UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 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

IDM PHARMA, INC.

(Exact name of registrant as specified in its charter)


Delaware		33-0245076

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

9 Parker, Suite 100
Irvine, California 92618
(Address of principal executive offices and zip code)

(949) 470-4751

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):


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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

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

IDM PHARMA, INC.
QUARTERLY REPORT
FORM 10-Q

COVER 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

IDM PHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31,			December 31,
	2009			2008
	(unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	7,371,000		$	12,752,000
Accounts receivable		21,000			45,000
Inventory		487,000			—
Research and development tax credit, current portion		228,000			240,000
Prepaid expenses and other current assets		516,000			470,000

Total current assets		8,623,000			13,507,000

Property and equipment, net		215,000			242,000
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 and accrued liabilities	$	2,816,000		$	2,672,000
Accrued payroll and related expenses		677,000			736,000
Deferred revenues, current portion		408,000			430,000
Common stock warrants		4,034,000			3,522,000
Other current liabilities		1,911,000			1,956,000

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, $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, $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		207,657,000			207,452,000
Accumulated other comprehensive income		17,378,000			18,125,000
Accumulated deficit		(221,846,000	)		(216,681,000	)

Total stockholders’ equity		3,442,000			9,149,000

	$	14,472,000		$	19,676,000

See accompanying notes to the Condensed Consolidated Financial Statements.

IDM PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	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.

IDM PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	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.

IDM PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

March 31, 2009

1. The Company

IDM Pharma, Inc. (“IDM Pharma” or the “Company”) is a biopharmaceutical company focused on the development of innovative cancer products that either destroy residual cancer cells by activating the immune system or prevent tumor recurrence by triggering a specific adaptive immune response.

The Company is developing its 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. In October 2006, the Company submitted a New Drug Application, or NDA, to the U.S. Food and Drug Administration, or the FDA, for mifamurtide, requesting marketing approval in the U.S. In November 2006 the Company submitted a Marketing Authorization Application, or MAA, for MEPACT to the European Medicines Agency, or EMEA for marketing approval in Europe.

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 in the European Union, or EU, for MEPACT. The CHMP recommendation was formally adopted by the CHMP on December 18, 2008 and final European Commission approval was received on March 6, 2009. The centralized marketing authorization allows mifamurtide to be marketed in the 27 Member States of the EU, as well as in Iceland, Liechtenstein and Norway. Mifamurtide 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 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 Company closed the operations of IDM Pharma S.A. as of June 2008 pursuant to the January 2008 restructuring plan. The Company continues to maintain IDM Pharma S.A. as a French subsidiary and to conduct its business, now solely related to MEPACT, both directly and through the use of consultants and contracted activity.

3. Recent Operating Results and Liquidity

The Company has incurred significant net losses and has generated limited revenues since inception. As of March 31, 2009, the Company’s accumulated deficit was $221.8 million and the Company’s revenues for the three months ended March 31, 2009 and 2008 were $4,000 and $2.4 million respectively. The Company will continue to spend significant amounts on pre-commercial activities for mifamurtide in Europe, including amounts spent for manufacturing clinical and commercial supplies. Successful transition to commercialization and to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure and, if necessary, obtaining additional financing and/or reducing expenditures. The Company has historically funded its operations through collaborative agreements with strategic partners and equity financings. As discussed in Note 9, beginning in 2006 and continuing through 2008, management has implemented restructuring and cost reduction initiatives, including the closure of IDM Pharma S.A. in the second quarter of 2008.

Financing proceeds and savings from continued cost management initiatives are expected to provide sufficient working capital for the Company’s currently planned operations into the third quarter of 2009. To focus on those areas the Company believes can provide the most near term value to its stockholders and to ensure it has adequate funds to complete its review of strategic options for the Company, it is concentrating its near-term efforts on certain MEPACT pre-launch commercial activities in Europe and the review of such strategic options, including merger or acquisition opportunities, which may involve a change in control of the company. Consequently, it has placed the U.S. mifamurtide NDA amendment submission on hold until it completes its strategic review. The Company currently has no committed sources of funding and its cash needs are not entirely predictable.

To continue operations, the Company will need to raise additional capital or pursue strategic opportunities in 2009. The Company has engaged JMP Securities, LLC, an investment bank, to advise it in exploring alternatives available to it with respect to a possible merger or acquisition transaction.

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.

As a result of sanofi-aventis’ decision to terminate its participation in the UVIDEM development program, and the Company’s decision to discontinue operations in Paris, France, the Company expects to generate little, if any, revenues in the near term. The Company expects to receive revenues from sales in Europe of its lead product candidate, MEPACT, assuming that it can find a commercialization partner or can raise additional capital to commercialize it itself. However, any efforts by the Company or any future partners to commercialize MEPACT may not be 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.

The Company’s continuing operating losses, operating cash flow deficits, uncertainty in funding sources and plans for pre-launch commercial activities of MEPACT in Europe, together raise substantial doubt about its ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements have been prepared assuming that it will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

4. Summary of Significant Accounting Policies

The preparation of these condensed consolidated financial statements requires the Company to make estimates and judgments in certain circumstances that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company’s management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. The Company reviews its estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. The Company believes that the policies described below involve the most significant judgments and estimates used in the preparation of its condensed consolidated financial statements.

Concentration of credit risk

The Company’s deposits, which are kept in dollars and euros, are maintained in major U.S. and French institutions. The Company has established guidelines relative to diversification and maturities that maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. Management attempts to schedule the maturities of the Company’s investments to coincide with the Company’s expected cash requirements.

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 their very short-term nature, such securities are subject to minimal interest rate risk. However, these 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, the Company can lose its invested principal if the underlying securities suffer losses. The funds may have holdings which include certain securities that are illiquid, in default, under restructuring or have been subject to a ratings downgrade. However, the funds continue to report a per share net asset value, or NAV, 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. The Company believes that its investment has not been impaired and that it can continue to withdraw its funds at any time without restriction. The Company will continue to monitor the value of the funds periodically for potential indicators of impairment.

Inventory

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.

Impairment of long lived assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company periodically evaluates the value reflected on its balance sheet of long-lived assets, such as patents and licenses, when events and circumstances indicate that the 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 with the regulatory agencies regarding safety and efficacy of our products under review, the use of the asset in current research and development projects, any potential alternative uses of the asset in other research and development projects in the short to medium term, clinical trial results and research and development portfolio management options. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to their estimated fair values. At March 31, 2009, the license from Novartis granting the Company an exclusive, worldwide license to intellectual property rights relating to mifamurtide represented approximately $2.2 million of the 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.

Net Loss Per Share

Earnings per share, referred to as EPS, is computed in accordance with SFAS No. 128, Earnings per 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.


	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.

The following table summarizes the share-based compensation expense for stock options and restricted stock awards granted under the Company’s equity plans to employees, directors and consultants that the Company recorded in accordance with SFAS No. 123(R) for the three months ended March 31, 2009 and 2008.


	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

As of March 31, 2009, there was $1.8 million (gross of estimated forfeitures) of total unrecognized compensation cost related to non-vested options granted under all equity compensation plans. The weighted average term over which the compensation cost will be recognized is 2.13 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.

Restricted Stock Awards

The Company has outstanding restricted stock awards issued to employees and to non-employees that vest over one to four-year service periods. Certain awards are subject to acceleration if performance conditions are met and certain awards accelerate vesting upon termination without cause or leaving employment for good reason or upon a change in control. Compensation costs based on the grant date fair value of the shares are initially recognized over the explicit service period. When the milestones become probable, the remaining unrecognized expense attributed to the milestone is recorded over the adjusted service period through the expected milestone achievement date.

During the 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.

5. Sale of Common Stock and Warrants

On 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.

In connection with the financing, the Company agreed to file a registration 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 days of the closing and have the registration statement declared effective within 90 days of the closing, referred to as the Resale Registration Statement. Pursuant to the terms of the unit purchase agreement, the Company is subject to various penalties up to approximately $1.6 million on an annual basis, in the event that the Resale Registration Statement was not filed with the Securities and 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. Pursuant to the terms of the unit purchase agreement, the Company filed the Resale Registration Statement with the SEC on March 21, 2007, which was declared effective May 4, 2007.

On June 20, 2007, the Company sold an aggregate 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 exercisable immediately following issuance over the next five years at $4.06 per share. The Company also paid $1.4 million (approximately 5.6% of the gross proceeds) and issued warrants to purchase 237,705 common shares to the placement agent as a transaction fee. These warrants were valued at $0.6 million on the date of grant and are subject to the same terms as those 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 shares issuable upon exercise of the warrants are registered under the Securities Act, on the Company’s previously filed and effective Registration Statement on Form S-3 (Registration No. 333-143058), as amended.

Under both the February and June 2007 stock purchase agreements, upon a change in control (as described in the warrant agreements) in which the Company receives 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.

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.

In accordance with EITF 00-19, Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In, a Company’s Own Stock, the warrants have been classified as a liability until the earlier of the date the warrants are exercised in full or expire. The Company allocated $0.8 million of the February 2007 offering proceeds and $3.5 million of the June 2007 offering proceeds to the warrants based on their respective fair value on the issuance date measured using the Black-Scholes-Merton model, adjusted for the probability of a change of control event occurring during the life of the warrants. EITF 00-19 also requires that the warrants be revalued as derivative instruments periodically. At each balance sheet date the Company adjusts the instruments to their current fair value using the Black-Scholes-Merton model formula, with the change in value recorded as an increase or reduction of non-cash interest expense. Fluctuations in the market price of the Company’s 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 the results of operations.

The 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.

As of March 31, 2009 and December 31, 2008, the fair value of the warrants recorded on the Company’s balance sheet was $4.0 million and $3.5 million, respectively. The $4.0 million represents the fair value of the warrants using the Black-Scholes-Merton pricing model. If a change in control in which all cash consideration is paid were actually to occur, 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. 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.

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 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

liability under EIFT 00-19, the adoption of EITF No. 07-5 did not have a material impact on the Company’s condensed consolidated financial statements.

6. Research and Development and Other Agreements

License Agreement with Novartis

In March 2003, 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 allocated to the MEPACT license, which was determined to have alternative future use and is included in Patents, Trademarks and Other Licenses. Under the license agreement, the Company is required to make certain potential milestone payments with respect to MEPACT totaling $2.75 million which is triggered by the achievement of gross profit related to MEPACT. The Company achieved two of the milestones totaling $750,000 in 2006 and prior years although no amounts had been previously recorded in the Company’s financial statements because ultimate payment was not determined to be probable. In the second quarter of 2008, 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.

The Novartis license 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 31, 2009 will be amortized over ten years (the market exclusivity period) as the final approval from the European Commissiion on the MAA for MEPACT was received on March 6, 2009.

IDM Pharma’s direct research and development expenses related to MEPACT amounted to approximately $2.4 million and $2.1 million for the three months ended March 31, 2009 and 2008, respectively.

Agreement with sanofi-aventis

Sanofi-aventis is a stockholder and, until March 2008, was a collaborative partner of the Company and is, therefore, considered a related party. Through March 31, 2009, sanofi-aventis invested approximately $33.0 million in the Company and owned approximately 4.6% of the Company’s outstanding common stock. In July 2001, the Company entered into an agreement with sanofi-aventis to cooperate in cellular immunotherapy research for the development and marketing of immunologic treatment for cancers. Under this agreement, sanofi-aventis has the right to select up to 20 cell drug development programs over a ten year period (individually an “option”) from the Company’s line of 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.

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.

Direct research and development expenses related to UVIDEM were $4,000 in the three months ended March 31, 2009, and approximately $0.8 million in the three months ended March 31, 2008.

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

Under certain collaboration and licensing agreements, the Company is obligated to make specified payments upon achieving certain milestones relating to the development and approval of its products, or on the basis of net sales of its products. In addition, under certain agreements with clinical sites for the conduct of clinical trials, the Company makes payments based on the number of patients enrolled. These contingent payment obligations are subject to significant variability. Such amounts are based on 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 the Company’s control.

8. Government Research Funding

In January 2007, the Company received $0.4 million on a grant through a new French government sponsored program to conduct research and clinical studies related to macrophages with antibodies and cancer vaccine antigen formulations. As of March 31, 2009, the $0.4 million was recorded as deferred revenue. As a result of the decision to shut down its operations in Paris, France, the Company has provided notice of cancellation of this grant, which it has the right to do with 30-days notice without penalty. According to the terms of the grant, upon cancellation, the Company may have to 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 Company receives confirmation from the grant agency as to whether such amount is subject to repayment.

9. Restructuring, Severance and Retention Related Charges

January 2008 Restructuring Plan

The Company accounted for the restructuring activities in accordance with Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“SFAS No. 146”) and Statement of Financial Accounting Standards No. 112, Employers’ Accounting for Postemployment Benefits (“SFAS 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

to incur additional costs related to the January 2008 restructuring plan.. As such, no restructuring costs were incurred in the first quarter of 2009.

A substantial portion of these expenses were offset by $5.7 million received in April 2008 under the March 2008 Settlement Agreement with sanofi-aventis in connection with its termination of participation in the UVIDEM development program as discussed in Note 6. In addition, the Company was able to sell the property and equipment and transfer the facility leases to third parties. Costs recovered and obligations relieved were recorded as a reduction in restructuring expense in 2008 when realized. In 2008, proceeds received from sale of property and equipment was $0.1 million and the costs to transfer facility leases to third parties amounted to $0.2 million.

Employee Retention

Retention bonuses based on continuous service and stock-based compensation related to restricted stock awards are recorded ratably over the requisite service or vesting periods, with immediate recognition of the remaining expenses if payment or vesting is accelerated upon the occurrence of specified events. Payments triggered by performance conditions will be recorded over the implicit service period if achievement is probable, or otherwise when the specified event occurs. Severance payments will be recorded upon separation. For the three months ended March 31, 2009, the Company recorded $0.1 million in cash compensation expense associated with retention and milestone bonuses and $5,000 in stock compensation expense in relation to the stock awards.

To retain key employees, the Company adopted the following employee retention programs. These programs are not directly related to the January 2008 restructuring plan and the related compensation expense is included in the applicable operating expense category in the consolidated statement of operations.

On December 20, 2007, the Company’s Board of Directors approved a non-executive retention program which would provide $0.3 million in retention bonuses for employees who remained employed on June 30, 2008 or were terminated without cause before then, a separate $0.5 million in total potential stay-on bonuses for those terminated without cause before June 30, 2008, and restricted stock awards that vest over one 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 Company’s Board of Directors approved an executive officer (applicable to executive officers other than the CEO, and following his decision to move to part-time status, the Company’s CFO) retention and bonus plan, which provided that if a specified executive officer was terminated without cause after August 31, 2008 but prior to December 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 December 31, 2008. The Company could have incurred expenses totaling $0.2 million in connection with the retention program if executives were terminated without cause before December 31, 2008. As none of the executives was terminated without cause before December 31, 2008, the Company did not incur any expenses. The Company would also be obligated to pay a bonus to its executives (applicable to executive officers other than the CEO and CFO) upon the earlier of the filing of an amended NDA with the FDA for mifamurtide prior to December 31, 2008 or a change of control of the Company (as defined in the executive plan) prior to December 31, 2008. The total bonus that could have been earned under this provision of the plan was $0.2 million. Because the Company did not file the amended NDA to address issues raised by the FDA by December 31, 2008, this milestone was not achieved. As such, no expenses were recorded related to this bonus. In addition, the Company would pay a bonus to each of its executive officers upon the earlier of 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, 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 plan are in addition to severance benefits in accordance with their respective employment agreements.

On December 11, 2008, the Company’s Board also approved the adoption of a plan for certain of its specified executive officers (applicable to executive officers other than the CEO and CFO) primarily providing for a cash bonus payable in connection with the filing of an amended NDA with the U.S. FDA for mifamurtide on or prior to March 31, 2009. Under the terms of this plan, upon the earlier of (i) the filing of an NDA amendment with the FDA for mifamurtide prior to March 31, 2009 or (ii) a change of control of the Company prior to March 31, 2009, a lump sum cash bonus payment would be payable to certain of the Company’s specified executive officers, provided such executive officer was an employee of the Company immediately prior to the closing of such change of control or filing of such NDA amendment. This cash payment would have been in addition to any payment the specified executive officer is entitled to under such 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 Company has placed the U.S. mifamurtide NDA amendment submission on hold until it completes its review of strategic alternatives available to the Company, this milestone was not achieved. As such, no expenses were recorded related to 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

$1,424,000 and $1,493,000, respectively, of unrecognized tax benefits, including accrued interest and penalties. Uncertain tax positions are classified as 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.

11. Fair Value Measurements

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

retrospectively 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.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations and SFAS No. 160, Accounting and Reporting of Noncontrolling Interests in Consolidated Financial Statements — an amendment of 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 assets acquired and liabilities assumed in a business combination and establishes the acquisition-date fair value as the measurement objective, including capitalizing at the acquisition date the fair value of acquired in-process research and development, and re-measuring and writing down these assets, if necessary, in subsequent periods during their development. SFAS No. 141(R) will also impact the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration), exclude transaction costs from acquisition accounting, and change accounting practices for acquired contingencies, acquisition-related restructuring costs, indemnification assets, and tax benefits. SFAS No. 141(R) and SFAS No. 160 will be applied prospectively for business combinations that occur on or after January 1, 2009, except that presentation and disclosure requirements of SFAS No. 160 regarding noncontrolling interests shall be applied retrospectively. The Company adopted SFAS No. 141(R) and SFAS No. 160 as of 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.

In April 2008, the FASB issued FSP FAS No. 142-3, which amends the factors that must be considered in developing renewal or extension assumptions used to determine the useful life over which the cost of a recognized intangible asset is amortized under SFAS No. 142, Goodwill and Other Intangible Assets. The FSP requires an entity to consider its own assumptions about renewal or extension of the term of the arrangement, consistent with its expected use of the asset, and is an attempt to improve consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure 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 the guidance 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.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 supersedes Statement on Auditing Standards (“SAS”) No. 69, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The guidance in this new standard, which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements in conformity with GAAP, is not materially different from the guidance contained in SAS 69. SFAS No. 162 became effective 60 days following the SEC’s approval, which occurred on September 16, 2008, of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. The adoption of SFAS No. 162 did not have a material impact on the Company’s condensed consolidated financial statements or result of operations.

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 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. The adoption of EITF No. 07-5 did not have a material impact on the Company’s condensed consolidated financial 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 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis should be read in conjunction with our financial statements and accompanying notes included in this report and our 2008 audited financial statements and notes thereto included in our Form 10-K filed with the Securities and Exchange Commission on March 31, 2009.

Operating results for the three months ended March 31, 2009 are not necessarily indicative of results that may occur in future periods.

Except for the historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. When used herein, the words “believe,” “anticipate,” “expect,” “estimate” and similar expressions are intended to identify such forward-looking statements. There can be no assurance that these statements will prove to be correct. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to such differences include, but are not limited to, 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.

Overview

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

quarter of 2009. 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.

The timing of potential marketing approval of mifamurtide in the U.S. is subject to risks and uncertainties 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 ability to respond to questions and concerns raised by the FDA in a satisfactory manner, the time needed to respond to any issues raised by the FDA during the review of our amended NDA for mifamurtide and 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 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 determination 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.

In addition, 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/or U.S. commercialization abilities or otherwise arrange for the commercialization ourselves. If we are unable to commercialize MEPACT ourselves or with or through a partner, any delay would materially adversely affect our business and financial position due to reduced or delayed revenues from MEPACT sales.

We have an agreement with Novartis granting us an exclusive, worldwide license to intellectual property rights relating to MEPACT. We have exclusive worldwide sales and marketing rights for MEPACT, except in Israel and South East Europe where we granted distribution rights to third parties.

We had been jointly developing UVIDEM, a cell-based therapeutic vaccine product candidate based on dendritic cells, with sanofi-aventis S.A., or sanofi-aventis. UVIDEM is based on dendritic cells, a type of specialized immune cells derived from a patient’s own white blood cells, exposed to tumor cell antigens in our production facility and then reinjected into the patient in order to stimulate the immune system to recognize and kill tumor cells that display these antigens on their surface. We completed patient enrollment in two Phase 2 clinical trials of UVIDEM for the treatment of melanoma and in the fourth quarter of 2007 started a new Phase 2 clinical trial of UVIDEM.

On December 26, 2007, sanofi-aventis notified us of its decision to terminate its participation in the UVIDEM development program and we have put on hold further development of the program. 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. 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 terms of the Settlement Agreement, sanofi-aventis retains its options with respect to our other cell therapy programs under an existing collaboration agreement for 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 development, or 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 have also been developing IDM-2101 for non-small cell lung cancer, or NSCLC. IDM-2101 is composed of multiple tumor-specific cytotoxic T-lymphocyte (CTL), epitopes that were selected from tumor-associated antigens. Some of the epitopes have been modified to create analogs in order to enhance the potency of the T cell response induced by the vaccine. We reported on early Phase 2 results of IDM-2101 at the ASCO meeting in June 2007 and the iSBTc meeting in November 2007, and reported on Phase 2 follow-up data at the ASCO meeting in June 2008. A manuscript of the study results were submitted, accepted and published 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.

As previously announced, we are evaluating our research and development programs, including related assets and costs, and strategic alternatives available to us. We are focusing our current research and development activities primarily on mifamurtide. In order to contain our expenses, we have discontinued further development of our other product candidates, including UVIDEM for treatment of melanoma, COLLIDEM for treatment of colorectal cancer and BEXIDEM, a product candidate for which we completed the Phase 2 stage of a Phase 2/3 clinical trial in Europe for the treatment of superficial bladder cancer, until collaborative partners can be found or other funding for those programs becomes available.

We completed a $12.9 million equity financing in February 2007 and a $25.0 million equity financing in June 2007 (see Note 5 to the Condensed Consolidated Financial Statements included in this report). 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.

Results of Operations for the Three Months Ended March 31, 2009 and 2008

Revenues. We had total revenues of $4,000 for the three months ended March 31, 2009, compared to total revenues of $2.4 million for the three months ended March 31, 2008. Revenue for the three 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 were 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.

Research and Development Expenses. Total research and development expenses were $3.0 million and $3.9 million for the three months ended March 31, 2009 and March 31, 2008, respectively. The decrease in research and development expenses were primarily due to a $0.8 million reduction in spending related to clinical development of UVIDEM, which we placed on hold in December 2007 following sanofi-aventis’ notification that it was discontinuing its participation in the development of the program, $0.2 million in savings due to the closing of our Paris, France facility, and $0.2 million decrease in spending associated with development activities related to products currently on hold, partially offset by higher spending of $0.3 million related to regulatory filings and manufacturing of MEPACT clinical supplies for our compassionate use program.

Direct research and development expenses related to our product candidates to destroy residual cancer cells were approximately $2.4 million and $2.1 million for the three months ended March 31, 2009 and 2008, respectively. Direct research and development expenses related to our product candidates to prevent tumor recurrence were approximately $0.1 million and $1.0 million for the three months ended March 31, 2009 and 2008, respectively.

Selling and Marketing Expenses. Selling and marketing expenses were $0.5 million and $0.2 million for the three months ended March 31, 2009 and 2008, respectively. These expenses consisted primarily of costs related to our participation in trade conferences and to the employment costs of our business development employees. Higher expenses in 2009 were the result of additional consulting fees in connection with pricing and reimbursement analysis of MEPACT in Europe.

General and Administrative Expenses. General and administrative expenses were $1.3 million and $2.6 million for the three months ended March 31, 2009 and 2008, respectively. Expenses for the 2009 period were lower primarily due to $0.5 million savings from the closing of our Paris facility, a $0.5 million reduction in finance-related consulting fees, as well as a decrease of $0.2 million in stock compensation expense during the 2009 period.

Restructuring Expenses. There were no restructuring expenses recorded for the three months ended March 31, 2009 as we recorded all charges related to the January 2008 restructuring plan as of December 31, 2008. Restructuring expenses were $2.6 million for the three months ended March 31, 2008, which included $2.3 million of severance benefits and $0.3 million of shutdown costs related to the closing of our facility in Paris, France.

Interest Income. Interest income for the three months ended March 31, 2009 and 2008 were $28,000 and $0.2 million, respectively. The decrease in interest income during the 2009 period was due to lower average investment balances and lower rates of return.

Interest Expense related to Warrants. Interest expense for the three months ended March 31, 2009 and 2008 was $0.5 million and $4.7 million, respectively, substantially all of which is a non-cash interest expense to record the net change in the fair value of warrants issued in connection with the February and June 2007 financings. The lower increase in the fair value during the 2009 period is primarily due to a smaller increase in our stock price during the 2009 period compared to the 2008 period.

Foreign Exchange Gain or Loss. We have an inter-company loan from our subsidiary in France to our subsidiary in the United 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, 2009, we recorded a foreign exchange gain of $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.

Income Tax Benefit. We recorded $17,000 and $20,000 of tax benefit for the three months ended March 31, 2009 and 2008, respectively. The 2009 and 2008 periods reflect an adjustment of the provision for income tax in accordance with FIN 48 for uncertain income tax positions (see Note 10 to the Condensed Consolidated Financial Statements included in this report). Due to our historical losses, we maintain a full valuation allowance for all deferred 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 credits are not utilized three years after they are generated.

As of March 31, 2009, we had research and development tax credits of $0.7 million that represent an account receivable corresponding to our accumulated income tax benefit from the French government, of which $0.2 million is recoverable during the next nine months.

Net Loss. Our net loss decreased to $5.2 million for the three months ended March 31, 2009, compared to $12.1 million for the three months ended March 31, 2008, as a result of the factors described above.

Liquidity and Capital Resources

Our continuing operating losses, operating cash flow deficits, uncertainty in funding sources and plans for pre-launch commercial activities of MEPACT, together raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

We will continue to spend significant amounts on pre-commercial activities for mifamurtide, including amounts spent for manufacturing clinical and commercial supplies. On January 10, 2008, our Board of Directors authorized an organizational restructuring that resulted in a workforce reduction in Irvine, California on January 29, 2008, and the closure of our operations in Paris, France as of the 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 of March 31, 2009, our cash and cash equivalents totaled $7.4 million, compared to $12.8 million as of December 31, 2008. In February 2007, we completed a private placement of our common stock and warrants to purchase common stock and received approximately $12.9 million in gross proceeds. In June 2007, we completed a registered direct offering of our common stock and warrants to purchase common stock and received approximately $25.0 million in gross proceeds. Cash and cash equivalents include principally cash and money-market funds denominated in both euros and U.S. dollars. We use our cash and cash equivalents to cover research and development

expenses and corporate expenses related to selling and marketing and general and administrative activities. If we enter into collaborations for certain of our products, 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.

Net cash used in operating activities decreased to $4.7 million for the three months ended March 31, 2009, compared to $6.9 million for the three months ended March 31, 2008. This decrease 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.

Net cash used in investing activities was $3,000 during the three month ended March 31, 2009, compared to $0.1 million of net cash provided by investing activities during the three months ended March 31, 2008. The proceeds from investing activities in 2008 is from sale of property and equipment from our Paris facility.

As of March 31, 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 common stock warrant liabilities. Current liabilities also include $1.5 million in tax obligations, $0.1 million relating to the current portion of an interest-free loan from the French government, which is due and payable upon request and $0.3 million of accrued restoration costs for our Irvine, California facility.

Our long-term liabilities as of March 31, 2009 were $1.2 million, which includes the $0.8 million Novartis milestone payment accrual, the non-current portion of deferred revenues of $0.1 million, and the non-current portion of an interest-free loan of $0.3 million from the French government that provides support to French companies for research and development. We must repay the remaining $0.3 million balance of the French government loan in 2011.

Our financial requirements to date have been met primarily through sales of equity securities, payments received under our collaboration agreement with sanofi-aventis and other partners, together with grants received from governmental agencies.

As a result of sanofi-aventis’ decision to terminate its participation in the UVIDEM development program, and our decision to discontinue operations in Paris, France, we expect to generate little, if any, revenues in the near term. We expect to receive revenues from sales of our lead product candidate, MEPACT, in Europe assuming that we choose to market MEPACT ourselves. However, we may have to spend significant amounts of capital to commercialize MEPACT, and these efforts may not be successful.

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. In the event we do 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. 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. In addition, we may not be able to enter into additional collaborations to reduce our funding requirements. 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 or acquisition transaction, may be difficult or impossible. 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. We do not have committed sources of additional funding and may not be able to obtain additional funding, particularly if volatile conditions in the capital markets, and more particularly in the markets for biotechnology company stocks, persist. Our failure to obtain additional funding may require us to delay, reduce the scope of or eliminate one or more of our current research and development projects, sell certain of our assets (including one or more of our drug programs or technologies), sell our company, or dissolve and liquidate all of our assets.

Our capital expenditures include purchase of property and equipment, including research and development laboratory equipment and product manufacturing facilities. Capital expenditures also include purchase of intangible assets, including payment of patent development costs, and acquisition of third party licenses, patents, and other intangibles.

Our major outstanding contractual obligations relate to our long-term debt, operating lease obligations, obligations under a number of our collaboration, licensing and consulting agreements and certain cash settlement provisions in our warrant agreements. As a result of sanofi-aventis’ decision to terminate its participation in the UVIDEM development program and our decision to shut down our operations in Paris, France, we have terminated and transferred our leases to third parties with respect to our facilities in Paris, France, and terminated various contractual arrangements in order to minimize the financial impact of the program termination. In addition, the lease for our facility in Irvine, California terminates November 30, 2009. In connection with the termination of the lease we are required to restore certain portions 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.

Under certain of 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 on the basis of net sales of our products. As of March 31, 2009, we believe that we have achieved two milestones totaling $750,000 due to Novartis that would be payable in the event MEPACT is successfully commercialized in Europe. As such, we have recorded this amount as Patents, Trademarks and Other Licenses with a corresponding non-current liability on our balance sheet as of the quarter ended March 31, 2009. In addition, under certain of our agreements with clinical sites for the conduct of our clinical trials, we make payments based on the number of patients enrolled. 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.

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 the 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 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 developing and commercializing new products resulting from our development programs and collaborations including the achievement of milestones, the cost of launching, marketing and sales of products if we choose to commercialize products ourselves, technological developments, our preparation and filing of patent applications, our securing and maintaining patents and other intellectual property rights and our dealings with the regulatory process. See the section entitled “Trends” below.

Off-Balance Sheet Arrangements

As of March 31, 2009, we were not a party to any transactions, agreements or contractual arrangements to which an entity that is not consolidated with us was a party, under which we had:

	•		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 classified in shareholders’ equity, or not reflected, in our statement of financial position; or

•

any obligation, including a contingent obligation, arising out of a variable interest, in an unconsolidated entity that is held by, and material to, us, where such entity provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

Trends

The level of our research and development spending will depend on numerous factors including the number of products in development, the number of products partnered, the results and progress of nonclinical and clinical testing, the regulatory approval process for our products, especially for mifamurtide in the U.S. in the near term, our financial condition and ability to raise additional capital as well as general market conditions.

For the three months ended March 31, 2009 and 2008, we have spent approximately $3.0 million and $3.9 million, respectively, related to research and development. As a result of sanofi-aventis’ decision to terminate its participation in the UVIDEM development program and our decision to shut down our operations in Paris, France, and the granting of marketing authorization in Europe for MEPACT, we expect our research and development expenses to decrease in 2009 from 2008 levels. Spending on MEPACT associated with certain pre-launch commercial activities in Europe will be partially offset as a result of shutting down our French operations and related development activities. In addition, the lease for our facility in Irvine, California terminates November 30, 2009. In connection with the termination of the lease we are required to restore certain portions 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.

If we are unable to find a commercialization partner and proceed with commercialization of MEPACT in Europe ourselves, we expect our selling and marketing expenses to increase correspondingly with our activities to commercialize MEPACT. In addition, we would expect to incur significant costs related to manufacturing MEPACT, which would be recorded as cost of goods sold. Furthermore, depending on the outcome of the NDA filing with the FDA for mifamurtide, we may owe milestone payments as well as royalties in the event of its commercialization, under a licensing agreement with Novartis, which was transferred to us by Jenner in 2003. However, our obligations to make milestone payments are contractually deferred until we realize profitability on MEPACT.

We expect our general and administrative expenses to decrease in 2009 compared to 2008 levels as a result of sanofi-aventis’ decision to terminate its participation in the UVIDEM development program and our decision to shut down our operations in Paris, France and our near-term focus on strategic alternatives.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At March 31, 2009, our investment portfolio included cash and money market accounts. Approximately $5.7 million of our 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 holdings which include certain securities that are illiquid, in default, under restructuring or have been subject to a ratings downgrade. However, the funds continue to report a per share net asset value, or NAV, 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 currently do not hedge interest rate exposure, and any decline in interest rates over time will reduce our interest income, while increases in interest rates over time will increase our interest income. We also do not hedge currency exchange rate exposure.

The current credit crisis may also have a potential impact on our need to obtain additional financing in the future and may impact the determination of fair values, financial instrument classification, or require impairments in the future.

ITEM 4T. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

As of March 31, 2009, we have performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report under the supervision and with the participation of our management, including our President and Chief Executive Officer, or CEO, our principal executive officer, and our Senior Vice President, Finance and Administration and Chief Financial Officer, or CFO, our principal financial officer. The Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report based on their evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 and 15d-15. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls are met, and no evaluation of controls can provide absolute assurance that all controls and instances of fraud, if any, within a company have been detected.

Changes in internal control over financial reporting

We have not made any significant changes to our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

ITEM 1A. RISK FACTORS

We wish to caution readers that the following important factors, among others, in some cases have affected our results and in the future could cause our actual results and needs to vary materially from forward-looking statements made from time to time by us on the basis of management’s then-current expectations. The business in which we are engaged is in a rapidly changing and competitive market and involves a high degree of risk, and accuracy with respect to forward-looking projections is difficult.

The Company has marked with an asterisk those risk factors that reflect changes from the risk factors included in the Company’s Annual Report on Form 10-K filed with the SEC.

*Our substantial additional capital requirements will require that we obtain additional funding if we do not complete a strategic transaction; if we are not able to obtain additional funding when needed, we may be required to sell our assets or our company, or dissolve and liquidate all of our assets.

We will continue to spend substantial amounts on research and development, including regulatory activities associated with gaining marketing authorization for mifamurtide in the U.S. and pre-commercial activities for mifamurtide, including amounts spent for manufacturing clinical and commercial supplies. While we have taken appropriate steps designed to contain such expenses, we cannot be certain that we will reduce our expenses sufficiently in light of our available funds. We will need to raise additional funding to continue to operate our business if we do not complete a strategic partnership or transaction. We do not have committed external sources of funding and may not be able to obtain any additional funding as a result of the volatile market conditions, particularly for biotechnology companies. 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 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:

	•		whether or not we are able to complete a strategic transaction on terms that are favorable to us, or at all;

	•		whether we are able to 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 failure 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 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;

	•		the time and costs involved in obtaining and maintaining regulatory approvals for our products;

	•		the costs involved in filing, prosecuting, enforcing and defending patent claims and any other proprietary rights;

	•		competing technological and market developments; and

	•		the magnitude of our immunotherapeutic product discovery and development programs.

In the event that we do 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 up 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 failure to obtain additional funding may require us to delay, reduce the scope of or eliminate one or more of our current research and development projects, sell certain of our assets (including one or more of our drug programs or technologies), sell our company, or dissolve and liquidate all of our assets. For example, given constraints on our cash resources, we have discontinued further development of UVIDEM, BEXIDEM and COLLIDEM candidates as we devote existing capital to the development of our lead product candidate, mifamurtide.

*We may not be able to continue as a going concern or fund our existing capital needs.

Our independent registered public accounting firm has included an explanatory paragraph in their report on our 2008 financial statements filed in our Annual Report, with the SEC on March 31, 2009, as amended, related to the uncertainty of our ability to continue as a going concern. There is substantial doubt as to whether we will be able to continue as a going concern beyond the third quarter of 2009 without access to additional capital. There can be no assurance that we will be able to obtain additional funds during 2009 on satisfactory terms, or at all. If we are unable to complete a strategic partnership or transaction and if we cannot obtain sufficient additional financing in the short-term, we may be forced to restructure or significantly curtail our operations, file for bankruptcy or cease operations. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be forced to take any such actions. Based upon the foregoing, our independent registered public accounting firm has included an explanatory paragraph in their report on our 2008 financial statements related to the uncertainty in our ability to continue as a going concern.

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

As previously announced, we are evaluating 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 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 secure sufficient shareholder support for any transaction and whether we could 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 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.

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. 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.

Even though we have received regulatory approval for MEPACT in Europe, we currently do not have the infrastructure or resources for commercialization and we may not be able to secure adequate pricing and reimbursement in Europe for us or any strategic partner to achieve profitability.

MEPACT is the only product candidate for which we have received marketing authorization. Any revenues generated will be limited by our ability to, in time, develop our own commercial organization or find a partner for the distribution of the product. In addition, the ability to obtain adequate pricing and reimbursement for MEPACT, and the rate of adoption of the product are risks associated with the commercialization of MEPACT. We may also face competition from new treatments or new investigational approaches with existing 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

approval a generic version of mifamurtide. The European 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.

*Our lead product candidate, mifamurtide, may never obtain regulatory approval in the U.S.

Even though we have received marketing authorization for MEPACT in Europe, we may never obtain regulatory approval in the U.S. We submitted an NDA to the FDA for mifamurtide, requesting approval for its use in the treatment of newly diagnosed resectable high grade osteosarcoma patients following surgical resection in combination with multiple agent chemotherapy. In August 2007, the FDA issued a not approvable letter to us after completing the review of the NDA for mifamurtide. In this letter, 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 existing resources on certain MEPACT pre-launch commercial activities in Europe and to conserve cash while we complete our review of strategic options for the Company, we have placed the U.S. mifamurtide NDA amendment submission on hold until we complete our review.

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 2003 and data from 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.

We may not be able to collect, analyze and submit additional data in an amendment to the NDA for mifamurtide, if at all. Further, it is possible that the additional data will not support the safety and efficacy of mifamurtide in the treatment of non-metastatic osteosarcoma, will not allow a more robust efficacy analysis of mifamurtide, will not continue to support the overall survival benefit of mifamurtide in osteosarcoma, and may not provide substantial evidence for the potential regulatory approval of 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

required manufacturing and regulatory specifications. If 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.

The development 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. If 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.

*We presently do not meet all of the NASDAQ Global Market continued listing requirements and our common stock may be delisted from the NASDAQ Global Market which could reduce the liquidity of our common stock and adversely affect our ability to raise additional capital.

Our common stock is currently listed on the NASDAQ Global Market under the symbol “IDMI.” 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.

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

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.

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

•

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

may 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.

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 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.


	IDM PHARMA, INC.
Dated: May 11, 2009	By:	/s/ Timothy P. Walbert
		Timothy P. Walbert
		President and Chief Executive Officer (Principal Executive Officer)



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

IDM PHARMA, INC. 10-Q