SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2008

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

For the transition period from ________ to ______________

Commission File Number: 000-32947

Lev Pharmaceuticals, Inc.

(Exact name of small business issuer as specified in its charter)

Delaware	88-0211496
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

675 Third Avenue, Suite 2200 New York, New York	10017
(Address of principal executive offices)	(Zip Code)

Issuer’s telephone number: (212) 682-3096

(Former Name, Former Address and Former Fiscal Year, if Changes

Since Last Report)

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 the filing requirements for the past 90 days. Yes x No o

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

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o

Smaller reporting company o

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

As of April 17, 2008, the issuer had 142,329,157 shares of common stock outstanding.

Lev Pharmaceuticals, Inc.

Index to Form 10-Q

		Page
Part I.	Financial Information	3

Item 1.	Condensed Consolidated Financial Statements	3

	Condensed Consolidated Balance Sheets as of March 31, 2008 (Unaudited) and December 31, 2007	3

	Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2008 and March 31, 2007 and for the Period from July 21, 2003 (Inception) to March 31, 2008	4

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2008 and March 31, 2007 and for the Period from July 21, 2003 (Inception) to March 31, 2008	5

	Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis or Plan of Operation	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	26

Part II.	Other Information	27

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 3.	Defaults Upon Senior Securities	44

Item 4.	Submission of Matters to a Vote of Security Holders	44

Item 5.	Other Information	44

Item 6.	Exhibits	45

	Signatures	45

LEV PHARMACEUTICALS , INC. AND SUBSIDIARY

(a development stage enterprise)

Condensed Consolidated Balance Sheets

	March 31, 2008 (Unaudited)			December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	13,241,427		$	21,910,084
Inventory		16,237,279			10,645,129
Prepaid expenses		1,241,151			2,809,253
Other assets		6,635			5,695
Total current assets		30,726,492			35,370,161

Fixed assets, net of accumulated depreciation		253,767			272,401
Loan receivable		3,663,179			3,414,755
Debt issuance costs		180,414			197,873
Other assets		93,335			93,335
Total assets	$	34,917,187		$	39,348,525

LIABILITIES
Current liabilities:
Accounts payable	$	1,652,066		$	1,997,263
Accrued expenses		2,832,623			1,684,045
Total current liabilities		4,484,689			3,681,308

Loan payable, net of debt discount		4,899,592			4,381,092
Term loan payable, net of debt discount		9,629,780			9,185,454
Deferred lease liability		16,660			16,423
Total liabilities		19,030,721			17,264,277

Commitments and contingencies

STOCKHOLDERS' EQUITY
Preferred stock - $0.01 par value, 20,000,000 authorized, no shares issued and outstanding
Common stock - $0.01 par value, 200,000,000 shares authorized, 142,329,157 and 141,750,203 shares issued and outstanding at March 31, 2008 and December 31, 2007, respectively		1,423,292			1,417,502
Additional paid-in capital		74,527,650			71,936,511
Deficit accumulated during the development stage		(60,064,476	)		(51,269,765	)
Total stockholders' equity		15,886,466			22,084,248
Total liabilities and stockholders’ equity	$	34,917,187		$	39,348,525

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

Condensed Consolidated Statements of Operations (Unaudited)

	Three Months Ended March 31,						Period From July 21,2003 (Inception) to March 31,
	2008			2007			2008
Costs and expenses:
Research and development	$	2,818,509		$	3,223,397		$	28,868,040
Merger costs								283,732
General and administrative		5,353,898			2,421,693			30,785,953
Loss before other (expense)/income		(8,172,407	)		(5,645,090	)		(59,937,725	)

Other (expense)/income:
Interest income		143,234			197,791			1,570,855
Interest expense		(525,311	)		(30,774	)		(1,077,858	)
Foreign exchange loss		(240,227	)					(249,693	)
Net loss	$	(8,794,711	)	$	(5,478,073	)	$	(59,694,421	)

Net loss per share-basic and diluted	$	(0.06	)	$	(0.05	)
Weighted average shares-basic and diluted		138,153,694			114,046,749

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Three Months Ended March 31,						July 21, 2003 (Inception) to March 31,
Cash flows from operating activities:		2008			2007			2008
Net loss	$	(8,794,711	)	$	(5,478,073	)	$	(59,694,421	)
Adjustments to reconcile net loss to net cash used
in operating activities:
Compensation to consultants from issuance of
warrants and common stock								2,209,177
Repricing of options and warrants								1,455,269
Option and warrants modification resulting from merger								75,201
Stock issued for services								78,750
Depreciation expense		20,418			11,506			109,817
Amortization of debt discount, loan payable		63,525			30,739			318,231
Amortization of debt discount and debt issuance costs,
term loan payable		108,963						181,604
Accrued interest on term loan		352,823						575,294
Foreign exchange loss		240,227						249,693
Stock compensation to employees		566,379			426,638			3,340,266
Stock compensation for unvested restricted stock		1,527,500						1,712,143
Accretion of investment income								(12,610	)
Gain on sale of investments								(155	)
Supplier purchase funding					640,222			3,372,671
Foreign exchange loss on research and development					49,096			753,715
Deferred lease liability		237			15,714			16,660

Changes in:
Inventory		(5,592,150	)					(16,237,279	)
Prepaid expenses and other assets		1,567,162			(28,238	)		(1,340,616	)
Accounts payable		(345,197	)		(116,840	)		1,652,066
Accrued expenses		1,114,901			(404,803	)		2,798,946
Income taxes liability								(64,463	)
Net cash used in operating activities		(9,169,923	)		(4,854,039	)		(58,450,041	)
Cash flows from investing activities:
Purchase of fixed assets		(1,784	)		(57,360	)		(363,584	)
Loan receivable								(3,424,221	)
Proceeds from the sale of investments								12,500,000
Purchase of investments								(12,487,235	)
Net cash used in investing activities		(1,784	)		(57,360	)		(3,775,040	)
Cash flows from financing activities:
Proceeds from stock subscription receivable								130
Proceeds from notes payable to stockholder								18,000
Proceeds from term loan payable								10,000,000
Payment of debt issuance costs								(209,513	)
Repayment of notes payable to stockholder								(18,000	)
Net proceeds from sale of common stock and warrants								64,623,886
Proceeds from exercise of warrants		503,050			105,523			1,052,005
Net cash provided by financing activities		503,050			105,523			75,466,508

Net (decrease) increase in cash and cash equivalents		(8,668,657	)		(4,805,876	)		13,241,427
Cash and cash equivalents - beginning of period		21,910,084			7,887,635
Cash and cash equivalents – end of period	$	13,241,427		$	3,081,759		$	13,241,427

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND BUSINESS

Lev Pharmaceuticals, Inc. (the “Company”) was incorporated on September 18, 1985 in the state of Nevada as Fun City Popcorn, Inc., (“FCP”).

On November 5, 2004, FCP entered into an agreement and plan of merger (the "Agreement") with Lev Development Corp., formerly known as Lev Pharmaceuticals, Inc. ("Lev"), which was incorporated on July 21, 2003 in the State of Delaware. At the time of this transaction, FCP was a non-operating public company. Lev is a development stage company which is engaged in developing and commercializing therapeutic products for the treatment of inflammatory diseases. On December 29, 2004, the merger closed and pursuant to the Agreement, FCP acquired 100% of the outstanding capital stock of Lev through its subsidiary Lev Acquisition Corp. ("LAC"). In connection with the merger, FCP subsequently changed its name to Lev Pharmaceuticals, Inc. and increased its authorized common stock to 200,000,000 shares and its authorized preferred stock to 20,000,000 shares. Under terms of the Agreement, the stockholders of Lev exchanged all of their issued and outstanding shares of common stock for 5,029,795 shares of FCP common stock, and 4,789,433 shares of Series A voting convertible preferred stock (the "Exchange"). Each Series A voting convertible preferred share was converted automatically into 13.940668 shares of FCP common stock (an aggregate of 66,767,994 common shares). The 71,797,789 shares of common stock represented approximately 94.10% of the ownership interests in FCP following the merger. In addition, 4,505,530 shares of common stock of FCP were deemed issued and outstanding in connection with the Exchange. In addition, all of the outstanding Lev options and warrants immediately prior to the merger were exchanged for 2,854,900 FCP options and 301,668 FCP warrants. The Exchange, which resulted in the stockholders of Lev having control of FCP, represents a recapitalization of FCP, or a "reverse merger" rather than a business combination. In connection therewith, FCP's historic capital accounts were retroactively adjusted to reflect the equivalent number of shares issued by FCP in the Exchange while Lev's historical accumulated deficit was carried forward. The statement of operations reflects the activities of Lev from the commencement of its operations on July 21, 2003. In connection with the Agreement, Lev agreed to acquire FCP for $350,000. In December 2004, Lev paid certain FCP stockholders $283,732 which represents the acquisition price of $350,000 less the assumption of a tax liability of $66,268. In connection with the Exchange, the exercise price of the outstanding warrants and options remained the same. The Company recorded a charge of approximately $75,000 for the change in value of the Company’s outstanding options and warrants as of December 29, 2004 as a result of the increase in the number of common shares into which these equity instruments are exercisable based on the exchange ratio used in the merger, since the aggregate intrinsic value of the warrants and options after the Exchange is greater than before. The Black-Scholes option-pricing model was used to calculate the value of certain options and warrants and the related charge based upon the following weighted average assumptions to determine fair value; risk-free interest rate of 3.58%; expected life of 5 years; dividend yield of 0% and expected volatility of 70%.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

[1] Basis of Presentation:

The unaudited condensed consolidated financial statements include the accounts of Lev Pharmaceuticals, Inc. and its wholly-owned subsidiary Lev Development Corp. All significant intercompany transactions and balances have been eliminated in consolidation. There has been no revenue generated from sales, license fees or royalties. There have been sales of residual plasma during the fourth quarter of 2007; however, the Company does not deem this to be its principal operation. The proceeds have been recorded as a reduction to research and development expense and inventory. The Company's financial statements are presented as statements of a development stage enterprise.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for full year financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ended December 31, 2008. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto that are included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[1] Basis of Presentation (continued):

The Company has prepared its financial statements under the assumption that it is a going concern. As a development stage enterprise, the Company's primary efforts are devoted to conducting research and development for the treatment of inflammatory diseases. As the Company has limited capital resources and has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future, the Company raised capital from the sales of its securities and debt to sustain operations. As of March 31, 2008, the Company had approximately $13.2 million in cash and cash equivalents. In August 2007, the Company raised net proceeds of approximately $32.4 million in a registered direct sale of its securities and in November 2007, we entered into a secured loan facility for a term loan of up to $20.0 million and received an initial loan of $10.0 million on the closing date (see Note G). Pursuant to this facility, we have the option to request additional borrowings of a maximum of $10.0 million for the twelve months following the closing date subject to the terms of the loan. We have cash commitments of $45.1 million over the next twelve months. We expect that our cash used in operations will increase significantly over the next several years and we may be required to raise additional capital to complete the development and commercialization of our current product candidates. Management believes that cash and cash equivalents on hand as of March 31, 2008 and proceeds from the sale of residual plasma should be sufficient to fund operations into the third quarter of 2008. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The Company does not have any commercial products available for sale and has not generated significant revenues and there is no assurance that if approval of their products is received that the Company will be able to generate cash flow to fund operations. We may pursue equity or debt financing alternatives or other financing in order to raise additional funds; however, we do not have any commitments or definitive or binding arrangements for such funds. There can be no assurance that such funds, if available at all, can be obtained on terms reasonable to the Company. If we are unsuccessful in raising additional capital we will need to reduce costs and operations substantially. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In addition to the normal risks associated with a new business venture, there can be no assurance that the Company's research and development will be successfully completed or that any product will be approved or commercially viable. The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, dependence on collaborative arrangements, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, and compliance with the Unites States Food and Drug Administration (“FDA”) and other governmental regulations and approval requirements.

[2] Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include valuation of warrants issued in connection with the term loan, imputed interest rate on loan payable and assumptions used in the fair value of stock-based compensation.

[3] Stock-based compensation:

During the three months ended March 31, 2008 and 2007, the Company recorded $566,379 and $426,638 of stock-based employee compensation expense, respectively.

For purposes of the disclosure and for purposes of determining estimated fair value under SFAS No.123(R), the Company has computed the estimated fair values of all stock-based compensation using the Black-Scholes option-pricing model and has applied the assumptions set forth in the following table. The Company calculated expected volatility based upon historical volatility of the Company’s common stock. The aggregate and per share fair value of options granted during the three months ended March 31, 2007 was approximately $6,372,000 or $1.45. No options were granted during the three months ended March 31, 2008. The following table illustrates the assumptions used in the Company’s Black-Scholes option pricing model to determine the stock option expense for the three months ended March 31, 2008 and 2007.

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[3] Stock-based compensation (continued):

The following table illustrates the assumptions used in the Company’s Black-Scholes option pricing model to determine the stock option expense for the three months ended March 31, 2007.

		Risk Free Interest Rate			Dividend Yield			Volatility Factor			Estimated Life (Years) (1)
For the three months ended March 31, 2007			4.48% - 4.80	%		0	%		125.3% - 130.6%	%		5.02

(1) Represents the period of time options are expected to remain outstanding. As the Company has so far only awarded “plain vanilla options” as described by the SEC’s Staff Accounting Bulletin No. 107 (SAB 107), the Company used the “simplified method” for determining the expected life of the options granted. Originally, under SAB 107, this method was allowed until December 31, 2007. However, on December 21, 2007, the SEC issued Staff Accounting Bulletin No. 110 (SAB 110), which will allow a Company to continue to use the “simplified method” under certain circumstances, which the Company will continue to use as the Company does not have sufficient, historical data to estimate the expected term of share based awards.

Plan options

A summary of option activity under the Plan as of March 31, 2008 and changes during the three month period then ended is presented below.

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding, December 31, 2007		9,984,900		$	1.00
Forfeited		(5,000	)		1.75
Outstanding, March 31, 2008		9,979,900		$	1.00		7.54	$	2,254,240
Vested and expected to vest, March 31, 2008		9,979,900		$	1.00		7.54	$	2,254,240
Exercisable shares as of March 31, 2008		5,536,151		$	0.66		7.16	$	2,032,240

As of March 31, 2008, there was $4,838,738 of total unrecognized compensation expense related to unvested stock-based compensation arrangements granted under the Plan. This expense is expected to be recognized over a weighted-average period of 30 months.

Out of Plan options

A summary of option activity outside the Plan as of March 31, 2008 and changes during the three month period then ended is presented below.

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding, December 31, 2007		1,815,273	$	1.82
Outstanding, March 31, 2008		1,815,273	$	1.82		6.62	$	0
Vested and expected to vest, March 31, 2008		1,815,273	$	1.82		6.62	$	0
Exercisable shares as of March 31, 2008		50,000	$	1.76		6.61	$	0

As of March 31, 2008, there was $2,086,829 of total unrecognized compensation expense related to unvested stock-based compensation arrangements granted out of Plan. This expense is expected to be recognized over a weighted-average period of 31 months. The beginning balance has been adjusted to reflect an option grant that was recorded as of December 31, 2007 prior to the completion of negotiations and final settlement of its terms, the effect of which is immaterial.

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

[4] Net loss per share:

Basic net loss per share is computed on the basis of net loss for the period divided by the weighted average number of shares of common stock outstanding during the period, excluding unvested restricted stock. There were potentially dilutive common shares of 35,605,390 and 25,125,872 as of March 31, 2008 and 2007, respectively related to stock options, warrants and unvested restricted stock for 2008, which were excluded from the diluted loss per share calculation since their effect would have been anti-dilutive.

[5] Inventory:

Inventory is stated at the lower of cost or market using the first-in first-out method. Inventory consists of the following:

	March 31, 2008 (Unaudited)		December 31, 2007
Raw materials	$	12,163,081	$	9,680,317
Work-in-process		4,074,198		964,812
Total	$	16,237,279	$	10,645,129

[6] Sale of residual plasma:

Sales of residual plasma resulting from the manufacturing process of our product is treated as a cost-recovery at the time of the delivery as a reduction to research and development expense and inventory. The Company does not deem these sales to be its principal operation.

[7] Fair Value Measurements:

On January 1, 2008, the Company adopted Financial Accounting Standards Board (“FASB”) issued Statement No. 157, Fair Value Measurements (“SFAS 157”). The Statement provides guidance for using fair value to measure assets and liabilities. This Statement references fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The Statement applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The Statement does not expand the use of fair value in any new circumstances. The adoption of SFAS No. 157 did not have a material impact on the Company’s financial statements.

On January 1, 2008, the Company adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115” (“SFAS 159”), which permits entities to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The adoption of SFAS 159 did not have a material impact on our consolidated financial position, results of operations, and cash flows.

[8] New Accounting Pronouncements:

In December 2007, the FASB issued SFAS No. 141 (revised 2007) ("SFAS 141R"), "Business Combinations" and SFAS No. 160 ("SFAS 160"), "Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulleting No. 51." SFAS 141R will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interest and classified as a component of equity. SFAS 141R and SFAS 160 are effective beginning the first fiscal quarter of 2009. Early adoption is not permitted. The Company does not expect the adoption of either SFAS 141R or SFAS 160 will have a material impact on its statements of financial position, results of operations and cash flows. The guidance in these pronouncements will be effective for any acquisitions closed by the Company subsequent to adoption.

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE C - PREPAID EXPENSES

Prepaid expenses consist of the following:

	March 31, 2008 (Unaudited)		December 31, 2007
Advance for plasma purchases	$	820,044	$	2,339,674
Prepaid insurance		369,131		451,499
Prepaid other		51,976		18,080
Total	$	1,241,151	$	2,809,253

NOTE D - FIXED ASSETS

Fixed assets, at cost, consist of the following:

	March 31, 2008 (Unaudited)			December 31, 2007
Office equipment	$	276,741		$	274,957
Lab equipment		11,645			11,645
Other		75,198			75,198
Total		363,584			361,800
Accumulated depreciation		(109,817	)		(89,399	)
	$	253,767		$	272,401

The Company recorded depreciation expense of $20,418 and $11,506 for the three months ended March 31, 2008 and 2007.

NOTE E - ACCRUED EXPENSES

Accrued expenses consisted of the following:

	March 31, 2008 (Unaudited)		December 31, 2007
Research and development - sponsored research	$	234,000	$	234,000
Research and development – clinical		1,051,434		335,485
Research and development – other		202,502
Research and development - payroll		45,860		24,604
General and administrative – professional fees		91,200		179,000
General and administrative – payroll		457,695		326,333
General and administrative – other		67,613		78,887
Sanquin facility upgrade		347,772		324,187
Other		334,547		181,549
Total	$	2,832,623	$	1,684,045

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE F – SANQUIN BLOOD SUPPLY FOUNDATION

[1] Loan payable

The Company purchased its C1-INH product from the Sanquin Blood Supply Foundation (“Sanquin”). Under the agreement with Sanquin, Sanquin provided loans to the Company for the value of C1-INH purchased for clinical trials. The loans are subject to a purchase money security interest. Upon regulatory approval, Sanquin will forgive each loan and release all security interests. If regulatory approval is not obtained, then each loan is payable on the earlier of January 16, 2014 or the termination of the agreement. The principal loan balance outstanding as of March 31, 2008 and December 31, 2007 was $4,899,592 net of debt discount of $1,809,321 and $4,381,092 net of debt discount of $1,872,846, respectively. This debt discount relates to interest imputed on the original loan balance as it is non-interest bearing and was recorded as a reduction to product costs that were included as research and development expense. We fulfilled the loan purchase commitment in August 2007 at which time the aggregate loan amount became fixed, subject to foreign exchange fluctuations. The loans are payable in Euros and any currency differences were recorded in our unaudited condensed consolidated statement of operations as a research and development expense and in 2008 are recorded as a foreign exchange gain or loss. The Company has recorded interest expense using the effective interest rate method. Interest rates range from 4.31% to 7.66%. For the three months ended March 31, 2008 and 2007, interest expense was $63,525 and $30,739, respectively. The amount included in research and development expense for product cost for the three months ended March 31, 2007 were $640,222 and the amount included as a foreign exchange loss for the three months ended March 31, 2008 was $454,975.

[2] Distribution and manufacturing services agreement and Loan Receivable

In January 2004, the Company and Sanquin entered into a distribution and manufacturing services agreement (the “Distribution Agreement”) under which Sanquin agreed to manufacture and supply agreed-upon quantities of the product to the Company, as soon as Sanquin obtained an export license during 2005, for an agreed-upon minimum price, which is subject to change. In connection with quantities supplied for the clinical trial prior to regulatory approval, Sanquin has provided loans to the Company as discussed in [1] above. Sanquin also granted to the Company the exclusive right to distribute, market and sell the product in the U.S. and certain other countries, upon receiving regulatory approval to do so in each respective country.

On June 1, 2007 the Company exercised an option to extend the Sanquin distribution agreement. Our distribution agreement with Sanquin terminates on December 31, 2010, unless extended by us for up to a three-year period or by mutual agreement of the parties prior to its expiration.

On October 10, 2007, the Company entered into an amendment, dated as of September 24, 2007, to the Distribution Agreement. Pursuant to the amendment, the Company agreed on terms of a construction project to scale-up the production facilities of Sanquin to be used for the purpose of meeting the Company’s anticipated ongoing requirements for the commercial use of the C1-INH product to be marketed as Cinryze™. Pursuant to the terms and conditions of the amendment, the Company is developing a project plan for the construction of additional production facilities with Sanquin. Subject to the terms of the final project plan, the Company will provide Sanquin with a non-interest bearing loan, up to a maximum amount of €7.5 million (approximately US $11.9 million, based on the exchange rate as of March 31, 2008), to finance the construction project. This loan will be due July 1, 2014 and Sanquin agreed to repay the principal amount of the loan by providing us with a discount to the per unit purchase price of Cinryze™. The loan receivable balance outstanding as of March 31, 2008 and December 31, 2007 was $3,663,179 and $3,414,755 and the fair value of the loan was $3,425,411 and $3,064,186, respectively. In accordance with APB No. 21, Interest on Receivables and Payables, the Company did not impute interest since the loan does not require repayment in the future, but rather will be applied to the purchase price of Cinryze™. The estimated fair value of the loan receivable as of March 31, 2008 and December 31, 2007 are based on the present value of the cash flows discounted at a rate 3.7% and 5.5%, respectively, that approximates current market returns. In addition, in the event the agreement is terminated before July 1, 2014 because of a default by the Company or if by such date the volume of product the Company ordered is less than the required volume for Sanquin to repay the loan, then the Company shall waive the then outstanding balance of the loan.

Pursuant to the amendment, Sanquin shall manufacture C1-INH product for the Company on a toll-manufacturing basis using blood plasma supplied by the Company. The Company agreed to purchase a specified amount of such product from Sanquin totaling approximately $20.5 million until the scale up is approved by the appropriate regulatory authorities, which we expect to occur during 2009. In addition, the Company agreed to an annual minimum purchase commitment of product of approximately $23.3 million during the term of the Agreement commencing in the year in which the scale up is approved in the U.S. for commercial production. The Company and Sanquin agreed to negotiate in good faith to modify these requirements in the event that regulatory approval for commercial release of Cinryze™ in the U.S. does not occur by March 31, 2008. As the Company has not received regulatory approval for Cinryze™ as of such date, the Company has been in discussions with Sanquin regarding these requirements. However, no assurances can be given that we will ultimately enter into a modification agreement, or similar arrangement with Sanquin to modify our commitments under this Agreement. In such an event, the Company’s liabilities to Sanquin would be subject to the current terms of the Agreement. The Company’s contractual purchase commitments are subject to annual adjustments based on market conditions and do not include the cost of storage, handling and testing services that Sanquin will provide.

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE G – TERM LOAN PAYABLE

On November 2, 2007, the Company and its wholly-owned subsidiary, Lev Development Corp. entered into a Term Loan Agreement dated as of November 2, 2007 (the “Loan Agreement”) and a Pledge and Security Agreement of the same date (the “Security Agreement” and together with the Loan Agreement, the “Secured Financing Agreements”), among the Company, the Lender executing the Loan Agreement (the “Lender”) and Mast Capital Management, LLC (“Mast”), as agent for the Lender.

Under the Loan Agreement, the Lender agreed to provide a term loan facility to the Company in an aggregate amount of up to $20,000,000. The loan is secured by a first priority lien on all of the Company’s assets. Pursuant to the terms and conditions of the Secured Financing Agreements, at the initial closing the Company received an initial loan of $10,000,000. Subsequent term loan advances may be requested by the Company in amounts not less than $1,000,000 each during the twelve month period from the closing date. The Company’s ability to request additional loans is subject to the Company maintaining (i) a borrowing base in excess of the outstanding aggregate loan amount and (ii) compliance with the covenants and conditions of the loan. The loan is for a term of 36 months and matures on November 1, 2010. Interest on the loan accrues at the rate of 13.5% per annum and has an effective interest rate of 26.6%. As of March 31, 2008, the principal balance of the loan outstanding was $10,000,000 with accrued interest owed of $575,294 net of debt discount of $945,514. As of December 31, 2007, the principal balance of the loan outstanding was $10,000,000 with accrued interest owed of $222,471 net of debt discount of $1,037,017. Commencing November 1, 2008, the Company must pay minimum cash interest payments of 10.5% and an additional 3% accrues through the term of the loan.

The Loan Agreement allows the Company to prepay the outstanding principal amount and all accrued but unpaid interest, subject to payment of a make-whole premium during the first year following the closing and a prepayment fee thereafter, until May 1, 2010. The Loan Agreement requires compliance with customary covenants and restrictions on the Company’s ability to, among other things, dispose of certain assets, engage in certain transactions, incur indebtedness and pay dividends. In addition, the Loan Agreement requires compliance with financial covenants that commence December 31, 2008. The Loan Agreement also provides for customary events of default following which, the Lender may, at its option, accelerate the amounts outstanding under the Loan Agreement.

In connection with the Loan Agreement, the Company issued to the Lender warrants to purchase an aggregate of 900,000 shares of Company common stock (the “Warrants”). The Company valued the warrants at $1,098,019 using the Black Scholes option pricing model and is deemed a debt discount. The debt discount is netted against the term loan and amortized over the life of the loan and is charged to interest expense. The Warrants are for a term of three years and have an exercise price of $1.6576 per share, which is the volume weighted average price per share of the Company’s common stock for the thirty trading days immediately preceding the closing. The Company also entered into a registration rights agreement with the Lender pursuant to which the Company agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the shares of common stock which may be issued upon exercise of the Warrants upon the demand of the holders of a majority of the Warrants. If no registration statement is filed and declared effective by the Securities and Exchange Commission covering the resale of the shares of common stock which may be issued upon exercise of the Warrants, the lender may exercise the warrants for unregistered shares of common stock. In consideration for services provided on behalf of the Company in connection with the consummation of the transactions contemplated by the Secured Financing Agreements, the Company paid $100,000 which was a fee of 1% of the amounts borrowed under the Loan Agreement to Mr. Richard Stone, who is the beneficial owner of greater than 5% of the Company’s outstanding common stock.

On February 11, 2008, the Lender, agent for the Lender and two affiliated individuals filed a Schedule 13G with the Securities and Exchange Commission reporting that as of January 30, 2008, such persons were the beneficial owner of greater than 5.0% of the Company’s common stock. Accordingly, in the event that the Company elects to increase its borrowings under this loan arrangement, such transaction would be reviewed by the audit committee of the Company’s board of directors in accordance with its procedures for reviewing related party transactions.

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE H - INCOME TAXES

The Company adopted the provisions of Financial Standards Accounting Board Interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”) an interpretation of FASB Statement No. 109 (“SFAS 109”) on January 1, 2007. As a result of the implementation of FIN 48, we did not recognize any adjustment in the liability for unrecognized income tax benefits. The tax years 2003-2006 remain open to examination by the major taxing jurisdictions to which we are subject. In the event that the Company is assessed interest or penalties at some point in the future, they will be classified in the financial statements as general and administrative expense.

NOTE I - EMPLOYMENT AGREEMENTS

On January 23, 2007, the Company entered into an amended and restated employment agreement with each of its Chief Executive Officer, Dr. Joshua D. Schein, and its Executive Vice President and Chairman, Mr. Judson Cooper. Both employment agreements are effective as of January 17, 2007. Under the employment agreements, the Executives will be entitled to a base salary of $425,000 beginning as of January 1, 2007. In addition, the Executives are entitled to a bonus as defined in the employment agreements. The Executives were each granted options to purchase 1,600,000 shares of the Company common stock, which options expire ten years from the date of grant and which are exercisable at an exercise price of $1.60, which was equal to the closing price of its common stock on the date of grant (January 17, 2007). The options vest in equal annual installments of 25% of the total option amount until vested in full, subject to the terms and conditions of the Company’s 2004 Omnibus Incentive Compensation Plan. In the event of the termination of employment by the Company without “cause” or by an Executive for “good reason,” there is a lump sum settlement payable as defined in the employment agreements. There is a provision for payment of additional benefits in the event of a change of control.

On December 20, 2007, the Company entered into a second amended and restated employment agreement with each of its Chief Executive Officer, Dr. Joshua D. Schein, and its Executive Vice President and Chairman, Mr. Judson Cooper. In addition to the execution of the amended and restated employment agreements, on December 20, 2007, we also awarded each of the Executives a cash bonus for the 2007 fiscal year of $425,000, which was approved by our Compensation Committee. The amended and restated employment agreements are for an initial term expiring December 31, 2012 and at the end of the initial term renew automatically for additional one year terms unless sooner terminated or not renewed. Under the employment agreements, the Executives will continue to receive a base salary of $425,000; provided, however, that the base salary shall increase to $500,000 effective upon the date on which the FDA approves our biologics license application for its lead product candidate (the “Approval Date”). In addition, the base salary shall increase at the end of each year of service (commencing at the end of 2007) by the greater of (i) 4% or (ii) a percentage equal to the increase, if any, in the United States Department of Labor Consumer Price Index (or comparable index, if available) for the New York metropolitan area over the previous 12 months. Commencing in the year in which the Approval Date occurs, the Executives will be entitled to a bonus opportunity within the target range of 75% to 200% of base salary, based on satisfaction of performance targets to be determined by the Compensation Committee. In addition, we granted 2,000,000 shares of restricted common stock to each of the Executives with the following vesting schedule: 50% of the restricted stock shall vest and the restrictions thereon shall lapse on the Approval Date and thereafter 25% of the restricted stock shall vest and the restrictions thereon shall lapse on each of the first and second anniversaries of the Approval Date. The Company has determined that it is probable as of March 31, 2008 and December 31, 2007 that the restricted shares will vest. The Company cannot provide any assurances as to when it may receive FDA approval and in the event that FDA approval is not obtained by such date, the Company will revise its estimates regarding these awards. Therefore, the Company recorded compensation expense of $184,643 for the period December 20, 2007 to December 31, 2007 and $1,527,500 in the first quarter of 2008 based upon the value of the common stock amortized through the estimated Approval Date.

Effective March 16, 2007, the Company entered into an employment relationship with Mr. Dov S. Elefant for Mr. Elefant to serve as its Corporate Controller. Pursuant to the terms of an offer letter executed by the Company and Mr. Elefant, Mr. Elefant will serve as Corporate Controller on an at-will basis and earn an annual salary at the rate of $195,000. Mr. Elefant will be eligible for an annual bonus of $20,000 at the discretion of the compensation committee of the Board. In the event Mr.Elefant’s employment is terminated by the Company without cause within three years of his start date, the Company will pay him a severance payment of six months of his then-current base salary. In addition, pursuant to the Company’s 2004 Omnibus Incentive Compensation Plan and subject to the terms and conditions therein, on March 19, 2007, the Company granted Mr. Elefant options to purchase 200,000 shares of the common stock, which options are exercisable for a period of seven years at a per share price of $1.75 and which options vest over a three year period, with 1/3 of the option award vesting on the one-year anniversary of the date of grant and the balance vesting in equal monthly installments of 1/24 of the remaining option award over the following 24 months.

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE J - PLASMA SUPPLY AGREEMENT

On July 19, 2007, the Company entered into an agreement, for the purchase and sale of plasma with DCI Management Group, LLC (the “DCI Agreement”) pursuant to which the Company will purchase certain quantities of U.S. Source Plasma to be utilized in the production of product under our Distribution and Manufacturing Services Agreement with Sanquin. Under the DCI Agreement, the supplier agreed to sell us specified annual quantities of plasma, in accordance with applicable good manufacturing practices. In 2007, the Company purchased approximately $13.5 million of plasma under this agreement. The Company is committed to purchase $13,950,000 worth of product during 2008 and has purchased approximately $3.7 million during the first quarter of 2008. Thereafter the Company expects its annual purchase commitment to be between $12.2 million and $12.9 million for the balance of the term of the DCI Agreement. The Company’s contractual purchase commitments are subject to annual percentage increases based on market conditions. The Company anticipates its total remaining commitment under this DCI Agreement to be approximately $47.9 million.

The DCI Agreement expires December 31, 2011, unless sooner terminated in accordance with its terms. Either party may terminate the DCI Agreement upon written notice if the other party is in material breach of any provision thereof, subject to applicable cure periods. Subject to the supplier’s ability to mitigate damages, in the event the Company is in default of its payment obligation under the contract, the Company will be liable to purchase the minimum quantities of plasma specified under the contract for the balance of the term. The Company has the right, however, to terminate the contract if by December 31, 2008 the Company does not obtain regulatory approval for the commercialization of its lead product candidate or is not able to secure adequate financial arrangements to cover our obligations with respect to the initial purchase commitments under the DCI Agreement. In either such event, the Company will be obligated to complete the purchase of 80% of the initial minimum purchase commitment, subject to the supplier’s ability to mitigate damages. Upon expiration of the DCI Agreement, or in the event the DCI Agreement is terminated for reasons other than as set forth above, the Company will be obligated to make a final purchase of plasma in the quantity specified in the DCI Agreement.

NOTE K - LEGAL

The Company may be subject to legal proceedings and claims in the ordinary course of business. The Company is not presently a party to any proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on our business, results of operations or financial condition.

NOTE L - SUBSEQUENT EVENTS

Plasma Supply Arrangement

On April 9, 2008, the Company entered into an agreement (the “Purchase Agreement”) with Plasma Centers of America, LLC (the “Seller”) pursuant to which the Company and the Seller will, subject to the terms and conditions of the Purchase Agreement, consummate the following transactions: (1) the acquisition by the Company of a maximum of three plasma collection centers, assuming the satisfaction of certain performance targets by Seller; (2) construction of three new plasma collection centers (the “New Centers”) by Seller; and (3) purchase by the Company of Source Plasma from each new collection center in accordance with the terms of the Purchase Agreement. Pursuant to the Purchase Agreement, Seller shall construct and operate the three New Centers in accordance with the schedule agreed upon by the parties. In connection with Seller’s obligations, the Company will make certain performance payments to Seller upon their achievement of agreed upon milestones relating to the construction and operation of each New Center. Further, during the period commencing on each New Center opening date and until the first to occur of the twelve month anniversary of such date, the closing date of the Company’s acquisition of such New Center or the election by the parties not to sell a qualified New Center, Seller shall exclusively sell the Plasma generated at the New Centers to the Company. The Purchase Agreement also provides that upon the achievement by Seller of the following operating benchmarks, the Seller shall have the right to cause the Company to acquire one or more New Centers: (a) Seller secures all regulatory approvals for each New Center with an agreed upon time frame and (b) Seller achieves and maintains an agreed-upon average collection level of plasma units. In the event Seller does not cause the Company to acquire a New Center, the Company shall have the right to require the Seller to proceed with the sale of the New Center. In addition, in the event that the operating benchmarks are not achieved for a New Center, then the Company shall also have the right to acquire such New Center for a reduced purchase price.

LEV PHARMACEUTICALS, INC. AND SUBSIDIARY

(a development stage enterprise)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE L - SUBSEQUENT EVENTS (CONTINUED

Plasma Supply Arrangement (continued)

The Purchase Agreement commences on the effective date and continues until December 31, 2010, unless sooner terminated. The Company shall have the right to terminate the Purchase Agreement upon written notice in the event that (a) the Company is unable to obtain any regulatory approvals necessary for it to take title to any of the New Centers; (b) the FDA does not approve the Company’s biologics license application for its lead product candidate for the treatment of hereditary angioedema prior to an agreed upon date; (c) Seller does not satisfy the operating benchmarks within the required timeframes; or (d) the parties are unable to consummate an acquisition of a New Center within the required time period. All performance payments for a given New Center and, to the extent applicable, payments for pre-licensed plasma collected at a particular New Center shall be reimbursed in the event that the Company’s obligation to acquire such New Center is terminated due to the non-performance of Seller of any of its obligations, in the event the operating benchmarks for such New Center are not timely achieved or in the event the parties do not consummate the sale of a qualified center.

Agreement for Sale of Plasma Intermediates

On April 9, 2008, the Company entered into an agreement (the “Sale Agreement”) with Biotest AG (“Purchaser”) pursuant to which the Company will sell to Purchaser all of its excess output of specific intermediate plasma products (the “Residuals”) derived from the plasma processed by Sanquin Blood Supply Foundation (“Sanquin”) on behalf of the Company. In addition, the Company offered Purchaser a right of first refusal to purchase unprocessed plasma in the event the Company elects to sell unprocessed plasma to a third party. The Company expects to sell approximately €6.4 million of Residuals during 2008. However, the amounts that we will receive are dependent upon the actual volume of plasma processed on our behalf and as this amount is subject to periodic fluctuations, actual proceeds may be less than expected. The Purchaser also agreed to provide the Company with a right of first refusal, subject to certain exceptions, to repurchase certain byproducts derived from the Residuals. The Sale Agreement has an initial term expiring December 31, 2012, unless sooner terminated. Either party may terminate the Sale Agreement upon written notice if the other party is in material breach of any provision thereof, subject to applicable cure periods. In the event of a breach of the Sale Agreement by Purchaser, Purchaser shall be liable to purchase all amounts of Residuals deliverable under the Sale Agreement during its remaining term.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes to those statements. In addition to historical information, the following discussion and other parts of this quarterly report contain forward-looking information that involves risks and uncertainties.

Forward Looking Statements

This Report on Form 10-Q for Lev Pharmaceuticals, Inc. may contain forward-looking statements. We are including the following cautionary statement in this Quarterly Report on Form 10-Q to make applicable the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by us or on our behalf. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are other than statements of historical facts. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate” and “continue” or similar words. You should read statements that contain these words carefully because they discuss future expectations and plans, which contain projections of future results of operations or financial condition or state other forward-looking information. We believe that it is important to communicate future expectations to investors. However, there may be events in the future that we are not able to accurately predict or control. Any forward-looking statement contained in this document speaks only as of the date on which the statement is made. We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events.

The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in good faith forward-looking statements. Certain of these risks are set forth under “Risk Factors” in our Annual Report on Form 10-K and our periodic reports filed with the SEC. These risks include, without limitation: the carrying-out of our research and development program for our product candidates, including demonstrating their safety and efficacy at each stage of testing; the timely obtaining of regulatory approvals; the commercialization of our product candidates, at reasonable costs; the ability to compete against products intended for similar use by recognized and well capitalized pharmaceutical companies; our ability to raise capital when needed, and without adverse and highly dilutive consequences to stockholders; and our ability to retain management and obtain additional employees as required. Our expectations, beliefs and projections are expressed in good faith and are believed by us to have a reasonable basis, including without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties, but there can be no assurance that management’s expectations, beliefs or projections will result or be achieved or accomplished. Accordingly, to the extent that this Report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of our company, please be advised that our actual financial condition, operating results and business performance may differ materially from that projected or estimated by us in forward-looking statements.

Overview

We are a development stage biopharmaceutical company that was formed in July 2003 to focus on developing and commercializing therapeutic products for the treatment of inflammatory diseases. Our product candidates are based on C1-INH, a human plasma protein that mediates inflammation and is potentially applicable as a treatment for a range of medical indications. We initiated a Phase III clinical trial of our lead product candidate, C1-INH for the acute treatment of hereditary angioedema (“HAE”) in March 2005. In November 2005, we initiated a Phase III clinical trial of C1-INH for the prophylactic treatment of HAE. In October 2005, we received fast track designation status by the United States Food and Drug Administration (“FDA”) for the treatment of HAE. We are also developing C1-INH for the treatment of selective other diseases and disorders in which inflammation is known or believed to play an underlying role. We have certain rights to C1-INH technology through agreements with Sanquin, an Amsterdam-based not-for-profit organization that provides blood and plasma products and related services, carries out research and provides education, primarily in the Netherlands.

Product Development

On January 17, 2007, we announced that we have completed patient treatment in the acute portion of a pivotal Phase III clinical trial for our lead product candidate, C1-INH for the treatment of HAE and on March 14, 2007, we announced positive results from our Phase III clinical trial of C1-INH for the acute treatment of HAE. In the acute trial, the protocol-defined primary endpoint was reached, showing a clinically and statistically significant reduction in the time to sustained relief of acute HAE symptoms. The primary endpoint was met using the protocol-defined intent to treat analysis, with a median time to sustained symptom relief of 2.0 hours for patients receiving C1-INH compared to greater than 4.0 hours, the maximum evaluation period, for patients receiving placebo. In addition, 21 laryngeal attacks were treated in the study on an open label basis. All of the laryngeal attacks were successfully treated with C1-INH. Based on the positive results of this trial, we filed a biologics license application, or BLA, with the FDA on July 31, 2007. If approved, we intend to commercialize C1-INH ourselves through a specialty sales force in the United States and market this product under the name Cinryze™.

On May 31, 2007, we announced that we have completed patient treatment in the second phase of the trial, examining the effectiveness of C1-INH in preventing inflammatory attacks in more severely affected HAE patients and on September 10, 2007 we announced positive results from our Phase III clinical trial of C1-INH for the prophylactic treatment of HAE. In the prophylactic trial, the protocol-defined primary endpoint was achieved, showing a clinically and statistically significant reduction in the number of HAE attacks. In the 24 week, double-blind, placebo controlled study, a total of 24 patients were randomly assigned to one of two treatment groups: twelve weeks of C1-INH treatment followed by 12 weeks of placebo or 12 weeks of placebo treatment followed by 12 weeks of C1-INH. A total of 22 patients were crossed-over to the second arm of the study. Patients received twice-weekly doses of C1-INH or placebo. The primary endpoint was met with a 52% reduction in the number of attacks in the C1-INH group (p<0.0001). Secondary endpoints in the study also showed highly significant differences in favor of C1-INH, including a 66% reduction in days of swelling (p<0.0001) and decreases in the average severity of attacks (p=0.0008) and average duration of attacks (p=0.0004). Based on the positive results of this study, we amended our BLA filing with the FDA on October 30, 2007. Our product candidate was well tolerated with an adverse event profile no different from placebo. The most common adverse reactions observed were injection site rash and lightheadedness. No drug-related serious adverse events, no immunogenicity and no decrease in efficacy have been observed in the trials.

On January 30, 2008, we announced our receipt of a complete response letter from the FDA regarding our BLA for Cinryze™ for the acute and prophylactic treatment of HAE. In our announcement, we stated that the FDA requested information with respect to chemistry, manufacturing and controls, as well as additional analyses of existing efficacy data from the Cinryze™ trials. While no new clinical trials were requested in this letter, no assurances can be given that additional clinical studies will not be requested in the future or on the timing of any further FDA action. On April 15, 2008, we announced that we formally submitted our complete response to the U.S. Food and Drug Administration’s complete response (or “approvable”) letter for our lead product candidate, Cinryze™. In addition, we have been advised that the FDA’s Blood Products Advisory Committee, or BPAC, intends to review our BLA for Cinryze™ on May 2, 2008, for the prophylactic treatment of HAE.

The FDA has substantial discretion in the approval process and may disagree with our interpretation of the data submitted in the BLA. Accordingly, there can be no assurance that the outcome of our Phase III trials will be successful or that the results of the trials will support licensure by the FDA. If approved, we intend to commercialize Cinryze™ through a specialty sales force in the United States.

From July 21, 2003 (inception) through March 31, 2008, we have not generated any revenue from operations. We expect to incur additional losses to perform further research and development activities. We do not currently have any commercial biopharmaceutical products, and do not expect to have a product until mid-2008 at the earliest subject to FDA approval. As a company that may have limited product revenues, subject to FDA approval, and no profit over the next year, management of cash flow is extremely important. A significant use of our cash is for research and development activities, which include clinical trials and regulatory clearance. During the three months ended March 31, 2008, our research and development expenses were $2,818,509.

Merger Transaction

On November 5, 2004, Fun City Popcorn (“FCP”), its wholly-owned subsidiary, Lev Acquisition Corp. (“Lev Sub”) and Lev Development Corp., previously known as Lev Pharmaceuticals, Inc. (“Old Lev” or “LDC”), entered into the Agreement and Plan of Merger (as amended on December 8, 2004, the “Agreement”). On December 29, 2004, the merger closed and pursuant to the Agreement, Lev Sub merged into Old Lev and the combined entity became a wholly-owned subsidiary of FCP (the “Public Company Merger”). As a result of the Public Company Merger, FCP issued 5,029,795 shares of common stock and 4,789,433 shares of Series A convertible preferred stock to holders of outstanding Old Lev common stock.

On December 29, 2004, the Board of Directors and stockholders of FCP approved a merger of FCP into a newly formed, wholly-owned subsidiary of FCP incorporated in Delaware (the “Recapitalization Merger”). This merger was undertaken to increase the authorized number of shares of common stock to permit the conversion of the Series A preferred stock, to reincorporate FCP in the State of Delaware and to change the name of the company. On February 17, 2005, the Recapitalization Merger closed and the issued and outstanding Series A preferred stock of FCP was automatically converted into an aggregate of 66,767,994 shares of common stock which, along with the 4,505,530 shares of FCP common stock outstanding prior to the Public Company Merger and the 5,029,795 shares of common stock issued to the Old Lev stockholders in the Public Company Merger, resulted in a total of 76,303,319 shares of common stock outstanding as of February 17, 2005. As part of the Recapitalization Merger, Old Lev changed its name to Lev Development Corp., FCP changed its name to Lev Pharmaceuticals, Inc. and we increased our authorized common stock to 200,000,000 shares and our preferred stock to 20,000,000 shares. As a result of these mergers, the stockholders of Old Lev acquired approximately 94% of our outstanding common stock.

The Public Company Merger, which resulted in the stockholders of Old Lev obtaining control of FCP, represents a recapitalization of FCP, or a “reverse merger”, rather than a business combination. In connection therewith, Old Lev's historical capital accounts were retroactively adjusted to reflect the equivalent number of shares issued by FCP while Old Lev's historical accumulated deficit was carried forward. The Consolidated Statement of Operations reflects the activities of Old Lev from the commencement of its operations on July 21, 2003. In connection with the Agreement, Old Lev paid $350,000 for the acquisition of FCP including $283,732 to certain stockholders and assuming the outstanding tax liability of $66,268. In connection with these mergers, the exercise price of the outstanding warrants and options remained the same. We recorded a charge of approximately $75,000 for the change in value of our outstanding options and warrants as of December 29, 2004 as a result of the increase in the number of common shares into which these equity instruments are exercisable based on the exchange ratio used in the merger, since the aggregate intrinsic value of the warrants and options after the Exchange is greater than before. The Black-Scholes option-pricing model was used to calculate the value of certain options and warrants and the related charge based upon the following weighted average assumptions to determine fair value; risk-free interest rate of 3.58%; expected life of 5 years; dividend yield of 0% and expected volatility of 70%.

Operational Activities

Our operational focus for the next twelve months is to continue our efforts to obtain approval from the FDA to commercialize our lead product candidate, Cinryze™ for the acute and prophylactic treatment of HAE, continue our open-label Phase III clinical trials of Cinryze™ for the acute and prophylactic treatment of HAE and prepare for the commercialization of Cinryze™ upon approval from the FDA. In addition, subject to our having available capital resources, we intend to initiate a research program for the development of a genetically engineered or recombinant version of C1-INH as part of a broader program examining the potential of C1-INH in treating cardiovascular disease, including acute myocardial infarction.

Research/Product Programs

Hereditary Angioedema

In January 2004, we entered into a distribution and manufacturing services agreement with Sanquin relating to the treatment of HAE. Sanquin currently manufactures and markets a highly purified preparation of C1-INH in Europe and pursuant to the agreement, Sanquin agreed to provide us with C1-INH for use in our clinical trials and for commercial distribution upon regulatory licensure. Pursuant to the agreement, we have distribution rights in Israel and all countries in North, Central and South America, with the exception of the Dutch Overseas Territories, Argentina and Brazil.

Under the distribution agreement, it is our responsibility to conduct the Phase III clinical trials of C1-INH for the treatment of HAE and to prepare and file all regulatory applications necessary to register the product candidate. Sanquin agreed to provide us with the technical data and support necessary to assist us in preparing and filing all such regulatory applications.

Furthermore, Sanquin agreed to supply C1-INH for our Phase III clinical trials. Upon receipt of FDA approval for our product candidate for the treatment of HAE, upon commercial launch of this product and thereafter during the term of the agreement, Sanquin will supply us with our commercial requirements for C1-INH for the treatment of HAE in each country where we have received regulatory approval. Our purchase of C1-INH from Sanquin is subject to minimum annual purchase requirements upon receipt of FDA approval.

On October 10, 2007, we entered into an amendment, dated as of September 24, 2007, to our distribution and manufacturing services agreement with Sanquin. Pursuant to this amendment, we agreed with Sanquin on the terms regarding a construction project to scale-up the production facilities of Sanquin to be used for the purpose of meeting our anticipated ongoing requirements for the commercial use of its C1-INH product, proposed to be marketed as Cinryze™. Subject to the terms of the final project plan, we would provide Sanquin with a non-interest bearing loan, up to a maximum amount of €7.5 million (approximately US $11.9 million, based on the exchange rate as of March 31, 2008), to finance the construction project. In addition, Sanquin agreed to manufacture our C1-INH product on a toll-manufacturing basis using blood plasma supplied by us. We agreed to purchase a specified amount of product from Sanquin until the scale up is approved by the appropriate regulatory authorities and also agreed to an annual minimum purchase commitment of product of approximately $23.3 million during the term of the agreement commencing in the year in which the scale up is approved in the U.S. for commercial production.

As described in greater detail above under the caption “Overview”, on March 14, 2007, we announced positive results from our Phase III clinical trial of C1-INH for the acute treatment of HAE. Based on the positive results of this study, we filed a BLA with the FDA on July 31, 2007. On September 10, 2007 we announced positive results from our Phase III clinical trial of C1-INH for the prophylactic treatment of HAE. Based on the positive results of this study, we amended our BLA filing with the FDA on October 30, 2007. On January 30, 2008, we announced our receipt of a complete response letter from the FDA regarding our BLA for Cinryze™ for the acute and prophylactic treatment of HAE. In our announcement, we stated that the FDA requested information with respect to chemistry, manufacturing and controls, as well as additional analyses of existing efficacy data from the Cinryze™ trials. We submitted our complete response to the FDA’s January 30, 2008 complete response letter on April 15, 2008. In addition, we have been advised that the FDA’s Blood Products Advisory Committee, or BPAC, intends to review our BLA for Cinryze™ on May 2, 2008, for the prophylactic treatment of HAE. The FDA has substantial discretion in the approval process and may disagree with our interpretation of the data submitted in the BLA. Accordingly, there can be no assurance that the outcome of our Phase III trials will be successful or that the results of the trials will support licensure by the FDA.

Acute Myocardial Infarction (“AMI”)

We entered into a separate license agreement with Sanquin on January 27, 2004 relating to the treatment of AMI. Under this agreement, we have an exclusive, worldwide, royalty-bearing license, with the right to sublicense, to the use of C1-INH for the treatment of AMI. In connection with the license agreement, we paid Sanquin certain fees and reimbursed Sanquin for certain expenses. In addition, we have an obligation to pay Sanquin royalties on sales of products incorporating the licensed technology.

This second development program is focused on the use of C1-INH in treating AMI. Current treatments for AMI, both surgical and pharmaceutical, are directed at restoring blood flow to heart tissue or preventing further obstruction. Despite a widespread appreciation for the role of inflammation in AMI in both the scientific and medical communities, no presently available treatments directly target the mechanisms of inflammation. Based on preliminary animal and clinical data, we believe that C1-INH may be useful as a treatment for AMI. Based on the rights obtained from Sanquin, we intend to initiate a research program for the development of a genetically engineered or recombinant version of C1-INH as part of a broader program examining the potential of C1-INH in treating cardiovascular disease, including AMI, in 2008. There can be no assurances, however, that we will have sufficient resources to deploy this research program within the next twelve months.

Satisfaction of Cash Resources

To date, we have relied solely upon selling equity securities in private placements and debt financing to generate cash to implement our plan of operations. Based on our current levels of research and development and our business plan, we believe that our existing cash and cash equivalents of $13,241,427 as of March 31, 2008 and proceeds from the sale of residual plasma should be sufficient to fund operations into the third quarter of 2008. This raises substantial doubt about the ability for us to continue as a going concern. We do not have any commercial products available for sale and have not generated significant revenues and there is no assurance that if approval of their products is received that we will be able to generate cash flow to fund operations. As we expect that our cash used in operations will increase significantly over the next several years, we may be required to raise additional capital to complete the development and commercialization of our current product candidates. We will pursue equity and/or debt financing alternatives or other financing in order to raise needed funds. If we are unsuccessful in raising additional capital we will need to reduce costs and operations substantially.. On April 9, 2008, we entered into an agreement with Biotest AG to purchase excess volumes of intermediate plasma products produced by Sanquin during the manufacturing process of our lead product candidate, Cinryze™. We expect to sell approximately €6.4 million of intermediates during 2008. However, the amounts that we will receive are dependent upon the actual volume of plasma processed on our behalf and as this amount is subject to periodic fluctuations, actual proceeds may be less than expected. Volumes of intermediates that we may sell in subsequent years of the agreement are similarly subject to fluctuations.

2007 Financings

Equity

On May 23, 2007 we filed with the SEC a Registration Statement on Form S-3 under the Securities Act, which was declared effective by the SEC on June 13, 2007. This registration statement allows us, from time to time, to offer and sell shares of common stock, preferred stock, warrants to purchase our securities and/or debt securities, up to a maximum aggregate amount of $70 million of such securities. On August 17, 2007, we closed on a registered direct sale of an aggregate of 23,333,333 shares of our common stock and warrants to purchase up to an aggregate of 4,666,667 shares of our common stock for aggregate proceeds of $35.0 million to certain institutions. These securities were sold pursuant to our shelf registration statement. The warrants are exercisable at any time until five years from the closing date at a price of $1.86. We have been using the net proceeds of the private placement of approximately $32.4 million for continued funding of our clinical trials, additional research and development efforts, and general working capital purposes. We paid approximately $2.6 million in total commissions and expenses to investment bankers engaged to assist us in the financing. We currently have no firm agreements with any third-parties for the sale of additional securities pursuant to this registration statement.

Secured Term Loan

On November 2, 2007, we entered into a Term Loan Agreement and a Pledge and Security Agreement with the lender executing the Loan Agreement and Mast Capital Management, LLC, as agent for the lender. Under this arrangement, the Lender agreed to provide a term loan facility to us in an aggregate amount of up to $20,000,000, subject to the further terms and conditions of the Loan Agreement. The loan is secured by a first priority lien on all of our assets. At the initial closing, we received an initial loan of $10,000,000. The loan is for a term of 36 months and matures on November 1, 2010. Interest on the loan accrues at the rate of 13.5% per annum.

Results of Operations

The following analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes contained elsewhere in this Form 10-Q.

Three Months Ended March 31, 2008 as compared to the Three Months Ended March 31, 2007

We had no revenues during the three months ended March 31, 2008 and 2007 because we do not have any commercial biopharmaceutical products.

Research and development expenses for the three months ended March 31, 2008 and 2007 were $2,818,509 and $3,223,397, respectively. The decrease of $404,888 was primarily due to lower expenses relating to the progress of the Phase III clinical trials, fewer purchases of plasma product that were purchased for the open-label clinical trial offset by increases in regulatory consulting, FDA panel review and payroll and related benefits.

General and administrative expenses for the three months ended March 31, 2008 and 2007 were $5,353,898 and $2,421,693, respectively. The increase of $2,932,205 was primarily due to increases in payroll and related benefits, stock-based compensation for restricted stock and stock options, legal and pre-commercialization activities.

Interest income for the three months ended March 31, 2008 and 2007 was $143,234 and $197,791, respectively. The decrease of $54,557 was attributed to having less cash to invest and declining interest rates.

Interest expense for the three months ended March 31, 2008 and 2007 was $525,311 and $30,774, respectively. The increase of $494,537 is primarily attributable to a $32,786 increase of imputed interest attributable to non-interest bearing loans from Sanquin, our supplier of C1-INH product, and accrued interest of $352,823 and amortization of debt discount and deferred financing costs of $108,963 attributable to the term loan payable.

Foreign exchange loss for the three months ended March 31, 2008 and 2007 was $240,227 and $0, respectively. The loss is primarily attributable to a foreign exchange loss of $454,975 on the loan payable offset by a gain of $248,424 on the loan receivable. In 2007, foreign exchange gain/loss on the loan payable for purchasing clinical product was recorded in research and development.

Due to the factors mentioned above, the net loss for the three months ended March 31, 2008 was $8,794,711 or a loss of $0.06 per common share, basic and diluted, as compared to a loss of $5,478,073 for the three months ended March 31, 2007 or a loss of $0.05 per common share, basic and diluted.

Liquidity and Capital Resources

Cash used in operating activities

As of March 31, 2008, we had cash and cash equivalents of $13,241,427 and working capital of $26,241,803. From inception through March 31, 2008, net cash used in operating activities was $58,450,041. Net cash used in operations was $9,169,923 for the three months ended March 31, 2008, representing an increase of $4,315,884 from net cash used in operating activities of $4,854,039 for the three months ended March 31, 2007. Net cash used in operating activities for the three months ended March 31, 2008 was primarily due to our loss of $8,794,711 in addition to purchases of inventory of $5,592,150. This loss consisted primarily of expenses associated with general and administrative expenses and research and development activity in the first three months of 2008. Significant increases were directly related to salaries, benefits, advancing our research and development clinical trials for each of our product candidates, and increased pre-launch planning and development costs as we approach potential commercialization of Cinryze™. The operating loss was partially offset by non cash expenses of $2,880,072 primarily related to stock-based compensation related to employee stock options and restricted stock and amortization of debt discount, increased accrued expenses of $1,114,901 and decreases in prepaid expense and other assets of $1,567,162. Pursuant to the Sanquin loan agreement, purchases made during our Phase III clinical trials are added to our loan and we are not required to make any principal payments. The loan balance, net of debt discount as of March 31, 2008 was $4,899,592 and will be forgiven when regulatory approval from the FDA is received. If we do not receive regulatory approval, then the loan is repayable on the earlier of January 16, 2014, or the termination of the Agreement. The loan does not bear interest and we impute interest using the effective interest rate method.

Cash used in investing activities

From inception through March 31, 2008, net cash used in investing activities was $3,775,040, primarily related to our loan receivable of $3,424,221 and purchases of fixed assets of $363,584. For the three months ended March 31, 2008, net cash used in investing activities was $1,784 resulting from the purchase of fixed assets.

Cash provided by financing activities

From inception through March 31, 2008, net cash provided by financing activities was $75,466,508. Cash provided by financing activities for the three months ended March 31, 2008 was $503,050 resulting from proceeds from the exercise of warrants during the quarter. We expect that cash provided by financing activities will fluctuate based on our ability to raise additional funds through the private and/or public sale of our equity securities, debt financings and the future volume of warrants and stock options exercised.

Cash Flows

Our unaudited condensed consolidated financial statements have been presented on the basis that we are a going concern, which contemplates the continuity of business, realization of assets and the satisfaction of liabilities in the ordinary course of business. We have limited capital resources and have an accumulated deficit of $60,064,476 since inception and have had negative cash flows from operations since inception. These losses have resulted principally from costs incurred in research and development activities, including acquisition of technology rights and general and administrative expenses. We have cash commitments of $45.1 million over the next twelve months. We expect to incur additional operating losses until such time as we generate sufficient revenue to offset expenses, and we may never achieve profitable operations. As a development stage enterprise, our primary efforts, to date, have been devoted to conducting research and development, raising capital and recruiting staff and our capital resources are focused on the clinical development and regulatory approval of C1-INH for the treatment of HAE. To date, we have relied solely upon selling equity and obtaining debt financing to generate cash to implement our plan of operations. Based on our current levels of research and development and our business plan, we believe that our existing cash and cash equivalents of $13,241,427 as of March 31, 2008 and proceeds from the sale of residual plasma should be sufficient to fund operations into the third quarter of 2008. This raises substantial doubt about the ability for us to continue as a going concern. We do not have any commercial products available for sale and have not generated revenues and there is no assurance that if approval of their products is received that we will be able to generate cash flow to fund operations. As we expect that our cash used in operations will increase significantly over the next several years, we may be required to raise additional capital to complete the development and commercialization of our current product candidates. We will pursue equity and/or debt financing alternatives or other financing in order to raise needed funds. If we are unsuccessful in raising additional capital we will need to reduce costs and operations substantially.

In addition, we have sought to enter into agreements with purchasers of the residual plasma derived from our manufacturing process to generate additional cash resources for us. On April 9, 2008, we entered into an agreement with Biotest AG to purchase excess volumes of intermediate plasma products produced by The Sanquin Blood Supply Foundation during the manufacturing process of our lead product candidate, Cinryze™. We expect to sell approximately €6.4 million of intermediates during 2008. However, the amounts that we will receive are dependent upon the actual volume of plasma processed on our behalf and as this amount is subject to periodic fluctuations, actual proceeds may be less than expected. Volumes of intermediates that we may sell in subsequent years of the agreement are similarly subject to fluctuations.

Capital Resources

As a development stage enterprise, our primary efforts, to date, have been devoted to conducting research and development, raising capital, forming collaborations and recruiting staff. We have limited capital resources and have an accumulated deficit of $60,064,476 since inception and have had negative cash flows from operations since inception. These losses have resulted principally from costs incurred in research and development activities, including acquisition of technology rights and general and administrative expenses. We expect to incur additional operating losses until such time as we generate sufficient revenue to offset expenses, and we may never achieve profitable operations.

The primary sources of our working capital have been equity financings and the establishment of our loan facility. On May 23, 2007, we filed with the SEC a Registration Statement on Form S-3 under the Securities Act, which was declared effective by the SEC on June 13, 2007. This registration statement allows us, from time to time, to offer and sell shares of common stock, preferred stock, warrants to purchase our securities and/or debt securities, up to a maximum aggregate amount of $70 million of such securities. On August 17, 2007, we closed on a registered direct sale to certain institutions of an aggregate of units consisting of 23,333,333 shares of our common stock and warrants to purchase up to an aggregate of 4,666,667 shares of our common stock for aggregate proceeds of $35.0 million. The warrants are exercisable at any time until five years from the closing date at a price of $1.86. We have been using the net proceeds from this transaction of approximately $32.4 million for continued funding of our clinical trials, additional research and development efforts, and general working capital purposes. We paid approximately $2.6 million in total commissions and expenses to investment bankers engaged to assist us in the financing. We currently have no firm agreements with any third-parties for the sale of additional securities pursuant to this registration statement.

On November 2, 2007, we entered into a Term Loan Agreement and a Pledge and Security Agreement with Mast Credit Opportunities I Master Fund, Ltd., as the lender, and Mast Capital Management, LLC, as agent for the lender. Under this arrangement, the lender agreed to provide a term loan facility to us in an aggregate amount of up to $20,000,000, subject to the further terms and conditions of the Loan Agreement. The loan is secured by a first priority lien on all of our assets. At the initial closing, we received an initial loan of $10,000,000. The loan proceeds will be used to finance the cost of additional plasma purchases. The loan is for a term of 36 months and matures on November 1, 2010. Interest on the loan accrues at the rate of 13.5% per annum. We may request additional term loan advances in amounts not less than $1,000,000 each during the twelve month period from the closing date. Our ability to request additional loans is subject to our maintaining (i) a borrowing base in excess of the outstanding aggregate loan amount and (ii) compliance with the covenants and conditions of the loan. Further, if the outstanding loan amount exceeds the borrowing base, then we will be required to prepay an amount equal to such excess, and, if applicable, the lender’s total commitment shall be reduced to equal the borrowing base at the time of such mandatory prepayment.

The Loan Agreement allows us to prepay the outstanding principal amount and all accrued but unpaid interest, subject to payment of a make-whole premium during the first year following the closing and a prepayment fee thereafter, until May 1, 2010. The Loan Agreement requires compliance with customary covenants and restrictions on our ability to, among other things, dispose of certain assets, engage in certain transactions, incur indebtedness and pay dividends. The Loan Agreement also provides for customary events of default following which, the lender may, at its option, accelerate the amounts outstanding under the Loan Agreement. In connection with the Loan Agreement, we issued to the Lender warrants to purchase an aggregate of 900,000 shares of our common stock. The warrants are for a term of three years and have an exercise price of $1.6576 per share, which is the volume weighted average price per share of our common stock for the thirty trading days immediately preceding the closing. The warrants were issued in reliance on the Section 4(2) exemption from the registration requirements of the Securities Act of 1933, as amended. We also entered into a registration rights agreement with the lender pursuant to which we agreed to file a registration statement with the Securities and Commission covering the resale of the shares of common stock which may be issued upon exercise of the warrants upon the demand of the holders of a majority of the warrants. In consideration for services provided on behalf of the Company in connection with the consummation of the transactions contemplated by the Secured Financing Agreements, the Company paid a fee of 1% of the amounts borrowed under the Loan Agreement to Mr. Richard Stone, who is the beneficial owner of greater than 5% of the Company’s outstanding common stock.

On February 11, 2008, the lender, agent for the lender and two affiliated individuals filed a Schedule 13G with the Securities and Exchange Commission reporting that as of January 30, 2008, such persons were the beneficial owner of greater than 5.0% of our common stock. Accordingly, in the event that we elect to increase our borrowings under this loan arrangement, such transaction would be reviewed by the audit committee of our board of directors in accordance with our procedures for reviewing related party transactions.

To raise additional funds, we intend to either undertake private placements or registered offerings of our securities, either as a self-offering or with the assistance of registered broker-dealers, or negotiate a private sale of our securities to one or more institutional investors. However, we currently have no firm agreements with any third-parties for any financing arrangements and no assurances can be given that we will be successful in raising additional capital from any proposed financings. There can be no assurance that additional financing, if at all available, can be obtained on terms acceptable to us. If we raise additional funds by selling shares of common stock or convertible securities, the ownership of our existing shareholders will be diluted. Further, if additional funds are raised through the issuance of equity or debt securities, such additional securities may have powers, designations, preferences or rights senior to our currently outstanding securities. Any inability to obtain required financing on sufficiently favorable terms could have a material adverse effect on our business, results of operations and financial condition. If we are unsuccessful in raising additional capital we will need to reduce costs and operations substantially. Further, if expenditures required to achieve our plans are greater than projected or if revenues are less than, or are generated more slowly than, projected, we will need to raise a greater amount of funds than currently expected.

We expect our cash requirements for operating activities will increase due to the following future activities:

•

Conduct commercialization activities in support of our product candidates, including development of market plans and regional sales and marketing capabilities;

•

Conduct clinical programs, including clinical trials to support regulatory submissions of our product candidates;

•

Maintain, protect and expand our intellectual property;

•

Develop expanded internal infrastructure; and

•

Hire additional personnel.

COMMITMENTS AND CONTINGENCIES

The following is a summary of our significant contractual cash obligations for the periods indicated that existed as of March 31, 2008.

	Total		Less than 1 year		1 - 2 years		3 - 5 years		More than 5 years
Office leases	$	805,224	$	223,832	$	202,141	$	379,251	$	0
CRO contract		469,805		469,805		0		0		0
Executive employment contracts		5,048,633		1,200,943		1,030,054		2,817,636		0
Plasma contract		48,042,759		13,367,296		12,312,188		22,363,275		0
Sanquin facility upgrade		8,534,593		8,534,593		0		0		0
Sanquin purchases (a)		20,526,814		20,526,814		0		0		0
Long-term debt		15,036,991		515,992		1,374,046		13,146,953		0
Research and development contract		234,000		234,000		0		0		0
Total obligations	$	98,698,819	$	45,073,275	$	14,918,429	$	38,707,115	$	0


(a)	prior to approval of scale up

Our major contractual obligations relate to purchase commitments, long-term debt, Sanquin facility upgrade and compensation under employment contracts. We expect to devote substantial resources to continue our research and development efforts, to expand our product pipeline and to support our product candidates as they move forward in the clinical development process. Our funding requirements will depend on numerous factors, including:

·	the scope and results of our clinical trials;
·	advancement of other product candidates into development;
·	potential acquisition or in-licensing of other product candidates, commercial products or technologies;
·	the timing of, and the costs involved in, obtaining regulatory approvals;
·	the cost of manufacturing activities for product candidates;
·	the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other patent-related costs, including litigation costs and the results of such litigation; and
·	our ability to establish and maintain additional collaborative arrangements.

We expect product development costs to increase in the future as more of our product candidates enter clinical trials. In addition, we may be obligated to make milestone payments on certain of our product candidates as they progress through the clinical trial process. The duration and cost of clinical trials may vary significantly over the life of a particular project as a result of, among other things, the following factors:

·	the length of time required to recruit qualified patients for clinical trials;
·	the duration of patient dosing and follow-up in light of trial results;
·	the number of clinical sites required for trials; and
·	the number of patients that ultimately participate.

Clinical Services Agreement

On March 2, 2005, we entered into a CRO services agreement with INC Research which governs INC Research’s provision of services in connection with the support of clinical investigation and management and/or research of our Phase III clinical trial. We entered into a separate services agreement with INC Research in September 2006 which governs INC Research’s provision of additional services in connection with our Phase III clinical trials and activities related to the commercialization of our product candidates. The services provided by INC Research pursuant to both contractual arrangements are on a work-order basis and we are invoiced on a time and materials basis. We have the right to terminate both agreements, and any pending work-order, with prior notice and without cause. As of March 31, 2008, we have estimated that we will pay INC Research approximately $470,000 for its services under both agreements in 2008. However, due to the variability associated with the conduct of clinical trials, we are unable to estimate with certainty the future costs we will incur under our CRO agreement. We anticipate that these costs will increase significantly above our current estimates if we expand the clinical trials.

New Amended and Restated Executive Employment Agreements

On December 20, 2007, we entered into second amended and restated employment agreements with each of its Chief Executive Officer, Dr. Joshua D. Schein, and its Executive Vice President and Chairman, Mr. Judson Cooper. As used in the following summary, the term “Executive(s)” shall refer to Messrs. Schein and Cooper. In addition to the execution of the amended and restated employment agreements, on December 20, 2007, we also awarded each of the Executives a cash bonus for the 2007 fiscal year of $425,000, which was approved by our Compensation Committee. The amended and restated employment agreements are for an initial term expiring December 31, 2012 and at the end of the initial term renew automatically for additional one year terms unless sooner terminated or not renewed. Under the employment agreements, the Executives will continue to receive a base salary of $425,000; provided, however, that the base salary shall increase to $500,000 effective upon the date on which the U.S. Food and Drug Administration approves our biologics license application for its lead product candidate (the “Approval Date”). In addition, the base salary shall increase at the end of each year of service (commencing at the end of 2007) by the greater of (i) 4% or (ii) a percentage equal to the increase, if any, in the United States Department of Labor Consumer Price Index (or comparable index, if available) for the New York metropolitan area over the previous 12 months. Commencing in the year in which the Approval Date occurs, the Executives will be entitled to a bonus opportunity within the target range of 75% to 200% of base salary, based on satisfaction of performance targets to be determined by the Compensation Committee.

Other Employment Agreements

During our 2006 fiscal year we entered into employment agreements with our Chief Financial Officer, Douglas J. Beck, and Jason Bablak, who serves as our Vice President, Regulatory Affairs and Product Development. In March 2007 we hired Dov Elefant as our Corporate Controller pursuant to the terms of an offer letter (see Note I to our unaudited condensed consolidated financial statements).

Distribution Agreement

On June 1, 2007 we exercised an option to extend the Sanquin distribution agreement. Our distribution agreement with Sanquin terminates on December 31, 2010, unless extended by us for up to a three-year period or by mutual agreement of the parties prior to its expiration. On October 10, 2007, we entered into an amendment, dated as of September 24, 2007, to our Distribution and Manufacturing Services Agreement with Sanquin. Pursuant to the amendment, we agreed with Sanquin on the terms of a construction project to scale-up the production facilities of Sanquin to be used for the purpose of meeting our anticipated ongoing requirements for the commercial use of our C1-INH product to be marketed as Cinryze™. Pursuant to the terms and conditions of the amendment, we will develop a project plan for the construction to the production facilities with Sanquin. Subject to the terms of the final project plan, we would provide Sanquin with a non-interest bearing loan, up to a maximum amount of €7.5 million (approximately US $11.9 million, based on the exchange rate as of March 31, 2008), to finance the construction project. This loan will be due July 1, 2014 and Sanquin agreed to repay the principal amount of the loan by providing us with a discount to the per unit purchase price of Cinryze™. The remaining cash commitment is approximately $8.5 million.

Pursuant to the amendment, Sanquin shall manufacture C1-INH product for us on a toll-manufacturing basis using blood plasma supplied by us. We agreed to purchase a specified amount of such product from Sanquin totaling approximately $20.5 million until the scale up is approved by the appropriate regulatory authorities, which we expect to occur during 2009. In addition, we agreed to an annual minimum purchase commitment of product of approximately $23.3 million during the term of the agreement commencing in the year in which the scale up is approved in the U.S. for commercial production. We agreed to negotiate in good faith to modify these requirements in the event that regulatory approval for commercial release of the Cinryze™ in the U.S. does not occur by March 31, 2008. As we have not received regulatory approval for Cinryze™ as of such date, we have been in discussions with Sanquin regarding these requirements. However, no assurances can be given that we will ultimately enter into a modification agreement, or similar arrangement with Sanquin to modify our commitments under this Agreement. In such an event, our liabilities to Sanquin would be subject to the current terms of the Agreement. Our contractual purchase commitments are subject to annual adjustments based on market conditions and do not include the cost of storage, handling and testing services that Sanquin will provide for us.

Plasma Supply Agreement

On July 19, 2007, we entered into an agreement, for the purchase and sale of plasma with DCI Management Group, LLC (the “DCI Agreement”) pursuant to which we will purchase quantities of U.S. Source Plasma to be utilized in the production of product under our Distribution and Manufacturing Services Agreement with Sanquin. Under the DCI Agreement, the supplier agreed to sell us specified annual quantities of plasma in accordance with applicable good manufacturing practices. We are committed to purchase $13,950,000 of product during 2008 and have purchased approximately $3.7 million during the first quarter of 2008. Thereafter we expect our annual purchase commitment to be between $12.2 million and $12.9 million for the balance of the term of the DCI Agreement. Our contractual purchase commitments are subject to annual percentage increases based on market conditions. We anticipate our total remaining commitment under this DCI Agreement to be approximately $47.9 million. As of March 31, 2008 we purchased approximately $3.7 million of plasma. In addition, we have an obligation of approximately $108,000 to purchase additional plasma from another supplier.

License Agreement – Research Plan

In connection with the license agreement with Sanquin for the treatment of AMI we are required to create a comprehensive research plan for the commercial exploitation of the licensed technology. We continue to work with Sanquin on the design of the research plan. We committed a minimum of $125,000 per annum during the first three years following the execution of the license agreement toward research on the licensed technology conducted by Sanquin and by other parties. To date, we have funded approximately $141,000 to third parties engaged in this research. We also have an obligation to pay Sanquin royalties on sales of products incorporating the technology.

Term Loan Agreement

As described in greater detail above, on November 2, 2007, we entered into a Term Loan Agreement dated as of November 2, 2007 and a Pledge and Security Agreement of the same date, with the lender executing the Term Loan Agreement and Mast Capital Management, LLC, as agent for the lender. The loan is for a term of 36 months and matures on November 1, 2010. Interest on the loan accrues at the rate of 13.5% per annum. Commencing November 1, 2008, we must pay minimum cash interest payments of 10.5% and an additional 3% accrues through the term of the loan. As of March 31, 2008, the principal balance of the loan outstanding was $10,000,000 with accrued interest owed of $575,294 net of debt discount of $945,514.

Plasma Collection Center Acquisition Center Agreement

On April 9, 2008, we entered into an agreement with Plasma Centers of America, LLC (the “Seller”) pursuant to which we agreed to, subject to the terms and conditions of the Purchase Agreement, consummate the following transactions: (1) the acquisition of a maximum of three plasma collection centers, assuming the satisfaction of certain performance targets by Seller; (2) construction of three new plasma collection centers (the “New Centers”) by Seller; and (3) purchase of Source Plasma from each new collection center. Under this agreement, Seller shall construct and operate the three New Centers in accordance with the schedule agreed upon by the parties. In connection with Seller’s obligations, we will make certain performance payments upon their achievement of agreed upon milestones relating to the construction and operation of each New Center. Further, during the period commencing on each New Center opening date and until the first to occur of the twelve month anniversary of such date, the closing date of our acquisition of such New Center or the election by the parties not to sell a qualified New Center, Seller shall exclusively sell the Plasma generated at the New Centers to us. The agreement also provides that upon the achievement by Seller of the following operating benchmarks, the Seller shall have the right to cause us to acquire one or more New Centers: (a) Seller secures all regulatory approvals for each New Center with an agreed upon time frame and (b) Seller achieves and maintains an agreed-upon average collection level of plasma units. In the event Seller does not cause us to acquire a New Center, we shall have the right to require the Seller to proceed with the sale of the New Center. In addition, in the event that the operating benchmarks are not achieved for a New Center, then we shall also have the right to acquire such New Center for a reduced purchase price. Any amounts due under this agreement are not included in the above table as it was entered into subsequent to March 31, 2008.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of March 31, 2008 with the exception of the leases of our office space and copiers.

Critical Accounting Policies

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 6, “Management’s Discussion and Analysis or Plan of Operation”, included in our 10-K for the fiscal year ended December 31, 2007.

New Accounting Pronouncements

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Related to Interest Rates and Foreign Currency

We are exposed to market risks related to changes in interest rates and foreign currency exchange rates as described below. We do not have any derivative financial instruments.

Interest Rate Risk

As of March 31, 2008, our cash included approximately $12,574,698 of money market securities. Due to the short term duration of our investment portfolio, an immediate 10% change in interest rates would not have a material effect on the fair market value of our portfolio, therefore, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our securities portfolio.

Foreign Currency Exchange Risk

We have no revenues and, as a result, we have no exposure to foreign currency exchange risk with respect to revenues. A portion of our expenses, loans payable and loan receivable are payable or denominated in foreign currency. We do not use forward exchange contracts to hedge exposures denominated in foreign currencies or any other derivative financial instruments for trading or speculative purposes. The effect of an immediate 10% change in exchange rates would result in additional cash expenditures of approximately $2,053,000 related to our annual manufacturing costs, additional cash expenditures of approximately $853,000 related to the Sanquin facility upgrade and additional expenses of approximately $671,000 related to our loan payable to Sanquin offset by a gain of approximately $366,000 related to our loan receivable. These changes would have a material impact on our future operating results and cash flows.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this report, have concluded that, based on the evaluation of these controls and procedures, our disclosure controls and procedures were effective at the reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Changes in Internal Controls

There was no change in our system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during our fiscal quarter ended March 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

We do not expect that internal controls over financial reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within its company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not presently a party to any proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, results of operations or financial condition.

ITEM 1A. RISK FACTORS

A restated description of the risk factors associated with our business is set forth below. This description includes any material changes to and supersedes the description of the risk factors associated with our business previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007. You should carefully consider the risks described below, together with all of the other information included in this report, in considering our business and prospects. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations, financial condition and/or operating results. If any of the following risks actually occur, our business, financial condition or results of operations could be harmed. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks related to our business

We are at an early stage of development as a company and currently have no source of revenue and may never become profitable.

We are a development stage biopharmaceutical company with a limited operating history. Currently, we have no products approved for commercial sale and, to date, we have not generated any revenue. Our ability to generate revenue depends on: first, obtaining FDA marketing approval for any of our products and, second, successfully commercializing and bringing to market these products. In particular, if we do not successfully develop and commercialize C1-INH for the treatment of HAE, we will be unable to generate any revenue for many years, if at all and, even if successful in obtaining FDA marketing approval for C1-INH for the treatment of HAE, it may be up to a year or more before we can expect to begin to generate revenue. If we are unable to generate revenue, we will not become profitable, and we may be unable to continue our operations.

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

As of March 31, 2008, we had a deficit accumulated during our development stage of $60,064,476. We have from our inception incurred and will continue to incur significant and increasing operating losses for the next several years as we pursue FDA approval of our BLA for C1-INH for the acute and prophylactic treatment of HAE, continue the open-label studies of C1-INH and advance C1-INH for the treatment of selected cardiovascular diseases into clinical development. For the three months ended March 31, 2008 and 2007, we incurred net losses of $8,794,711 and $5,478,073, respectively. In addition, if we receive regulatory approval of any of our product candidates, we expect to incur significant sales and marketing expenses in the future. Because of the numerous risks and uncertainties associated with developing and commercializing these product candidates, we are unable to predict the extent of future losses or when and if we will generate revenues or become profitable.

We currently are devoting substantially all of our efforts on the development of product candidates based on C1-INH. If we are unable to successfully develop and commercialize these product candidates, or experience significant delays in doing so, our business, financial condition and results of operations will be materially harmed.

We are investing substantially all of our time and resources to the development of C1-INH for the treatment of inflammatory diseases. Our ability to generate product revenues, if ever, depends on the successful development and eventual commercialization of our product candidates. The success of our product candidates will depend on several factors, including the following:

·		successful completion of preclinical and clinical trials;

·		receipt of marketing approvals from the FDA and similar regulatory authorities outside the United States;

·		establishing commercial manufacturing arrangements with third-party manufacturers;

·		launching commercial sales of our product candidates, whether alone or in collaboration with others;

·		acceptance of the product by patients, the medical community and third-party payors;

·		competition from other therapies; and

·		a continued acceptable safety profile of our C1-INH-based products following approval.

Given our limited focus on C1-INH product candidates, if these product candidates do not prove successful in clinical trials, and are not approved or are not commercialized because we have insufficient resources for continued development for any other reason, we may be required to suspend or discontinue our operations and our business could be materially harmed.

We are a development stage company, making it difficult for you to evaluate our business and your investment.

We are in the development stage and our operations and the development of our proposed products are subject to all of the risks inherent in the establishment of a new business enterprise, including:

·	the absence of an operating history;

·	the lack of commercialized products;

·	insufficient capital;

·	expected substantial and continual losses for the foreseeable future;

·	limited experience in dealing with regulatory issues;

·	limited marketing and manufacturing experience;

·	an expected reliance on third parties for the development and commercialization of some of our proposed products;

·	a competitive environment characterized by numerous, well-established and well-capitalized competitors;

·	uncertain market acceptance of our proposed products; and

·	reliance on key personnel.

Because we are subject to these risks, you may have a difficult time evaluating our business and your investment in our company.

We expect that we may need to raise substantial additional capital to fund our operations, and our failure to obtain funding when needed would adversely affect our development programs and other operations.

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

·		complete the clinical development of C1-INH for the treatment of HAE;
·		continue the development of our other product candidates;
·		finance our general, administrative and license acquisition costs;
·		prepare regulatory filings for C1-1NH and our other product candidates;
·		launch and commercialize our product candidates, if any such product candidates receive regulatory approval; and
·		develop and implement sales, marketing and distribution capabilities.

Our cash used in operations increased significantly over the period from July 21, 2003 (inception) to March 31, 2008 and we expect that our cash used in operations will increase significantly over the next several years. Based on our current levels of research and development and our business plan, we believe that our existing cash and cash equivalents of approximately $13.2 million and proceeds from the sale of residual plasma should be sufficient to fund operations into the third quarter of 2008. Based on the foregoing, we have received an audit report from our independent registered public accounting firm containing an explanatory paragraph stating that our historical recurring losses from operations, limited capital resources and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern. We do not have any commercial products available for sale and have not generated significant revenues and there is no assurance that if approval of our products is received that we will be able to generate cash flow to fund operations. Due to the foregoing factors, we expect that we may need to raise additional capital to complete the development and commercialization of our current product candidates. Our future funding requirements will depend on many factors, including, but not limited to:

·		the rate of progress and cost of our clinical trials and other development activities;
·		any future decisions we may make about the scope and prioritization of the programs we pursue;
·		the costs and timing of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
·		the timing of, and the costs involved in, obtaining regulatory approvals;
·		the costs of establishing sales, marketing and distribution capabilities;
·		the effect of competing technological and market developments;
·		ongoing determinations of the potential commercial success of our proposed products;
·		the costs involved in utilizing third party contract research organizations for preclinical studies and clinical trials;
·		the availability of third parties, and the cost, to manufacture compounds for clinical trial supply;
·		the terms and timing of any collaborative, licensing and other arrangements that we may establish; and
·		general market conditions for offerings from biopharmaceuticals companies.

To date, our sources of cash have been primarily limited to the sale of equity securities and debt financing. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct our business. If we are unable to raise additional capital, when required, or on acceptable terms, we may have to significantly delay, scale back or discontinue the development and /or the commercialization of one or more of our product candidates. Accordingly, any failure to raise adequate capital in a timely manner would have a material adverse effect on our business, operating results, financial condition and future growth prospects. We also may be required to:

·		seek collaborators for our product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; and
·		relinquish, license or otherwise dispose of rights to technologies, on unfavorable terms, product candidates or products that we would otherwise seek to develop or commercialize ourselves.

If either of our agreements with Sanquin terminate, we may be unable to continue our business.

Our business is highly dependent on distribution and license rights that we have received from Sanquin pursuant to a distribution agreement relating to the treatment of HAE and a license agreement relating to the treatment of AMI. Upon commercial launch of our product candidate for the treatment of HAE and thereafter during the term of the agreement, Sanquin will supply us with our commercial requirements for C1-INH for the treatment of HAE in each country where we have received regulatory approval, subject to minimum annual purchase requirements in Euros equal to approximately $21.7 million per year. If we fail to fulfill certain obligations or fail to meet certain milestones under the distribution agreement, the distribution agreement may be terminated. These milestones include (a) submission of a BLA with the FDA within 12 months from the completion of the clinical trial for HAE, and (b) obtaining marketing approval in the United States within 18 months from the submission of the BLA. In addition, Sanquin has the right to terminate the agreement if it is unable to maintain liability insurance for its United States obligations, under certain circumstances as described in the distribution agreement. In addition, either party may terminate the agreement upon an uncured breach. If Sanquin terminates the distribution agreement, we would have to retain another supplier of C1-INH for the treatment of HAE. If we are unable to locate another supplier of C1-INH comparable to Sanquin on economically acceptable terms, or at all, we will not be able to commercialize our product candidates and we may be forced to cease our operations.

Under the license agreement, Sanquin granted us an exclusive license to use certain patent, patent applications and know-how related to the use of C1-INH technology for the treatment of AMI. Under the terms of the license agreement for AMI, we are obligated to make minimum and earned royalty and other payments to Sanquin. If we fail to fulfill those obligations or other material obligations, the license agreement may be terminated by Sanquin. If Sanquin terminates the license agreement, we will have no further rights to utilize the intellectual property covered by the license agreement, we would not be able to commercialize the applicable product candidate for the treatment of AMI and we may be forced to cease our operations relating to the treatment to AMI using C1-INH, particularly if we do not have rights to other product candidates.

We are dependent on Sanquin as our sole source of supply for C1-INH and it will expand its manufacturing capacity to satisfy potential demand if we obtain regulatory approval for our lead product candidate.

Pursuant to our distribution agreement with Sanquin, Sanquin will supply us with certain annual minimum and maximum amounts of C1-INH. In the event demand for C-1NH is greater than the amount supplied by Sanquin, we would have to find alternative suppliers of C1-INH. Although we do not currently have any commercial products, we believe that we will need additional manufacturing capacity to meet anticipated demand for our products, if we obtain FDA approval for Cinryze™, our lead product candidate. If we are unable to locate another supplier of C1-INH comparable to Sanquin on economical terms, or at all, we may lose business and our reputation in the marketplace could be adversely affected. Due to this risk, in October 2007, we agreed with Sanquin to finance a portion of the costs of the project to increase the manufacturing capacity of its facilities. Under this arrangement, we agreed to provide Sanquin with a non-interest bearing loan, up to a maximum amount of €7.5 million (approximately US $11.9 million, based on the exchange rate as of March 31, 2008), to finance the construction project. As of March 31, 2008, we have provided Sanquin with approximately €2.3 million under this arrangement. This arrangement has increased our financial commitments and since we agreed that Sanquin would repay this loan amount through a discount on the cost of product purchasers, we will not be able to recoup this amount in the short term. Further, assuming the completion of construction, Sanquin would need to obtain the requisite regulatory approvals for the facility on a timely basis in order to manufacture Cinryze™ for us. If they cannot obtain necessary approvals for these contemplated expansions, or complete the planned construction, in a timely manner, we may need to locate an alternative supplier.

We agreed to provide Sanquin with a loan to finance the scale up of their production facilities, the repayment of which may be waived in the event we fail to perform under our agreement with them.

On October 10, 2007, we entered into an amendment to our Distribution and Manufacturing Services Agreement with Sanquin. Pursuant to this amendment, Lev and Sanquin agreed to jointly develop a project plan for, and initiate a construction project to scale-up the production facilities of Sanquin to be used for the purpose of meeting our anticipated ongoing requirements for the commercial use of the C1-Inhibitor product. Subject to the terms of the final project plan, we agreed to provide Sanquin with a non-interest bearing loan, up to a maximum amount of €7.5 million (approximately US $11.9 million, based on the exchange rate as of March 31, 2008), to finance the construction project. As of March 31, 2008, we have provided Sanquin with approximately €2.3 million under this arrangement. This loan is due July 1, 2014 and Sanquin agreed to repay the principal amount of the loan by providing us with a discount to the per unit purchase price of product. In the event the agreement is terminated because of a default of Sanquin prior to the loan being repaid in full, then Sanquin shall pay us the entire outstanding principal balance of the loan as of the date of termination within 60 days from such date. However, in the event the agreement is terminated before July 1, 2014 because of a default by us or if by such date the volume of product we order is less than the required volume for Sanquin to repay the loan, then we shall waive the then outstanding balance of the loan.

We rely on third parties to supply and manufacture our product candidates, without any direct control over the timing for the supply, production and delivery of our product candidates, thereby possibly adversely affecting any future revenues.

We have relied exclusively and are dependent on certain third party source suppliers to supply raw materials, specifically plasma, for our product candidates. To date, we have only required plasma for the production of C1-INH to conduct our clinical trials. However, in connection with our ongoing trials and in the event any of our product candidates receives the approval of the FDA, we will need increased supplies of plasma.

On July 19, 2007, we entered into an agreement for the purchase and sale of plasma with DCI Management Group, LLC, the “supplier” pursuant to which we will purchase quantities of U.S. Source Plasma to be utilized in the production of product under our Distribution and Manufacturing Services Agreement with Sanquin Blood Supply Foundation. We will expend a significant amount of our currently available cash in obtaining a sufficient supply of plasma. This will increase the likelihood that we will need to raise additional capital to fund our operations.

Under this agreement, the supplier agreed to sell us specified annual quantities of plasma in accordance with applicable good manufacturing practices. Under this agreement, we are committed to purchase a minimum of $13,950,000 of product during 2008 and have purchased approximately $3.7 million during the first quarter of 2008. Thereafter we expect our annual purchase commitment to be between $12.2 million and $12.9 million for the balance of the term of the agreement. Our contractual purchase commitments are subject to annual percentage increases based on market conditions and do not include additional pre-delivery testing which we may require the supplier to undertake. This agreement expires December 31, 2011, unless sooner terminated in accordance with its terms. Either party may terminate the agreement upon written notice if the other party is in material breach of any provision thereof, subject to applicable cure periods. Subject to the supplier’s ability to mitigate damages, in the event we are in default of our payment obligation under the contract, we will be liable to purchase the minimum quantities of plasma specified under the contract for the balance of the term. We have the right, however, to terminate the contract if by December 31, 2008 we do not obtain regulatory approval for the commercialization of our lead product candidate or are not able to secure adequate financial arrangements to cover our obligations with respect to the initial purchase commitments under the Agreement. In either such event, we will be obligated to complete the purchase of 80% of the initial minimum purchase commitment, subject to the supplier’s ability to mitigate damages. Further, upon expiration of the agreement, or in the event that it is terminated for reasons other than as set forth above, we will be obligated to purchase a closing inventory of plasma.

If we are unable to obtain or maintain this level of plasma supply, we will need to obtain our supply from other parties in order to satisfy our expected needs. Establishing additional or replacement suppliers for these materials may take a substantial amount of time. In addition, we may have difficulty obtaining similar supplies from other suppliers that are acceptable to the FDA. If we have to switch to a replacement supplier, we may face additional regulatory delays and the manufacture and delivery of our product candidates could be interrupted for an extended period of time, which may delay completion of our clinical trials or commercialization of our product candidates. As a result, regulatory approval of our product candidates may not be received at all. All these delays could cause delays in commercialization of our product candidates, delays in our ability to generate revenue, and increase our costs.

If our third-party suppliers do not maintain high standards of manufacturing in accordance with cGMP and other manufacturing regulations, our development and commercialization activities could suffer significant interruptions or delays.

If any of our product candidates receives the approval of the FDA we expect to rely on Sanquin and possibly another third-party contractor to manufacture our commercial products. If any current or future third-party supplier ceases to supply the products in the quantity and quality we need to manufacture the drug candidates or if the current or future third-party suppliers are unable to comply with current Good Manufacturing Practices, or cGMPs, and other government regulations, the qualification of additional or replacement suppliers could be a lengthy process, and there may not be adequate alternatives to meet our needs, which would negatively affect our business. In such a case, we may not be able to obtain the necessary materials used in our products in the future on a timely basis, if at all. The FDA and regulatory agencies in other countries also periodically inspect manufacturing facilities, including third parties who manufacture products or active ingredients for us. The FDA and/or applicable foreign regulatory agencies may not believe that the chosen manufacturers have sufficient experience making the dosage forms that we have contracted with them to produce, and may subject those manufacturers to increased scrutiny. Pharmaceutical manufacturing facilities must comply with applicable cGMPs, and manufacturers usually must invest substantial funds, time and effort to ensure full compliance with these standards. We will not have control over our contract manufacturers’ compliance with these regulations and standards. In complying with these regulations, we and our third-party suppliers must expend significant time, money and effort in the areas of design and development, testing, production, record-keeping and quality control to assure that our products meet applicable specifications and other regulatory requirements. The failure to comply with these requirements could result in an enforcement action against us or our suppliers, including fines, delays or suspensions of approvals, seizures or recalls of products, operating restrictions, manufacturing interruptions, costly corrective actions, injunctions, adverse publicity against us and our products and possible criminal prosecutions. If any of our third-party suppliers or we fail to comply with cGMP or other applicable manufacturing regulations, our ability to develop and commercialize our products could suffer significant interruptions.

Our lead product candidate is derived from human plasma, and is therefore subject to the risk of biological contamination inherent in plasma-derived products. This risk could adversely affect our ability to obtain raw materials and market our products.

Cinryze™ is derived from donated human plasma. Many disease-causing viruses, bacteria and other pathogens are present in the plasma of infected individuals. If infected individuals donate plasma, the plasma would likely contain those pathogens. As a result, the sourcing of plasma, and the production of products derived from plasma, is regulated extensively by the FDA and other medical product and health care regulatory agencies. We rely on our suppliers to maintain compliance with regulations promulgated by such agencies. The failure to comply with these regulations or the accidental contamination of plasma could adversely affect our ability to source plasma at commercially reasonable prices. Moreover, public perception about the safety of plasma-derived products could adversely affect the market for our products. Concern over the safety of plasma-derived products, driven in part by past screening failures in the industry and the appearance of new infectious agents like HIV, has resulted in the adoption of rigorous screening procedures by regulatory authorities, and screening procedures are likely to become stricter and more involved over time. As screening procedures have become more rigorous, potential donors have been disqualified and other potential donors have been discouraged from donating due to their reluctance to undergo the required screening procedures. Increasingly stringent measures could adversely affect plasma supplies, with a corresponding adverse effect on our ability to obtain raw materials at a commercially acceptable price or at all. The safety concerns associated with plasma-derived products also affect our ability to market our products. Medical events or studies that raise or substantiate concerns about the safety of our or other similar products would negatively impact public perception of all plasma-derived products and of the plasma donation process. Further, any failure in screening, whether by us or by other manufacturers of these products, could adversely affect our reputation, the support we receive from the medical community and overall demand for our products.

Our proposed products are in the development stages and will likely not be commercially introduced until mid-2008, if at all.

Our proposed products are in the development stages and will require further development, preclinical and clinical testing and investment prior to commercialization in the United States and abroad. We have not commercially introduced any products and do not expect to do so until mid-2008 at the earliest, depending upon the timing of our completion of clinical trials, our preparation and filing, and the FDA’s review, of our biologics license application for our proposed products. As previously announced, on April 15, 2008, we formally submitted our complete response to the FDA’s complete response (or “approvable”) letter for our lead product candidate, Cinryze™. Further, we have been advised that the FDA’s BPAC intends to review our biologics license application for Cinryze™ on May 2, 2008, for the prophylactic treatment of HAE.

We cannot assure you that any of our proposed products will:

·	be successfully developed;

·	prove to be safe and efficacious in clinical trials;

·	meet applicable regulatory standards or obtain required regulatory approvals;

·	demonstrate substantial protective or therapeutic benefits in the prevention or treatment of any disease;

·	be capable of being produced in commercial quantities at reasonable costs;


·	obtain coverage and favorable reimbursement rates from insurers and other third-party payors; or

·	be successfully marketed or achieve market acceptance by physicians and patients.

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

In order to receive regulatory approval for the commercialization of our product candidates, we must conduct, at our own expense, extensive clinical trials to demonstrate safety and efficacy of these product candidates. Clinical testing is expensive, can take many years to complete and its outcome is uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates do not necessarily predict the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through initial clinical testing. The data collected from clinical trials of our product candidates may not be sufficient to support the submission of a biologics license application to the FDA or to obtain regulatory approval in the United States or elsewhere. Because of the uncertainties associated with drug development and regulatory approval, we cannot determine if or when we will have an approved product for commercialization or achieve sales or profits.

Delays in clinical testing could result in increased cost to us and delay our ability to generate revenue.

We may experience delays in clinical testing of our product candidates. We do not know whether planned clinical trials will need to be redesigned or will be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays in obtaining regulatory approval to commence a trial, in reaching agreement on acceptable clinical trial terms with prospective sites, in obtaining institutional review board approval to conduct a trial at a prospective site, in recruiting patients to participate in a trial or in obtaining sufficient supplies of clinical trial materials. Many factors affect patient enrollments, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, competing clinical trials and new drugs approved for the conditions we are investigating. Prescribing physicians will also have to decide to use our product candidates over existing drugs that have established safety and efficacy profiles. Any delays in completing our clinical trials will increase our cost, slow down our product development and approval process and delay our ability to generate revenue.

We may be required to suspend or discontinue clinical trials due to unexpected side effects or other safety risks that could preclude approval of our product candidates.

Our clinical trials may be suspended at any time for a number of reasons. For example, we may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to the clinical trial patients. In addition, regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that the clinical trials are not being conducted in accordance with requirements or that they present an unacceptable safety risk to the clinical trial patients.

Administering any product candidates to humans may produce undesirable side effects. These side effects could interrupt, delay or halt clinical trials of our product candidates and could result in the FDA or other regulatory authorities denying further developments or approval of our product candidates for any or all targeted indications. Ultimately, some or all of our product candidates may prove to be unsafe for human use. Moreover, we could be subject to significant liability if any volunteer or patient suffers, or appears to suffer, adverse health effects as a result of participating in our clinical trials.

If we are unable to satisfy regulatory requirements, we may not be able to commercialize our product candidates.

We need FDA approval prior to marketing our product candidates in the United States. If we fail to obtain FDA approval to market our product candidates, we will be unable to sell our products in the United States and we will not generate any revenue. The FDA regulatory review and approval process, which includes evaluation of preclinical studies and clinical trials of a product candidate as well as the evaluation of our manufacturing process and our contract manufacturers’ facilities, is lengthy, expensive and uncertain. To receive approval, we must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that the product is both safe and effective for each indication where approval is sought. Satisfaction of these requirements typically takes several years and the time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the pharmaceutical product. We cannot predict if or when we might submit for regulatory review any of our product candidates currently under development. Any approvals we may obtain may not cover all of the clinical indications for which we are seeking approval. Also, an approval might contain significant limitations in the form of narrow indications, warnings, precautions, or contra-indications with respect to conditions of use.

Before the FDA determines whether to approve Cinryze™, we will present our clinical data from the prophylactic trials to be reviewed by the Blood Products Advisory Committee, or BPAC. We have been scheduled to appear before BPAC on May 2, 2008. BPAC would then make a recommendation to the FDA for, or against, approval. Even if BPAC were to recommend approval of one or more of our products, the FDA would not necessarily approve those products. If BPAC were to recommend against approval of one or more of our products, it is likely that the FDA would not approve those products. If our product candidates receive approval for commercial sale, their marketing and manufacturing will be subject to continuing FDA and other regulatory requirements, such as requirements to comply with Good Manufacturing Practices.

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

We will also be subject to a wide variety of foreign regulations governing the development, manufacture and marketing of our products. Whether or not FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must still be obtained prior to manufacturing or marketing the product in those countries. The approval process varies from country to country and the time needed to secure approval may be longer or shorter than that required for FDA approval. We cannot assure you that clinical trials conducted in one country will be accepted by other countries or that approval in one country will result in approval in any other country.

If testing of a particular product candidate does not yield successful results, then we will be unable to commercialize that product.

Our product candidates in clinical trials must meet rigorous testing standards. We must demonstrate the safety and efficacy of our potential products through extensive preclinical and clinical testing. Clinical trials are subject to continuing oversight by governmental regulatory authorities and institutional review boards and must meet the requirements of these authorities in the United States, including those for informed consent and good clinical practices. We may not be able to comply with these requirements, which could disqualify completed or ongoing clinical trials. We may experience numerous unforeseen events during, or as a result of, the testing process that could delay or prevent commercialization of Cinryze™ or our other product candidates, including the following:


·		safety and efficacy results from human clinical trials may show the product candidate to be less effective or safe than desired or those results may not be replicated in later clinical trials;

·		the results of preclinical studies may be inconclusive or they may not be indicative of results that will be obtained in human clinical trials;

·		after reviewing relevant information, including preclinical testing or human clinical trial results, we may abandon or substantially restructure projects that we might previously have believed to be promising;

·		we or the FDA may suspend or terminate clinical trials if the participating patients are being exposed to unacceptable health risks or for other reasons; and

·		the effects of our product candidates may not be the desired effects or may include undesirable side effects or other characteristics that interrupt, delay or cause us or the FDA to halt clinical trials or cause the FDA or foreign regulatory authorities to deny approval of the product candidate for any or all target indications.

Data from our completed clinical trials may not be sufficient to support approval by the FDA for Cinryze™ or our other product candidates. The clinical trials of our product candidates may not be completed as or when planned, and the FDA may not approve any of our product candidates for commercial sale. If we fail to demonstrate the safety or efficacy of a product candidate to the satisfaction of the FDA, this will delay or prevent regulatory approval of that product candidate. Therefore, any delay in obtaining, or inability to obtain, FDA approval of any of our product candidates could materially harm our business and cause our stock price to decline.

The FDA may determine our clinical trials data regarding safety or efficacy are insufficient for regulatory approval.

We discuss with and obtain guidance from regulatory authorities on certain of our clinical development activities. These discussions are not binding obligations on the part of regulatory authorities. Under certain circumstances, regulatory authorities may revise or retract previous guidance during the course of our clinical activities or after the completion of our clinical trials. The FDA may also disqualify a clinical trial in whole or in part from consideration in support of approval of a potential product for commercial sale or otherwise deny approval of that product. Even if we obtain successful clinical safety and efficacy data, we may be required to conduct additional, expensive trials to obtain regulatory approval.

We may take longer to complete our clinical trials than we project, or we may not be able to complete them at all.

A number of factors, including unexpected delays in the initiation of clinical sites, slower than projected enrollment, competition with ongoing clinical trials and scheduling conflicts with participating clinicians, regulatory requirements, limits on manufacturing capacity and failure of a product candidate to meet required standards for administration to humans may cause significant delays in the completion of our clinical trials. In addition, it may take longer than we project to achieve study endpoints and complete data analysis for a trial. Even if our product candidates proceed successfully through clinical trials and receive regulatory approval, there is no guarantee that an approved product can be manufactured in commercial quantities at reasonable cost or that such a product will be successfully marketed.

We have relied on academic institutions, physician practices and clinical research organizations to conduct, supervise or monitor some or all aspects of clinical trials involving our product candidates. We have less control over the timing and other aspects of these clinical trials than if we conducted the monitoring and supervision entirely on our own. Third parties may not perform their responsibilities for our clinical trials on our anticipated schedule or consistent with a clinical trial protocol or applicable regulations. We also rely on clinical research organizations to perform much of our data management and analysis. They may not provide these services as required or in a timely manner.

If we fail to commence, complete or experience delays in present or planned clinical trials, in particular any additional trials for Cinryze™ that could be required in advance of, or as a condition to, FDA approval, our ability to conduct our business as currently planned could materially suffer. Our development costs will increase if we are required to complete additional or larger clinical trials for Cinryze™ prior to FDA approval or with respect to other product candidates. If the delays or costs are significant, our financial results and our ability to commercialize Cinryze™ or our other product candidates will be adversely affected.

The commercial success of our product candidates will depend upon the degree of market acceptance of these products among physicians, patients, health care payors and the medical community.

Our product candidates have never been commercialized in the United States for any indication. Even if approved for sale by the appropriate regulatory authorities, physicians may not prescribe our product candidates, in which case we could not generate revenue or become profitable. Market acceptance of C1-INH for the treatment of HAE and our other product candidates by physicians, healthcare payors and patients will depend on a number of factors, including:

·		acceptance by physicians and patients of each such product as a safe and effective treatment;
·		cost effectiveness;
·		adequate reimbursement by third parties;
·		potential advantages over alternative treatments;
·		relative convenience and ease of administration; and
·		prevalence and severity of side effects.

If our product candidates are unable to compete effectively with marketed treatments, our commercial opportunity will be reduced or eliminated.

We face competition from established pharmaceutical and biotechnology companies, as well as from academic institutions, government agencies and private and public research institutions. Many products are either under development or are currently marketed for the treatment of HAE and AMI. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Our commercial opportunity will be reduced or eliminated if our competitors develop and commercialize competing products that are safer, more effective, have fewer side effects or are less expensive than our product candidates. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies and technology licenses complementary to our programs or advantageous to our business. Because we will most often be competing against significantly larger companies with established track records, we will have to demonstrate to physicians that based on experience, clinical data, side-effect profiles and other factors, our products are preferable to existing products. If we are unable to compete effectively and differentiate our products from currently marketed products, we may never generate meaningful revenue.

If we are not first to market for our HAE product, the Orphan Drug Act may provide a competitor with up to seven years of market exclusivity.

The Orphan Drug Act was created to encourage companies to develop therapies for rare diseases by providing incentives for drug development and commercialization. One of the incentives provided by the act is seven years of market exclusivity for the first product in a class licensed for the treatment of a rare disease. HAE is considered to be a rare disease under the Orphan Drug Act, and companies may obtain orphan drug status for therapies that are developed for this indication. We believe CSL Behring and Pharming NV are currently developing products that the FDA may determine to be in the same class as our C1-INH product candidate for the acute treatment of HAE. In March 2008, CSL Behring submitted a biologics license application with the FDA for a product candidate for the acute treatment of HAE. In the event that either of these companies are first to obtain FDA licensure for their product, we could be prevented from obtaining licensure and marketing our C1-INH product candidate for the acute treatment of HAE.

We currently have a very limited sales and marketing organization. If we are unable to establish a direct sales force or we are unable to enter into marketing agreements with third parties in the United States to promote our products, the commercial opportunity for our products may be diminished.

We currently have a very limited sales and marketing organization. If any of our product candidates are approved by the FDA, we intend to market these products directly to health care providers in the United States through our own sales force and enter into distribution agreements with one or more third parties. We will incur significant additional expenses and may need to commit significant additional management resources to promote and sell our products. In the event we are unable to develop our own sales force and collaborate with one or more third parties to sell our product candidates, we may not be able to commercialize our product candidates, which would negatively impact our ability to generate revenue.

If the FDA does not approve our contract manufacturers’ facilities, we may be unable to develop or commercialize our product candidates.

We rely on Sanquin to manufacture our product candidates, and currently have no plans to develop our own manufacturing facility. The facilities used by Sanquin to manufacture our product candidates will require approval by the FDA and the FDA has conducted an investigation of their facilities as part of its review of our biologics license application for Cinryze™. There can be no assurance that Sanquin will be able to obtain or maintain compliance with the FDA’s requirements. We may need to find alternative manufacturing facilities, which would result in significant costs to us as well as a delay of up to several years in obtaining approval for and manufacturing of our product candidates.

We have relied on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to seek or obtain regulatory approval for or commercialize our product candidates.

We have an agreement with a third party clinical research organization, or CRO, to implement, provide monitors and manage data for our clinical programs. We and our CRO are required to comply with current Good Clinical Practices, or GCPs, regulations and guidelines enforced by the FDA for all of our products in clinical development. The FDA enforces GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. In the future, if we or our CRO fails to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will determine that any of our clinical trials for products in clinical development comply with GCPs. In addition, our clinical trials must be conducted with products produced under current Good Manufacturing Practices, or cGMP regulations, and will require a large number of test subjects. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

If any of our current or future relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed.

We have been increasing our inventory of U.S. Source Plasma and unfinished product in anticipation of a commercial launch of Cinryze™.

Pursuant to our agreements with key suppliers, we have been increasing our inventory of U.S. Source Plasma and unfinished product in anticipation of a commercial launch of Cinryze™. Under our agreement with our plasma supplier, we are committed to purchase a minimum of $13,950,000 of product during 2008 and have purchased approximately $3.7 million during the first quarter of 2008. Thereafter we expect our annual purchase commitment to be between $12.2 million and $12.9 million for the balance of the term of the agreement. Further, under our distribution and manufacturing agreement with Sanquin, we agreed to purchase a specified amount of such product from Sanquin totaling approximately $20.5 million until the scale up is approved by the appropriate regulatory authorities, which we expect to occur during 2009. At March 31, 2008, we have valued our inventory of U.S. Source Plasma (or raw materials) and unfinished product at $12.1 million and $4.1 million, respectively. Furthermore, we expect our inventory levels to increase during the current fiscal year while we continue to pursue FDA approval of Cinryze™.

In the event that the FDA does not approve the commercial introduction of Cinryze™, or if approval is delayed to an extent where we are prevented from marketing Cinryze™ due to operation of the Orphan Drug Act, we would need to dispose of these inventories in an effort to recover our costs. While we believe that under current market conditions we would be able to resell quantities of these inventories on commercially reasonable terms, no assurances can be given that such conditions would exist at the time of any such transaction or that we would be able to enter into any agreements with third parties to resell our inventories on commercially reasonable terms or at all. Accordingly, we are exposed to the risk of being unable to recover a significant portion of our costs of these inventories. In the event that this occurs, we may need to write-off a material portion of the value of these assets and our financial condition would be adversely affected.

If product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face an inherent risk of product liability lawsuits related to the testing of our product candidates, and will face an even greater risk if we sell our products commercially. Currently, we are not aware of any anticipated product liability claims with respect to our product candidates. In the future, an individual may bring a liability claim against us if one of our product candidates causes, or merely appears to have caused, an injury. If we cannot successfully defend ourselves against the product liability claim, we may incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:


·		decreased demand for any product candidates or products that we may develop;

·		injury to our reputation;

·		withdrawal of clinical trial participants;

·		costs to defend the related litigation;

·		substantial monetary awards to trial participants or patients;

·		loss of revenue; and

·		the inability to commercialize any products that we may develop.

We have clinical trial liability insurance that covers our clinical trials with an annual aggregate limit of $5,000,000. We intend to expand our insurance coverage to include the sale of commercial products if marketing approval is obtained for our product candidates. We believe that we will be able to procure sufficient insurance coverage for our proposed clinical development activities. However, as enrollment in our clinical trials increases and we initiate additional clinical trials, such insurance coverage may prove insufficient to cover any liability claims brought against us. In addition, because of the increasing costs of insurance coverage, we may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If we are required to pay a product liability claim, we may not have sufficient financial resources to complete development or commercialization of any of our product candidates and, if so, our business and results of operations would be harmed.

Even if we receive regulatory approval for our product candidates, we will be subject to ongoing significant regulatory obligations and oversight.

If we receive regulatory approval to sell our product candidates, the FDA and foreign regulatory authorities may, nevertheless, impose significant restrictions on the indicated uses or marketing of such products, or impose ongoing requirements for post-approval studies. If we fail to comply with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. Any of these events could harm or prevent sales of the affected products or could substantially increase the costs and expenses of commercializing and marketing these products. In addition, if any of our product candidates receive marketing approval and we or others later identify undesirable side effects caused by the product, we could face one or more of the following:


·		a change in the labeling statements or withdrawal of FDA or other regulatory approval of the product;

·		a change in the way the product is administered; or

·		the need to conduct additional clinical trials.

Discovery after approval of previously unknown problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in actions such as:

restrictions on such products’ manufacturers or manufacturing processes;

·		restrictions on the marketing of a product;

·		warning letters;

·		withdrawal of the products from the market;

·		refusal to approve pending applications or supplements to approved applications that we submit;

·		recall of products;

·		fines, restitution or disgorgement of profits or revenue;

·		suspension or withdrawal of regulatory approvals;

·		refusal to permit the import or export of our products;

·		product seizure;

·		injunctions; or

·		imposition of civil or criminal penalties.

If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize our product candidates.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel and on our ability to develop and maintain important relationships with leading academic institutions, clinicians and scientists. We are highly dependent upon our senior management, particularly Judson Cooper, our Chairman and Executive Vice President, and Joshua D. Schein, Ph.D., our Chief Executive Officer. The loss of services of Mr. Cooper or Dr. Schein, or one or more other members of senior management could delay or prevent the successful completion of our planned clinical trials or the commercialization of our product candidates.

Recruiting and retaining qualified scientific personnel, clinical personnel and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms, if at all, given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from other companies, universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

We will need to increase the size of our organization, and we may experience difficulties in managing growth.

We are a small company with 27 employees as of April 17, 2008. To continue our clinical trials and commercialize our product candidates, we will need to expand our employee base for managerial, operational, financial and other resources. Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively.

Reimbursement may not be available for our product candidates, including due to legislative or regulatory reform of the healthcare system, which could diminish our sales or affect our ability to sell our products profitably.

C1-INH, if commercialized, is likely to be significantly more expensive than traditional drug treatments. Our future revenues and profitability will be adversely affected if we cannot depend on governmental, private third-party payors and other third-party payors, including Medicare and Medicaid, to defray the cost of C1-INH to the consumer. If these entities refuse to provide coverage and reimbursement with respect to C1-INH or determine to provide an insufficient level of coverage and reimbursement, C1-INH may be too costly for general use, and physicians may not prescribe it. Many third-party payors cover only selected drugs, making drugs that are not preferred by such payor more expensive for patients, and require prior authorization or failure on another type of treatment before covering a particular drug. Third-party payors may be especially likely to impose these obstacles to coverage for higher-priced drugs, which we anticipate C1-INH to be.

In addition to potential restrictions on coverage, the amount of reimbursement for our products may also reduce our profitability and worsen our financial condition. In the United States and elsewhere, there have been, and we expect there will continue to be, actions and proposals to control and reduce healthcare costs. Government and other third-party payors are challenging the prices charged for healthcare products and increasingly limiting and attempting to limit both coverage and level of reimbursement for prescription drugs.

Since C1-INH will likely be too expensive for most patients to afford without health insurance coverage, if adequate coverage and reimbursement by third-party payors is not available, our ability to successfully commercialize C1-INH may be adversely impacted. Any limitation on the use of C1-INH or any decrease in the price of C1-INH will have a material adverse effect on our ability to achieve profitability. Even where patients have access to insurance, their insurance co-payment amounts may be too expensive for them to afford.

As a result of legislative proposals and the trend towards managed healthcare in the United States, third-party payers are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement for new drugs. Market acceptance and sales of our product candidates will depend on reimbursement policies and healthcare reform measures. The levels at which government authorities and third-party payers, such as private health insurers and health maintenance organizations, reimburse patients for the price they pay for our products will affect whether we are able to commercialize these products. We cannot be sure that reimbursement will be available for any of these products. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our products. We have not commenced efforts to have our product candidates reimbursed by government or third party payers. If reimbursement is not available or is available only to limited levels, we may not be able to commercialize our products.

Rapid technological change could make our product candidates obsolete.

Biopharmaceutical technologies have undergone rapid and significant change and we expect that they will continue to do so. Any compounds, products or processes that we develop may become obsolete or uneconomical before we recover any expenses incurred in connection with their development. Rapid technological change could make our products obsolete or uneconomical. Our future success will depend not only on our ability to develop our product candidates, but also on our ability to maintain market acceptance against emerging industry developments. We cannot assure prospective investors that we will be able to do so.

Compliance with the Sarbanes-Oxley Act of 2002 will result in increased expenditures.

We are exposed to significant costs and risks associated with complying with increasingly stringent and complex regulation of corporate governance and disclosure standards. Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations require a growing expenditure of management time and external resources. In particular, Section 404 of the Sarbanes-Oxley Act of 2002 requires management’s annual review and evaluation of our internal controls, and attestations of the effectiveness of our internal controls by our independent auditors. Under current law, the internal controls certification and attestation requirements of Section 404 of the Sarbanes-Oxley were first applicable to us for our fiscal year ending December 31, 2007. As our SEC reporting status had evolved from “small business” issuer to “accelerated filer” we must comply with Section 404 of the Sarbanes-Oxley Act of 2002 and have our independent registered public accounting firm attest to management’s assessment of our internal controls over financial reporting. By reason of this reporting status, our compliance costs have substantially increased and a significant portion of management’s time has been allocated in order to comply with these rules, especially with respect to compiling the initial comprehensive documentation of our internal controls, and then evaluating and testing the operating effectiveness of our internal controls systems. Any failure by us to maintain effective internal controls could have a material adverse effect on our business, operating results and stock price. This process may also require us to hire additional personnel and outside advisory services and will result in significant accounting and legal expenses. We expect to incur significant expense in future periods to comply with regulations pertaining to corporate governance and internal controls as described above.

We have a significant amount of net operating loss and credit carryforwards the use of which may be limited in certain circumstances.

As of December 31, 2007, we have available, for tax purposes, unused net operating loss carryforwards of approximately $20,378,000 that expire from 2023 to 2027. We also have approximately $1,261,000 of research and development credits that expire from 2024 to 2027. Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of our net operating loss and credit carryforwards prior to December 4, 2007 and August 23, 2004 is limited due to a cumulative change in ownership of more than 50% that occurred within a three-year period. In the event we achieve profitable operations, any significant limitation on the utilization of net operating loss and credit carryforwards would have the effect of increasing our current tax liability.

Risks related to our intellectual property

It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection.

Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our product candidates and the methods used to manufacture them, as well as successfully defending these patents against third party challenges. We will only be able to protect our product candidates from unauthorized making, using, selling, and offering to sell or importation by third parties to the extent that we have rights under valid and enforceable patents or trade secrets that cover these activities.

The patent position of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date in the United States. The biotechnology patent situation outside the United States is even more uncertain. Changes in either the patent laws or interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our licensed patents or in third-party patents.

The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

·		others may be able to make compounds that are competitive with our product candidates but that are not covered by the claims of our licensed patents, or for which we are not licensed under our license agreements;
·		we or our licensor might not have been the first to make the invention covered by our future pending patent applications, if any, or the pending patent applications and issued patents of our licensors;
·		we or our licensor might not have been the first to file patent applications for these inventions;
·		others may independently develop similar or alternative technologies or duplicate any of our technologies;
·		it is possible that our pending patent applications, if any, or one or more of the pending patent applications of our licensor, will not result in issued patents;
·		the issued patents of our licensor may not provide us with any competitive advantage, or may be held invalid or unenforceable as a result of legal challenges by third parties;
·		we may not develop additional proprietary technologies that are patentable; or
·		the patents of others may have an adverse effect on our business.

We also may rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. While we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third party illegally obtained and is using our trade secrets is expensive and time-consuming and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods, and know-how.

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights or use our technology.

If we pursue litigation to stop someone else from using the inventions claimed in our owned or licensed patents or the patents issuing from a licensed application, that individual or company has the right to ask the court to rule that these patents are invalid and/or should not be enforced. These lawsuits are expensive and would consume time and other resources even if we were successful in stopping the infringement of these patents. In addition, there is a risk that the court will decide that these patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that even if the validity of these patents is upheld, the court will refuse to stop the other party on the ground that such other party’s activities do not infringe our rights in these patents.

Furthermore, a third party may claim that we are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our products. These lawsuits are costly and could affect our results of operations and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we are infringing the third party’s patents and would order us to cease engaging in activities judged to be covered by the patents. In addition, there is a risk that a court will order us to pay the other party damages for having violated the other party’s patents. The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our products or methods of use either do not infringe the patent claims of the relevant patent and/or that the patent claims are invalid and/or unenforceable, and we may not be able to do this. Proving invalidity and/or unenforceability is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.

Because some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications in the United States and many foreign jurisdictions are typically not published until eighteen months after filing and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our licensors’ issued patents or patents issued from a licensed application or our licensors’ pending applications or that we or our licensors were the first to invent the technology. Our competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such patent application may have priority over our licensors’ patent applications and could further require us to obtain rights to issued patents covering such technologies. If another party has filed a United States patent application on inventions similar to ours, we may have to participate in an interference proceeding declared by the United States Patent and Trademark Office to determine priority of inventions in the United States. The cost of these proceedings would be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our United States patent position with respect to such inventions. In addition, we have sought to register a number of trademarks in the US and in certain foreign jurisdictions, including the trademarks “Lev Pharma” and “Cinryze”. These applications are currently pending and no assurance can be given that registration will be obtainable or if obtained, will be effective to protect our trademarks. Certain third parties, however, have opposed our trademark application for “Lev Pharma” with the U.S. Patent and Trademark Office and with the Community Trade Marks Office of the European Union. We are vigorously contesting these proceedings and do not believe that they will have a material adverse effect on our business, results of operations or financial condition. However, no assurances can be given that such belief will ultimately prove to be accurate, in which case the ultimate resolution of these matters could potentially have a material adverse effect on our business.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.

Risks Relating to our Securities

As a result of the shares issued in our recent financing transactions, the number of shares of our common stock outstanding has increased substantially and certain purchasers beneficially own significant blocks of our common stock and these shares are generally available for resale in the public market.

Upon the closing of the private placement in October 2006, we issued to a small group of institutional and other accredited investors an aggregate of 32,307,693 shares of common stock, plus warrants to purchase an aggregate of 9,692,308 additional shares of common stock. We also issued warrants to purchase 1,897,057 shares of common stock to registered-broker dealers that assisted us in this transaction. Under the purchase agreement for the private placement, we agreed to file a registration statements with the SEC covering the resale of the all of the shares of common stock issued or to be issued in the private placement, including the shares of common stock issuable upon exercise of the warrants. We have also granted to the purchasers piggyback rights to participate in any company registration, subject to certain limitations. This registration statement was initially declared effective by the SEC on December 11, 2006 and these shares are presently generally available for immediate resale in the public market. In addition, in August 2007 we sold an aggregate of 23,333,333 shares of common stock and warrants to purchase 4,666,667 shares of common stock in a registered direct offering to certain institutional investors. The market price of our common stock could fall due to this increase in the number of shares available for sale in the public market. Further, the issuance of these securities resulted in substantial dilution to stockholders who held our common stock prior to the time of the transactions.

If we are unable to make the scheduled principal and interest payments on the term loan facility or maintain compliance with other debt covenants as defined in the loan and security agreement, we may default on our debt.

In November 2007, we entered into a loan and security agreement for up to $20 million. Upon execution of the agreement, we borrowed an initial amount of $10 million under the agreement. The loan is secured by all of our assets. Under the agreement, we are required to maintain a minimum liquidity level based on the balance of the outstanding advances. As the loan agreement requires our compliance with customary covenants and restriction, it may affect our operations in several ways, including the following:

•

A portion of our cash flow from operations will be dedicated to the payment of the principal and interest on our indebtedness;

•

Our future cash flow may be insufficient to meet our required principal and interest payments;

•

We may need to raise additional capital in order to remain in compliance with the loan covenants; or

•

Our ability to enter into certain transactions, incur additional indebtedness and dispose of certain assets may be limited.

Our ability to request additional loans is subject to our ability to maintain a borrowing base in excess of the outstanding aggregate loan amount. Further, if the outstanding loan amount exceeds the borrowing base, then we will be required to prepay an amount equal to such excess, and, if applicable, the lender’s total commitment shall be reduced to equal the borrowing base at the time of such mandatory prepayment. The loan is for a term of 36 months and matures on November 1, 2010. Interest on the loan accrues at the rate of 13.5% per annum. Commencing November 1, 2008, we must pay minimum interest payments of 10.5%. We can prepay the outstanding principal and accrued but unpaid interest, subject, however, to making payment of a make-whole premium during the first year and a prepayment fee thereafter, until May 1, 2010. In addition to the conditions above, we may not be able to borrow additional funds under this agreement if we are not able to maintain various negative and financial covenants. Further, events of default are not limited to, but include the following:

•

Payment default;

•

Covenant default;

•

A material adverse change in our business, including the development path for Cinryze™;

•

Breach of our agreements with Sanquin; or

•

Judgments against us over a certain dollar amount.

In case of an uncured default, the following actions may be taken against us by the lenders:

•

All outstanding obligations associated with the term loan facility would be immediately due and payable;

•

Any future advancement of credit under the term loan facility would cease;

•

Balances and accounts at other financial institutions could be “held” or exclusive control be transferred to the lending institutions; and

•

All collateral, as defined in the agreement, could be seized and disposed of.

If shares under our universal shelf registration statement are issued, then the price of our securities may be negatively affected.

We have on file with the SEC a universal shelf registration statement on Form S-3 (Registration No. 333-143196), which provides for the offer, from time to time, of common stock, preferred stock, debt securities and warrants up to an aggregate remaining availability of approximately $35 million, net of financing amounts previously executed under this registration statement. The SEC declared the shelf registration statement effective on June 13, 2007. Subject to market conditions and our capital needs, and so long as we are then eligible to use the registration statements under SEC rules, we may again seek to use any remaining availability under the shelf registration statement by making an offering of securities covered for sale under the registration statement. In addition, we may amend our shelf registration statement or file a new shelf registration statement to increase our potential access to capital. The addition of these securities into the market may be dilutive to existing stockholders and have an adverse effect on the price of our securities.

Market volatility may affect our stock and the value of your investment.

The market prices for securities of biopharmaceutical companies in general have been highly volatile and may continue to be highly volatile in the future. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our common stock:

announcements of technological innovations or new products by us or our competitors;

announcements of FDA approval or non-approval of our product candidates or delays in the FDA review process;

actions taken by regulatory agencies with respect to our product candidates, clinical trials, manufacturing process or sales and marketing activities;

regulatory developments in the United States and foreign countries;

the success of our development efforts to acquire or in-license additional products or product candidates;

any intellectual property infringement action, or any other litigation, involving us;

non-issuance of patents on our, or our licensors’, pending patent applications, or invalidation of our, or our licensors’, patents or other intellectual property rights;

announcements concerning our competitors, or the biotechnology or biopharmaceutical industries in general;

actual or anticipated fluctuations in our operating results;

changes in financial estimates or recommendations by securities analysts;

sales of large blocks of our common stock;

sales of our common stock by our executive officers, directors and significant stockholders; and

the loss of any of our key scientific or management personnel.

The occurrence of one or more of these factors may cause our stock price to decline, and you may not be able to resell your shares at or above the price you paid for your shares. In addition, the stock market in general, and the markets for biotechnology and biopharmaceutical stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market conditions may adversely affect the trading price of our common stock.

We are at risk of securities class action litigation.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and biopharmaceutical stocks have experienced significant stock price volatility in recent years. If we faced such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

The ownership interests of our officers and directors could conflict with the interests of our other stockholders.

As of April 17, 2008, our officers and directors beneficially own approximately 25.6% of our common stock. As a result, these stockholders, acting together, will be able to significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. The interests of this group of stockholders may not always coincide with our interests or the interests of other stockholders.

We may be subject to “penny stock” regulations that would limit the trading market for our common stock.

Our common stock is currently listed for trading on the OTC Bulletin Board which is generally considered to be a less efficient market than markets such as Nasdaq or other national exchanges, and which may cause difficulty in obtaining future financing. Further, the SEC has adopted regulations which generally define Penny Stocks to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. As the closing price for our common stock is currently less than $5.00 per share, it may be designated a “Penny Stock.” Although we currently satisfy the net worth exemption from the “Penny Stock” definition, no assurance can be given that such exemption will be maintained. As a Penny Stock, our common stock may become subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rules. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors”. For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market. Many brokers have decided not to trade “penny stock” because of the requirements of the Penny Stock Rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock. In the event that we are subject to the Penny Stock Rules for any significant period, there may develop an adverse impact on the market for our securities and investors will find it more difficult to dispose of our securities. Further, for companies whose securities are traded on the OTC Bulletin Board, it is more difficult: (i) to obtain accurate quotations, (ii) to obtain coverage for significant new events because major wire services, such as the Dow Jones News Service, generally do not publish press releases about such companies, and (iii) to obtain needed capital. There can be no assurance that our common stock will continue to qualify for exemption from the penny stock restrictions.

A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could fall. These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. As of April 16, 2008, there were approximately 67,981,443 shares of restricted common stock outstanding that may be eligible for sale pursuant to Rule 144 under the Securities Act of 1933. Amended Rule 144 provides, that, in general, a person that is not an affiliate of our company that holds restricted securities for a period of six months may sell such shares subject only to our compliance with the current public information requirement until the end of a one year holding period and after one year, these securities may be freely sold without regard to such requirement. Sales of our common stock by certain present stockholders under Rule 144 may, in the future, have a depressive effect on the market price of our securities. In addition, the sale of shares by officers and directors and other affiliated shareholders may also have a depressive effect on the market for our securities.

Because we do not intend to pay dividends, you will benefit from an investment in our common stock only if it appreciates in value.

We have paid no cash dividends on any of our capital stock to date, and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. The success of your investment in our common stock will likely depend entirely upon any future appreciation. There is no guarantee that our common stock will appreciate in value or even maintain the price at which you purchased your shares.

Provisions in our charter documents and applicable law could discourage or prevent a takeover, even if an acquisition would be beneficial to our stockholders.

Provisions of our certificate of incorporation and bylaws, as well as provisions of applicable law, could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. These provisions include:

·	authorizing the issuance of “blank check” preferred that could be issued by our Board of Directors to increase the number of outstanding shares and thwart a takeover attempt;

·	prohibiting cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; and

·	advance notice provisions in connection with stockholder proposals that may prevent or hinder any attempt by our stockholders to bring business to be considered by our stockholders at a meeting or replace our board of directors.

Exercise of outstanding options and warrants will dilute stockholders and could decrease the market price of our common stock.

As of April 17, 2008, we had issued and outstanding options and warrants to purchase an aggregate of 31,955,390 additional shares of common stock. To the extent that these securities are exercised or converted, dilution to our shareholders will occur. The exercise of these securities by the holders may adversely affect the market price of our common stock and the terms under which we could obtain additional equity capital. This excludes 4,000,000 shares of unvested restricted stock issued on December 20, 2007.

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

During the quarter ended March 31, 2008, we did not issue any securities that were not registered under the Securities Act of 1933, as amended, except as has been reported in previous filings with the SEC.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed herewith or incorporated by reference.

		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Dated	Exhibit	Filed Herewith

10.1*	Strategic Supply Agreement between the Company and Plasma Centers of America, LLC				X

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				X

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

* Confidential treatment has been requested with respect to portions of this document pursuant to Rule 24b-2 of the Securities Exchange Act. The redacted portions of this document were filed separately with the Securities and Exchange Commission.

SIGNATURES

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

	Lev Pharmaceuticals, Inc.

April 30, 2008	By:	/s/ Joshua D. Schein
		Joshua D. Schein, Ph.D.
		Chief Executive Officer

April 30, 2008	By:	/s/ Douglas J. Beck
		Douglas J. Beck
		Chief Financial Officer

Lev Pharmaceuticals Inc 10-Q