UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 Form 10-Q x
  Quarterlyreport pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
  1934FOR
  THE QUARTERLY PERIOD ENDED MARCH 31, 2001oro
  Transitionreport pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
  1934For
  the transition period from __________ to __________
  COMMISSION
  FILE NUMBER 0-29993INTRABIOTICS
  PHARMACEUTICALS, INC.(Exact name of
  Registrant as specified in its charter)DELAWARE
  94-3200380(State or other
  jurisdiction of
  (I.R.S. Employerincorporation or
  organization)
  Identification Number)2021
  STIERLIN COURT, MT. VIEW, CA
  94043(Address of principal
  executive offices)
  (zip code)(650)
  526-6800(Registrants
  telephone number including area code)
 Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YesxNoo There were 29,297,793 shares of the Companys Common Stock,
par value $.001, outstanding on April 30, 2001.   INTRABIOTICS
PHARMACEUTICALS, INC.

FORM
10-Q
QUARTER ENDED MARCH 31, 2000

TABLE
OF CONTENTS

PART
  I.
  FINANCIAL INFORMATIONItem
  1.
  Financial
  Statements:Condensed Balance Sheets as of
  March 31, 2001 and December 31, 2000Condensed
  Statements of Operations for the Three Month Periods Ended March 31, 2001 and
  March 31, 2000Statements of Cash Flows for
  the Three Month Periods Ended March 31, 2001 and March 31, 2000Notes to
  Condensed Financial StatementsItem
  2.
  Managements
  Discussion and Analysis of Financial Condition and Results of OperationsItem
  3.
  Quantitative
  and Qualitative Disclosures About Market RiskPART
  II
  OTHER INFORMATIONItem
  6.
  Exhibits and
  Reports on Form 8-KSIGNATURES

INTRABIOTICS PHARMACEUTICALS, INC.CONDENSED BALANCE SHEETS
(IN THOUSANDS)


(UNAUDITED)


MARCH 31, 
  2001
  DECEMBER 31, 
  2000Assets
  
  (Note 1)Current
  assets:Cash and cash equivalents
  $41,922
  $38,983Restricted cash deposits
  1,371
  1,371Short-term investments
  23,601
  45,711Other current assets, primarily
  prepayments and deposits
  10,393
  10,101Total current assets
  77,287
  96,166Property
  and equipment, net
  14,964
  12,056Other
  assets
  66
  66Total assets
  $92,317
  $108,288Liabilities and Stockholders' EquityCurrent
  liabilities:Accounts payable
  $2,070
  $1,680Accrued clinical costs
  4,056
  3,236Accrued employee liabilities
  991
  625Other accrued liabilities
  1,021
  854Current financing obligations
  3,896
  3,629Total current liabilities
  12,034
  10,024Long-term
  financing obligations
  8,342
  8,309Stockholders equity:Common
  stock
  29
  29Additional
  paid-in capital
  198,235
  198,388Deferred
  stock compensation
  (9,366)
  (10,198)Accumulated
  other comprehensive income
  206
  186Accumulated
  deficit
  (117,163)
  (98,450)Total stockholders' equity
  71,941
  89,955Total liabilities and stockholders'
  equity
  $92,317
  $108,288See accompanying notes.

INTRABIOTICS
PHARMACEUTICALS, INC CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


(UNAUDITED)


THREE MONTHS ENDED MARCH 31,2001
  2000Operating expenses:Research and
  development
  $15,524
  $5,438General and
  administrative
  4,108
  2,137Total operating
  expenses
  19,632
  7,575Operating loss
  (19,632)
  (7,575)Interest income
  1,227
  414Interest expense
  (308)
  (137)Net loss
  $(18,713)
  $(7,298)Basic and diluted net loss per share
  $(0.64)
  $(2.62)Shares used to compute basic and diluted net loss per share
  29,260
  2,785Pro forma basic and diluted net loss per share
  
  $(0.34)Shares used to compute
  pro forma basic and diluted net loss per share
  
  21,659See accompanying notes.

INTRABIOTICS PHARMACEUTICALS, INC.STATEMENTS OF CASH FLOWS
(IN THOUSANDS)


(UNAUDITED)


THREE
  MONTHS ENDED MARCH 31,2001
  2000Operating
  activitiesNet loss
  $(18,713)
  $(7,298)Adjustments to
  reconcile net loss to net cash used in operating activities:Depreciation and amortization
  462
  286Amortization of deferred stock
  compensation
  649
  794Change in assets and liabilitiesOther current assets
  (292)
  (423)Accounts payable
  390
  (1,334)Accrued clinical liabilities
  820
  (171)Accrued employee liabilities
  366
  -Other accrued liabilities
  167
  753Amount payable to contract partner
  -
  (1,677)Net cash used in
  operating activities
  (16,151)
  (9,070)Investing
  activitiesCapital expenditures
  (3,370)
  (1,065)Maturities of short-term investments
  22,130
  2,036Net cash provided by
  investing activities
  18,760
  971Financing
  activitiesProceeds from issuance of common stock
  30
  103,789Proceeds from financing obligations
  1,209
  1,166Payments on financing obligations
  (909)
  (266)Net cash provided by
  financing activities
  330
  104,689Net increase in cash
  and cash equivalents
  2,939
  96,590Cash and cash equivalents
  at beginning of period
  38,983
  18,862Cash and cash
  equivalents at end of period
  $41,922
  $115,452Supplemental
  disclosure of cash flow informationInterest paid
  $308
  $137Supplemental
  disclosure of non-cash informationConversion of preferred stock to common
  stock
  $-
  $79,609Deferred compensation (termination)
  $(183)
  $2,645See accompanying notes.

INTRABIOTICS PHARMACEUTICALS, INC.NOTES TO CONDENSED FINANCIAL
STATEMENTS
(Unaudited)

Note
1. Basis of Presentation

The
accompanying condensed financial statements are unaudited and have been
prepared by the Company in accordance with the rules and regulations of the
Securities and Exchange Commission for interim financial information, and in
accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X.

Certain
information and footnote disclosures normally included in the Companys annual
audited financial statements (as required by generally accepted accounting
principles) have been condensed or omitted. 
The interim financial statements, in the opinion of management, reflect
all adjustments (consisting of normal recurring accruals) necessary for a fair
statement of the Companys financial position as of March 31, 2001 and December
31, 2000, and the results of its operations and cash flows for the three month
periods ended March 31, 2001 and 2000.

The
results of operations of the interim periods are not necessarily indicative of
the results of operations to be expected for the fiscal year.  These interim financial statements should be
read in conjunction with the audited financial statements for the year ended
December 31, 2000, which are contained in the Companys Annual Report on Form
10-K, as amended, and filed with the Securities and Exchange Commission.  The accompanying condensed Balance Sheet as
of December 31, 2000 is derived from such audited financial statements.

Comprehensive loss is primarily
comprised of net loss and net unrealized gains or losses on available-for-sale
securities.  There is no material
difference between the reported net loss and the comprehensive loss for all
periods presented.

In
June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and
Hedging Activities" (SFAS 133), which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as
"derivatives") and for hedging activities. SFAS 133 (as deferred by
SFAS 137) is effective for the Companys year ending December 31, 2001. As the
Company does not currently hold derivatives or engage in hedging transactions,
there was no current impact to the Companys results of operations, financial
position, or cash flows upon the adoption of SFAS 133 in the quarter ended
March 31, 2001.

Note
2. Lease Commitments and Equipment Financing Arrangements

The Company leases its facilities
under operating lease agreements, which expire in July 2004 and April 2011. At
March 31, 2001 and December 31, 2000, the Company has restricted cash of
$1,371,000 in connection with these leases.

In
December 2000, the Company entered into an equipment financing agreement to
finance up to $7.6 million of equipment. 
The interest rate varies according to U.S. Treasury rates.  In December 2000, the Company completed two
draws against this arrangement.  The
first draw was for $3.8 million with a loan term of 36 months and an average
annual interest rate of 9.98%.  The
second draw was for $945,000 with a term of 48 months and an average annual
interest rate of 9.64%.  In March 2001,
the Company completed a third draw for $1.2 million with a loan term of 48
months and an average annual interest rate of 9.64%.  The remaining balance available under this agreement of $1.7
million can be drawn down on or before July 31, 2001.

Note 3. Cash, Cash Equivalents and
Short-term Investments

The
Company invests its excess cash in short-term money market funds and commercial
paper. The following is a summary of the Company's cash, cash equivalents,
restricted cash deposits and investments by major security type at their fair
market value, based on quoted market values:

MARCH 31,
  DECEMBER 31,2001
  2000(IN THOUSANDS)(UNAUDITED)Operating
  cash
  $344
  $723Money
  market
  41,578
  38,260Certificates
  of deposit
  1,371
  1,371Commercial
  paper
  23,601
  45,711$66,894
  $86,065Amounts
  included in cash and cash equivalents and restricted cash deposits
  $43,293
  $40,354Amounts
  included in short-term investments
  23,601
  45,711$66,894
  $86,065The Company classifies all securities as
either cash and cash equivalents or available for sale.

Note
4. Net Loss Per Common Share

Net
loss per share has been computed according to Financial Accounting Standards
Board Statement No. 128, Earnings Per Share (SFAS 128), which requires
disclosure of basic and diluted earnings per share.  Basic and diluted earnings per share is calculated using the
weighted-average number of shares of common stock outstanding during the
period, less shares subject to repurchase. 
Diluted earnings per share include the impact of potentially dilutive
securities.  As the Companys
potentially dilutive securities (convertible preferred stock, stock options,
and warrants) were antidilutive for all periods, they were not included in the
computation of weighted-average shares used in computing diluted net loss per
share.

Pro
forma net loss per share has been computed as described above and also gives
effect to the conversion of convertible preferred shares not included above
that automatically converted into common stock upon completion of the Companys
initial public offering of common stock from the original date of issuance.

The
following is a reconciliation of the numerator and denominator of basic and
diluted net loss per share (in thousands, except per share amounts):

THREE MONTHS ENDED MARCH 31,2001
  2000(UNAUDITED)Basic and
  diluted:Net loss
  $(18,713)
  $(7,298)Weighted-average shares used in computing
  basic and diluted net loss per share
  29,260
  2,785Basic and
  diluted net loss per share
  $(0.64)
  $(2.62)Pro forma
  basic and diluted:Shares used above
  
  2,785Pro forma adjustment to reflect
  weighted-average effect of conversion of preferred stock from the date of
  issuance
  
  18,874Total
  weighted-average shares of common stock outstanding
  
  21,659Pro forma
  basic and diluted net loss per share
  
  $(0.34)Note
5. Agreements

In
April 2001, the Company entered into a 
research collaboration with Cetek Corporation (Cetek).   This research collaboration will allow
IntraBiotics to utilize Cetek's proprietary capillary electrophoresis (CE)
screening technology to identify compounds with antibacterial or antifungal
properties. Cetek will receive an initiation fee and milestone payments for
achievement of various goals under the agreement.

ITEM
2.  MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The
following Managements Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements, which involve risks
and uncertainties.  The Companys actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under RISKS RELATED TO OUR BUSINESS below.  The following discussion should be read in
conjunction with the financial statements and notes included elsewhere herein.  Except as required by law, IntraBiotics
disclaims any obligation to update any of the forward-looking statements
contained in this report to reflect any future events or developments.

OVERVIEW

IntraBiotics
Pharmaceuticals, Inc. develops and intends to commercialize new antibacterial
and antifungal drugs for the prevention or treatment of serious infectious
diseases. We have initiated expanded human clinical trials to test for efficacy
and safety, known as phase III trials, for our two lead product candidates.
These are iseganan HCl oral solution for the treatment of oral mucositis, a
side effect of anti-cancer therapies, and ramoplanin powder for the prevention
of infections due to Vancomycin-Resistant Enterococci, or VRE.  We recently completed the first of two phase
III trials for iseganan for patients undergoing chemotherapy.   This trial met its secondary endpoint of
reducing pain and demonstrated safety but missed its primary endpoint of
reducing ulceration in terms of statistical significance.   However, we believe that this trial underestimates the true
benefit of iseganan because a subcontractor mistakenly randomized certain
patients to receive a mixture of active drug or placebo during their treatment
periods which damaged the statistical power of the trial.   We are enrolling patients in a second phase
III trial of iseganan for patients undergoing radiotherapy as well as a phase
III trial for Ramoplanin Oral.  We previously
obtained data from human clinical trials that test for preliminary safety and
efficacy, known as phase II trials, that indicate each of these products was
well tolerated and support these efficacy trials. We completed a Phase IIa
trial that demonstrated safety and microbiological efficacy for iseganan HCl
oral solution in patients on mechanical ventilators that support further
efficacy trials for the prevention of pneumonia.  We completed additional chemistry and biology research to
optimize the properties of a new antibacterial compound and a new antifungal
compound.  Finally, we entered into
three research collaborations with Diversa Corporation, Cetek, Inc. and Albany
Molecular Research, Inc., to increase our research capabilities for new
antimicrobial drugs.

We
have incurred significant losses since inception and expect to incur
substantial losses for the foreseeable future. 
As of March 31, 2001, the Companys accumulated deficit was
approximately $117.2 million.

RESULTS OF OPERATIONS

Three month periods ended March 31, 2001 and 2000

IntraBiotics
had no product sales or contract revenue for the three-month periods ended
March 31, 2001 and 2000.  The Company
does not anticipate any product revenue in the near future.

Research
and development expenses increased to $15.5 million in the three-month period
ended March 31, 2001 from $5.4 million for the same period in 2000.  The increase was attributable to higher
personnel and payroll expenses, technology access fees, clinical trial
activity, facilities and consulting expenses. 
We are evaluating our research and development spending in response to
the recent Iseganan HCl oral solution (previously referred to as Protegrin
IB-367) chemotherapy phase III clinical trial result announced in April 2001.
These results indicated that the product candidate did not meet its primary endpoint
of reducing ulceration, but did meet its secondary endpoint of reducing pain
and was well tolerated.

General
and administrative expenses increased to $4.1 million in the three-month period
ended March 31, 2001 from $2.1 million for the same period in 2000.  The increase was primarily attributed to
increased personnel and payroll expenses, consulting, legal, professional,
travel and other expenses associated with increased business development
activities.  We are evaluating our
general and administrative spending  in
response to the recent Iseganan HCl oral solution chemotherapy phase III
clinical trial result announced in April 2001. These results indicated that the
product candidate did not meet its primary endpoint of reducing ulceration, but
did meet its secondary endpoint of reducing pain and was well tolerated.

In
connection with the grant of certain stock options to employees, the Company
recorded deferred compensation of $2.6 million in the three-month period ended
March 31, 2000 and none in the three month period ended March 31, 2001.   In the three month period ended March 31,
2001, there was a reduction in deferred compensation of $183,000 due to
employee terminations.  Deferred
compensation represents the difference between the deemed fair value of the
common stock for financial reporting purposes and the exercise price of these
options at the date of grant.  Deferred
compensation is presented as a reduction of stockholders equity and is
amortized over the vesting period of the applicable options.

We
expensed $649,000 of deferred compensation during the three-month period ended
March 31, 2001, compared to $794,000 of deferred compensation for the same
period in 2000.  The decrease in
deferred compensation expense was due to the cancellation of options for
terminated employees.  These amounts
were expensed to research and development and to general and administrative
expense based on the deferred compensation liability attributed to each
department.  The research and
development deferred compensation amortization expense in the three-month
periods ended March 31, 2001 was $376,000, down from $460,000 for the same
period in 2000.  The general and
administrative deferred compensation amortization expense in the three-month
period ended March 31, 2001 was $273,000, down from $334,000 for the same
period in 2000.   We expect that
deferred compensation expense will decrease due to employee terminations.

Interest
income increased to $1.2 million in the three-month period ended March 31, 2001
from $414,000 for the same period in 2000. 
The increase in interest income resulted from the increase in average
cash and investment balances primarily due to the Companys prior financing
activities.  Interest expense increased
to $308,000 for the three-month period ended March 31, 2001, from $137,000 for
the same period in 2000.  The increase
was primarily attributed to additional equipment financing obligations.

LIQUIDITY AND CAPITAL RESOURCES

At
March 31, 2001, we had cash, cash equivalents and short-term investments of
$66.9 million including restricted cash deposits of approximately $1.4 million
in connection with standby letters of credit for leased facilities and
short-term investments of $23.6 million. 
The Company regularly invests excess funds in short-term money market
funds and commercial paper.

Net
cash used in operating activities for the three-month periods ended March 31,
2001 and 2000 was $16.2 million and $9.1 million, respectively.  Cash used in operating activities in the
three-month period ended March 31, 2001 was primarily the result of net losses
and increased prepaid expenses primarily for clinical trials, offset by
increases in accounts payable, accrued clinical liabilities, accrued employee
liabilities, asset depreciation and amortization and deferred stock
compensation amortization. Cash used in operating activities in the three-month
period ended March 31, 2000 was primarily the result of net losses, increased
prepaid expenses primarily for clinical trials and decreases in accounts payable,
accrued clinical liabilities and amounts payable to contract partner, offset by
increases in accrued liabilities, asset depreciation and amortization and
deferred stock compensation amortization.

Net
cash provided by investing activities for the three-month periods ended March
31, 2001 and 2000 was $18.8 million and $1.0 million, respectively.  Cash provided by investing activities in the
three-month period ended March 31, 2001 was due to the maturities of short-term
investments of $22.1 million partially offset by capital expenditures of $3.4
million.  During the three months ended
March 31, 2000, the Company used cash to purchase equipment of $1.1 million.

Net
cash provided by financing activities for the three-month periods ended March
31, 2001 and 2000 was $330,000 and $104.7 million, respectively. Cash provided
by financing activities for the three-month period ended March 31, 2001 was
from $1.2 million in additional financing obligations and $30,000 from the
issuance of common stock, partially offset by $909,000 in payments on financing
obligations. Cash provided by financing activities for the three-month period
ended March 31, 2000, was due to net proceeds from the issuance of common
stock, of $103.8 million from the initial public offering, and net proceeds of
$900,000 from financing obligations.

We
expect to continue to incur substantial operating losses.  We believe that existing capital resources
and interest income will be sufficient to fund our operations for at least the
next 12 months.

Our
future capital requirements will depend on many factors, including:

 the timing, cost,
extent and results of clinical trials;

 payments to third
parties for manufacturing scale up;

 the costs and
timing of regulatory approvals;

 the costs of
acquiring technologies or assets that compliment our business;

 the costs of
establishing sales, marketing and distribution capabilities;

 the progress of our
research and development activities;

 availability of
technology in-licensing opportunities; and

 future
opportunities for raising capital.

Until we can generate sufficient
cash from our operations, which we do not anticipate in the foreseeable future,
we will need to finance future cash needs through private and public
financings, including equity financings. We cannot be certain that additional
funding will be available when needed or on favorable terms. If funding is not
available, we may need to delay or curtail our development and
commercialization activities to a significant extent.

RISKS RELATED TO OUR BUSINESS

Our business
faces significant risks and the risks described below may not be the only risks
we face.  Additional
risks that we do not know of or that we currently believe are immaterial may
also impair our business operations.  If
any of the events or circumstances described in the following risks actually
occurs, our business, financial condition, or results of operations could be
materially adversely affected and the trading price of our common stock could
decline.

We will have to re-evaluate our
Research and Development and General and Administrative expenses due to the
recent Iseganan HCl oral solution (previously referred to as Protegrin IB-367)
Phase III chemotherapy trial result.

In
April 2001, we announced preliminary results from our first completed phase III
clinical trial of Protegrin IB-367 Rinse for the prevention of oral mucositis
in patients undergoing high-dose chemotherapy for the treatment of cancer.  These results indicated that the product
candidate did not meet its primary endpoint of reducing ulceration, but did
meet its secondary endpoint of reducing pain and was well tolerated.

We expect to continue to incur future
operating losses and may never achieve profitability.

We have never generated revenue from
product sales and have incurred significant net losses in each year since
inception. We incurred net losses of 
$23.1 million in 1999, $45.6 million in 2000 and $18.7 million in the
quarter ended March 31, 2001.  Our
accumulated deficit was approximately $117.2 million, as of March 31,
2001.  We expect to continue to incur
substantial additional losses for the foreseeable future primarily as a result
of our clinical trial expense costs, and we may never become profitable. In
addition, we will continue to have expenses in pre-clinical research to
identify new product candidates and manufacturing and development costs to
commercialize ramoplanin and iseganan HCl oral solution, formerly referred to
as Protegrin IB-367 Rinse. To date, we have financed our operations primarily
through the private sale of equity securities, funds received from a terminated
collaboration agreement, the proceeds of equipment financing arrangements and
our initial public offering of common stock in March 2000. We will receive product
revenues only if we complete clinical trials with respect to one or more
products, receive regulatory approvals and successfully commercialize such
products.

We may be forced to raise capital sooner than currently
anticipated and if we fail to obtain the capital necessary to fund our
operations, we will be unable to develop our drug candidates and may have to
cease operations.

We believe that our current cash,
cash equivalents and restricted cash deposits of approximately $43.3 million,
short-term investments of approximately $23.6 million and interest income are
sufficient to meet our operating and capital requirements for at least the next
12 months. However, we have based this estimate on assumptions that may prove
to be wrong. For the quarter ended March 31, 2001 and the years ended December
31, 2000, 1999 and 1998, net cash used for operating activities was $16.2
million, $50.4 million,  $25.1 million
and $9.3 million, respectively.  Our
future liquidity and capital requirements will depend on many factors,
including the timing, cost, extent and results of clinical trials, payments
associated with manufacturing scale-up, the costs and timing of regulatory
approvals, costs associated with researching drug candidates, securing
in-licensing opportunities and conducting pre-clinical research.

Any additional equity financing may
be dilutive to stockholders, and debt financing, if available, may involve
restrictive covenants. Collaborative arrangements may require us to relinquish
our rights to certain of our technologies, drug candidates or marketing
territories. We believe that additional financing may be required in the future
to fund our operations. We do not know whether additional financing will be
available when needed or on acceptable terms, if at all. If we are unable to
raise additional financing whennecessary, we may have to delay some or all of our product development
efforts or be forced to cease operations.

We depend on the outcome of our clinical trials and if they
are unsuccessful, we may not be able to commercialize our products and generate
product revenue.

Before
obtaining regulatory approvals for the commercial sale of any products, we must
demonstrate through preclinical research and clinical trials that our drug
candidates are safe and effective for use in humans. We currently have two drug
candidates in phase III clinical trials, iseganan
HCl oral solution and ramoplanin oral powder. 
If either drug candidate fails to establish safety and efficacy in phase
III clinical trials, we would be unable to obtain regulatory approval from the
FDA or to commercialize the drug candidate, and we will be unable to generate
product revenue from that candidate. Clinical trials are expensive and
time-consuming to conduct, and the outcome of these trials is uncertain. A
number of new drugs have shown promising results in clinical trials, but
subsequently failed to establish sufficient safety and efficacy data to obtain
necessary regulatory approvals. A number of companies have suffered significant
setbacks in advanced clinical trials, even after promising results in earlier
trials.

In addition, if we have delays in
clinical trials or the FDA approval process or if we need to perform more or
larger clinical trials, our product development costs will increase and our
ability to generate product revenue will be delayed.

Our commencement and completion of
clinical trials may be delayed by many factors, including:

 slower than
expected rate of patient recruitment;

 inability to
adequately obtain data about patients after their treatment;

 additional
regulatory requests;

 inability to
manufacture sufficient quantities of materials used for clinical trials; or

 unforeseen safety
issues.

For
example, in March 2001, the steering committee for the clinical trial
determined that the rate of enrollment in the phase III clinical program for
ramoplanin oral powder has not been sufficiently accelerated and that
completion of the study would be delayed a year or more. If the delays are
substantial, the increase in product development expenses could cause our
losses to increase and diminish the commercial potential for our drug products.

If our collaborative partners assisting in our clinical
trials fail to appropriately manage our clinical trials, the trials could be
delayed or could fail.

We have limited experience in
conducting and managing clinical trials. We rely on several contract research
organizations, including PharmaNet, Inc. and Amarex Clinical Research, to
assist us in managing and monitoring our clinical trials. The FDA may inspect
some of our clinical investigational sites, our collaborative partners records
and our facility and files to determine if the clinical trials were conducted
according to good clinical practices. If the FDA determines that the trials
were not in compliance, we may be required to repeat the clinical trials. If
our contract research organizations fail to perform under our agreements with
them, we may face delays in completing our clinical trials or failure of our
clinical program.

If our single-source third party manufacturers fail to
produce clinical or commercial quantities of our drug candidates, we may not
have sufficient quantities of our drug candidates to meet demand.

We rely on PolyPeptide and
Biosearch to manufacture our bulk drug substances on a commercial scale. While
we maintain a limited inventory of our drug candidates, we depend on these
single-source contract manufacturers to produce each of our products for use in
our clinical trials. Our contract manufacturers have limited experience in
manufacturing iseganan HCl or ramoplanin in quantities sufficient for
commercialization and may have difficulty in scaling up production. If our
contract manufacturers are unable or fail to produce the required quantities of
our drug candidates for clinical use or commercial sale on a timely basis, at
commercially reasonable prices and with sufficient purity, we will not have
sufficient quantities of our drug candidates to complete current and future
clinical trials, or to meet commercial demand. In addition, we intend to
contract with third parties for the manufacture of the final formulation. We
cannot guarantee that we will be able to contract with a reliable manufacturer
on commercially reasonable terms.

Our third-party manufacturers and
we are required to register manufacturing facilities with the FDA and foreign
regulatory authorities. If these facilities become unavailable for any reason
or if our contract manufacturers fail to comply with the FDAs current good manufacturing
practices or if our contract manufacturers terminate their agreements with us,
we would have to find an alternative source for manufacturing our drug
candidates. There are, on a worldwide basis, a limited number of contract
facilities in which our drug candidates can be produced according to current
good manufacturing practice regulations. In addition, the manufacturing
processes for iseganan HCl and ramoplanin are extremely complex and
proprietary. If we are unable to continue having iseganan HCl or ramoplanin
manufactured by our current contract manufacturers, we do not know if we could
engage another contract manufacturer when needed or on acceptable terms, if at
all.

If we fail to obtain FDA approvals for our products, we will
be unable to commercialize our drug candidates.

We do not have a drug candidate
approved for sale in the United States or any foreign market. We must obtain
approval from the FDA in order to sell our drug candidates in the United States
and from foreign regulatory authorities in order to sell our drug candidates in
other countries. We must successfully complete our phase III clinical trials
and demonstrate manufacturing capability before we can file with the FDA for
approval to sell our products. The FDA could require us to repeat clinical
trials as part of the regulatory review process. Delays in obtaining or failure
to obtain regulatory approvals may:

 delay or prevent the successful
commercialization of any of our drug candidates;

 diminish our competitive advantage; and

 defer or decrease our receipt of
revenues or royalties.

The regulatory review and approval
process is lengthy, expensive and uncertain. Extensive preclinical and clinical
data and supporting information must be submitted to the FDA for each indication
to establish safety and effectiveness in order to secure FDA approval. We have
limited experience in obtaining such approvals, and cannot be certain when, if
ever, we will receive these regulatory approvals.

In addition to initial regulatory
approval, our drug candidates will be subject to extensive and rigorous ongoing
domestic and foreign government regulation. 
Any approvals, once obtained, may be withdrawn if compliance with
regulatory requirements is not maintained or safety problems are identified.
Failure to comply with these requirements may subject us to stringent
penalties.

Development and commercialization of competitive products
could reduce or prevent sales of our products and reduce revenue.

We may be unable to compete
successfully if other companies develop and commercialize competitive products
that are less expensive, more effective, have fewer side effects or are easier
to administer than our drug candidates. If we are unable to compete
successfully with our drug candidates, physicians may not recommend and
patients may not buy our drugs, which would cause our product revenue to
decline.

There are several drugs
commercially available or under development that might compete with ramoplanin
oral powder and iseganan HCl oral solution. To the best of our knowledge, there
are no direct competitors approved or under development for the prevention of
VRE bloodstream infections. However, there are two approved products for the
treatment of VRE infections, SynercidÒand ZyvoxÒ.  For oral mucositis,
there is one approved device, RadiacareÒ, and several drugs in early stage clinical trials.
These include two growth factors, keratinocyte growth factor and
interleukin-11, as well as a chemoprotective agent, EthyolÒ. The companies sponsoring these trials have
successfully commercialized products in the past. In addition, there may be
products under development of which we are unaware for the prevention of VRE
bloodstream infections or the treatment of oral mucositis.

Many
of our competitors and related private and public research and academic
institutions have substantially greater experience, financial resources and
larger research and development staffs than we do. In addition, many of these
competitors, either alone or together with their collaborative partners, have
significantly greater experience than we do in developing drugs, obtaining
regulatory approvals and manufacturing and marketing products. We also compete
with these organizations and other companies for in-licensing opportunities for
future drug candidates, and for attracting scientific and management personnel.

If we are unable to adequately protect our intellectual
property, we may be unable to sell our products or to compete effectively.

We rely on a combination of
patents, trade secrets and contractual provisions to protect our intellectual
property. If we fail to adequately protect our intellectual property, other
companies or individuals may prevent us from selling our products or may
develop competing products based on our technology. Our success depends in part
on our ability to:

 obtain patents;

 protect trade secrets;

 operate without infringing upon
the proprietary rights of others; and

 prevent others from infringing on
our proprietary rights.

We will be able to protect our
proprietary rights from unauthorized use by third parties only to the extent
that our proprietary rights are covered by valid and enforceable patents or are
effectively maintained as trade secrets.

We try to protect our proprietary
position by filing U.S. and foreign patent applications related to our
proprietary technology, inventions and improvements that are important to the
development of our business. For example, we own or have rights to eight
patents and eleven pending patent applications in the U.S. However, the patent
position of biopharmaceutical companies involves complex legal and factual
questions. We cannot predict the enforceability or scope of any issued patents
or those that may issue in the future. Patents, if issued, may be challenged,
invalidated or circumvented. Consequently, if any patents that we own or
license from third parties do not provide sufficient protection, our
competitive position would be weakened. Furthermore, others may independently
develop similar technologies or duplicate any technology that we have
developed.  In addition, we may not be
issued patents for our pending patent applications, those we may file in the
future, or those we may license from third parties.

In addition to patents, we rely on
trade secrets and proprietary know-how. 
Our contract manufacturers perform the manufacturing processes covered
by these trade secrets. Accordingly, our contract manufacturers and we must
maintain confidentiality. We have confidentiality and proprietary information agreements
with our contract manufacturers and with our employees. These agreements may
not provide meaningful protection or adequate remedies for our technology in
the event of unauthorized use or disclosure of confidential and proprietary
information.

We may be subject to intellectual property litigation that
could be costly and time-consuming.

The biotechnology and
pharmaceutical industries have been characterized by extensive litigation
regarding patents and other intellectual property rights.  Although we are not currently a party to any
lawsuits, third parties may assert infringement or other intellectual property
claims against us. We may have to pay substantial damages, including treble
damages, for past infringement if it is ultimately determined that our products
infringe a third partys proprietary rights. The defense and prosecution of
intellectual property suits, U.S. Patent and Trademark Office interference
proceedings and related legal and administrative proceedings in the United
States and internationally are costly and time-consuming to pursue and their
outcome is uncertain. If we become involved in any of these proceedings, we
will incur substantial expense and the efforts of our technical and management
personnel will be significantly diverted. An adverse determination may result
in the invalidation of our patents, subject us to significant liabilities or
require us to seek licenses that may not be available from third parties on
satisfactory terms, or at all. Our stock price could decline based on any
public announcements related to litigation or interference proceedings
initiated or threatened against us.

If physicians and patients do not accept our products, we may
be unable to generate significant revenue, if any.

Our drug candidates may not gain
market acceptance among physicians, patients and the medical community. If any
of our drug candidates fail to achieve market acceptance, we may be unable to
successfully market and sell the product, which would limit our ability to
generate revenue. The degree of market acceptance of any drug candidate depends
on a number of factors, including:

 demonstration of clinical
efficacy and safety;

 cost-effectiveness;

 convenience and ease of
administration;

 potential advantage over
alternative treatment methods; and

 marketing and distribution
support.

Currently, we have two drug candidates in phase III
clinical trials and do not have any drug candidate approved by the FDA.
Physicians will not recommend our products until such time as clinical data or
other factors demonstrate the safety and efficacy of our drugs as compared to
other treatments. In practice, competitors may be more effective in marketing
their drugs. Even if the clinical safety and efficacy of our antibiotic
products is established, physicians may elect not to recommend products. For
example, physicians may be reluctant to prescribe widespread use of our
products because of concern about developing bacterial strains that are
resistant to our drugs.

If we are unable to establish sales, marketing and
distribution capabilities or enter into agreements with third parties to
perform these services, we will be unable to commercialize our drug products.

We do not currently have marketing,
sales or distribution capabilities. Initially we intend to establish a direct
marketing and sales force in the United States and Canada. If we fail to
establish successful marketing and sales capabilities or fail to enter into
successful marketing arrangements with third parties, we would be unable to
commercialize these drug products. We must develop a marketing and sales force
with technical expertise and distribution capabilities to market any of our
products directly.  We intend to enter
into arrangements with third parties to market and sell most of our products
outside of the United States and Canada. To the extent that we enter into
marketing and sales arrangements with other companies, our revenues will be
lower than if we marketed the products directly.

The failure to recruit and retain key personnel may delay our
ability to complete, develop and commercialize iseganan HCl oral solution,
ramoplanin oral powder and our earlier stage products.

We are highly dependent on our
management and technical staff. Competition for personnel is intense. If we
lose the services of any of our senior management, we may be delayed in our
product development and commercialization efforts. We do not maintain key
person life insurance and do not have employment agreements with our management
and technical staff. In order to pursue product development, marketing and
commercialization plans, we will need to hire additional qualified scientific
personnel to perform research and development. 
We will also need to hire personnel with expertise in clinical testing,
government regulation, manufacturing, marketing and finance. We may not be able
to attract and retain personnel on acceptable terms given the competition for
such personnel among biotechnology, pharmaceutical and other companies.

In addition, we rely on consultants
to assist us in formulating our research and clinical development strategy. All
of our consultants are employed by other entities. They may have commitments
to, or relationships with, other entities that may limit their availability to
us. The loss of the services of these personnel may delay our research and
development efforts.

Directors, executive officers, principal stockholders and
affiliated entities own a significant portion of our capital stock and will
have substantial control over our activities.

Our directors, executive officers,
principal stockholders and affiliated entities beneficially own, in the
aggregate, approximately 51% of our outstanding common stock. These
stockholders, if 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.

Antitakeover provisions in our charter documents and under
Delaware law may make an acquisition of us more difficult.

Provisions of our certificate of
incorporation and bylaws could make it more difficult for a third party to
acquire us, even if doing so would be beneficial to our stockholders.

These provisions:

 provide for a classified board of
directors of which approximately one third of the directors will be elected
each year;

 allow the authorized number of
directors to be changed only by resolution of the board of  directors;

 require that stockholder actions
must be effected at a duly called stockholder meeting and prohibit stockholder
action by written consent;

 establish advance notice
requirements for nominations to the board of directors or for proposals that
can be acted on at stockholder meetings; and

 limit who may call stockholder
meetings.

In addition, because we are
incorporated in Delaware, we are governed by the provisions of Section 203 of
the Delaware General Corporation Law, which may prohibit large stockholders
from consummating a merger with, or acquisition of us. These provisions may
prevent a merger or acquisition that would be attractive to stockholders and
could limit the price that investors would be willing to pay in the future for
our common stock.

Our stock price may be volatile, and the value of your investment
may decline.

The market prices for securities of
biotechnology companies in general have been highly volatile and our stock may
be subject to volatility. The following factors, in addition to the 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 commercial products by our competitors or us;

 developments concerning
proprietary rights;

 publicity regarding actual or perceived adverse
events in our clinical trials or relating to products under development by our
competitors;

 regulatory developments in the
United States or foreign countries;

 litigation;

 significant short selling in our
common stock;

 economic and other external
factors; and

 period-to-period fluctuations in
our financial results and changes in analysts recommendations.

ITEM
3.  QUANTITATIVE AND QUALITATIVE
DISCLOSURE REGARDING MARKET RISK

The
primary objective of our investment activities is to preserve our capital until
it is required to fund operations at the same time maximizing the income we
receive from our investments without significantly increasing risk.  We own financial instruments that are
sensitive to market risks as part of our investment portfolio.  To minimize this risk, we maintain a
portfolio of cash equivalents and short-term investments in a variety of
securities, including money market funds and commercial paper.  The average maturity of all our investments
in the first quarter of 2001 was less than one year.  Due to the short-term nature of these investments, a 50 basis
point movement in market interest rates would not have a material impact on the
fair value of our portfolio as of March 31, 2001 and December 31, 2000 and
1999. We have no investments denominated in foreign country currencies and
therefore our investments are not subject to foreign currency exchange risk.

PART II OTHER
INFORMATION

ITEM
6. EXHIBITS AND REPORTS ON FORM 8-K

(a)         List of Exhibits

NumberExhibit Description
10.21                          Diversa
Corporation Agreement
10.22                          New
Chemical Entities, Inc. Agreement(b)        Reports on Form 8-K

The Company did not file a report
on Form 8-K during the quarter ended March 31, 2001.Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

IntraBiotics
  Pharmaceuticals, Inc.May
  10, 2001
  Kenneth
  J. KelleyChairman
  of the Board,President
  and Chief Executive OfficerMay
  10, 2001
  Sandra
  J. WrobelChief
  Financial Officer