**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





**(Mark
      One)**





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





**For
                the quarterly period ended March 31,
                2008**





**or**





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





**For
                the transition period from  ________     to
                ______________**





**Commission
      File Number: 000-32947**




**Lev
      Pharmaceuticals, Inc.**


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





**Delaware**
            **88-0211496**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer Identification No.)**675
                Third Avenue, Suite 2200**
              **New
                York, New York**
            **10017**(Address
                of principal executive offices)
            (Zip
                Code)




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







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


Since
      Last Report)





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





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





Large
                accelerated filer o
            Accelerated
                filer þ
            Non-accelerated
                filer o
            Smaller
                reporting company o





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





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









**Lev
      Pharmaceuticals, Inc.**




**Index
      to Form 10-Q**




PagePart I.
            
            Financial
                Information
            3Item
                1.
            
            Condensed
                Consolidated Financial Statements
            3Condensed
                Consolidated Balance Sheets as of March 31, 2008 (Unaudited) and
                December
                31, 2007
            3Condensed
                Consolidated Statements of Operations (Unaudited) for the Three Months
                Ended
              March
                31, 2008 and March 31, 2007 and for the Period from July 21, 2003
                (Inception) to March 31, 2008
            4Condensed
                Consolidated Statements of Cash Flows (Unaudited) for the Three Months
                Ended
              March
                31, 2008 and March 31, 2007 and for the Period from July 21, 2003
                (Inception) to March 31, 2008
            5Notes
                to Unaudited Condensed Consolidated Financial Statements
            6Item
                2.
            
            Management’s
                Discussion and Analysis or Plan of Operation
            16Item
                3.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            26Item
                4.
            
            Controls
                and Procedures
            26Part
                II.
            
            Other
                Information
            27Item
                1.
            
            Legal
                Proceedings
            27Item 1A.
            
            Risk
                Factors
            27Item
                2.
            
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            44Item
                3.
            
            Defaults
                Upon Senior Securities
            44Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            44Item
                5.
            
            Other
                Information
            44Item
                6.
            
            Exhibits
            45Signatures
            45




2




**LEV
        PHARMACEUTICALS , INC. AND SUBSIDIARY**
 (a
        development stage enterprise)
 **Condensed
            Consolidated Balance Sheets**
 March 31,
                  2008
                  (Unaudited)
                
                December 31,
                  2007ASSETSCurrent
                    assets:Cash
                    and cash equivalents
                
                $
                13,241,427
                
                $
                21,910,084Inventory
                
                
                16,237,279
                
                
                10,645,129Prepaid
                    expenses
                
                
                1,241,151
                
                
                2,809,253Other
                    assets
                
                
                6,635
                
                
                5,695Total
                    current assets
                
                
                30,726,492
                
                
                35,370,161Fixed
                    assets, net of accumulated depreciation
                
                
                253,767
                
                
                272,401Loan
                    receivable
                
                
                3,663,179
                
                
                3,414,755Debt
                    issuance costs
                
                
                180,414
                
                
                197,873Other
                    assets
                
                
                93,335
                
                
                93,335Total
                    assets
                
                $
                34,917,187
                
                $
                39,348,525LIABILITIESCurrent
                    liabilities:Accounts
                    payable
                
                $
                1,652,066
                
                $
                1,997,263Accrued
                    expenses
                
                
                2,832,623
                
                
                1,684,045Total
                    current liabilities
                
                
                4,484,689
                
                
                3,681,308Loan
                    payable, net of debt discount
                
                
                4,899,592
                
                
                4,381,092Term
                    loan payable, net of debt discount
                
                
                9,629,780
                
                
                9,185,454Deferred
                    lease liability
                
                
                16,660
                
                
                16,423Total
                    liabilities
                
                
                19,030,721
                
                
                17,264,277Commitments
                    and contingenciesSTOCKHOLDERS'
                    EQUITYPreferred
                    stock - $0.01 par value, 20,000,000 authorized,no
                    shares issued and outstandingCommon
                    stock - $0.01 par value, 200,000,000 shares authorized,142,329,157
                    and 141,750,203 shares issued and outstanding at March 31, 2008and
                    December 31, 2007, respectively
                
                
                1,423,292
                
                
                1,417,502Additional
                    paid-in capital
                
                
                74,527,650
                
                
                71,936,511Deficit
                    accumulated during the development stage
                
                
                (60,064,476
                )
                
                (51,269,765
                )Total
                    stockholders' equity
                
                
                15,886,466
                
                
                22,084,248Total
                    liabilities and stockholders’ equity
                
                $
                34,917,187
                
                $
                39,348,525


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




3




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)




**Condensed
      Consolidated Statements of Operations (Unaudited)**


Three Months
                Ended
                March 31,
              
              Period From
                July 21,2003
                (Inception) to
                March 31,2008
              
              2007
              
              2008Costs
                  and expenses:Research
                  and development
              
              $
              2,818,509
              
              $
              3,223,397
              
              $
              28,868,040Merger
                  costs
              
              
              
              
              
              
              
              
              283,732General
                  and administrative
              
              
              5,353,898
              
              
              2,421,693
              
              
              30,785,953Loss
                  before other (expense)/income
              
              
              (8,172,407
              )
              
              (5,645,090
              )
              
              (59,937,725
              )Other
                  (expense)/income:Interest
                  income
              
              
              143,234
              
              
              197,791
              
              
              1,570,855Interest
                  expense
              
              
              (525,311
              )
              
              (30,774
              )
              
              (1,077,858
              )Foreign
                  exchange loss
              
              
              (240,227
              )
              
              
              
              
              (249,693
              )Net
                  loss
              
              $
              (8,794,711
              )
              $
              (5,478,073
              )
              $
              (59,694,421
              )Net
                  loss per share-basic and diluted
              
              $
              (0.06
              )
              $
              (0.05
              )Weighted
                  average shares-basic and diluted
              
              
              138,153,694
              
              
              114,046,749





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





4




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**Condensed
      Consolidated Statements of Cash Flows (Unaudited)**


Three Months
                Ended
                March 31,
              
              July 21, 2003
                (Inception) to
                March 31,**Cash
                  flows** **from** **operating** **activities:******
              
              
              2008
              
              
              2007
              
              
              2008Net
                  loss
              
              $
              (8,794,711
              )
              $
              (5,478,073
              )
              $
              (59,694,421
              )Adjustments
                  to reconcile net loss to net cash usedin
                  operating activities:Compensation
                  to consultants from issuance ofwarrants
                  and common stock
              
              
              
              
              
              
              
              
              2,209,177Repricing
                  of options and warrants
              
              
              
              
              
              
              
              
              1,455,269Option
                  and warrants modification resulting from merger
              
              
              
              
              
              
              
              
              75,201Stock
                  issued for services
              
              
              
              
              
              
              
              
              78,750Depreciation
                  expense
              
              
              20,418
              
              
              11,506
              
              
              109,817Amortization
                  of debt discount, loan payable
              
              
              63,525
              
              
              30,739
              
              
              318,231Amortization
                  of debt discount and debt issuance costs,term
                  loan payable
              
              
              108,963
              
              
              
              
              
              181,604Accrued
                  interest on term loan
              
              
              352,823
              
              
              
              
              
              575,294Foreign
                  exchange loss
              
              
              240,227
              
              
              
              
              
              249,693Stock
                  compensation to employees
              
              
              566,379
              
              
              426,638
              
              
              3,340,266Stock
                  compensation for unvested restricted stock
              
              
              1,527,500
              
              
              
              
              
              1,712,143Accretion
                  of investment income
              
              
              
              
              
              
              
              
              (12,610
              )Gain
                  on sale of investments
              
              
              
              
              
              
              
              
              (155
              )Supplier
                  purchase funding
              
              
              
              
              
              640,222
              
              
              3,372,671Foreign
                  exchange loss on research and development
              
              
              
              
              
              49,096
              
              
              753,715Deferred
                  lease liability
              
              
              237
              
              
              15,714
              
              
              16,660
 Changes
                  in:Inventory
              
              
              (5,592,150
              )
              
              
              
              
              (16,237,279
              )Prepaid
                  expenses and other assets
              
              
              1,567,162
              
              
              (28,238
              )
              
              (1,340,616
              )Accounts
                  payable
              
              
              (345,197
              )
              
              (116,840
              )
              
              1,652,066Accrued
                  expenses
              
              
              1,114,901
              
              
              (404,803
              )
              
              2,798,946Income
                  taxes liability
              
              
              
              
              
              
              
              
              (64,463
              )Net
                  cash used in operating activities
              
              
              (9,169,923
              )
              
              (4,854,039
              )
              
              (58,450,041
              )**Cash
                  flows from investing activities:******Purchase
                  of fixed assets
              
              
              (1,784
              )
              
              (57,360
              )
              
              (363,584
              )Loan
                  receivable
              
              
              
              
              
              
              
              
              (3,424,221
              )Proceeds
                  from the sale of investments
              
              
              
              
              
              
              
              
              12,500,000Purchase
                  of investments
              
              
              
              
              
              
              
              
              (12,487,235
              )Net
                  cash used in investing activities
              
              
              (1,784
              )
              
              (57,360
              )
              
              (3,775,040
              )**Cash
                  flows from financing activities:******Proceeds
                  from stock subscription receivable
              
              
              
              
              
              
              
              
              130Proceeds
                  from notes payable to stockholder
              
              
              
              
              
              
              
              
              18,000Proceeds
                  from term loan payable
              
              
              
              
              
              
              
              
              10,000,000Payment
                  of debt issuance costs
              
              
              
              
              
              
              
              
              (209,513
              )Repayment
                  of notes payable to stockholder
              
              
              
              
              
              
              
              
              (18,000
              )Net
                  proceeds from sale of common stock and warrants
              
              
              
              
              
              
              
              
              64,623,886Proceeds
                  from exercise of warrants
              
              
              503,050
              
              
              105,523
              
              
              1,052,005Net
                  cash provided by financing activities
              
              
              503,050
              
              
              105,523
              
              
              75,466,508**Net
                  (decrease) increase in cash and cash equivalents******
              
              
              (8,668,657
              )
              
              (4,805,876
              )
              
              13,241,427Cash
                  and cash equivalents - beginning of period
              
              
              21,910,084
              
              
              7,887,635**Cash
                  and cash equivalents – end of period**
              
              $
              13,241,427
              
              $
              3,081,759
              
              $
              13,241,427





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




5




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS**


**NOTE
      A - ORGANIZATION AND BUSINESS**





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





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




**NOTE
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**[1]
      Basis of Presentation:**




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




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




6




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





**[1]
      Basis of Presentation (continued):**





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





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





**[2]
      Use of estimates:**





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





**[3]
      Stock-based compensation:**




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





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





7




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





**[3]
      Stock-based compensation (continued):**





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





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




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





**Plan
      options**





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




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





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





**Out
      of Plan options**





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




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





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





8




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





**[4]
      Net loss per share:**





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




**[5]
      Inventory:**




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





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





**[6]
      Sale of residual plasma:**





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





**[7]
      Fair Value Measurements:**





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





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





**[8]
      New Accounting Pronouncements:**





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





9




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      C - PREPAID EXPENSES**




Prepaid
      expenses consist of the following:





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





**NOTE
      D - FIXED ASSETS**




Fixed
      assets, at cost, consist of the following:





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




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





**NOTE
      E - ACCRUED EXPENSES**





Accrued
      expenses consisted of the following:




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


10


**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      F – SANQUIN BLOOD SUPPLY FOUNDATION**


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





**[2]
      Distribution and manufacturing services agreement and Loan
      Receivable**





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





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





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





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




11




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      G – TERM LOAN PAYABLE**





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





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





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





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





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




12




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      H - INCOME TAXES**





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





**NOTE
      I - EMPLOYMENT AGREEMENTS**





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





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





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




13




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      J - PLASMA SUPPLY AGREEMENT**





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





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





**NOTE
      K - LEGAL**





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





**NOTE
      L - SUBSEQUENT EVENTS**





**Plasma
      Supply Arrangement**





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




14




**LEV
      PHARMACEUTICALS, INC. AND SUBSIDIARY**


(a
      development stage enterprise)





**NOTES
      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**NOTE
      L - SUBSEQUENT EVENTS (CONTINUED**





**Plasma
      Supply Arrangement (continued)**




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





**Agreement
      for Sale of Plasma Intermediates**





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




15




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




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





**Forward
      Looking Statements**





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





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





**Overview**





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





*Product
      Development*





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





16




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





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





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





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





**Merger
      Transaction**





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





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




17




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





**Operational
      Activities**





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




*Research/Product
      Programs*





Hereditary
      Angioedema





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





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





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





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





18




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





Acute
      Myocardial Infarction (“AMI”)





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





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





*Satisfaction
      of Cash Resources*





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




*2007
      Financings*





Equity





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





19




Secured
      Term Loan





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





**Results
      of Operations**




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





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





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





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





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




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





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





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





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





**Liquidity
      and Capital Resources**





*Cash
      used in operating activities*





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




20


*Cash
        used in investing activities*
 
 From
        inception through March 31, 2008, net cash used in investing activities was
        $3,775,040, primarily related to our loan receivable of $3,424,221 and purchases
        of fixed assets of $363,584. For the three months ended March 31, 2008, net
        cash
        used in investing activities was $1,784 resulting from the purchase of fixed
        assets.
 
 *Cash
        provided by financing activities*
 
 From
        inception through March 31, 2008, net cash provided by financing activities
        was $75,466,508. Cash provided by financing activities for the three months
        ended March 31, 2008 was $503,050 resulting from proceeds from the exercise
        of
        warrants during the quarter. We expect that cash provided by financing
        activities will fluctuate based on our ability to raise additional funds
        through
        the private and/or public sale of our equity securities, debt financings
        and the
        future volume of warrants and stock options exercised.
 
 **Cash
        Flows**
 
 Our
        unaudited condensed consolidated financial statements have been presented
        on the
        basis that we are a going concern, which contemplates the continuity of
        business, realization of assets and the satisfaction of liabilities in the
        ordinary course of business. We have limited capital resources and have an
        accumulated deficit of $60,064,476 since inception and have had negative
        cash
        flows from operations since inception. These losses have resulted principally
        from costs incurred in research and development activities, including
        acquisition of technology rights and general and administrative expenses.
        We
        have cash commitments of $45.1 million over the next twelve months. We expect
        to
        incur additional operating losses until such time as we generate sufficient
        revenue to offset expenses, and we may never achieve profitable
        operations.  As a development stage enterprise, our primary efforts, to
        date, have been devoted to conducting research and development, raising capital
        and recruiting staff and our capital resources are focused on the clinical
        development and regulatory approval of C1-INH for the treatment of HAE. To
        date,
        we have relied solely upon selling equity and obtaining debt financing to
        generate cash to implement our plan of operations. Based on our current levels
        of research and development and our business plan, we believe that our existing
        cash and cash equivalents of $13,241,427 as of March 31, 2008 and proceeds
        from
        the sale of residual plasma should be sufficient to fund operations into
        the
        third quarter of 2008. This raises substantial doubt about the ability for
        us to
        continue as a going concern. We do not have any commercial products available
        for sale and have not generated revenues and there is no assurance that if
        approval of their products is received that we will be able to generate cash
        flow to fund operations. As we expect that our cash used in operations will
        increase significantly over the next several years, we may be required to
        raise
        additional capital to complete the development and commercialization of our
        current product candidates. We will pursue equity and/or debt financing
        alternatives or other financing in order to raise needed funds. If we are
        unsuccessful in raising additional capital we will need to reduce costs and
        operations substantially.
 
 In
        addition, we have sought to enter into agreements with purchasers of the
        residual plasma derived from our manufacturing process to generate additional
        cash resources for us. On April 9, 2008, we entered into an agreement with
        Biotest AG to purchase excess volumes of intermediate plasma products produced
        by The Sanquin Blood Supply Foundation during the manufacturing process of
        our
        lead product candidate, CinryzeTM. We expect to sell approximately €6.4 million
        of intermediates during 2008. However, the amounts that we will receive are
        dependent upon the actual volume of plasma processed on our behalf and as
        this
        amount is subject to periodic fluctuations, actual proceeds may be less than
        expected. Volumes of intermediates that we may sell in subsequent years of
        the
        agreement are similarly subject to fluctuations.
 
 **Capital
        Resources**
 
 As
        a
        development stage enterprise, our primary efforts, to date, have been devoted
        to
        conducting research and development, raising capital, forming collaborations
        and
        recruiting staff. We have limited capital resources and have an accumulated
        deficit of $60,064,476 since inception and have had negative cash flows from
        operations since inception. These losses have resulted principally from costs
        incurred in research and development activities, including acquisition of
        technology rights and general and administrative expenses. We expect to incur
        additional operating losses until such time as we generate sufficient revenue
        to
        offset expenses, and we may never achieve profitable operations.
  21
 
 The
        primary sources of our working capital have been equity financings and the
        establishment of our loan facility. On May 23, 2007, we filed with the SEC
        a
        Registration Statement on Form S-3 under the Securities Act, which was declared
        effective by the SEC on June 13, 2007. This registration statement allows
        us,
        from time to time, to offer and sell shares of common stock, preferred stock,
        warrants to purchase our securities and/or debt securities, up to a maximum
        aggregate amount of $70 million of such securities. On August 17, 2007, we
        closed on a registered direct sale to certain institutions of an aggregate
        of units consisting of 23,333,333 shares of our common stock and warrants
        to purchase up to an aggregate of 4,666,667 shares of our common stock for
        aggregate proceeds of $35.0 million. The warrants are exercisable at any
        time
        until five years from the closing date at a price of $1.86. We have been
        using
        the net proceeds from this transaction of approximately $32.4 million for
        continued funding of our clinical trials, additional research and development
        efforts, and general working capital purposes. We paid approximately $2.6
        million in total commissions and expenses to investment bankers engaged to
        assist us in the financing. We currently have no firm agreements with any
        third-parties for the sale of additional securities pursuant to this
        registration statement.
 
 On
        November 2, 2007, we entered into a Term Loan Agreement and a Pledge and
        Security Agreement with Mast Credit Opportunities I Master Fund, Ltd., as
        the
        lender, and Mast Capital Management, LLC, as agent for the lender. Under
        this
        arrangement, the lender agreed to provide a term loan facility to us in an
        aggregate amount of up to $20,000,000, subject to the further terms and
        conditions of the Loan Agreement. The loan is secured by a first priority
        lien
        on all of our assets. At the initial closing, we received an initial loan
        of
        $10,000,000. The loan proceeds will be used to finance the cost of additional
        plasma purchases. The loan is for a term of 36 months and matures on November
        1,
        2010. Interest on the loan accrues at the rate of 13.5% per annum. We may
        request additional term loan advances in amounts not less than $1,000,000
        each
        during the twelve month period from the closing date. Our ability to request
        additional loans is subject to our maintaining (i) a borrowing base in excess
        of
        the outstanding aggregate loan amount and (ii) compliance with the covenants
        and
        conditions of the loan. Further, if the outstanding loan amount exceeds the
        borrowing base, then we will be required to prepay an amount equal to such
        excess, and, if applicable, the lender’s total commitment shall be reduced to
        equal the borrowing base at the time of such mandatory prepayment.
 
 The
        Loan
        Agreement allows us to prepay the outstanding principal amount and all accrued
        but unpaid interest, subject to payment of a make-whole premium during the
        first
        year following the closing and a prepayment fee thereafter, until May 1,
        2010.
        The Loan Agreement requires compliance with customary covenants and restrictions
        on our ability to, among other things, dispose of certain assets, engage
        in
        certain transactions, incur indebtedness and pay dividends. The Loan
        Agreement also provides for customary events of default following which,
        the
        lender may, at its option, accelerate the amounts outstanding under the Loan
        Agreement. In connection with the Loan Agreement, we issued to the Lender
        warrants to purchase an aggregate of 900,000 shares of our common stock. 
The warrants are for a term of three years and have an exercise price of
        $1.6576
        per share, which is the volume weighted average price per share of our common
        stock for the thirty trading days immediately preceding the closing.  The
        warrants were issued in reliance on the Section 4(2) exemption from the
        registration requirements of the Securities Act of 1933, as amended.  We
        also entered into a registration rights agreement with the lender pursuant
        to
        which we agreed to file a registration statement with the Securities and
        Commission covering the resale of the shares of common stock which may be
        issued
        upon exercise of the warrants upon the demand of the holders of a majority
        of
        the warrants. In consideration for services provided on behalf of the Company
        in
        connection with the consummation of the transactions contemplated by the
        Secured
        Financing Agreements, the Company paid a fee of 1% of the amounts borrowed
        under
        the Loan Agreement to Mr. Richard Stone, who is the beneficial owner of greater
        than 5% of the Company’s outstanding common stock.
 
 On
        February 11, 2008, the lender, agent for the lender and two affiliated
        individuals filed a Schedule 13G with the Securities and Exchange Commission
        reporting that as of January 30, 2008, such persons were the beneficial owner
        of
        greater than 5.0% of our common stock. Accordingly, in the event that we
        elect
        to increase our borrowings under this loan arrangement, such transaction
        would
        be reviewed by the audit committee of our board of directors in accordance
        with
        our procedures for reviewing related party transactions.
 
 To
        raise
        additional funds, we intend to either undertake private placements or registered
        offerings of our securities, either as a self-offering or with the assistance
        of
        registered broker-dealers, or negotiate a private sale of our securities
        to one
        or more institutional investors. However, we currently have no firm agreements
        with any third-parties for any financing arrangements and no assurances can
        be
        given that we will be successful in raising additional capital from any proposed
        financings. There can be no assurance that additional financing, if at all
        available, can be obtained on terms acceptable to us. If we raise additional
        funds by selling shares of common stock or convertible securities, the ownership
        of our existing shareholders will be diluted. Further, if additional funds
        are
        raised through the issuance of equity or debt securities, such additional
        securities may have powers, designations, preferences or rights senior to
        our
        currently outstanding securities. Any inability to obtain required financing
        on
        sufficiently favorable terms could have a material adverse effect on our
        business, results of operations and financial condition. If we are unsuccessful
        in raising additional capital we will need to reduce costs and operations
        substantially. Further, if expenditures required to achieve our plans are
        greater than projected or if revenues are less than, or are generated more
        slowly than, projected, we will need to raise a greater amount of funds than
        currently expected.
 
 We
        expect
        our cash requirements for operating activities will increase due to the
        following future activities:
 
 •
              Conduct
                  commercialization activities in support of our product candidates,
                  including development of market plans and regional sales and marketing
                  capabilities;
  22
 
 •
              Conduct
                  clinical programs, including clinical trials to support regulatory
                  submissions of our product
                  candidates;
  •
              Maintain,
                  protect and expand our intellectual
                  property;
  •
              Develop
                  expanded internal infrastructure;
                  and
  •
              Hire
                  additional personnel.
  **COMMITMENTS
        AND CONTINGENCIES**
  The
        following is a summary of our significant contractual cash obligations for
        the
        periods indicated that existed as of March 31, 2008.
 Total
              
              Less
                  than
                1
                  year
              
              1
                  -
                  2
                years
              
              3
                  -
                  5
                years
              
              More
                  than
                5
                  yearsOffice
                  leases
              
              $
              805,224
              
              $
              223,832
              
              $
              202,141
              
              $
              379,251
              
              $
              0CRO
                  contract
              
              
              469,805
              
              
              469,805
              
              
              0
              
              
              0
              
              
              0Executive
                  employment contracts
              
              
              5,048,633
              
              
              1,200,943
              
              
              1,030,054
              
              
              2,817,636
              
              
              0Plasma
                  contract
              
              
              48,042,759
              
              
              13,367,296
              
              
              12,312,188
              
              
              22,363,275
              
              
              0Sanquin
                  facility upgrade
              
              
              8,534,593
              
              
              8,534,593
              
              
              0
              
              
              0
              
              
              0Sanquin
                  purchases (a)
              
              
              20,526,814
              
              
              20,526,814
              
              
              0
              
              
              0
              
              
              0Long-term
                  debt
              
              
              15,036,991
              
              
              515,992
              
              
              1,374,046
              
              
              13,146,953
              
              
              0Research
                  and development contract
              
              
              234,000
              
              
              234,000
              
              
              0
              
              
              0
              
              
              0Total
                  obligations
              
              $
              98,698,819
              
              $
              45,073,275
              
              $
              14,918,429
              
              $
              38,707,115
              
              $
              0
 
 (a)
              prior
                  to approval of scale up
 
 Our
        major
        contractual obligations relate to purchase commitments, long-term debt, Sanquin
        facility upgrade and compensation under employment contracts. We expect to
        devote substantial resources to continue our research and development efforts,
        to expand our product pipeline and to support our product candidates as they
        move forward in the clinical development process. Our funding requirements
        will
        depend on numerous factors, including:
 
 ·
              the
                  scope and results of our clinical trials;·
              advancement
                  of other product candidates into development;·
              potential
                  acquisition or in-licensing of other product candidates, commercial
                  products or technologies;·
              the
                  timing of, and the costs involved in, obtaining regulatory
                  approvals;·
              the
                  cost of manufacturing activities for product
                  candidates;·
              the
                  costs involved in preparing, filing, prosecuting, maintaining and
                  enforcing patent claims and other patent-related costs, including
                  litigation costs and the results of such litigation;
                  and·
              our
                  ability to establish and maintain additional collaborative
                  arrangements.
 
 We
        expect
        product development costs to increase in the future as more of our product
        candidates enter clinical trials. In addition, we may be obligated to make
        milestone payments on certain of our product candidates as they progress
        through
        the clinical trial process. The duration and cost of clinical trials may
        vary
        significantly over the life of a particular project as a result of, among
        other
        things, the following factors:
 
 ·
              the
                  length of time required to recruit qualified patients for clinical
                  trials;·
              the
                  duration of patient dosing and follow-up in light of trial
                  results;·
              the
                  number of clinical sites required for trials; and·
              the
                  number of patients that ultimately
                  participate.
 
 *Clinical
        Services Agreement*
 
 On
        March
        2, 2005, we entered into a CRO services agreement with INC Research which
        governs INC Research’s provision of services in connection with the support of
        clinical investigation and management and/or research of our Phase III clinical
        trial. We entered into a separate services agreement with INC Research in
        September 2006 which governs INC Research’s provision of additional services in
        connection with our Phase III clinical trials and activities related to the
        commercialization of our product candidates. The services provided by INC
        Research pursuant to both contractual arrangements are on a work-order basis
        and
        we are invoiced on a time and materials basis. We have the right to terminate
        both agreements, and any pending work-order, with prior notice and without
        cause. As of March 31, 2008, we have estimated that we will pay INC Research
        approximately $470,000 for its services under both agreements in 2008. However,
        due to the variability associated with the conduct of clinical trials, we
        are
        unable to estimate with certainty the future costs we will incur under our
        CRO
        agreement. We anticipate that these costs will increase significantly above
        our
        current estimates if we expand the clinical trials.
  23
 
 *New
        Amended and Restated Executive Employment Agreements*
 
 On
        December 20, 2007, we entered into second amended and restated employment
        agreements with each of its Chief Executive Officer, Dr. Joshua D. Schein,
        and
        its Executive Vice President and Chairman, Mr. Judson Cooper. As used in
        the
        following summary, the term “Executive(s)” shall refer to Messrs. Schein and
        Cooper. In addition to the execution of the amended and restated employment
        agreements, on December 20, 2007, we also awarded each of the Executives
        a cash
        bonus for the 2007 fiscal year of $425,000, which was approved by our
        Compensation Committee. The amended and restated employment agreements are for
        an initial term expiring December 31, 2012 and at the end of the initial
        term
        renew automatically for additional one year terms unless sooner terminated
        or
        not renewed. Under the employment agreements, the Executives will continue
        to
        receive a base salary of $425,000; provided, however, that the base salary
        shall
        increase to $500,000 effective upon the date on which the U.S. Food and Drug
        Administration approves our biologics license application for its lead product
        candidate (the “Approval Date”).  In
        addition, the base salary shall increase at the end of each year of service
        (commencing at the end of 2007) by the greater of (i) 4% or (ii) a percentage
        equal to the increase, if any, in the United States Department of Labor Consumer
        Price Index (or comparable index, if available) for the New York metropolitan
        area over the previous 12 months. Commencing in the year in which the Approval
        Date occurs, the Executives will be entitled to a bonus opportunity within
        the
        target range of 75% to 200% of base salary, based on satisfaction of performance
        targets to be determined by the Compensation Committee.
 
 *Other
        Employment Agreements*
 
 During
        our 2006 fiscal year we entered into employment agreements with our Chief Financial Officer, Douglas J. Beck, and Jason Bablak,
        who serves as our Vice President, Regulatory Affairs and Product Development.
        In
        March 2007 we hired Dov Elefant as our Corporate Controller pursuant to the
        terms of an offer letter (see Note I to our unaudited condensed consolidated
        financial statements).
 
 *Distribution
        Agreement*
 
 On
        June
        1, 2007 we exercised an option to extend the Sanquin distribution agreement.
        Our
        distribution agreement with Sanquin terminates on December 31, 2010, unless
        extended by us for up to a three-year period or by mutual agreement of the
        parties prior to its expiration. On October 10, 2007, we entered into an
        amendment, dated as of September 24, 2007, to our Distribution and Manufacturing
        Services Agreement with Sanquin. Pursuant to the amendment, we agreed with
        Sanquin on the terms of a construction project to scale-up the production
        facilities of Sanquin to be used for the purpose of meeting our anticipated
        ongoing requirements for the commercial use of our C1-INH product to be marketed
        as CinryzeTM. Pursuant to the terms and conditions of the amendment, we will
        develop a project plan for the construction to the production facilities
        with
        Sanquin. Subject to the terms of the final project plan, we would provide
        Sanquin with a non-interest bearing loan, up to a maximum amount of €7.5 million
        (approximately US $11.9 million, based on the exchange rate as of March 31,
        2008), to finance the construction project. This loan will be due July 1,
        2014
        and Sanquin agreed to repay the principal amount of the loan by providing
        us
        with a discount to the per unit purchase price of CinryzeTM. The remaining cash
        commitment is approximately $8.5 million.
 
 Pursuant
        to the amendment, Sanquin shall manufacture C1-INH product for us on a
        toll-manufacturing basis using blood plasma supplied by us. We agreed to
        purchase a specified amount of such product from Sanquin totaling approximately
        $20.5 million until the scale up is approved by the appropriate regulatory
        authorities, which we expect to occur during 2009. In addition, we agreed
        to an
        annual minimum purchase commitment of product of approximately $23.3 million
        during the term of the agreement commencing in the year in which the scale
        up is
        approved in the U.S. for commercial production. We agreed to negotiate in
        good
        faith to modify these requirements in the event that regulatory approval
        for
        commercial release of the CinryzeTM in the U.S. does not occur by March 31, 2008. As
        we
        have not received regulatory approval for CinryzeTM as of such date, we have been
        in discussions with Sanquin regarding these requirements. However, no assurances
        can be given that we will ultimately enter into a modification agreement,
        or
        similar arrangement with Sanquin to modify our commitments under this Agreement.
        In such an event, our liabilities to Sanquin would be subject to the current
        terms of the Agreement. Our
        contractual purchase commitments are subject to annual adjustments based
        on
        market conditions and do not include the cost of storage, handling and testing
        services that Sanquin will provide for us.
  24
  *Plasma
        Supply Agreement*
 
 On
        July
        19, 2007, we entered into an agreement, for the purchase and sale of plasma
        with
        DCI Management Group, LLC (the “DCI Agreement”) pursuant to which we will
        purchase quantities of U.S. Source Plasma to be utilized in the production
        of
        product under our Distribution and Manufacturing Services Agreement with
        Sanquin. Under the DCI Agreement, the supplier agreed to sell us specified
        annual quantities of plasma in accordance with applicable good manufacturing
        practices. We are committed to purchase $13,950,000 of product during 2008 and
        have
        purchased approximately $3.7 million during the first quarter of
        2008 .
        Thereafter we expect our annual purchase commitment to be between $12.2 million
        and $12.9 million for the balance of the term of the DCI Agreement. Our
        contractual purchase commitments are subject to annual percentage increases
        based on market conditions. We anticipate our total remaining commitment
        under
        this DCI Agreement to be approximately $47.9 million. As of March 31, 2008
        we
        purchased approximately $3.7 million of plasma. In addition, we have an
        obligation of approximately $108,000 to purchase additional plasma from another
        supplier.
 
 *License
        Agreement – Research Plan*
 
 In
        connection with the license agreement with Sanquin for the treatment of AMI
        we
        are required to create a comprehensive research plan for the commercial
        exploitation of the licensed technology. We continue to work with Sanquin
        on the
        design of the research plan. We committed a minimum of $125,000 per annum
        during
        the first three years following the execution of the license agreement toward
        research on the licensed technology conducted by Sanquin and by other parties.
        To date, we have funded approximately $141,000 to third parties engaged in
        this
        research. We also have an obligation to pay Sanquin royalties on sales of
        products incorporating the technology.
 
 *Term
        Loan Agreement*
 
 As
        described in greater detail above, on November 2, 2007, we entered into a
        Term
        Loan Agreement dated as of November 2, 2007 and a Pledge and Security Agreement
        of the same date, with the lender executing the Term Loan Agreement and Mast
        Capital Management, LLC, as agent for the lender. The loan is for a term
        of 36
        months and matures on November 1, 2010. Interest on the loan accrues at the
        rate of 13.5% per annum. Commencing November 1, 2008, we must pay minimum
        cash
        interest payments of 10.5% and an additional 3% accrues through the term
        of the
        loan. As of March 31, 2008, the principal balance of the loan outstanding
        was
        $10,000,000 with accrued interest owed of $575,294 net of debt discount of
        $945,514.
 
 *Plasma
        Collection Center Acquisition Center Agreement*
 
 On
        April
        9, 2008, we entered into an agreement with Plasma Centers of America, LLC
        (the
“Seller”) pursuant to which we agreed to, subject to the terms and conditions of
        the Purchase Agreement, consummate the following transactions: (1) the
        acquisition of a maximum of three plasma collection centers, assuming the
        satisfaction of certain performance targets by Seller; (2) construction of
        three
        new plasma collection centers (the “New Centers”) by Seller; and (3) purchase of
        Source Plasma from each new collection center. Under this agreement, Seller
        shall construct and operate the three New Centers in accordance with the
        schedule agreed upon by the parties. In connection with Seller’s obligations, we
        will make certain performance payments upon their achievement of agreed upon
        milestones relating to the construction and operation of each New Center.
        Further, during the period commencing on each New Center opening date and
        until
        the first to occur of the twelve month anniversary of such date, the closing
        date of our acquisition of such New Center or the election by the parties
        not to
        sell a qualified New Center, Seller shall exclusively sell the Plasma generated
        at the New Centers to us. The agreement also provides that upon the achievement
        by Seller of the following operating benchmarks, the Seller shall have the
        right
        to cause us to acquire one or more New Centers: (a) Seller secures all
        regulatory approvals for each New Center with an agreed upon time frame and
        (b)
        Seller achieves and maintains an agreed-upon average collection level of
        plasma
        units. In the event Seller does not cause us to acquire a New Center, we
        shall
        have the right to require the Seller to proceed with the sale of the New
        Center.
        In addition, in the event that the operating benchmarks are not achieved
        for a
        New Center, then we shall also have the right to acquire such New Center
        for a
        reduced purchase price. Any amounts due under this agreement are not included
        in
        the above table as it was entered into subsequent to March 31,
        2008.
 
 **Off-Balance
        Sheet Arrangements**
 
 We
        had no
        off-balance sheet arrangements as of March 31, 2008 with the exception of
        the
        leases of our office space and copiers.
  25
  **Critical
        Accounting Policies**
  There
        have been no material changes to our critical accounting policies and estimates
        from the information provided in Item 6, “Management’s Discussion and Analysis
        or Plan of Operation”, included in our 10-K for the fiscal year ended December
        31, 2007.
  **New
        Accounting Pronouncements**
 
 In
        December 2007, the FASB issued SFAS No. 141 (revised 2007)
        ("SFAS 141R"), "Business Combinations" and SFAS No. 160
        ("SFAS 160"), "Noncontrolling Interests in Consolidated Financial
        Statements, an amendment of Accounting Research Bulleting No. 51."
        SFAS 141R will change how business acquisitions are accounted for and will
        impact financial statements both on the acquisition date and in subsequent
        periods. SFAS 160 will change the accounting and reporting for minority
        interests, which will be recharacterized as noncontrolling interest and
        classified as a component of equity. SFAS 141R and SFAS 160 are
        effective beginning the first fiscal quarter of 2009. Early adoption is not
        permitted. The Company does not expect the adoption of either SFAS 141R or
        SFAS 160 will have a material impact on its statements of financial
        position, results of operations and cash flows. The guidance in these
        pronouncements will be effective for any acquisitions closed by the Company
        subsequent to adoption.
 
 **ITEM
        3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
 
 **Market
        Risk Related to Interest Rates and Foreign Currency**
 
 We
        are
        exposed to market risks related to changes in interest rates and foreign
        currency exchange rates as described below. We do not have any derivative
        financial instruments.
 
 **Interest
        Rate Risk**
 
 As
        of
        March 31, 2008, our cash included approximately $12,574,698 of money market
        securities. Due to the short term duration of our investment portfolio, an
        immediate 10% change in interest rates would not have a material effect on
        the
        fair market value of our portfolio, therefore, we would not expect our operating
        results or cash flows to be affected to any significant degree by the effect
        of
        a sudden change in market interest rates on our securities portfolio.
 
 **Foreign
        Currency Exchange Risk**
 
 We
        have
        no revenues and, as a result, we have no exposure to foreign currency exchange
        risk with respect to revenues. A portion of our expenses, loans payable and
        loan
        receivable are payable or denominated in foreign currency. We do not use
        forward
        exchange contracts to hedge exposures denominated in foreign currencies or
        any
        other derivative financial instruments for trading or speculative purposes.
        The
        effect of an immediate 10% change in exchange rates would result in additional
        cash expenditures of approximately $2,053,000 related to our annual
        manufacturing costs, additional cash expenditures of approximately $853,000
        related to the Sanquin facility upgrade and additional expenses of approximately
        $671,000 related to our loan payable to Sanquin offset by a gain of
        approximately $366,000 related to our loan receivable. These changes would
        have
        a material impact on our future operating results and cash flows.
 
 **ITEM
        4. CONTROLS AND PROCEDURES**
 
 *Evaluation
        of Disclosure Controls and Procedures*
 
 Our
        Chief
        Executive Officer and Chief Financial Officer, after evaluating the
        effectiveness of our disclosure controls and procedures (as defined in Rule
        13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period
        covered by this report, have concluded that, based on the evaluation of these
        controls and procedures, our disclosure controls and procedures were effective
        at the reasonable assurance level to
        ensure
        that information required to be disclosed by us in the reports that we file
        or
        submit under the Exchange Act is recorded, processed, summarized and reported,
        within the time periods specified in the SEC’s rules and forms.
 
 *Changes
        in Internal Controls*
 
 There
        was
        no change in our system of internal control over financial reporting (as
        defined
        in Rule 13a-15(f) under the Securities Exchange Act of 1934) during our fiscal
        quarter ended March 31, 2008 that has materially affected, or is reasonably
        likely to materially affect, our internal control over financial reporting
        and
        that such information is accumulated and communicated to our management,
        including our chief executive officer and chief financial officer, to allow
        timely decisions regarding required disclosure.
  26
 
 We
        do not
        expect that internal controls over financial reporting will prevent all errors
        or all instances of fraud. A control system, no matter how well designed
        and
        operated, can provide only reasonable, not absolute, assurance that the control
        system’s objectives will be met. Further, the design of a control system must
        reflect the fact that there are resource constraints, and the benefits of
        controls must be considered relative to their costs. Because of the inherent
        limitations in all control systems, no evaluation of controls can provide
        absolute assurance that all control issues and instances of fraud, if any,
        within its company have been detected. These inherent limitations include
        the
        realities that judgments in decision-making can be faulty, and that breakdowns
        can occur because of simple error or mistake. Controls can also be circumvented
        by the individual acts of some persons, by collusion of two or more people,
        or
        by management override of the controls. The design of any system of controls
        is
        based in part upon certain assumptions about the likelihood of future events,
        and any design may not succeed in achieving its stated goals under all potential
        future conditions. Over time, controls may become inadequate because of changes
        in conditions or deterioration in the degree of compliance with policies
        or
        procedures. Because of the inherent limitation of a cost-effective control
        system, misstatements due to error or fraud may occur and not be detected.
 
 **PART
        II - OTHER INFORMATION**
  **ITEM
        1. LEGAL PROCEEDINGS**
 
 From
        time
        to time, we may be subject to legal proceedings and claims in the ordinary
        course of business. We are not presently a party to any proceedings or claims
        that we believe will have, individually or in the aggregate, a material adverse
        effect on our business, results of operations or financial
        condition.
  **ITEM
        1A. RISK FACTORS**
 
 *A
        restated description of the risk factors associated with our business is
        set
        forth below. This description includes any material changes to and supersedes
        the description of the risk factors associated with our business previously
        disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year
        ended December 31, 2007.*  *You
        should carefully consider the risks described below, together with all of
        the
        other information included in this report, in considering our business and
        prospects. The risks and uncertainties described below are not the only ones
        facing our company. Additional risks and uncertainties not presently known
        to us
        or that we currently deem immaterial also may impair our business operations,
        financial condition and/or operating results. If any of the following risks
        actually occur, our business, financial condition or results of operations
        could
        be harmed. In such case, the trading price of our common stock could decline,
        and you may lose all or part of your investment.*
 
 **Risks
        related to our business**
 
 ***We
        are at an early stage of development as a company and currently have no source
        of revenue and may never become profitable*** ***.***
 
 We
        are a
        development stage biopharmaceutical company with a limited operating history.
        Currently, we have no products approved for commercial sale and, to date,
        we
        have not generated any revenue. Our ability to generate revenue depends on:
        first, obtaining FDA marketing approval for any of our products and, second,
        successfully commercializing and bringing to market these products. In
        particular, if we do not successfully develop and commercialize C1-INH for
        the
        treatment of HAE, we will be unable to generate any revenue for many years,
        if
        at all and, even if successful in obtaining FDA marketing approval for C1-INH
        for the treatment of HAE, it may be up to a year or more before we can expect
        to
        begin to generate revenue. If we are unable to generate revenue, we will
        not
        become profitable, and we may be unable to continue our operations.
 
 ***We
        have incurred significant losses since inception and anticipate that we will
        incur continued losses for the foreseeable future.***
 
 As
        of
        March 31, 2008, we had a deficit accumulated during our development stage
        of
        $60,064,476. We have from our inception incurred and will continue to incur
        significant and increasing operating losses for the next several years as
        we
        pursue FDA approval of our BLA for C1-INH for the acute and prophylactic
        treatment of HAE, continue the open-label studies of C1-INH and advance C1-INH
        for the treatment of selected cardiovascular diseases into clinical development.
        For the three months ended March 31, 2008 and 2007, we incurred net losses
        of
        $8,794,711 and $5,478,073, respectively. In addition, if we receive regulatory
        approval of any of our product candidates, we expect to incur significant
        sales
        and marketing expenses in the future. Because of the numerous risks and
        uncertainties associated with developing and commercializing these product
        candidates, we are unable to predict the extent of future losses or when
        and if
        we will generate revenues or become profitable.
  27
 
 ***We
        currently are devoting substantially all of our efforts on the development
        of
        product candidates based on C1-INH. If we are unable to successfully develop
        and
        commercialize these product candidates, or experience significant delays
        in
        doing so, our business, financial condition and results of operations will
        be
        materially harmed.***
 
 We
        are
        investing substantially all of our time and resources to the development
        of
        C1-INH for the treatment of inflammatory diseases. Our ability to generate
        product revenues, if ever, depends on the successful development and eventual
        commercialization of our product candidates. The success of our product
        candidates will depend on several factors, including the following:
 
 ·
              
              successful
                  completion of preclinical and clinical trials;·
              
              receipt
                  of marketing approvals from the FDA and similar regulatory authorities
                  outside the United States;·
              
              establishing
                  commercial manufacturing arrangements with third-party
                  manufacturers;·
              
              launching
                  commercial sales of our product candidates, whether alone or in
                  collaboration with others;·
              
              acceptance
                  of the product by patients, the medical community and third-party
                  payors;
 
 ·
              
              competition
                  from other therapies; and·
              
              a
                  continued acceptable safety profile of our C1-INH-based products
                  following
                  approval.
 
 Given
        our
        limited focus on C1-INH product candidates, if these product candidates do
        not
        prove successful in clinical trials, and are not approved or are not
        commercialized because we have insufficient resources for continued development
        for any other reason, we may be required to suspend or discontinue our
        operations and our business could be materially harmed.
 
 ***We
        are a development stage company, making it difficult for you to evaluate
        our
        business and your investment.***
  We
        are in
        the development stage and our operations and the development of our proposed
        products are subject to all of the risks inherent in the establishment of
        a new
        business enterprise, including:
  ·
              the
                  absence of an operating history;
  ·
              the
                  lack of commercialized products;
  ·
              insufficient
                  capital;
  ·
              expected
                  substantial and continual losses for the foreseeable
                  future;
  ·
              limited
                  experience in dealing with regulatory
                  issues;
 
 ·
              limited
                  marketing and manufacturing
                  experience;
  ·
              an
                  expected reliance on third parties for the development and
                  commercialization of some of our proposed
                  products;
  ·
              a
                  competitive environment characterized by numerous, well-established
                  and
                  well-capitalized competitors;
  ·
              uncertain
                  market acceptance of our proposed products;
                  and
  ·
              reliance
                  on key personnel.
  Because
        we are subject to these risks, you may have a difficult time evaluating our
        business and your investment in our company.
  28
  ***We
        expect that we may need to raise substantial additional capital to fund our
        operations, and our failure to obtain funding when needed would adversely
        affect
        our development programs and other operations*** .
 
 Our
        operations have consumed substantial amounts of cash since inception. We
        expect
        to continue to spend substantial amounts to:
 ·
                
                complete
                    the clinical development of C1-INH for the treatment of
                    HAE;·
                
                continue
                    the development of our other product candidates;·
                
                finance
                    our general, administrative and license acquisition
                    costs;·
                
                prepare
                    regulatory filings for C1-1NH and our other product
                    candidates;·
                
                launch
                    and commercialize our product candidates, if any such product
                    candidates
                    receive regulatory approval; and·
                
                develop
                    and implement sales, marketing and distribution
                    capabilities.
 
 Our
        cash
        used in operations increased significantly over the period from July 21,
        2003
        (inception) to March 31, 2008 and we expect that our cash used in operations
        will increase significantly over the next several years. Based on our current
        levels of research and development and our business plan, we believe that
        our
        existing cash and cash equivalents of approximately $13.2 million and proceeds
        from the sale of residual plasma should be sufficient to fund operations
        into
        the third quarter of 2008. Based on the foregoing, we have received an audit
        report from our independent registered public accounting firm containing
        an
        explanatory paragraph stating that our historical recurring losses from
        operations, limited capital resources and negative cash flows from operations
        raise substantial doubt about our ability to continue as a going concern.
        We do
        not have any commercial products available for sale and have not generated
        significant revenues and there is no assurance that if approval of our products
        is received that we will be able to generate cash flow to fund operations.
        Due
        to the foregoing factors, we expect that we may need to raise additional
        capital
        to complete the development and commercialization of our current product
        candidates. Our future funding requirements will depend on many factors,
        including, but not limited to:
 
 ·
              
              the
                  rate of progress and cost of our clinical trials and other development
                  activities;·
              
              any
                  future decisions we may make about the scope and prioritization
                  of the
                  programs we pursue;·
              
              the
                  costs and timing of filing, prosecuting, defending and enforcing
                  any
                  patent claims and other intellectual property rights;·
              
              the
                  timing of, and the costs involved in, obtaining regulatory
                  approvals;·
              
              the
                  costs of establishing sales, marketing and distribution
                  capabilities;·
              
              the
                  effect of competing technological and market
                  developments;·
              
              ongoing
                  determinations of the potential commercial success of our proposed
                  products;·
              
              the
                  costs involved in utilizing third party contract research organizations
                  for preclinical studies and clinical trials;·
              
              the
                  availability of third parties, and the cost, to manufacture compounds
                  for
                  clinical trial supply;·
              
              the
                  terms and timing of any collaborative, licensing and other arrangements
                  that we may establish; and·
              
              general
                  market conditions for offerings from biopharmaceuticals
                  companies.
 
 To
        date,
        our sources of cash have been primarily limited to the sale of equity securities
        and debt financing. We cannot be certain that additional funding will be
        available on acceptable terms, or at all. To the extent that we raise additional
        funds by issuing equity securities, our stockholders may experience significant
        dilution. Any debt financing, if available, may involve restrictive covenants
        that impact our ability to conduct our business. If we are unable to raise
        additional capital, when required, or on acceptable terms, we may have to
        significantly delay, scale back or discontinue the development and /or the
        commercialization of one or more of our product candidates. Accordingly,
        any
        failure to raise adequate capital in a timely manner would have a material
        adverse effect on our business, operating results, financial condition and
        future growth prospects. We also may be required to:
  ·
              
              seek
                  collaborators for our product candidates at an earlier stage than
                  otherwise would be desirable and on terms that are less favorable
                  than
                  might otherwise be available; and·
              
              relinquish,
                  license or otherwise dispose of rights to technologies, on unfavorable
                  terms, product candidates or products that we would otherwise seek
                  to
                  develop or commercialize ourselves.
 
 ***If
        either of our agreements with Sanquin terminate, we may be unable to continue
        our business.***
 
 Our
        business is highly dependent on distribution and license rights that we have
        received from Sanquin pursuant to a distribution agreement relating to the
        treatment of HAE and a license agreement relating to the treatment of AMI.
        Upon
        commercial launch of our product candidate for the treatment of HAE and
        thereafter during the term of the agreement, Sanquin will supply us with
        our
        commercial requirements for C1-INH for the treatment of HAE in each country
        where we have received regulatory approval, subject to minimum annual purchase
        requirements in Euros equal to approximately $21.7 million per year. If we
        fail
        to fulfill certain obligations or fail to meet certain milestones under the
        distribution agreement, the distribution agreement may be terminated. These
        milestones include (a) submission of a BLA with the FDA within 12 months
        from
        the completion of the clinical trial for HAE, and (b) obtaining marketing
        approval in the United States within 18 months from the submission of the
        BLA.
        In addition, Sanquin has the right to terminate the agreement if it is unable
        to
        maintain liability insurance for its United States obligations, under certain
        circumstances as described in the distribution agreement. In addition, either
        party may terminate the agreement upon an uncured breach. If Sanquin terminates
        the distribution agreement, we would have to retain another supplier of C1-INH
        for the treatment of HAE. If we are unable to locate another supplier of
        C1-INH
        comparable to Sanquin on economically acceptable terms, or at all, we will
        not
        be able to commercialize our product candidates and we may be forced to cease
        our operations.
  29
 
 Under
        the
        license agreement, Sanquin granted us an exclusive license to use certain
        patent, patent applications and know-how related to the use of C1-INH technology
        for the treatment of AMI. Under the terms of the license agreement for AMI,
        we
        are obligated to make minimum and earned royalty and other payments to Sanquin.
        If we fail to fulfill those obligations or other material obligations, the
        license agreement may be terminated by Sanquin. If Sanquin terminates the
        license agreement, we will have no further rights to utilize the intellectual
        property covered by the license agreement, we would not be able to commercialize
        the applicable product candidate for the treatment of AMI and we may be forced
        to cease our operations relating to the treatment to AMI using C1-INH,
        particularly if we do not have rights to other product candidates.
 
 ***We
        are dependent on Sanquin as our sole source of supply for C1-INH and it will
        expand its manufacturing capacity to satisfy potential demand if we obtain
        regulatory approval for our lead product candidate.***
 
 Pursuant
        to our distribution agreement with Sanquin, Sanquin will supply us with certain
        annual minimum and maximum amounts of C1-INH. In the event demand for C-1NH
        is
        greater than the amount supplied by Sanquin, we would have to find alternative
        suppliers of C1-INH. Although we do not currently have any commercial products,
        we believe that we will need additional manufacturing capacity to meet
        anticipated demand for our products, if we obtain FDA approval for CinryzeTM, our
        lead product candidate. If we are unable to locate another supplier of C1-INH
        comparable to Sanquin on economical terms, or at all, we may lose business
        and
        our reputation in the marketplace could be adversely affected. Due to this
        risk,
        in October 2007, we agreed with Sanquin to finance a portion of the costs
        of the
        project to increase the manufacturing capacity of its facilities. Under this
        arrangement, we agreed to provide Sanquin with a non-interest bearing loan,
        up
        to a maximum amount of €7.5 million (approximately US $11.9 million, based on
        the exchange rate as of March 31, 2008), to finance the construction project.
        As
        of March 31, 2008, we have provided Sanquin with approximately €2.3 million
        under this arrangement. This arrangement has increased our financial commitments
        and since we agreed that Sanquin would repay this loan amount through a discount
        on the cost of product purchasers, we will not be able to recoup this amount
        in
        the short term. Further, assuming the completion of construction, Sanquin
        would
        need to obtain the requisite regulatory approvals for the facility on a timely
        basis in order to manufacture CinryzeTM for us. If they cannot obtain necessary
        approvals for these contemplated expansions, or complete the planned
        construction, in a timely manner, we may need to locate an alternative supplier.
 
 ***We
        agreed to provide Sanquin with a loan to finance the scale up of their
        production facilities, the repayment of which may be waived in the event
        we fail
        to perform under our agreement with them.***
 
 On
        October 10, 2007, we entered into an amendment to our Distribution and
        Manufacturing Services Agreement with Sanquin. Pursuant to this amendment,
        Lev
        and Sanquin agreed to jointly develop a project plan for, and initiate a
        construction project to scale-up the production facilities of Sanquin to
be used
        for the purpose of meeting our anticipated ongoing requirements for the
        commercial use of the C1-Inhibitor product. Subject to the terms of the final
        project plan, we agreed to provide Sanquin with a non-interest bearing loan,
        up
        to a maximum amount of €7.5 million (approximately US $11.9 million, based on
        the exchange rate as of March 31, 2008), to finance the construction project.
        As
        of March 31, 2008, we have provided Sanquin with approximately €2.3 million
        under this arrangement. This loan is due July 1, 2014 and Sanquin agreed
        to
        repay the principal amount of the loan by providing us with a discount to
        the
        per unit purchase price of product. In the event the agreement is terminated
        because of a default of Sanquin prior to the loan being repaid in full, then
        Sanquin shall pay us the entire outstanding principal balance of the loan
        as of
        the date of termination within 60 days from such date. However, in the event
        the
        agreement is terminated before July 1, 2014 because of a default by us or
        if by
        such date the volume of product we order is less than the required volume
        for
        Sanquin to repay the loan, then we shall waive the then outstanding balance
        of
        the loan.
 
 ***We
        rely on third parties to supply and manufacture our product candidates, without
        any direct control over the timing for the supply, production and delivery
        of
        our product candidates, thereby possibly adversely affecting any future
        revenues.***
  We
        have
        relied exclusively and are dependent on certain third party source suppliers
        to
        supply raw materials, specifically plasma, for our product candidates. To
        date,
        we have only required plasma for the production of C1-INH to conduct our
        clinical trials. However, in connection with our ongoing trials and in the
        event
        any of our product candidates receives the approval of the FDA, we will need
        increased supplies of plasma.
  30
 
 On
        July
        19, 2007, we entered into an agreement for the purchase and sale of plasma
        with
        DCI Management Group, LLC, the “supplier” pursuant to which we will purchase
        quantities of U.S. Source Plasma to be utilized in the production of product
        under our Distribution and Manufacturing Services Agreement with Sanquin
        Blood
        Supply Foundation. We will expend a significant amount of our currently
        available cash in obtaining a sufficient supply of plasma. This will increase
        the likelihood that we will need to raise additional capital to fund our
        operations.
 
 Under
        this agreement, the supplier agreed to sell us specified annual quantities
        of
        plasma in accordance with applicable good manufacturing practices. Under
        this
        agreement, we are committed to purchase a minimum of $13,950,000 of product
        during 2008 and have purchased approximately $3.7 million during the first
        quarter of 2008. Thereafter we expect our annual purchase commitment to be
        between $12.2 million and $12.9 million for the balance of the term of the
        agreement. Our contractual purchase commitments are subject to annual percentage
        increases based on market conditions and do not include additional pre-delivery
        testing which we may require the supplier to undertake. This agreement expires
        December 31, 2011, unless sooner terminated in accordance with its terms.
        Either
        party may terminate the agreement upon written notice if the other party
        is in
        material breach of any provision thereof, subject to applicable cure periods.
        Subject to the supplier’s ability to mitigate damages, in the event we are in
        default of our payment obligation under the contract, we will be liable to
        purchase the minimum quantities of plasma specified under the contract for
        the
        balance of the term. We have the right, however, to terminate the contract
        if by
        December 31, 2008 we do not obtain regulatory approval for the commercialization
        of our lead product candidate or are not able to secure adequate financial
        arrangements to cover our obligations with respect to the initial purchase
        commitments under the Agreement. In either such event, we will be obligated
        to
        complete the purchase of 80% of the initial minimum purchase commitment,
        subject
        to the supplier’s ability to mitigate damages. Further, upon expiration of the
        agreement, or in the event that it is terminated for reasons other than as
        set
        forth above, we will be obligated to purchase a closing inventory of plasma.
 
 If
        we are
        unable to obtain or maintain this level of plasma supply, we will need to
        obtain
        our supply from other parties in order to satisfy our expected needs.
        Establishing additional or replacement suppliers for these materials may
        take a
        substantial amount of time. In addition, we may have difficulty obtaining
        similar supplies from other suppliers that are acceptable to the FDA. If
        we have
        to switch to a replacement supplier, we may face additional regulatory delays
        and the manufacture and delivery of our product candidates could be interrupted
        for an extended period of time, which may delay completion of our clinical
        trials or commercialization of our product candidates. As a result, regulatory
        approval of our product candidates may not be received at all. All these
        delays
        could cause delays in commercialization of our product candidates, delays
        in our
        ability to generate revenue, and increase our costs.
 
 ***If
        our third-party suppliers do not maintain high standards of manufacturing
        in
        accordance with cGMP and other manufacturing regulations, our development
        and
        commercialization activities could suffer significant interruptions or delays.***
 
 If
        any of
        our product candidates receives the approval of the FDA we expect to rely
        on
        Sanquin and possibly another third-party contractor to manufacture our
        commercial products. If any current or future third-party supplier ceases
        to
        supply the products in the quantity and quality we need to manufacture the
        drug
        candidates or if the current or future third-party suppliers are unable to
        comply with current Good Manufacturing Practices, or cGMPs, and other government
        regulations, the qualification of additional or replacement suppliers could
        be a
        lengthy process, and there may not be adequate alternatives to meet our needs,
        which would negatively affect our business. In such a case, we may not be
        able
        to obtain the necessary materials used in our products in the future on a
        timely
        basis, if at all. The FDA and regulatory agencies in other countries also
        periodically inspect manufacturing facilities, including third parties who
        manufacture products or active ingredients for us. The FDA and/or applicable
        foreign regulatory agencies may not believe that the chosen manufacturers
        have
        sufficient experience making the dosage forms that we have contracted with
        them
        to produce, and may subject those manufacturers to increased scrutiny.
        Pharmaceutical manufacturing facilities must comply with applicable cGMPs,
        and
        manufacturers usually must invest substantial funds, time and effort to ensure
        full compliance with these standards. We will not have control over our contract
        manufacturers’ compliance with these regulations and standards. In complying
        with these regulations, we and our third-party suppliers must expend significant
        time, money and effort in the areas of design and development, testing,
        production, record-keeping and quality control to assure that our products
        meet
        applicable specifications and other regulatory requirements. The failure
        to
        comply with these requirements could result in an enforcement action against
        us
        or our suppliers, including fines, delays or suspensions of approvals, seizures
        or recalls of products, operating restrictions, manufacturing interruptions,
        costly corrective actions, injunctions, adverse publicity against us and
        our
        products and possible criminal prosecutions. If any of our third-party suppliers
        or we fail to comply with cGMP or other applicable manufacturing regulations,
        our ability to develop and commercialize our products could suffer significant
        interruptions.
  31
  ***Our
        lead product candidate is derived from human plasma, and is therefore subject
        to
        the risk of biological contamination inherent in plasma-derived products.
        This
        risk could adversely affect our ability to obtain raw materials and market
        our
        products.***
 
 CinryzeTM
        is derived from donated human plasma. Many disease-causing viruses, bacteria
        and
        other pathogens are present in the plasma of infected individuals. If infected
        individuals donate plasma, the plasma would likely contain those pathogens.
        As a
        result, the sourcing of plasma, and the production of products derived from
        plasma, is regulated extensively by the FDA and other medical product and
        health
        care regulatory agencies. We rely on our suppliers to maintain compliance
        with
        regulations promulgated by such agencies. The failure to comply with these
        regulations or the accidental contamination of plasma could adversely affect
        our
        ability to source plasma at commercially reasonable prices. Moreover, public
        perception about the safety of plasma-derived products could adversely affect
        the market for our products. Concern over the safety of plasma-derived products,
        driven in part by past screening failures in the industry and the appearance
        of
        new infectious agents like HIV, has resulted in the adoption of rigorous
        screening procedures by regulatory authorities, and screening procedures
        are
        likely to become stricter and more involved over time. As screening procedures
        have become more rigorous, potential donors have been disqualified and other
        potential donors have been discouraged from donating due to their reluctance
        to
        undergo the required screening procedures. Increasingly stringent measures
        could
        adversely affect plasma supplies, with a corresponding adverse effect on
        our
        ability to obtain raw materials at a commercially acceptable price or at
        all.
        The safety concerns associated with plasma-derived products also affect our
        ability to market our products. Medical events or studies that raise or
        substantiate concerns about the safety of our or other similar products would
        negatively impact public perception of all plasma-derived products and of
        the
        plasma donation process. Further, any failure in screening, whether by us
        or by
        other manufacturers of these products, could adversely affect our reputation,
        the support we receive from the medical community and overall demand for
        our
        products.
 
 ***Our
        proposed products are in the development stages and will likely not be
        commercially introduced until mid-2008, if at all.***
  Our
        proposed products are in the development stages and will require further
        development, preclinical and clinical testing and investment prior to
        commercialization in the United States and abroad. We have not commercially
        introduced any products and do not expect to do so until mid-2008 at the
        earliest, depending upon the timing of our completion of clinical trials,
        our
        preparation and filing, and the FDA’s review, of our biologics license
        application for our proposed products. As previously announced, on April
        15,
        2008, we formally submitted our complete response to the FDA’s complete response
        (or “approvable”) letter for our lead product candidate, CinryzeTM. Further, we
        have been advised that the FDA’s BPAC intends to review our biologics license
        application for CinryzeTM on May 2, 2008, for the prophylactic treatment of HAE.
 
 We
        cannot
        assure you that any of our proposed products will:
  ·
              be
                  successfully developed;
  ·
              prove
                  to be safe and efficacious in clinical trials;
  ·
              meet
                  applicable regulatory standards or obtain required regulatory
                  approvals;
  ·
              demonstrate
                  substantial protective or therapeutic benefits in the prevention
                  or
                  treatment of any disease;·
              be
                  capable of being produced in commercial quantities at reasonable
                  costs;
  ·
              obtain
                  coverage and favorable reimbursement rates from insurers and other
                  third-party payors; or
  ·
              be
                  successfully marketed or achieve market acceptance by physicians
                  and
                  patients.
  ***Clinical
        trials involve a lengthy and expensive process with an uncertain outcome,
        and
        results of earlier studies and trials may not be predictive of future trial
        results.***
 
 In
        order
        to receive regulatory approval for the commercialization of our product
        candidates, we must conduct, at our own expense, extensive clinical trials
        to
        demonstrate safety and efficacy of these product candidates. Clinical testing
        is
        expensive, can take many years to complete and its outcome is uncertain.
        Failure
        can occur at any time during the clinical trial process. The results of
        preclinical studies and early clinical trials of our product candidates do
        not
        necessarily predict the results of later-stage clinical trials. Product
        candidates in later stages of clinical trials may fail to show the desired
        safety and efficacy traits despite having progressed through initial clinical
        testing. The data collected from clinical trials of our product candidates
        may
        not be sufficient to support the submission of a biologics license application
        to the FDA or to obtain regulatory approval in the United States or elsewhere.
        Because of the uncertainties associated with drug development and regulatory
        approval, we cannot determine if or when we will have an approved product
        for
        commercialization or achieve sales or profits.
  32
 
 ***Delays
        in clinical testing could result in increased cost to us and delay our ability
        to generate revenue.***
 
 We
        may
        experience delays in clinical testing of our product candidates. We do not
        know
        whether planned clinical trials will need to be redesigned or will be completed
        on schedule, if at all. Clinical trials can be delayed for a variety of reasons,
        including delays in obtaining regulatory approval to commence a trial, in
        reaching agreement on acceptable clinical trial terms with prospective sites,
        in
        obtaining institutional review board approval to conduct a trial at a
        prospective site, in recruiting patients to participate in a trial or in
        obtaining sufficient supplies of clinical trial materials. Many factors affect
        patient enrollments, including the size of the patient population, the proximity
        of patients to clinical sites, the eligibility criteria for the trial, competing
        clinical trials and new drugs approved for the conditions we are investigating.
        Prescribing physicians will also have to decide to use our product candidates
        over existing drugs that have established safety and efficacy profiles. Any
        delays in completing our clinical trials will increase our cost, slow down
        our
        product development and approval process and delay our ability to generate
        revenue.
 
 ***We
        may be required to suspend or discontinue clinical trials due to unexpected
        side
        effects or other safety risks that could preclude approval of our product
        candidates.***
 
 Our
        clinical trials may be suspended at any time for a number of reasons. For
        example, we may voluntarily suspend or terminate our clinical trials if at
        any
        time we believe that they present an unacceptable risk to the clinical trial
        patients. In addition, regulatory agencies may order the temporary or permanent
        discontinuation of our clinical trials at any time if they believe that the
        clinical trials are not being conducted in accordance with requirements or
        that
        they present an unacceptable safety risk to the clinical trial
        patients.
 
 Administering
        any product candidates to humans may produce undesirable side effects. These
        side effects could interrupt, delay or halt clinical trials of our product
        candidates and could result in the FDA or other regulatory authorities denying
        further developments or approval of our product candidates for any or all
        targeted indications. Ultimately, some or all of our product candidates may
        prove to be unsafe for human use. Moreover, we could be subject to significant
        liability if any volunteer or patient suffers, or appears to suffer, adverse
        health effects as a result of participating in our clinical trials.
 
 ***If
        we are unable to satisfy regulatory requirements, we may not be able to
        commercialize our product candidates.***
 
 We
        need
        FDA approval prior to marketing our product candidates in the United States.
        If
        we fail to obtain FDA approval to market our product candidates, we will
        be
        unable to sell our products in the United States and we will not generate
        any
        revenue. The FDA regulatory review and approval process, which includes
        evaluation of preclinical studies and clinical trials of a product candidate
        as
        well as the evaluation of our manufacturing process and our contract
        manufacturers’ facilities, is lengthy, expensive and uncertain. To receive
        approval, we must, among other things, demonstrate with substantial evidence
        from well-controlled clinical trials that the product is both safe and effective
        for each indication where approval is sought. Satisfaction of these requirements
        typically takes several years and the time needed to satisfy them may vary
        substantially, based on the type, complexity and novelty of the pharmaceutical
        product. We cannot predict if or when we might submit for regulatory review
        any
        of our product candidates currently under development. Any approvals we may
        obtain may not cover all of the clinical indications for which we are seeking
        approval. Also, an approval might contain significant limitations in the
        form of
        narrow indications, warnings, precautions, or contra-indications with respect
        to
        conditions of use.
 
 Before
        the FDA determines whether to approve CinryzeTM, we will present our clinical
        data from the prophylactic trials to be reviewed by the Blood Products Advisory
        Committee, or BPAC. We have been scheduled to appear before BPAC on May 2,
        2008.
        BPAC would then make a recommendation to the FDA for, or against, approval.
        Even
        if BPAC were to recommend approval of one or more of our products, the FDA
        would
        not necessarily approve those products. If BPAC were to recommend against
        approval of one or more of our products, it is likely that the FDA would
        not
        approve those products. If our product candidates receive approval for
        commercial sale, their marketing and manufacturing will be subject to continuing
        FDA and other regulatory requirements, such as requirements to comply with
        Good
        Manufacturing Practices.
 
 The
        FDA
        has substantial discretion in the approval process and may either refuse
        to file
        our application for substantive review or may form the opinion after review
        of
        our data that our application is insufficient to allow approval of our product
        candidates. If the FDA does not file or approve our application, it may require
        that we conduct additional clinical, preclinical or manufacturing validation
        studies and submit that data before it will reconsider our application.
        Depending on the extent of these or any other studies, approval of any
        applications that we submit may be delayed by several years or may require
        us to
        expend more resources than we have available. It is also possible that
        additional studies, if performed and completed, may not be considered sufficient
        by the FDA to make our application approvable. If any of these outcomes occur,
        we may be forced to abandon our applications for approvals, which might cause
        us
        to cease operations.
  33
 
 We
        will
        also be subject to a wide variety of foreign regulations governing the
        development, manufacture and marketing of our products. Whether or not FDA
        approval has been obtained, approval of a product by the comparable regulatory
        authorities of foreign countries must still be obtained prior to manufacturing
        or marketing the product in those countries. The approval process varies
        from
        country to country and the time needed to secure approval may be longer or
        shorter than that required for FDA approval. We cannot assure you that clinical
        trials conducted in one country will be accepted by other countries or that
        approval in one country will result in approval in any other
        country.
 
 ***If
        testing of a particular product candidate does not yield successful results,
        then we will be unable to commercialize that product.***
  Our
        product candidates in clinical trials must meet rigorous testing standards.
        We
        must demonstrate the safety and efficacy of our potential products through
        extensive preclinical and clinical testing. Clinical trials are subject to
        continuing oversight by governmental regulatory authorities and institutional
        review boards and must meet the requirements of these authorities in the
        United
        States, including those for informed consent and good clinical practices.
        We may
        not be able to comply with these requirements, which could disqualify completed
        or ongoing clinical trials. We may experience numerous unforeseen events
        during,
        or as a result of, the testing process that could delay or prevent
        commercialization of CinryzeTM or our other product candidates, including the
        following:
 ·
              
              safety
                  and efficacy results from human clinical trials may show the product
                  candidate to be less effective or safe than desired or those results
                  may
                  not be replicated in later clinical trials;·
              
              the
                  results of preclinical studies may be inconclusive or they may
                  not be
                  indicative of results that will be obtained in human clinical trials;·
              
              after
                  reviewing relevant information, including preclinical testing or
                  human
                  clinical trial results, we may abandon or substantially restructure
                  projects that we might previously have believed to be promising;·
              
              we
                  or the FDA may suspend or terminate clinical trials if the participating
                  patients are being exposed to unacceptable health risks or for
                  other
                  reasons; and·
              
              the
                  effects of our product candidates may not be the desired effects
                  or may
                  include undesirable side effects or other characteristics that
                  interrupt,
                  delay or cause us or the FDA to halt clinical trials or cause the
                  FDA or
                  foreign regulatory authorities to deny approval of the product
                  candidate
                  for any or all target indications.
  Data
        from
        our completed clinical trials may not be sufficient to support approval by
        the
        FDA for CinryzeTM or our other product candidates. The clinical trials of our
        product candidates may not be completed as or when planned, and the FDA may
        not
        approve any of our product candidates for commercial sale. If we fail to
        demonstrate the safety or efficacy of a product candidate to the satisfaction
        of
        the FDA, this will delay or prevent regulatory approval of that product
        candidate. Therefore, any delay in obtaining, or inability to obtain, FDA
        approval of any of our product candidates could materially harm our business
        and
        cause our stock price to decline.
 
 ***The
        FDA may determine our clinical trials data regarding safety or efficacy are
        insufficient for regulatory approval.***
  We
        discuss with and obtain guidance from regulatory authorities on certain of
        our
        clinical development activities. These discussions are not binding obligations
        on the part of regulatory authorities. Under certain circumstances, regulatory
        authorities may revise or retract previous guidance during the course of
        our
        clinical activities or after the completion of our clinical trials. The FDA
        may
        also disqualify a clinical trial in whole or in part from consideration in
        support of approval of a potential product for commercial sale or otherwise
        deny
        approval of that product. Even if we obtain successful clinical safety and
        efficacy data, we may be required to conduct additional, expensive trials
        to
        obtain regulatory approval.
  ***We
        may take longer to complete our clinical trials than we project, or we may
        not
        be able to complete them at all.***
  A
        number
        of factors, including unexpected delays in the initiation of clinical sites,
        slower than projected enrollment, competition with ongoing clinical trials
        and
        scheduling conflicts with participating clinicians, regulatory requirements,
        limits on manufacturing capacity and failure of a product candidate to meet
        required standards for administration to humans may cause significant delays
        in
        the completion of our clinical trials. In addition, it may take longer than
        we
        project to achieve study endpoints and complete data analysis for a trial.
        Even
        if our product candidates proceed successfully through clinical trials and
        receive regulatory approval, there is no guarantee that an approved product
        can
        be manufactured in commercial quantities at reasonable cost or that such
        a
        product will be successfully marketed.
  34
 
 We
        have
        relied on academic institutions, physician practices and clinical research
        organizations to conduct, supervise or monitor some or all aspects of clinical
        trials involving our product candidates. We have less control over the timing
        and other aspects of these clinical trials than if we conducted the monitoring
        and supervision entirely on our own. Third parties may not perform their
        responsibilities for our clinical trials on our anticipated schedule or
        consistent with a clinical trial protocol or applicable regulations. We also
        rely on clinical research organizations to perform much of our data management
        and analysis. They may not provide these services as required or in a timely
        manner.
  If
        we
        fail to commence, complete or experience delays in present or planned clinical
        trials, in particular any additional trials for CinryzeTM that could be required
        in advance of, or as a condition to, FDA approval, our ability to conduct
        our
        business as currently planned could materially suffer. Our development costs
        will increase if we are required to complete additional or larger clinical
        trials for CinryzeTM prior to FDA approval or with respect to other product
        candidates. If the delays or costs are significant, our financial results
        and
        our ability to commercialize CinryzeTM or our other product candidates will be
        adversely affected.
 
 ***The
        commercial success of our product candidates will depend upon the degree
        of
        market acceptance of these products among physicians, patients, health care
        payors and the medical community.***
 
 Our
        product candidates have never been commercialized in the United States for
        any
        indication. Even if approved for sale by the appropriate regulatory authorities,
        physicians may not prescribe our product candidates, in which case we could
        not
        generate revenue or become profitable. Market acceptance of C1-INH for the
        treatment of HAE and our other product candidates by physicians, healthcare
        payors and patients will depend on a number of factors, including:
 ·
                
                acceptance
                    by physicians and patients of each such product as a safe and
                    effective
                    treatment;·
                
                cost
                    effectiveness;·
                
                adequate
                    reimbursement by third parties;·
                
                potential
                    advantages over alternative treatments;·
                
                relative
                    convenience and ease of administration; and·
                
                prevalence
                    and severity of side effects.
 
 ***If
        our product candidates are unable to compete effectively with marketed
        treatments, our commercial opportunity will be reduced or
        eliminated.***
 
 We
        face
        competition from established pharmaceutical and biotechnology companies,
        as well
        as from academic institutions, government agencies and private and public
        research institutions. Many products are either under development or are
        currently marketed for the treatment of HAE and AMI. Many of our competitors
        have significantly greater financial resources and expertise in research
        and
        development, manufacturing, preclinical testing, conducting clinical trials,
        obtaining regulatory approvals and marketing approved products than we do.
        Smaller or early-stage companies may also prove to be significant competitors,
        particularly through collaborative arrangements with large, established
        companies. Our commercial opportunity will be reduced or eliminated if our
        competitors develop and commercialize competing products that are safer,
        more
        effective, have fewer side effects or are less expensive than our product
        candidates. These third parties compete with us in recruiting and retaining
        qualified scientific and management personnel, establishing clinical trial
        sites
        and patient registration for clinical trials, as well as in acquiring
        technologies and technology licenses complementary to our programs or
        advantageous to our business. Because we will most often be competing against
        significantly larger companies with established track records, we will have
        to
        demonstrate to physicians that based on experience, clinical data, side-effect
        profiles and other factors, our products are preferable to existing products.
        If
        we are unable to compete effectively and differentiate our products from
        currently marketed products, we may never generate meaningful
        revenue.
 
 ***If
        we are not first to market for our HAE product, the Orphan Drug Act may provide
        a competitor with up to seven years of market
        exclusivity.***
 
 The
        Orphan Drug Act was created to encourage companies to develop therapies for
        rare
        diseases by providing incentives for drug development and commercialization.
        One
        of the incentives provided by the act is seven years of market exclusivity
        for
        the first product in a class licensed for the treatment of a rare disease.
        HAE
        is considered to be a rare disease under the Orphan Drug Act, and companies
        may
        obtain orphan drug status for therapies that are developed for this indication.
        We believe CSL Behring and Pharming NV are currently developing products
        that
        the FDA may determine to be in the same class as our C1-INH product candidate
        for the acute treatment of HAE. In March 2008, CSL Behring submitted a biologics
        license application with the FDA for a product candidate for the acute treatment
        of HAE. In the event that either of these companies are first to obtain FDA
        licensure for their product, we could be prevented from obtaining licensure
        and
        marketing our C1-INH product candidate for the acute treatment of
        HAE.
  35
 
 ***We
        currently have a very limited sales and marketing organization. If we are
        unable
        to establish a direct sales force or we are unable to enter into marketing
        agreements with third parties in the United States to promote our products,
        the
        commercial opportunity for our products may be
        diminished.***
 
 We
        currently have a very limited sales and marketing organization. If any of
        our
        product candidates are approved by the FDA, we intend to market these products
        directly to health care providers in the United States through our own sales
        force and enter into distribution agreements with one or more third parties.
        We
        will incur significant additional expenses and may need to commit significant
        additional management resources to promote and sell our products. In the
        event
        we are unable to develop our own sales force and collaborate with one or
        more
        third parties to sell our product candidates, we may not be able to
        commercialize our product candidates, which would negatively impact our ability
        to generate revenue.
 
 ***If
        the FDA does not approve our contract manufacturers’ facilities, we may be
        unable to develop or commercialize our product
        candidates.***
 
 We
        rely
        on Sanquin to manufacture our product candidates, and currently have no plans
        to
        develop our own manufacturing facility. The facilities used by Sanquin to
        manufacture our product candidates will require approval by the FDA and the
        FDA
        has conducted an investigation of their facilities as part of its review
        of our
        biologics license application for CinryzeTM. There can be no assurance that
        Sanquin will be able to obtain or maintain compliance with the FDA’s
        requirements. We may need to find alternative manufacturing facilities, which
        would result in significant costs to us as well as a delay of up to several
        years in obtaining approval for and manufacturing of our product
        candidates.
 
 ***We
        have relied on third parties to conduct our clinical trials. If these third
        parties do not successfully carry out their contractual duties or meet expected
        deadlines, we may not be able to seek or obtain regulatory approval for or
        commercialize our product candidates.***
 
 We
        have
        an agreement with a third party clinical research organization, or CRO, to
        implement, provide monitors and manage data for our clinical programs. We
        and
        our CRO are required to comply with current Good Clinical Practices, or GCPs,
        regulations and guidelines enforced by the FDA for all of our products in
        clinical development. The FDA enforces GCPs through periodic inspections
        of
        trial sponsors, principal investigators and trial sites. In the future, if
        we or
        our CRO fails to comply with applicable GCPs, the clinical data generated
        in our
        clinical trials may be deemed unreliable and the FDA may require us to perform
        additional clinical trials before approving our marketing applications. We
        cannot assure you that, upon inspection, the FDA will determine that any
        of our
        clinical trials for products in clinical development comply with GCPs. In
        addition, our clinical trials must be conducted with products produced under
        current Good Manufacturing Practices, or cGMP regulations, and will require
        a
        large number of test subjects. Our failure to comply with these regulations
        may
        require us to repeat clinical trials, which would delay the regulatory approval
        process.
 
 If
        any of
        our current or future relationships with these third-party CROs terminate,
        we
        may not be able to enter into arrangements with alternative CROs. If CROs
        do not
        successfully carry out their contractual duties or obligations or meet expected
        deadlines, if they need to be replaced, or if the quality or accuracy of
        the
        clinical data they obtain is compromised due to the failure to adhere to
        our
        clinical protocols, regulatory requirements or for other reasons, our clinical
        trials may be extended, delayed or terminated, and we may not be able to
        obtain
        regulatory approval for or successfully commercialize our product candidates.
        As
        a result, our financial results and the commercial prospects for our product
        candidates would be harmed, our costs could increase, and our ability to
        generate revenue could be delayed.
 
 ***We
        have been increasing our inventory of U.S. Source Plasma and unfinished product
        in anticipation of a commercial launch of CinryzeTM.***
 
 Pursuant
        to our agreements with key suppliers, we have been increasing our inventory
        of
        U.S. Source Plasma and unfinished product in anticipation of a commercial
        launch
        of CinryzeTM. Under our agreement with our plasma supplier, we are committed to
        purchase a minimum of $13,950,000 of product during 2008 and have purchased
        approximately $3.7 million during the first quarter of 2008. Thereafter we
        expect our annual purchase commitment to be between $12.2 million and $12.9
        million for the balance of the term of the agreement. Further, under our
        distribution and manufacturing agreement with Sanquin, we agreed to purchase
        a
        specified amount of such product from Sanquin totaling approximately $20.5
        million until the scale up is approved by the appropriate regulatory
        authorities, which we expect to occur during 2009. At March 31, 2008, we
        have
        valued our inventory of U.S. Source Plasma (or raw materials) and unfinished
        product at $12.1 million and $4.1 million, respectively. Furthermore, we
        expect
        our inventory levels to increase during the current fiscal year while we
        continue to pursue FDA approval of CinryzeTM.
  36
 
 In
        the
        event that the FDA does not approve the commercial introduction of CinryzeTM, or
        if approval is delayed to an extent where we are prevented from marketing
        CinryzeTM due to operation of the Orphan Drug Act, we would need to dispose of
        these inventories in an effort to recover our costs. While we believe that
        under
        current market conditions we would be able to resell quantities of these
        inventories on commercially reasonable terms, no assurances can be given
        that
        such conditions would exist at the time of any such transaction or that we
        would
        be able to enter into any agreements with third parties to resell our
        inventories on commercially reasonable terms or at all. Accordingly, we are
        exposed to the risk of being unable to recover a significant portion of our
        costs of these inventories. In the event that this occurs, we may need to
        write-off a material portion of the value of these assets and our financial
        condition would be adversely affected.
 
 ***If
        product liability lawsuits are successfully brought against us, we may incur
        substantial liabilities and may be required to limit commercialization of
        our
        product candidates.***
 
 We
        face
        an inherent risk of product liability lawsuits related to the testing of
        our
        product candidates, and will face an even greater risk if we sell our products
        commercially. Currently, we are not aware of any anticipated product liability
        claims with respect to our product candidates. In the future, an individual
        may
        bring a liability claim against us if one of our product candidates causes,
        or
        merely appears to have caused, an injury. If we cannot successfully defend
        ourselves against the product liability claim, we may incur substantial
        liabilities. Regardless of merit or eventual outcome, liability claims may
        result in:
 ·
              
              decreased
                  demand for any product candidates or products that we may
                  develop;·
              
              injury
                  to our reputation;·
              
              withdrawal
                  of clinical trial participants;·
              
              costs
                  to defend the related litigation;·
              
              substantial
                  monetary awards to trial participants or patients;·
              
              loss
                  of revenue; and·
              
              the
                  inability to commercialize any products that we may
                  develop.
  We
        have
        clinical trial liability insurance that covers our clinical trials with an
        annual aggregate limit of $5,000,000. We intend to expand our insurance coverage
        to include the sale of commercial products if marketing approval is obtained
        for
        our product candidates. We believe that we will be able to procure sufficient
        insurance coverage for our proposed clinical development activities. However,
        as
        enrollment in our clinical trials increases and we initiate additional clinical
        trials, such insurance coverage may prove insufficient to cover any liability
        claims brought against us. In addition, because of the increasing costs of
        insurance coverage, we may not be able to maintain insurance coverage at
        a
        reasonable cost or obtain insurance coverage that will be adequate to satisfy
        any liability that may arise. If we are required to pay a product liability
        claim, we may not have sufficient financial resources to complete development
        or
        commercialization of any of our product candidates and, if so, our business
        and
        results of operations would be harmed.
 
 ***Even
        if we receive regulatory approval for our product candidates, we will be
        subject
        to ongoing significant regulatory obligations and
        oversight.***
 
 If
        we
        receive regulatory approval to sell our product candidates, the FDA and foreign
        regulatory authorities may, nevertheless, impose significant restrictions
        on the
        indicated uses or marketing of such products, or impose ongoing requirements
        for
        post-approval studies. If we fail to comply with applicable regulatory
        requirements, we may be subject to fines, suspension or withdrawal of regulatory
        approvals, product recalls, seizure of products, operating restrictions and
        criminal prosecution. Any of these events could harm or prevent sales of
        the
        affected products or could substantially increase the costs and expenses
        of
        commercializing and marketing these products. In addition, if any of our
        product
        candidates receive marketing approval and we or others later identify
        undesirable side effects caused by the product, we could face one or more
        of the
        following:
 ·
              
              a
                  change in the labeling statements or withdrawal of FDA or other
                  regulatory
                  approval of the product;·
              
              a
                  change in the way the product is administered; or·
              
              the
                  need to conduct additional clinical
                  trials.
  37
 
 Discovery
        after approval of previously unknown problems with our products, manufacturers
        or manufacturing processes, or failure to comply with regulatory requirements,
        may result in actions such as:
  ·
              
              restrictions
                  on such products’ manufacturers or manufacturing
                  processes;
 
 ·
              
              restrictions
                  on the marketing of a product;·
              
              warning
                  letters;·
              
              withdrawal
                  of the products from the market;·
              
              refusal
                  to approve pending applications or supplements to approved applications
                  that we submit;·
              
              recall
                  of products;·
              
              fines,
                  restitution or disgorgement of profits or revenue;·
              
              suspension
                  or withdrawal of regulatory approvals;·
              
              refusal
                  to permit the import or export of our products;·
              
              product
                  seizure;·
              
              injunctions;
                  or·
              
              imposition
                  of civil or criminal penalties.
 
 ***If
        we fail to attract and keep senior management and key scientific personnel,
        we
        may be unable to successfully develop our product candidates, conduct our
        clinical trials and commercialize our product
        candidates.***
 
 Our
        success depends in part on our continued ability to attract, retain and motivate
        highly qualified management, clinical and scientific personnel and on our
        ability to develop and maintain important relationships with leading academic
        institutions, clinicians and scientists. We are highly dependent upon our
        senior
        management, particularly Judson Cooper, our Chairman and Executive Vice
        President, and Joshua D. Schein, Ph.D., our Chief Executive Officer. The
        loss of
        services of Mr. Cooper or Dr. Schein, or one or more other members of senior
        management could delay or prevent the successful completion of our planned
        clinical trials or the commercialization of our product candidates.
 
 Recruiting
        and retaining qualified scientific personnel, clinical personnel and sales
        and
        marketing personnel will also be critical to our success. We may not be able
        to
        attract and retain these personnel on acceptable terms, if at all, given
        the
        competition among numerous pharmaceutical and biotechnology companies for
        similar personnel. We also experience competition for the hiring of scientific
        and clinical personnel from other companies, universities and research
        institutions. In addition, we rely on consultants and advisors, including
        scientific and clinical advisors, to assist us in formulating our research
        and
        development and commercialization strategy. Our consultants and advisors
        may be
        employed by employers other than us and may have commitments under consulting
        or
        advisory contracts with other entities that may limit their availability
        to
        us.
 
 ***We
        will need to increase the size of our organization, and we may experience
        difficulties in managing growth.***
 
 We
        are a
        small company with 27 employees as of April 17, 2008. To continue our clinical
        trials and commercialize our product candidates, we will need to expand our
        employee base for managerial, operational, financial and other resources.
        Future
        growth will impose significant added responsibilities on members of management,
        including the need to identify, recruit, maintain and integrate additional
        employees. Our future financial performance and our ability to commercialize
        our
        product candidates and to compete effectively will depend, in part, on our
        ability to manage any future growth effectively.
 
 ***Reimbursement
        may not be available for our product candidates, including due to legislative
        or
        regulatory reform of the healthcare system, which could diminish our sales
        or
        affect our ability to sell our products profitably.***
 
 C1-INH,
        if commercialized, is likely to be significantly more expensive than traditional
        drug treatments. Our future revenues and profitability will be adversely
        affected if we cannot depend on governmental, private third-party payors
        and
        other third-party payors, including Medicare and Medicaid, to defray the
        cost of
        C1-INH to the consumer. If these entities refuse to provide coverage and
        reimbursement with respect to C1-INH or determine to provide an insufficient
        level of coverage and reimbursement, C1-INH may be too costly for general
        use,
        and physicians may not prescribe it. Many third-party payors cover only selected
        drugs, making drugs that are not preferred by such payor more expensive for
        patients, and require prior authorization or failure on another type of
        treatment before covering a particular drug. Third-party payors may be
        especially likely to impose these obstacles to coverage for higher-priced
        drugs,
        which we anticipate C1-INH to be.
  38
 
 In
        addition to potential restrictions on coverage, the amount of reimbursement
        for
        our products may also reduce our profitability and worsen our financial
        condition. In the United States and elsewhere, there have been, and we expect
        there will continue to be, actions and proposals to control and reduce
        healthcare costs. Government and other third-party payors are challenging
        the
        prices charged for healthcare products and increasingly limiting and attempting
        to limit both coverage and level of reimbursement for prescription drugs.
 
 Since
        C1-INH will likely be too expensive for most patients to afford without health
        insurance coverage, if adequate coverage and reimbursement by third-party
        payors
        is not available, our ability to successfully commercialize C1-INH may be
        adversely impacted. Any limitation on the use of C1-INH or any decrease in
        the
        price of C1-INH will have a material adverse effect on our ability to achieve
        profitability. Even where patients have access to insurance, their insurance
        co-payment amounts may be too expensive for them to afford.
 
 As
        a
        result of legislative proposals and the trend towards managed healthcare
        in the
        United States, third-party payers are increasingly attempting to contain
        health
        care costs by limiting both coverage and the level of reimbursement for new
        drugs. Market acceptance and sales of our product candidates will depend
        on
        reimbursement policies and healthcare reform measures. The levels at which
        government authorities and third-party payers, such as private health insurers
        and health maintenance organizations, reimburse patients for the price they
        pay
        for our products will affect whether we are able to commercialize these
        products. We cannot be sure that reimbursement will be available for any
        of
        these products. Also, we cannot be sure that reimbursement amounts will not
        reduce the demand for, or the price of, our products. We have not commenced
        efforts to have our product candidates reimbursed by government or third
        party
        payers. If reimbursement is not available or is available only to limited
        levels, we may not be able to commercialize our products.
 
 ***Rapid
        technological change could make our product candidates
        obsolete.***
 
 Biopharmaceutical
        technologies have undergone rapid and significant change and we expect that
        they
        will continue to do so. Any compounds, products or processes that we develop
        may
        become obsolete or uneconomical before we recover any expenses incurred in
        connection with their development. Rapid technological change could make
        our
        products obsolete or uneconomical. Our future success will depend not only
        on
        our ability to develop our product candidates, but also on our ability to
        maintain market acceptance against emerging industry developments. We cannot
        assure prospective investors that we will be able to do so.
 
 ***Compliance
        with the Sarbanes-Oxley Act of 2002 will result in increased expenditures.***
 
 We
        are
        exposed to significant costs and risks associated with complying with
        increasingly stringent and complex regulation of corporate governance and
        disclosure standards. Changing laws, regulations and standards relating to
        corporate governance and public disclosure, including the Sarbanes-Oxley
        Act of
        2002 and new SEC regulations require a growing expenditure of management
        time
        and external resources. In particular, Section 404 of the Sarbanes-Oxley
        Act of 2002 requires management’s annual review and evaluation of our internal
        controls, and attestations of the effectiveness of our internal controls
        by our
        independent auditors. Under current law, the internal controls certification
        and
        attestation requirements of Section 404 of the Sarbanes-Oxley were first
        applicable to us for our fiscal year ending December 31, 2007. As our SEC
        reporting status had evolved from “small business” issuer to “accelerated filer”
we must comply with Section 404 of the Sarbanes-Oxley Act of 2002 and have
        our independent registered public accounting firm attest to management’s
        assessment of our internal controls over financial reporting. By reason of
        this
        reporting status, our compliance costs have substantially increased and a
        significant portion of management’s time has been allocated in order to comply
        with these rules, especially with respect to compiling the initial comprehensive
        documentation of our internal controls, and then evaluating and testing the
        operating effectiveness of our internal controls systems. Any failure by
        us to
        maintain effective internal controls could have a material adverse effect
        on our
        business, operating results and stock price. This process may also require
        us to
        hire additional personnel and outside advisory services and will result in
        significant accounting and legal expenses. We expect to incur significant
        expense in future periods to comply with regulations pertaining to corporate
        governance and internal controls as described above.
 
 ***We
        have a significant amount of net operating loss and credit carryforwards
        the use
        of which may be limited in certain circumstances.***
 
 As
        of
        December 31, 2007, we have available, for tax purposes, unused net
        operating loss carryforwards of approximately $20,378,000 that expire from
        2023
        to 2027. We also have approximately $1,261,000 of research and development
        credits that expire from 2024 to 2027. Pursuant to Sections 382 and 383 of
        the Internal Revenue Code, annual use of our net operating loss and credit
        carryforwards prior to December 4, 2007 and August 23, 2004 is limited due
        to a
        cumulative change in ownership of more than 50% that occurred within a
        three-year period. In the event we achieve profitable operations, any
        significant limitation on the utilization of net operating loss and credit
        carryforwards would have the effect of increasing our current tax
        liability.
  39
 
 **Risks
        related to our intellectual property**
 
 ***It
        is difficult and costly to protect our proprietary rights, and we may not
        be
        able to ensure their protection.***
 
 Our
        commercial success will depend in part on obtaining and maintaining patent
        protection and trade secret protection of our product candidates and the
        methods
        used to manufacture them, as well as successfully defending these patents
        against third party challenges. We will only be able to protect our product
        candidates from unauthorized making, using, selling, and offering to sell
        or
        importation by third parties to the extent that we have rights under valid
        and
        enforceable patents or trade secrets that cover these activities.
 
 The
        patent position of pharmaceutical and biotechnology companies can be highly
        uncertain and involve complex legal and factual questions for which important
        legal principles remain unresolved. No consistent policy regarding the breadth
        of claims allowed in biotechnology patents has emerged to date in the United
        States. The biotechnology patent situation outside the United States is even
        more uncertain. Changes in either the patent laws or interpretations of patent
        laws in the United States and other countries may diminish the value of our
        intellectual property. Accordingly, we cannot predict the breadth of claims
        that
        may be allowed or enforced in our licensed patents or in third-party
        patents.
 
 The
        degree of future protection for our proprietary rights is uncertain because
        legal means afford only limited protection and may not adequately protect
        our
        rights or permit us to gain or keep our competitive advantage. For
        example:
 
 ·
              
              others
                  may be able to make compounds that are competitive with our product
                  candidates but that are not covered by the claims of our licensed
                  patents,
                  or for which we are not licensed under our license
                  agreements;·
              
              we
                  or our licensor might not have been the first to make the invention
                  covered by our future pending patent applications, if any, or the
                  pending
                  patent applications and issued patents of our
                  licensors;·
              
              we
                  or our licensor might not have been the first to file patent applications
                  for these inventions;·
              
              others
                  may independently develop similar or alternative technologies or
                  duplicate
                  any of our technologies;·
              
              it
                  is possible that our pending patent applications, if any, or one
                  or more
                  of the pending patent applications of our licensor, will not result
                  in
                  issued patents;·
              
              the
                  issued patents of our licensor may not provide us with any competitive
                  advantage, or may be held invalid or unenforceable as a result
                  of legal
                  challenges by third parties;·
              
              we
                  may not develop additional proprietary technologies that are patentable;
                  or·
              
              the
                  patents of others may have an adverse effect on our
                  business.
 
 We
        also
        may rely on trade secrets to protect our technology, especially where we
        do not
        believe patent protection is appropriate or obtainable. However, trade secrets
        are difficult to protect. While we use reasonable efforts to protect our
        trade
        secrets, our employees, consultants, contractors, outside scientific
        collaborators and other advisors may unintentionally or willfully disclose
        our
        information to competitors. Enforcing a claim that a third party illegally
        obtained and is using our trade secrets is expensive and time-consuming and
        the
        outcome is unpredictable. In addition, courts outside the United States are
        sometimes less willing to protect trade secrets. Moreover, our competitors
        may
        independently develop equivalent knowledge, methods, and know-how.
 
 ***We
        may incur substantial costs as a result of litigation or other proceedings
        relating to patent and other intellectual property rights and we may be unable
        to protect our rights or use our technology.***
 
 If
        we
        pursue litigation to stop someone else from using the inventions claimed
        in our
        owned or licensed patents or the patents issuing from a licensed application,
        that individual or company has the right to ask the court to rule that these
        patents are invalid and/or should not be enforced. These lawsuits are expensive
        and would consume time and other resources even if we were successful in
        stopping the infringement of these patents. In addition, there is a risk
        that
        the court will decide that these patents are not valid and that we do not
        have
        the right to stop the other party from using the inventions. There is also
        the
        risk that even if the validity of these patents is upheld, the court will
        refuse
        to stop the other party on the ground that such other party’s activities do not
        infringe our rights in these patents.
 
 Furthermore,
        a third party may claim that we are using inventions covered by the third
        party’s patent rights and may go to court to stop us from engaging in our normal
        operations and activities, including making or selling our products. These
        lawsuits are costly and could affect our results of operations and divert
        the
        attention of managerial and technical personnel. There is a risk that a court
        would decide that we are infringing the third party’s patents and would order us
        to cease engaging in activities judged to be covered by the patents. In
        addition, there is a risk that a court will order us to pay the other party
        damages for having violated the other party’s patents. The biotechnology
        industry has produced a proliferation of patents, and it is not always clear
        to
        industry participants, including us, which patents cover various types of
        products or methods of use. The coverage of patents is subject to interpretation
        by the courts, and the interpretation is not always uniform. If we are sued
        for
        patent infringement, we would need to demonstrate that our products or methods
        of use either do not infringe the patent claims of the relevant patent and/or
        that the patent claims are invalid and/or unenforceable, and we may not be
        able
        to do this. Proving invalidity and/or unenforceability is difficult since
        it
        requires a showing of clear and convincing evidence to overcome the presumption
        of validity enjoyed by issued patents.
  40
  Because
        some patent applications in the United States may be maintained in secrecy
        until
        the patents are issued, because patent applications in the United States
        and
        many foreign jurisdictions are typically not published until eighteen months
        after filing and because publications in the scientific literature often
        lag
        behind actual discoveries, we cannot be certain that others have not filed
        patent applications for technology covered by our licensors’ issued patents or
        patents issued from a licensed application or our licensors’ pending
        applications or that we or our licensors were the first to invent the
        technology. Our competitors may have filed, and may in the future file, patent
        applications covering technology similar to ours. Any such patent application
        may have priority over our licensors’ patent applications and could further
        require us to obtain rights to issued patents covering such technologies.
        If
        another party has filed a United States patent application on inventions
        similar
        to ours, we may have to participate in an interference proceeding declared
        by
        the United States Patent and Trademark Office to determine priority of
        inventions in the United States. The cost of these proceedings would be
        substantial, and it is possible that such efforts would be unsuccessful,
        resulting in a loss of our United States patent position with respect to
        such
        inventions. In addition, we have sought to register a number of trademarks
        in
        the US and in certain foreign jurisdictions, including the trademarks “Lev
        Pharma” and “Cinryze”. These applications are currently pending and no assurance
        can be given that registration will be obtainable or if obtained, will be
        effective to protect our trademarks. Certain third parties, however, have
        opposed our trademark application for “Lev Pharma” with the U.S. Patent and
        Trademark Office and with the Community Trade Marks Office of the European
        Union. We are vigorously contesting these proceedings and do not believe
        that
        they will have a material adverse effect on our business, results of operations
        or financial condition. However, no assurances can be given that such belief
        will ultimately prove to be accurate, in which case the ultimate resolution
        of
        these matters could potentially have a material adverse effect on our
        business.
 
 Some
        of
        our competitors may be able to sustain the costs of complex patent litigation
        more effectively than we can because they have substantially greater resources.
        In addition, any uncertainties resulting from the initiation and continuation
        of
        any litigation could have a material adverse effect on our ability to raise
        the
        funds necessary to continue our operations.
 
 **Risks
        Relating to our Securities**
 
 ***As
        a result of the shares issued in our recent financing transactions, the number
        of shares of our common stock outstanding has increased substantially and
        certain purchasers beneficially own significant blocks of our common stock
        and
        these shares are generally available for resale in the public
        market.***
 
 Upon
        the
        closing of the private placement in October 2006, we issued to a small
        group of institutional and other accredited investors an aggregate of 32,307,693
        shares of common stock, plus warrants to purchase an aggregate of 9,692,308
        additional shares of common stock. We also issued warrants to purchase 1,897,057
        shares of common stock to registered-broker dealers that assisted us in this
        transaction. Under the purchase agreement for the private placement, we agreed
        to file a registration statements with the SEC covering the resale of the
        all of
        the shares of common stock issued or to be issued in the private placement,
        including the shares of common stock issuable upon exercise of the warrants.
        We
        have also granted to the purchasers piggyback rights to participate in any
        company registration, subject to certain limitations. This registration
        statement was initially declared effective by the SEC on December 11, 2006
        and
        these shares are presently generally available for immediate resale in the
        public market. In addition, in August 2007 we sold an aggregate of 23,333,333
        shares of common stock and warrants to purchase 4,666,667 shares of common
        stock
        in a registered direct offering to certain institutional investors. The market
        price of our common stock could fall due to this increase in the number of
        shares available for sale in the public market. Further, the issuance of
        these
        securities resulted in substantial dilution to stockholders who held our
        common
        stock prior to the time of the transactions.
 
 ***If
        we are unable to make the scheduled principal and interest payments on the
        term
        loan facility or maintain compliance with other debt covenants as defined
        in the
        loan and security agreement, we may default on our debt.***
  In
        November 2007, we entered into a loan and security agreement for up to $20
        million. Upon execution of the agreement, we borrowed an initial amount of
        $10
        million under the agreement. The loan is secured by all of our assets. Under
        the
        agreement, we are required to maintain a minimum liquidity level based on
        the
        balance of the outstanding advances. As the loan agreement requires our
        compliance with customary covenants and restriction, it may affect our
        operations in several ways, including the following:
  41
  •
              
              A
                  portion of our cash flow from operations will be dedicated to the
                  payment
                  of the principal and interest on our indebtedness;
  •
              
              Our
                  future cash flow may be insufficient to meet our required principal
                  and
                  interest payments;
  •
              
              We
                  may need to raise additional capital in order to remain in compliance
                  with
                  the loan covenants; or
  •
              
              Our
                  ability to enter into certain transactions, incur additional indebtedness
                  and dispose of certain assets may be
                  limited.
  Our
        ability to request additional loans is subject to our ability to maintain
        a
        borrowing base in excess of the outstanding aggregate loan amount. Further,
        if
        the outstanding loan amount exceeds the borrowing base, then we will be required
        to prepay an amount equal to such excess, and, if applicable, the lender’s total
        commitment shall be reduced to equal the borrowing base at the time of such
        mandatory prepayment. The loan is for a term of 36 months and matures on
        November 1, 2010. Interest on the loan accrues at the rate of 13.5% per
        annum.  Commencing November 1, 2008, we must pay minimum interest payments
        of 10.5%. We can prepay the outstanding principal and accrued but unpaid
        interest, subject, however, to making payment of a make-whole premium during
        the
        first year and a prepayment fee thereafter, until May 1, 2010. In addition
        to
        the conditions above, we may not be able to borrow additional funds under
        this
        agreement if we are not able to maintain various negative and financial
        covenants. Further, events of default are not limited to, but include the
        following:
  •
              
              Payment
                  default;
  •
              
              Covenant
                  default;
  •
              
              A
                  material adverse change in our business, including the development
                  path
                  for CinryzeTM;
 
 •
              
              Breach
                  of our agreements with Sanquin; or
  •
              
              Judgments
                  against us over a certain dollar amount.
  In
        case
        of an uncured default, the following actions may be taken against us by the
        lenders:
  •
              
              All
                  outstanding obligations associated with the term loan facility
                  would be
                  immediately due and payable;
  •
              
              Any
                  future advancement of credit under the term loan facility would
                  cease;
  •
              
              Balances
                  and accounts at other financial institutions could be “held” or exclusive
                  control be transferred to the lending institutions; and
  •
              
              All
                  collateral, as defined in the agreement, could be seized and disposed
                  of.
 
 ***If
        shares under our universal shelf registration statement are issued, then
        the
        price of our securities may be negatively
        affected.***
 
 We
        have
        on file with the SEC a universal shelf registration statement on Form S-3
        (Registration No. 333-143196), which provides for the offer, from time to
        time, of common stock, preferred stock, debt securities and warrants up to
        an
        aggregate remaining availability of approximately $35 million, net of financing
        amounts previously executed under this registration statement. The SEC declared
        the shelf registration statement effective on June 13, 2007. Subject to market
        conditions and our capital needs, and so long as we are then eligible to
        use the
        registration statements under SEC rules, we may again seek to use any remaining
        availability under the shelf registration statement by making an offering
        of
        securities covered for sale under the registration statement. In addition,
        we
        may amend our shelf registration statement or file a new shelf registration
        statement to increase our potential access to capital. The addition of these
        securities into the market may be dilutive to existing stockholders and
        have an adverse effect on the price of our securities.
 
 ***Market
        volatility may affect our stock and the value of your
        investment.***
 
 The
        market prices for securities of biopharmaceutical companies in general have
        been
        highly volatile and may continue to be highly volatile in the future. The
        following factors, in addition to other risk factors described in this section,
        may have a significant impact on the market price of our common
        stock:
  42
 
 ·
              
              announcements
                  of technological innovations or new products by us or our
                  competitors;·
              
              announcements
                  of FDA approval or non-approval of our product candidates or delays
                  in the
                  FDA review process;·
              
              actions
                  taken by regulatory agencies with respect to our product candidates,
                  clinical trials, manufacturing process or sales and marketing
                  activities;·
              
              regulatory
                  developments in the United States and foreign
                  countries;·
              
              the
                  success of our development efforts to acquire or in-license additional
                  products or product candidates;·
              
              any
                  intellectual property infringement action, or any other litigation,
                  involving us;·
              
              non-issuance
                  of patents on our, or our licensors’, pending patent applications, or
                  invalidation of our, or our licensors’, patents or other intellectual
                  property rights;·
              
              announcements
                  concerning our competitors, or the biotechnology or biopharmaceutical
                  industries in general;·
              
              actual
                  or anticipated fluctuations in our operating results;·
              
              changes
                  in financial estimates or recommendations by securities
                  analysts;·
              
              sales
                  of large blocks of our common stock;·
              
              sales
                  of our common stock by our executive officers, directors and significant
                  stockholders; and·
              
              the
                  loss of any of our key scientific or management
                  personnel.
 
 The
        occurrence of one or more of these factors may cause our stock price to decline,
        and you may not be able to resell your shares at or above the price you paid
        for
        your shares. In addition, the stock market in general, and the markets for
        biotechnology and biopharmaceutical stocks in particular, have experienced
        extreme volatility that has often been unrelated to the operating performance
        of
        particular companies. These broad market conditions may adversely affect
        the
        trading price of our common stock.
 
 ***We
        are at risk of securities class action litigation.***
 
 In
        the
        past, securities class action litigation has often been brought against a
        company following a decline in the market price of its securities. This risk
        is
        especially relevant for us because biotechnology and biopharmaceutical stocks
        have experienced significant stock price volatility in recent years. If we
        faced
        such litigation, it could result in substantial costs and a diversion of
        management’s attention and resources, which could harm our
        business.
 
 ***The
        ownership interests of our officers and directors could conflict with the
        interests of our other stockholders.***
 
 As
        of
        April 17, 2008, our officers and directors beneficially own approximately
        25.6% of our common stock. As a result, these stockholders, acting together,
        will be able to significantly influence all matters requiring approval by
        our
        stockholders, including the election of directors and the approval of mergers
        or
        other business combination transactions. The interests of this group of
        stockholders may not always coincide with our interests or the interests
        of
        other stockholders.
 
 ***We
        may be subject to “penny stock” regulations that would limit the trading market
        for our common stock.***
 
 Our
        common stock is currently listed for trading on the OTC Bulletin Board which
        is
        generally considered to be a less efficient market than markets such as Nasdaq
        or other national exchanges, and which may cause difficulty in obtaining
        future
        financing. Further, the SEC has adopted regulations which generally define
        Penny
        Stocks to be an equity security that has a market price less than $5.00 per
        share or an exercise price of less than $5.00 per share, subject to certain
        exemptions. As the closing price for our common stock is currently less than
        $5.00 per share, it may be designated a “Penny Stock.” Although we currently
        satisfy the net worth exemption from the “Penny Stock” definition, no assurance
        can be given that such exemption will be maintained. As a Penny Stock, our
        common stock may become subject to Rule 15g-9 under the Exchange Act, or
        the
        Penny Stock Rules. This rule imposes additional sales practice requirements
        on
        broker-dealers that sell such securities to persons other than established
        customers and “accredited investors”. For transactions covered by Rule 15g-9, a
        broker-dealer must make a special suitability determination for the purchaser
        and have received the purchaser’s written consent to the transaction prior to
        sale. As a result, this rule may affect the ability of broker-dealers to
        sell
        our securities and may affect the ability of purchasers to sell any of our
        securities in the secondary market. Many brokers have decided not to trade
        “penny stock” because of the requirements of the Penny Stock Rules and, as a
        result, the number of broker-dealers willing to act as market makers in such
        securities is limited. For any transaction involving a penny stock, unless
        exempt, the rules require delivery, prior to any transaction in a penny stock,
        of a disclosure schedule prepared by the SEC relating to the penny stock
        market.
        Disclosure is also required to be made about sales commissions payable to
        both
        the broker-dealer and the registered representative and current quotations
        for
        the securities. Finally, monthly statements are required to be sent disclosing
        recent price information for the penny stock held in the account and information
        on the limited market in penny stock. In the event that we are subject to
        the
        Penny Stock Rules for any significant period, there may develop an adverse
        impact on the market for our securities and investors will find it more
        difficult to dispose of our securities. Further, for companies whose securities
        are traded on the OTC Bulletin Board, it is more difficult: (i) to obtain
        accurate quotations, (ii) to obtain coverage for significant new events because
        major wire services, such as the Dow Jones News Service, generally do not
        publish press releases about such companies, and (iii) to obtain needed capital.
        There can be no assurance that our common stock will continue to qualify
        for
        exemption from the penny stock restrictions.
  43
 
 ***A
        sale of a substantial number of shares of our common stock may cause the
        price
        of our common stock to decline.***
 
 If
        our
        stockholders sell substantial amounts of our common stock in the public market,
        the market price of our common stock could fall. These sales also may make
        it
        more difficult for us to sell equity or equity-related securities in the
        future
        at a time and price that we deem reasonable or appropriate. As of April 16,
        2008, there were approximately 67,981,443 shares of restricted common stock
        outstanding that may be eligible for sale pursuant to Rule 144 under the
        Securities Act of 1933. Amended Rule 144 provides, that, in general, a person
        that is not an affiliate of our company that holds restricted securities
        for a
        period of six months may sell such shares subject only to our compliance
        with
        the current public information requirement until the end of a one year holding
        period and after one year, these securities may be freely sold without regard
        to
        such requirement. Sales of our common stock by certain present stockholders
        under Rule 144 may, in the future, have a depressive effect on the market
        price
        of our securities. In addition, the sale of shares by officers and directors
        and
        other affiliated shareholders may also have a depressive effect on the market
        for our securities.
  ***Because
        we do not intend to pay dividends, you will benefit from an investment in
        our
        common stock only if it appreciates in value.***
 
 We
        have
        paid no cash dividends on any of our capital stock to date, and we currently
        intend to retain our future earnings, if any, to fund the development and
        growth
        of our business. As a result, we do not expect to pay any cash dividends
        in the
        foreseeable future. The success of your investment in our common stock will
        likely depend entirely upon any future appreciation. There is no guarantee
        that
        our common stock will appreciate in value or even maintain the price at which
        you purchased your shares.
 
 ***Provisions
        in our charter documents and applicablelaw could discourage or prevent a takeover, even if an acquisition
        would
        be beneficial to our stockholders.***
  Provisions
        of our certificate of incorporation and bylaws, as well as provisions
        of applicablelaw, could make it more difficult for a third party to acquire us,
        even
        if doing so would be beneficial to our stockholders. These provisions
        include:
  ·
              authorizing
                  the issuance of “blank check” preferred that could be issued by our Board
                  of Directors to increase the number of outstanding shares and thwart
                  a
                  takeover attempt;
 
 ·
              prohibiting
                  cumulative voting in the election of directors, which would otherwise
                  allow less than a majority of stockholders to elect director candidates;
                  and
  ·
              advance
                  notice provisions in connection with stockholder proposals that
                  may
                  prevent or hinder any attempt by our stockholders to bring business
                  to be
                  considered by our stockholders at a meeting or replace our board
                  of
                  directors.
  ***Exercise
        of outstanding options and warrants will dilute stockholders and could decrease
        the market price of our common stock.***
  As
        of
        April 17, 2008, we had issued and outstanding options and warrants to purchase
        an aggregate of 31,955,390 additional shares of common stock. To the extent
        that
        these securities are exercised or converted, dilution to our shareholders
        will
        occur. The exercise of these securities by the holders may adversely affect
        the
        market price of our common stock and the terms under which we could obtain
        additional equity capital. This excludes 4,000,000 shares of unvested restricted
        stock issued on December 20, 2007.
 
 **ITEM
        2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
        PROCEEDS**
 
 During
        the quarter ended March 31, 2008, we did not issue any securities that were
        not
        registered under the Securities Act of 1933, as amended, except as has been
        reported in previous filings with the SEC.
 ****
 **ITEM
        3. DEFAULTS UPON SENIOR SECURITIES**
 
 Not
        applicable.
  **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 Not
        applicable.
 
 **ITEM
        5. OTHER INFORMATION**
 
 None.
  44
  **ITEM
        6. EXHIBITS**
 
 The
        following exhibits are filed herewith or incorporated by reference.
  **Incorporated by Reference****Exhibit**
                **Number**
              
              **Exhibit
                  Description**
              
              **Form**
              
              **Dated**
              
              **Exhibit**
              
              **Filed**
                **Herewith**10.1*
              
              Strategic
                  Supply Agreement between the Company and Plasma Centers of America,
                  LLC
              
              
              
              
              
              
              
              X31.1
              
              Certification
                  of Chief Executive Officer pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002
              
              
              
              
              
              
              
              X31.2
              
              Certification
                  of Chief Financial Officer pursuant to
                Section 302
                  of the Sarbanes-Oxley Act of 2002
              
              
              
              
              
              
              
              X32.1
              
              Certification
                  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
              
              
              
              
              
              
              
              X32.2
              
              Certification
                  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
              
              
              
              
              
              
              
              X
 
 *
        Confidential treatment has been requested with respect to portions of this
        document pursuant to Rule 24b-2 of the Securities Exchange Act. The redacted
        portions of this document were filed separately with the Securities and Exchange
        Commission.
 
 
 **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 **Lev
                        Pharmaceuticals, Inc.**April
                        30, 2008
                    By:
                    /s/
                        Joshua D. ScheinJoshua
                        D. Schein, Ph.D.Chief
                        Executive OfficerApril
                        30, 2008
                    By:
                    /s/
                        Douglas J. BeckDouglas
                        J. BeckChief
                        Financial
                        Officer
  45