**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**FORM 10-K**

 

**ANNUAL REPORT PURSUANT TO SECTION 13OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

 

**For the fiscal year ended September 30, 2003**

 

**Commission File No. 1-14430**

 

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**MAXIM PHARMACEUTICALS, INC.**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                                                    |   | **87-0279983**                          |
|-----------------------------------------------------------------|--------|-----------------------------------------|
| (State or other jurisdiction of incorporation or  organization) |   | (I.R.S. Employer Identification Number) |

 

**8899 University Center Lane, Suite 400San Diego, California 92122(858) 453-4040**

(Address, including zip code, and telephone number,including area code, of Registrant’s principal executive offices)

 

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Securitiesregistered pursuant to Section 12(b) of the Act: **None**

 

Securitiesregistered pursuant to Section 12(g) of the Act:

 

| **Title of Each Class**       |   | **Name of Each Exchange on Which Registered** |
|-------------------------------|--------|-----------------------------------------------|
|                          |   |                                          |
| Common Stock, $.001 Par Value |   | NASDAQ National Market                        |

 

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Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes ý  No o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, tothe best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. o

 

Indicateby check mark whether the registrant is an accelerated filer (as defined in theExchange Act Rule 12b-2). Yes o  No ý

 

The aggregate market valueof the voting common equity held by persons considered by the registrant forthis purpose to be non-affiliates of the registrant was approximately$73,009,177 on March 31, 2003, when the closing price of such stock, asreported on the Nasdaq National Market, was $3.17. This number is provided onlyfor the purposes of this report and does not represent an admission by eitherthe Registrant or any such person as to the status of such person.

 

The number of outstandingshares of the registrant’s Common Stock, $.001 par value, as ofDecember 2, 2003 was 28,013,317.

 

**DOCUMENTS INCORPORATED BY REFERENCE**

 

1.             Certain portions of the Registrant’s AnnualReport to Stockholders for the fiscal year ended September 30, 2003, areincorporated into Part II hereof.

 

2.             Certain portions of the Registrant’s ProxyStatement for its Annual Meeting of Stockholders to be held onFebruary 19, 2004 to be filed with the Securities and Exchange Commissionwithin 120 days after September 30, 2003, are incorporated intoPart III hereof.

 

 

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**This Form 10-K contains forward-looking statements thatinvolve risks and uncertainties. Such forward-looking statements arecharacterized by future or conditional verbs and include, but are not limitedto, statements regarding the results of product development efforts, clinicaltrials and applications for marketing approval of pharmaceutical products, andthe scope and success of future operations. Such statements are onlypredictions and our actual results may differ materially from those anticipatedin these forward-looking statements. Factors that may cause such differencesinclude, but are not limited to, those discussed under “Risk Factors” andelsewhere in this Form 10-K for the year ended September 30, 2003, asfiled with the Securities and Exchange Commission, including the uncertaintiesassociated with product development, the risk that products that appearedpromising in early clinical trials do not demonstrate efficacy in larger-scaleclinical trials, the risk that we will not obtain approval to market ourproducts, the risks associated with dependence upon key personnel, the need foradditional financing, and the dependence upon collaborative partners. We do notassume any obligation to update forward-looking statements as circumstanceschange.**

 

**PART I**

 

**ITEM 1. BUSINESS**

 

MaximPharmaceuticals, Inc. is referred to throughout this report as “Maxim”,the “Company”, “we” or “us”.

 

**Overview**

 

We are a globalbio-pharmaceutical company with a diverse pipeline of drug candidates forlife-threatening cancers and chronic liver diseases.

 

Our lead drug candidateCepleneTM (histamine dihydrochloride) is designed to prevent or reverse damageassociated with oxidative stress, thereby protecting critical cells andtissues. Because Ceplene modulates basic immune functions, it has the potentialto be used in the treatment of a broad range of diseases in which oxidativestress plays an important role. More than 2,000 patients have participated inour 17 completed and ongoing clinical trials of Ceplene, conducted in 20countries.  The clinical trials involvethe following diseases:

 

•      Life-threatening cancers, such as advancedmalignant melanoma (the most deadly form of skin cancer), acute myeloidleukemia and renal cell carcinoma (kidney cancer); and

 

•      Hepatitis C, the most common blood-bornevirus in the United States.

 

Clinical trials completed todate have suggested that Ceplene can be safely self-administered by mostpatients in their own homes.

 

Ceplene for the treatment of advanced malignantmelanoma represents our most advanced program. In November 2003, we filed a European Centralized Procedure MarketingAuthorization Application for Ceplene, in combination with interleukin-2(IL-2), a drug manufactured by Chiron, for the treatment of patients withadvanced malignant melanoma.  TheCeplene application was filed with the European Agency for the Evaluation ofMedicinal Products (EMEA) as an electronic Common Technical Dossier (eCTD) incompliance with the most recent International Committee of Harmonization (ICH)guidelines.   Ireland and Sweden havebeen assigned by the EMEA as the Rapporteur and Co-rapporteur, respectively,with responsibility to review the application on behalf of the European Union(EU).

 

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Cepleneis also currently being tested in the MP-8899-0104 confirming Phase 3 trial(M0104) designed to support registration for U.S. marketing approval. The firstPhase 3 trial in advanced malignant melanoma, the 305-patient United StatesPhase 3 trial (M01), which was completed in 2000, demonstrated a statisticallysignificant improvement in survival as highlighted in two publications in 2002in the *Journal of Clinical Oncology*.Data from this clinical trial were also selected for presentation at a numberof key scientific conferences including the American Society of ClinicalOncology (ASCO), the World Health Organization 5th World Conferenceon Melanoma, and the European Cancer Conference (ECCO).

 

In2000, we submitted a New Drug Application (NDA) to the United States Food andDrug Administration (FDA) seeking approval to market Ceplene for the treatmentof advanced malignant melanoma with liver metastases based on the data from thesingle M01 Phase 3 trial. In January 2001, the FDA determined that thissingle study would not be adequate to support approval. Despite the FDA action,the M01 Phase 3 trial results were the first results from any published, large,controlled study in advanced malignant melanoma that showed a statisticallysignificant survival benefit.

 

In September 2003, we fully enrolled the M0104 Phase 3 trial, including230 patients, based in the United States, Canada and Europe.  This trial is designed, in combination withthe completed M01 Phase 3 trial, and the additional international MP-MA-0102Phase 2 trial (M0102) which was completed in 2003, to form the basis formarketing approval in the United States and other countries. The FDA reviewedand accepted the protocol for the M0104 Phase 3 trial under its “SpecialProtocol Assessment” procedures, a process for reaching a confirmed agreementbetween the FDA and ourselves for the trial design and objectives.

 

Ourresearchers have also identified a series of novel cancer drug candidates thatare potent inducers of apoptosis, also known as programmed cell death. Thecompounds were identified through our proprietary high-throughput screeningtechnology that uses a unique live cell screening assay. We have screenedapproximately one million compounds and have identified drug candidates withunique mechanisms of action that target major cancers such as breast, lung,prostate, and colorectal.

 

A clinical developmentprogram for Ceplene is also underway in hepatitis C and is designed to improvepatient care by enhancing the efficacy of pegylated interferon and ribavirin,the current standard of care. In 2001, we completed the MP-MA-0405 Phase 2(M0405) dose-ranging study of Ceplene (M0405) in combination withinterferon-alpha (IFN-alpha) for the treatment of naïve, chronically infectedhepatitis C patients. As of the 72-week end-of-trial evaluation date, 35% ofall patients (intent-to-treat basis) treated with Ceplene and IFN-alphaachieved a complete sustained viral response. Published reports suggest thatapproximately 13% of hepatitis C patients attain a sustained viral response fromtreatment with IFN-alpha alone. In December 2001, we commenced arandomized, controlled Phase 2 trial designed to compare the treatment ofnonresponder hepatitis C patients with a triple-drug combination of Ceplene andSchering Corporation’s Peg-IntronTM (peginterferon alfa-2b) and Rebetol®(ribavirin, USP) versus treatment with Peg-Intron and Rebetol combinationtherapy alone.  This trial was fullyenrolled with 320 patients in July 2003.

 

Inaddition, our MX8899 topical gel is being tested in clinical trials to treatpatients who suffer from oral mucositis and other debilitating side effects ofcertain cancer therapies.

 

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**Ceplene—Drug Candidate for Cancer and Infectious Diseases**

 

*Overview*

 

A substantial body ofresearch suggests that the immune system’s ability to destroy virally infectedor cancer cells is suppressed by oxygen free radicals released by certainimmune cells. This process is commonly referred to as oxidative stress.Oxidative stress, which is implicated in numerous diseases, causes tissuedamage and can damage or destroy the liver in patients with hepatitis and otherchronic liver diseases.

 

Ceplene, based on thenaturally occurring molecule histamine, prevents the production and release ofoxygen free radicals, thereby reducing oxidative stress. Accordingly, treatmentwith Ceplene has the potential to prevent or reverse damage induced byoxidative stress, thereby protecting critical cells and tissue, includingimmune cells.

 

Because Ceplene modulatesbasic immune functions, it has the potential to be used in a broad range ofdiseases in which oxidative stress plays an important role. More than 2,000patients have participated in our 17 completed and ongoing clinical trials ofCeplene, which have been conducted in 20 countries. The results of ourcompleted clinical trials suggest that Ceplene can be safely self-administeredby most patients in their own homes. To date, clinical trials of Ceplene havebeen conducted in the following life-threatening diseases:

 

•      Advanced malignant melanoma, the most deadlyform of skin cancer;

 

•      Acute myeloid leukemia, the most common acuteadult leukemia;

 

•      Renal cell carcinoma, a deadly cancer of thekidneys; and

 

•      Hepatitis C, the leading blood-borne viralinfection in the United States.

 

Research and clinicalresults regarding Ceplene and related topics have been the subject of more than80 presentations at major scientific and clinical meetings and have beenpublished in more than 300 scientific and clinical articles. Ceplene is aninvestigational drug and has not been approved by the FDA or any internationalregulatory agency.

 

*Ceplene Mechanism of Action*

 

Ceplene, based on thenaturally occurring molecule histamine, prevents the production and release ofoxygen free radicals, thereby reducing oxidative stress. Research suggests thattreatment with Ceplene has the potential to protect critical cells and tissues,and prevent or reverse the cellular damage induced by oxidative stress. Thisbody of research has demonstrated that the primary elements of Ceplene’sproposed mechanism of action are as follows:

 

**Reversing Immune Suppression:**  Twokinds of immune cells, Natural Killer (NK) cells and cytotoxic T cells, possessan ability to kill and support the killing of cancer cells and virally infectedcells. Natural-Killer/T cells (NK/T cells), a form of NK cells that arecommonly found in the liver, also have anti-cancer and anti-viral properties.Much of the current practice of immunotherapy is based on treatment withcytokines such as interferon (IFN) and interleukin-2 (IL-2), proteins thatstimulate NK, T

 

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andNK/T cells.

 

Research has shown thatphagocytic cells (including monocytes, macrophages and neutrophils), a type ofwhite blood cell typically present in large quantities in virally infectedliver tissue and in sites of malignant cell growth, release reactive oxygenfree radicals and have been shown to inhibit the cell-killing activity of humanNK cells and T cells. In preclinical studies, human NK, T, and liver-type NK/Tcells have been shown to be sensitive to oxygen free radical-induced apoptosiswhen these immune cells were exposed to phagocytes. The release of freeradicals by phagocytes results in apoptosis, or programmed cell death, of NK, Tand NK/T cells, thereby destroying their cytotoxic capability and rendering theimmune response against the tumor or virus largely ineffective. In addition,the liver-type NK/T cells have been shown to be particularly susceptible tooxygen free radical- induced apoptosis.

 

Histamine, anatural molecule present in the body, and other molecules in the class known ashistamine type-2 (H2) receptor agonists, bind to the H2receptor on the phagocytes, temporarily preventing the production and releaseof oxygen free radicals. By preventing the production and release of oxygenfree radicals, Ceplene may protect NK, T, and liver-type NK/T cells. Thisprotection may allow immune-stimulating agents, such as IL-2 and IFN-alpha, toactivate NK cells, T cells and NK/T cells more effectively, thus enhancing thekilling of virally infected cells or tumor cells.

 

**Preventing Oxidative Damage:**  Mostacute and chronic liver diseases have oxidative damage as a common feature oftheir pathology. Phagocytic cells and Kupffer cells, both typically present inlarge quantities in virally infected liver tissue, release oxygen free radicalsin response to infections or other factors. Research suggests that oxygen freeradicals cause much of the cell damage in the liver common to hepatitis,alcohol-induced liver damage and other liver diseases. By preventing theproduction and release of oxygen free radicals by phagocytic and Kupffer cells,Ceplene may prevent and reverse oxidative damage to the liver.

 

The intellectual propertyprotection surrounding the Ceplene technology now includes 20 U.S. patents and13 pending U.S. patent applications, with corresponding patents issued orpending in the international markets. Claims include the therapeuticadministration of histamine or any H2 receptor agonist in thetreatment of cancer, infectious diseases and other diseases, either alone or incombination therapies, the novel synthetic method for the production ofpharmaceutical-grade histamine dihydrochloride, and the rate and route ofadministration.

 

*Potential Benefits of Ceplene*

 

The results from ourcompleted M01 Phase 3 and preceding Phase 2 trials in advanced malignantmelanoma, and earlier-stage results in our other disease targets, havesuggested that Ceplene may be integral in the growing trend toward combinationtherapy for certain cancers and infectious diseases and may offer a number ofimportant clinical and commercial advantages relative to current therapies orapproaches, including:

 

•      *Extending survival incancer.* Our M01 Phase 3melanoma trial and other clinical trials of Ceplene have potentially providedevidence of substantially improved therapeutic efficacy (extended survival)over approved therapies or standards of care.

 

•      *Increasing sustainedresponse rates in hepatitis C.*Our M0405 Phase 2 hepatitis C trial suggests that Ceplene may have thepotential to increase sustained viral response rates in treatment-naïvehepatitis C patients.

 

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•      *Maintaining quality oflife.* The results from ourM01 Phase 3 melanoma trial indicated that Ceplene did not add clinicallysignificant grade 3 or 4 toxicity compared to IL-2 alone, is safe in mostpatients and resulted in no additional clinically significant degradation ofthe patient’s quality of life during outpatient treatment.

 

•      *Outpatient administration.* In clinical trials conducted to date,Ceplene has been self-administered at home by most patients, in contrast to thein-hospital administration required for many other therapies.

 

•      *Cost effectiveness.* The delivery of combination therapy withCeplene on an outpatient basis may eliminate the costs associated within-hospital patient care. These factors, combined with the potentialimprovements in efficacy, may contribute favorably to the assessment of benefitversus cost for this therapy.

 

Ceplene is aninvestigational drug candidate and has not been approved by the FDA or anyinternational regulatory agency.

 

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*Ceplene Clinical Trial Status*

 

The table below summarizesour current and completed clinical trial activities for each disease wecurrently target or may target in the future with Ceplene. We have 13 Phase 1and Phase 2 trials and four Phase 3 trials, completed or currently underway.

 
| **Indication**                   |   | **Trial  Number** |   | **Trial Phase**     |   | **Number  Patients** |   | **Status**                      |   | **Location**                                                           |
|----------------------------------|--------|-------------------|--------|---------------------|--------|----------------------|--------|---------------------------------|--------|------------------------------------------------------------------------|
|                             |   |              |   |                |   |                 |   |                            |   |                                                                   |
| Advanced  Malignant  Melanoma    |   | MP-8899-0104      |   | Phase 3             |   | 230                  |   | Ongoing;  enrollment  completed |   | United States,  Europe &  Canada                                   |
|                             |   | MP-US-M01         |   | Phase 3             |   | 305                  |   | Completed                       |   | United States                                                          |
|                             |   | MP-MA-0102        |   | Phase 3             |   | 241                  |   | Completed                       |   | Europe,  Australia,  Canada & Israel                               |
|                             |   | MP-MA-0103        |   | Phase 2             |   | 163                  |   | Completed                       |   | United States                                                          |
|                             |   | MP-S01            |   | Phase 2             |   | 42                   |   | Completed                       |   | Europe                                                                 |
|                             |   | MM-2              |   | Phase 2  low-dose   |   | 27                   |   | Completed                       |   | Europe                                                                 |
|                             |   | MM-1              |   | Phase 2  high-dose  |   | 17                   |   | Completed                       |   | Europe                                                                 |
|                             |   |              |   |                |   |                 |   |                            |   |                                                                   |
| Acute Myeloid  Leukemia          |   | MP-MA-0201        |   | Phase 3             |   | 320                  |   | Completed; in  follow up        |   | United States,  Europe,  Australia,  Canada, Israel &  New Zealand |
|                             |   | AML1              |   | Phase 2             |   | 39                   |   | Completed                       |   | Europe                                                                 |
|                             |   |              |   |                |   |                 |   |                            |   |                                                                   |
| Renal Cell  Carcinoma            |   | MP-MA-SO2         |   | Phase 2  controlled |   | 41                   |   | Completed: in  follow up        |   | Europe                                                                 |
|                             |   | MP-MA-SO4         |   | Phase 2  controlled |   | 63                   |   | Completed; in  follow up        |   | Europe                                                                 |
|                             |   | I-318-MA          |   | Phase 2  single arm |   | 48                   |   | Completed                       |   | Europe                                                                 |
|                             |   |              |   |                |   |                 |   |                            |   |                                                                   |
| Multiple  Myeloma                |   |              |   | Phase 1             |   | 7                    |   | Completed                       |   | Europe                                                                 |
|                             |   |              |   |                |   |                 |   |                            |   |                                                                   |
| Hepatitis C —  Nonresponder |   | MP-8899-0406      |   | Phase 2             |   | 320                  |   | Ongoing;  enrollment  complete  |   | Europe, Canada  & Israel                                           |
|                             |   | MP-MA-S05         |   | Phase 1             |   | 18                   |   | Completed                       |   | Israel                                                                 |
|                             |   | NP16341           |   | Phase 1             |   | 10                   |   | Completed                       |   | Sweden                                                                 |
|                             |   |              |   |                |   |                 |   |                            |   |                                                                   |
| Hepatitis C —  Naïve   |   | MP-MA-0405        |   | Phase 2             |   | 129                  |   | Completed                       |   | Europe & Israel                                                    |

 

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*Potential Cancer Indications for Ceplene*

 

Areport from the American Cancer Society, *2003Cancer Facts and Figures*, estimates that a total of approximately1,334,100 new cases and approximately 556,500 deaths were expected for invasivecancers in the United States in 2003. One in four deaths in the U.S. are fromcancer. Other sources report that one in five deaths in Europe are from cancer,and that the worldwide incidence of cancer exceeds 10 million per year.The National Cancer Institute estimates that the direct medical cost oftreating cancer in the United States is $60 billion per year. Predominantforms of cancer include leukemia and lymphoma, breast, lung, urinary, prostate,melanoma, ovarian, colorectal and brain cancers.

 

Information regardingcertain cancer indications is summarized below. The following estimates for thecancers initially targeted by Ceplene are based upon the American CancerSociety’s *2003 Cancer Facts and Figures*for the United States.

 

**Estimated Incidence and Mortality for Selected Cancersfor 2003 for the United States**

 
|                             |   | **Annual**    |   |
|----------------------------------|--------|---------------|--------|
|                             |   | **New Cases** |   | **Deaths** |   |
|                             |   |          |   |   |   |
| Malignant Melanoma               |   | 54,200        |   | 7,600 |   |
| Acute Myeloid Leukemia           |   | 10,500        |   | 7,800 |   |
| Renal Cell Carcinoma             |   | 31,900        |   | 11,900 |   |
| Liver and Intrahepatic Bile Duct |   | 17,300        |   | 14,400 |   |
| All Invasive Cancers             |   | 1,334,100     |   | 556,500 |   |

 

Predominant methods oftreating cancer generally include surgery, radiation therapy, chemotherapy andimmunotherapy. Although these techniques have achieved success for certaincancers, particularly when detected in the early stages, each has drawbacks,which may significantly limit its success in treating certain types and stagesof cancer. For example, cancer may recur even after repeated attempts atsurgical removal of tumors or after other treatment. Surgery may be successfulin removing visible tumors but may leave smaller undetectable nests of cancercells in the patient that continue to proliferate. Radiation and chemotherapyare relatively imprecise methods for the destruction of cancer cells becausesuch therapies can kill both cancer cells and normal cells. Radiation andchemotherapy also have toxic side effects, which may be lethal to the patient.These toxic side effects may also restrict the application of these treatmentsto less than optimal levels required to ensure eradication of the cancer.

 

The high number ofcancer-related deaths indicates the need for more efficacious therapies formany patients. Many existing therapies have been approved on the basis thatthey shrink or limit the growth of tumors for a short period of time, but theyhave failed to demonstrate a clinically meaningful survival benefit topatients.

 

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*Ceplene—Advanced Malignant Melanoma*

 

Malignant melanoma is themost deadly form of skin cancer and is one of the most rapidly increasingcancers in the developed world. There are approximately 54,200 new cases ofmelanoma and 7,600 deaths from the disease each year in the United States.

 

Ceplene for advancedmalignant melanoma represents our most advanced program with seven clinicaltrials in more than 1,000 patients completed or ongoing. The first Phase 3 trial(M01) demonstrated a significant increase in survival for patients treated withCeplene.  Based upon the results of thisPhase 3 trial as well as the results of the M0102 Phase 2 trial completedearlier this year, in November 2003 we filed for approval to market Ceplene forthe treatment of advanced malignant melanoma in the European Union (EU).Ceplene is also being tested in the M0104 Phase 3 trial designed to supportregistration for U.S. marketing approval. We currently expect to amend our NDAto seek U.S. approval to market Ceplene after the conclusion of the currentPhase 3 trial.

 

*Phase 3 Trial Results* In March 2000, we completed the305-patient M01 Phase 3 clinical trial of Ceplene in the United States for thetreatment of advanced malignant melanoma, a trial that commenced in 1997. Inthis Phase 3 trial, advanced malignant melanoma patients were treated with acombination of Ceplene and IL-2, while patients in the control group weretreated with the same dose of IL-2 alone. More than 50 clinical sites in theUnited States participated in the study.

 

The purpose of themulti-center, controlled trial was to evaluate whether Ceplene improves theefficacy of IL-2, an immunotherapeutic agent already approved for the treatmentof advanced malignant melanoma. The primary endpoint of the M01 Phase 3 trialwas survival duration evaluated through application of the unadjusted Log-RankTest to Kaplan Meier survival distribution curves, evaluated in two primarypopulations:

 

•      All patients who entered the study (305patients); and

 

•      All patients who entered the study with livermetastases (129 patients).

 

In October 2003, SanjivS. Agarwala, M.D., a principal investigator and Associate Medical Director ofthe Melanoma Center at the University of Pittsburgh Cancer Institute, presentedthe 36-month follow-up results for the M01 Phase 3 trial at the *EuropeanOrganization for Research and Treatment of Cancer (EORTC): Perspectives in Melanoma Managemen*t conference. The 36-month results demonstrated that theintent-to-treat population of all 305 patients randomized into the trialdemonstrated a statistically significant improvement in survival for patientstreated with the combination of Ceplene and IL-2 (p=0.039, Log-Rank test,adjusted for multiple hypotheses) compared to the control patients treated withIL-2 alone.

 

Alsonoteworthy was that the 36-month data demonstrated that the Ceplene/IL-2combination significantly increased survival in the population of advancedmalignant melanoma patients with liver metastases (p=0.0062, Log-Rank test,adjusted for multiple hypotheses). Melanoma patients with liver metastases have a very poor prognosis forsurvival with a median survival of less than five months. In the M01 Phase 3trial, the percentage of liver metastases patients that lived three or moreyears (18%) was six times larger in the group treated with the Ceplene/IL-2combination compared to the group treated with IL-2 alone (3%).

 

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Dr. Agarwalaalso presented an analysis of 36 patients with ocular melanoma and livermetastases enrolled in the M01 trial. Ocular melanoma, the most common intra-ocular malignancy, metastasizesto the liver in about two-thirds of patients, and these patients typically havea median survival of only two to seven months. Dr. Agarwala reported thatthe median survival for patients with ocular melanoma and liver metastasestreated with Ceplene and IL-2 was 12.6 months compared to 4.8 monthsfor patients receiving IL-2 alone (p=0.038).

 

The12-month data from the M01 Phase 3 trial were published in theJanuary 2002 edition of the *Journal ofClinical Oncology*(*JCO*).These results, and an update of the 24-month results, were published inSeptember 2002 in the *JCO* “*Classic Papers and Current Comments*.” The *Classic Papers and Current Comments*publication represents the major articles related to melanoma researchpublished in *JCO* over the last20 years. Data from this clinical trial were also selected forpresentation at a number of key scientific conferences including the AmericanSociety of Clinical Oncology (ASCO), the World Health Organization 5thWorld Conference on Melanoma, and the European Cancer Conference.

 

TheM01 Phase 3 results are further potentially supported by the results of the 163-patient,multi-center, single-arm, M0103 Phase 2 trial, which was completed earlier thisyear.  A comparison of survival resultsfrom the M0103 trial to historical controls and to the survival curves from thecontrol arm of the M01 trial demonstrate the potential effectiveness of thistreatment.  For example, a comparison oflong-term survival (24-month) for patients with liver metastases treated withthe Ceplene/IL-2 combination in the M0103 trial (n=80) with published trialssuggests an improved long-term survival benefit.   Long-term survival at 24 months in the M0103 trial was 12%compared to approximately 3-6% reported for other published clinicaltrials.  This is particularlysignificant because the patients enrolled in this Phase 2 trial were potentiallymore advanced in their disease than those in enrolled in the Phase 3 trial inthat patients who had failed prior IL-2 treatment or bio-chemo treatment werealso allowed in this trial.  On averagethe patients enrolled in this trial had failed more prior treatments and hadmore multi-organ involvement than those enrolled in the prior trial.

 

*Regulatory Approval Process* In 2000 we sought FDA approval of Ceplenefor the treatment of advanced malignant melanoma with liver metastases based onthe 12-month follow-up data from the M01 Phase 3 trial as called for under theapproved statistical plan for the trial. The 12-month data from the M01 Phase 3trial demonstrated that combination therapy using Ceplene plus IL-2significantly improved the survival of advanced malignant melanoma patientswith liver metastases (adjusted p=0.008). For all patients entering the study,treatment with the Ceplene/IL-2 combination improved survival over

treatmentwith IL-2 alone, with a trend toward significance (p = 0.125). These datawere promising but did not achieve the p=0.05 threshold for statisticalsignificance, therefore we applied for approval in the United States only forthe patient population that achieved statistical significance, the patientswith liver metastases.

 

InJanuary 2001 the FDA informed us that the single M01 Phase 3 trial wouldnot support approval on its own and that an additional Phase 3 trial would berequired. In January 2002 we commenced the confirming M0104 Phase 3 trial,which was fully enrolled in October 2003 with 230 patients.  This confirming trial is designed tosupport, in combination with the results of the M01 trial, marketing approvalin the U.S. and other countries. The FDA reviewed and accepted the protocol forthe M0104 Phase 3 trial under its “Special Protocol Assessment” procedures, aprocess used to ensure that the FDA regards the trial to be an adequate andwell-controlled study when conducted in accordance with the approved protocol.

 

TheM0104 Phase 3 trial is based in the United States, Europe and Canada andincludes 230 patients with advanced malignant melanoma with liver metastases(the patient population in which Ceplene demonstrated the strongeststatistically significant survival benefit in the M01 Phase 3 trial). As

 

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inthe M01 Phase 3 trial, patients enrolled are randomized and treated with eitherthe combination of Ceplene and IL-2 or the same dose of IL-2 alone. The primaryendpoint in the trial is duration of patient survival. We currently estimatethat the M0104 Phase 3 trial will conclude in late 2004.  We will use the data from the current Phase3 trial to amend our existing NDA.

 

TheFDA has granted orphan drug status to Ceplene for the treatment of advancedmalignant melanoma. Orphan drug status provides for U.S. marketing exclusivityfor seven years upon marketing approval by the FDA. The status also providescertain tax benefits and exempts us from certain FDA application fees.

 

On November 7, 2003, we filed a European Centralized Procedure MarketingAuthorization Application for Ceplene, in combination with IL-2, a drugmanufactured by Chiron, for the treatment of patients with advanced malignantmelanoma.  The Ceplene application wasfiled with the European Agency for the Evaluation of Medicinal Products (EMEA)as an electronic Common Technical Dossier (eCTD) in compliance with the mostrecent International Committee of Harmonization (ICH) guidelines.   Ireland and Sweden have been assigned bythe EMEA as the Rapporteur and Co-rapporteur, respectively, with responsibilityto review the application on behalf of the EU. We expect this review process totake approximately one year.  Should theEMEA approve our application we could receive approval to market Ceplene by late2004 in the EU for the treatment of advanced malignant melanoma.

 

*Other Studies in Melanoma* In 2003, we completed the M0102 Phase 3 trial of Ceplene forthe treatment of advanced malignant melanoma based in Europe, Australia, Canadaand Israel. The international trial commenced in November 1997 andincluded 241 patients. Patients in the Ceplene group received Ceplene pluslow-dose IL-2 and IFN-alpha, while patients in the control group receiveddacarbazine (DTIC), the most commonly used chemotherapeutic agent for thetreatment of advanced malignant melanoma, particularly in Europe and Australia.The international M0102 Phase 3 malignant melanoma trial was designed to test aproposed triple-drug combination, broaden the exposure of the drug outside the UnitedStates and provide a comparison between combination immunotherapy with Cepleneversus a chemotherapeutic agent.

 

The preliminary results from the M0102 Phase 3 trial suggest thatCeplene can be safely administered to patients, on an outpatient basis, incombination with both IFN-alpha and IL-2. Preliminary results suggest that treatment with the combination ofCeplene, IFN-alpha and IL-2 resulted in a median survival of 271 days for theoverall intent-to-treat population compared to 231 days for patients treatedwith DTIC.  In addition, for thepopulation of patient with liver metastases, treatment with the combination ofCeplene, IFN-alpha and IL-2 resulted in a median survival of 211 days comparedto 154 days for treatment with DTIC. Overall survival evaluated using the unadjusted log-rank test did notachieve statistical significance.  Nofurther testing of this triple-drug regiment will be undertaken, as the Companyhas elected to focus exclusively on the Ceplene/IL-2 combination regimen usedin the M01, M0103 and M0104 trials.

 

*Ceplene—Other Cancer Indications*

 

*Acute Myeloid Leukemia* Acute Myeloid Leukemia (AML) is the mostcommon form of acute leukemia in adults, and prospects for long-term survivalare poor for the majority of patients. There are approximately 10,500 new casesof AML and 7,800 deaths caused by this cancer each year in the United States.Once diagnosed with AML, patients are typically treated with chemotherapy, andthe majority achieve complete remission. Unfortunately, 75-80% of patients whoachieve their first complete remission will relapse, and the median time inremission before relapse with current treatments is only 12 months.  The prospects for these relapsed patients ispoor, and less than 5% survive long term. There are currently no effectiveremission therapies for AML patients. The FDA has granted orphan drug status

 

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toCeplene for the treatment of AML.

 

We conducted a Phase 2 trial in Sweden in which 39 AML patients inremission were treated with Ceplene and low-dose IL-2. The objective of theCeplene/IL-2 combination is to treat AML patients in remission to preventrelapse and prolong leukemia-free survival while maintaining a good quality oflife for patients during treatment. Accordingly, Ceplene is designed tocomplement rather than supplant chemotherapy. In the Phase 2 trial, the 25patients treated in their first complete remission with the Ceplene/IL-2combination experienced a median leukemia-free survival of 20 monthscompared to published reports suggesting a median time to relapse of12 months. Also treated in the Phase 2 trial were 14 patients who were intheir second or subsequent complete remission at the time of enrollment. These14 patients were also treated with the Ceplene/IL-2 combination and experienceda median time to relapse of 16 months compared to published reportssuggesting a six-month historic median.

 

In September 2000 we completed enrollment of the MP-MA-0201 Phase3 AML clinical trial (M0201) based in 12 countries, including clinical sites inthe United States, Europe, Australia, Canada, Israel and New Zealand. Theglobal trial commenced in November 1997 and included 320 patients. Thetrial is designed as a remission therapy to demonstrate that the combination ofCeplene and IL-2 can prolong leukemia-free survival time and prevent relapse inAML patients compared to the current standard of care, which is no therapyduring remission. The purpose of this study is to expand the potential use of Ceplenein key markets and to potentially expand the labeling for the drug candidate ifapproval is received for the treatment of melanoma. This trial was completed inOctober 2003 and we expect that data from the trial will be available foranalysis in early 2004.

 

*Renal Cell Carcinoma* There are approximately 31,900 new casesannually of renal cell carcinoma (RCC), a deadly cancer of the kidneys, in theUnited States. Malignant RCC often is resistant to radiation therapy andchemotherapy and the disease results in more than 11,900 deaths each year.Expanding the clinical testing of Ceplene into RCC was logical as IL-2, thedrug that Ceplene has been tested with in melanoma, is also approved for thetreatment of advanced RCC.

 

OnePhase 2 trial has been completed and Phase 2 trials are ongoing in RCC.Researchers reported at the ASCO meeting in May 2002 the results from a41-patient randomized, controlled Phase 2 trial. In the Phase 2 trial, advancedmalignant renal cell carcinoma patients were treated with a combination ofCeplene and IL-2, while patients in the control group were treated with thesame dose of IL-2 alone. For the group of patients treated with theCeplene/IL-2 combination, 42% achieved a partial response or diseasestabilization compared to 26% for the group treated with IL-2 alone. Analysisof the survival data for the final two Phase 2 studies is expected to becompleted in early 2004.

 

*Ceplene—Hepatitis C*

 

Ourclinical development program for Ceplene in hepatitis C is designed to increasepatient viral response rates through a triple-drug combination of Ceplene,pegylated interferon and ribavirin.

 

Accordingly,Ceplene is designed to complement rather than compete with the current standardof care for treating hepatitis C.

 

HepatitisC is the leading blood-borne infection in the United States. The U.S. Centerfor Disease Control and Prevention estimates that over 3.9 millionAmericans are infected with the hepatitis C virus. The World HealthOrganization and other sources estimate that at least 180 million peopleare infected worldwide. Hepatitis is a viral infection in which oxidativestress causes inflammation and tissue damage in the liver and, in many cases,permanent cirrhosis (scarring). The cycle of disease from infection to significantliver damage can take 20 years or more. Some experts estimate that withoutsubstantial

 

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improvementsin treatment, deaths from hepatitis C will surpass those from HIV in the nearfuture. Hepatitis C is the leading cause of liver cancer and the primary reasonfor liver transplantation in many countries.

 

Thestandard treatment for hepatitis C is interferon-alpha (IFN-alpha), animmunotherapeutic agent often given in combination with the anti-viral drugribavirin. The most recent advance in hepatitis C therapy approved by the FDAis a pegylated, or sustained release, formulation of IFN-alpha given incombination with ribavirin. Even with recent advances, approximately half ofpatients do not attain a sustained viral response with current therapy. Severalfactors can influence the patient’s response to therapy, including thepatient’s viral load and the genotype of the virus with which the patient isinfected. Of the several variations (genotypes) of hepatitis C, genotype-1 isthe most common type in the United States. Patients infected with thisgenotype, and those with viral levels greater than 800,000 IU per milliliter ofblood, typically have the poorest response to treatment.

 

Ourclinical development program for Ceplene (histamine dihydrochloride) inhepatitis C is designed to improve patient outcome (sustained viral response)through a triple-drug combination of Ceplene, pegylated interferon andribavirin. A series of studies have been completed that provide the foundationfor more advanced clinical testing of histamine in hepatitis C.

 

*Results of Phase 2 Trials* In May 1999, we commenced the M0405Phase 2 trial of Ceplene in the treatment of 129 patients with hepatitis C. Thetrial was designed to evaluate the combination of Ceplene and IFN-alpha in thetreatment of chronic hepatitis C patients who had not previously receivedtreatment with IFN-alpha. The primary purpose of this study was to evaluatefour dose regimens for Ceplene in the treatment of chronic hepatitis C, and toprovide evidence that Ceplene, through its unique mechanism of action, maybenefit cytokines such as IFN-alpha in the treatment of hepatitis C. The trialwas based in the United Kingdom, Belgium, Israel and Russia. Patients were randomlyassigned to one of four treatment groups, with each patient receiving Ceplene,in one of four dosing regimens, plus IFN-alpha under the then current standarddose regimen (3 MIU three times per week). The study was designed to evaluatethe efficacy and safety of each of the four dosing regimens of Ceplene.

 

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Patientswere treated for up to 48 weeks, and then followed for an additional 24 weeksto evaluate the primary measures of efficacy, including reduction of viral load(defined by virus levels that are below the limit of detection using avalidated PCR-RNA technique) and normalization of liver function (measured bythe liver enzyme ALT, a standard measure of liver function). The study includeda high percentage of patients that would normally be considered difficult totreat because they were characterized by high viral loads and the genotype-1variant of the virus. The mean viral load of the patients in this study was6.7 million copies per milliliter of blood, and 50% of the patients wereinfected with genotype-1.

 

Resultsfrom the 129-patient M0405 Phase 2 trial were presented by Yoav Lurie, M.D.,principal investigator in the study and Head, Hepatitis Clinic, Liver Unit,Institute of Gastroenterology and Hepatology, Tel Aviv Souraski Medical Center,Israel, at the 2001 American Association for the Study of Liver Diseases(AASLD) meeting. As of the 72-week end-of-trial evaluation date, 35% of allpatients (intent-to-treat basis) treated with Ceplene and IFN-alpha achieved acomplete sustained viral response. Published reports suggest that approximately13% of hepatitis C patients attain a sustained viral response from treatmentwith IFN-alpha alone. A sustained biochemical response for all patients at the72-week time point was achieved in 35% of patients treated with Ceplene andIFN-alpha. Published reports suggest a sustained biochemical response amongapproximately 20% of patients treated with IFN-alpha alone.

 

Inaddition to the favorable results in the overall study, response rates achievedfor the higher-risk patients treated with the Ceplene/IFN-alpha combinationwere substantially better than those typically expected for treatment withIFN-alpha alone. Despite the poor prognosis for successful treatment, 28% ofall patients (intent-to-treat basis) with the genotype-1 variant of thehepatitis C virus treated with Ceplene and IFN-alpha achieved a sustainedcomplete viral response. Published reports suggest that approximately 7% ofgenotype-1 patients attain a sustained response when treated with IFN-alphaalone.

 

InSeptember 2002, the results from the M0405 Phase 2 trial of Ceplene inhepatitis C were published in the *Journal ofViral Hepatitis*. The researchers concluded from the study that thesedata indicate that the addition of Ceplene as a combination therapy withIFN-alpha for patients with chronic hepatitis C is safe, potentiallyefficacious and should progress to advanced clinical testing.

 

Inaddition to the M0405 Phase 2 trial, we completed a pilot safety study toevaluate the feasibility and safety of triple-drug treatment with Ceplene incombination with IFN-alpha and the anti-viral drug ribavirin in hepatitis Cpatients who were nonresponsive to prior therapy or relapsed after prior therapy.This trial was designed to support the advancement of triple-drug therapy withCeplene into pivotal, large-scale trials in hepatitis C.

 

Theresults of this study were also presented at the 2001 AASLD conference. At 72weeks, a sustained complete viral response was observed in 28% (5/18) ofpatients who entered the study, and in 38% (5/13) of evaluable patients(patients who completed at least four weeks of therapy). No serious adverseevents and no unexpected or irreversible side effects were reported in theCeplene study. We believe that these results suggest that Ceplene can be safelyadministered in this triple-drug combination, and that this triple-drug therapyis feasible in nonresponder patients.

 

*Ongoing Phase 2 Trial in Nonresponder Patients* In July 2003, we fully enrolled theMP-8899-0406 randomized, controlled Phase 2 trial (M0406) in 320 patientsdesigned to compare the treatment of nonresponder hepatitis C patients with atriple-drug combination of Ceplene and Schering’s Peg-IntronTM (peginterferonalfa-2b) and Rebetol® (ribavirin, USP) versus treatment with Peg-Intron andRebetol combination therapy alone. Nonresponder patients represent the largestcurrent unmet medical need in

 

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hepatitisC. Patients will be treated for up to 48 weeks and followed for an additional24 weeks after completion of treatment. The trial is expected to be completedin early 2005. To help facilitate this trial and reduce our costs, we enteredinto an agreement with Schering under which Schering will contribute thePeg-Intron and Rebetol product and perform the viral testing for the study atno cost to Maxim.

 

*Histamine—Chronic Liver Diseases*

 

Histamine,the active agent in Ceplene, has shown the potential to prevent or inhibitoxidative stress, a condition associated with most acute and chronic liverdiseases. The liver plays an important role in regulating numerous vitalprocesses and performs many functions essential to life. In the United Statesalone, approximately 25 million people—1 in every 10—have been afflictedwith chronic liver, bile duct or gallbladder diseases. In addition, 26,000 ofthese patients die each year from chronic liver diseases and cirrhosis.

 

Inaddition to hepatitis, some of the most common diseases of the liver include:

 

•      Cirrhosis, in which normal liver cells aredamaged and replaced by scar tissue as a result of various chronic liverdiseases. A common cause of cirrhosis is excessive intake of alcohol. Alcoholichepatitis in the severe form has a greater than 50% mortality rate.

 

•      Fatty liver, the accumulation of fat in livercells. Fat accumulates in the liver usually in connection with heavy use ofalcohol, extreme weight gain or diabetes mellitus.

 

•      Nonalcoholic steatohepatitis (NASH), a subsetof fatty liver, is an inflammation of the liver associated with an increase offat deposits in liver cells that may lead to severe liver damage and cirrhosis.NASH may occur in middle-aged, overweight, and often diabetic patients who donot drink alcohol.

 

In2002, Maxim researchers reported the results from preclinical studiessuggesting that histamine dihydrochloride accelerated recovery fromalcohol-induced liver damage in an animal model of alcoholic liver disease(ALD). Liver injury was induced in the study through the administration of asingle dose of ethanol once per day for four weeks in rats. After four weeks,alcohol administration was discontinued, and animals were treated with eitherhistamine (0.5 mg/kg) or a vehicle control by subcutaneous injection twice aday for one week. Liver damage was assessed through measurement of the liverenzymes ALT and AST, markers that are elevated when there is damage to theliver. Animals that were treated with histamine achieved normalization of ALT andAST levels in approximately one-half of the time experienced by the controlanimals.  During 2003, additionalwork was presented on the observed benefit of Ceplene to accelerate thereversal (healing) of previous alcohol-induced liver damage approximatelytwo-fold over no treatment.

 

In 2003, pre-clinicaldata was presented at the annual conference of the American Association for theStudy of Liver Diseases (AASLD) that demonstrated the potential ability ofhistamine dihydrochloride to accelerate the regeneration of the liver afterpartial surgical resection in a rodent model.    In the studies presented at AASLD, high dose lipopolysaccharide(LPS) was used to slow liver regeneration following a two-thirds partial hepatectomy(removal of two-thirds of the liver).  Histamine not only accelerated the normal regenerative process, but itsuse as a pretreatment counteracted the initial delay in regeneration that wouldbe caused by LPS.    These data providea good rationale for future planned studies in humans with liver disease.

 

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*Oral Formulation* We are currently developing an oral formulationof histamine for the treatment of chronic liver diseases.  We are currently performing certain animalstudies designed to assist in the development of such an oral formulation.  We expect to begin clinical testing of anoral formulation in 2004.

 

Asa result from these multiple preclinical studies we will likely expand thefuture testing of histamine to investigate the protective mechanism of the drugcandidate as a potential therapy for certain non-viral chronic liver diseasessuch as nonalcoholic steatohepatitis (NASH) and/or ALD.  We expect that all future clinical trials ofhistamine in chronic liver diseases will be with an oral formulation.

 

**MX8899 Topical Gel—Cancer Supportive Care**

 

OurMX8899 topical gel is being studied as a potential treatment for patients whosuffer from oral mucositis and other significant side effects of certain cancertherapies.

 

Histaminedihydrochloride, the active agent in the MX8899 gel, has been shown inpreclinical work to reduce inflammation by preventing the production andrelease of oxygen free radicals and proinflamatory cytokines such as TNF-alphaand IL-1b, thereby reducing oxidative stress and inflammation. In addition, ithas been reported that histamine may improve blood circulation and assist inwound healing. Accordingly, histamine-related gels have the potential to beuseful in situations where free-radical damage and excessive inflammation areinvolved, thereby facilitating the healing processes.

 

Maxim’stopical gel has been tested by investigators in small pilot, randomized,blinded, placebo-controlled trials conducted by independent researchers inpatients with oral mucositis, herpes labialis (cold sores), burns (thermal andsun), decubitus ulcers, shingles and conjunctivitis. Patients experiencedimproved healing times when treated with topical histamine gels compared toplacebo controls.

 

*MX8899 for Oral Mucositis*

 

Oralmucositis is a common, painful and debilitating toxicity suffered by cancerpatients treated with certain chemotherapeutic agents and radiation therapy.Symptoms of oral mucositis include the formation of canker sore-like lesionswithin the mouth that may extend to the tongue, throat and gastrointestinaltract, with mild to severe discomfort and difficulty eating and drinking. Thelesions may last two to three weeks, and in severe cases patients requirehospitalization, pain medication and limitations to or interruptions in theircancer therapy. Currently, there is no effective therapy for the prevention ortreatment of oral mucositis.

 

Apilot safety clinical trial of MX8899 in oral mucositis commenced in 2002. Atotal of 30 evaluable patients were studied in the trial, each receivedchemotherapy with or without total body irradiation in preparation for eitherallogeneic or autologous hematopoietic stem cell transplantation. Half of thepatients in the study were randomized to receive the MX8899 gel, and the otherhalf received a placebo control gel. The objectives of this study were toevaluate the safety, tolerability, pharmacokinetics and potential biologicalactivity of the histamine gel in patients with oral mucositis. Preliminaryresults from the trial suggested that MX8899 can be safely administered inpatients with oral mucositis, although no conclusion regarding the potentialefficacy of MX8899 could be drawn from the small patient population.

 

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MX8899was also studied in radiation dermatitis, a serious side effect of head andneck radiation therapy suffered by up to 600,000 patients per year in U.S. Inaddition to causing patient discomfort, the burns and severe irritationassociated with radiation dermatitis are sometimes severe enough that patientsare forced to take breaks in their radiation treatment. Currently, there are nostandard preventative or therapeutic treatments for radiation-induceddermatitis.

 

Inthis safety trial, nine patients were enrolled, each receiving bilateral neckradiotherapy for head and neck squamous cell carcinoma. One side of their necksreceived treatment gel in a blinded manner and the other side of their neckreceived the placebo gel. The results of the study suggested that MX8899 can besafely administered in patients with radiation dermatitis.

 

Wewill consider the results of the two recent trials of MX8899 in determining thefuture development strategy for the drug candidate.

 

**Novel Cancer Drug Candidates**

 

*Small-Molecule Apoptosis Inducers*

 

Our researchershave identified more than 40 compound families that induce apoptosis (alsoknown as programmed cell death) in cancer cells and are candidates fordevelopment as anti-cancer agents.  Wediscovered these development candidates by screening more than one millioncompounds using our novel, caspase-based screening technology.

 

In November 2003, the capabilities and proprietary nature of ourscreening technology were presented at the 2003 Cancer Drugs Research andDevelopment conference.  Our screening assays identify theactivation of caspase 3, often described as the “executioner caspase” since theactivation of caspase 3 commits a cell to undergo apoptotic cell death.  Research suggests that Maxim’s apoptosisassays are able to monitor activation of the caspase 3 inside living cells andare versatile enough to measure caspase activity inside multiple cell types(for example, cancer cells, immune cells, brain cells, cells of the endocrinesystem, cells or cell lines from different organ systems or geneticallyengineered cells).  The assaysunderlying the screening technology are protected by multiple U.S. andinternational patents and patent applications.

 

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As reported at theconference, the efficacy-based characteristics inherent to our screeningtechnology have allowed researchers to identify compounds that selectivelyinduce apoptosis through a wide variety of underlying mechanisms of action,both known and unknown.  Accordingly,the portfolio of potential drug candidates identified through the screeningtechnology includes a number of compounds that induce apoptosis throughmolecular targets not previously described for the purpose of treating cancer,as highlighted with the lead candidates summarized below:

 
| **Candidate** |   | **Description**                                                         |   | **2003  Highlights**                                                                                                                                                           |
|---------------|--------|-------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| MX2167        |   | Novel, cell-surface  targetBroad  activity                              |   | Patent filed covering  novel mechanism and target Preclinical results presented at  2003 AACR-NCI-EORTC International Conference on Molecular Targets and Cancer  Therapeutics |
| MX126374      |   | Novel, intracellular  targetSelective  for breast and colorectal cancer |   | Patent filed covering  novel mechanism and target Preclinical results presented at  2003 AACR meeting                                                                          |
| MX128495      |   | Dual mechanismBroad activity                                            |   | Exclusive worldwide  collaboration with Myriad Genetics                                                                                                                        |
| MX2105        |   | Anti-vascular  targeting agentBroad  activity                           |   | Preclinical results presented at 2003 AACR-NCI-EORTC International  Conference on Molecular Targets and Cancer Therapeutics                                                    |

 

Preclinicalresults for one of the leading candidates, the MX2160 family of compounds, waspresented at the 2003 AACR-NCI-EORTCInternational Conference on Molecular Targets and Cancer Therapeutics in Bostonin November 2003.  Researchers reported that MX2167 demonstratedattractive pharmacokinetic properties and potent efficacy in rat syngeneicprostate cancer models, with 90% inhibition of tumor growth using moderatedosing schedules.  The MX2167 seriesfeatures compounds whose apoptosis-inducing anti-tumor activities are mediatedby a novel molecular mechanism different from the actions of traditional cancerdrugs.  In preclinical testing MX2167 has been shown to induce apoptosis in cancer cells inmultiple cell lines, including prostate, breast, colorectal, non-small celllung and small cell lung cancers and leukemia. During2003, we announced that we had identified and filed U.S. patents covering thenovel mechanism of action of the MX2060 series and the use of the relatedmolecular target for the induction of apoptosis for the treatment of cancer.

 

The MX2060 series is only one of more than 40 compound familiesidentified by our researchers through our proprietary caspase-basedhigh-throughput screening system.  It isour intent to seek partners for certain of our novel apoptosis compounds toaccelerate their advancement into clinical testing.

 

In December 2003, we announced the exclusivelicense of our MX128495 series of preclinical apoptosis inducer compounds forthe treatment of cancer to Myriad Genetics, Inc.  MX128495 has shown potency in preclinical testing in multiplecancer types including prostate cancer, breast cancer, colorectalcancer, non-small cell lung cancer, small cell lung cancer and leukemia.  Under the terms of the agreement, we granted an exclusiveworldwide license to Myriad for the development and commercialization of theMX128495 series of compounds.  Myriadwill be responsible for the clinical development and commercialization ofMX128495, with oversight to be provided by a joint development committeecomprised of Myriad and Maxim personnel. We will provide research services to Myriad for a period of at least oneyear to assist with the development of MX128495.  The license agreement calls for Myriad to pay up to $27 millionto us in the form of milestone payments, license fees and research supportassuming successful commercialization of any compound within the MX128495series, as well as a royalty to Maxim on sales of MX128495-related products.

 

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In addition to collaborations related to specific compoundfamilies, the capacity of our high-through screening assays (the ability toscreen more than 20,000 compounds per day) enable us to collaborate onearlier-stage discovery efforts as well. Undera collaboration with Celera Genomics, we have screened approximately 700,000 ofCelera’s proprietary compounds to identify inducers of apoptosis.  We expect to seekadditional corporate collaborators to augment our internal development effortsto accelerate the clinical development of our apoptosis inducer drugcandidates.

 

**Product Development and Collaborative Relationships**

 

Weconduct our research, clinical trials and other product development activitiesthrough a combination of efforts by our internal personnel and collaborativeprograms. For Ceplene and the MX8899 topical gel, we rely upon our clinicalmanagement personnel in collaboration with universities and other clinicalresearch sites, contract research organizations and other similar serviceproviders and persons. Earlier-stage research and development efforts relatedto the apoptosis modulator technology have historically been conducted in ourinternal laboratories, although we recently entered into a collaborativeagreement for one of our compound families and we expect to rely onpharmaceutical company collaborative relationships to advance the clinicaldevelopment of certain other compounds and indications encompassed by thistechnology. We have relied upon licensing and other transactions to gain accessto certain of our proprietary technologies.

 

*Ceplene Collaborations*

 

In2001, we entered into an agreement with Schering Corporation related to ourM0406 Phase 2  clinical trial of thetriple-drug combination of Ceplene, Peg-Intron and Rebetol in nonresponderhepatitis C patients. Under the agreement, we have full responsibility forconducting the clinical trial, and Schering is providing the Peg-Intron andRebetol product and performing the viral testing for the study at no cost to us.Both we and Schering will retain marketing responsibilities and revenues forour respective drugs.

 

In2000, we entered into a development collaboration with F. Hoffmann-LaRoche Ltd., Switzerland and its US branch Hoffmann-La Roche, Inc. toundertake the clinical development and approval of Ceplene in combination withPegasys®, Roche’s pegylated interferon-alpha agent.  In 2001, Roche and we agreed to terminate the developmentcollaboration. We initiated the termination, and we believe that thetermination was in our best interest, as the rate of progress under thecollaboration was not acceptable to us.

 

During1998, we entered into clinical collaborations with Chiron Corporation. Chironhas provided the IL-2 drug (Proleukin®) and other assistance related to ourPhase 3 AML clinical trial.

 

Theseaforementioned collaborations reinforce our belief that Ceplene iscomplementary rather than competitive with many existing and future drugs, andmay be the key to the successful use of many immunotherapeutic agents. Weexpect to pursue a major pharmaceutical collaboration to provide additionalresources to assist with the future development of Ceplene.

 

*Apoptosis Modulator and Other Collaborations*

 

In2000, we licensed our MX2105 series of anti-cancer compounds to Shire BioChem(Shire). The agreement requires that Shire make licensing, research andmilestone payments to us totaling up to $55 million assuming thesuccessful commercialization of the compound for the treatment of two cancerindications, as well as pay a royalty on product sales resulting from thiscollaboration. Shire is to provide the preclinical testing, manufacturingdevelopment and clinical development of the compound.  In July

 

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2003 Shire announced that oncology would no longer be a therapeuticfocus of the company’s research and development efforts.  We are currently in discussions with Shireon the impact that this announcement will have on our license agreement.

 

In2000, we entered into a collaboration with Celera Genomics under which we havescreened approximately 700,000 compounds from Celera’s proprietary librariesusing our high-throughput screening technology. We will also perform researchregarding the mechanisms of action for any promising compounds identifiedduring the screening process. The agreement calls for Celera to perform thepreclinical work for such compounds. Under the agreement we have the option toelect, at our sole discretion, to jointly develop with Celera any compounds thatare taken into clinical trials and to share equally the development costs andcommercial revenues.  We have completedthe screening of these additional compounds and are working with Celera toadvance several of the identified compound families.

 

In December 2003, we announced the exclusiveworldwide license of our MX128495 series of preclinical apoptosis inducercompounds for the treatment of cancer to Myriad Genetics, Inc.  Myriad will be responsible for the clinicaldevelopment and commercialization of MX128495, with oversight to be provided bya joint development committee comprised of Myriad and Maxim personnel.  We will provide research services to Myriadfor a period of at least one year to assist with the development ofMX128495.  The license agreement callsfor Myriad to pay up to $27 million to us in the form of milestone payments,license fees and research support assuming successful commercialization of anycompound within the MX128495 series, as well as a royalty to us on sales ofMX128495-related products.

 

**Marketing and Sales**

 

AssumingEuropean Union approval of Ceplene we plan to enter into a marketingcollaboration with a company that has relevant experience marketing oncologydrugs within the European Union. Assuming FDA approval of Ceplene, we plan to market the drug candidatein the United States. The treatment of cancer is a highly specialized activityin which the approximately 10,000 practicing oncologists in the United Statestend to be concentrated in approximately 1,500 major medical centers. MarketingCeplene in the United States requires us to build a marketing and salesinfrastructure, including sales representatives, through the recruitment ofqualified personnel.

 

In1999, we entered into an agreement granting F. H. Faulding &Co., Ltd. (now Mayne) the right to market Ceplene in Australia and NewZealand. Also during 1999, we entered into an agreement grantingMegaPharm, Ltd. the right to market Ceplene in Israel.

 

Ourmarketing strategies for the initial apoptosis modulator and topical geltechnologies will rely upon out-licensing and other collaborativerelationships. For example, our MX128495 series of anti-cancer compounds waslicensed to MyriadGenetics, Inc. under anagreement that calls for Myriad to market any products within this series thatattain regulatory approval.

 

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**Manufacturing**

 

Wedo not intend to acquire or establish our own dedicated manufacturingfacilities for Ceplene in the foreseeable future. There are a number offacilities in compliance with FDA Good Manufacturing Practice available forcontract manufacturing, and we have contracted with established pharmaceuticalmanufacturers for the production of Ceplene. These manufacturers are supplyingthe Ceplene required for our current clinical trial activities and havedemonstrated the capability to supply commercial quantities of the product forany potential market launch.

 

Webelieve that, in the event of the termination of an agreement with any singlesupplier or manufacturer, we would likely be able to enter into agreements withother suppliers or manufacturers on similar terms. We are currentlyestablishing relationships with additional manufacturers to provide alternatesources of supply for Ceplene. We currently rely upon similar relationships forthe manufacturing of our apoptosis modulator and topical gel drug candidatesand expect to continue to rely upon such relationships in the future.

 

**Patents, Licenses and Proprietary Rights**

 

Weown or have the rights to 41 issued or allowed U.S. patents and 56 U.S. patentapplications. Corresponding patent applications have been filed, and in anumber of instances patents have been issued, in major international markets,including Europe, Australia and Japan. Our policy is to file, where possible,patent applications to protect technologies, inventions and improvements thatare important to the development of our business. We have devoted substantialattention and resources to our patent and license portfolio. Maintainingpatents and licenses and conducting an assertive patent prosecution strategy isa priority for us.

 

*Key Granted Patents and Pending Applications*

 

Weown or have rights to 20 U.S. patents or allowed applications related toCeplene, a technology platform based upon histamine, a naturally occurring H2receptor agonist. These patents encompass various topics relating to:

 

•      therapeutic administration of histamine;

 

•      compositions comprising IL-2 and H2receptor agonists (H2RAs);

 

•      compositions comprising IFN-alpha and H2RAs;

 

•      methods of treating cancer or infectiousdisease using certain NK cell activators in combination with certain compoundsthat inhibit the production or release of hydrogen peroxide, includinghistamine, or a hydrogen peroxide scavenger;

 

•      methods of treating cancer in a patientreceiving radiation therapy or chemotherapy, using certain NK cell activatorsin combination with a compound that inhibits the production or release ofhydrogen peroxide, including histamine, or a hydrogen peroxide scavenger;

 

•      methods of treatment with histamine incombination with any NK cell activating cytokine or chemotherapeutic agent;

 

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•      compositions comprising IFN-alpha andhistamine or related compounds and methods of treating viral infections usingthe claimed compositions;

 

•      methods for the therapeutic administration ofhistamine and related compounds, the combination of histamine or relatedcompounds and a controlled release carrier, and a device for the administrationof histamine and related compounds;

 

•      novel synthetic method for the production ofpharmaceutical-grade histamine dihydrochloride;

 

•      administration of histamine to inhibitoxidative damage for the treatment of ischemia or reperfusion injury,infectious disease, autoimmune or inflammatory diseases, and neurodegenerativediseases.

 

Anumber of corresponding patents have also issued in international markets.

 

Wehold or have rights to 12 U.S. patents and 40 U.S. patent applications relatedto the apoptosis modulator technology. Corresponding patent applicationsrelated to the above have also been filed internationally.

 

Weown or have rights to nine issued or allowed U.S. patents and three U.S. patentapplications for material compositions and other rights underlying the topicalgel technology. Corresponding patents for the above have also been filedinternationally.

* *

*Technology Rights*

 

In1993, we entered into a technology transfer agreement under which we purchasedcertain intellectual property and patent rights related to our Ceplenetechnology. The technology transfer agreement required that we pay certainroyalty obligations to the two inventors of the technology, although one of theinventors waived his royalty rights as part of a subsequent agreement with us.In October 1999, we entered into a new royalty agreement with theremaining inventor under which we agreed to pay $1 million over threeyears in exchange for a reduced royalty rate. We have also filed a large numberof additional patent applications and received a substantial number ofadditional patents encompassing the Ceplene technology as described above.

 

In1998, we entered into a license agreement with ProfessionalPharmaceuticals, Inc. (PPI) for an exclusive, worldwide license totechnology related to material compositions and other patent rights underlyingthe topical gel technology. The license agreement requires that we pay certainroyalty obligations to PPI.

 

In2000, we acquired Cytovia, Inc., a privately held biopharmaceuticalresearch company. The technology rights associated with our apoptosis modulatorprogram were acquired in this transaction.

 

**Government Regulation**

 

Regulationby governmental authorities in the United States, the European Union and othercountries is a significant factor in the development, manufacture and marketingof our proposed products and in our ongoing research and product developmentactivities. The nature and extent to which such regulation applies to us willvary depending on the nature of any products which may be developed by us. Weanticipate that many, if not all, of our products will require regulatoryapproval by governmental agencies prior to commercialization. In particular,human therapeutic and vaccine products are subject to rigorous preclinical andclinical testing and other approval procedures of the FDA, the EMEA and similar

 

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regulatoryauthorities in other countries. Various governmental statutes and regulationsalso govern or influence testing, manufacturing, safety, labeling, storage andrecord-keeping related to such products and their marketing. The process ofobtaining these approvals and the subsequent compliance with appropriatestatutes and regulations require the expenditure of substantial time and money.Any failure by us or our collaborators to obtain, or any delay in obtaining,regulatory approval could adversely affect the marketing of any productsdeveloped by us and prevent us from generating product revenues and obtainingadequate cash to continue present and planned operations.

 

*FDA Approval Process*

 

Priorto commencement of clinical studies involving humans, preclinical testing ofnew pharmaceutical products is generally conducted on animals in the laboratoryto evaluate the potential efficacy and the safety of the product. The resultsof these studies are submitted to the FDA as a part of an Investigational NewDrug application, which must become effective before clinical testing in humanscan begin. Typically, human clinical evaluation involves a time consuming andcostly three-phase process. In Phase 1, clinical trials are conducted with asmall number of people to assess safety and to evaluate the pattern of drugdistribution and metabolism within the body. In Phase 2, clinical trials areconducted with groups of patients afflicted with a specific disease in order todetermine preliminary efficacy, optimal dosages and expanded evidence ofsafety. In Phase 3, large-scale, multi-center, comparative trials are conductedwith patients afflicted with a target disease in order to provide enough datato demonstrate the efficacy and safety required by the FDA. The FDA closelymonitors the progress of each of the three phases of clinical testing and may,at its discretion, re-evaluate, alter, suspend or terminate the testing basedupon the data which have been accumulated to that point and its assessment ofthe risk/benefit ratio to the patient. Monitoring of all aspects of the studyto minimize risks is a continuing process. Reports of all adverse events mustbe made to the FDA.

 

Theresults of the preclinical and clinical testing on a non-biologic drug andcertain diagnostic drugs are submitted to the FDA in the form of an NDA forapproval prior to commencement of commercial sales. In responding to an NDA,the FDA may grant marketing approval, request additional information or denythe application if the FDA determines that the application does not satisfy itsregulatory approval criteria. There can be no assurance that approvals will begranted on a timely basis, if at all, for any of our potential products.Similar procedures are in place in countries outside the United States.

 

*European and Other Regulatory Approval*

 

Whetheror not FDA approval has been obtained, approval of a product by comparableregulatory authorities in Europe and other regions is necessary prior tocommencement of marketing the product in such countries.   As discussed above, in November 2003 wefiled for approval to market Ceplene for the treatment of advanced malignantmelanoma in the European Union. The regulatory authorities in each country mayimpose their own requirements and may refuse to grant, or may requireadditional data before granting, an approval even though the relevant product hasbeen approved by the FDA or another authority. As with the FDA, the regulatoryauthorities in the European Union and other developed countries have lengthyapproval processes for pharmaceutical products. The process for gainingapproval in particular countries varies, but generally follows a similarsequence to that described above for FDA approval. In Europe, the EuropeanCommittee for Proprietary Medicinal Products provides a mechanism for EU-memberstates to exchange information on all aspects of product licensing. The EU hasestablished a European agency for the evaluation of medical products, with botha centralized community procedure and a decentralized procedure, the latterbeing based on the principle of licensing within one member country followed bymutual recognition by the other member countries.

 

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*Other Regulations*

 

Weare also subject to various U.S. federal, state, local and international laws,regulations and recommendations relating to safe working conditions, laboratorymanufacturing practices and the use and disposal of hazardous or potentiallyhazardous substances, including radioactive compounds and infectious diseaseagents, used in connection with our research work. The extent of governmentregulation that might result from future legislation or administrative action,cannot be predicted accurately.

 

**Third-Party Reimbursement**

 

Thebusiness and financial condition of pharmaceutical and biotechnology companieswill continue to be affected by the efforts of government and third-partypayors to contain or reduce the cost of health care through various means. Forexample, in certain European markets, pricing negotiations are often requiredin each country, even if approval to market the drug under the European MedicalEvaluation Authority’s centralized procedure is obtained. In the United States,there have been, and we expect that there will continue to be, a number offederal and state proposals to implement similar government control.  Our industry is currently facing concernsrelated to the re-importation into the United States of pharmaceuticalproducts, manufactured in the U.S., that are sold in other countries at pricessignificantly below their U.S. prices.  In addition, an increasing emphasis on managed care in the United Stateshas and will continue to increase the pressure on pharmaceutical pricing. Whilewe cannot predict whether any such legislative or regulatory proposals will beadopted or the effect such proposals or managed care efforts may have on ourbusiness, the announcement of such proposals or efforts could have a materialadverse effect on our ability to raise capital, and the adoption of suchproposals or efforts could have a material adverse effect on our business, financialcondition and results of operations. Further, to the extent that such proposalsor efforts have a material adverse effect on other pharmaceutical companiesthat are prospective corporate partners for us, our ability to establishcorporate collaborations may be adversely affected. In addition, in both theUnited States and elsewhere, sales of prescription pharmaceuticals aredependent in part on the availability of reimbursement to the consumer fromthird-party payors, such as government and private insurance plans that mandatepredetermined discounts from list prices. Third-party payors are increasinglychallenging the prices charged for medical products and services. If we succeedin bringing one or more products to the market, we cannot assure you that theseproducts will be considered cost effective and that reimbursement to theconsumer will be available or will be sufficient to allow us to sell ourproducts on a competitive basis.

 

**Competition**

 

Competitionin the discovery and development of methods for treating or preventing cancerand infectious disease is intense. Numerous pharmaceutical, biotechnology andmedical companies and academic and research institutions in the United Statesand elsewhere are engaged in the discovery, development, marketing and sale ofproducts for the treatment of cancer and infectious diseases. These includesurgical approaches, new pharmaceutical products and new biologically derivedproducts. We expect to encounter significant competition for the principalpharmaceutical products we plan to develop. Companies that complete clinicaltrials, obtain regulatory approvals and commence commercial sales of theirproducts before us may achieve a significant competitive advantage. A number ofpharmaceutical companies are developing new products for the treatment of thesame diseases being targeted by us, particularly in cancer and hepatitis C. Insome instances, our competitors already have products in late-stage clinicaltrials. In addition, certain pharmaceutical companies are currently marketingdrugs for the treatment of the same diseases being targeted by us, and may alsobe developing new drugs to address these disorders.

 

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Inthe area of immunotherapy, the impact of competition for Ceplene may be reducedby the fact that the drug may be complementary to many other immunotherapeuticagents. Our current clinical testing combines the administration of Ceplenewith the administration of cytokines, certain immunotherapeutic agents.Accordingly, Ceplene and these immunotherapeutic agents may not be competitivebut may play complementary and synergistic roles in enhancing the immunesystem. For this reason, we believe that continuing advancements in the overallfield of immunotherapy may create new opportunities for Ceplene.

 

Manyof our competitors have substantially greater financial, clinical testing,regulatory compliance, manufacturing, marketing, human and other resources.Additional mergers and acquisitions in the pharmaceutical industry may resultin even more resources being concentrated with our competitors. We believe thatour competitive success will be based on our ability to create and maintainscientifically advanced technology, develop proprietary products, attract andretain scientific personnel, obtain patent or other protection for ourproducts, obtain required regulatory approvals, obtain orphan drug status forcertain products and manufacture and successfully market our products eitherindependently or through outside parties.

 

**Employees and Consultants**

 

Asof December 2, 2003, Maxim had 96 full-time employees, all but two of whomwere based at its two facilities in San Diego, California. The Company believesits relationships with its employees are satisfactory.

 

Inaddition to our employees, we have engaged a number of experienced consultantsin North America, Europe, Israel and Australia with pharmaceutical and businessbackgrounds to assist in product development efforts. We plan to leverage ourkey personnel by making extensive use of contract laboratories, developmentconsultants and collaborations with pharmaceutical companies to expand ourpreclinical and clinical trials.

 

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**RISK FACTORS**

 

You should carefully consider the following riskfactors and the other information included herein as well as the informationincluded in other reports and filings made with the Securities and ExchangeCommission before investing in our common stock.  If any of the following risks actually occurs, our business,financial condition or results of operations could be harmed.  The trading price of our common stock coulddecline due to any of these risks, and you may lose part or all of yourinvestment.

 

**The development of our drug candidates issubject to uncertainties, many of which are beyond our control. If we fail tosuccessfully develop our drug candidates, our ability to generate revenues willbe substantially impaired.**

 

Potential products based on our CepleneTM (histaminedihydrochloride), apoptosis modulator and topical histamine gel technologieswill require, dependent upon the specific drug candidate, extensive researchand development, preclinical testing, clinical testing, regulatory approval andsubstantial additional investment before we can market them. We cannot assureyou that any of our drug candidates will:

 

•   be successfully developed;

 

•   prove to be safe and effective inclinical trials;

 

•   meet applicable United States orinternational regulatory standards;

 

•   be capable of being produced incommercial quantities at acceptable costs;

 

•   be commercially viable;

 

•   be eligible for third partyreimbursement from governmental or private insurers; or

 

•   achieve market acceptance.

 

We have not completed final testing for efficacy orsafety in humans for the diseases we propose to treat with Ceplene and ourother drug candidates. Failure to ultimately obtain approval for Ceplene andour other drug candidates, any delay in our expected testing and developmentschedules, or any elimination of a product development program in its entirety,will negatively impact our ability to generate revenues in the future from thesale of our products.

 

**We may not obtain regulatory clearance tomarket Ceplene or our other drug candidates on a timely basis, or at all.**

 

Ceplene and our other drug candidates are subject toextensive government regulations related to development, clinical trials,manufacturing and commercialization. The process of obtaining Federal DrugAdministration (FDA), European Agency for the Evaluation of Medicinal Products(EMEA), and other governmental and similar international regulatory approvalsis costly, time consuming, uncertain and subject to unanticipated delays. Evenif we believe that preclinical and clinical data are sufficient to supportregulatory approval for a drug candidate, the FDA, EMEA, and similarinternational regulatory authorities may not ultimately approve the candidatefor commercial sale in any jurisdiction. The FDA,

 

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EMEA,or similar international regulators may refuse to approve an application forapproval of a drug candidate if they believe that applicable regulatorycriteria are not satisfied. The FDA, EMEA, or similar international regulatorsmay also require additional testing for safety and efficacy. For example, in2000, we submitted a New Drug Application (NDA) to the FDA seeking approval tomarket Ceplene based on the data from our first Phase 3 clinical study inadvanced malignant melanoma. In January 2001, the FDA determined that asecond study was required to support approval. In response to the FDA request,in January 2002 we commenced another Phase 3 trial. Although we believethat this additional Phase 3 trial, in combination with the results of thefirst Phase 3 trial, will support approval in the United States and othercountries, we have no assurance that (i) the results from this additionalPhase 3 trial will confirm the results from the first Phase 3 trial, (ii) theFDA, EMEA, or similar regulatory agencies will not require additional Phase 3trials, or (iii) the FDA, EMEA, or similar regulatory agencies willapprove our regulatory filings for drug approval.

 

In addition, manufacturing facilities operated by thethird party manufacturers with whom we contract to manufacture Ceplene and ourother drug candidates may not pass an , EMEA, or similar internationalregulatory preapproval inspection. Moreover, if the , EMEA, or similarinternational regulatory agency grants regulatory approval of a product, theapproval may be limited to specific indications or limited with respect to itsdistribution. Similar international regulatory authorities may apply similarlimitations or may refuse to grant any approval.

 

Any failure or delay in obtaining these approvalscould prohibit or delay us from marketing Ceplene and our other drugcandidates. If Ceplene and our other drug candidates do not meet applicableregulatory requirements for approval, we may not have the financial resources tocontinue research and development of these candidates, and we may not generaterevenues from the commercial sale of any products.

 

**Delays in the commencement, conduct orcompletion of our clinical trials would negatively impact our business.**

 

We may encounter problems with any of our completed,ongoing or planned clinical studies. For example, we may encounter delays incommencing studies or enrolling volunteers, lower than anticipated retentionrate of volunteers in a trial, or serious side effects experienced by studyparticipants relating to the drug candidate. Factors that could affect patientenrollment include the size of the patient enrollment population for thetargeted disease, eligibility criteria, proximity of eligible patients toclinical sites, clinical trial protocols, and the existence of competingprotocols, including competitive financial incentives for patients andclinicians, and existing approved drugs. If we encounter any delay in thecommencement, conduct or completion of our clinical studies for Ceplene or ourother drug candidates, we may experience the following consequences:

 

•   the analysis of data from ourclinical studies and the reporting of results may be delayed;

 

•   the submission of our applicationsfor regulatory approval of Ceplene and other drug candidates with regulatoryauthorities in North America, Europe, and elsewhere in the world may bedelayed;

 

•  regulatoryapproval of our drug candidates may be delayed and may not occur on a timelybasis, delaying the generation of revenues from the commercial sale of any ofour marketed products;

 

•   we may not have the financialresources to continue and complete research and development of any of ourproduct candidates; and

 

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•   we may not be able to enter intocollaborative arrangements relating to any product as a result of the delay inclinical development or regulatory filings.

 

**We have been named as a defendant insecurities class action and other litigation that could result in substantialcosts and divert management’s attention and resources.**

 

On December 14, 2000 plaintiff, Blake Martin, onbehalf of himself and purportedly on behalf of a class of others similarlysituated, filed a complaint in the United States District Court for theSouthern District of California against us and two officers of our Company,alleging violations of federal securities laws related to declines in theCompany’s stock price in connection with various statements and allegedomissions to the public and to the securities markets, and seeking damagestherefore. In December 2003, the United States Federal Court granted our motionto dismiss the lawsuit with prejudice and without leave to amend.  It is possible that plaintiff Blake Martinwill exercise his right to appeal the decision of the United States DistrictCourt for the Southern District of California to the Ninth Circuit.  Thecomplaint has been tendered to our insurance carrier.

 

In October 2001 and May 2002, certain formershareholders of Cytovia filed complaints in California Superior Court in SanDiego, against us and two of our officers based on similar facts andcircumstances, alleging fraud and negligent misrepresentation in connectionwith our acquisition of Cytovia. The Superior Court subsequently issued anorder compelling the first lawsuit to a binding arbitration forum, and thesecond lawsuit has been stayed pending the resolution of the arbitrationproceeding. A binding arbitration proceeding with the American ArbitrationAssociation was held in May 2003.  The three-member arbitration panelrejected all of the claims asserted by certain former shareholders of Cytovia,Inc., determined that we have no liability for such claims and awarded recoveryof our reasonable attorneys’ fees and costs of approximately $922,000 asprevailing party in the proceedings.  InDecember 2003, the decision was confirmed by the Superior Court, which willenter a judgment to this effect.  It ispossible the plaintiffs will appeal the judgment.

 

No assurances can be made that we will be successfulin our defense of the pending claims. If we are not successful in our defenseof such claims, we could be forced to make significant payments to ourstockholders, the plaintiffs and defense lawyers, and such payments could havea material adverse effect on our business, financial condition and results ofoperations if not covered by our insurance carrier. Even if our defense againstsuch claims is successful, the litigation could result in substantial costs anddivert management’s attention and resources, which could adversely affect ourbusiness.

 

**Because we are dependent on clinicalresearch centers and other contractors for clinical testing and for certainresearch and development activities, the results of our clinical trials andsuch research activities are, to a certain extent, beyond our control.**

 

The nature of clinical trials and our businessstrategy requires us to rely on clinical research centers and our othercontractors to assist us with clinical testing and certain research anddevelopment activities. As a result, our success is dependent upon the successof these outside parties in performing their responsibilities. Although webelieve our contractors are economically motivated to perform on their contractualobligations, we cannot directly control the adequacy and timeliness of theresources and expertise applied to these activities by our contractors. If ourcontractors do not perform their activities in an adequate or timely manner,the development and commercialization of our drug candidates could be delayed.

 

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**We expect to rely on collaborative partnersfor research and development and commercialization of certain potentialproducts.**

 

We expect to rely on collaborative arrangements forresearch and development and commercialization of certain drug candidatesdiscovered and developed by us, such as our agreement with Schering Corporationrelated to our M0406 Phase 2 Ceplene clinical trial in nonresponder hepatitis Cpatients. We cannot be certain that we will be able to maintain thesecollaborations or enter into any future collaborative arrangements, that any ofour collaborations will be successful or that we will receive revenues from anyof these collaborations. The success of these and any future collaborationswill depend, in significant part, on our partners’ development and strategicconsiderations, including the relative advantages of alternative products beingdeveloped or marketed by competitors. If our partners fail to conduct theiractivities in a timely manner, or at all, preclinical or clinical developmentof drug candidates under those collaborations could be delayed or terminated.The suspension or termination of our collaborations, the failure of ourcollaborations to be successful or the delay in the development orcommercialization of drug candidates pursuant to our collaborations could harmour business.

 

**Our planned business may expose us to product, clinical trialand other liability claims.**

 

Our design, testing, and development of productsinvolves an inherent risk of exposure to clinical trial and product liabilityclaims and related adverse publicity. Insurance coverage is expensive anddifficult to obtain, and we may be unable to obtain coverage in the future onacceptable terms, if at all. Although we currently maintain clinical trialinsurance for our drug candidates in the amounts we believe to be commerciallyreasonable, we cannot be certain that the coverage limits of our insurancepolicies or those of our strategic partners will be adequate. If we are unableto obtain sufficient insurance at an acceptable cost or if a claim is broughtagainst us, whether fully covered by insurance or not, our business, results ofoperations and financial condition could be materially adversely affected.

 

**Our products may not be accepted, purchasedor used by doctors, patients or payors.**

 

Ceplene, and any of our other drug candidates indevelopment, may not achieve market acceptance even if they are approved by theFDA, EMEA, and similar international regulatory agencies. We cannot guaranteethat physicians, patients, payors or the medical community in general willaccept and utilize any products that we develop.  The degree of market acceptance of our products will depend on anumber of factors, including:

 

•   the scope of regulatory approvals;

 

•   the establishment and demonstrationof the clinical efficacy, safety and advantages of our products by clinicaltrial results, and the acceptance of such results by the medical community;

 

•   the potential advantages of ourproducts over existing treatment methods; and

 

•   reimbursementpolicies of government and other third-party payors.

 

**We have yet to market or sell any of ourproducts.**

 

Although we currently intend to market Ceplene in theUnited States if it is approved by the FDA through the recruitment ofexperienced marketing and sales personnel, we have never before marketed orsold any pharmaceutical product. In order to market or co-market Ceplene or certainother drug candidates, we will need to hire a significant number of people withrelevant pharmaceutical experience to staff our sales force and marketinggroup, and possibly also to make appropriate arrangements with

 

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collaborativepartners. If we cannot develop the required marketing and sales expertise bothinternally and through our partnering arrangements, our ability to generaterevenue from product sales will likely suffer.

 

We intend to rely on collaborative partners to marketand sell Ceplene in international markets, and such arrangements may be soughtto market certain other drug candidates in all markets. We have not yet enteredinto any collaborative arrangement with respect to marketing or selling Ceplenewith the exception of agreements relating to Australia, New Zealand and Israel.We cannot guarantee that we will be able to enter into any such arrangements onterms favorable to us, or at all. If we are able to enter into marketing andselling arrangements with collaborative partners, we cannot assure you thatsuch marketing collaborators will apply adequate resources and skills to theirresponsibilities, or that their marketing efforts will be successful.  If we are unable to enter into favorablecollaborative arrangements with respect to marketing or selling Ceplene or ourmarketing collaborators efforts are not successful, our ability to generaterevenue from product sales will suffer.

 

**We will be dependent on third partymanufacturers of our products. Our ability to sell our products may be harmedif adequate quantities of our products are not manufactured on a timely basis.**

 

We do not intend to acquire or establish our owndedicated manufacturing facilities for Ceplene and our other drug candidates inthe foreseeable future. We have contracted and expect to continue to contractwith established pharmaceutical manufacturers for the production of Ceplene. Ifwe are unable to continue to contract with third-party manufacturers on acceptableterms or our manufacturers do not comply with applicable regulatoryrequirements, our ability to conduct clinical testing and to produce commercialquantities of Ceplene and other products will be adversely affected. If wecannot adequately manufacture our products, it could result in delays insubmissions for regulatory approval and in commercial product launches, whichin turn could materially impair our competitive position and the possibility ofachieving profitability. We cannot guarantee that we will be able to maintainour existing contract manufacturing relationships, or acquire or establish new,satisfactory third-party relationships to provide adequate manufacturingcapabilities in the future.

 

**We are not profitable and expect to continueto incur losses. If we do not become profitable, we may ultimately be forced todiscontinue our operations.**

 

We are a development-stage enterprise. We haveexperienced net losses every year since our inception. Our net lossesapplicable to common stock were $45.5 million, $64.3 million and $37.3 millionfor the years ended September 30, 2003, 2002 and 2001.  As of September 30, 2003, we had anaccumulated deficit of approximately $306.5 million.  We anticipate incurring substantial additional losses over at leastthe next several years related to developing and testing our drug candidatesand preparing for commercialization and planned market launches of ourproducts. If we do not become profitable, our stock price will be negativelyaffected, and we may ultimately be forced to discontinue our operations. We maynever generate product revenues or become profitable. We expect to havequarter-to-quarter fluctuations in revenues, expenses, and losses, some ofwhich could be significant.

 

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**We will need to raise additional funds inthe future. If we are unable to obtain the funds necessary to continue ouroperations, we will be required to delay, scale back or eliminate one or moreof our drug development programs.**

 

We have already spent substantial funds developing ourpotential products and business. We expect to continue to have negative cashflow from our operations for at least the next several years. We will have toraise additional funds to complete the development of our drug candidates andto bring them to market. Our future capital requirements will depend onnumerous factors, including:

 

•   the results of our clinical trials;

 

•   the timing and scope of anyadditional clinical trials undertaken;

 

•   the scope andresults of our research and development programs;

 

•   the time required to obtainregulatory approvals;

 

•   our ability to establish marketingalliances and collaborative agreements;

 

•   the cost of our internal marketingactivities; and

 

•   the cost of filing, prosecuting and,if necessary, enforcing patent claims.

 

Additional financing may not be available onacceptable terms, if at all. If adequate funds are not available, we will berequired to delay, scale back or eliminate one or more of our drug developmentprograms or obtain funds through arrangements with collaborative partners orothers that may require us to relinquish rights to certain of our technologiesor products that we would not otherwise relinquish.

 

**We compete against many companies and researchinstitutions that are developing products to treat the same diseases as ourdrug candidates. To the extent these competitors are successful in developingand marketing such products, our future potential market share and revenuescould be reduced.**

 

There are many companies, both publicly and privatelyheld, including well-known pharmaceutical companies and academic and otherresearch institutions, engaged in developing pharmaceutical products for thetreatment of life-threatening cancers and liver diseases. Products developed byany of these companies or institutions may demonstrate greater safety orefficacy than our drug candidates or be more widely accepted by doctors,patients or third-party payors. Many of our competitors and potential competitorshave substantially greater capital resources, research and developmentcapabilities and human resources than we do. Many of these competitors alsohave significantly greater experience than we do in undertaking preclinicaltesting and clinical trials of new pharmaceutical products and obtaining FDA,EMEA, and other regulatory approvals. If any of our drug candidates areapproved for commercial sale, we will also be competing with companies thathave greater resources and experience in manufacturing, marketing and sellingpharmaceutical products. To the extent that any of our competitors succeed indeveloping products that are more effective, less costly or have better sideeffect profiles than our products, then our future potential market share coulddecrease, which may have a negative impact on our business.

 

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**If we fail to secure adequate protection ofour intellectual property or the right to use certain intellectual property ofothers, we may not be able to protect our products and technologies fromcompetitors.**

 

Our success depends in large part on our ability toobtain, maintain and protect patents, trademarks, and trade secrets and tooperate without infringing upon the proprietary rights of others. If we areunable to do so, our products and technologies may not provide us with anycompetitive advantage.

 

The patent positions of biotechnology andpharmaceutical companies are highly uncertain and involve complex legal andfactual questions, and the breadth of claims allowed in biotechnology andpharmaceutical patents cannot be predicted. As a result, patents may not issuefrom any of our patent applications. Patents currently held by us or issued tous in the future, or to licensors from whom we have licensed technology rights,may be challenged, invalidated or circumvented so that our intellectualproperty rights may not protect our technologies or provide commercialadvantage to us. In addition, we also rely on unpatented trade secrets andproprietary know-how, and we cannot be sure that others will not obtain accessto or independently develop such trade secrets and know-how. Enforcement of ourintellectual property rights against any infringers of our patents relating toCeplene and our other technologies will be costly and time-consuming. Becauseof the nature of those patents, we could be required to bring lawsuits againstmany different entities such as hospitals or clinics. This would have theeffect of increasing the costs of enforcing our rights.

 

The pharmaceutical industry has experienced extensivelitigation regarding patent and other intellectual property rights. Although todate we are not aware of any intellectual property claims against us, in thefuture we could be forced to incur substantial costs in defending ourselves inlawsuits that are brought against us claiming that we have infringed on thepatent rights of others or in asserting our patent rights in lawsuits againstother parties. We may also be required to participate in interferenceproceedings declared by the United States Patent and Trademark Office orinternational patent authorities for the purpose of determining the priority ofinventions in connection with our patent applications or other parties’ patentapplications. Adverse determinations in litigation or interference proceedingscould require us to seek licenses that may not be available on commerciallyreasonable terms or subject us to significant liabilities to third parties.

 

**The technology in our sector is developing rapidly,and our future success depends on our ability to keep abreast of technologicalchange.**

 

We are engaged in the pharmaceutical field, which ischaracterized by extensive research efforts and rapid technological progress.New developments in oncology, cancer therapy, medicinal pharmacology,biochemistry and other fields are expected to continue at a rapid pace.Research and discoveries by others may render some or all of our proposedprograms or products noncompetitive or obsolete. Our business strategy issubject to the risks inherent in the development of new products using newtechnologies and approaches. Unforeseen problems may develop with thesetechnologies or applications, and we may not be able to successfully addresstechnological challenges we encounter in our research and development programs.This may result in our inability to develop commercially feasible products.

 

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**Our future success depends on our ability toattract and retain key personnel.**

 

Our success will depend, to a great extent, upon theexperience, abilities and continued services of our executive officers, and keypersonnel for research, development and commercialization. If we lose theservices of any of these officers or key research and development personnel,our business could be harmed. Our success also will depend upon our ability toattract and retain other highly qualified research and development, managerial,manufacturing and sales personnel and our ability to develop and maintainrelationships with qualified clinical researchers. Competition for thesepersonnel and relationships is intense and we compete with numerouspharmaceutical and biotechnology companies as well as with universities andnon-profit research organizations. We may not be able to continue to attractand retain qualified personnel or develop and maintain relationships withclinical researchers.

 

**The marketability of our products may dependon reimbursement and reform measures in the health care industry.**

 

Our success may depend, in part, on the extent towhich reimbursement for the costs of therapeutic products and relatedtreatments will be available from third-party payors such as United States andsimilar international government health administration authorities, privatehealth insurers, managed care programs and other organizations. Over the pastdecade, the cost of health care has risen significantly, and there have beennumerous proposals by legislators, regulators and third-party health care payorsto curb these costs. Some of these proposals have involved limitations on theamount of reimbursement for certain products. We cannot guarantee that similarUnited States federal or state or similar international health care legislationwill not be adopted in the future or that any products sought to becommercialized by us will be considered cost-effective or that adequatethird-party insurance coverage will be available for us to establish andmaintain price levels sufficient for realization of an appropriate return onour investment in product development. Moreover, the existence or threat ofcost control measures could have an adverse effect on the willingness ofpotential collaborators to pursue research and development programs related toour products.

 

**We may engage in strategic transactions,which could adversely affect our business.**

 

From time to time we consider strategic transactionsand alternatives with the goal of maximizing stockholder value.  Thesepotential transactions may include a variety of different businessarrangements, including spin-offs, acquisitions, strategic partnerships, jointventures, restructurings, divestitures, business combinations and investments.We cannot assure you that any such transactions will be consummated on favorableterms or at all, will in fact enhance stockholder value, or will not adverselyaffect our business or the trading price of our stock. Any such transactionsmay require us to incur non-recurring or other charges and may pose significantintegration challenges and/or management and business disruptions, any of whichcould materially and adversely affect our business and financial results.

 

**Our stock price may be highly volatile dueto external factors.**

 

Our common stock currently trades on the Nasdaq NationalMarket and on the OM Stockholm Exchange. Historically, our common stock hasgenerally experienced relatively low daily trading volumes in relation to theaggregate number of shares outstanding. Sales of substantial amounts of ourcommon stock in the public market could adversely affect the prevailing marketprices of our common stock and our ability to raise equity capital in thefuture.

 

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Factors that may have a significant impact on themarket price or the liquidity of our common stock also include:

 

•   actual or potential clinical trialresults relating to drug candidates under development by us or our competitors;

 

•   delays in our clinical testing anddevelopment schedules;

 

•   events or announcements relating toour collaborative relationships;

 

•   announcements of technologicalinnovations or new products by us or our competitors;

 

•   developmentsor disputes concerning patents or proprietary rights;

 

•   regulatory developments in both theUnited States and other countries;

 

•   economic and other external factors,disasters or crises, as well as period-to-period fluctuations in our financialresults;

 

•   market conditions for pharmaceuticaland biotechnology stocks, whether or not related to results or news regardingus or our competitors; and

 

•   publicity regarding actual orpotential medical results relating to products under development by us or ourcompetitors.

 

External factors may also adversely affect the marketprice for our common stock. The price and liquidity of our common stock may besignificantly affected by the overall trading activity and market factors onthe Nasdaq National Market and the OM Stockholm Exchange, and these factors maydiffer between the two markets. In addition, the securities markets have fromtime to time experienced significant price and volume fluctuations that may beunrelated to the operating performance of particular companies. The marketprices of the common stock of many publicly traded pharmaceutical or biotechnologycompanies have in the past been, and can in the future be expected to be,especially volatile.

 

**Certain anti-takeover provisions in ourcharter, by-laws, shareholder rights plan and under Delaware law may deter athird party from acquiring us, even though such acquisition may be beneficialto our stockholders.**

 

Certain provisions of our charter and by-laws may makeit more difficult for a third party to acquire control of us, even though suchacquisition may be beneficial to our stockholders. These provisions include:

 

•   a staggered or classified board;

 

•   the inability of stockholders to actby written consent; and

 

•   no right to remove directors otherthan for cause.

 

We have also adopted a shareholder rights plan or“poison pill.” Our shareholder rights plan is designed to protect ourshareholders in the event of an unsolicited bid to acquire the company. Ingeneral terms, the rights plan imposes a significant penalty upon any person orgroup that acquires 15% or more

 

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ofour outstanding common stock without the approval of our board of directors.Our shareholder rights plan could discourage a third party from attempting toacquire us through an acquisition of our outstanding voting stock, even thoughsuch acquisition may be beneficial to our stockholders.

 

Our board of directors also has the authority toissue, at any time, without further stockholder approval, up to 5,000,000shares of preferred stock, and to determine the price, rights, privileges andpreferences of those shares. These preferred shares are available to be used inconnection with our shareholder rights plan. Any issuance of preferred stock could discourage a third party fromacquiring a majority of our outstanding voting stock.

 

Furthermore, we are subject to the provisions of Section 203 ofthe Delaware General Corporations Law, an anti-takeover law, which may alsodissuade a potential acquiror of our common stock, even though such acquisitionmay be beneficial to our stockholders.

 

**ITEM 2. PROPERTIES**

 

We currently lease approximately 69,168 rentable square feet oflaboratory and office space in three facilities in San Diego, California.Approximately 1,776 rentable square feet of laboratory and office space issubleased to third parties. We believe that our existing facilities will beadequate to accommodate the implementation of our current business strategies.

 

**ITEM 3. LEGAL PROCEEDINGS**

 

On December 14, 2000plaintiff, Blake Martin, on behalf of himself and purportedly on behalf of aclass of others similarly situated, filed a complaint in the United StatesDistrict Court for the Southern District of California against the Company andtwo officers of the Company, alleging violations of federal securities lawsrelated to declines in the Company’s stock price in connection with variousstatements and alleged omissions to the public and to the securities markets,and seeking damages therefore. In December 2003, the United States FederalCourt granted the Company’s motion to dismiss the lawsuit with prejudice andwithout leave to amend.  It is possiblethat plaintiff Blake Martin will exercise his right to appeal the decision ofthe United States District Court for the Southern District of California to theNinth Circuit.  The complaint has beentendered to the Company’s insurance carrier.

 

InOctober 2001 and May 2002, certain former shareholders of Cytovia filedcomplaints in California Superior Court in San Diego against the Company andtwo of its officers based on similar facts and circumstances, alleging fraudand negligent misrepresentation in connection with the Company’s acquisition ofCytovia. The Superior Court subsequently issued an order compelling the firstlawsuit to a binding arbitration forum, and the second lawsuit has been stayedpending resolution of the arbitration proceeding.  A bindingarbitration proceeding with the American Arbitration Association was held inMay 2003.  The three-member arbitrationpanel rejected all of the claims asserted by certain former shareholders ofCytovia, Inc., determined that Maxim has no liability for such claims andawarded recovery of the Company’s reasonable attorneys’ fees and costs ofapproximately $922,000 as prevailing party in the proceeding.  In December 2003, the decision was confirmedby the Superior Court, which will enter a judgment to this effect.  It is possible that the plaintiffs willappeal the judgment.

 

TheCompany believes that the claims set forth in the pending complaints arewithout merit, and it intends to engage in a rigorous defense against suchclaims.  No assurances can be made that the Companywill be successful in its defense of the pending claims. If the Company is notsuccessful in its defense of such claims, the Company could be forced to makesignificant payments to its stockholders, the plaintiffs and defense lawyers,and such payments could have a material adverse effect on the Company’sbusiness, financial condition and results of operations if not covered by theCompany’s

 

35

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insurancecarrier. Even if the Company’s defense against such claims is successful, thelitigation could result in substantial costs and divert management’s attentionand resources, which could adversely affect the Company’s business.

 

 

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

 

Nomatters were submitted to a vote of security holders during the quarter endedSeptember 30, 2003.

 

36

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**PART II**

 

**ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATEDSTOCKHOLDER MATTERS**

 

(a)           The following disclosures are noted in accordance with the Item 5(a)

 

1.     *Recent Sales of Unregistered Securities*

 

On September 23, 2003, the Company issued 4,555,357 shares of commonstock and warrants to purchase 1,366,607 shares of common stock to accreditedinvestors in a private placement transaction. The Company received gross proceeds of approximately $25.5 million fromthe issuance.  The Company received netproceeds of $24.1 million after placement fees and other issuance costs of $1.4million, including placement agent fees in the amount of $1.3 million.  The warrants, which are not exercisable fora period of six months from the date of the transaction, are exercisable at$7.70, and expire 5 1⁄2 years after issuance (March 23, 2009).

 

In addition, on September 23, 2003, the Company issued warrants topurchase 148,049 shares of common stock to Merriman Curhan Ford & Co. aspartial consideration for services rendered as placement agent in the privateplacement transaction.  These warrantscontain substantially the same terms as the warrants issued to the investors inthe private placement.

 

The issuance of these securities was deemed to be exempt fromregistration under the Securities Act of 1933, as amended, or the Act, byvirtue of Section 4(2) and/or Regulation D promulgated under the Act.  Each investor in the private placementtransaction represented to the Company that it was an “accredited investor” as thatterm is defined under Regulation D promulgated under the Act, and that itacquired the securities in the private placement transaction solely for its ownaccount as principal, for investment purposes only, and not with a present viewto the public resale or distribution of all or any part thereof.

 

2.     *Price Range of Common Stock (Unaudited)*

 

The Company’s common stock currently trades on both the Nasdaq NationalMarket (“Nasdaq”) and the OM Stockholm Exchange under the symbol “MAXM”. Thefollowing table shows the high and low sales price for the common stock byquarter, as reported by the Nasdaq for the periods indicated:

 
|                                 |   | **Price  Range** |   |
|--------------------------------------|--------|------------------|--------|
| **Period**                           |   | **High**         |   | **Low** |   |
|                                 |   |             |   |   |   |
| Fiscal Year Ended September 30, 2003 |   |             |   |   |   |
| First Quarter                        |   | $                | 3.76   |   | $ | 2.04 |   |
| Second Quarter                       |   | 3.32             |   | 2.77 |   |
| Third Quarter                        |   | 6.60             |   | 3.05 |   |
| Fourth Quarter                       |   | 7.18             |   | 5.23 |   |
|                                 |   |             |   |   |   |
| Fiscal Year Ended September 30, 2002 |   |             |   |   |   |
| First Quarter                        |   | $                | 7.50   |   | $ | 3.88 |   |
| Second Quarter                       |   | 7.04             |   | 5.24 |   |
| Third Quarter                        |   | 5.60             |   | 3.19 |   |
| Fourth Quarter                       |   | 3.40             |   | 2.13 |   |

 

37

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On December 2, 2003, the last reported sales price of the Common Stock,as reported by the Nasdaq, was $8.11 per share. As of such date, there wereapproximately 220 holders of record of the Common Stock. The Company has notpaid cash dividends on its common stock and has no intention to do so in theforeseeable future.

 

3.     *Securities Authorized for Issuance Under EquityCompensation Plans*

 

Theinformation required to be disclosed by Item 201 (d) of Regulation S-K“Securities Authorized for Issuance Under Equity Compensation Plans” isincluded under Item 12 of this 10-K.

 

(b)Not applicable.

 

**ITEM 6. SELECTED FINANCIAL DATA**

 

The information required by this Item 6 is incorporated herein byreference to the information set forth in our Annual Report to Stockholders forthe fiscal year ended September 30, 2003, filed as Exhibit 13.1hereto.

 

**ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS**

 

The information required by this Item 7 is incorporated herein byreference to the information contained under the caption “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” inour Annual Report to Stockholders for the fiscal year ended September 30,2003, filed as Exhibit 13.1 hereto.

 

**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKETRISK**

 

Theinformation required by this Item 7A is incorporated herein by reference to theinformation contained under the caption “Management’s Discussion and Analysisof Financial Condition and Results of Operations” in our Annual Report toStockholders for the fiscal year ended September 30, 2003, filed asExhibit 13.1 hereto.

 

**ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

 

The information required by this Item 8 is incorporated herein byreference to the information set forth in our Annual Report to Stockholders forthe fiscal year ended September 30, 2003, filed as Exhibit 13.1hereto.

 

**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURES**

 

None.

 

**ITEM 9A. CONTROLS AND PROCEDURES**

 

The information required by this Item 9A is incorporated herein byreference to the information set forth under the caption “Controls andProcedures” in our Annual Report to Stockholders for the fiscal year endedSeptember 30, 2003, filed as Exhibit 13.1 hereto.

 

38

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**PART III**

 

**ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**

 

Informationconcerning directors and executive officers and our audit committee financialexpert is incorporated herein by reference to the information under thecaptions “Election of Directors” and “Executive Officers of the Company” setforth in our definitive Proxy Statement to be filed with the Securities andExchange Commission within 120 days after September 30, 2003, for ourAnnual Meeting of Stockholders to be held on February 19, 2004.

 

Informationconcerning compliance with Section 16(a) of the Exchange Act isincorporated herein by reference to the information included under the caption“Section 16(a) Beneficial Ownership Reporting Compliance” set forth in ourdefinitive Proxy Statement to be filed with the Securities and ExchangeCommission within 120 days after September 30, 2003, for our AnnualMeeting of Stockholders to be held on February 19, 2004.

 

Informationconcerning the Company’s Code of Business Conduct and Ethics is incorporatedherein by reference to the information included under the caption “Code ofEthics” set forth in our definitive Proxy Statement to be filed with theSecurities and Exchange Commission within 120 days after September 30, 2003,for our Annual Meeting of Stockholders to be held on February 19, 2004.

 

**ITEM 11. EXECUTIVE COMPENSATION**

 

The information required by this Item 11 is incorporated herein byreference to the information under the caption “Executive Compensation” setforth in our definitive Proxy Statement to be filed with the Securities andExchange Commission within 120 days after September 30, 2003, for ourAnnual Meeting of Stockholders to be held on February 19, 2004.

 

**ITEM 12. SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

 

The information required by this Item 12 is incorporated herein byreference to the information under the caption “Security Ownership of CertainBeneficial Owners and Management” and “Equity Compensation Plan Information” inour definitive Proxy Statement to be filed with the Securities and ExchangeCommission within 120 days after September 30, 2003, for our AnnualMeeting of Stockholders to be held on February 19, 2004.

 

**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

 

The information required by this Item 13 is incorporated herein byreference to the information under the caption “Certain Transactions” in ourdefinitive Proxy Statement to be filed with the Securities and ExchangeCommission within 120 days after September 30, 2003, for our AnnualMeeting of Stockholders to be held on February 19, 2004.

 

**ITEM 14. PRINCIPAL ACCOUNTANT FEES ANDSERVICES**

 

The information required by this Item 14 isincorporated herein by reference to the information under the caption“Ratification of Selection of Independent Auditors” in our definitive ProxyStatement to be filed with the Securities and Exchange Commission within120 days after September 30, 2003, for our Annual Meeting ofStockholders to be held on February 19, 2004.

 

39

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**PART IV**

 

**ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTSON FORM  8-K**

 

(a)           The followingdocuments are filed as part of this Annual Report:

 

1.             *Consolidated FinancialStatements*

 

Thefollowing financial statements, including the Notes thereto, are incorporatedherein by reference to our Annual Report to Stockholders for the fiscal yearended September 30, 2003 filed as Exhibit 13.1 hereto:

 

ConsolidatedBalance Sheets as of September 30, 2003 and 2002

ConsolidatedStatements of Operations for the years ended September 30, 2003, 2002, and2001, and from inception (October 23, 1989) through September 30, 2003

ConsolidatedStatements of Stockholders’ Equity from inception (October 23, 1989) throughSeptember 30, 2003

ConsolidatedStatements of Cash Flows for the years ended September 30, 2003, 2002, and2001, and from inception (October 23, 1989) through September 30, 2003

 

2.             *Financial StatementSchedules*

 

Allschedules have been omitted since the required information is not present inamounts sufficient to require submission of the schedule, or because theinformation required is included in the consolidated financial statements ornotes thereto.

 

3.             *Exhibits*

 

Seelist of Exhibits set forth in paragraph (c) below.

 

40

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(b)                   Reports on Form 8-K

 
| **Date of Report** |   | **Description  of Exhibits**                                                                       |   | **Financial  Statements Filed** |
|--------------------|--------|----------------------------------------------------------------------------------------------------|--------|---------------------------------|
| August 5, 2003     |   | Press  Release: “Maxim Pharmaceuticals Announces 2003 Third Quarter Financial  Results”  |   | No                              |
|               |   |                                                                                               |   |                            |
| September 22, 2003 |   | Securities  Purchase Agreement dated  September 22, 2003 between Maxim and investors               |   | No                              |
|               |   |                                                                                               |   |                            |
|               |   | Registration  Rights Agreement dated  September 22, 2003 between Maxim and investors               |   | No                              |
|               |   |                                                                                               |   |                            |
|               |   | Form of  Warrant to be issued to investors                                                         |   | No                              |
|               |   |                                                                                               |   |                            |
|               |   | Press  Release:  “Maxim Pharmaceuticals  Announces $25.5 Million Private Placement” |   | No                              |

 

41

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(c)           Exhibits

 

**INDEX**

 
| **Exhibit Number** |   | **Description**                                                                                                                                                     |
|--------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                |   | Amended and Restated Certificate of Incorporation  of Registrant. (1)                                                                                               |
| 3.2                |   | Certificate of Amendment of Amended and Restated  Certificate of Incorporation. (5)                                                                                 |
| 3.3                |   | Rights Agreement, dated as of June 15, 2000,  between the Registrant and American Stock Transfer & Trust Company, as  Rights Agents. (6)                        |
| 3.4                |   | Bylaws of Registrant. (1)                                                                                                                                           |
| 4.1                |   | Reference is made to Exhibits 3.1, 3.2, 3.3, and  3.4.                                                                                                              |
| 10.1               |   | Form of Indemnification Agreement for directors  and officers of the Registrant. (14)                                                                               |
| 10.2               |   | Option to Buy Technology and Rights Agreement,  dated March 30, 1993, between the Registrant and Estero Anstalt. (1)†                                          |
| 10.3               |   | Security Agreement, dated July 27,1993, between  the Registrant and Estero Anstalt. (1)†                                                                       |
| 10.4               |   | Exclusive License Agreement dated June 14, 1995,  among the Registrant, Jan Holmgren, M.D., Ph.D., Cecil Czerkinsky, Duotol AB  and Triotol Ltd. (1)†          |
| 10.5               |   | Agreement, dated December 2, 1995, among the  Registrant, Syntello Vaccine Development AB and Estero Anstalt. (1)†                                             |
| 10.6               |   | Agreement, dated April 23, 1996, among the  Registrant, Anders Vahlne, M.D., Ph.D. and Syntello Vaccine Development AB.  (1)†                                  |
| 10.7               |   | Amended and Restated 1993 Long-Term Incentive Plan  and forms of stock option agreements. (2)                                                                       |
| 10.8               |   | Employment Agreement dated October 1, 2002 between  the Registrant and Kurt R. Gehlsen.* (13)                                                                       |
| 10.9               |   | Employment Agreement dated November 15, 2002  between the Registrant and Larry G. Stambaugh.* (13)                                                                  |
| 10.10              |   | Lease dated May 28, 1998 between Del Mar Capital  Group/Ridgeview, LLC, as Landlord, and the Registrant. (10)                                                       |
| 10.11              |   | License Agreement dated November 6, 1998 among the  Registrant, Professional Pharmaceutical, Inc., Bruce A. Jack, D.D.S. and B.  Thomas White, R.PH. (3)            |
| 10.12              |   | Common Stock Purchase Warrant, No. #99AR-1, to  purchase 200,000 shares of the Registrant’s common stock, issued to The  Kriegsman Group on March 3, 1999. (4) |
| 10.13              |   | Research and License Agreement effective July 10,  2000 with BIOCHEM Pharma Inc. (7)‡                                                                          |
| 10.14              |   | Registrant’s 2000 Nonstatutory Stock Option Plan.  (7)                                                                                                         |
| 10.15              |   | Secured Revolving Promissory Note dated December  8, 2000 between Larry G. Stambaugh and the Registrant. (7)                                                        |
| 10.16              |   | Loan and Security Agreement dated October 9, 2000  between the Registrant and Silicon Valley Bank. (8)                                                              |
| 10.17              |   | Assignment of Deposit Account dated April 11, 2001  between the Registrant, Silicon Valley Bank and Geoffrey B. Altman. (9)                                         |
| 10.18              |   | Assignment of Deposit Account dated April 11, 2001  between the Registrant, Silicon Valley Bank and Kurt R. Gehlsen. (9)                                            |
| 10.19              |   | Assignment of Deposit Account dated April 11, 2001  between the Registrant, Silicon Valley Bank and Dale A. Sander and Denise M.  Sander. (9)                       |
| 10.20              |   | Loan Modification Agreement dated March 21, 2001  between the Registrant and Silicon Valley Bank. (9)                                                               |

 

42

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| **Exhibit  Number** |   | **Description**                                                                                                                                                                 |
|---------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.21               |   | Loan Modification Agreement dated April 25, 2001  between the Registrant and Silicon Valley Bank. (9)                                                                           |
| 10.22               |   | Registrant’s 2001 Incentive Stock Option Plan. (9)                                                                                                                         |
| 10.23               |   | Amendment dated December 8, 2001 to the Secured  Revolving Promissory Note between the Registrant and Larry G. Stambaugh.*(11)                                                  |
| 10.24               |   | Employment Agreement dated October 1, 2002 between  the Registrant and Dale A. Sander.* (13)                                                                                    |
| 10.25               |   | Employment Agreement dated October 1, 2002 between  the Registrant and Pam G. Gleason.* (13)                                                                                    |
| 10.26               |   | Loan Modification Agreement dated July 29, 2002  between the Registrant and Silicon Valley Bank. (12)                                                                           |
| 10.27               |   | Amendment to Assignment of Deposit Account dated  July 23, 2002 between the Registrant, Silicon Valley Bank and Geoffrey B.  Altman. (12)                                       |
| 10.28               |   | Amendment to Assignment of Deposit Account dated  July 23, 2002 between the Registrant, Silicon Valley Bank and Kurt R.  Gehlsen. (12)                                          |
| 10.29               |   | Amendment to Assignment of Deposit Account dated  July 23, 2002 between the Registrant, Silicon Valley Bank and Dale A. Sander  and Denise M. Sander. (12)                      |
| 10.30               |   | Employment Agreement dated October 1, 2002 between  the Registrant and Anthony E. Altig.*(13)                                                                                   |
| 10.31               |   | Lease dated July 31, 2003 between Alecta Pensionsförsäkring, Ömsesidigt, a Swedish  company, as Landlord, and the Registrant.                                    |
| 10.32               |   | Securities Purchase Agreement dated September 22,  2003, between Maxim and the investors whose names appear on the signature  pages thereto. (15)                               |
| 10.33               |   | Registration Rights Agreement dated September 22,  2003, between Maxim and the investors whose names appear on the signature  pages thereto. (15)                               |
| 10.34               |   | Form of Common Stock Purchase Warrant issued to  the investors on September 23, 2003. (15)                                                                                      |
| 10.35               |   | Common Stock Purchase Warrant, No. #03-024, to  purchase 148,049 shares of the Registrant’s common stock, issued to Merriman  Curhan Ford & Co. on September 23, 2003. |
| 13.1                |   | Registrant’s Annual Report to Stockholders for the  fiscal year ended September 30, 2003.                                                                                  |
| 23.1                |   | Consent of KPMG LLP, Independent Auditors.                                                                                                                                      |
| 24.1                |   | Power of Attorney. Reference is made to the  signature page hereto.                                                                                                             |
| 31.1                |   | Certification by Larry G. Stambaugh, Chief  Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.       |
| 31.2                |   | Certification by Anthony E. Altig, Chief Financial  Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section  302 of the Sarbanes-Oxley Act of 2002.         |
| 32.1                |   | Certification Pursuant to 18 U.S.C. Section 1350,  as Adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2002.                                                         |

 

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*              Management contract or compensatory plan orarrangement required to be filed as an exhibit to this form pursuant to Item601 of Regulation S-K.

 

†              Certain confidential portions deletedpursuant to order granting application for confidential treatment.

 

‡              Confidential treatment has been requestedwith respect to deleted portions of this agreement.

 

(1)           Previouslyfiled together with Registrant’s Registration Statement on Form SB-2 (FileNo. 333-4854-LA) or amendments thereto and incorporated herein byreference.

 

(2)           Previouslyfiled together with Registrant’s Quarterly Report on Form 10-Q (FileNo. 1-14430) dated December 31, 1996 and incorporated herein byreference.

 

43

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(3)           Previouslyfiled together with Registrant’s Quarterly Report on Form 10-Q (FileNo. 1-14430) dated December 31, 1998 and incorporated herein byreference.

 

(4)           Previouslyfiled together with Registration Statement on Form S-3 (FileNo. 333-84711) or amendments thereto and incorporated herein by reference.

 

(5)           Previouslyfiled together with Registrant’s Current Report on Form 8-K (FileNo. 1-14430) dated February 25, 2000 and incorporated herein byreference.

 

(6)           Previouslyfiled together with the Registrant’s Current Report on Form 8-A (FileNo. 1-14430) dated June 20, 2000 and incorporated herein byreference.

 

(7)           Previouslyfiled together with the Registrant’s Annual Report on Form 10-K (FileNo. 1-14430) dated September 30, 2000 and incorporated herein byreference.

 

(8)           Previouslyfiled together with Registrant’s Quarterly Report on Form 10-Q (FileNo. 1-14430) dated December 31, 2000 and incorporated herein byreference.

 

(9)           Previouslyfiled together with Registrant’s Quarterly Report on Form 10-Q (FileNo. 1-14430) dated March 31, 2001 and incorporated herein byreference.

 

(10)         Previouslyfiled together with the Registrant’s Annual Report on Form 10-K (FileNo. 1-14430) dated September 30, 2001 and incorporated herein byreference.

 

(11)         Previouslyfiled together with Registrant’s Quarterly Report on Form 10-Q (FileNo. 1-14430) dated December 31, 2001 and incorporated herein byreference.

 

(12)         Previouslyfiled together with Registrant’s Quarterly Report on Form 10-Q (FileNo. 1-14430) dated June 30, 2002 and incorporated herein byreference.

 

(13)         Previouslyfiled together with Registrant’s Quarterly Report on Form 10-Q (FileNo. 1-14430) dated December 31, 2002 and incorporated herein byreference.

 

(14)         Previouslyfiled together with Registrant’s Quarterly Report on Form 10-Q (FileNo. 1-14430) dated March 31, 2003 and incorporated herein by reference.

 

(15)         Previouslyfiled together with Registrant’s Current Report on Form 8-K (File No. 1-14430)dated September 22, 2003 and incorporated herein by reference.

 

44

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** **

**SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Actof 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.

 
|   | MAXIM  PHARMACEUTICALS, INC. |
|--------|------------------------------|
|   | By:                          | /s/ ANTHONY E. ALTIG |
|   |                         | Anthony E. Altig,*Vice President, Finance and Chief  Financial Officer*

Date: December 19, 2003 |

 

KNOWALL PERSONS BY THESE PRESENTS, that each person whose signature appears belowconstitutes and appoints Larry G. Stambaugh and Anthony E. Altig, and each ofthem, as his true and lawful attorneys-in-fact and agents, with full power ofsubstitution and resubstitution, for him and in his name, place and stead, inany and all capacities, to sign any and all amendments to this Report, and tofile the same, with all exhibits thereto, and other documents in connectiontherewith, with the Securities and Exchange Commission, granting unto saidattorneys-in-fact and agents, and each of them, full power and authority to doand perform each and every act and thing requisite and necessary to be done inconnection therewith, as fully to all intents and purposes as he might or coulddo in person, hereby ratifying and confirming that all said attorneys-in-factand agents, or any of them or their or his substitute or substituted, maylawfully do or cause to be done by virtue hereof.

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below, by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.

 

| **Signature**           |   | **Title**                                                      |   | **Date**           |
|-------------------------|--------|----------------------------------------------------------------|--------|--------------------|
|                    |   |                                                           |   |               |
| /s/LARRY G. STAMBAUGH   |   | Chairman of the Board, President and Chief  Executive Officer  |   | December 19, 2003  |
| Larry G. Stambaugh      |   | (Principal Executive Officer)                                  |   |               |
|                    |   |                                                           |   |               |
| /s/ANTHONY E. ALTIG     |   | Vice  President, Finance, and Chief Financial Officer          |   | December  19, 2003 |
| Anthony E. Altig        |   | (Principal Accounting Officer and Principal Financial Officer) |   |               |
|                    |   |                                                           |   |               |
| /s/THEODOR H. HEINRICHS |   | Director                                                       |   | December  19, 2003 |
| Theodor H. Heinrichs    |   |                                                           |   |               |
|                    |   |                                                           |   |               |
| /s/GARY E. FRASHIER     |   | Director                                                       |   | December  19, 2003 |
| Gary E. Frashier        |   |                                                           |   |               |
|                    |   |                                                           |   |               |
| /s/PER-OLOF MARTENSSON  |   | Director                                                       |   | December  19, 2003 |
| Per-Olof Martensson     |   |                                                           |   |               |
|                    |   |                                                           |   |               |
| /s/F. DUWAINE TOWNSENF. |   | Director                                                       |   | December  19, 2003 |
| Duwaine Townsen         |   |                                                           |   |               |
|                    |   |                                                           |   |               |
| /s/WAYNE P. YETTER      |   | Director                                                       |   | December  19, 2003 |
| Wayne P. Yetter         |   |                                                           |   |               |

 

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| /s/ROBERT L. ZERBE, M.D. |   | Director |   | December  19, 2003 |
|--------------------------|--------|----------|--------|--------------------|
| Robert L. Zerbe, M.D.    |   |     |   |               |

 

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