withdraw our funds at any time without restriction. We will continue to monitor the value of the funds periodically for potential indicators of impairment

We ~~have~~currently do not ~~completed~~hedge ~~the~~interest ~~development~~rate ofexposure, ~~any product~~ and, ~~accordingly,~~any ~~have~~decline ~~not~~in ~~begun~~interest torates ~~market~~over ortime ~~generate~~will ~~revenues~~reduce ~~from~~our ~~the~~interest ~~commercialization~~income, ofwhile ~~any~~increases ~~product.~~in Weinterest dorates ~~not~~over ~~expect~~time towill ~~market~~increase ~~any of~~ our ~~therapeutic~~interest ~~or prophylactic vaccines or any other products for at least six years (and this would assume approval of either our HIV or NSCLC product candidate, which may not occur)~~income. IfWe wealso do not ~~successfully~~ ~~develop~~hedge ~~and~~currency ~~commercialize~~exchange ~~products,~~rate ~~we will never generate revenues that would allow us to become profitable~~exposure.

The ~~lengthy~~current ~~approval~~credit ~~process~~crisis ~~and~~may ~~uncertainty~~also ofhave ~~government~~a ~~regulatory~~potential ~~requirements~~impact ~~may~~on ~~impair~~ our ~~ability~~ need to ~~develop,~~obtain ~~manufacture~~additional financing in the future and ~~sell~~may ~~any~~impact ~~vaccines~~the determination of fair values, financial instrument classification, or require impairments in the future.

We, and our collaborators, cannot commercialize our vaccines or other products if we do not receive FDA or state regulatory approval to market our products. The regulatory process for new therapeutic drug products, including the required preclinical studies and clinical testing, is lengthy, uncertain and expensive. We, and our collaborators, may not receive necessary FDA clearances for any of our vaccines or other potential products in a timely manner, or at all. Once approved, we are subject to the continuing requirements of the FDA.

Noncompliance with initial or continuing requirements can result in, among other things:

• fines and penalties; • injunctions; • seizure of products; • total or partial suspension of product marketing; • failure of the government to grant a new drug application; • withdrawal of marketing approvals; and • criminal prosecution.

The length of the clinical trial process and the number of patients the FDA will require to be enrolled in clinical trials in order to establish the safety and efficacy of our products is uncertain. In addition, our clinical studies may not provide the FDA with sufficient clinical data to permit approval of a new drug application, or NDA, or a biologic license application, or BLA, even though we, or our collaborators, believe we are doing the right studies based on the protocol. The FDA or we and our collaborators may decide to discontinue or suspend clinical trials at any time if the subjects or patients who are participating in such trials are being exposed to unacceptable health risks or if the results show no or limited benefit in patients treated with the vaccine compared to patients in the control group.

~~Regulatory~~ITEM ~~requirements are evolving and uncertain~~4T. ~~Future~~CONTROLS ~~United~~AND ~~States or state legislative or~~PROCEDURES administrative acts could also prevent or delay regulatory approval of our products. Even if we obtain commercial regulatory approvals, the approvals may significantly limit the indicated uses for which we may market our products.

~~The~~Evaluation ~~approval~~of ~~process~~disclosure ~~outside~~controls ~~the United States is also uncertain~~ and ~~may limit our ability to~~procedures ~~develop, manufacture and sell our products internationally.~~

To As ~~market~~of ~~any~~March 31, ~~drug~~2009, ~~products~~we ~~outside~~have performed an evaluation of the ~~United~~effectiveness ~~States,~~of weour disclosure controls and ~~our~~procedures ~~collaborators~~(as ~~are~~defined ~~also~~in ~~subject to~~Exchange ~~numerous~~Act ~~and~~Rule 13a-15(e)) ~~varying~~as ~~foreign~~of ~~regulatory~~the ~~requirements,~~end ~~implemented~~of the period covered by ~~foreign~~this ~~health~~Quarterly ~~authorities, governing~~Report under the ~~design~~supervision and ~~conduct~~with the participation of ~~human~~our management, ~~clinical~~including ~~trials~~our President and ~~marketing~~Chief ~~approval~~Executive ~~for~~Officer, ~~vaccines~~ or CEO, our principal executive ~~other~~officer, ~~drug~~and ~~products.~~our ~~The~~Senior ~~approval~~Vice ~~procedure~~President, ~~varies~~Finance ~~among~~and ~~countries~~Administration and ~~can~~Chief ~~involve~~Financial ~~additional~~Officer, or ~~testing~~CFO, ~~and~~our ~~the~~principal ~~time~~financial ~~required~~officer. toThe ~~obtain~~Chief ~~approval~~Executive ~~may~~Officer ~~differ~~and ~~from~~Chief ~~that~~Financial ~~required~~Officer tohave concluded ~~obtain~~that ~~FDA approval.~~our ~~The~~disclosure ~~foreign~~controls ~~regulatory~~and ~~approval~~procedures ~~process~~are ~~includes~~effective ~~all~~as of the ~~risks~~end ~~associated~~of ~~with~~the period ~~obtaining~~covered ~~FDA~~by ~~approval~~this ~~set~~Quarterly ~~forth~~Report ~~above,~~based on their evaluation of these controls and ~~approval~~procedures required by ~~the~~paragraph ~~FDA~~(b) of ~~does~~Exchange ~~not~~Act ~~ensure~~Rules 13a-15 ~~approval~~and by15d-15. ~~the~~A controls system, no matter how ~~health~~well ~~authorities~~designed and operated, cannot provide absolute assurance that the objectives of ~~any~~the ~~other~~controls are ~~country~~met, ~~nor~~and ~~does~~no ~~the~~evaluation ~~approval~~of bycontrols ~~foreign~~can ~~health~~provide ~~authorities~~absolute ~~ensure~~assurance that all controls and ~~approval~~instances byof ~~the~~fraud, ~~FDA~~if any, within a company have been detected.

~~Even~~Changes ifin weinternal ~~obtain~~control ~~regulatory~~over ~~approval,~~financial ~~we may be required to perform additional clinical trials or~~reporting ~~change the labeling of our products if we, or others identify side effects after our products are on the market, which could harm sales of the affected products.~~

If We ~~we,~~have ornot ~~others~~made ~~identify~~any ~~adverse~~significant ~~side~~changes ~~effects~~to ~~after~~our ~~any~~internal ofcontrol ~~our~~over ~~vaccines~~financial orreporting ~~other~~(as defined ~~drug~~in ~~products~~Exchange ~~are on~~Act Rules 13a-15(f) and 15d-15(f)) during the ~~market~~quarter ended March 31, 2009 that have materially affected, or ifare ~~manufacturing~~reasonably ~~problems~~likely ~~occur:~~to materially affect, our internal control over financial reporting.

• regulatory approval may be withdrawn; • reformulation of our products, additional clinical trials, changes in labeling of our products or changes to or re-approvals of our manufacturing facilities may be required; • sales of the affected products may drop significantly; • our reputation in the marketplace may suffer; and • lawsuits, including costly and lengthy class action suits, may be brought against us.

Any of the above occurrences could halt or reduce sales of the affected vaccines or other products or could increase the costs and expenses of commercializing and marketing these vaccines or other products.

If we are unable to protect our trade secrets, we may be unable to protect from competitors our interests in proprietary know-how that is not patentable or for which we have elected not to seek patent protection.

Our competitive position depends in part on our ability to protect trade secrets that are not patentable or for which we have elected not to seek patent protection. To protect our trade secrets, we rely primarily on confidentiality agreements with our collaborative partners, employees and consultants. Nevertheless, our collaborative partners, employees and consultants may breach these agreements and we may be unable to enforce these agreements. In addition, other companies may develop similar or alternative technologies, methods or products or duplicate our technologies, methods or vaccines that are not protected by our patents or otherwise obtain and use information that we regard as proprietary, and we may not have adequate remedies in such event. Any material leak of our confidential information into the public domain or to third parties could harm our competitive position.

IfPART weII. ~~lose~~OTHER ~~our key scientific and management personnel or are unable to attract and retain~~INFORMATION ~~qualified personnel, it could delay or hurt our epitope identification and vaccine development efforts.~~

WeITEM ~~are highly dependent on the principal members of our scientific and management staff~~1. WeLEGAL ~~do not~~PROCEEDINGS ~~maintain key person life insurance on the life of any employee and, although we have an employment~~ contract with Dr. Emile Loria, he may terminate his employment at any time. Our ability to identify epitopes, develop vaccines and achieve our other business objectives also will depend in part on the continued service of our key scientific and management personnel and our ability to identify, hire and retain additional qualified personnel. There is intense competition for qualified personnel in biochemistry, molecular biology, immunology and other areas of our activities, and we may not be able to continue to attract and retain such personnel necessary for the development of our business. Because of the intense competition for qualified personnel among technology-based businesses, particularly in the San Diego area, we may not be successful in adding technical personnel as needed to meet the staffing requirements of additional collaborative relationships. Our failure to attract and retain key personnel could delay or be significantly detrimental to our product development programs and could cause our stock price to decline.

We ~~out-license~~are ~~technology~~not ~~outside~~a ofparty ~~our~~to ~~core area of focus, and these licensees may not develop~~ any ~~products~~material ~~using~~legal ~~our technology, which may limit our revenue~~proceedings.

WeITEM ~~have licensed to third parties some of our technology in markets that we are not pursuing ourselves or with our collaborators~~1A. IfRISK ~~these licensees are not successful in developing and~~FACTORS commercializing products using our technology, our revenues would be limited. Our licensees may pursue alternative technologies or develop alternative products either on their own or in collaboration with others in competition with products developed under licenses or collaborations with us.

~~Some~~ We ofwish ~~our~~to ~~programs~~caution ~~are~~readers ~~funded~~that by the ~~U.S.~~following ~~government~~important ~~and~~factors, ~~therefore~~among others, in some cases have affected our results and in the ~~government~~future ~~may~~could ~~have~~cause our actual results and needs to vary ~~rights~~materially from forward-looking statements made from time to ~~certain~~time by us on the basis of management’s ~~our~~then-current ~~technology~~expectations. The business in which we are engaged is in a rapidly changing and ~~could~~competitive ~~require~~market usand toinvolves ~~grant~~a ~~licenses~~high degree of ~~our~~risk, ~~technology~~and accuracy with respect to ~~third~~forward-looking ~~parties~~projections is difficult.

We The ~~fund~~Company ~~certain~~has ofmarked ~~our~~with ~~research~~an ~~and~~asterisk ~~development~~those ~~related~~risk tofactors ~~our~~that ~~HIV,~~reflect ~~cancer~~changes ~~and malaria programs pursuant to grants~~ from the ~~U.S.~~risk factors ~~government.~~included Asin ~~a result of these grants,~~ the ~~government~~Company’s ~~may~~Annual ~~have rights~~Report inon ~~the~~Form ~~technology~~10-K ~~and~~filed ~~inventions developed~~ with ~~government funding. In addition,~~ the ~~government~~ may require us to grant to a third party an exclusive license to any inventions resulting from the grant if the government determines that we have not taken adequate steps to commercialize inventions, or for public health or safety needsSEC.

~~Adverse~~*Our ~~determinations~~substantial ~~concerning~~additional ~~product~~capital ~~pricing,~~requirements ~~reimbursement~~will ~~and~~require ~~related~~that ~~matters~~we ~~could~~obtain ~~prevent~~additional funding if uswe ~~from~~do ~~successfully~~not ~~commercializing~~complete ~~products~~a ~~and~~strategic ~~impair~~transaction; ~~our~~if ~~ability~~we are not able to ~~generate~~obtain ~~revenues~~additional funding when needed, we may be required to sell our assets or our company, or dissolve and liquidate all of our assets.

~~Our~~ We ~~ability~~will continue to ~~successfully~~spend ~~commercialize~~substantial ~~our~~amounts ~~vaccines~~on orresearch ~~other~~and ~~products~~development, ~~may~~including regulatory ~~depend~~activities inassociated ~~part~~with ongaining marketing authorization for mifamurtide in the U.S. ~~extent~~and topre-commercial ~~which~~activities ~~reimbursement~~for mifamurtide, including amounts spent for ~~the~~manufacturing ~~cost~~clinical and ofcommercial supplies. While we have taken appropriate steps designed to contain such ~~products~~expenses, we ~~and~~cannot ~~related~~be ~~treatment~~certain that we will bereduce our expenses sufficiently in light of our available funds. ~~from~~We ~~government~~will ~~health~~need ~~administration~~to ~~authorities,~~raise ~~private~~additional ~~health~~funding ~~insurers~~to ~~and~~continue ~~other~~to ~~organizations~~operate our business if we do not complete a strategic partnership or transaction. We do not have committed external sources of funding and ~~Third-party~~may ~~payors~~not ~~are~~be ~~increasingly~~able ~~challenging~~to ~~the~~obtain ~~price~~any additional funding as a result of ~~medical~~the ~~products~~volatile ~~and~~market ~~services.~~conditions, ~~Significant~~particularly ~~uncertainty~~for ~~exists~~biotechnology ascompanies. In order to ~~the~~focus ~~reimbursement~~on ~~status~~those ofareas ~~newly~~we ~~approved~~believe ~~health~~can ~~care~~provide ~~products,~~the most near term value to our stockholders and to ensure we have adequate ~~third~~cash to complete our review of strategic options for the Company, we are concentrating our near-~~party~~term ~~coverage~~efforts ~~may~~on ~~not~~certain MEPACT bepre-launch ~~available~~commercial toactivities ~~enable~~in usEurope toand ~~maintain~~review ~~price~~of such strategic options, including ~~levels~~merger ~~sufficient~~or toacquisition ~~realize~~opportunities, anwhich ~~appropriate~~may ~~return~~involve a change in control of our company. Consequently, we have placed the U.S. mifamurtide NDA amendment submission on hold until we complete our ~~investment~~strategic inreview, ~~product~~which ~~development~~we believe will allow us to operate into the third quarter of 2009. Our future operational and capital requirements will depend on many factors, including:

~~Product~~• ~~liability~~whether ~~risks~~or ~~may~~not ~~expose~~we usare able to ~~significant~~complete ~~liability~~a strategic transaction on terms that ~~could~~are ~~cause~~favorable to us, or at all; • whether we are able to ~~incur significant~~secure additional financing on favorable terms, or at all; • the costs associated with, and the success of, obtaining pricing approval for MEPACT in Europe, and for obtaining marketing and pricing approval for mifamurtide in the U.S. and the timing of any such approvals; • the success or ~~cease~~failure ~~developing~~of the product launch and commercialization of MEPACT in Europe; • the costs associated with filing an NDA amendment for mifamurtide as a result of what the FDA requested and may request later from us in such filing; • the costs associated with planning for and conducting clinical trials for our ~~products.~~ product candidates, including IDM-2101, our lung cancer vaccine candidate; • progress with other nonclinical testing and clinical trials in the future; • our ability to establish and maintain collaboration and license agreements and any government contracts and grants; • the actual revenue we receive under any license agreements;

Our business exposes us to potential product liability risks that are inherent in the testing, manufacturing and marketing of human therapeutic products. While we currently have product liability insurance for an

~~early~~• ~~stage~~the ~~clinical~~time ~~trial,~~and wecosts ~~cannot~~involved bein ~~sure~~obtaining ~~that~~and wemaintaining ~~can~~regulatory ~~maintain~~approvals ~~such~~for ~~insurance~~our onproducts; ~~acceptable terms~~• orthe ~~obtain~~costs ~~acceptable~~involved ~~insurance~~in asfiling, weprosecuting, ~~progress~~enforcing ~~through~~and ~~product~~defending ~~development~~patent claims and ~~commercialization,~~ orany ~~that~~other ~~our~~proprietary ~~insurance~~rights; ~~will~~• ~~provide~~competing ~~adequate~~technological ~~coverage~~and ~~against~~market ~~potential liabilities,~~developments; ~~either~~and in• ~~human~~the ~~clinical~~magnitude ~~trials~~of orour ~~following~~immunotherapeutic ~~commercialization~~product ofdiscovery ~~any~~and ~~vaccines~~development ~~we may develop~~programs.

~~Our~~ In ~~use~~the ofevent ~~hazardous~~that ~~materials~~we ~~could~~do ~~expose~~not complete a strategic transaction, we will likely seek additional funding, which may be accomplished through equity or debt financings and/or collaboration and license agreements and we are considering various business alternatives, including merger and acquisition transactions. Given the current volatility in the capital markets and the weakening economy, obtaining additional funding in the near future, whether through equity or debt financing and/or collaboration and license agreements, or otherwise completing a merger and acquisition transaction, may be difficult or impossible. We may not be able to obtain additional financing or accomplish any other business transaction we decide to pursue on terms that are favorable to us or at all. For example, the terms of the February 2007 $12.9 million private placement of our common stock include various penalties equal to ~~significant~~up ~~costs~~to approximately $1.6 million on an annual basis that may become due if, among other things, the resale registration statement we have filed in connection with that private placement is not available for resale by the purchasers in the private placement and under certain other conditions set forth in the unit purchase agreement related to the private placement. In addition, we may not be able to enter into additional collaborations to reduce our funding requirements. If we acquire funds by issuing securities, dilution to existing stockholders will result. If we raise funds through additional collaborations and license agreements, we will likely have to relinquish some or all of the rights to our product candidates or technologies that we may have otherwise developed ourselves.

Our ~~research~~failure ~~and~~to ~~development~~obtain ~~processes~~additional ~~involve~~funding ~~the~~may ~~controlled~~require ~~storage,~~us ~~use~~to ~~and disposal of hazardous materials~~delay, ~~chemicals~~reduce ~~and~~the ~~radioactive~~scope ~~compounds.~~of Weor eliminate ~~are~~one ~~subject~~or tomore ~~federal,~~of ~~state~~our ~~and local~~current ~~laws~~research and ~~regulations~~development ~~governing the use~~projects, ~~manufacture,~~sell ~~storage,~~certain ~~handling and disposal~~ of ~~these~~our assets ~~materials~~(including ~~and~~one ~~some~~or ~~waste~~more ~~products. The risk~~ of ~~accidental~~our ~~contamination~~drug programs or ~~injury~~technologies), ~~from~~sell ~~these materials~~our ~~cannot~~company, beor ~~completely~~dissolve ~~eliminated.~~and liquidate Inall ~~the event~~ of anour ~~accident,~~assets. weFor ~~could be held liable for any damages that result~~example, ~~and~~given ~~any~~constraints ~~liability~~on ~~could exceed~~ our cash resources., Wewe ~~cannot~~have discontinued befurther ~~sure~~development ~~that compliance~~of ~~with~~UVIDEM, ~~environmental~~BEXIDEM ~~laws~~ and ~~regulations~~COLLIDEM incandidates ~~the~~as ~~future~~we ~~will~~devote ~~not entail significant costs,~~existing orcapital ~~that our ability~~ to ~~conduct~~the ~~research and~~ development ~~activities~~of ~~will~~our ~~not~~lead beproduct ~~harmed~~candidate, ~~by current or future environmental laws or regulations~~mifamurtide.

~~The~~*We ~~subordination~~may ofnot ~~our~~be ~~common~~able ~~stock~~ to ~~our~~continue ~~preferred~~as ~~stock~~a ~~could~~going ~~hurt~~concern ~~common~~or ~~stockholders~~fund ~~and, upon conversion,~~ our ~~preferred~~existing ~~stock~~capital ~~will further dilute our holders of common stock~~needs.

Our ~~common~~independent ~~stock~~registered ispublic ~~expressly~~accounting ~~subordinate~~firm tohas ~~our~~included ~~series~~an Sexplanatory ~~and~~paragraph ~~series~~in their ~~S-1~~report ~~preferred~~on ~~stock~~our 2008 financial statements filed in our Annual Report, with the SEC on March ~~event~~31, of2009, ~~our~~as ~~liquidation~~amended, ~~dissolution~~related orto ~~winding~~the ~~up.~~uncertainty ~~With~~of ~~respect~~our ability to ~~our~~continue ~~series~~as Sa ~~preferred,~~going ~~any~~concern. ~~merger~~There oris ~~sale~~substantial ofdoubt ~~substantially~~as ~~all~~to ofwhether ~~our~~we ~~assets~~will ~~shall~~ be ~~considered~~able to continue as a ~~deemed~~going ~~liquidation.~~concern Ifbeyond wethe ~~were~~third toquarter ~~cease~~of ~~operations~~2009 ~~and~~without ~~liquidate~~access ~~our~~to ~~assets,~~additional wecapital. ~~would~~There ~~first~~can be ~~required~~no toassurance ~~pay~~that ~~$10 million~~we towill ~~our~~be ~~holders~~able ofto ~~preferred~~obtain ~~stock~~additional ~~and~~funds ~~there~~during ~~may~~2009 ~~not~~on besatisfactory ~~any~~terms, ~~remaining~~or ~~value~~at ~~available~~all. ~~for~~If ~~distribution~~we are unable to ~~the~~complete ~~holders~~a ofstrategic ~~common~~partnership ~~stock~~or ~~after~~transaction ~~providing~~and ~~for~~if ~~the~~we ~~series~~cannot Sobtain ~~and~~sufficient ~~series~~additional financing Sin the short-1term, ~~preferred~~we ~~stock~~may be forced to restructure or significantly curtail our ~~liquidation~~operations, ~~preference~~file for bankruptcy or cease operations. InThe ~~addition,~~consolidated ~~due~~financial tostatements do not include any adjustments relating to the ~~conversion~~recoverability ~~price~~and classification of ~~our~~recorded ~~series~~asset Samounts ~~preferred~~or ~~stock,~~amounts inand ~~the~~classification ~~event~~of ~~our~~liabilities ~~series~~that Smight ~~preferred~~be ~~stock~~necessary isshould ~~converted~~we be forced to ~~common~~take any ~~stock~~such actions. Based upon the foregoing, itour ~~will~~independent registered public accounting firm has ~~further~~included ~~dilute~~an explanatory paragraph in their report on our ~~holders~~2008 offinancial ~~common~~statements ~~stock~~related to the uncertainty in our ability to continue as a going concern.

~~The~~We ~~volatility~~are ofevaluating ~~the~~and ~~price~~considering ofstrategic ~~our~~transactions, ~~common~~but ~~stock~~we may ~~hurt~~not ~~our~~be ~~stockholders~~able to complete any transaction successfully.

As previously announced, we are evaluating strategic alternatives available to us. The options ~~market~~we ~~prices~~are ~~for~~considering ~~securities~~include ofvarious ~~biotechnology~~strategic ~~companies~~transactions, including ~~our~~merger ~~common~~or ~~stock~~acquisition opportunities, ~~have historically~~which ~~been~~may ~~highly~~involve ~~volatile,~~a ~~and~~change ~~the~~in ~~market~~control ~~from~~of ~~time~~our tocompany. ~~time~~We ~~has~~have ~~experienced~~engaged ~~significant~~JMP ~~price~~Securities, ~~and~~LLC, ~~volume~~an ~~fluctuations~~investment ~~that~~bank, ~~are~~to ~~not~~advise ~~necessarily~~us ~~related~~in toexploring ~~the~~alternatives ~~operating~~available ~~performance~~to ofus ~~such~~with ~~companies.~~respect ~~From~~to ~~January 1,~~a ~~2004~~possible ~~through~~merger ~~June 30,~~or ~~2005,~~acquisition ~~our~~transaction. ~~closing~~Our ~~stock~~consideration ~~price~~and ~~has~~completion ~~ranged~~of ~~from~~any ~~$0.65~~strategic transaction is subject to ~~$2.66~~risks that could materially and ~~has~~adversely ~~been~~affect our business and ~~will~~financial ~~continue~~results, toincluding berisks ~~influenced~~that bywe ~~general~~will ~~market~~forego ~~and~~business ~~industry conditions.~~opportunities Inwhile ~~addition,~~any transaction ~~the~~is ~~following~~being ~~factors~~considered ~~may~~or ~~have~~is apending; ~~significant~~that ~~effect~~our onbusiness, ~~the~~including ~~market~~our ~~price~~ability ofto retain ~~our~~key ~~common~~employees, ~~stock:~~may suffer due to uncertainty; risks inherent

• whether we are able to secure additional financing on favorable terms, or at all; • announcements of technological innovations or new commercial vaccines or other therapeutic products by us or others; • governmental regulation that affects the biotechnology and pharmaceutical industries; • developments in patent or other proprietary rights; • receipt of funding under collaboration and license agreements and government grants; • developments in, or termination of, our relationships with our collaborators and licensees; • public concern as to the clinical results and/or the safety of drugs developed by us or others; and • announcements related to the sale of our stock.

Fluctuations in our financial performance from period to period also may have a significant impact on the market price of our common stock.

~~Concentration~~in ofnegotiating ~~ownership~~and ~~among~~completing ~~our~~any ~~existing officers~~transaction, ~~directors~~including whether we would be able to secure sufficient shareholder support for any transaction and ~~principal~~whether ~~stockholders~~we ~~may~~could complete a transaction on ~~prevent~~favorable ~~other~~terms ~~stockholders~~if ~~from~~at ~~influencing~~all; ~~significant~~and ~~corporate~~challenges ~~decisions~~in integrating businesses and ~~depress~~technologies ~~our~~in ~~stock~~the event ~~price~~any transaction is completed. Our efforts to implement any strategic alternative are further complicated by the current volatility in the capital markets and the weakening economy. If we are not able to complete a strategic partnership or transaction within a reasonable period of time, we will need to obtain additional funding in order to be able to continue to operate our business.

As If ofwe ~~June 30,~~were ~~2005,~~to ~~our~~complete ~~officers,~~a ~~directors~~strategic ~~and~~transaction ~~those~~for ~~stockholders~~cash ~~owning~~consideration atand ~~least~~the ~~five~~transaction ~~percent of~~were ~~our~~considered ~~outstanding~~a ~~stock~~change ~~together~~in control ~~approximately~~under ~~34.1%~~the terms of ~~our~~the ~~outstanding~~warrants ~~common~~issued ~~stock~~in ~~as converted~~our February and ~~Pfizer~~June 2007 financings, ~~Inc.,~~the ~~through~~amount ~~G.D.~~to ~~Searle~~be ~~LLC,~~paid ~~holds~~to ~~100%~~the ofwarrant ~~our~~holders ~~preferred~~would ~~stock.~~be Ifdetermined ~~some~~using orspecific ~~all~~valuation ofassumptions ~~these~~prescribed ~~officers,~~in ~~directors~~the ~~and~~warrant ~~principal~~agreements ~~stockholders~~which ~~act~~differ ~~together,~~from ~~they~~those ~~will~~used ~~be able to~~in ~~exert~~measuring athe ~~significant~~fair ~~degree~~value of ~~influence over our management and affairs and over matters requiring stockholder approval, including~~ the ~~election~~warrants ofprior ~~directors~~to ~~and~~such ~~approval~~event oras ~~disapproval~~reflected ofon ~~any proposed~~our ~~merger~~balance ~~or financing or other business combination transaction~~sheet. The ~~interests~~cash ofpayment ~~this concentration~~could ofbe ~~ownership~~significantly ~~may~~higher ~~not~~or ~~always~~lower, ~~coincide~~depending ~~with~~on ~~our interests or~~ the ~~interests~~actual ofper ~~other~~share ~~stockholders.~~transaction ~~For instance~~price, ~~officers,~~prescribed ~~directors~~volatility and ~~principal~~after ~~stockholders,~~adjusting ~~acting~~the ~~together,~~expected ~~could cause~~term us to ~~enter~~the ~~into~~actual remaining ~~transactions~~life orof ~~agreements~~the ~~that~~outstanding wewarrants ~~would~~as ~~not otherwise consider. Similarly, this concentration~~ of ~~ownership may have~~ the ~~effect~~date of ~~delaying~~the ~~or preventing a~~ change in control ~~of our company otherwise favored by our other stockholders~~. ~~This concentration of ownership also~~ ~~could depress our stock price.~~

~~Compliance~~Even ~~with~~though ~~the~~we ~~Sarbanes-Oxley~~have ~~Act~~received ofregulatory ~~2002~~approval ~~and~~for ~~other~~MEPACT ~~changing~~in ~~regulations~~Europe, ofwe ~~corporate~~currently do not have the ~~governance~~infrastructure ~~and~~or ~~public~~resources ~~disclosure~~for commercialization and we may ~~result~~not be able to secure adequate pricing and reimbursement in ~~additional~~Europe ~~expenses~~for us or any strategic partner to achieve profitability.

~~Changing~~ MEPACT ~~laws,~~is ~~regulations~~the ~~and~~only ~~standards~~product ~~relating~~candidate tofor ~~corporate~~which ~~governance~~we ~~and~~have ~~public~~received ~~disclosure,~~marketing authorization. Any ~~including~~revenues ~~the~~generated ~~Sarbanes-Oxley~~will ~~Act~~be oflimited ~~2002,~~by ~~new~~our ~~SEC~~ability ~~regulations~~to, ~~Nasdaq~~in ~~Stock~~time, ~~Market~~develop ~~rules,~~our ~~and~~own ~~new~~commercial ~~accounting~~organization ~~pronouncements~~or ~~are~~find ~~creating~~a ~~uncertainty~~partner ~~and~~for ~~additional~~the ~~complexities~~distribution ~~for~~of ~~companies~~the ~~such as ours~~product. In ~~particular~~addition, the ~~Section 404~~ability ~~internal control requirements under the Sarbanes-Oxley Act~~to ~~will~~obtain ~~continue~~adequate topricing ~~add complexity~~ and ~~costs~~reimbursement tofor ~~our~~MEPACT, ~~business~~ and ~~require~~the arate ~~significant investment~~ of ~~our~~ ~~time~~adoption and resources to complete each year. We take these new requirements seriously and expect to make every effort to ensure that we receive clean attestations on our internal controls each year from our outside auditors. To maintain high standards of ~~corporate~~the ~~governance~~product ~~and public~~are ~~disclosure,~~risks weassociated ~~intend to invest all reasonably necessary resources to comply~~ with ~~all~~the ~~other evolving~~commercialization ~~standards~~of MEPACT. ~~These~~We ~~investments~~ may ~~result~~also inface ~~increased~~competition ~~general~~from ~~and administrative expenses~~new ~~and~~treatments aor ~~diversion~~new ofinvestigational ~~management~~approaches ~~time~~with ~~and~~existing ~~attention from strategic revenue generating and cost management activities~~therapies.

We currently do not have operational sales and marketing infrastructure for MEPACT and do not currently have plans or sufficient funds to secure this capability. We would need to complete a strategic collaboration or other transaction with a strategic partner that has EU, and potentially U.S., operational commercial abilities or otherwise arrange for the commercialization ourselves, which would require financing. If we are unable to commercialize MEPACT ourselves or with or through a partner promptly, any delay would materially adversely affect our business and financial position due to reduced or delayed revenues from MEPACT sales.

In addition, the ability to obtain adequate pricing and reimbursement for MEPACT, and the rate of adoption of the product by the national healthcare systems are uncertainties that may influence the timing for commercial launch of MEPACT. MEPACT is the first ultra-orphan oncology drug approved in Europe and as such, there are no similar approved products in the EU against which the pricing and reimbursement for MEPACT can be referenced. In most European markets, demand levels for healthcare in general and for pharmaceuticals in particular are principally regulated by national governments. Therefore, pricing and reimbursement for MEPACT will have to be negotiated on a Member State by Member State basis according to national rules, as there does not exist a centralized European process. We have started the pricing and reimbursement process in certain EU Member States. As each Member State has its own national rules governing pricing control and reimbursement policy for pharmaceuticals, there are likely to be uncertainties attaching to the review process, and the level reimbursement that national governments are prepared to accept. In the current economic environment, governments and private payers or insurers are increasingly looking to contain healthcare costs, including costs on drug therapies. If we are unable to obtain adequate pricing and reimbursement for MEPACT in Europe, we or a potential strategic partner or collaborator may not be able to cover the costs necessary to manufacture, market and sell the product limiting or preventing our ability to achieve profitability.

MEPACT has received orphan drug designation in the U.S. and in the EU, which would provide us with a seven-year period of market exclusivity in the U.S. commencing on the date of FDA approval, and a 10-year period of market exclusivity in EU commencing on the date of grant of the European centralized marketing authorization, or through March 2019 in the EU. This market exclusivity would apply only to the approved indication for the treatment of osteosarcoma. However, the granted market exclusivity does not stop a similar product being considered for regulatory approval if it is proven to be clinically more effective and/or safer than MEPACT. In parallel, because MEPACT is considered a new active substance, under European pharmaceutical law, a period of 10-year regulatory data protection/exclusivity is attached to the marketing authorization. During the regulatory data protection period, no generic applicants may cross-refer to the nonclinical and clinical data contained in the file for MEPACT to support

~~ITEM~~approval 4a generic version of mifamurtide. ~~CONTROLS~~The ~~AND~~European ~~PROCEDURES~~patents for the liposomal formulation of MEPACT expired in 2005 and certain other patents covering the active ingredient in MEPACT expired at the end of 2003. As a result, if a competitor develops a new formulation for MEPACT, we may face generic competition following the expiration of market exclusivity and regulatory data protection. If we are not able to commercialize MEPACT successfully, we may not bring to market our other product candidates for several years, if ever, and our prospects will be harmed as a result.

~~(a) Evaluation~~*Our oflead ~~Disclosure~~product ~~Controls~~candidate, ~~and~~mifamurtide, ~~Procedures~~may never obtain regulatory approval in the U.S.

~~Under~~ Even ~~the~~though ~~supervision~~we ~~and~~have ~~with~~received ~~the~~marketing ~~participation~~authorization offor ~~our~~MEPACT ~~management~~in Europe, ~~including~~we ~~our~~may ~~principal~~never obtain ~~executive~~regulatory ~~officer~~approval ~~and~~in ~~principal~~the ~~financial~~U.S. ~~officer,~~We wesubmitted ~~conducted~~ an ~~evaluation~~NDA ofto the ~~effectiveness~~FDA for mifamurtide, requesting ofapproval ~~the~~for ~~design~~its ~~and~~use ~~operation~~in the treatment of ~~our~~newly ~~disclosure~~diagnosed ~~controls~~resectable ~~and~~high ~~procedures,~~grade asosteosarcoma patients ~~such~~following ~~term~~surgical isresection ~~defined under~~in ~~Rules 13a-15(e)~~combination ~~and~~with ~~15d-15(e)~~multiple ~~promulgated~~agent ~~under~~chemotherapy. In August 2007, the ~~Securities~~FDA ~~Exchange~~issued ~~Act~~a not approvable letter to us after completing the review of ~~1934,~~the asNDA for ~~amended~~mifamurtide. (In this letter, the ~~Exchange~~FDA ~~Act)~~requested data from additional clinical trials to demonstrate the benefit of mifamurtide, as ofwell ~~the~~as ~~end~~information or clarification with respect to other sections of the ~~period~~NDA. ~~covered~~In byorder ~~this~~to ~~report.~~focus ~~Based~~existing resources on ~~their evaluation,~~certain ~~our~~MEPACT ~~principal~~pre-launch ~~executive~~commercial activities ~~officer~~in Europe and ~~principal~~to ~~financial~~conserve ~~officer~~cash ~~concluded~~while ~~that~~we complete our ~~disclosure~~ ~~controls~~review ~~and~~of ~~procedures~~strategic ~~are~~options ~~effective~~for asthe Company, ofwe have placed the ~~evaluation~~U.S. ~~date~~mifamurtide NDA amendment submission on hold until we complete our review.

~~(b) Changes~~ If a single randomized trial is intended to support a marketing application, the trial should be well designed, well conducted, internally consistent and provide statistically persuasive efficacy findings, and a second trial would be ethically or practically impossible to perform. The mifamurtide marketing applications include efficacy and safety data from one Phase 3 clinical trial conducted by the COG sponsored by the NCI completed prior to our purchase of mifamurtide from Jenner in ~~Internal~~2003 ~~Control~~and ~~Over~~data ~~Financial~~from ~~Reporting~~nonclinical, Phase 1 and Phase 2 studies. The FDA may not consider nonclinical and clinical development work conducted by Ciba-Geigy, or safety and efficacy data and analyses from several Phase 1/2 and Phase 3 clinical trials, or the Phase 3 study design, conduct and analysis to be adequate or valid for their assessment of mifamurtide. These factors may cause significant delays in review, may result in the FDA requiring us to conduct additional nonclinical or clinical trials, or may result in a determination by the FDA that the quality, safety and/or efficacy data do not support marketing approval.

~~Our~~ We ~~principal~~may ~~executive~~not ~~officer~~be ~~and~~able ~~principal~~to ~~financial~~collect, ~~officer~~analyze ~~also~~and ~~evaluated~~submit ~~whether~~additional ~~any~~data ~~change~~ in ~~our~~an ~~internal~~amendment ~~control~~to ~~over~~the ~~financial~~NDA for ~~reporting~~mifamurtide, asif ~~such~~at ~~term~~all. isFurther, ~~defined~~it ~~under~~is ~~Rules 13a-15(f)~~possible ~~and 15d-15(f)~~that ~~promulgated under~~ the ~~Exchange~~additional ~~Act,~~data ~~occurred~~will ~~during~~not ~~our~~support ~~most~~the safety ~~recent~~and ~~fiscal~~efficacy ~~quarter covered~~of bymifamurtide ~~this~~in ~~report~~the ~~that~~treatment ~~has~~of ~~materially~~non-metastatic ~~affected~~osteosarcoma, orwill isnot ~~likely to materially affect, our~~allow ~~internal~~a ~~control~~more ~~over~~robust ~~financial~~efficacy ~~reporting.~~analysis ~~Based~~of ~~on their evaluation~~mifamurtide, ~~our~~will ~~principal~~not ~~executive officer~~continue ~~and~~to ~~principal~~support ~~financial~~the ~~officer~~overall ~~concluded~~survival benefit ~~that~~of ~~there~~mifamurtide ~~has been no change~~ in ~~our~~osteosarcoma, ~~internal control~~and ~~over~~may ~~financial~~not ~~reporting~~provide ~~during~~substantial ~~our~~evidence ~~most~~for ~~recent~~the ~~fiscal quarter covered by this report that~~potential ~~has~~regulatory ~~materially~~approval ~~affected,~~of ~~or is likely to materially affect, our internal control over financial reporting~~mifamurtide.

Other risks relating to regulatory approval of mifamurtide include our ability and time needed to respond to questions raised during review with regard to regulatory submissions for mifamurtide. In addition, FDA staffing issues could delay critical FDA meetings that are needed to file our amended NDA. We may not be able to address outstanding issues of the FDA. For instance, the FDA’s not approvable letter related to the NDA for mifamurtide requested data from additional clinical trials to demonstrate the benefit of mifamurtide, and we do not have sufficient financial, operational and other resources necessary to complete additional clinical trials. If we are not able to address these issues to the satisfaction of the FDA, we may not receive necessary approvals for the marketing and commercialization of mifamurtide in the U.S. when expected or at all.

Manufacturing of mifamurtide and mifamurtide components for IDM Pharma by third party suppliers is based in part on the specifications and processes established before the Phase 3 trial. We have produced MEPACT materials that meet the same specifications as the product used in pivotal clinical trials. We submitted data showing comparability of the new (IDM Pharma) and the old (Ciba-Geigy) materials in the NDA and MAA so that the data generated during nonclinical and clinical development can be used to support regulatory marketing approval. If the FDA does not accept our assessment of the comparability results, the approval in the U.S. would be significantly delayed.

Manufacturing of mifamurtide and mifamurtide components for IDM Pharma is also a complex process involving a number of suppliers and steps, and is carried out in numerous locations and countries. Managing this manufacturing process is intricate and also involves issues created by time zone and language differences as well as knowledge of local and territorial regulations. We rely on our employees, local manufacturer representatives and consultants with knowledge of the local and territorial regulations to manufacture mifamurtide and its components to meet all of the

~~PART~~required IImanufacturing and regulatory specifications. ~~OTHER~~If ~~INFORMATION~~we are unable to manufacture mifamurtide and its components in accordance with application requirements, our ability to obtain regulatory approval for mifamurtide in the U.S. would be adversely affected.

~~ITEM~~ The 1development of mifamurtide suitable for commercial distribution, the review of our NDA amendments by the FDA and stringent regulatory requirements to manufacture commercial products in various geographies have required and will continue to require significant investments of time and money, as well as the focus and attention of key personnel. ~~LEGAL~~If ~~PROCEEDINGS~~we fail to receive or are delayed in receiving regulatory approval for mifamurtide in the U.S., our financial condition and results of operations will be significantly and adversely affected.

~~From~~*We ~~time~~presently todo ~~time~~not wemeet ~~are~~all ~~involved~~of inthe ~~certain~~NASDAQ ~~litigation~~Global ~~arising~~Market ~~out~~continued oflisting requirements and our common ~~operations.~~stock Wemay ~~are~~be ~~not~~delisted from the NASDAQ Global Market which could reduce the liquidity of our ~~currently~~common ~~engaged~~stock inand ~~any~~adversely ~~legal~~affect ~~proceedings~~our ability to raise additional capital.

~~ITEM~~ Our 6common stock is currently listed on the NASDAQ Global Market under the symbol “IDMI.” ~~EXHIBITS~~In order to continue trading on the NASDAQ Global Market we must comply with the NASDAQ Global Market’s continued listing requirements, which include the requirement that we must satisfy either the $50.0 million minimum market value of listed securities requirement for ten consecutive trading days (pursuant to Rule 5450(b)(2)(A) of the NASDAQ Marketplace Rules) or the $10 million in stockholders’ equity requirement (pursuant to Rule 5450(b)(1)(A) of the NASDAQ Marketplace Rules). Our stockholders’ equity was $9.1 million as of December 31, 2008, and consequently, on April 8, 2009, we were notified by the Listing Qualifications Staff of the NASDAQ Stock Market LLC, or NASDAQ, that our common stock may be subject to delisting for failing to satisfy the $10 million in stockholders’ equity requirement, and requesting that we submit a plan describing what we intend to do in order to regain and maintain compliance with all of NASDAQ’s continued listing requirements, including the $10 million in stockholders’ equity requirement. In response to the NASDAQ notice we submitted a request to NASDAQ for an extension of time to regain compliance and NASDAQ has granted that request. Because we do not have committed external sources of funding and may not be able to obtain any additional funding due to volatile market conditions, particularly for biotechnology companies, there is a risk that we will not be able to regain compliance with the stockholders’ equity requirement during the extension period. If we do not regain compliance, and do not elect or are unable to transfer to the NASDAQ Capital Market, NASDAQ will provide written notification that our common stock will be delisted, after which we may choose to appeal the staff determination to the NASDAQ Listing Qualifications Panel. Delisting could adversely affect the market liquidity of our common stock and the market price of our common stock could decrease. Such delisting could also adversely affect our ability to obtain future financing for the continuation of our operations.

Exhibit 3.1		Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on December 2, 1991.(1)
Exhibit 3.2		Certificate of Designation of Series A Junior Participating Preferred Stock filed with the Secretary of State of Delaware on April 2, 1993.(2)
Exhibit 3.3		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on July 5, 1995.(3)
Exhibit 3.4		Certificate of Increase of Series A Junior Participating Preferred Stock filed with the Secretary of State of Delaware on July 5, 1995.
Exhibit 3.5		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on July 2, 1998.(4)
Exhibit 3.6		Certificate of Increase of Series A Junior Participating Preferred Stock filed with the Secretary of State of Delaware on July 2, 1998.(4)
Exhibit 3.7		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on November 12, 1998.(5)
Exhibit 3.8		Certificate of Designations of the Series S and Series S-1 Preferred Stock filed with the Secretary of State of Delaware on June 29, 1999.(6)
Exhibit 3.9		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on July 1, 1999.(7)
Exhibit 3.10		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on September 23, 1999.(8)
Exhibit 3.11		Certificate of Decrease of Series A Junior Participating Preferred Stock filed with the Secretary of State of Delaware on September 23, 1999.(8)
Exhibit 3.12		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on June 17, 2004.(9)
Exhibit 3.13		Amended and Restated Bylaws of the Registrant.(10)
Exhibit 4.1		Reference is made to Exhibits 3.1 through 3.13.

We are evaluating our research and development programs and considering strategic transactions, but we may not be able to complete any transaction successfully.

As previously announced, we are evaluating our research and development programs, including related assets and costs, and strategic alternatives available to us. The options we are considering include various strategic transactions, including merger or acquisition opportunities, which may involve a change in control of our Company. We have engaged JMP Securities, LLC, an investment bank, to advise us in exploring alternatives available to us with respect to a possible merger or acquisition transaction. Our consideration and completion of any strategic partnership or transaction is subject to risks that could materially and adversely affect our business and financial results, including risks that we will forego business opportunities while any transaction is being considered or is pending; that our business, including our ability to retain key employees, may suffer due to uncertainty; risks inherent in negotiating and completing any transaction, including whether we would be able to complete a transaction on favorable terms if at all; and challenges in integrating businesses and technologies in the event any transaction is completed. Our efforts to implement any strategic alternative are further complicated by the current volatility in the capital markets and the weakening economy. If we are not able to complete a strategic transaction within a reasonable period of time, we will need to obtain additional funding in order to be able to continue to operate our business.

If we were to complete a strategic transaction for cash consideration and the transaction were considered a change in control under the terms of the warrants issued in our February and June 2007 financings, the amount to be paid to the warrant holders would be determined using specific valuation assumptions prescribed in the warrant agreements which differ from those used in measuring the fair value of the warrants prior to such event as reflected on our balance sheet.

Exhibit 4.2		Specimen certificate of the common stock.(1)
Exhibit 10.1		Share Exchange Agreement dated March 15, 2005 among Epimmune Inc. and certain shareholders of IDM S.A.(11)
Exhibit 10.3		Amendment No. 1 (to the Share Exchange Agreement) dated March 15, 2005 among Epimmune Inc. and certain shareholders of IDM S.A.(11)
Exhibit 10.4		Voting Agreement dated March 15, 2005 among Epimmune Inc., Hélène Ploix, as the Shareholder Representative, and certain stockholders of Epimmune Inc.(11)
Exhibit 10.5		Preferred Exchange Agreement dated March 15, 2005.(11)
Exhibit 10.6		Employment Agreement with Emile Loria, M.D. dated March 17, 2005.(11)
Exhibit 10.7		Employment Agreement with Mark Newman, Ph.D. dated March 17, 2005.(11)
Exhibit 10.8		Employment Agreement with Robert De Vaere dated March 17, 2005.(11)
Exhibit 10.9		Amended and Restated Preferred Exchange Agreement dated April 12, 2005.(12)
Exhibit 10.10		Amendment No. 2 (to the Share Exchange Agreement) dated April 21, 2005 among Epimmune Inc. and certain shareholders of IDM S.A.(13)
Exhibit 10.11		Amendment No. 3 (to the Share Exchange Agreement) dated May 31, 2005 among Epimmune Inc. and certain shareholders of IDM S.A.(14)
Exhibit 10.11		Amendment No. 4 (to the Share Exchange Agreement) dated June 30, 2005 among Epimmune Inc. and certain shareholders of IDM S.A.(15)
Exhibit 31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
Exhibit 31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
Exhibit 32.1		Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350).

The cash payment could be significantly higher or lower, depending on the actual per share transaction price, prescribed volatility and after adjusting the expected term to the actual remaining life of the outstanding warrants as of the date of the change in control.

(1)		Incorporated by reference to the Company’s Form S-1 Registration Statement and Amendments thereto filed with Securities and Exchange Commission (the “SEC”) (File No. 33-43356).
(2)		Incorporated by reference to the Company’s Form 8-K, filed with the SEC on March 22, 1993.

Even if we obtain regulatory approval for our products, we may be required to perform additional clinical trials or change the labeling of our products if we or others identify side effects after our products are on the market, which could harm sales of the affected products.

If others or we identify adverse side effects after any of our products are on the market, or if manufacturing problems occur:

	•		regulatory approval may be withdrawn;

	•		reformulation of our products, additional clinical trials, changes in labeling of our products or changes to or re-certifications of our manufacturing facilities may be required;

	•		sales of the affected products may drop significantly;

	•		our reputation in the marketplace may suffer; and

	•		lawsuits, including costly and lengthy class action suits, may be brought against us.

Any of the above occurrences could halt or reduce sales of the affected products or could increase the costs and expenses of commercializing and marketing these products, which would materially and adversely affect our business, operations, financial results and prospects.

The process of developing immunotherapeutic products requires significant research and development, nonclinical testing and clinical trials, all of which are extremely expensive and time-consuming and may not result in a commercial product.

Our product candidates other than mifamurtide are at early stages of development, and we may fail to develop and successfully commercialize safe and effective treatments based on these products or other technology. For each product candidate, we must demonstrate safety and efficacy in humans through extensive clinical testing, which is very expensive, can take many years and has an uncertain outcome. We may experience numerous unforeseen events during or as a result of the testing process that could delay or prevent testing or commercialization of our products, including:

	•		the results of nonclinical studies may be inconclusive, or they may not be indicative of results that will be obtained in human clinical trials;

	•		after reviewing test results, we may abandon projects that we might previously have believed to be promising;

	•		after reviewing test results, our collaborators may abandon projects that we might believe are still promising and we would either have to bear the operating expenses and capital requirements of continued development of our therapeutic cancer vaccines or abandon the projects outright or put them on hold as we have done with our UVIDEM development program following sanofi-aventis’ termination of its participation in the program;

	•		we, our collaborators or government regulators may suspend or terminate clinical trials if the participating subjects or patients are being exposed to unacceptable health risks;

	•		clinical trials may be delayed as a result of difficulties in identifying and enrolling patients who meet trial eligibility criteria;

	•		safety and efficacy results attained in early human clinical trials may not be indicative of results that are obtained in later clinical trials; and

(3)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1994, filed with the SEC on March 31, 1995.
(4)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998, filed with the SEC on August 14, 1998.
(5)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, filed with the SEC on November 16, 1998.
(6)		Incorporated by reference to the Company’s Form 8-K, filed with the SEC on July 16, 1999.
(7)		Incorporated by reference to the Company’s Definitive Proxy Statement, filed with the SEC on Form DEF 14A on July 28, 1999.
(8)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999, filed with the SEC on November 15, 1999.
(9)		Incorporated by reference to the Company’s Registration Statement on Form S-8, filed with the SEC on July 2, 2004.
(10)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, filed with the SEC on March 29, 2002.
(11)		Incorporated by reference to our Current Report on Form 8-K, filed with the SEC on March 18, 2005.
(12)		Incorporated by reference to our Current Report on Form 8-K, filed with the SEC on April 18, 2005.
(13)		Incorporated by reference to our Current Report on Form 8-K, filed with the SEC on April 22, 2005.
(14)		Incorporated by reference to our Current Report on Form 8-K, filed with the SEC on June 2, 2005.
(15)		Incorporated by reference to our Current Report on Form 8-K, filed with the SEC on July 7, 2005.

•

our product candidates may not have the desired effects or may have undesirable side effects that preclude regulatory approval or limit their commercial use, if approved.

The data collected from clinical trials may not be sufficient to support regulatory approval of any of our products, and the regulatory agencies may not ultimately approve any of our products for commercial sale, which will adversely affect our business and prospects. If we fail to commence or complete, or experience delays in, any of our planned clinical trials, our operating income, stock price and ability to conduct business as currently planned could be materially and adversely affected.

*Our revenues and operating results are likely to fluctuate and be unpredictable.

Our revenues and operating results have fluctuated in the past, and our revenues and operating results are likely to continue to do so in the future. This is due to the non-recurring nature of these revenues, which in the past have been derived principally from payments made under the collaboration agreement with sanofi-aventis and from government grants and contracts. As a result of sanofi-aventis’ decision to terminate its participation in the UVIDEM development program and our decision to close operations of our Paris, France facility, where the majority of our government grants and contracts were awarded and performed, we expect revenues in the near term to be primarily derived from investment income and to be significantly less than in prior years. If we are able to commercialize mifamurtide, either with a partner, or alone if we are able to obtain financing, our revenues will be unpredictable after initial launch as they will be impacted by pricing and reimbursement for mifamurtide, and the rate of adoption of the product. Our costs associated with mifamurtide may also be unpredictable and fluctuate depending on volume, distribution, warehousing, transportation and manufacturing costs, and taxes and other costs in the various geographies in which we may sell.

In connection with the private placement we completed on February 20, 2007 and the registered direct offering we completed on June 20, 2007, we issued warrants to purchase 782,568 and 2,594,844 shares of common stock (including those shares issued to the placement agent in the registered direct offering), respectively. Upon a change in control (as described in the warrant agreements) in which we receive all cash consideration, the unexercised portion of these warrants becomes exercisable for (or in the case of the February 20, 2007 warrants is terminated in exchange for) cash in an amount equal to such warrants’ value computed using the Black-Scholes-Merton pricing model with prescribed assumptions and guidelines. Initially, the warrants are exercisable for five years from the respective dates of issuance and may be exercised in cash or on a cashless exercise basis.

At each balance sheet date we will adjust the instruments to their estimated fair value using the Black-Scholes-Merton pricing model formula and utilizing several assumptions including: historical stock price volatility, risk-free interest rate, remaining maturity, and the closing price of our common stock, with the change in value recorded as a non-cash interest expense. Fluctuations in the market price of our common stock between measurement periods will have an impact on the revaluations, the results of which are highly unpredictable and may have a significant impact on our results of operations.

*Our history of operating losses and our expectation of continuing losses may hurt our ability to reach profitability or continue operations.

We have experienced significant operating losses since our inception. Our accumulated deficit was $221.8 million as of March 31, 2009. It is likely that we will continue to incur substantial net operating losses for the foreseeable future, which may adversely affect our ability to continue operations. We have not generated revenues from the commercialization of any product. All of our revenues to date have consisted of contract research and development revenues, license and milestone payments, research grants, certain asset divestitures and interest income. To achieve profitable operations, we, alone or with collaborators, must successfully identify, develop, register and market proprietary products. We currently do not have operational sales and marketing infrastructure for mifamurtide and do not currently have plans or sufficient funds to secure this capability. We also cannot be assured that we will secure adequate pricing, listing and reimbursement of MEPACT in Europe. We would need to complete a strategic collaboration or other transaction with a strategic partner that has EU, and potentially U.S., operational commercial abilities or otherwise arrange for the commercialization ourselves, which would require financing. We therefore do not expect to generate revenues from the commercialization of any product until the second half of 2009 at the earliest. We

~~EPIMMUNE~~may ~~INC~~not be able to generate sufficient product revenue to become profitable. Even if we do achieve profitability, we may not be able to sustain or increase our profitability on a quarterly or yearly basis.

If we lose our key management personnel or are unable to attract and retain qualified personnel, it could delay or hurt our research and product development efforts.

We are dependent on the principal members of our management staff, including Mr. Timothy P. Walbert, President and Chief Executive Officer, Mr. Robert J. De Vaere, Senior Vice President, Finance and Administration and Chief Financial Officer, Dr. Jeffrey W. Sherman, M.D., FACP, Senior Vice President, Research and Development and Chief Medical Officer and Mr. Timothy C. Melkus, Senior Vice President, Business Development and Operations. We have previously entered into employment contracts and retention agreements with the aforementioned management staff, which we believe provide them incentives to remain as employees with us, although there can be no assurance they will do so. We do not maintain key person life insurance on the life of any employee. Our ability to develop our products and achieve our other business objectives also depends in part on the continued service of our key management personnel and our ability to identify hire and retain additional qualified personnel. We do not have employment agreements with our non-management personnel. However, we have entered into retention bonus arrangements with certain of our employees, which we believe provide them incentives to remain as employees with us, although there can be no assurance they will do so. As previously disclosed, Mr. Walbert and Mr. De Vaere are also serving as President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, respectively, of Horizon Therapeutics, Inc., a private biopharmaceutical company focused on the development of prescription drugs for mild to moderate pain relief, while continuing to serve as our President, Chief Executive Officer and a member of the Board and Senior Vice President Finance and Administration and Chief Financial Officer, respectively of the Company. There is risk that this dual-employment arrangement may not be sustainable for an extended period. There is intense competition for qualified personnel in chemistry, biochemistry, immunology and other areas of our proposed activities and we may not be able to continue to attract and retain such personnel necessary for the development of our business. Because of the intense competition for qualified personnel among technology-based businesses, particularly in the Southern California area, we may not be successful in adding technical personnel as needed to meet the staffing requirements of additional collaborative relationships. Our failure to attract and retain key personnel could delay or be significantly detrimental to our product development programs and could cause our stock price to decline.

Unexpected or undesirable side effects or other characteristics of our products and technology may delay or otherwise hurt the development of our drug candidates, or may expose us to significant liability that could cause us to incur significant costs.

Certain product candidates may produce serious side effects. If our product candidates prove to be ineffective, or if they result in unacceptable side effects, we will not be able to successfully commercialize them and our prospects will be significantly and adversely affected. In addition, there may be side effects in our current or future clinical trials that may be discovered only after long-term exposure, even though our safety tests may indicate favorable results. We may also encounter technological challenges relating to these technologies and applications in our research and development programs that we may not be able to resolve. Any such unexpected side effects or technological challenges may delay or otherwise adversely affect the development, regulatory approval or commercialization of our drug candidates.

Our business will expose us to potential product liability risks that are inherent in the testing, manufacturing and marketing of human therapeutic products. While we currently have product liability insurance for our clinical trials, we cannot be sure that we will be able to maintain such insurance on acceptable terms or obtain acceptable insurance as we progress through product development and commercialization, or that our insurance will provide adequate coverage against potential liabilities, either in human clinical trials or following commercialization of any products we may develop.

Adverse publicity regarding the safety or side effects of the technology approach or products of others could negatively impact us and cause the price of our common stock to decline.

Despite any favorable safety tests that may be completed with respect to our product candidates, adverse publicity regarding immunotherapeutic products or other products being developed or marketed by others could negatively affect us. If other researchers’ studies raise or substantiate concerns over the safety or side effects of our technology approach

or product development efforts generally, our reputation and public support for our clinical trials or products could be harmed, which would adversely impact our business and could cause the price of our common stock to decline.

We have a variety of treatment approaches and some may not prove effective.

Our immunotherapeutic treatment approaches are largely untested. To date, only a limited number of immunotherapeutic antibody-based and vaccine-based products designed to fight cancer have been approved for commercialization, and for only a few specific types of cancer. The basis for most immunotherapeutic treatment approaches being developed for the treatment of cancer is the discovery that cancer cells express more of certain proteins, known as antigens, on their surfaces, which may allow them to be distinguished from normal cells. Immunotherapy is designed either to manipulate the body’s immune cells to target antigens and destroy the cancer cells that overexpress them or to activate the body’s immune system generally. However, immunotherapy has failed in the past for a number of reasons, including:

	•		the targeted antigens are not sufficiently different from those normal cells to cause an immune reaction;

	•		the tumor cells do not express the targeted antigen or other target structures at all or in sufficient quantities to be recognized by immune system cells, such as T cells or macrophages;

	•		the immune response stimulated by the immunotherapeutic agent is not strong enough to destroy all of the cancer cells; or

	•		cancer cells may, through various mechanisms, escape an immune response.

If we cannot enter into and maintain strategic collaborations on acceptable terms in the future, we may not be able to develop products in markets where it would be too costly or complex to do so on our own.

We will need to enter into and maintain collaborative arrangements with pharmaceutical and biotechnology companies or other strategic partners both for development and for commercialization of potential products in markets where it would be too costly or complex to do so on our own, such as commercialization of mifamurtide in Europe. If we are not able to enter into new collaborations on acceptable terms, we may be forced to abandon or delay development and commercialization of some product candidates and our business will be harmed.

If our collaboration or license arrangements are unsuccessful, our revenues and product development may be limited.

Collaborations and license arrangements generally pose the following risks:

	•		collaborations and licensee arrangements may be terminated, in which case we will experience increased operating expenses and capital requirements if we elect to pursue further development of the product candidate;

	•		collaborators and licensees may delay clinical trials and prolong clinical development, under-fund a clinical trial program, stop a clinical trial or abandon a product candidate;

	•		expected revenue might not be generated because milestones may not be achieved and product candidates may not be developed;

	•		collaborators and licensees could independently develop, or develop with third parties, products that could compete with our future products;

	•		the terms of our contracts with current or future collaborators and licensees may not be favorable to us in the future;

	•		a collaborator or licensee with marketing and distribution rights to one or more of our products may not commit enough resources to the marketing and distribution of our products, limiting our potential revenues from the commercialization of a product; and

	•		disputes may arise delaying or terminating the research, development or commercialization of our product candidates, or result in significant and costly litigation or arbitration.

We may not be able to license technology necessary to develop products.

We may be required to enter into licenses or other collaborations with third parties in order to access technology that is necessary to successfully develop certain of our products. We may not successfully negotiate acceptable licenses or other collaborative arrangements that will allow us to access such technologies. If we cannot obtain and maintain license rights on acceptable terms to access necessary technologies, we may be prevented from developing some product candidates. In addition, any technologies accessed through such licenses or other collaborations may not help us achieve our product development goals.

*Our supplies of certain materials necessary to our business may be limited and key raw materials of desired quantity and quality may be difficult to obtain.

We have entered into several arrangements for the supply of various materials, chemical compounds, antibodies and antigens that are necessary to manufacture our product candidates.

The manufacturing of MEPACT involves the acquisition of the active pharmaceutical ingredient, or API, and excipients, which are dissolved in a specialized solvent, mixed, filtered and finally lyophilized, or freeze-dried, in vials. Currently we have contracts with third-party suppliers for the manufacture of the API and final product formulation, fill and finish for MEPACT. We also have agreements with several other suppliers that perform the key analytical and quality control tests necessary for the release of MEPACT. The excipients are purchased via purchase orders.

While we have identified alternate suppliers that could provide these products and services, should the ability of our current contractors to manufacture and test MTP-PE and/or MEPACT be impaired or otherwise limited, we do not have any agreements or current arrangements with these alternate suppliers. Delays or impairment of our ability to continue manufacturing mifamurtide could be caused by physical damage or impairment of our supplier facilities, failure to renew manufacturing agreements with them or other unforeseen circumstances. Such impairment could significantly impact our ability to commercialize MEPACT in Europe should we find a partner or conclude a financing which would allow us to commercialize on our own. Despite our having already identified potential alternative suppliers, it would take a significant amount of time and resources to initiate and validate all of the required processes and activities to bring any new supplier on-line, resulting in interruptions in the availability of MEPACT.

We have one sole source supplier for a component of our IDM-2101 product candidate. This material is not supplied under a long-term contract but we have not had difficulties obtaining the material in a timely manner in the past. The supplier also provides the same or similar material to other customers and we do not believe we are at risk of losing this supplier. We have several other suppliers that are currently our sole sources for the materials they supply, though we believe alternate suppliers could be developed in a reasonable period of time.

Supply of any of these products could be limited, interrupted or restricted in certain geographic regions. In such a case, we may not be able to obtain from other manufacturers alternative materials, chemical compounds, components, antibodies or antigens of acceptable quality, in commercial quantities and at an acceptable cost. If our key suppliers or manufacturers fail to perform, or if the supply of products or materials is limited or interrupted, we may not be able to produce or market our products on a timely and competitive basis.

If we and/or our collaborators cannot cost-effectively manufacture our immunotherapeutic product candidates in commercial quantities or for clinical trials in compliance with regulatory requirements, we and/or our collaborators may not be able to successfully commercialize the products.

We have not commercialized any products, and we do not have the experience, resources or facilities to manufacture therapeutic vaccines and other products on a commercial scale. We will not be able to commercialize any products and

earn product revenues unless we and our collaborators demonstrate the ability to manufacture commercial quantities in accordance with regulatory requirements. Among the other requirements for regulatory approval is the requirement that we and our contract manufacturers conform to the GMP requirements of the respective regulatory agencies. In complying with GMP requirements, we and our manufacturers must continue to expend time, money and effort in production, record keeping and quality control to assure that the product meets applicable specifications and other requirements.

We are currently dependent on third parties for the production and testing of our lead product candidate, mifamurtide and mifamurtide components. We may not be able to enter into future subcontracting agreements for the commercial supply of mifamurtide or certain of our other products or to do so on terms that are acceptable to us. If we are unable to enter into acceptable subcontracting agreements, we will not be able to successfully commercialize mifamurtide or any of our other products. In addition, reliance on third-party manufacturers poses additional risks which we would not face if we produced our products ourselves, including:

	•		non-compliance by these third parties with regulatory and quality control standards;

	•		breach by these third parties of their agreements with us; and

	•		termination or non-renewal of these agreements for reasons beyond our control.

If products manufactured by third-party suppliers fail to comply with regulatory standards, sanctions could be imposed on us. These sanctions could include fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of our products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business. If we change manufacturers for MEPACT, we will be required to undergo revalidation of the manufacturing process and procedures in accordance with GMP. This revalidation could be costly, incur significant delays and require the attention of our key personnel.

We cannot be sure that we can manufacture, either on our own or through contracts with outside parties, our immunotherapeutic product candidates at a cost or in quantities that are commercially viable.

We are subject to extensive and uncertain government regulation and we may not be able to obtain necessary regulatory approvals.

To date, none of our potential products have been approved for marketing by any regulatory agencies. We cannot be sure that we will receive the regulatory approvals necessary to commercialize any of our potential products. Our product candidates will be subject to extensive governmental regulation, and the applicable regulatory requirements are uncertain and subject to change. The FDA and the EMEA maintain rigorous requirements for, among other things, the research and development, nonclinical testing and clinical trials, manufacture, safety, efficacy, record keeping, labeling, marketing, sale and distribution of therapeutic products. Failure to meet ongoing regulatory requirements or obtain and maintain regulatory approval of our products could harm our business. In particular, the U.S. is the world’s largest pharmaceutical market. Without FDA approval, we would be unable to access the U.S. market. In addition, noncompliance with initial or continuing requirements can result in, among other things:

	•		fines and penalties;

	•		injunctions;

	•		seizure of products;

	•		total or partial suspension of product marketing;

	•		failure of a regulatory agency to grant marketing authorization;

	•		withdrawal of marketing approvals; and

	•		criminal prosecution.

The regulatory process for new drug products, including the required nonclinical studies and clinical testing, is lengthy, uncertain and expensive. We will be required to submit extensive product characterization, manufacturing and control, and nonclinical and clinical data and supportive information for each indication in order to establish the potential product’s safety and effectiveness. The approval process may result in long-term commitments for post-marketing studies.

To market any drug products outside of the U.S. and the EU, we and our collaborators will also be subject to numerous and varying foreign regulatory requirements, implemented by foreign health authorities, governing the design and conduct of human clinical trials and marketing approval for biologics or other drug products. The approval procedure varies among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA or EMEA approval. The foreign regulatory approval processes usually include all of the risks associated with obtaining FDA or EMEA approval, and approval by the FDA does not ensure approval by the health authorities of any other country, nor does the approval by the EMEA or the foreign health authorities ensure approval by the FDA. Even if we obtain commercial regulatory approvals, the approvals may significantly limit the indicated uses for which we may market our products.

We may not be able to commercialize products under development by us if those products infringe claims in existing patents or patents that have not yet issued, and this would materially harm our ability to operate.

As is typical in the biotechnology industry, our commercial success will depend in part on our ability to avoid infringing patents issued to others and/or to avoid breaching the technology licenses upon which we might base our products. There may be patents issued to others that contain claims that may cover certain aspects of our technologies or those of our collaborators, including cancer vaccine epitopes and peptide vaccines. If we are required to obtain a license under one or more of these patents to practice certain aspects of our immunotherapy technologies in Europe and in the U.S., such a license may not be available on commercially reasonable terms, if at all. If we fail to obtain a license on acceptable terms to any technology that we need in order to develop or commercialize our products, or to develop an alternative product or technology that does not infringe on the patent rights of others, we would be prevented from commercializing our products and our business and prospects would be harmed.

Our failure to obtain issued patents and, consequently, to protect our proprietary technology, could hurt our competitive position.

Our success depends in part on our ability to obtain and enforce claims in our patents directed to our products, technologies and processes, both in the U.S. and in other countries. Although we have issued patents and have filed various patent applications, our patent position is highly uncertain and involves complex legal and factual questions. Legal standards relating to patentability, validity and scope of patent claims in epitope identification, immunotherapy and other aspects of our technology field are still evolving. Patents issued, or which may be issued, to us may not be sufficiently broad to protect our immunotherapy technologies and processes, and patents may not issue from any of our patent applications. For example, even though our patent portfolio includes patent applications with claims directed to peptide epitopes and methods of utilizing sequence motifs to identify peptide epitopes and also includes patent applications with claims directed to vaccines derived from blood monocytes, we cannot assure you of the breadth of claims that will be allowed or that may issue in future patents. Other risks and uncertainties that we will face with respect to our patents and patent applications include the following:

	•		the pending patent applications we have filed or to which we have exclusive rights may not result in issued patents or may take longer than we expect to result in issued patents;

	•		the allowed claims of any patents that issue may not provide meaningful protection;

	•		we may be unable to develop additional proprietary technologies that are patentable;

	•		the patents licensed or issued to us may not provide a competitive advantage;

	•		other companies may challenge patents licensed or issued to us;

	•		disputes may arise regarding inventions and corresponding ownership rights in inventions and know-how resulting from the joint creation or use of our intellectual property and our respective licensors or collaborators; and

	•		other companies may design around the technologies patented by us.

If we are unable to compete effectively in the highly competitive biotechnology industry, our business will fail.

The market for cancer therapeutics is characterized by rapidly evolving technology, an emphasis on proprietary products and intense competition. Many entities, including pharmaceutical and biotechnology companies, academic institutions and other research organizations, are actively engaged in the discovery, research and development of immunotherapy and other products for the treatment of cancer. Should any of our product candidates be approved for marketing and launched, they would compete against a range of established therapies.

Our product candidates under development address a range of cancer markets. The competition in these markets is formidable. Our potential products would also compete with a range of novel therapies either under development or recently introduced onto the market, including monoclonal antibodies, cancer vaccines and cell therapy, gene therapy, angiogenesis inhibitors and signal transduction inhibitors. The strongest competition is likely to come from other immunotherapies (such as monoclonal antibodies) and, to a lesser extent, from chemotherapeutic agents and hormonal therapy.

An important factor in competition may be the timing of market introduction of our product candidates and competitive products. Accordingly, the relative speed with which we can develop vaccines, complete the clinical trials and approval processes and supply commercial quantities of the vaccines to the market is expected to be an important competitive factor. We expect that competition among products approved for sale will be based, among other things, on product effectiveness, safety, reliability, availability, price and patent position. We cannot predict whether our products will compare favorably with competitive products in any one or more of these categories.

Many of the companies developing competing technologies and products have significantly greater financial resources and expertise in research and development, manufacturing, nonclinical and clinical development, obtaining regulatory approvals and marketing than we have, and we may not be able to compete effectively against them. Large pharmaceutical companies in particular, such as sanofi-aventis, Glaxo SmithKline, Roche, Pfizer, Novartis and AstraZeneca have substantially more extensive experience in clinical testing and in obtaining regulatory approvals than us. Smaller or early-stage companies, most importantly those in the immunotherapy field, may also prove to be significant competitors. These companies may become even stronger competitors through collaborative arrangements with large companies. All of these companies may compete with us to acquire rights to promising antibodies, antigens and other complementary technologies.

Litigation regarding intellectual property rights owned or used by us may be costly and time-consuming.

Litigation may be necessary to enforce the claims in any patents issued to us or to defend against any claims of infringement of patents owned by third parties that are asserted against us. In addition, we may have to participate in one or more interference proceedings declared by the U.S. Patent and Trademark Office or other foreign patent governing authorities, which could result in substantial costs to determine the priority of inventions.

If we become involved in litigation or interference proceedings, we may incur substantial expense, and the proceedings may divert the attention of our technical and management personnel, even if we ultimately prevail. An adverse determination in proceedings of this type could subject us to significant liabilities, allow our competitors to market competitive products without obtaining a license from us, prohibit us from marketing our products or require us to seek licenses from third parties that may not be available on commercially reasonable terms, if at all. If we cannot obtain such licenses, we may be restricted or prevented from developing and commercializing our product candidates.

The enforcement, defense and prosecution of intellectual property rights, including the U.S. Patent and Trademark Office’s and related foreign patent offices’ interference proceedings, and related legal and administrative proceedings in the United States and elsewhere involve complex legal and factual questions. As a result, these proceedings are costly and time-consuming, and their outcome is uncertain. Litigation may be necessary to:

	•		assert against others or defend ourselves against claims of infringement;

	•		enforce patents owned by, or licensed to us from another party;

	•		protect our trade secrets or know-how; or

	•		determine the enforceability, scope and validity of our proprietary rights or those of others.

Our competitive position will depend in part on our ability to protect trade secrets that are not patentable or for which we have elected not to seek patent protection. To protect our trade secrets, we rely primarily on confidentiality agreements with our collaborative partners, employees and consultants. Nevertheless, our collaborative partners, employees and consultants may breach these agreements and we may be unable to enforce these agreements. In addition, other companies may develop similar or alternative technologies, methods or products or duplicate our technologies, methods, vaccines or immunotherapy products that are not protected by our patents or otherwise obtain and use information that we regard as proprietary, and we may not have adequate remedies in such event. Any material leak of our confidential information into the public domain or to third parties could harm our competitive position.

Successful commercialization of our future products will depend on our ability to gain acceptance by the medical community.

If we succeed in receiving regulatory approval and launching our product candidates based on our immunotherapeutic technology, it will take time to gain acceptance in the medical community, including health care providers, patients and government or third-party payers. The degree of market acceptance will depend on several factors, including:

	•		the extent to which our therapeutic product candidates are demonstrated to be safe and effective in clinical trials;

	•		convenience and ease of administration;

	•		the success of sales, marketing and public relations efforts;

	•		the availability of alternative treatments;

	•		competitive pricing;

	•		the reimbursement policies of governments and other third parties; and

	•		garnering support from well respected external advocates.

If our products are not accepted by the market or only receive limited market acceptance, our business and prospects will be adversely affected.

*We may experience difficulties managing our growth if we determine to market and commercialize our products independently, which could adversely affect our results of operations.

We currently do not have operational sales and marketing infrastructure for MEPACT and do not currently have plans or sufficient funds to secure this capability. We also cannot be assured that we will secure adequate pricing, listing and reimbursement of MEPACT in Europe. We would need to complete a strategic collaboration or other transaction with a strategic partner that has EU, and potentially U.S., operational commercial abilities or otherwise arrange for the commercialization ourselves, which would require financing. If we were to market and commercialize mifamurtide on our own in the U.S., assuming receipt of the necessary regulatory approval, it is expected that we will grow in certain areas of our operations as we develop. In particular, we will need to expand our sales and marketing capabilities to market MEPACT. We will therefore need to recruit personnel, particularly sales and marketing

personnel, and expand our capabilities, which may strain our managerial, operational, financial and other resources. To compete effectively and manage our growth, we would have to:

	•		train, manage, motivate and retain our employee base;

	•		accurately forecast demand for, and revenues from, our product candidates, particularly mifamurtide; and

	•		expand existing operational, financial and management information systems to support development and commercialization activities.

Our failure to manage these challenges effectively could harm our business.

*Our financial results may be adversely affected by fluctuations in foreign currency exchange rates.

We will be exposed to currency exchange risk with respect to the U.S. dollar in relation to the euro, because a significant portion of our operating expenses will be incurred in euros. This exposure may increase if we expand our operations in Europe in connection with the marketing of any approved products. We have not entered into any hedging arrangements to protect our business against currency fluctuations. We will monitor changes in our exposure to exchange rate risk that result from changes in our situation. If we do not enter into effective hedging arrangements in the future, our results of operations and prospects could be materially and adversely affected by fluctuations in foreign currency exchange rates.

*The volatility of the price of our common stock may adversely affect stockholders.

The market prices for securities of biotechnology companies, including our common stock, have historically been highly volatile, and the market from time to time has experienced significant price and volume fluctuations that are not necessarily related to the operating performance of such companies. From August 16, 2005, when we began trading on the NASDAQ Global Market under our new trading symbol “IDMI” through March 31, 2009, the closing stock price of our common stock ranged from $0.59 to $9.27 and has been and will continue to be influenced by general market and industry conditions. In addition, the following factors may have a significant effect on the market price of our common stock:

	•		The development and regulatory status of our product candidates, particularly mifamurtide;

	•		whether we are able to secure additional financing on favorable terms, if at all;

	•		announcements of technological innovations or new commercial immunotherapeutic products by us or others;

	•		governmental regulation that affects the biotechnology and pharmaceutical industries in general or us in particular;

	•		developments in patent or other proprietary rights by us;

	•		receipt of funding by us under collaboration and license agreements and government grants;

	•		developments in, or termination of, our relationships with our collaborators and licensees;

	•		public concern as to the clinical results and/or the safety of drugs developed by us or others; and

	•		announcements related to the sale of our common stock or other securities.

Changes in our financial performance from period to period also may have a significant impact on the market price of our common stock.

*Our principal stockholders, executive officers and directors own a significant percentage of shares of our common stock and, as a result, the trading price for shares of our common stock may be depressed. These stockholders may make decisions that may be adverse to your interests.

Our executive officers and directors, in the aggregate, beneficially own approximately 0.3% of the shares of our common stock as of March 31, 2009. Moreover, Palo Alto Investors, LLC, Medarex and sanofi-aventis currently own approximately 41.0%, 10.4%, and 4.6%, respectively, of the total shares of our common stock outstanding as March 31, 2009. As a result, Palo Alto Investors LLC, Medarex and sanofi-aventis, and our other principal stockholders, executive officers and directors, should they decide to act individually or together, have the ability to exert substantial influence over all matters requiring approval by our stockholders, including any strategic transaction that may require stockholder approval, the election and removal of directors, distribution of dividends, changes to our bylaws and other important decisions, such as future equity issuances. To our knowledge, Palo Alto Investors LLC, Medarex and sanofi-aventis have not, nor have any of our other principal stockholders, entered into any voting agreements or formed a group as defined under the Exchange Act.

This significant concentration of share ownership in a limited number of investors may adversely affect the trading price of our common stock because investors often perceive such a concentration as a disadvantage. It could also have the effect of delaying, deferring or preventing a change in control, or impeding a merger or consolidation, takeover or other transactions that could be otherwise favorable to our stockholders.

Future sales of shares of our common stock may cause the market price of your shares to decline.

The sale of a large number of shares of our common stock, including through the exercise of outstanding warrants and stock options or the perception that such sales could occur, could adversely affect the market price of our common stock.

ITEM 6. EXHIBITS


Exhibit
Number		Document Description
3.1		Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on December 2, 1991.(1)

3.2		Certificate of Designation of Series A Junior Participating Preferred Stock filed with the Secretary of State of Delaware on April 2, 1993.(2)

3.3		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on July 5, 1995.(3)

3.4		Certificate of Increase of Series A Junior Participating Preferred Stock filed with the Secretary of State of Delaware on July 5, 1995.(3)

3.5		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on July 2, 1998.(4)

3.6		Certificate of Increase of Series A Junior Participating Preferred Stock filed with the Secretary of State of Delaware on July 2, 1998.(4)

3.7		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on November 12, 1998.(5)

3.8		Certificate of Designations of the Series S and Series S-1 Preferred Stock filed with the Secretary of State of Delaware on June 29, 1999.(6)

3.9		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on July 1, 1999.(7)

3.10		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on September 23, 1999.(8)

3.11		Certificate of Decrease of Series A Junior Participating Preferred Stock filed with the Secretary of State of Delaware on September 23, 1999.(8)

3.12		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on June 17, 2004.(9)

3.13		Certificate of Amendment of Amended and Restated Certificate of Incorporation filed with the Secretary of State of Delaware on August 15, 2005.(10)

3.14		Certificate of Ownership and Merger, filed with the Secretary of State of Delaware on August 15, 2005.(10)

3.15		Amended and Restated Bylaws of the Company.(12)

4.1		Reference is made to Exhibits 3.1 through 3.15.

4.2		Specimen certificate of the Common Stock.(14)

4.3		Unit Purchase Agreement, dated February 20, 2007, by and among the Registrant and the purchasers listed on Exhibit A thereto.(11)

4.4		Form of Warrant.(11)

4.5		Form of Securities Purchase Agreement.(13)

4.6		Form of Warrant.(13)

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. § 1350, as adopted).

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. § 1350, as adopted).

32.1		Certification pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. § 1350, as adopted).


*		Executive Compensation Plans and Arrangements

(1)		Incorporated by reference to the Company’s Form S-1 Registration Statement and Amendments thereto filed with Securities and Exchange Commission (the “SEC”) (File No. 33-43356).

(2)		Incorporated by reference to the Company’s Form 8-K, filed with the SEC on March 22, 1993 (File No. 000-19591).

(3)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1994, filed with the SEC on March 31, 1995 (File No. 000-19591).

(4)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998, filed with the SEC on August 14, 1998 (File No. 000-19591).

(5)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998, filed with the SEC on November 16, 1998 (File No. 000-19591).

(6)		Incorporated by reference to the Company’s Form 8-K, filed with the SEC on July 16, 1999 (File No. 000-19591).

(7)		Incorporated by reference to the Company’s Definitive Proxy Statement, filed with the SEC on Form DEF 14A on July 28, 1999 (File No. 000-19591).

(8)		Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999, filed with the SEC on November 15, 1999 (File No. 000-19591).

(9)		Incorporated by reference to the Company’s Registration Statement on Form S-8, filed with the SEC on July 2, 2004 (File No. 333-11716).

(10)		Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on August 17, 2005.

(11)		Incorporated by reference to the Company’s Current Report on Form 8-K, filed on February 21, 2007.

(12)		Incorporated by reference to the Company’s Current Report on Form 8-K, filed on March 27, 2007.

(13)		Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on June 21, 2007.

(14)		Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the SEC on March 21, 2008.

IDM PHARMA, INC.

SIGNATURES

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

	EPIMMUNE INC.
	IDM PHARMA, INC.
Dated: August 9, 2005	By:	/s/ Emile Loria
Dated: May 11, 2009	By:	/s/ Timothy P. Walbert
		Emile Loria, M.D.
		Timothy P. Walbert
		President, Chief Executive Officer and Director (Principal Executive Officer)
		President and Chief Executive Officer (Principal Executive Officer)

Dated: August 9, 2005	By:	/s/ Robert De Vaere
Dated: May 11, 2009	By:	/s/ Robert J. De Vaere
		Robert De Vaere
		Robert J. De Vaere
		Vice President, Finance and Administration, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)
		Senior Vice President, Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer)

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