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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31,
    2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number
    001-33054
 Trubion Pharmaceuticals,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  DELAWARE(State or other jurisdiction
    of
    incorporation or organization)

52-2385898(IRS Employer
    Identification No.)2401 FOURTH AVENUE, SUITE 1050
    SEATTLE, WASHINGTON(Address of
    registrants principal executive offices)

98121(Zip
    Code)   (206) 838-0500
    (Telephone number, including area code)
      Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCOMMON STOCK, $0.001 PAR VALUE

NASDAQ GLOBAL MARKET   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





TRUBION
    PHARMACEUTICALS, INC.
  2009
    Form 10-K
    Annual Report
  Table of
    Contents
   
 PageNo.PART IItem 1


Business


2Item 1A


Risk Factors


21Item 1B


Unresolved Staff Comments


37Item 2


Properties


37Item 3


Legal Proceedings


37Item 4


Submission of Matters to a Vote of Security
    Holders


37PART IIItem 5


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


38Item 6


Selected Financial Data


40Item 7


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


41Item 7A


Quantitative and Qualitative Disclosures About
    Market Risk


53Item 8


Financial Statements and Supplementary Data


53Item 9


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


53Item 9A


Controls and Procedures


53Item 9B


Other Information


56PART IIIItem 10


Directors, Executive Officers and Corporate
    Governance


56Item 11


Executive Compensation


56Item 12


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


56Item 13


Certain Relationships and Related Transactions,
    and Director Independence


56Item 14


Principal Accountant Fees and Services


56PART IVItem 15


Exhibits and Financial Statement Schedules


57Signatures


60EX-10.30EX-23.1EX-31.1EX-31.2EX-32




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PART I  Forward-Looking
    Statements
  Form 10-K Form 10-Q Form 8-K.
  ITEM 1.
    BUSINESS  Overview
  first-in-class best-in-class tm tm tm
       2




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##### Table of Contents



and/or
      
    TRU-015 for the Treatment of Rheumatoid
    Arthritis.  According to Datamonitor, RA is
    estimated to affect approximately 5.2 million people in the
    United States, Japan, and the five major European markets. In
    2009, total reported worldwide therapeutic sales for the
    treatment of RA were over $10 billion. Unfortunately, a
    significant segment of the RA population are refractory to
    current biological disease modifying anti-rheumatic drugs, or
    DMARDs, and clinical benefit (as measured by America College of
    Rheumatology, or ACR, 50 score) is estimated at less than 50% at
    six months post therapy.    
    SBI-087 for the Treatment of Rheumatoid
    Arthritis.  In collaboration with us, our partner
    Pfizer has commenced two clinical studies of SBI-087 for the
    treatment of RA. The first is a Phase 2 randomized,
    placebo-controlled, double-blind, parallel-group, outpatient
    dose regimen-finding study in which patient dosing commenced in
    December 2009, with interim data review anticipated to occur
    late 2010 or early 2011 and final data is anticipated at the end
    of 2011. The second is a Phase 1 dose escalation clinical trial
    designed to evaluate the safety, tolerability, pharmacokinetics,
    or PK, and pharmacodynamics, or PD, of a single dose of SBI-087
    in patients with RA, in which patient enrollment is complete. In
    addition, patient recruitment is also under way in an additional
    Phase 1 study of SBI-087 for RA in Japan.
    SBI-087 for the Treatment of Systemic Lupus
    Erythematosus.  According to Datamonitor, SLE is
    estimated to affect approximately 434,000 people in the
    United States, Japan, and the five major European markets. The
    prevalence of SLE varies significantly on a
    country-by-country
    basis and could be up to five times greater with expanding
    disease definitions and increasing diagnosis. No new
    pharmaceutical or biologic treatments have been approved for SLE
    in over 40 years. Our partner Pfizer is conducting a Phase
    1 clinical trial of SBI-087 in SLE in which patient dosing has
    commenced and recruitment is ongoing. Currently, no protein
    therapeutics have been approved specifically for the treatment
    of SLE.
    TRU-016 for the Treatment of B-cell
    Malignancies.  According to the National Cancer
    Institute, CLL is estimated to affect approximately
    70,000 people in the United States. Approximately 12,000
    new cases of CLL are diagnosed each year according to
    Datamonitor. In addition, NHL, another B-cell malignancy, is one
    of the most common types of cancer accounting for approximately
    4% of all cancers. About 66,000 people are expected to be
    diagnosed with NHL in 2009 according to the American Cancer
    society. Total reported worldwide sales of one of the most
    commonly used biologics 3




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in NHL,
    Rituxan®,

    surpassed $3 billion in 2009. Our TRU-016 product candidate
    targets CD37 for the treatment of B-cell malignancies such as
    CLL and NHL. TRU-016 uses a different mechanism of action than
    CD20-directed therapies. As a result, we believe its novel
    design may provide patients with improved therapeutic options
    and enhance efficacy when used alone or in combination with
    chemotherapy
    and/or other
    CD20-directed therapeutics. We are currently conducting a Phase
    1 clinical trial of TRU-016 in CLL and have filed an amendment
    to include treatment of patients with NHL.      product-by-product country-by-country
  Product
    Technologies
  tm tm tm first-in-class best-in-class
  SMIPtmProtein Therapeutics vs. mAbs
      
    Engineered Structural Characteristics:  When
    engaging cell surface targets, SMIP proteins are capable of
    bringing together cell surface molecules in ways not always
    possible with mAbs. The binding 4




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domains of SMIP product candidates have a different geometry
    than the binding domains of mAbs  that is, the
    binding domains are closer together. The structural format of
    SMIP proteins permits engineering a range of distances between
    the binding domains. SMIP proteins are also capable of binding
    and neutralizing soluble molecules.  
    Differentiated Product Candidates:  SMIP
    product candidates can be engineered to deliver desired cellular
    signaling responses. These properties can be used to generate
    biological responses not observed with mAbs. In addition, SMIP
    proteins can be engineered to balance target signal induction,
    complement-dependent cytotoxicity, or CDC and antibody-dependent
    cellular cytotoxicity, or ADCC, mediated activity. The ability
    to customize this balance of biological activities could result
    in safer and more effective immunopharmaceuticals.  
  
    Improved Biodistribution:  SMIP product
    candidates have a particle size that is approximately one-half
    the size of mAbs. Smaller molecules have been demonstrated to
    penetrate tissues more readily, a feature we believe will
    provide increased therapeutic benefits.
    Reliable Manufacturing:  SMIP product
    candidates can be produced at large scale in mammalian cell
    expression systems from readily available materials.
    Broad Therapeutic Application:  SMIP product
    candidates have potential application in diabetes, solid organ
    transplant, oncology, and other high unmet need areas.  SCORPIONtmMultispecific Protein Therapeutics
  tm
  
 5




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
    Dual Targeting:  Scorpion constructs enable
    simultaneous multi-valent engagement of two or more different
    soluble or cell-surface targets, providing the capability for
    differentiated signaling events.
    Desirable Pharmacodynamic Properties:  Scorpion
    constructs retain immunoglobulin effector functions such as long
    in vivohalf-life and Fc-dependent cellular cytotoxicity
    (FcDCC) activity, if desired.
    Development of Multiple Product
    Candidates:  Scorpion technology provides for a
    multitude of product candidates by utilizing binding domains in
    a variety of target combinations .
    Reliable Manufacturing:  Scorpion constructs
    can be produced as stable, homogeneous products with a standard
    manufacturing profile.
    Broad Therapeutic Application:  Scorpion
    therapeutics have applications in autoimmune and inflammatory
    diseases, or AIID, transplant, oncology, and other high unmet
    need areas.  TRU-ADhanCetmTechnology: Greater ADCC Potency
  tm
  
    TRU-ADhanCe requires no change to the amino acid sequence of a
    product;
    TRU-ADhanCe requires no change to a manufacturing cell
    line; and
    TRU-ADhanCe can be applied late in product development.    Our
    Product Candidates
   6




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TRU-015
    Rheumatoid
    Arthritis
  Background.
  Potential Market.
  Current Treatments.
 7




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® ® ® ® ® ® ® ®
  TRU-015 for RA Clinical Trial Results.
      
  American College of Rhuematology (ACR) Criteria for
    Improvement
  FDA Approved CD20-Directed Therapies in
    RA. ®
 8




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TRU-015 for RA Ongoing Clinical
    Development.
  SBI-087
    Rheumatoid
    Arthritis
  Background.
  SBI-087 for RA Ongoing Clinical
    Development.
  Systemic
    Lupus Erythematosus
  Background.
 9




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Potential Market. country-by-country
  Current Treatment. and/or
  SBI-087 for SLE Ongoing Clinical
    Development.
  Commercialization
    Rights
    TRU-016
  and/or
  B-cell
    Malignancies: Chronic Lymphocytic Leukemia and
    Non-Hodgkins Lymphoma
  Background.
  tm ®
 10




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Potential Market. ®
  Current Treatments. ® ® ® ® ® ®
  TRU-016 for CLL Ongoing Clinical
    Development.
  TRU-016 for CLL Clinical Trial Results.
  TRU-016
    Phase 1 Clinical Results: Dose Response in Evaluable
    Patients  Reduction in Peripheral
    Lymphocytes
  Normalized

Median

BestDose Cohort

N

Lymph Count

Reduction

Response1 mg/kg

3

0/3 (0%)

67%

03 mg/kg

4

0/4 (0%)

78%

06 mg/kg

4

1/4 (25%)

85%

1 PR10 mg/kg

5

4/5 (80%)

95%

2 PR3 mg/kg TIW

4

1/4 (25%)

49%

1 PR6 mg/kg TIW

4

1/1 (100%)

77%

1 PR   Strategic
    Collaborations
  Facet
     11




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sixty-day
    product-by-product
          Pfizer
  product-by-product country-by-country
 12




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agreed-upon
          Competition
   13




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
    design and develop products that are superior to other products
    in the market;
    successfully collaborate with others in the design, development
    and commercialization of new products;
    attract and retain qualified scientific, medical, product
    development, commercial and sales and marketing personnel;
    obtain patent
    and/or other
    proprietary protection for our processes, product candidates and
    technologies;
    operate without infringing the patents and proprietary rights of
    third parties; and
    obtain required regulatory approvals.    tm and/or
  Product Candidates for Autoimmune and Inflammatory
    Diseases. ® ® ® ® ® ® ® ®
    Product Candidates for B-cell Malignancies. ® ® ® ® ®
  Intellectual
    Property
     14




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tm tm tm
       15




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and/or
    No. EP-B-1176981,
   16




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Manufacturing
        Government
    Regulation
    United
    States Government Regulation
   17




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BLA
    and NDA Approval Process
      
    completion of laboratory tests and animal studies under the
    FDAs good laboratory practices regulations;
    submission to the FDA of an IND for human clinical testing,
    which must become effective before human clinical trials may
    begin;
    performance of adequate and well-controlled clinical trials to
    establish the safety and efficacy of the product for each
    indication;
    submission to the FDA of a BLA or NDA, which includes the
    results of all required preclinical animal studies, laboratory
    tests, clinical trials, and data relating to the products
    pharmacology, chemistry, manufacture, and control;
    satisfactory completion of an FDA inspection of the
    manufacturing facility or facilities at which the product is
    produced to assess compliance with cGMP; and
    FDA review and approval of the BLA or NDA.       18




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
    evaluate dosage tolerance and appropriate dosage;
    identify possible adverse effects and safety risks; and
    evaluate preliminarily the efficacy of the drug for specific
    indications.          Priority
    Review
     19




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Post-Approval
    Requirements
        Foreign
    Regulation
      Reimbursement
       20




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Employees
    Available
    Information
  www.trubion.com.
    Item 1A.
    RISK
    FACTORS  Form 10-K Form 10-Q Form 8-K.
  Risks
    Related to Our Business
  Our
    success depends on the success of our clinical product
    candidates, TRU-015, TRU-016, and SBI-087, and we cannot be
    certain that they will be safe or effective, complete clinical
    trials, receive regulatory approval or be successfully
    commercialized.
   21




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1 2
    If we
    fail to obtain the capital necessary to fund our operations, we
    may be unable to develop our product candidates and we could be
    forced to share our rights to these product candidates with
    third parties on terms that may not be favorable to
    us.
    We
    have incurred operating losses in each year since our inception
    and expect to continue to incur substantial and increasing
    losses for the foreseeable future.
   22




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We
    depend on our collaborative relationship with Pfizer to develop,
    manufacture, and commercialize TRU-015, SBI-087, and other
    selected product candidates.
  target-by-target
     23




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We
    depend on our collaborative relationship with Facet to develop,
    manufacture, and commercialize TRU-016 and other CD37-directed
    protein therapeutics.
              We
    currently rely on third-party manufacturers to supply our
    product candidates for clinical trials and will rely on
    third-party manufacturers to manufacture our product candidates
    in commercial quantities, which could delay, prevent or increase
    the costs associated with the clinical development and future
    commercialization of our product candidates.
   24




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scale-up
    Our
    success depends on the proper management of our current and
    future business operations, and the expenses associated with
    them.
      We
    rely on highly skilled personnel, and if we are unable to retain
    or motivate key personnel or hire qualified personnel, we may
    not be able to maintain our operations.
   25




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We
    cannot assure you any of our product candidates will be safe or
    effective, or receive regulatory approval.
   26




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Any
    failure or delay in commencing or completing clinical trials for
    product candidates could severely harm our
    business.
    
    having the capital resources available to fund additional
    clinical trials;
    our or our collaborators ability to obtain regulatory
    approval to commence a clinical trial;
    our or our collaborators ability to manufacture or obtain
    from third parties materials sufficient for use in preclinical
    studies and clinical trials;
    delays in patient enrollment and variability in the number and
    types of patients available for clinical trials;
    poor effectiveness of product candidates during clinical trials;
    unforeseen safety issues or side effects;
    governmental or regulatory delays related to clinical trials,
    including trial design, results, and materials supply;
    changes in regulatory requirements, policy, and
    guidelines; and
    varying interpretation of data by us, any or all of our
    collaborators, the FDA, and similar foreign regulatory agencies.    We
    rely on third parties to conduct our clinical trials. If these
    third parties do not perform as contractually required or
    otherwise expected, we may not be able to obtain regulatory
    approval for or commercialize our product
    candidates.
   27




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If we
    enter into additional strategic partnerships we may be required
    to relinquish important rights to and control over the
    development of our product candidates or otherwise be subject to
    terms unfavorable to us.
    
    we may not be able to control the amount and timing of resources
    that our strategic partners devote to the development or
    commercialization of product candidates;
    strategic partners may delay clinical trials, design clinical
    trials in a manner with which we do not agree, provide
    insufficient funding, terminate a clinical trial or abandon a
    product candidate, repeat or conduct new clinical trials, or
    require a new version of a product candidate for clinical
    testing;
    strategic partners may not pursue further development and
    commercialization of products resulting from the strategic
    partnering arrangement or may elect to discontinue research and
    development programs;
    strategic partners may not commit adequate resources to the
    marketing and distribution of any future products, limiting our
    potential revenues from these products;
    disputes may arise between us and our strategic partners that
    result in the delay or termination of the research, development,
    or commercialization of our product candidates or that result in
    costly litigation or arbitration that diverts managements
    attention and consumes resources;
    strategic partners may experience financial difficulties;
    strategic partners may not properly maintain or defend our
    intellectual property rights or may use our proprietary
    information in a manner that could jeopardize or invalidate our
    proprietary information or expose us to potential litigation;
    business combinations or significant changes in a strategic
    partners business strategy may also adversely affect a
    strategic partners willingness or ability to complete its
    obligations under any arrangement;
    strategic partners could independently move forward with a
    competing product candidate developed either independently or in
    collaboration with others, including our competitors; and
    strategic partners could terminate the arrangement or allow it
    to expire, which would delay the development and may increase
    the cost of developing our product candidates.    If our
    technology or our product candidates conflict with the rights of
    others we may not be able to manufacture or market our product
    candidates, which could have a material adverse effect on
    us.
   28




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tm
    If we
    are unable to obtain, maintain, and enforce our proprietary
    rights, we may not be able to compete effectively or operate
    profitably.
    
    obtain and maintain patent and other proprietary protection for
    our technology, processes, and product candidates;
    enforce patents once issued and defend those patents if their
    enforceability is challenged;
    preserve trade secrets; and
    operate without infringing the patents and proprietary rights of
    third parties. 29




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
    we might not have been the first to make the inventions claimed
    in our patents, if issued, or disclosed in our pending patent
    applications;
    we 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 none of our pending patent applications will
    result in issued patents or, if issued, these patents may not be
    sufficient to protect our technology or provide us with a basis
    for commercially viable products, and may not provide us with
    any competitive advantages;
    if our pending applications issue as patents, they may be
    challenged by third parties as not infringed, invalid, or
    unenforceable under U.S. or foreign laws;
    if issued, the patents under which we hold rights may not be
    valid or enforceable; or
    we may develop additional proprietary technologies that are not
    patentable and that may not be adequately protected through
    trade secrets, if, for example, a competitor were to
    independently develop duplicative, similar, or alternative
    technologies.       30




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We may
    incur substantial costs as a result of litigation or other
    proceedings relating to patent and other intellectual property
    rights.
    We
    face substantial competition, which may result in others
    discovering, developing, or commercializing products before, or
    more successfully than, we do.
    Product Candidates for Autoimmune and Inflammatory
    Diseases. ® ® ® ® ® ® ® ®
  Product Candidates for B-cell Malignancies. ®
 31




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® ® ® ®
    
    design and develop products that are superior to other products
    in the market;
    attract and retain qualified scientific, medical, product
    development, commercial, and sales and marketing personnel;
    obtain patent
    and/or other
    proprietary protection for our processes, product candidates,
    and technologies;
    operate without infringing the patents and proprietary rights of
    third parties;
    obtain required regulatory approvals; and
    successfully collaborate with others in the design, development,
    and commercialization of new products.    We may
    fail to select or capitalize on the most scientifically,
    clinically, or commercially promising or profitable product
    candidates.
    Even
    if our product candidates receive regulatory approval, they
    could be subject to restrictions or withdrawal from the market
    and we may be subject to penalties if we fail to comply with
    regulatory requirements or if we experience unanticipated
    problems with our products.
    
    restrictions on the products or manufacturing processes;
    withdrawal of the products from the market; 32




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
    voluntary or mandatory recalls;
    fines;
    suspension of regulatory approvals;
    product seizures; or
    injunctions or the imposition of civil or criminal penalties.    Failure
    to obtain regulatory approval in foreign jurisdictions would
    prevent us from marketing our products
    internationally.
  non-U.S. jurisdictions,
  Our
    product candidates may never achieve market acceptance even if
    we obtain regulatory approvals.
    
    our ability to provide acceptable evidence of safety and
    efficacy;
    the prevalence and severity of adverse side effects;
    availability, relative cost, and relative efficacy of
    alternative and competing treatments;
    the effectiveness of our marketing and distribution strategy;
    publicity concerning our products or competing products and
    treatments; and
    our ability to obtain sufficient third-party insurance coverage
    or reimbursement.   33




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If we
    are unable to establish a sales and marketing infrastructure or
    enter into collaborations with partners to perform these
    functions, we will not be able to commercialize our product
    candidates.
    
    our inability to recruit and retain adequate numbers of
    effective sales and marketing personnel;
    the inability of sales personnel to obtain access to or persuade
    adequate numbers of physicians to prescribe our products;
    the lack of complementary products to be offered by sales
    personnel, which may put us at a competitive disadvantage
    relative to companies with more extensive product lines; and
    unforeseen costs and expenses associated with creating a sales
    and marketing organization.    If any
    products we develop become subject to unfavorable pricing
    regulations, third-party reimbursement practices, or healthcare
    reform initiatives, our business could be harmed.
    We
    face potential product liability exposure, and if successful
    claims are brought against us, we may incur substantial
    liability for a product candidate and may have to limit its
    commercialization.
   34




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
    decreased demand for our product candidates;
    impairment of our business reputation;
    withdrawal of clinical trial participants;
    costs of related litigation;
    substantial monetary awards to patients or other claimants;
    loss of revenues; and
    the inability to commercialize our product candidates.    If we
    use biological and hazardous materials in a manner that causes
    contamination or injury or violates laws, we may be liable for
    damages.
    Risks
    Related to Our Common Stock
  The
    trading price of our common stock may be subject to significant
    fluctuations and volatility, and our stockholders may be unable
    to resell their shares at a profit.
  intra-day intra-day
  
    low trading volumes;
    our ability to develop and market new and enhanced product
    candidates on a timely basis; 35




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
    announcements by us or our collaborators or competitors of new
    commercial products, clinical progress or the lack thereof,
    changes in or terminations of relationships, significant
    contracts, commercial relationships, or capital commitments;
    commencement of, or our involvement in, litigation;
    changes in earnings estimates or recommendations by securities
    analysts;
    changes in governmental regulations or in the status of our
    regulatory approvals;
    any major change in our board or management;
    quarterly variations in our operating results or those of our
    collaborators or competitors;
    general economic conditions and slow or negative growth of our
    markets; and
    political instability, natural disasters, war,
    and/or
    events of terrorism.    If
    securities analysts do not publish research or reports about our
    business, or if they downgrade our stock, the price of our stock
    could decline.
    The
    concentration of our capital stock ownership with insiders will
    likely limit your ability to influence corporate
    matters.
    Anti-takeover
    provisions in our charter documents and under Delaware law could
    make an acquisition of us, which may be beneficial to our
    stockholders, more difficult and may prevent attempts by our
    stockholders to replace or remove our current
    management.
   36




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We are
    exposed to potential risks from legislation requiring companies
    to evaluate controls under Section 404 of the
    Sarbanes-Oxley Act.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    ITEM 3.
    LEGAL
    PROCEEDINGS    No. EP-B-1176981,
  ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   37




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PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information for Common Stock
      High


LowYear ended December 31, 2009First Quarter

$
1.76


$
1.16Second Quarter

$
2.97


$
1.30Third Quarter

$
6.25


$
2.36Fourth Quarter

$
5.11


$
3.65Year ended December 31, 2008First Quarter

$
12.55


$
5.99Second Quarter

$
8.80


$
4.39Third Quarter

$
5.40


$
3.32Fourth Quarter

$
3.67


$
1.01   Stockholders
    Dividend
    Policy
   38




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Stock
    Performance Graph
      
   10/18/2006


12/29/2006


12/31/2007


12/31/2008


12/31/2009Trubion Pharmaceuticals, Inc.


$
100.00



$
137.59



$
76.39



$
9.78



$
29.41Nasdaq Stock Market Index


$
100.00



$
87.97



$
141.40



$
70.60



$
56.63Nasdaq Biotechnology Index


$
100.00



$
99.47



$
104.03



$
90.89



$
105.10   Recent
    Sales of Unregistered Securities
  sixty-day
 39




---



##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA    Year Ended December 31,2009


2008


2007


2006


2005(In thousands, except per share data)Statements of Operations Data:Revenue:Collaboration revenue

$
18,003


$
16,467


$
20,148


$
36,530


$
222Grant revenue


















127Total revenue


18,003



16,467



20,148



36,530



349Operating expenses:Research and development


34,396



31,608



36,466



33,309



15,212General and administrative


12,429



11,374



10,833



9,473



4,146Total operating expenses


46,825



42,982



47,299



42,782



19,358Loss from operations


(28,822
)


(26,515
)


(27,151
)


(6,252
)


(19,009
)Net interest income (expense)


(361
)


956



3,837



2,222



278Other income (expense)














101



(134
)Loss before cumulative effect of change in accounting principle


(29,183
)


(25,559
)


(23,314
)


(3,929
)


(18,865
)Cumulative effect of change in accounting principle


















(62
)Net loss(1)

$
(29,183
)

$
(25,559
)

$
(23,314
)

$
(3,929
)

$
(18,927
)Basic and diluted net loss per share

$
(1.55
)

$
(1.43
)

$
(1.32
)

$
(0.83
)

$
(23.30
)Shares used in computation of basic and diluted net loss per
    share


18,797



17,856



17,688



4,744



812     (1)
    
    Effective January 1, 2006, we began recognizing
    compensation expenses for all future share-based payments made
    to employees and directors be based on estimated fair values.
    For the years ended December 31, 2009, 2008 and 2007, we
    recorded non-cash stock-based employee compensation expense of
    $3.5 million, $3.2 million and $2.9 million,
    respectively. See Note 10 of the Notes to Financial
    Statements for further discussion.  At December 31,2009


2008


2007


2006


2005(In thousands)Balance Sheet Data:Cash, cash equivalents and investments

$
54,846


$
52,897


$
78,515


$
105,801


$
9,792Receivable from collaborations


3,428



3,084



4,237



4,354



40,000Working capital


40,530



45,287



69,132



93,188



37,881Total assets


65,380



67,290



95,174



121,394



54,009Deferred revenue


35,262



19,493



24,854



31,778



39,778Non-current portion of notes payable


6,975



8,261



7,567



6,708



1,276Preferred stock warrant liability


















282Convertible preferred stock


















45,753Total stockholders equity (deficit)


15,094



31,468



53,313



72,654



(37,902
)  40




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##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following discussion and analysis should be read in
    conjunction with our audited financial statements and the
    related notes thereto that appear elsewhere in this annual
    report. This discussion contains forward-looking statements
    reflecting our current expectations that involve risks and
    uncertainties. Actual results may differ materially from those
    discussed in these forward-looking statements due to a number of
    factors, including those set forth in the section entitled
    Risk Factors and elsewhere in this annual report.
  Overview
  first-in-class best-in-class tm tm tm
    Product
    Candidates and Recent Developments
         41




---



##### Table of Contents



and/or
    Collaborations
  Facet
    sixty-day
    product-by-product
   42




---



##### Table of Contents



Pfizer
  product-by-product country-by-country
    agreed-upon
   43




---



##### Table of Contents



and/or and/or
        Outlook
      Critical
    Accounting Policies and Significant Judgments and
    Estimates
   44




---



##### Table of Contents



Form 10-K.
  Form 10-K.
  Revenue
    Recognition
    Up-Front Fees and License Fee.
  Collaborative Research Funding.
 45




---



##### Table of Contents



Milestones.
  Preclinical
    Study, Clinical Trial and Manufacturing Accruals
    
    contract research organizations in connection with preclinical
    studies;
    clinical research organizations and other clinical sites in
    connection with clinical trials; and
    contract manufacturers in connection with the production of
    components and drug materials for preclinical studies and
    clinical trials.    Stock-Based
    Compensation
   46




---



##### Table of Contents



Year Ended December 31,2009

2008

2007Risk-free interest rate

2.13%-2.72%

2.80%-3.40%

3.78%-4.78%Weighted-average expected life (in years)

5.92

6.04

6.14Expected dividend yield

0%

0%

0%Expected volatility rate

88%-105%

70%-74%

65%-75%Weighted-average estimated fair value of employee options

$1.85

$5.29

$12.87       Valuation
    of Investments
  available-for-sale. other-than-temporary,
  Recent
    Accounting Pronouncements
   47




---



##### Table of Contents



Results
    of Operations for the Years Ended December 31, 2009, 2008
    and 2007
  Revenue
    2009


2008


2007Pfizer

$
15,855


$
16,467


$
20,148Facet


2,148







Total revenue

$
18,003


$
16,467


$
20,148         Research
    and Development Expenses
     48




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##### Table of Contents



Year Ended December 31,2009


2008


2007Research and preclinical programs

$
17,954


$
20,257


$
21,344Clinical development programs:TRU-015


7,168



7,423



9,296TRU-016


7,659



2,009



4,587Indirect


1,615



1,919



1,239Total clinical development programs


16,442



11,351



15,122Total research and development

$
34,396


$
31,608


$
36,466        49




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##### Table of Contents



tm
  General
    and Administrative Expenses
    Net
    Interest Income (Expense)
    Income
    Taxes
    Liquidity
    and Capital Resources
   50




---



##### Table of Contents



Operating Activities.
  Investing Activities.
  Financing Activities.
  84-month
   51




---



##### Table of Contents




    the ability to raise capital through strategic partnerships or
    in the debt/equity markets;
    the terms and timing of any additional collaborative or
    licensing agreements that we may establish;
    milestone payments projected to be received under the Pfizer and
    Facet collaboration agreements;
    the determination by any of our current collaboration partners
    to cease developing any product candidate that is the subject of
    that collaboration;
    the scope, rate of progress, results and costs of our
    preclinical testing, clinical trials, and other research and
    development activities;
    the number of programs we pursue;
    the cost of establishing clinical and commercial supplies of our
    product candidates;
    the cost of preparing, filing, prosecuting, defending, and
    enforcing any patent claims and other intellectual property
    rights;
    the cost, timing, and outcomes of regulatory approvals; and
    the extent to which we acquire or invest in businesses,
    products, or technologies.   52




---



##### Table of Contents



Payments Due by PeriodTotal


1 Year


2-3 Years


4-5 Years


ThereafterNotes payable (including interest)

$
9,531


$
1,744


$
3,486


$
4,301


$
Manufacturing commitment


2,100



2,100











Operating lease obligations


4,934



1,490



2,952



492



Total

$
16,565


$
5,334


$
6,438


$
4,793


$
   Off-Balance
    Sheet Arrangements
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK      ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation of Disclosure Controls and
    Procedures.
  Internal Control Over Financial
    Reporting. Rules 13a-15(f) 15d-15(f).
 53




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##### Table of Contents



Internal
    Control  Integrated Framework
     54




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm on Internal
    Control Over Financial Reporting
                 
    55




---



##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   56




---



##### 



PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  Financial Statements
     
 PageNo.Report of Independent Registered Public
    Accounting Firm


61Balance Sheets


62Statements of Operations


63Statement of Stockholders Equity
    (Deficit)


64Statement of Cash Flows


67Notes to Financial Statements


68    Financial Statement Schedules
    Exhibits
  ExhibitNumber

Description3
.1(1)

Amended and Restated Certificate of Incorporation
    (exhibit 3.1)3
.2(11)

Amended and Restated Bylaws (exhibit 3.1)4
.1(2)

Form of common stock certificate (exhibit 4.1)4
.2(1)

Amended and Restated Investor Rights Agreement, dated
    July 13, 2004 (exhibit 4.2)4
.3(1)

Amendment No. 1 to Amended and Restated Investor Rights
    Agreement, dated December 19, 2005 (exhibit 4.3)10
.1(1)+

Form of Indemnification Agreement entered into between the
    registrant and its officers and its non-fund designated
    directors (exhibit 10.1)10
.2(13)+

Form of Indemnification Agreement entered into between the
    registrant and its fund-designated directors (exhibit 10.1)10
.3(1)+

2002 Stock Plan (exhibit 10.2)10
.4(1)+

Form of Stock Option Agreement under the 2002 Stock Plan
    (exhibit 10.3)10
.5(1)+

2002 Equity Incentive Plan (exhibit 10.4)10
.6(1)+

Form of Stock Option Agreement under the 2002 Equity Incentive
    Plan (exhibit 10.5)10
.7(2)+

2006 Equity Incentive Plan (exhibit 10.6)10
.8(2)+

Form of Stock Option Agreement under the 2006 Equity Incentive
    Plan (exhibit 10.7)10
.9(1)

Lease Agreement between the registrant and Selig Real Estate
    Holdings Eight, dated April 28, 2003 (exhibit 10.8)10
.10(1)

Amendment to Lease Agreement between the registrant and Selig
    Real Estate Holdings Eight, dated December 8, 2004
    (exhibit 10.9)10
.11(1)

Amendment to Lease Agreement between the registrant and Selig
    Real Estate Holdings Eight, dated February 1, 2006
    (exhibit 10.10)10
.12(10)

Amendment to Lease Agreement between the registrant and Selig
    Real Estate Holdings Eight, L.L.C, dated February 2, 2007
    (exhibit 10.1)10
.13(3)

Collaboration and License Agreement between the registrant and
    Wyeth, acting through Wyeth Pharmaceuticals Division, dated
    December 19, 2005 (exhibit 10.11) 57




---



##### Table of Contents



ExhibitNumber

Description10
.14(5)

Amendment No. 1 to the Collaboration and License Agreement
    between the registrant and Wyeth, acting through Wyeth
    Pharmaceuticals Division, dated November 30, 2006
    (exhibit 10.12)10
.15(1)

Common Stock Purchase Agreement between the registrant and
    Wyeth, dated December 19, 2005 (exhibit 10.12)10
.16(14)

Collaboration and License Agreement between the registrant and
    Facet Biotech Corporation, dated August 27, 2009
    (exhibit 10.1)10
.17(14)

Manufacturing Services Agreement between the registrant and
    Lonza Biologics dated November 21, 2005 (exhibit 10.2)10
.18(10)

Novation Agreement effective as of January 1, 2007, among
    the registrant, Lonza Biologics, Inc. and Lonza Sales AG,
    effective January 1, 2007 (exhibit 10.3)10
.19(14)

Amendment, dated December 5, 2008, to the Manufacturing
    Services Agreement dated November 21, 2005 between the
    registrant and Lonza Sales AG (exhibit 10.4)10
.20(14)

Quality Agreement for TRU-016 between the registrant and Lonza
    Sales AG dated December 5, 2008 (exhibit 10.5)10
.21(14)

Second Amendment, dated April 3, 2009, to the Manufacturing
    Services Agreement dated November 21, 2005 between the
    registrant and Lonza Sales AG (exhibit 10.6)10
.23(7)+

Employment Agreement between the registrant and Peter A.
    Thompson, M.D., FACP dated March 21, 2008
    (exhibit 10.1)10
.24(7)+

Employment Agreement between the registrant and Michelle G.
    Burris dated March 21, 2008 (exhibit 10.2)10
.26(7)+

Employment Agreement between the registrant and Kathleen M.
    Deeley dated March 21, 2008 (exhibit 10.4)10
.27(7)+

Employment Agreement between the registrant and Kendall M.
    Mohler, Ph.D. dated March 21, 2008 (exhibit 10.5)10
.28(8)+

Form of Amendment No. 1 to Employment Agreement between the
    registrant and each of Michelle G. Burris, Kathleen M. Deeley
    and Kendall M. Mohler (exhibit 10.1)10
.29(12)+

Employment Agreement between the registrant and Scott C.
    Stromatt, M.D. dated March 11, 2009 (exhibit 10.1)10
.30*+

Employment Agreement between the registrant and John A. Bencich
    dated November 16, 200910
.31(1)

Consulting Agreement with Lee R. Brettman, M.D., FACP,
    dated January 1, 2003 (exhibit 10.31)10
.32(1)

Letter from Oxford Finance Corporation, dated April 2, 2003
    (exhibit 10.33)10
.33(1)

Letter from Oxford Finance Corporation, dated November 3,
    2004 (exhibit 10.34)10
.34(1)

Master Security Agreement with Oxford Finance Corporation, dated
    June 18, 2003 (exhibit 10.35)10
.35(1)

Form of Oxford Finance Corporation Promissory Note
    (exhibit 10.36)10
.36(1)

Technology & Investment Agreement by and among the
    registrant, Jeffrey A. Ledbetter, Ph.D., Martha
    Hayden-Ledbetter, Ph.D., and the Pacific Northwest Research
    Institute, dated December 31, 2001 (exhibit 10.39)10
.37(4)

Independent Contractor Agreement between the registrant and
    Martha Hayden-Ledbetter, Ph.D., dated May 1, 2004
    (exhibit 10.40)10
.38(9)

Loan and Security Agreement between the registrant and Silicon
    Valley Bank, dated July 25, 2008 (exhibit 99.1)10
.39(6)

First Amendment to Loan and Security Agreement between the
    registrant and Comerica Bank, entered into as of July 24,
    2007 (exhibit 10.1)23
.1*

Consent of Independent Registered Public Accounting Firm24
.1*

Power of Attorney (included on signature page) 58




---



##### Table of Contents



ExhibitNumber

Description31
.1*

Certification of Chief Executive Officer of Trubion
    Pharmaceuticals, Inc., Pursuant to Exchange Act
    Rules 13a-14(a)
    and 15d-14(a), as Adopted Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200231
.2*

Certification of Chief Financial Officer of Trubion
    Pharmaceuticals, Inc., Pursuant to Exchange Act
    Rules 13a-14(a)
    and 15d-14(a), as Adopted Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 200232*


Certification of Chief Executive Officer and Chief Financial
    Officer of Trubion Pharmaceuticals, Inc., Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002      *
    
    Filed herewith(1)
    
    Incorporated by reference to the designated exhibit to the
    registrants Registration Statement on
    Form S-1
    filed with the SEC on June 2, 2006 (File
    No. 333-134709).(2)
    
    Incorporated by reference to the designated exhibit to the
    registrants Registration Statement on
    Form S-1
    filed with the SEC on October 2, 2006 (File
    No. 333-134709).(3)
    
    Incorporated by reference to the designated exhibit to the
    registrants Registration Statement on
    Form S-1
    filed with the SEC on October 5, 2006 (File
    No. 333-134709).(4)
    
    Incorporated by reference to the designated exhibit to the
    registrants Registration Statement on
    Form S-1
    filed with the SEC on July 18, 2006 (File
    No. 333-134709).(5)
    
    Incorporated by reference to the designated exhibit to the
    registrants Annual Report on
    Form 10-K
    filed with the SEC on March 26, 2007 (File
    No. 001-33054).(6)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    filed with the SEC on July 26, 2007 (File
    No. 001-33054).(7)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K/A
    filed with the SEC on April 8, 2008 (File
    No. 001-33054).(8)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K/A
    filed with the SEC on April 8, 2008 (File
    No. 001-33054).(9)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    filed with the SEC on July 29, 2008 (File
    No. 001-33054).(10)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    filed with the SEC on August 7, 2008 (File
    No. 001-33054).(11)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    filed with the SEC on November 26, 2008 (File
    No. 001-33054).(12)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    filed with the SEC on May 7, 2009 (File
    No. 001-33054).(13)
    
    Incorporated by reference to the designated exhibit to the
    registrants Current Report on
    Form 8-K
    filed with the SEC on August 13, 2009 (File
    No. 001-33054).(14)
    
    Incorporated by reference to the designated exhibit to the
    registrants Quarterly Report on
    Form 10-Q
    filed with the SEC on November 5, 2009 (File
    No. 001-33054).
    
    Portions of the agreement are subject to confidential treatment+
    
    Executive Compensation Plan or Agreement 59




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##### Table of Contents



SIGNATURES    TRUBION PHARMACEUTICALS, INC.
  By:
    /s/  Steven
    Gillis   Executive Chairman and
 Acting President
      Signature

Title

Date/s/  Steven
    GillisSteven
    Gillis, Ph.D.

Executive Chairman and Acting President (Principal Executive
    Officer)

March 15, 2010/s/  John
    A. BencichJohn
    A. Bencich

Vice President and Chief Financial Officer (Principal Accounting
    and Financial Officer)

March 15, 2010/s/  Lee
    R. BrettmanLee
    R. Brettman, M.D., FACP

Director

March 15, 2010/s/  Patrick
    J. HeronPatrick
    J. Heron

Director

March 15, 2010/s/  Anders
    D. HoveAnders
    D. Hove, M.D.

Director

March 15, 2010/s/  David
    A. MannDavid
    A. Mann

Director

March 15, 2010/s/  Samuel
    R. SaksSamuel
    R. Saks, M.D.

Director

March 15, 2010/s/  David
    SchnellDavid
    Schnell, M.D.

Director

March 15, 2010  60




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm             Internal Control  Integrated Framework
  
    61




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##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  BALANCE
    SHEETS
  December 31,2009


2008(In thousands, except share and par value)ASSETSCurrent assets:Cash and cash equivalents

$
22,304


$
29,969Investments


29,037



22,928Receivable from collaborations


3,428



3,084Prepaid expenses


977



2,112Total current assets


55,746



58,093Property and equipment, net


6,129



9,190Long-term investments


3,505



Other assets






7Total assets

$
65,380


$
67,290LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
379


$
301Accrued liabilities


4,143



4,981Accrued compensation


2,106



1,169Current portion of notes payable


1,286



1,302Current portion of deferred rent


135



180Current portion of deferred revenue


7,167



4,873Total current liabilities


15,216



12,806Non-current portion of notes payable


6,975



8,261Non-current portion of deferred rent






135Non-current portion of deferred revenue


28,095



14,620Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value per share; shares
    authorized  5,000,000 at December 31, 2009 and
    2008; issued and outstanding  none at
    December 31, 2009 and 2008






Common stock, $0.001 par value per share; shares
    authorized  150,000,000; outstanding 
    20,381,561 and 17,882,307 at December 31, 2009 and 2008,
    respectively


20



18Additional paid-in capital


136,732



123,846Deferred stock-based compensation






(30
)Accumulated other comprehensive income (loss)


(6
)


103Accumulated deficit


(121,652
)


(92,469
)Total stockholders equity


15,094



31,468Total liabilities and stockholders equity

$
65,380


$
67,290    62




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  STATEMENTS
    OF OPERATIONS
  Year Ended December 31,2009


2008


2007(In thousands, except per share data)Revenue:Collaboration revenue

$
18,003


$
16,467


$
20,148Operating expenses:Research and development


34,396



31,608



36,466General and administrative


12,429



11,374



10,833Total operating expenses


46,825



42,982



47,299Loss from operations


(28,822
)


(26,515
)


(27,151
)Interest income


173



1,781



4,607Interest expense


(534
)


(825
)


(770
)Net loss

$
(29,183
)

$
(25,559
)

$
(23,314
)Basic and diluted net loss per share

$
(1.55
)

$
(1.43
)

$
(1.32
)Shares used in computation of basic and diluted net loss per
    share


18,797



17,856



17,688    63




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##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  STATEMENT
    OF STOCKHOLDERS EQUITY (DEFICIT)
  AccumulatedOther





TotalAdditional


Deferred


Comprehensive





StockholdersCommon Stock


Paid-in


Stock-Based


Income


Accumulated


EquityShares


Amount


Capital


Compensation


(Loss)


Deficit


(Deficit)(In thousands, except share data)Balance at January 1, 2007


17,554,318


$
18


$
117,061


$
(850
)

$
21


$
(43,596
)

$
72,654Issuance of common stock upon exercise of stock options


237,852







468















468Stock-based compensation to non-employees at fair value










91















91Stock-based compensation expense










2,881















2,881Amortization of deferred stock-based compensation














526











526Reversal of deferred stock-based compensation due to employee
    terminations










(30
)


30











Comprehensive lossChange in valuation of interest rate swap liability for the
    twelve months ended December 31, 2007


















(129
)






(129
)Unrealized holding gain on
    available-for-sale
    securities


















136







136Net loss






















(23,314
)


(23,314
)Comprehensive loss


























(23,307
)Balance at December 31, 2007 (carried forward)


17,792,170


$
18


$
120,471


$
(294
)

$
28


$
(66,910
)

$
53,313    64




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##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  STATEMENT
    OF STOCKHOLDERS EQUITY
    (DEFICIT)  (Continued)
  AccumulatedOther





TotalAdditional


Deferred


Comprehensive





StockholdersCommon Stock


Paid-in


Stock-Based


Income


Accumulated


EquityShares


Amount


Capital


Compensation


(Loss)


Deficit


(Deficit)(In thousands, except share data)Balance at December 31, 2007 (brought forward)


17,792,170


$
18


$
120,471


$
(294
)

$
28


$
(66,910
)

$
53,313Issuance of common stock upon exercise of stock options


90,137







91















91Stock-based compensation to non-employees at fair value










106















106Stock-based compensation expense










3,216















3,216Amortization of deferred stock-based compensation














226











226Reversal of deferred stock-based compensation due to employee
    terminations










(38
)


38











Comprehensive lossRealized loss on interest rate swap liability


















129







129Unrealized holding loss on
    available-for-sale
    securities


















(54
)






(54
)Net loss






















(25,559
)


(25,559
)Comprehensive loss


























(25,484
)Balance at December 31, 2008 (carried forward)


17,882,307


$
18


$
123,846


$
(30
)

$
103


$
(92,469
)

$
31,468    65




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  STATEMENT
    OF STOCKHOLDERS EQUITY
    (DEFICIT)  (Continued)
  AccumulatedOther





TotalAdditional


Deferred


Comprehensive





StockholdersCommon Stock


Paid-in


Stock-Based


Income


Accumulated


EquityShares


Amount


Capital


Compensation


(Loss)


Deficit


(Deficit)(In thousands, except share data)Balance at December 31, 2008 (brought forward)


17,882,307


$
18


$
123,846


$
(30
)

$
103


$
(92,469
)

$
31,468Issuance of common stock upon exercise of stock options


255,605







90















90Stock-based compensation to non-employees at fair value










661















661Stock-based compensation expense










3,544















3,544Amortization of deferred stock-based compensation














30











30Issuance of common stock for cash in private placement offering


2,243,649



2



8,591















8,593Comprehensive lossUnrealized holding loss on
    available-for-sale
    securities


















(109
)






(109
)Net loss






















(29,183
)


(29,183
)Comprehensive loss


























(29,292
)Balance at December 31, 2009


20,381,561


$
20


$
136,732


$



$
(6
)

$
(121,652
)

$
15,094    66




---



##### Table of Contents





TRUBION
    PHARMACEUTICALS, INC.
  STATEMENT
    OF CASH FLOWS
  Year Ended December 31,2009


2008


2007(In thousands)Operating activitiesNet loss

$
(29,183
)

$
(25,559
)

$
(23,314
)Adjustments to reconcile net loss to net cash used in operating
    activities:Non-cash stock-based compensation expense


4,235



3,548



3,498Depreciation and amortization


3,146



3,230



2,936Net amortization of premium (discount) on investments


132



81



(7
)Amortization of debt discount


11



34



21Changes in operating assets and liabilities:Receivable from collaborations


(344
)


1,153



117Prepaid expenses and other assets


1,142



(860
)


(354
)Accounts payable


78



(730
)


(506
)Accrued liabilities and compensation


99



791



(1,658
)Deferred revenue


15,769



(5,361
)


(6,924
)Deferred rent


(180
)


(180
)


(180
)Net cash used in operating activities


(5,095
)


(23,853
)


(26,371
)Investing activitiesPurchases of property and equipment


(85
)


(1,257
)


(3,765
)Purchases of investments


(51,980
)


(64,385
)


(81,240
)Sales of investments


649



20,255



4,458Maturities of investments


41,476



57,755



89,624Net cash provided by (used in) investing activities


(9,940
)


12,368



9,077Financing ActivitiesProceeds from issuance of notes payable






10,000



3,516Payments on notes payable


(1,313
)


(10,464
)


(1,277
)Proceeds from private placement of common stock


8,593







Proceeds from issuance of common stock and exercise of stock
    options


90



91



468Net cash provided by (used in) financing activities


7,370



(373
)


2,707Net decrease in cash and cash equivalents


(7,665
)


(11,858
)


(14,587
)Cash and cash equivalents at beginning of year


29,969



41,827



56,414Cash and cash equivalents at end of year

$
22,304


$
29,969


$
41,827Supplemental disclosure information:Cash paid for interest

$
525


$
807


$
713    67




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS
  1.
    Organization
    and Summary of Significant Accounting Policies  Organization
  first-in-class best-in-class tm tm tm
      Use of
    Estimates
    Fair
    Value of Financial Instruments
  available-for-sale
  Cash,
    Cash Equivalents and Investments
   68




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  available-for-sale. other-than-temporary, available-for-sale
  Property
    and Equipment
    Impairment
    of Long-Lived Assets
    Deferred
    Rent
    Revenue
    Recognition
     69




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Up-Front Fees and License
    Fees.
  Collaborative Research Funding.
  Milestones.
  Research
    and Development
   70




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Income
    Taxes
      Comprehensive
    Income (Loss)
    available-for-sale.
  Stock-Based
    Compensation
      Concentration
    of Credit Risk
   71




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Major
    Customers
      2009


2008


2007Pfizer

$
15,855


$
16,467


$
20,148Facet


2,148







Total revenue

$
18,003


$
16,467


$
20,148     2009


2008


2007Pfizer

$
11,570


$
12,259


$
13,342Facet


30,452







Total cash received

$
42,022


$
12,259


$
13,342       2009


2008Pfizer

$
2,496


$
3,084Facet


932



Total accounts receivable

$
3,428


$
3,084   Recent
    Accounting Pronouncements
   72




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   2.
    Fair
    Value Measurements  available-for-sale
          December 31, 2009

Level 1


Level 2


Level 3


TotalMoney market funds

$
22,259


$



$



$
22,259Government and agency debt securities






32,542







32,542Total

$
22,259


$
32,542


$



$
54,801   December 31, 2008

Level 1


Level 2


Level 3


TotalMoney market funds

$
27,444


$



$



$
27,444Government and agency debt securities






12,424







12,424Corporate debt securities






13,003







13,003Total

$
27,444


$
25,427


$



$
52,871      73




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   3.
    Investments  available-for-sale
  Gross


GrossAmortized


Unrealized


Unrealized


Estimated FairDecember 31, 2009

Cost


Gains


Losses


Market ValueMoney market funds

$
22,259


$



$



$
22,259Government and agency debt securities


32,549



6



(13
)


32,542Total


54,808



6



(13
)


54,801Less: cash equivalents


(22,259
)










(22,259
)Amounts classified as investments

$
32,549


$
6


$
(13
)

$
32,542   Gross


GrossAmortized


Unrealized


Unrealized


Estimated FairDecember 31, 2008

Cost


Gains


Losses


Market ValueMoney market funds

$
27,444


$



$



$
27,444Government and agency debt securities


12,384



40







12,424Corporate debt securities


12,940



63







13,003Total


52,768



103







52,871Less: cash equivalents


(29,935
)


(8
)






(29,943
)Amounts classified as investments

$
22,833


$
95


$



$
22,928   available-for-sale
  Less Than 12 MonthsGrossFair


UnrealizedValue


LossesGovernment and agency debt securities

$
13,804


$
13   other-than-temporarily
  4.
    Net Loss
    per Share   74




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    As of December 31,2009

2008

2007Stock options


2,654,035



2,093,940



1,551,968   5.
    Collaboration
    Agreements  Facet
    sixty-day
    product-by-product
 75




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
              Pfizer
  product-by-product country-by-country
   76




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    agreed-upon
    6.
    Termination
    Benefits     77




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    7.
    Property
    and Equipment    December 31,2009


2008Lab equipment

$
10,534


$
10,495Leasehold improvements


6,673



6,611Computer equipment and software


1,163



1,141Furniture and fixtures


449



447Construction in progress






4018,819



18,734Accumulated depreciation and amortization


(12,690
)


(9,544
)$
6,129


$
9,190     8.
    Accrued
    Liabilities    December 31,2009


2008Accrued clinical trials

$
3,078


$
2,979Accrued professional fees


421



556Accrued manufacturing


65



933Other


579



513$
4,143


$
4,981   9.
    Notes
    Payable  Equipment Financing Arrangements  84-month
 78




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
          NotesPayableYear ending December 31, 2010

$
1,2942011


1,3722012


1,4532013


4,172Total payments

$
8,291   10.
    Commitments
    and Contingencies  Operating
    Lease Commitments
      OperatingLeasesYear ending December 31, 2010

$
1,4902011


1,4762012


1,4762013


492Total minimum lease payments

$
4,934  79




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Manufacturing
    Commitments
    Guarantees
    and Indemnifications
        11.
    Convertible
    Preferred Stock and Stockholders Equity
    (Deficit)  Preferred
    Stock
    Common
    Stock
    sixty-day
 80




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Equity
    Incentive Plans
      Weighted-Weighted-


AverageAverage


RemainingShares





Exercise


Contractual


AggregateAvailable





Price per


Life


Intrinsicfor Grant


Options Granted


Share


(In years)


ValueBalance at January 1, 2007


490,522



1,587,626


$
3.90



8.34


$
22,449Authorized increase in Plan


877,716







Granted at fair value


(237,000
)


237,000



18.55Exercised






(237,852
)


1.97Cancelled


34,806



(34,806
)


5.79Balance at December 31, 2007


1,166,044



1,551,968


$
6.39



7.44


$
8,106Authorized increase in Plan


889,609







Granted at fair value


(770,375
)


770,375



8.21Exercised






(90,137
)


1.02Cancelled


138,266



(138,266
)


9.76Balance at December 31, 2008


1,423,544



2,093,940


$
7.07



7.51


$
513Authorized increase in Plan


894,115







Granted at fair value


(1,223,042
)


1,223,042



2.47Exercised






(255,605
)


0.35Cancelled


407,342



(407,342
)


6.05Balance at December 31, 2009


1,501,959



2,654,035


$
5.75



7.69


$
2,861Vested and expected to vest at December 31, 2009






2,333,704


$
5.75



7.69


$
2,462Exercisable at December 31, 2009






1,462,544


$
6.64



6.68


$
1,443  81




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      Options OutstandingWeighted-AverageRemainingContractual





Options ExercisableNumber of


Life


Aggregate


Number of


AggregateExercise Price per Share

Shares


(In Years)


Intrinsic Value


Shares


Intrinsic Value$0.07  $ 0.32


257,328



3.90


$
932



255,734


$
927$1.33  $ 1.33


704,334



9.08



1,775



168,331



424$1.37  $ 3.85


191,175



7.73



154



97,136



92$3.86  $ 8.98


1,213,267



7.80







721,054



$9.35  $21.43


287,931



7.22







220,289



$0.07  $21.43


2,654,035



7.69


$
2,861



1,462,544


$
1,443   Employee
    Stock-Based Compensation
    Year Ended December 31, 2009G&A


R&D


TotalEmployee stock options granted prior to January 1, 2006

$
30


$



$
30Employee stock options granted on or subsequent to
    January 1, 2006


2,112



1,432



3,544Non-employee stock options(1)


584



77



661$
2,726


$
1,509


$
4,235   Year Ended December 31, 2008G&A


R&D


TotalEmployee stock options granted prior to January 1, 2006

$
144


$
82


$
226Employee stock options granted on or subsequent to
    January 1, 2006


2,008



1,208



3,216Non-employee stock options


70



36



106$
2,222


$
1,326


$
3,548   Year Ended December 31, 2007G&A


R&D


TotalEmployee stock options granted prior to January 1, 2006

$
265


$
261


$
526Employee stock options granted on or subsequent to
    January 1, 2006


1,748



1,133



2,881Non-employee stock options


9



82



91$
2,022


$
1,476


$
3,498     (1)
    
    Includes $584,000 related to the accelerated vesting of options
    in the fourth quarter of 2009 and extended period to exercise
    vested stock options. 82




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   Employee
    Stock Options Granted Prior to January 1,
    2006
    Employee
    Stock Options Granted On or Subsequent to January 1,
    2006
          Year Ended December 31,2009

2008

2007Risk-free interest rate

2.13%-2.72%

2.80%-3.40%

3.78%-4.78%Weighted-average expected life (in years)

5.92

6.04

6.14Expected dividend yield

0%

0%

0%Expected volatility rate

88%-105%

70%-74%

65%-75%Weighted-average estimated fair value of employee options

$1.85

$5.29

$12.87     Non-employee
    Stock-Based Compensation
   83




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
        12.
    401(k)
    Plan    13.
    Income
    Taxes      December 31,2009


2008Deferred tax assetsNet operating loss carry forwards

$
22,500


$
19,035Deferred revenue


12,341



6,823Stock compensation


2,047



1,377R&D tax credit carry forwards


2,677



1,978Other current assets and liabilities (net)


224



272Other non-current assets and liabilities (net)


1,287



1,442Less: Valuation allowance


(41,076
)


(30,927
)Net deferred tax asset (liability)

$



$
  84




---



##### Table of Contents



TRUBION
    PHARMACEUTICALS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   16.
    Quarterly
    Information (Unaudited)    March 31,(1)


June 30,


September 30,


December 31,2009Revenue

$
4,212


$
4,119


$
4,452


$
5,220Total operating expenses


15,189



10,719



10,556



10,361Loss from operations


(10,977
)


(6,600
)


(6,104
)


(5,141
)Net loss


(10,999
)


(6,702
)


(6,227
)


(5,255
)Basic and diluted net loss per share


(0.61
)


(0.37
)


(0.33
)


(0.29
)2008Revenue

$
3,963


$
4,468


$
3,766


$
4,270Total operating expenses


10,488



11,415



10,384



10,695Loss from operations


(6,525
)


(6,947
)


(6,618
)


(6,425
)Net loss


(5,968
)


(6,632
)


(6,582
)


(6,377
)Basic and diluted net loss per share


(0.33
)


(0.37
)


(0.37
)


(0.36
)     (1)
    
    The quarterly period ending March 31, 2009 included
    $3.6 million for outside manufacturing costs for TRU-016. 85