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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-Q
  þ
    
    Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
1934
 For the quarterly period ended March 31, 2006
 Or
 o
    
    Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
 For the transition period from            to
 Commission File Number 0-29993
 INTRABIOTICS PHARMACEUTICALS, INC.
 (Exact name of Registrant as specified in its charter)
 DELAWARE
    
    94-3200380(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 1009 Oak Hill Rd., Suite 201
Lafayette, CA 94549
  (925) 906-5331
  þ o
 
 o o þ
 þ o




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TABLE OF CONTENTS
 INTRABIOTICS PHARMACEUTICALS, INC.
 FORM 10-Q
 QUARTER ENDED MARCH 31, 2006
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Condensed Balance Sheets as of March 31, 2006 (unaudited) and December 31, 2005
    
    
    3Condensed Statements of Operations for the Three Months Ended March 31, 2006 and 2005 (unaudited)
    
    
    4Condensed Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2005 (unaudited)
    
    
    5Notes to Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    8Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    12Item 4. Controls and Procedures
    
    
    12PART II. OTHER INFORMATION
    
    
    14Item 1. Legal Proceedings
    
    
    14Item 1A. Risk Factors
    
    
    14Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    15Item 3. Defaults Upon Senior Securities
    
    
    15Item 4. Submission of Matters to a Vote of Security Holders
    
    
    15Item 5. Other Information
    
    
    15Item 6. Exhibits
    
    
    15SIGNATURES
    
    
    16EXHIBIT INDEXEXHIBIT 31.1EXHIBIT 32.1
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 INTRABIOTICS PHARMACEUTICALS, INC.
 
 CONDENSED BALANCE SHEETS
 (Dollars In thousands, except per share data)
 March 31,
    
    
    December 31,2006
    
    
    2005(Unaudited)
    
    
    (Note 1)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    714
    
    
    $
    2,772Short-term investments
    
    
    48,050
    
    
    
    46,058Prepaid expenses and other current assets
    
    
    258
    
    
    
    341Total current assets
    
    
    49,022
    
    
    
    49,171Total assets
    
    $
    49,022
    
    
    $
    49,171LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    56
    
    
    $
    58Accrued clinical liabilities
    
    
    8
    
    
    
    99Other accrued liabilities
    
    
    143
    
    
    
    194Total current liabilities
    
    
    207
    
    
    
    351Stockholders equity:Convertible preferred stock, $0.001 par value: 5,000,000 shares authorized;
300 shares outstanding and $3,000 aggregate liquidation preference at
March 31, 2006 and December 31, 2005, respectively
    
    
    1,634
    
    
    
    1,634Common stock, $0.001 par value: 70,000,000 shares authorized at March 31,
2006 and December 31, 2005; 9,304,265 and 9,287,685 shares outstanding at
March 31, 2006 and December 31, 2005, respectively
    
    
    9
    
    
    
    9Additional paid-in capital
    
    
    282,973
    
    
    
    282,828Deferred stock compensation
    
    
    
    
    
    
    (45
    )Accumulated other comprehensive loss
    
    
    (20
    )
    
    
    (36
    )Accumulated deficit
    
    
    (235,781
    )
    
    
    (235,570
    )Total stockholders equity
    
    
    48,815
    
    
    
    48,820Total liabilities and stockholders equity
    
    $
    49,022
    
    
    $
    49,171
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INTRABIOTICS PHARMACEUTICALS, INC.
 
 CONDENSED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 (Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005Operating expenses:Research and development
    
    $
    7
    
    
    $
    189General and administrative
    
    
    660
    
    
    
    1,194Total operating expenses
    
    
    667
    
    
    
    1,383Operating loss
    
    
    (667
    )
    
    
    (1,383
    )Other (expense)
    
    
    (1
    )Interest income
    
    
    518
    
    
    
    309Net loss
    
    
    (150
    )
    
    
    (1,074
    )Non-cash dividends on Series A preferred stock
    
    
    (60
    )
    
    
    (60
    )Net loss applicable to common stockholders
    
    $
    (210
    )
    
    $
    (1,134
    )Basic and diluted net loss per share applicable to common
stockholders
    
    $
    (0.02
    )
    
    $
    (0.13
    )Shares used to compute basic and diluted net loss per share
applicable to common stockholders
    
    
    9,298
    
    
    
    8,991
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INTRABIOTICS PHARMACEUTICALS, INC.
 
 CONDENSED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005Operating activitiesNet loss
    
    $
    (150
    )
    
    $
    (1,074
    )Adjustments to reconcile net loss to net cash used in operating activities:Stock compensation for directors
    
    
    133Stock compensation for variable option awards
    
    
    
    
    
    
    (45
    )Amortization of deferred stock compensation
    
    
    
    
    
    
    14Stock compensation for consultant services
    
    
    2
    
    
    
    56Depreciation and amortization
    
    
    
    
    
    
    5Change in assets and liabilities:Prepaid expenses and other current assets
    
    
    83
    
    
    
    40Accounts payable
    
    
    (2
    )
    
    
    (27
    )Accrued clinical liabilities
    
    
    (91
    )
    
    
    (64
    )Accrued employee liabilities
    
    
    
    
    
    
    1Accrued restructuring charges
    
    
    
    
    
    
    (3
    )Other accrued liabilities
    
    
    (51
    )
    
    
    (22
    )Net cash used in operating activities
    
    
    (76
    )
    
    
    (1,119
    )Investing activitiesPurchase of short term investments
    
    
    (59,712
    )
    
    
    (14,168
    )Proceeds from sale or maturity of short-term investments
    
    
    57,730
    
    
    
    30,792Net cash provided by (used in) investing activities
    
    
    (1,982
    )
    
    
    16,624Financing activityProceeds from issuance of common stock, net of issuance costs
    
    
    
    
    
    
    23Net cash provided by financing activities
    
    
    
    
    
    
    23Net increase (decrease) in cash and cash equivalents
    
    
    (2,058
    )
    
    
    15,528Cash and cash equivalents at beginning of the period
    
    
    2,772
    
    
    
    1,755Cash and cash equivalents at end of the period
    
    $
    714
    
    
    $
    17,283Supplemental disclosure of non-cash information:Issuance of common stock dividend on Series A preferred stock
    
    $
    (60
    )
    
    $
    (60
    )Issuance of common stock upon conversion of Series A preferred stock
    
    $
    
    
    
    $
    (137
    )
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INTRABIOTICS PHARMACEUTICALS, INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 Note 1. Basis of Presentation and Summary of Significant Accounting Policies
    Use of Estimates
   Note 2. Stock-Based Compensation
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Three Months EndedMarch 31, 2006Risk-free interest rate
    
    
    4.82
    %Volatility
    
    
    0.20Dividend yield
    
    
    0.00
    %Expected life of option
    
    
    2
 Note 3. Comprehensive Loss
  Three Months EndedMarch 31,2006
    
    
    2005(In thousands)Net loss
    
    $
    (150
    )
    
    $
    (1,074
    )Unrealized loss on available-for-sale securities
    
    
    16
    
    
    
    (53
    )Comprehensive loss
    
    $
    (134
    )
    
    $
    (1,127
    )
 Note 4. Net Loss Per Share
 Earnings Per Share,
 Note 5. Stockholders Equity
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Note 6. Commitments
  Note 7. Legal Proceedings
   
 ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis of our financial condition and results of operations
should be read together with our financial statements and related notes included in our quarterly
report on this Form 10-Q and in our annual report on Form 10-K for the year ended December 31,
2005. This discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. The actual results may differ materially from those anticipated in
these forward-looking statements as a result of many factors, including but not limited to those
set forth in Part1, Item 1A  Risk Factors of our Form 10-K for the year ended December 31, 2005.
All forward-looking statements included in this document are based on information available to us
on the date of this document and we assume no obligation to update any forward-looking statements
contained in this Form 10-Q .
 Overview
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Critical Accounting Policies and Estimates
   Stock-Based Compensation
 Accounting
for Stock-Based Compensation, Accounting
for Stock-Based Compensation  Transition and Disclosure,
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Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction
with Selling, Goods or Services
 Results of Operations
 Three Months Ended March 31, 2006 and 2005
 Research and Development
  General and Administrative
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Interest Income
  Net Loss and Net Loss Applicable to Common Stockholders
  Liquidity and Capital Resources
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Contractual Obligations
   Off-Balance Sheet Arrangements
  Indemnifications
  
 ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
  
 ITEM 4. Controls and Procedures
   12




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Disclosure Controls and Procedures
  Scope of the Controls Evaluation
  Future requirements
   13




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  Directors, principal stockholders and affiliated entities beneficially own or control at least 48%
of our capital stock outstanding and may be able to exert control over our activities, and the
results of our operations and financial condition may suffer.
  We may continue to incur net losses.
  Our stock price has been, and will be volatile, and the value of your investment may continue to
decline.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
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SIGNATURES
  IntraBiotics Pharmaceuticals, Inc.May 4, 2006
    
    /s/ Denis HickeyDenis HickeyChief Executive Officer and Chief Financial Officer
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EXHIBIT INDEX
 31.1
    
    Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Rules 13a-14(a) or 15d-14(a) promulgated under the
Securities Exchange Act of 1934, as amended.*32.1
    
    Certifications of Chief Executive Officer and Chief Financial Officer
as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of
Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).*